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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.
How does price discrimination apply to airline tickets?
Airlines charge different prices for the same flight based on booking time and demand.
How does market segregation enable price discrimination?
It allows firms to identify groups with different price sensitivities and charge accordingly.
How does the 'no resale' condition affect price discrimination?
It prevents customers from buying low and selling high, undermining the price discrimination strategy.
How do universities use price discrimination?
By offering different tuition rates based on financial aid and scholarships.
How do car dealerships practice price discrimination?
By negotiating prices individually with each customer.
How does price discrimination affect consumer surplus?
It typically reduces or eliminates consumer surplus as the monopolist captures it as profit.
How does price discrimination affect producer surplus?
It increases producer surplus as the monopolist captures more of the consumer's willingness to pay.
How does perfect price discrimination achieve allocative efficiency?
By producing where P = MC, eliminating deadweight loss and maximizing total surplus.
How does price discrimination relate to market power?
Price discrimination requires market power because firms need to be able to influence prices.
How does price discrimination impact the quantity produced compared to a single-price monopoly?
Price discrimination typically leads to a higher quantity produced, approaching the socially optimal level.