Q1

Price Discrimination: With limited competition, dominant ISPs could engage in price
discrimination.

Higher Prices: Monopolistic firms have the power to set higher prices compared to competitive
markets.

Reduced Consumer Choice: Concentration in the ISP market could limit consumer choice. With
only a few dominant players, consumers might have limited options for service plans, speeds,
and features.

Innovation Incentives: Monopolistic firms may have less incentive to innovate and improve their
services. In a competitive market, firms strive to offer better products and services to attract
customers.

Barriers to Entry: High concentration can result in significant barriers to entry for new
competitors. If existing ISPs have already established strong market positions and infrastructure,
it becomes difficult for new entrants to compete.

B)

Market A: Prescription Drugs (Higher Consumer Harm)

In Market A, if there is high concentration among pharmaceutical companies, it could lead to

higher consumer harm due to monopoly power. Here's why:

Limited Competition: High concentration means that there are only a few dominant
pharmaceutical companies producing certain essential prescription drugs.

Price Manipulation: With monopoly power, dominant pharmaceutical companies could set
higher prices for essential medications, as consumers have limited alternatives.

Inelastic Demand: Many prescription drugs have inelastic demand, meaning consumers are less
responsive to price changes because they rely on these drugs for their health.

Market B: Smartphones (Lower Consumer Harm)

In Market B, even if there are only a few dominant smartphone manufacturers, the consumer
harm might be lower compared to Market A. Here's why:

Technological Innovation: Smartphone markets are characterized by rapid technological

advancements and innovation. Even with a few dominant players, the competitive pressure to
introduce new features and better products remains high.

Substitute Products: In the smartphone market, consumers have the option to switch to different
brands or operating systems, offering a level of substitutability. .

Price Competition: The smartphone market tends to be more price-sensitive due to the presence
of alternative brands and models. Dominant firms cannot set excessively high prices without the
risk of losing customers to competitors.

Lower Barriers to Entry: The technology sector often allows for easier entry of new competitors,
even if there are dominant players. This potential for new entrants helps maintain competitive
pressure and prevent the monopolistic tendencies seen in Market A

Q2

Example: Ride-Sharing App

Imagine a ride-sharing company called "Go-Trip " that implements price discrimination based on
location, time, and user behavior.

Implementation of Price Discrimination:

Go-Trip uses a dynamic pricing model where they adjust ride prices based on various factors.

1. Market Segmentation:

Go-Trip divides its customers into different segments based on their location, travel patterns, and
usage behavior. For instance, they identify users who frequently request rides during peak hours,
users who book rides in high-demand areas, and users who travel longer distances.

2. Price Variation:
For users in high-demand areas or during peak hours, Go-Trip charges higher prices. For
example, during rush hour in a busy city center, the price per ride might be higher due to
increased demand. Similarly, rides requested in remote areas with limited availability might also
have slightly elevated prices to balance supply and demand.

3. No Arbitrage:

Go-Trip prevents arbitrage by limiting users' ability to manipulate prices Additionally, Go-Trip
sets a reasonable cap on the price increase to prevent excessive exploitation of customers during
peak times.

4. Elasticity of Demand:

Go-Trip assesses the price elasticity of demand for different user segments. For instance, they
might find that users in busy urban areas are less price-sensitive during peak hours because they
value convenience more.

Qualification as Price Discrimination:

In this scenario, Go-Trip pricing strategy qualifies as price discrimination based on the four
criteria:

Market Segmentation: Go-Trip divides its customers into different groups based on location,
time, and usage behavior, creating distinct segments.

Price Variation: The company adjusts prices differently for each segment, charging higher prices
for rides in high-demand areas or during peak hours.

No Arbitrage: Go-Trip takes measures to prevent users from easily manipulating their location
data to access lower prices, ensuring that the pricing structure remains intact.

Elasticity of Demand: The company evaluates the price elasticity of demand for different
segments and sets prices according to the relative price sensitivity of each group.

B)

Seller Profitability:

Price discrimination, as implemented by Go-Trip, can positively impact seller profitability.

In terms of class concepts, this aligns with the concept of price discrimination based on elasticity
of demand.

Consumer Surplus and Consumer Welfare:

Price discrimination can impact consumer surplus differently for various segments of
consumers.

For consumers who are less price-sensitive and value convenience or immediate availability,
their consumer surplus might decrease due to higher prices during peak times. However, for
consumers who are more price-sensitive, they might choose to travel during off-peak hours or to
areas with lower demand, resulting in a potentially higher consumer surplus.

In terms of consumer welfare, the impact is mixed. While some consumers might experience a
reduction in consumer surplus, others might benefit from more accessible and affordable options
during off-peak times, enhancing their welfare.

Consumer Benefit as a Whole:

Overall, price discrimination can have both positive and negative effects on consumer welfare,
depending on individual preferences and price sensitivities.

In this context, the class concept of segmented pricing or tiered pricing is relevant. .

Firm's Competitive Advantage:

Price discrimination can enhance a firm's competitive advantage relative to its competitors.

The class concept of market segmentation is at play here.

Q#3
Wage (W)

I' ||\\

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I || \\ Initial Supply (I)

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D L*

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Equilibrium (W')

In the illustrative graph

1. Points (W*, L*) at the point where the initial supply curve (I) and demand curve (D)
converge are where the initial equilibrium is located.
2. After the policy is put into place, the labor supply shifts to the right, creating a new
supply curve designated as I.
3. Points (W', L') at the intersection of the same demand curve (D) and the new supply
curve (I') are where the new equilibrium first appears.
4. While the equilibrium labor amount (L') increases in contrast to the initial equilibrium
labor quantity (L*), the equilibrium wage (W') decreases from the first equilibrium wage
(W*).
---------------------------------------------------------------------------------------------------------
(B)
Workers: This arrangement yields clear benefits for laborers. The arrangement of
momentary handicap protection, financed completely by the business, goes about as a
defend for representatives against unanticipated interruptions brought about by brief
sicknesses or wounds.
Company's Benefits: While the underlying discernment might propose that the firm
exclusively bears the monetary obligation of the arrangement, there are likely gains for
the firm too. By offering transient inability protection to laborers, bosses advance quick
clinical consideration chasing and quicker recuperation. Therefore, this could bring about
diminished occurrences of truancy and more limited recovery times, coming full circle in
uplifted efficiency levels. Moreover, the consideration of thorough advantages, including
handicap protection, can add to raised worker fulfillment, possibly prompting further
developed consistency standards and, surprisingly, a decrease in enlistment and preparing
costs.
Firm’s: The strategy likewise stretches out advantages to a more extensive society. Ideal
admittance to momentary incapacity protection discourages laborers from deferring
clinical consideration because of monetary concerns. This ideal intercession can prompt
superior wellbeing results and a lighter burden on medical services frameworks. In
addition, the strategy's affirmation of monetary solidness for laborers during times of
disease or injury mitigates the gamble of these specialists diving into neediness or
depending on government help. This adds to a more-steady friendly texture and possibly
eases the stress on friendly government assistance programs.
Workers: Upgraded employer stability, diminished monetary strain during wellbeing
related mishaps
Firms: Potential additions in efficiency because of diminished truancy as well as
expanded worker spirit
Society: Improved wellbeing results, diminished strain on friendly government assistance
organizations, and a stronger labor force