Reading 19: Monopoly-LOS c 习题精选

In order for effective price discrimination to occur, the seller must have a downward sloping demand curve. The seller must also have at least two identifiable groups of customers with price elasticities of demand for the product, and the seller must be able to prevent customers from reselling the product.

Price discrimination is the practice of charging different consumers different prices for the same product or service.

Price discrimination is the practice of charging different consumers different prices for the same product or service. For price discrimination to work the seller must: 1) have a downward sloping demand curve, 2) have at least two identifiable groups of customers with different price elasticities of demand, 3) must be able to prevent customers in the lower-price group from reselling the product to customers in the higher-price group.

Statement 1 is incorrect because the sum of consumer and producer surpluses is maximized under perfect competition when marginal benefit and marginal cost are equal, or equivalently, where the marginal cost curve intersects the demand curve. Monopolies, however, produce a quantity that is less than the quantity where marginal cost equals marginal benefit, so the sum of producer and consumer surpluses is not maximized.

Price discrimination works when the seller (discriminator) faces a downward-sloping demand curve and has at least two customer groups each having different price elasticities for the product. It is also necessary that trading does not occur between customer groups so that the customers paying a lower price cannot resell the product to the customers paying a higher price.

Allocative efficiency occurs when the quantity produced maximizes the sum of consumer and producer surplus. That is, where marginal benefit equals marginal cost. Price discrimination reduces the allocative inefficiency that exists when prices are greater than marginal cost by increasing output toward the quantity where price equals marginal cost. Firms gain by selling to customers with inelastic demand while still providing goods to customers with more elastic demand. This may even cause production to take place at a level where it would not take place otherwise.

Price discrimination is the practice of charging different consumers different prices for the same product or service. Examples include different prices for airline tickets based on whether a Saturday-night stay is involved and different prices for movie tickets based on age.