The following graph gives the demand (D) curve for satellite TV services in the fictional town of Streamship Springs. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local satellite TV company, a natural monopolist.

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A: Average total cost is the per unit cost incurred in producing a commodity.

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Price Discrimination

Price discrimination or differential pricing is based on the principle that the seller will charge the buyer a price based on the buyer’s ability and willingness to pay for the product rather than applying uniform pricing for all.