1. What information would be required to determine whether the poultry processing market, which produces "disassembled bird parts," is competitive? Briefly explain the significance of whether this market is competitive or not.
2. Now, assume this market is competitive. Based on this assumption, describe the short-run equilibrium for both the market and a typical processing firm. Using both graphical and algebraic approaches, interpret and explain the key features of the equilibrium.
1. In order to determine whether the poultry market is competitive, there should be changes in the variables like price. The price of the poultry products is also in the similar range, which means there is a very small difference in the prices. In order to attract the customers there is price war, which is exerted by the producers. In a competitive environment, the demand is high. In a poultry glut economy, demand would be low due to Asian H5N1 flu infection. The buyers are reluctant to buy chicken that is infected by the virus.
The competitive market is the one, which includes rivalry among the sellers and are always willing to gain large market share and increase the rate of profit. The poultry market in this scenario can be termed as uncompetitive as the sellers are lessening the price due to chicken slump so that more customers are attracted. The processing firms in the competitive market would still wedge a price war so that more customers are attracted despite the market scenario. The firms would offer more discounts to the suppliers so that market share is increased (Gray, 2016).
2. When there is competitive market in the poultry market then there is no lack of information in the market. The processed market for chicken has seen to affect negatively the normal operations. This change has not affected the demand of chicken items of the fast food industry. In the production market, producers are the first to be affected by the price change. When there is no free flow of information in the poultry market, the consumers are susceptible to changes (Gray & Kilman, 2016).
In case of short run, competitive market there will be super normal profit earned by the firm. The profit maximizing condition is MR=MC. The profit is the shaded portion.
Gray, S. (2016). McDonald's Menu UpgradeBoosts Meal Prices and Results. WSJ. Retrieved 22 January 2016, from https://www.wsj.com/articles/SB114022907202077745
Gray, S., & Kilman, S. (2016). Glut of Poultry Saves Shoppers Chicken Feed. Glut of Poultry Saves Shoppers Chicken Feed. Retrieved 22 January 2016, from https://www.wsj.com/articles/SB114842929129661266