It was the year 2012, and the tire factories in the Southern states was competitively structured and in long-run completive equilibrium. Firms were earning a normal rate of return and were competing in a monopolistically competitive market structure. In 2013, a couple of savvy business men quietly purchased all the tire factories and firms and began operations as a monopoly called “Big Daddy’s Tires.” To operate efficiently, Big Daddy’s hired a management consulting firm, which estimated a different long run competitive equilibrium. The new company is now run as a monopoly, and this paper shall explain how this benefit’s the stakeholders involved, such as the government, businesses, and consumers. Furthermore, given the transition from a monopolistically
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Sellers can enter the market freely so that the market is less profitable. On the other hand, each tire has different genre and name and use for a different vehicle. So, each supplier has different consideration of how much to charge. In monopolistic competition, one can see the following combination of characteristics between monopoly and perfectly competitive market:
* Many sellers. Many firms competing for the same group of costumers.
* Product differentiation. Each producer offers products that are not the same. Instead, being a price taker, each producer follows the downward sloping curve.
* Free entry. Firms can enter or exit without any restriction. According to economics, a monopoly is a firm that produces a product for which there are no close substitutes and in which significant barriers exist to prevent new firms from entering the industry. By purchasing all firms involved with the tire industry the business men created a perfect monopoly. A perfect monopoly would allow the owners to control the whole industry. By seizing control of the market, the firm would now control their position on the market demand curve. They control everything from output quantity, to price point and their only limit to production would be cost of
Sellers can enter the market freely so that the market is less profitable. On the other hand, each tire has different genre and name and use for a different vehicle. So, each supplier has different consideration of how much to charge. In monopolistic competition, one can see the following combination of characteristics between monopoly and perfectly competitive market:
* Many sellers. Many firms competing for the same group of costumers.
* Product differentiation. Each producer offers products that are not the same. Instead, being a price taker, each producer follows the downward sloping curve.
* Free entry. Firms can enter or exit without any restriction. According to economics, a monopoly is a firm that produces a product for which there are no close substitutes and in which significant barriers exist to prevent new firms from entering the industry. By purchasing all firms involved with the tire industry the business men created a perfect monopoly. A perfect monopoly would allow the owners to control the whole industry. By seizing control of the market, the firm would now control their position on the market demand curve. They control everything from output quantity, to price point and their only limit to production would be cost of