When a monopolist switches from charging a single price to practicing perfect price discriminati

step 1 Hi everyone, so this problem six from chapter 15. So this question is asking about which primato

When a monopolist switches from charging a single price to...

Key Concepts

Total Surplus

The sum of consumer surplus and producer surplus, reflecting the overall economic welfare within a market. Even though total surplus remains the same (with the consumer surplus transferred entirely to the producer) when a monopolist practices perfect price discrimination, the redistribution can raise concerns related to fairness and market power.

Monopoly

A market structure where a single firm is the sole provider of a good or service, enabling it to set prices and output levels to maximize profit. Monopolies typically restrict output and charge higher prices compared to competitive markets, leading to potential inefficiencies.

Perfect Price Discrimination

A pricing strategy in which a monopolist charges each consumer their maximum willingness to pay, capturing all available surplus. Under this approach, there is no single market price, and the firm extracts the entire area under the demand curve as profit.

Consumer Surplus

The difference between what consumers are willing to pay for a good and what they actually pay. In the case of perfect price discrimination, consumer surplus is completely eliminated because each consumer is charged exactly their reservation price.

Transcript

00:01 Hi everyone, so this problem six from chapter 15.

00:07 So this question is asking about which primator will be reducing when a monopolist switches from charging a single price to participating perfect price discrimination.

00:28 And before we are attempting to talking about this question, i want to just rephrase what is press discrimination.

00:43 The price discrimination by definition is the business practice of selling the same good at different suppresses to different customers.

00:59 What does this mean that before practicing perfect price discrimination, the monopolist just charged a single price to all customers, right? no matter the customer's willingness to pay this product.

01:20 But after conducting perfect price discrimination, the monopolies, before conducting this, perfect price discrimination, the monopolist must know the willingness of the consumer willingness of paying this product for each single customer in order to have this so -called perfect price discrimination.

01:50 And also, the best way to understand this sort of focus is to visualize it.

01:58 So i took figure nine.

02:00 From chapter 15 to kind of illustrate what i was just talking about.

02:08 So at the left hand side, we can see this graph.

02:13 It's about a monopoly with single price.

02:16 So this is a single price and there's a quantity sold.

02:19 We know the profit, the consumer surplus, and also that we lost.

02:25 But after conducting perfect price, discrimination.

02:33 We know that this whole triangle, as we can see, the whole triangle, which was split into three parts at left -hand side, and right now it's just a single region, which is the profit for the monopolies...

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