EC120 Lecture 16: Monopolies II
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Monopoly one seller; identical market multiple sellers. There is no substitutes in this market. In perfectly competitive market, no welfare cost. Price is higher than marginal cost they make a profit. Price discrimination: so far we have been assuming that the monopoly firm charges the same prices to all customers. In many cases, firms try to sell the same good to different customers for different prices: price discrimination: the business practise of selling the same good at different prices, a competitive market cannot take part in price discrimination. A parable about pricing : well known australian author that has many of her fans in australia. Hard-core enthusiasts are willing to pay a higher price . She is the only novelist with a specific style that many people like, therefore she technically has a monopoly. If we charge in canada, we are losing potential customers! Canada willing to purchase the book, but is much too high a price.
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