Manon's Econ Blog

Archive for the ‘2.3 Profit & Revenue’ Category

Perfect competition

Oligopoly

Monopolistic competition

Monopoly

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Back to the time I was in France, it was quite common that I received mails on my phone from clubs saying “Ladies’ Night – Entrance free for ladies!” I thought this was an interesting example of price discrimination since the purpose of these “Ladies’ Night” is not to directly increase revenue nor to divide people into groups in order to maximize profit, but to increase the number of girls coming, hoping they would buy more drinks since the entrance is free for them.

With the “Ladies’ Night,” clubs do not increase their profit because of the entrance tickets but because of the drinks that people can buy while they are inside the club. In any case it contributes to a maximisation of the profit.

During the tennis ball game, we had to pass on tennis balls from one end to the other, adding people into the line everytime.

The total product (the number of balls passed on to the other side) increased most of the time; it increased a lot at first, then slow down, and decreased at the end. This is because as the more people are added, we were all getting closer and closer to each other so it was getting hard.

The average product was a line getting lower and lower quite smoothly.

The marginal product is going up and down all the time because of changes in method; as more pople were added we had to change method because the old one was not working anymore; when the method was good the curve went up, when it was not it went down, sometimes to negative values.

The maximum output happened with 10 people because we had a good method and we were all focused; when it got to 14 people we did not have any space and the new people did not have any training so some messed up in passing the balls, so the total product, the marginal product, and the average product went down.

In conclusion, adding people is not always the best thing to do, but finding a good method and a correct number of labor make the level of output increase.