A 2.85 g lead weight, initially at 10.3 °C, is submerged in 7.55 g of water at 52.3 °C in an insulated container. What is the final temperature of both substances at thermal equilibrium?
ECN212PriceDiscrimination SpringSEMESTER2016 Professor:Dr.WilliamFoster EliteNotetaker:Phoebe(firstname.lastname@example.org) 1. Price Discrimination ○ Definition ■ Selling same product at different prices to different customers ■ Firm with market power can use price discrimination to increase profit ■ Gives greater profit than single price strategy ■ The more inelastic of the demand, the higher the profit will be in a price discriminated market ■ Monopoly applies when demand curves are different in different markets ○ Arbitrage ■ Taking advantage of price differences for the same good in different markets by buying low in one marketing and selling high in another ■ Increases profits for smugglers ■ Reduces profits for price discrimination firms ■ Arbitrage activimust be prevented in order to increase profits ■ Some are easy to prevent ■ E.g. Services ○ Examples ■ Men vs Women products ■ Coupons ■ Student/Senior discount ■ Financial Aid in private colleges ■ Airline companies— Pay more when shorter notice ■ Business Traveler (more inelastic demand) ■ Vacationers (more elastic demand) ○ Effects 1 ■ Can increase output = increase total surplus = lesser deadweight loss ■ PPD can eliminate deadweight loss of monopoly ■ Can increase incentives to innovate and lower fixed costs ■ E.g. University / Movie / Music / Books ■ Having very different demand curves ■ Copyright = Monopoly 2. Perfect Price Discrimination (PPD) ○ aka first degree price discrimination ○ Almost impossible to happen ○ Each customers is charged with his/hers maximum willingness to buy ■ Zero consumer surplus ■ Zero deadweight loss ■ All surplus is producer surplus ○ Everybody pays a different price ○ Neither perfect competition and perfect price discrimination is inefficient 3. Tying ○ Base good is tied to a second good (variable good) ○ Allows firms to charge a higher price to consumers with a high willingness to pay; vice versa ○ Pricing base good lower than variable good ○ E.g. Printer & Printer ink 4. Bundling ○ aka Traditional price discrimination ○ Requires products to be bought together in a bundle or package ○ Can increase output / total surplus ○ Can increase innovation due to lower fixed cost (on customers) ○ Used when firms have more demand for the bundle than single parts ○ Used when arbitrage is too hard to prevent ○ Price increase without bundle (e.g. phone with carrier) ○ E.g. Microsoft Office, iW rk 2 ECN212Monopoly SpringSEMESTER2016 Professor:Dr.WilliamFoster EliteNotetaker:Phoebe(email@example.com) Perfect Competition ● Competitive Market Conditions ○ A lot of buyers and sellers ○ Goods produced by different companies are around the same (perfect substitute) ○ Few or no barriers to entry and exit ○ No singleseller or buyer has influence on market price ○ Everyone is selling at the same market price ○ Demand rise, market price rise, more firms join the industry, each firm produce more ● Application ○ Maximizing profit = minimizing cost (same process) ○ Stable individual demand (perfectly elastic/flat) ○ Stable market demand and supply ○ Firms don’get to decide aboprice ○ Firms doget to decide abouantity ○ Tiny part of the market (individuals) has no effect on the total market ○ Examples of competitive markets (different brands = same thing) ■ Gas ■ Water ■ Egg ■ Gold ● Demand shows value, supply shows cost 1 Maximizing Profit ● Terms ○ Profit = Total revenue Total cost ○ Profit = (PriceAverage Cost) ⨉ Quantity ■ Positive Profit = Price > Average Cost (MC>AC) ■ Negative Profit = Price < Average Cost (MC AC ○ Exit when P < AC ○ No exit or entry wheP=AC ■ Zero economic profit can be positive accounting profit (not the same thing) ■ Normal rate of return ● Shortrun (uncertainty and sunk costs) ○ Depends on variable cost ○ Firms stay in operation if fixed cost > variable cost ○ Should be included the value of time / employees pay etc ○ Sunk Cost cannot be recovered shouldn’t be included to decision ○ Lifetime expected profi alternative resolution for the problem for a firm ● Entrepreneurs ○ Chasing profits by entering high profit industries / exiting low profit industries ○ Needs to innovate to earn above normal profit due to elimination principle ○ Creative Destruction = those who fail to adapt innovations ● Elimination Principle (Profits stays stable) ○ Above normal profits are eliminated by entry ○ Below normal profits are eliminated by xit 3 Industry Supply Curve ● Increasing Cost Industry ○ Costs increase when output increases ○ Upward sloping supply curve ○ E.g. Pollution deduction / Drilling oil ● Constant Cost Industry ○ Costs don’t change when output increases ○ Flat supply curve ● Decreasing Cost Industry ○ Costs decrease when output increases ○ Downward sloping supply curve Calculation ● Profit = Area of the box that is (price average cost)×Quantity ● Consumer Surplus + Producer Surplus + Tax Paid = Total Surplus ● Consumer tax paid + Producer tax paid = Tax Paid ● Deadweight loss = (Consumer paid tax producer paid tax)×(QQ*)× 0.5 4