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Second Degree Price Discrimination

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"Will a monopolist's total revenue be larger with second-degree price discrimination when the batches on which it charges a uniform price are larger or smaller? Why?"

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In the literal sense, a monopolist has the freedom to set whatever price it wants because it is the only producer/ manufacturer/ provider of the good or service in the market. Since there is no ...

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A monopolist's revenue with second degree price discrimination is explored.

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Second-Degree Price Discrimination Benefits

Suppose that individual demand for a product is given by QD = 1000 - 5P. Marginal revenue is MR = 200 - 0.4Q, and marginal cost is constant at $20. There are no fixed costs.

a. The firm is considering a quantity discount. The first 400 units can be purchased at a price of $120, and further units can be purchased at a price of $80. How many units will the consumer buy in total?

b. Show that this second-degree price-discrimination scheme is more profitable than a single monopoly price.

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