L7 Monopolies

L7 Monopolies - Chapter 9: Monopoly, Oligopoly, and...

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1 • First in-class exam on Wednesday, Jan 28 • Exam cover Chapters 7 and 9 • Answers to practice exam will be reviewed in discussion sections between Wednesday, Jan 21 and Monday, Jan 26 Chapter 9: Monopoly, Oligopoly, and Monopolistic Competition A. Total revenue and marginal revenue B. Total cost, marginal cost and fixed cost C. Profit maximization D. Monopoly E. Perfect competition F. Comparison between perfect competition and monopoly G. Price discrimination “Perfect price discrimination”: monopolist can charge each customer the maximal amount that customer is willing to pay Under perfect price discrimination, marginal revenue would be the price Price discrimination is hard to implement: (1) It’s against the law Clayton Act of 1914: “It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality” Price discrimination is hard to implement: (1) It’s against the law (2) All customers will try to buy at the lowest price (3) Firm doesn’t know each customer’s maximal price (4) Firm must be able to prevent resale
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2 Many firms find ways to implement partial price discrimination anyway: (1) Each passenger on this flight may have paid a different price (2) Sales and promotions This weekend you could buy 12-pack of Coke for $4.00 Last month the cost was $2.50 (3) Discounts for seniors, students, children, … Chapter 9: Monopoly, Oligopoly, and Monopolistic Competition G. Price discrimination H. Natural monopoly Definition: An industry in which an increase in the quantity produced leads to a decrease in average cost per unit is called a “natural monopoly” This property is sometimes referred to as
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L7 Monopolies - Chapter 9: Monopoly, Oligopoly, and...

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