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Total Revenue with Perfect Price Discrimination

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Calculate the total revenue without price discrimination as well as with price discrimination, and put the data into the table below.

Price____Qd____TR____TR (with perfect price discrimination)
20______ 0_____ -- ____ --
18______12_____ ? ____ ?
14______18_____ ? ____ ?
10______26_____ ? ____ ?
7_______33_____ ? ____ ?

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See the attachment.

Price____Qd____TR____TR (with perfect price discrimination)
20______ 0_____ -- ____ --
18______12____216 ___228
14______18____252 ___306
10______26____260 ___390
7_______33____221 ___435.5

Perfect competition is the act of charging different prices to different customers, above the equilibrium price. The objective is to get the highest possible total revenue. The rational behind this is based on the definition of demand: the ...

Solution Summary

Perfect price discrimination is the act of charging different prices to different customers to take advantage of demand condition in order to maximize total revenue. The solution calculates total revenue with this, with almost 300 words of explanation and a full example with a demand curve and equilibrium price attached.

See Also This Related BrainMass Solution

Problem concerning maximizing net revenues

The rule for maximizing net revenue (total revenue minus total cost) is: Take any action if, but only if, the expected marginal revenue exceeds the expected marginal cost. What is marginal revenue? How is it related to demand? You can test your grasp of this key concept by examining the case of Maureen Supplize, who runs a yacht dealership. She has five potential customers, and she knows how much each would be willing to pay for one of her yachts.

See the attachment for the full problem and related tables.

(a) Fill in the blanks in the second column to complete the demand schedule implied by these data.
(b) Fill in the blanks in the third column to show Maureen s total receipts from yacht sales at the various prices listed.
(c) Fill in the blanks in the fourth column to show the extra revenue obtained by Maureen from each additional yacht she manages to sell when she lowers her selling price.
(d) How many yachts will she want to sell if her goal is to maximize total revenue? (Don't start thinking yet about selling to different people at different prices. We'll take that up later. Assume for now that she can't get away with charging one buyer more than another.) What price will she want to set?
(e) Now assume that her goal is to maximize net revenue and that the marginal cost to her of selling a yacht is $6 million. In other words, each additional yacht she sells adds $6 million to her total costs. How many yachts will she now want to sell? What price will she want to set?
(f) If you have proceeded correctly, you should now be able to experience something of Maureen's frustration. Ewing and Penney are both willing to pay more for a yacht than it costs Maureen to sell one to them. Yet she can't sell to either without reducing her net revenue. Why?
(g) Suppose now that none of her customers is acquainted with any of the others and that she can consequently get away with charging each one the maximum he is willing to pay. Under such an arrangement, which we shall call "perfect" price discrimination, what is Maureen's marginal-revenue schedule? Fill in the blanks in the fifth column.
(h) How many yachts will Maureen now want to sell?
(i) Fill in her total revenue schedule under "perfect" price discrimination.

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