Chap009.7 - Slide 40 If Carla can price discriminate, how...

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7 Chapter 9: Monopoly and Other Forms of Imperfect Competition Slide 37 Total and Marginal Revenue from Editing Reservation Price Total Revenue Marginal revenue Student ($ per paper) ($ per week) ($ per paper) A 40 40 B 38 76 C 36 108 D 34 136 E 32 160 F 30 180 G 28 196 H 26 208 40 36 32 28 24 20 16 12 Chapter 9: Monopoly and Other Forms of Imperfect Competition Slide 38 ± How many manuscripts will Carla edit? z Carla edits 3 papers, charges P = 36 ² TC = 3 x $29 = $87 ² TR = 3 x $36 = $108 ² Economic profit = $108 - $87 = $21/wk Why the Invisible Hand Breaks Down Under Monopoly Chapter 9: Monopoly and Other Forms of Imperfect Competition Slide 39 ± How many manuscripts should Carla edit? z Reservation price > opportunity cost for student A to F z Socially efficient number is 6 ² TR = 6 x $30 = $180 ² TC = 6 x $29 = $174 ² Economic profit = $180- $174 = $6 Why the Invisible Hand Breaks Down Under Monopoly Chapter 9: Monopoly and Other Forms of Imperfect Competition
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Unformatted text preview: Slide 40 If Carla can price discriminate, how many papers will she edit? z Assume Carla can charge each student the reservation price. Why the Invisible Hand Breaks Down Under Monopoly Chapter 9: Monopoly and Other Forms of Imperfect Competition Slide 41 Example Reservation Student price A 40 B 38 C 36 D 34 E 32 F 30 G 28 H 26 Carla would edit A to F TR = $40 + $38 = $210 TC = 6 x $29 = $174 Economic Profit = $210 - $174 = $36/wk Economic Profit is $30 more Chapter 9: Monopoly and Other Forms of Imperfect Competition Slide 42 Using Discounts to Expand the Market Perfectly Discriminating Monopolist z Charging each buyer exactly their reservation price Economic surplus is maximized Consumer surplus is zero Economic surplus = producer surplus...
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