ECO 1104 Chapter 15: Chapter 15.docx

• School: University of Ottawa
• Department: Economics
• Course: ECO 1104
• Professor: David Gray

Document Summary

Why monopolies arise: monopoly resources, a single firm owns a key resources, government created monopolies, the government has given one person or group the exclusive right to sell a good or service, natural monopolies, when a single firm can supply a good or service at a lower cost than 2 or more firms. P falls which lowers total revenue: profit maximization, p>mr=mc, find when mr=mc and take that quantity up to the demand price, monopoly"s profit, profit = tr tc = (tr/q tc/q) x q = (p atc) x q. Price discrimination: selling the same good at different prices to different customers, a parable about pricing, increases profits, separating customers willingness to pay, can raise economic welfare, the analytics of price discrimination, perfect discrimination is p=willingness to pay, 2nd degree is higher quantity equals lower price, 3rd degree is different segments of the market, examples of price discrimination, airline prices, discount coupons, financial aid, quantity discounts.