ECO 204 Week 5 Final Paper

Apr 16th, 2015
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Final Paper 1Final PaperECO204: Principles of MicroeconomicsFinal PaperFinal Paper 2In 2008, two lawyers began purchasing competitive potato chip firms with thegoal to form a monopoly firm called Wonks. After purchase of these firms, the twolawyers then hired a management consulting firm to estimate the long-run competitiveequilibrium of this new monopoly. The following paper will discuss the benefits of thisnew monopoly towards stakeholders involved, the changes that may occur in price andoutput of the product in this particular market structure; and market structure that willmost benefit the Wonks potato chip monopoly.A monopoly is defined as a firm that produces a product for which there are noclose substitutes and in which significant barriers exist to prevent new firms fromentering the industry. By purchasing all firms involved with the potato chip industry thetwo lawyers created a pure monopoly. A pure monopoly would allow the two firmowners to control the whole industry. By seizing control of the market, the firm wouldnow control their position on the market demand curve. They control everything fromoutput quantity, to price point and their only limit to production would be cost ofproduction.When a firm controls there position on the demand curve, the firm has over allpower as to what and how much product is produced. By operating as a monopoly thereis no difference between the industry and the firm, as stated in our text. The firm is

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