hw4 - Steven Kordvani Business Economics(BUS 247 HW 4-Fall...

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53 P1= 10 Steven Kordvani Business Economics (BUS 247) HW # 4-Fall 2008 Prof. Bradbury 1. When firms are able to achieve perfect price discrimination: a. The value of consumer surplus is zero because all the consumer surplus is transferred to the firm. b. The share of total welfare which is acquired by the firm is all of it. There is no net loss to total social welfare. 2. Arbitrage is the practice of buying and selling to profit from a price difference. This makes it impossible to price discriminate. 3. a. Calculate the ratio for the price discrimination monopolists P1P2 : = ( - ∈ ) MRi Pi 1 1 i P1 ( - ∈ ) 1 1 1 = P2 ( - ∈ ) 1 1 2 P1P2 = ( - ∈ ) 1 1 1 ( - ∈ ) 1 1 2 ( - ) ( - ) 1 16 1 12 ( ) ( ) 56 12 If P2 = 6, then what is the value of P1: P1= 53 P2 53 (6) b. The group of consumers according to this equation that will end up paying the higher price is the first group because they are more inelastic. c.
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This note was uploaded on 02/15/2011 for the course ECON 247 taught by Professor Bradberry during the Fall '10 term at CUNY Queens.

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hw4 - Steven Kordvani Business Economics(BUS 247 HW 4-Fall...

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