1. Market Structures in South America

In January a few years back, I went to my good friend Carla's wedding in Santiago, Chile. I was immediately impressed by the high Andes, the beautiful beaches, the good wine and of course the flourishing ECONOMIC MARKETS!

I noticed that with the warm weather in January, numerous ice cream vendors take to the metro bus and subway system. They each sell similar ice cream brands to the many bus and metro riders who have pretty good information about prices.

a). What kind of market is this? Explain. Would you expect to see much profit in this industry as it approaches long-run equilibrium? Show a graph of the possible long-run equilibrium and explain why you might either expect to see profits in the long run or not.

b) To my surprise, Chileans could always tell that I was an American (Heck, I'm mainly Italian and German in origin and so are they; maybe it was the running shoes?) One night we went to "RANCHEROS," a popular disco in Santiago. (I wanted to go to bed as I was a couple of years older than the crowd and can't take going out at 1:00AMbut agreed to go for sake of curiosity. I only got excited when I noticed that the disco was charging 7,000 pesos for males and 4,000 for females. And for "men from rich countries" the price was 10,000 pesos. I thought Wow!!, they're practicing a certain economic technique here! What is that technique called? Assuming the marginal cost of providing disco entertainment was the same for everybody, on two separate graphs, show my equilibrium on one and that of a Chilean male on another. How did they manage to charge me more?