HW- ch9 (10-23-06)

HW- ch9 (10-23-06) - no consumption inefficiencey because...

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Dorian Dreher Homework- Ch.9; Questions 4,5,6 10/23/06 4.) if the monopoly can price discriminate, then yes the total output will expand. All forms of price discrimination raise the total output and increase total profits. 5.) The first consumer's demand curve forms a rectangle. It is horizontal from zero to 1 unit at $10 adn then drops to zero at 1 unit. The maximum consumer surplus that can be captured is the entire area under the demand curve. the monopoly captures this consumer surplus if it sets its price equal to $10. Similarly, the monopoly captures all the consumer surplus of the second consumer y charging $9. There is
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Unformatted text preview: no consumption inefficiencey because there are no further transactions between the conusmers that would increase at least on conumser's welfare. 6.) A firm price discriminates to increase it's profits; however it can only price discriminate under certain conditions. If under these conditions (having market power, knowing ho to charge the higher price to, and the ability to limit/prevent resales) then a firm who does NOT price discriminate cannot hope to profit more than a firm who is price discriminating....
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This note was uploaded on 05/04/2008 for the course BUAD 305 taught by Professor Davila during the Spring '07 term at USC.

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