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1. The higher the degree of product differentiation in the monopolistic competition, the higher
the element of monopoly. How? (3)
A firm under monopolistic competition is neither a price taker nor a price maker. However,
it is able to exercise partial control over price by differentiating their products. By producing
a unique product or establishing a particular reputation, a firm is in a position to influence
the price.
2. How does the price discrimination influence the monopolist to earn abnormal profit?
(3)
A monopolist may charge different prices for the same product from different sets of
consumers at the same time. By practicing price discrimination, the monopoist can
dominate the entire market and can earn abnormal profit.
For example, a doctor can charge less fees from poor people and can get more from the rich
people. So he has the power to set his price without losing his entire share of the market.
Not possible, unrealistic one because in the real world , homogeneous product is unrealistic
due to large no. of sellers and stiff competition. Consumer prefers variety.
product differentiation and price discrimination exists in this competition, consumer will be
exploited otherwise.
Value: Consumer awareness/consumer rights.