Price discrimination
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Intros
Lessons
- Price Discrimination
- Price Discrimination Definitions
- Definition of Price Discrimination
- Converts Consumer Surplus to Producer Surplus
- Two methods to Price Discrimination
- Groups of Buyers
- Units of Good
- Profiting Using Price Discrimination
- Regular Single-Price Monopoly
- Monopolist Offers Different Buyers Different Products
- Converts Consumer Surplus to Producer Surplus
- More Economic Profit
- Still a Little bit of Consumer Surplus
- Perfect Price Discrimination
- Each output sold at highest price
- No consumer surplus
- All consumer surplus becomes producer surplus
- Full economic profit
Examples
Lessons
- Understanding Price Discrimination Definitions
Identify which one is an example of price discriminating among a group of consumers:- Offering discounts for ages 65+
- Offering a 50% discount for a second item
- Offering a premium version of a product.
- Offering discounts by gender.
- When perfect price discrimination is achieved:
- There is no consumer surplus
- There is no producer surplus
- There is no deadweight loss
- There is no economic profit.
- Both a) and c)
- Both b) and d)
- None of the above
- Suppose Dennis produced wallets for a marginal cost of $2. Its standard price is $15 a wallet. Dennis offers the second wallet for $5. He also distributes coupons that give a $5 rebate on a wallet.
- Maximizing Profit with Price Discrimination
Suppose we have a firm's average total cost in the table below:Quantity (q) Average total Cost (ATQ) 5 27 10 17 15 14 20 12 25 13 30 17
The demand function and marginal cost function are p = 20 - q and MC = q - Understanding Perfect Price Discrimination
Which of the following is not true when there is perfect price discrimination?- The demand curve becomes the marginal revenue curve
- All consumer surplus is converted to producer surplus.
- The total economic profit is the consumer surplus that was converted.
- Profit maximization occurs at = = .
- Use the following graph to calculate the economic profit made from perfect price discrimination.