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Q: Fast Food Managerial Economics ( No Answer,   2 Comments )
Question  
Subject: Fast Food Managerial Economics
Category: Business and Money > Economics
Asked by: michellegetter-ga
List Price: $5.00
Posted: 21 Oct 2005 15:35 PDT
Expires: 20 Nov 2005 14:35 PST
Question ID: 583271
Firms like McDonald?s and Wendy?s sell hamburgers, salads, and
other products that are differentiated in nature. While numerous
fast-food restaurants exist in most locations, the differentiated
nature of the firms? products permits them to charge prices that are
in excess of marginal cost. Given these observations, is the fast-food
industry most likely a perfectly competitive industry, a monopoly,
monopolistically competitive, or an oligopoly? Why?
Answer  
There is no answer at this time.

Comments  
Subject: Re: Fast Food Managerial Economics
From: myoarin-ga on 21 Oct 2005 18:00 PDT
 
Geez, all those big words!  If I were a researcher, just providing
links to explain them would be about a $5 question's worth of
searching, but I wouldn't even start to, since this seems so much like
homework.
Subject: Re: Fast Food Managerial Economics
From: parex-ga on 22 Oct 2005 08:22 PDT
 
This reads like a question from exercises in a textbook.  It's always
important to bear in mind that just because things are stated in
authoritative language in a text does not make them absolutely true.

The trick here is to match the author's interpretations of the terms
to the premise of the question.  So we'd need to know the key concepts
emphasized for each of the terms by the person who set up this
particular game.

It seems to me that a key piece of information that is missing is a
premise in the question about the height of barriers to entry in the
fast food market.  For example, if we assume that the differentiated
nature of products offerred can only carry a price premium if the
seller is able to establish a national market identifying the
particular feature, the answer to the question might tilt more toward
oligopoly, but if I could sell my famous Tortilla Soup at similar
margins above cost starting next week in that market, the answer might
be a more toward perfect market.

The question does say "in the fast food industry," and this is a
global industry, so maybe we are to assume that issues like barriers
to entry are to be evaluated relative to typical entry into
international retail consumer markets for low-priced goods.  At this
stratospheric market level, this may be a near perfect market. 
However, the market in my neighborhood for quick food, as opposed to
"fast food", may not be nearly as perfect.  This would be due to
economies of scale that reduce the marginal cost for sellers that
operate from a huge organization, rather than any factors relating to
the price/benefit perception of the consumer.

If this is indeed a question out of a text, the way to get the best
"score" is to scan the definitions of the four terms offerred as
answers for the questions for one that implies a market in which
multiple sellers can receive a premium over marginal cost due to
differentiation in product.  Voila!  Correct answer.

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