Focus of the Final Paper
Assume that the potato chip industry in the Northwest in 2007 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.
• 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?
• 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?
• What market structure is more beneficial for Wonks to operate in, and will
this be the same market structure that will benefit consumers? Explain the
reasoning behind your answers.