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Seinfeld Economics: The Bottle Deposit

by Linda Ghent

Arbitrage is the practice of taking advantage of a price difference between two or more markets.

An incentive is any factor (financial or non-financial) that enables or motivates a particular course of action, or counts as a reason for preferring one choice to the alternatives.

Fixed costs are business expenses that are not dependent on the level of goods or services produced by the business. They are the costs of fixed inputs, such as rent or insurance.

Variable costs are expenses that change in proportion to the activity of a business. Variable cost is the sum of marginal costs over all units produced. 

Seinfeld: The Bottle Deposit

Kramer and Newman hatch a scheme to arbitrage bottles from NY, where the deposit is 5 cents, to Michigan, where the deposit is 10 cents. They can't figure out how to make the costs work; gas is too expensive (variable costs), and there's too much overhead (fixed costs of tolls, permits, etc.) with using a semi to haul the bottles in volume. Finally, they hatch a scheme to use a mail truck, which lowers their variable and fixed costs to zero.

from Seinfeld, Season 7 (1996)
Creator: Larry David & Jerry Seinfeld
Posted by Linda Ghent
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