Ashford 6: - Week 5 - Final Paper

In: Business and Management

Final Paper 2
Final Paper
It was the year 2007, and the potato chip industry in the Northwest was
competitively structured and in long-run completive equilibrium. Firms were earning a
normal rate of return and were competing in a monopolistically competitive market
structure. In 2008, a couple of lawyers quietly purchased all the firms and began
operations as a monopoly called “Wonks.” To operate efficiently, Wonk’s hired a
management consulting firm, which estimated a different long run competitive
equilibrium. The new company is now run as a monopoly, and this paper shall explain
how this benefit’s the stakeholders involved, such as the government, businesses, and
consumers. Furthermore, given the transition from a monopolistically competitive firm to
a monopoly, I will explain the changes with regard to prices and output in both of these
market structures. Lastly, an explanation about which market structure is more beneficial
for Wonks to operate in, and if this will be the same market structure that will benefit
In any market transaction between a seller and a buyer, the price of the good or
service is determined by supply and demand in a market, (Asmundson, 2010). Supply and
demand are in turn determined by technology and the conditions under which people
operate. Economists have formulated models to explain various types of markets. The
most fundamental is perfect competition, in which there are large numbers of identical
suppliers and demanders of the same product, buyers and sellers can find one another at
no cost, and no barriers prevent new suppliers from entering the market. Prices can
change for many reason
Final Paper 3
The relationship between the supply and demand for a good (and service) and
changes in price is called elasticity. In monopoly situations, there usually is a barrier
natural or legal to potential...

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