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1. Read the story about Heartland Towing and answer the following questions. (Http: / /

1. Read the story about Heartland Towing and answer the following questions. (Http: / / wps.aw.com/aw_parkin_economics_8/65/16892/4324444.cw/index.html). a. Is Heartland Towing a monopoly? Why or why not? b. What economic phenomenon does this news article illustrate? c. Do you think Heartland Towing ends up earning an economic profit? Why or Why not? If you've paid cover price for The Innocent Man by John Grisham, you've paid way too much. (Landy, Heather. Â?? Book Wars, Â?? Fort Worth Star-Telegram, Texas, December 14, 2006.) This is the conclusion reached by the reporter who covered the vigorous price competition between Borders and Barnes & Noble in Fort Worth region during the 2006 holiday shopping season. The article made several points: Â?? Pumping the price war is Borders Rewards, the loyalty program that Borders Group introduced at the start of the year. Members get weekly coupons via e-mail and a personal shopping day when they can save 10 percent on most purchases on a day of their choosing each time they spend at least $ 50 in a month at Borders or Waldenbooks stores. Â?? Barnes & Noble responded. In October, the company stepped up the usual 10 percent discount offered to its cardholders to 40 percent for hardcover bestsellers and 20 percent off all other hardcover books for adults. Â?? Â?? David Norwood, who opened a bookstore in Frisco four months ago, closely watches his big-box competitors. But so far they mainly seem to be beating up one another, he said Â?? We're in a position where if we had to, we could run some similar discounts of our own if they were doing something we felt we needed to compete against, Â?? said Norwood, owner of The Bookworm at 3245 Main St. Â?? But at the moment, we're just enjoying the steady stream of people coming in and saying they're just so glad they don't have to drive 30 minutes to get to one of the big stores. Â?? Â?? As the chains (Borders and Barnes & Noble) expanded in the 1980s and 1990s, they distinguished themselves from the rest of the industry with their giant locations, vast selections, in-store cafes and cozy reading areas. Use this information to: a. explain why the retail market for books in the Fort Worth area does not qualify as perfectly competitive. b. identify examples of price discrimination. c. find evidence from the article of produce differentiation. 3. Is there sufficient competition in this industry for producersÂ?? profit-seeking activities to benefit consumers? Or do the producers gain at consumersÂ?? expense? Would consumers be better off if the market were perfectly competitive? Explain. 4. Explain how all the book stores in the region could gain by cooperating with one another to keep book prices high. Why donÂ?? T they do this? Why is this price-fixing behavior impractical for producers in a perfectly competitive market?

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