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... are a few assumptions that need to be satisfied so that a monopoly can exist. * Sellers are price makers * Sellers do not behave strategically * There are barriers to enter the industry * Buyers are price takers. The Graph below illustrates the profit maximizing output. Figure 1 As a price maker, the monopolist tends to have the incentive to earn a higher revenue from a given level of sales by charging a higher price than its profit maximizing P* price (MC=MR). In other words, when the above assumptions are satisfied, the monopolist can engage in price discrimination. The concept of price discrimination is to charge different consumers different prices for the same good. (Katz and Rosen, 1998) There are many examples of price discrimination in the real world, i.e. different transport fares and different prices for cinema tickets. In reality, what might appear as 'altruistic pricing schemes' aiming at charging less ...