Using the data in the graph below, please answer the following questions: - In t
ID: 1191434 • Letter: U
Question
Using the data in the graph below, please answer the following questions:
- In the absence of dumping (without price discrimination), how much profit does ABC Co. earn?
- With dumping (price discrimination), how many calculators will ABC Co. sell to Canada? To France? What price can ABC CO. charge the Canadians? The French? What are total profits now?
- Does ABC Co. benefit from dumping (price discrimination)? Explain why this is.
- In the real world, why might price discrimination be difficult to achieve? What are the unintended consequences?
Explanation / Answer
- In the absence of dumping profit made by company ABC will be by selling 27 calculators at 5$. (See total market graph)
So, total profit = 54 $ .
-ABC sells 21 calculators to CANADA and 6 calculators to FRANCE (See demand curve at 5 $)
ABC chraged CANADIANS 21*5 = 105 $
ABC charged FRENCH 6*5 = 30$
So, total profits now = 105 + 30 = 135 $
- Yes, ABC company benefit from dumping as profit now earned are 135 $ as comapred to 54 $ earlier.
- Price discrimination is dificult to achieve in real world as it require firm to read customer's mind.
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