Eco 550 Assignment 2

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Assignment 2

ECO 550

August 5, 2012

1. Describe the industry and explain the general pattern of change of the particular market model. The restaurant Industry in Greenville, SC currently seems to be a monopolistic competition. Monopolistic Competition means that there are many small firms, no barriers of entry, each firm is convinced that their brand id better than the other and there is not a homogenius product. The pattern of change seems to be moving from left to right. Greenville started with a few restaurants and continues to grow each month. The more research that is done, the closer the scale is shifting from left to right. Oligapoly means that few a few firms produce 80% of the market, products can be very different and strategic behavior is at play. Strategic behavior is at play because competition is the value, it can bring benefits and it can also lead to violation if the market is not watched closely. 2. Hypothesize the basic short-run and long-run behaviors of the model in the industry you have chosen in a “market economy.”

The short-run behaviors in the restaurant industry would be the reactions to inflation and deflation within the economy. The long-term behaviors would be how the scales are shifting from right to left or from left to right. 3. Analyze at least three (3) possible areas for the industry that could lead to transaction costs, and explain each in detail.

There is a lot of cost incorporated with the restaurant industry. Such cost include the ability of accepting credit cards, delivery fees, and contract negotiations and fees. Restaurants that have a credit card system must pay a processing fee from each major credit card company’s card they except. Along with the credit card processing franchises will have to...
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