AP®︎ Microeconomics: Topic 4.3 Flashcards

Charging different buyers different prices for the same good based on willingness to pay.

Charging each unit at each consumer's maximum willingness to pay.

Market power, ability to identify buyers' willingness to pay, and prevention of resale or arbitrage.

A single seller charging one price to all buyers at the quantity where marginal revenue equals marginal cost.

Demand equals marginal revenue because each additional unit is sold at its own reservation price.

Produce the quantity where demand, or price, equals marginal cost.

Consumer surplus becomes zero, and all economic surplus is captured as producer surplus.

It is eliminated because output expands to the allocatively efficient quantity where price equals marginal cost.

Allocatively efficient at P = MC, but not productively efficient unless output also occurs at minimum average total cost.

Economic profit rises because the firm converts consumer surplus into additional revenue.

Revenue is the area under demand up to output, and profit equals that area minus total cost.