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Differentiate demand and MR in pure vs. price discriminating monopoly.
Pure: D > MR. Price Discriminating: D = MR.
Compare efficiency in pure vs. price discriminating monopoly.
Pure: Productively & allocatively inefficient. Price Discriminating: Allocatively efficient, productively inefficient.
Compare economic profits in pure vs. price discriminating monopoly.
Pure: Smaller long-run profits. Price Discriminating: Larger long-run profits.
Compare consumer surplus in pure vs. price discriminating monopoly.
Pure: Some consumer surplus. Price Discriminating: Zero consumer surplus.
Compare deadweight loss in a single-price vs. perfect price discriminating monopoly.
Single-price: Deadweight loss exists. Perfect price discrimination: Deadweight loss is eliminated.
Compare the quantity produced in a single-price vs. perfect price discriminating monopoly.
Single-price: Lower quantity. Perfect price discrimination: Higher quantity, closer to socially optimal.
Compare the distribution of surplus in a single-price vs. perfect price discriminating monopoly.
Single-price: Consumer and producer surplus exist. Perfect price discrimination: All surplus goes to the producer.
Compare the pricing strategies in a single-price vs. perfect price discriminating monopoly.
Single-price: Charges the same price to all consumers. Perfect price discrimination: Charges each consumer their maximum willingness to pay.
Compare the information requirements for a single-price vs. perfect price discriminating monopoly.
Single-price: Less information required. Perfect price discrimination: Requires detailed information about each consumer's willingness to pay.
Compare the real-world applicability of single-price vs. perfect price discriminating monopoly.
Single-price: More common in reality. Perfect price discrimination: Rarer, but approximated in some markets.
What is price discrimination?
Selling the same product at different prices to different buyers.
What is a uniformly-pricing monopoly?
A monopoly that charges everyone the same price.
What is perfect price discrimination?
Charging each customer the maximum they're willing to pay.
Define Monopoly Power.
The ability of a firm to control the market and set prices.
What is market segregation?
Identifying and separating groups of consumers with different price sensitivities.
What is allocative efficiency?
Producing at the socially optimal level where P = MC.
Define Consumer Surplus.
The difference between what consumers are willing to pay and what they actually pay.
Define Producer Surplus.
The difference between the price producers receive and their marginal cost.
What is Deadweight Loss?
The loss of economic efficiency when the equilibrium is not Pareto optimal.
What is Marginal Revenue (MR)?
The additional revenue gained from selling one more unit.
Analyze the demand curve in perfect price discrimination.
The demand curve is also the marginal revenue curve (D=MR).
What does the area under the demand curve represent in perfect price discrimination?
Total Revenue for the price discriminating monopolist.
How is profit shown on a perfect price discrimination graph?
Area between the demand curve and the marginal cost curve up to the quantity produced.
What happens to consumer surplus in perfect price discrimination?
Consumer surplus is zero.
What happens to deadweight loss in perfect price discrimination?
Deadweight loss is eliminated.
How does the quantity produced compare to a single-price monopoly?
Quantity produced is higher, closer to the socially optimal level.
How is total cost represented on the graph?
A rectangle formed by ATC and the quantity produced.
How does the marginal cost curve behave in perfect price discrimination?
The marginal cost curve stays the same as in a regular monopoly.
What does the trapezoid under the demand curve represent?
Total revenue.
How does the producer surplus change compared to a regular monopoly?
Producer surplus increases significantly, capturing all consumer surplus.