ECO 204 Week 5 Final Paper Monopoly Potato chips Industry

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.