ECN 1A Study Guide - Midterm Guide: Deadweight Loss, Price Discrimination, Economic Surplus
Document Summary
Practice questions for midterm 3: suppose that a monopolist has a marginal cost of , and a fixed cost of . What is the deadweight loss from the tax: suppose instead the government imposes a lump sum profits tax of . Children are lighter, so imply a lower marginal cost to airlines. Airlines are legally required to offer lower fares to children. Families with children typically have more elastic demand. Families with children are typically poorer than people without. Because families have multiple people the airline gets more profit from being able to sell two or more tickets to them, so offers a discount. Another page on expedia used to offer a lower fare if the traveler was willing to buy the ticket before the airline or the route or the time of departure on the day specified is revealed.
