Aug 05, 2017

Development of the Potato Chip Monopoly in the Northwest

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Development of the Potato Chip Monopoly in the Northwest

INSTRUCTIONS:
Eco_Final.docx Review the following information pertaining to the potato chip industry and answer the questions below in a five double spaced page paper (not including title and reference pages). In 2007, the potato chip industry in the Northwest was competitively structured and in long-run competitive equilibrium; firms were earning a normal rate of return and were competing in a monopolistically competitive market structure. In 2008, two smart lawyers quietly bought up all the firms and began operations as a monopoly called “Wonks.” To operate efficiently, Wonks hired a management consulting firm, which estimated a different long-run competitive equilibrium. 1. Given that the new company is now run as a monopoly, how will this benefit the stakeholders involved, such as the government, businesses, and consumers? 2. Given the transition from a monopolistically competitive firm to a monopoly, what will be the changes with regard to prices and output in both of these market structures? 3. What market structure is more beneficial for Wonks to operate in, and will this be the same market structure that will benefit consumers? Be sure to explain the reasoning behind each of your answers.
CONTENT:
Development of the Potato Chip Monopoly in the NorthwestName:Course title:Instructor:Institution:Date Due Development of the Potato Chip Monopoly in the NorthwestIn US, the potato chip was invented in 1853, and since this invention, it has been turned into a staple food by many American families. Additionally, it is also considered as a top snack among the majority of people (Maslow 2004). Potato chips are available in many stores, supermarkets and even specialty shops. These Potato chips are packed in a range of textures, styles, flavors and tastes. In the year 2007, the potato chip industry in Northwest was competitively structured and in the long run achieved competitive equilibrium. During this era, organizations in this industry were earning a substantial amount of profits in the market structure that was competitive in this entity. Two clever lawyers came up with an idea in 2008 to buy all the firms that engaged in the potato chip business. This led to the formation of a monopoly, which they termed as “Wonks”. They hired a subcontractor in management consultancy so as to make operations more efficient. This tactic changed the long run competitive equilibrium of the business entity into ales competitive monopolistic entity. This paper evaluates the advantages of this new monopoly, the anticipated changes with regard to output and pricing in a particular type of market structure and especially the market structure that would mostly of benefit to Wonks Potato Chip and their clientele. Since Wonks Potato Chip operates as a monopoly, how will this be advantageous to the stakeholders involved, such as the government, businesses, and consumers?GovernmentA market structure, which is monopolistic in nature, allows the market franchise, which is offered by the government to such entities. In franchising, an organization is offered to produce particular goods and or services in a given area. In exchange, the government imposes certain regulations in the organization`s operations. The regulations pertains to the pricing, behaviors and conduct and other operations policies. This will also allow the government to obtain higher tariffs and taxes since the organization is the sole manipulator in the market. In addition, the government can impose the use of subsidiaries by the consumers to enhance their operations (Bosch & de Man, 1994).  ConsumersWith regard to the welfare impact of pure monopoly, it can be argued that a monopolistic market structure can be advantageous from the producer`s perspective. Wonks Potato Chip will not have other competitors in the industry and therefore, will be able to control its pricing strategy, therefore, maximizing the profits. Additionally, they could be able to regulate their outpu...


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