King Rat (gkr) wrote,
King Rat

Eco 200: below cost

(group) Which of the following products are being sold below cost? With what other products are they competing? Is the competition unfair?

  1. Coffee offered by a bank to its customers without charge
  2. As many cups of coffee after dinner as the diner in an expensive restaurant requests, at no extra charge
  3. Commcercial television programs
  4. Soft drinks on an airline flight
  5. A roll of film given to each adult customer during a pizza shop's first week of operation

None of them seem to be sold below cost, if one considers the proper opportunity cost. Each of these is being offered to bring in more customers. The opportunity cost of the television show, for instance, is the advertising revenue. It may not even be advertising shown with the show itself. It may even be advertising revenue shown on the show following it (for instance, friends).

In none of the cases illustrated is there really a restraint on trade, so I wouldn't personally characterize them as unfair.


  • Last post

    I don't plan to delete my LJ (I paid for permanent status, dammit), but this will be the last post. I don't plan to read it anymore, either…

  • Unemployed

    Turns out my insurance is cut off at midnight tonight, not the end of the month. In a way, that's a good thing. Now I'll move my appointment…

  • Home from the cruise, off to Sunnyvale

    A week off, but tomorrow I head to the home office for a week there.

  • Post a new comment


    Anonymous comments are disabled in this journal

    default userpic

    Your reply will be screened