ECO 1304 Lecture Notes - Lecture 42: Price Discrimination, Monopoly, Allocative Efficiency
31 Dec 2017
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What is government regulation: government sets the price that a monopolist can charge, goals: Avoid the high monopoly prices and low output that can promote allocative inefficiency. 9. 5 section check: anti-combine laws are designed to reduce the abuses of monopoly power and push production closer to the social optimum, privately owned monopolies may be allowed to operate but under regulation of a government agency. 9. 5 section check cont"d: marginal cost pricing sets price equal to marginal cost, where demand intersects marginal cost. This regulation achieves allocative efficiency: average cost pricing sets price equal to average total cost, where the demand curve intersects average total costs. What is price discrimination: price discrimination is the practice of sellers charging different prices for the same good or service when costs do not differ. Conditions for price discrimination: monopoly power, market segregation, no resale. Why does price discrimination exist: a profit-maximizing firm will price where mr = mc for each group, resulting in.
