Dr. Izzeldin Bakhit
ECO 550 Managerial Economics and Globalization
March 3rd, 2014
There are a lot of frozen food and low calorie microwavable food options available in the market. A few years ago people were not able to purchase the microwavable food but with the increase in income, people can now afford an easier lifestyle and can change the way they cook breakfast, lunch, and dinner. Because microwavable food easy to cook, people are replacing traditional cooking methods to microwavable foods. A few of the companies that are manufactured are Lean Cuisine and Healthy Choice. They both are competitors in the market of frozen foods. Lean ...view middle of the document...
Profile variables like socio-economic group or geographic locations are very necessary in deciding the target audience.
In Monopolistic competition there are few dominant firms along with a large number of competitive firms. The thing that sets the dominant firms apart is that they sell product that are differentiated in some way such as: real perceived, or just imagined. Individual firms make independent decisions, and it is easy to enter or exit the market but there are significant barriers when entering the market with leading brands. The cross-price elasticity of demand between the products of individual firms is much lower than in purely competitive markets (McGuigan, J. R., Moyer, C.R., & Harris, F.H. 2014).
When the market becomes more concentrated, there would be a possibility of fewer firms in the industry. This in turn means if there are fewer firms in the industry, they can have more control on the price for the product. When this happens the monopolistic competition turns into oligopolistic competition. Oligopoly market has few firms and each firm must consider the reaction of the rival firm and keep up with price, production, or product decisions. All the reaction that firms make is interrelated. Also, if all the firms in the monopolistic market would start changing price and compete using the price, firms would start realizing that their profits are reducing. Another factor that will make monopolistic competition to turn into oligopolistic competition is making the product alike. Monopolistic firms have to keep producing products that are different in their own way or consumers won’t buy them or would prefer one over the other.
In monopolistic competition when it comes to short term analytics, price is always greater than marginal cost. Which means that Monopolistic competitive firm may or may not generate a profit in the short run. When new firms enter in the industry, there is an increase in industry supply which causes the equilibrium price to fall (Ottaviano, G. & Thesse,J. 2011). Because of this the downward movement is reflected in the demand curve facing any individual firm. In monopolistic competition there is free entry and exit, there is a fluctuation in price and demand for the firms that have been in the market for a long period of time. When it comes to long run marginal revenue is always equal to marginal cost. Profits in long run are zero and also long run entry in industry would steal customers. Competitive firms that are in the monopolistic category produce with excess capacity as their competitor produces at a level of output where costs are still declining.
There are few reasons a company should discontinue operations:
1. If there is inadequate capital to continue a business project
2. Where there is no proper inventory management because inventory is essential to sustain equilibrium in between demand and supply and if the equilibrium is disturbed the company might have to shutdown.