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| What is the "max" second order condition? |
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| What is the "min" second order condition? |
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| The area that comprises producer surplus. |
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| What is the shortcut formula for producer surplus? |
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| Profits + Fixed Costs = PS |
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| What is the intuition behind the shortcut to producer surplus? |
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| Profits - Variable Costs = Price - MC |
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| What is the inverse elasticitiy pricing rule? |
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| What are the four conditions for price discrimination? |
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1) Firms need to know consumer preferences
2) Prevent resale and arbitrage
3) Market power (can be oligopoly)
4) Consumers must have different WTP |
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| What are the three types of price discrimination? |
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1) First Degree: perfect price discrimination
2) Second Degree: quantity discounts
3) Third Degree: multimarket segmentation (airline tickets), different prices for different market segments |
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| What are the key qualities of first degree price descrimination? |
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1) CS = 0 and TS = PS
2) The firm knows everything about you
3) Sell the same number of goods as in a competitive market |
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| T/F: In 1st degree price discrimination, the discrimination is done on an individual basis whereas in 3rd degree price discrimination, the discrimination is done on a group basis. |
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