Economics 1021A/B Lecture 20: Price Discrimination

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ECON 1021A/B Full Course Notes
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ECON 1021A/B Full Course Notes
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Economics1021 lecture 020 chapter 13. Price discrimination: practise of selling different units of good or service for different prices. To be able to price discriminate, a monopoly must: 1. Identify and separate different buyer types: 2. 2 ways of price discriminating: among groups of buyers, among units of a good, ex. Advance purchase and other restriction on airline tickets: ex. Quantity discounts except discounts that that reflect lower costs at higher volumes. Increasing profit and producer surplus: price discrimination allows a firm to convert consumer surplus into producer surplus. Economic profit = total revenue total cost. Producer surplus = total revenue total variable cost (area under the marginal cost curve) By subbing in the 2nd equation into the 1st equation you get: economic profit = (producer surplus + tvc) tc, therefore: economic profit = producer surplus = total fixed cost. Single price profit maximization: single price monopoly maximizes profit by producing 8000 trips, for a trip.

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