ECON101 Lecture Notes - Lecture 10: Business Travel, Price Discrimination, Economic Surplus

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ECON101 Full Course Notes
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ECON101 Full Course Notes
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Business travel: producer surplus and business travelers" consumer surplus are unchanged from a single price of air travel. Leisure travel: increase in consumer surplus, increase in producer surplus, increase in output. Perfect price discrimination occurs if a firm is able to sell each unit of output for the highest price someone is willing to pay. Now, mr = p so, the demand curve = mr: quantity: where mr = mc, but, you can"t determine the price b/c diff buyers pay diff prices, no consumer surplus. Perfect price discriminating monopoly increases its output until the price of the last trip equals mc. The entire consumer surplus is captured by the producer. The more perfect a monopoly can price discriminate, the. But, the increase in economic profit attracts even more rent- seeking activity that leads to inefficiency. Regulation: rules administered by a government agency to influence prices, quantities, entry, and other aspects of economic activity.

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