The Act of Selling

B. There are about 34,000 full service restaurants in Miami, Florida with a population of about 2.5 million. What type of market structure is the restaurant business in Miami, Florida? Explain your reasons.

The market structure of the restaurant business in Miami, Florida would be considered a “Monopolistic Competition”. Monopolistic competition is where you have a large number of firms similar to one another, advertising or selling similar, not identical products. When considering restaurant business, you must consider the location of the restaurant and being that these are considered “full service” restaurants; no two restaurants would be exactly the same. Also you must take into consideration, idealistically the most important consideration, the chefs. Being a chef is a skill and depending on their specialty, its closely impossible to find two chefs who cook exactly the same. I believe chefs cook with their own special signature and that is why I consider a full service restaurant, a monopolistic competition. Again, this type of market is easy to get in and easy to get out due to the many variation of competition between the firms. Also when taking into consideration of a restaurant and what type of foods are prepared, it’s rather simple to obtain the research on the cuisines or even the chef, themselves.

D. PC-World is a U.S. manufacturer of personal computers. The CEO is looking at opportunities for off-shore production. The selection of the country where PC-World will establish a production facility will depend on the following two factors: 1. The local wage in US$ terms; and 2. The rate of unemployment. According to the CEO, a low wage country will give the company a cost advantage, while a high unemployment rate will mean that there are plenty of workers available to work at the manufacturing facility. How would you advice the CEO regarding the use of these two indicators as the selection criteria?

In order to determine what would be the best option, we would need to determine the Real GDP per person in its corresponding economy. What this would do is provide us an analysis on how much workers would produce. Also we need to consider the average labor of productivity; ie human capital ie education and training for the different working class, physical capital ie machinery and equipment, natural resources ie ability to obtain raw material and the availability of land, obtainable technological advances to be applied in production, and the social and legal environment. This analysis of labor productivity who gives us a solid understanding what our overhead cost would be. Now to consider the high unemployment rate, we must determine what the GDP capita is. This would allow us to determine what total population is working so that we can isolate the populations that have the high unemployment rates. Therefore we are not looking for countries that have high productivity growth. Therefore the CEO should keep towards countries that have a high recessional gap which should have a negative output gap. Based on the few analogies referenced, the CEO should be able to make a good analysis and go forward with offshore production. We take into consideration companies like Apple, for instance who uses foreign employees and mainly foreign parts. They are able to cut down on overhead in their manufacturing facilities. Keep their more skilled jobs domestic, therefore “no harm no foul” and still have higher profits.