Monopoly Case Study

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Chapter 15: Monopoly
Question 1: explain how the following industries practice price discrimination: movie theaters.
Different price is charge to different age range. Price is based to the buyers’ age whether they are a student, adult or elderly, most adult receives regular admission price while students and elderly receives discount, this is because students and elderly are less likely not able to afford the full-price of a movie ticket as they may not have income. Thus, this pricing strategy is used among the movie theaters. Moreover, the price of the movie tickets varies on the time of purchase, movie theater may charge less price in the morning/afternoon and charge more in the popular time such as evening or Fridays.

Question 2: explain how the following industries practices price discrimination: airlines.
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(Hints: Graph the market failure and explain the problem. Then show how the government action will change the situation.) Without Government Intervention The air pollution imposes a cost on people who breathe in the air because the increase in air pollution will affect the health of the people.In the presence of the pollution, the social cost of the pollution exceeds the private cost.due to negative externality the social cost curve is above the supply curve, in which the vertical distance between the curve of private cost and the social cost is the external cost.In the graph it can be seen that the optimal quantity is smaller than the market quantity, where QMKT is the free-market and OOpt is the efficient output, Thus, there is a welfare loss(A, B, C)

In order to improve economic efficiency, the government can consider imposing green tax on drivers and factories to reduce the pollution that is being emitted. In the graph the supply curve(private cost) will shift to the left resulting in the market equilibrium equals to the social
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