Ashford 6: - Week 5 - Final Paper

1927 Words Feb 6th, 2013 8 Pages
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
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Monopolistic competition requires specialized inputs because some product differentiation is compatible with perfect competition, (Carson, 2006). If we think of a good or service as a bundle of attributes, each different product could be a different combination of the same attributes. Perfect competition in the supply of each attribute could then result in perfect competition in the supply of products. Firms would be price takers, even though no two supply exactly the same good or service. It is when each firm imparts a unique attribute to its output one not exactly copied by any other supplier and therefore one which has no perfect substitute that we leave the world of perfect competition, both in attributes and in products. In order to supply an attribute that no competitor is able to provide, either a firm would have to be protected by a barrier that gives it a cost advantage in supplying this attribute, or else the advantage would have to come from possession of at least one indivisible input that is specialized to this attribute, and therefore to the firm's product. Since there are no entry barriers under monopolistic competition, each seller must be the sole possessor of one or more specialized inputs.
Without these product specialized inputs, it is hard to explain why monopolistic rather than perfect competition prevail. Final Paper 4
The Benefits

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