ECO 204 Week 5 Final Paper

Assignment 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.