Cost Structure of Microchips Manufacturer - Essay Example

 Cost Structure of Microchip’s Manufacturer The entire cost structure of a manufacturer of microchips is illustrated below: Output (Microchips/ Day) Total Cost (000’s) Fixed Cost (000’s) Variable Cost (000’s) Avg. Fixed Cost (000’s) Avg. Variable Cost (000’s) Avg. Total Cost (000’s) 0 10 10 0 25 60 10 50 0.4 2 2.4 50 95 10 85 0.2 1.7 1.9 75 150 10 140 0.133333333 1.866666667 2 100 220 10 210 0.1 2.1 2.2 125 325 10 315 0.08 2.52 2.6 150 465 10 455 0.066666667 3.033333333 3.

1 Question 12: State the necessary conditions for price discrimination. Then, discuss how they might apply to the medical services of a doctor Price discrimination is the practice by firms of charging different prices for identical goods and services, to different sets of consumers (Tutor2u, 2010). This practice can however be implemented after four conditions have been met, which are referred to as the necessary conditions of price discrimination: It is necessary that the firm should have the ability to control market prices, therefore it should have a downward sloping demand curve The firm must carefully draw a distinction between markets, and plan the prices accordingly, with regards to ability and willingness of consumers, for if the cost of initiating a price differential is costly, it might overcome any profit margins resulting from it The buyers capability to reach alternates and substitutes would determine the price discrimination, if the price elasticity of demand is low, or close to inelasticity, it assures that the firm can charge higher prices without the fear of losing its customers, otherwise it has to be the price taker and would have to accept the market price resulting from competition The firm must be the end seller of the product, it should ensure that no other agent or entity purchases the product at lower price and sells it at a higher price elsewhere, which would undermine the profits of the producer With regards to the medical services of a doctor, the price differential would exist geographically, in rural areas a doctor would have to charge lower price as compared to urban areas owing to the income differential.

Similarly, the developed suburbs where skilled doctors are in a shortage would open the market for higher prices; hence the doctor could charge higher profits for same service as compared to areas with high elasticity of demand for their service. Despite the efforts on part of the State to control these discriminatory prices, the efforts go down the drain, due to collaborative lobbying efforts by doctors and medical institutions, specifically the medical trainers who supply less trained medical professionals in the market in order to keep their demand high and the prices soaring up (Watkins, 2010).

Question 4: Contrast the major objectives of economic regulation and social regulation The Government of any nation is the regulatory body which undertakes different measures targeted at certain aims, for varying purposes, thus the regulation practice with to rectify any damages to the economy of the nation are called the ‘economic regulations’ and the acts for the welfare of the society are ‘social regulations’. The main purpose of economic regulation is to control the prices which can be charged by regular businesses.

It is also referred to as ‘rate regulation’ which pertains to preventing the exploitation of customers at the hands of the monopolies, which tend to produce at lower than the efficiency level by charging above the point where Marginal Cost is equal to the Marginal Revenue, hence they largely operate inefficiently (allocatively inefficient) and charge astronomically high prices. On the contrary, the main purpose behind the implementation of social regulation practices is to protect the environment and society from the detrimental effects of production activities.

It generally focuses on better quality life for all people associated with the production of goods and services, through stress on better quality products to protect consumers, favorable working conditions for the labor force, less polluting production methods for the safety of the environment and atmosphere, and also promotes similar social objectives. Thus it could be concluded that economic regulation’s main aim is to initiate efficiency and help the economy of the nation, while social regulation focuses on the environment, working conditions and betterment of all the stakeholders of an enterprise.

In certain situations it is hard to mark the distinction between a regulation, and it becomes extremely difficult to classify it into economic or social purpose, such as a ban on marijuana, which is harmful for the environment as well as the economy because it entails a market failure, making Government intervention a necessity (Rasmusen, 2007). Works Cited Rasmusen. E. Economic Regulation and Social Regulation, 1. Intro. 2007. July 25, 2010 Tutor2u. Price Discrimination. 2010. July 25, 2010 Watkins. T. The AMA and Price Discrimination in Medical Care. 2010. July 25, 2010