Question
Suppose we have we have a price-discriminating monopolist that has identified two distinct market segments to which they can sell their product to each segment,
Suppose we have we have a price-discriminating monopolist that has identified two distinct market segments to which they can sell their product to each segment, each a t a different price. The larger of the two segments is charged the lower of the two prices while the smaller segment is charged the higher of the two prices. Suppose marginal costs are constant which means that the marginal cost curve is a horizontal line. Note that when MC is constant, MC = ATC. What does price discrimination allow producers to do? What sorts of considerations would the business use in order to successfully accomplish their price discrimination scheme? What are two examples of price discrimination you can think of?
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