Answer to Question #105212 in Microeconomics for Nhlaphu Mulaudzi

Question

Questions:
1-Explain why certain firms practice price discrimination. (3 marks)
2-What is the fundamental difference between state-supported firm monopoly and monopoly that develops in the market. (Give reference to the current situation in SOUTH AFRICA at Eskom also list one advantage and one disadvantage of state supported firm monopoly).6 marks

NB:reference list (bibliography)
:citation (text reference)

Answer 1

A state-supported firm monopoly exists in the absence of competitors in the market due to legislative restrictions that the state has introduced to restrain competitors. The monopoly that develops in the market exists independently, the state regulates and restricts the activities of the company to maintain order in the market. An example of a monopoly is Eskom. Electricity is a product that requires government regulation. Environmental issues and organizational issues interfere with quality electricity production. Moreover, any preventive measures can strike ordinary people life. If there was competition in the market, these problems could be solved in a tough and quick way.

The advantage of the state monopoly is that it is most stable during the crisis, while the main drawback is the lack of scientific and technological progress in production due to the lack of competitors in the market.