Discriminatory Monopoly

Explanation:
Discriminatory monopoly refers to a situation where a firm charges different prices to different groups of consumers. This means that the firm exercises its monopoly power by discriminating among different groups of consumers and charging them different prices for the same product or service.

Charging Different Prices to Different Groups of Consumers:
Under discriminatory monopoly, the firm has the ability to segment the market and charge different prices to different groups of consumers based on factors such as their willingness to pay, their income levels, or their geographical location. This allows the firm to maximize its profits by extracting the maximum possible price from each group of consumers.

Example:
For example, let's consider a pharmaceutical company that has a monopoly on a life-saving drug. The company can charge a higher price to consumers in developed countries who have a higher willingness to pay, while charging a lower price to consumers in developing countries who have a lower willingness to pay. This allows the company to earn higher profits from consumers in developed countries while still making the drug more affordable to consumers in developing countries.

Benefits:
Discriminatory monopoly can have several benefits for the firm. By charging different prices to different groups of consumers, the firm can increase its profits and potentially expand its market share. It also allows the firm to capture a larger portion of consumer surplus by extracting more value from consumers who are willing to pay higher prices.

Drawbacks:
However, discriminatory monopoly can also have drawbacks. It can lead to price discrimination and inequality among different groups of consumers. It can also create barriers to entry for potential competitors, as the firm can use its monopoly power to prevent other firms from entering the market and offering lower prices.

Conclusion:
In conclusion, discriminatory monopoly refers to a situation where a firm charges different prices to different groups of consumers. While it allows the firm to maximize its profits and potentially expand its market share, it can also lead to price discrimination and inequality among consumers.