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Lecture 11

Economics 1021A/B Lecture Notes - Lecture 11: Variable Cost, Fixed Cost, Marginal Cost

Course Code
ECON 1021A/B
Michael Parkin

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Chapter 13: Monopoly
Price discrimination: selling different units to different people at different prices
oMonopoly needs to be able to identify different groups
oSell a product that cannot be resold
Monopoly can discriminate
oAmong groups of buyers
oAmong units of a good
Price discrimination allows a firm to convert consumer surplus into producer surplus
oEconomic profit = total revenue – total cost
oProducer surplus = total revenue – total variable cost
Total revenue = producer surplus + total variable cost
oEconomic profit = (producer surplus + total variable cost) – total cost
oEconomic profit = producer surplus – total fixed cost
Marginal cost pricing rule: govt sets the price at marginal cost
Average pricing rule:
Don’t focus too much for exam
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