Reference no: EM134046037

Assignment:

Consider Bridget. Bridget makes Widgets and Wodgets, a most favored snack. Given the popularity of Bridget's Widgets and Wodgets, Bridget wants to make the snack available to as many people as possible. To this end, Bridget uses price discrimination.

1. Analyze how regulations against price discrimination can harm consumers.

Bridget decides to enhance production of the Widgets and Wodgets by using additional machinery for packaging.

2. If the new machinery increases production such that Bridget would make an additional $10,000 a year for the expected 10 year life of the machinery. Bridget's cost of funds is 6%. What is the maximum Bridget would be willing to pay for the machinery? Show your calculations.

3. Describe how this new machinery would affect Bridget's earning potential compared to Bridget's competitor, Slugworth, who does not use the machinery.

Bridget's Widgets and Wodgets are so successful, Bridget decides to sell the Widgets and Wodgets in Canada.

4. Explain why some Canadians might wish to assess a tariff on Bridget's Widgets and Wodgets.

5. Explain the fallacies behind these wishes.

Suppose the Canadian government decides against tariffs on Bridget's Widgets and Wodgets but is still concerned about the effect Bridget's Widgets and Wodgets will have on Tim Tam makers. Seeking to aid Tim Tam workers, the Canadian government provides subsidies to keep the after-tax earnings of Tim Tam workers near where they were prior to the competition from Bridget's Widgets and Wodgets.

6. Describe how these government aid programs can cause more harm to the Canadian economy.