Q1. A television newscaster stated, ‘Janet Jones is $20 million richer nowadays. She just won the Florida lottery that will pay her $1 million per year for each of the next 20 years. Is she really $20 million richer?
Q2. Some time ago, most of the main airlines issued student travel cards at nominal price. These cards permitted college students to fly ‘space available’ (that is, no reservations permitted) at substantial discounts. Whenever this practice was in effect, some older non students were employing the cards and some students were insuring themselves accessible space by reserving seats for fictitious passengers who then don’t show up for the flight.
a) Did the discount symbolize the price discrimination?
b) Did the conditions essential for a successful price discrimination exist?
Q3. Suppose that the soft coal industry is a competitive industry and it is in long run equilibrium. Now suppose that the firms in the industry form a cartel.
a) What will occur to the equilibrium output and price of coal and explain why?
b) After the cartel is operating, are there incentives for individual firms to cheat? Explain why?
c) Does the possibility of entry through all the firms make a difference in the behavior of cartel?