Chap009.7

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

This preview shows page 1. Sign up to view the full content.

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
This is the end of the preview. Sign up to access the rest of the document.

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 ² Economic surplus is maximized ² Consumer surplus is zero ² Economic surplus = producer surplus...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online