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The potato chip industry - Essay Example

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WONK POTATO CHIP COMPANY Instructor: Abstract In an environment involving a monopolistic competition, there normally exists an atmosphere that suits both the consumer and the business. The consumer is able to enjoy a range of options when shopping while avoiding exploitation from the producers of those products…
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The potato chip industry
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The potato chip industry

Download file to see previous pages... The change in the market structure of the potato chip industry will have a few effects upon the stakeholders. A monopoly market structure tends to risk the freedom of the consumer, but businesses can enjoy the advantages of a pure monopoly while at the same time protecting the consumer from subsequent exploitation characteristic of a monopoly. Characteristics of a Competitive Monopoly A monopoly competition is characterized by a number of distinct values. Normally, there exists a number of small businesses that produce identical goods but with minimal differences. These small firms end up having competition for their products in the market. Some of the hurdles that entrants of a business line or an industry experience include barriers involving government policies, creation of demand for products, research and development costs, and start-up and so on. However, in the case of a competitive monopoly, the firms involved do not have experience these (Ackerman, Goodwin & Weissskopf, 2009). Due to the demand created for their products. More often than not, demand exceeds supply for the product in question and therefore the business try to compete for a larger share of available demand. In relation to this, the potato chip industry had a monopolistic competition for their products before the lawyers came and took over the industry. The market structure for the potato chip industry experienced minimal price control due to the reason that it was a competitive monopoly. Effects of Pure Monopoly to the Stakeholders Every business has a number of stakeholders, who may have interest in the company due to one or more reasons. The stakeholders of any company include, but are not limited to consumers, suppliers, government, creditors and owners/shareholders. A pure monopoly market affects the stakeholders in different ways depending on the benefits that they attain from their relationship with the company (Hall & Liberman, 2001). When the two lawyers bought up the entire industry, they wanted to be able to exercise pure monopoly in the potato chips industry in Northwest region. Particularly being the sole owners of the entire industry in the region, the partners are able to enjoy price control to the detriment of the consumers of this product. This way they can maximize their profits. The consumers of the potatoes in the Northwest region will have several major adverse effects from the monopolistic practices of Wonk Company. Firstly, the prices of the potato chips will shoot up meaning that the consumers will spend more for the same products that were once affordable. For the reason that Wonk Company does not experience competition, it is possible that the products will decline in quality and as a consequence the consumers will suffer the effect. The suppliers from whom the potato chip businesses bought their products will also experience a hit. Wonk Company will attempt to practice price control of the products that they acquire from their suppliers. As a result, many of the suppliers such as farmers will have to look for alternative markets for their potatoes. Otherwise, Wonk will buy the products at low prices and farmers will suffer the effects of the monopolistic market. Impacts of Monopoly on Prices, Output and Efficiency Davies puts forward the fact that ...Download file to see next pagesRead More
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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. The new company is now a “monopoly” which is only the sole provider of potato chip in the entire country.
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