Price Discrimination Strategy
You own a local sub shop in a college town. You primarily serve two groups of people: local residents (both students and other local residents) and visitors to your town. Devise a price discrimination strategy that will increase your revenues compared to a single-pricing strategy. Price discrimination is common type of pricing strategy used by businesses with flexible pricing power. It is price competition between firms attempting to get an advantage in the market or to protect a position they already have in the market. Price discrimination takes place when a firm charges a different price to different groups of consumers for the same good or service. A price discrimination strategy that could be used in the sub shop to increase revenue would be to have a discount for students who come in with their student identification between 8:00 p.m. and 10:00 p.m. This is a prime time for those that don’t make it to eat at the cafeteria before it closes. The cafeterias on most college campuses close at 8:00 p.m. In a survey that I did of 10 college students and former college students, 8 of them said that they eat off campus after 7:00 p.m. and all said that during mid-terms and finals they go to off campus restaurants after 9:00 p.m. I would also have coupons place in the local paper to offer specials on combo meals. These coupons would be great for those local residents that want to eat out occasionally, but do not want to pay the regular price. There would also be certain deals on certain days of the week that do not require coupons or student identification. This would be great for all that come to the shop and great for the occasional visitor to the town that want to try out the food for the first time.
Supply and Demand Analysis
Suppose the cable TV industry is currently unregulated. However, due to complaints from consumers that the price of cable TV is too high, the legislature is considering placing a price ceiling on cable TV below the current equilibrium price. If the government does make this price ceiling law, diagram and explain the effects with supply and demand analysis. If the cable TV company is worried about disgruntling customers, suppose that the company may introduce a different type of programming that is cheaper for the company to provide yet is equally appealing to customers. Explain what would be the effects of this action.

When the supply curve shifts to the right or increases, then the equilibrium price will decrease. The initial cost of the cable was at 6, but after the legislature created a price ceiling that was below the initial equilibrium price, the new supply was increased; this caused the price to decrease to 5.25 to become the new price ceiling for the cable.
Perfectly Competitive Market
Consider a perfectly competitive market. Analyze and explain in detail using graphical tools to show what you expect to happen to the number of firms and firm profitability in the short run and long run a) if demand for the product falls and b) if demand for the product rises. In the short-run analysis of cost, the cost is divided into two types of production cost; fixed cost and variable cost (O'Sullivan, Sheffrin, & Perez, 2011). The fixed cost does not change if the quantity does change, but the variable does change based on the quantity produced.
The table and graph below shows the relationship between a firms output and production cost.
Table 1- SHORT-RUN COSTS Labor | Output | FC | VC | TC | AFC | AVC | ATC | MC | 0 | 0 | $100.00 | 0 | $100.00 | _ | _ | _ | _ | 1 | 1 | 100.00 | $50.00 | 150.00 | $100.00 | $50.00 | $150.00 | $50.00 | 2 | 5 | 100.00 | 100.00 | 200.00 | 20.00 | 20.00 | 40.00 | 12.50 | 3 | 8 | 100.00 | 150.00 | 250.00 | 12.50 | 18.75 | 31.25 | 16.67 | 4 | 10 | 100.00 | 200.00 | 300.00 | 10.00 | 20.00 | 30.00 | 25.00 | 5 | 11 | 100.00 | 250.00 | 350.00 | 9.09 | 22.73 | 31.82 | 50.00 | 6 | 11.5 | 100.00 | 300.00 | 400.00 | 8.70 | 26.09 | 34.78 | 100.00 |

Figure 1-SHORT-RUN COSTS

The long-run total cost is the total cost of production when the firm is perfectly flexible in choosing the inputs. The table below shows Long –run cost of a firm.
Table 2-LONG-RUN COSTS LABOR | CAPITAL | OUTPUT | LC | LTC | LAC | 1 | $100 | 1 | 50 | 150 | 150 | 2 | 100 | 5 | 100 | 200 | 40 | 4 | 100 | 10 | 200 | 300 | 30 | 8 | 200 | 20 | 400 | 600 | 30 | 12 | 300 | 30 | 600 | 900 | 30 |

Long-Run Cost Curve
Discuss why some long-run average cost curves are steeper on the downward side than others. Discuss fully. Long run average cost curves show the economies and diseconomies of scale of a specific firm. So as a firm grows, it tries to achieve the maximum amount of economies of scale without any diseconomies of scale (which is when the curve starts to slope in a positive direction). If an average cost curve is steeper on the downward side, it means that it is more inelastic to the changes in the cost to the quantity it can produce (Lars).

Price Discrimination
If you purchased a new model of a digital camera right after it is released, you will likely pay more than if you purchase it six months after release. Explain why this is an example of price discrimination on the part of the firm Some consumers are willing to pay more than others. Some consumers are willing to pay a lot of money to get a new product and be the first ones to have the new technology, while others are not willing to pay as much and are not as concerned to be the first to have new technology. This happens, with new products. This enables a firm to charge the first group of consumers more money, and then lower the price so that the next group of consumers will buy it. This process will continue until all consumers that enables a profit, have purchased the cameras.

Evaluating Proposed Mergers Explain the rationale and the implications of the new guidelines used by the Department of Justice and the Federal Trade Commission for evaluating proposed mergers. The Federal Trade Commission and Department of Justice made changes to the Horizontal Merger Guidelines that show how the federal antitrust agencies evaluate the competitive impact of mergers and whether those mergers comply with U.S. antitrust law. These changes mark the first major revision of the merger guidelines in 18 years, and will give businesses a better understanding of how the agencies evaluate proposed mergers (Fedeeral Trade Commission, 2010). The main goal of the 2010 guidelines is to help the agencies identify and challenge mergers that may be harmful while avoiding unnecessary interference with mergers that either are competitively beneficial or likely will have no competitive impact on the marketplace. In order to accomplish this, the guidelines detail the techniques and main types of evidence the agencies typically use to predict whether horizontal mergers may largely decrease competition.

Federal Trade Commission. (2010, August 19). Retrieved January 3, 2011, from Federal Trade Commission: http://www.ftc.gov/opa/2010/08/hmg.shtm
Lars, P. (n.d.). USC Marshall. Retrieved January 3, 2011, from University of Southern California: http://www.consumerpsychologist.com/marketing_introduction.html
O'Sullivan, A., Sheffrin, S., & Perez, S. (2011). Production Technology and Cost-Short-Run Total Cost. In Survey of Economics: Principles, Applications, and Tools (pp. 112-113). Upper Saddle River: Prentice Hall.