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Eco 204

In: Business and Management

Submitted By dantoinette
Words 1362
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Final Paper Name. ECO204: Principles of Microeconomics Professor date

Final Paper In 2008, two lawyers began purchasing competitive potato chip firms with the goal to form a monopoly firm called “Wonks”. After purchase of these firms, the two lawyers then hired a management consulting firm to estimate the long-run competitive equilibrium of this new monopoly. The following paper will discuss the benefits of this new monopoly towards stakeholders involved, the changes that may occur in price and output of the product in this particular market structure; and market structure that will most benefit the Wonks potato chip monopoly.

A monopoly is defined as a firm that produces a product for which there are no close substitutes and in which significant barriers exist to prevent new firms from entering the industry. By purchasing all firms involved with the potato chip industry the two lawyers created a pure monopoly. A pure monopoly would allow the two firm owners to control the whole industry. By seizing control of the market, the firm would now control their position on the market demand curve. They control everything from output quantity, to price point and their only limit to production would be cost of production.

When a firm controls there position on the demand curve, the firm has over all power as to what and how much product is produced. By operating as a monopoly there is no difference between the industry and the firm, as stated in our text. The firm is now the industry, so all decisions are ultimately decided by the firm. The result of this can be price discrimination which will impact household and suppliers of the product. Different suppliers may be charged a higher fee for the same product, which in turn, will…...

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