Wonk Potato Chips

Good Essays
Topics: Economics, Monopoly
As a company changes its market structure it can mean major changes. Major changes that can be made can not only affect the company its self but businesses that work with the company as well as consumers. Throughout this paper I will be discussing a potato chip company that has changed its market structure and what affects this change has made on the company, businesses that work with the company, and consumers. Prior to Wonks potato chips being in existence it was independent potato chip companies that operated in the Northwest that were ran in a competitive structure and in long-run competitive equilibrium. Once these potato chip companies were all bought up and turned into one company called Wonks potato chips which is now running as a monopoly with a different outlook to a long-run competitive equilibrium. Since this major change in market structure has occurred the benefits for the stakeholders involved with the company has changed. As a monopoly, Wonk can now determine how much product they release to the market. By controlling production and amount of product to be received by the consumer, they can impact the selling price. Since Wonk would not be in competition with any other manufactures they could increase their price as high as possible as long as the original cost of production is covered. By doing this it benefits the business involved because they will be receiving more revenue. This will benefit the consumers since Wonk is operating as a monopoly price is usually set by what the consumer is willing to pay so, if the price is increased to much the consumer will take a stand and stop buying the product until the company bring the price back down to what they will be willing to pay for the product (Case, 2009, pgs. 262-263). With the transition that is occurring from Wonk changing their market structure, changes to the price and output are both going to be effected. As mentioned above, the price will be affected by an initial increase. But Wonk


References: Case, K.E., Fair, R. C., & Oster, S.M. (2009). Principles of microeconomics (9th ed.). Upper Saddle River, N.J.: Pearson Prentice Hall. Benefits of Monopoly Power, Economics Blog, (n.d.). Economics Help –Helping to Simplify Economics. Retrieved March 5, 2012, from http://www.economicshelp.org/blog/365/ Monopoly/benefits-of-monopoly-power/

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