Saturday, April 6, 2019
Competition vs. monopoly Essay Example for Free
Competition vs. monopoly Essay1. Analyze the fast pabulum industry from the point of view of perfect contest. Include the concepts of elasticity, utility, costs, and market mental synthesis to explain the prices charged by fast food retailers. Firms in spite of appearance the fast food industry fall under the market structure of perfect competition. Market structure is a classification system for the key traits of a market. The characteristics of perfect competition include large number of buyers and sellers, easy origination to and exit from the market, homogeneous crops, and the firm is the price taker. more fast food franchises fit all or nigh of these characteristics. Competition within the industry as well as market supply and conduct conditions set the price of products sold. For example, when Wendys introduced its $. 99 value menu, several(prenominal) some separate companies implemented the same type of changes to their menu. The withdraw for items on Wendys va lue menu was so noble because they were offering the same products as always, barely at a discounted price. This change in market demand basically forced Wendys competition to lower prices of items on their menu, in order to maintain their share of the market.The previous example illustrates the elasticity of the fast food industry. Supply and demand set the equilibrium price for goods offered by franchises within the industry. Competitors of Wendys must accept the prices established by the consumer demand for the value menu. If consumers didnt respond so positively to Wendys changes, other firms wouldnt have had to adjust prices. On the flip side of this concept, there is no need for franchises to save reduce prices below the current levels. At the current prices, firms may sell as much product as they want, thereby maximizing profits.This industry has a in truth high utility value. Utility is a measure of satisfaction or pleasure that is obtained from consuming a good or servic e. If consumers feel as if they get a good meal, at a good price, then theyre satisfied. This customer satisfaction coupled with relatively low prices keeps the industry profitable. Another quality of perfect competition that may be overlooked, but is vital to this industry is the ease of entry into the market. Start-up franchises within this market structure can begin operate with relatively low initial investments (compared to other industries).This is not the case where monopolies are concerned. There are numerous barriers to entry into monopolistic market structures, capital being one of the most prominent barriers. If a refreshed franchise an offer the consumer a quality product at a reduced price, then the chances of achiever are greatly increased. For example, Chanellos and Little Caesars offer discounted pizza prices, and maintain the same quality as other pizza chains. These companies spend less on advertising and more on the actual product.Thats a very important concept in this industry, because their quality product at this discounted price gives them a niche in the market. Once a company establishes a niche, they become more visible to the consumer, thereby creating more demand, which leads to great revenue. 2. Analyze sports franchises from the point of view of a monopoly. Sports franchises fall within the market structure of monopolies. Most passe-partout sports police squads fit most or all of the characteristics of a monopoly. For each sport, there are a particular number of teams and new entries into the league are few and far between.Also, there are many barriers to entry into the market, including large initial capital investment, dominance by one or few firms, and other effective issues that must be considered. An investor would initially need cash for payroll of players, payroll for management, advertising, playing facility, and many other miscellaneous costs. The new franchise owner would need to be very wealthy and have the O.K. of other wealthy individuals just to purchase the franchise. Once a franchise eventually enters the market, they have the power to set the prices for that particular market.Monopolies are price makers and the products offered are not sensitive to changes in the market. The demand arch of a monopoly is not elastic, as is such in a perfectly competitive market. The monopolistic demand curve is the same as the curve for the industry since there is only one firm within the industry. This allows the franchise owner to maximize profits by setting the price of tickets and concessions at an amount that creates the most revenue. Consumers will pay the price, if they want to attend a particular sporting event, no matter how dread(a) the price.This price setting is allowable, because unlike perfect competition, there are no substitutes. Cities may have devil or three teams of different types of sports (i. e. baseball, hockey, football), but few cities have more than one professional team of the same sport. Sports franchises, although theyre monopolies are not all bad. These teams bring million and millions of dollars in revenue to the city in which theyre located. First of all, jobs are created in the construction of the sports facility. Then there is revenue to the city from taxes, consumer spending at hotels and restaurants, tourist visits and numerous other avenues.Sports franchises are similar to the fast food industry in the approve that they also have a very high utility value. Fans are pleased when they witness a very competitive, hard fought sporting event, and they are willing to pay to do so. Just look at the price of Super Bowl or NBA finals tickets. Spectators pay hundreds and even thousands of dollars to witness these events division in and year out. As long as the teams are competitive and there are superstar players, consumers will go forward to watch and attend events regardless of the price.