Question

Fill the following table:

Number of Earning	TVC	MC	AVC	TFC	TC	AFC	ATC
0					100
1		50
2							95
3			46.67
4					300
5	270

b. Explain how price discrimination converts consumer surplus into economic profit.

Answer 1

A. Answer —

Q	TVC	MC	AVC	TFC	TC	AFC	ATC
0	0	—	—	100	100	‐	‐
1	50	50	50	100	150	100	150
2	90	40	45	100	190	50	95
3	140	50	46.67	100	240	33.33	80
4	200	60	50	100	300	25	75
5	270	70	54	100	370	20	74

Method — TC = TFC at o output , TC or TVC =MC or MC n = TC n —TC n‐1 or TVCn — TVCn-1 , AFC = TFC/Q , AVC = TVC/Q , TVC = TC ‐TFC ...............

B . A monopolist can discriminate price i.e . he can charge different prices from different customers for the identical product. Price discrimination converts consumer surplus into economic profit as;

i. A monopolist charges higher prices from the customers whose willingness to pay are higher and lower prices for customers whose willingness to pay are lower. So the monopolist is able to reap the willingness to pay of consumers and convert it into additional profits.

ii. Under the first degree of price discrimination the monopolist can completely harvest the consumer surplus by charging each customers differently as per their willingness to pay and convert it into producer surplus ( economic profits).