Question

Explain how consumer surplus, economic profit, and output change when a monopoly perfectly price discriminates.

Answer 1

Explanation:

Price discrimination is a microeconomic pricing strategy where identical or largely similar goods or services are transacted at different prices by the same provider in different markets.[1][2][3] Price discrimination is distinguished from product differentiation by the more substantial difference in production cost for the differently priced products involved in the latter strategy.[3] Price differentiation essentially relies on the variation in the customers' willingness to pay[2][3][4] and in the elasticity of their demand. Price discrimination, very differently, relies on monopoly power, including market share, product uniqueness, sole pricing power, etc.[5]

The term differential pricing is also used to describe the practice of charging different prices to different buyers for the same quality and quantity of a product,[6] but it can also refer to a combination of price differentiation and product differentiation.[3] Other terms used to refer to price discrimination include equity pricing, preferential pricing,[7] dual pricing[4] and tiered pricing.[8] Within the broader domain of price differentiation, a commonly accepted classification dating to the 1920s is:[9][10]

Answer 2

• Price discrimination is a microeconomic pricing strategy where identical or largely similar goods or services are transacted at different prices by the same provider in different markets.
• Price discrimination is distinguished from product differentiation by the more substantial difference in production cost for the differently priced products involved in the latter strategy.
• Price differentiation essentially relies on the variation in the customers' willingness to pay and in the elasticity of their demand.
• Price discrimination, very differently, relies on monopoly power, including market share, product uniqueness, sole pricing power, etc.