Tap Market Structure

Market Structures Essay

“…relationships too must be like islands. One must accept them for what they are here and now, within their limits -- islands, surrounded and interrupted by the sea, continually visited and abandoned by the tides. One must accept the security of the winged life, of ebb and flow, of intermittency."- Anne Morrow Lindbergh. An island community is typically cut off from most other societies. It has to work with the resources it has, with the people it has, and the institutions that have already been established. On the island of Tap, the Tapese people have a bustling market of one type of corn. There are many sellers of corn creating a very competitive market for the product. However, The Mega Company, the local beef producer,

This creates a fiercely competitive market, and since it is so competitive, the market price of the corn is exceptionally low. Having so many sellers of one type of corn creates a perfectly competitive market making the buyers of the product the price makers of the good. Since the buyers have the control of the price of the product it makes it very difficult for the firms that sell the good at a higher price. Therefore, firms will rise and fall because of the market. If the good is selling well, then many firms will start to establish themselves so that the demand of the product will be met, but most importantly it is because at that time the price of the good is higher than it normally would be. However, once the market gets overly saturated with different firms there becomes a surplus of product. Once there is a surplus of product, and since the demand of the product is already being met, the equilibrium price will starts to decline. Subsequently firms will not be able to meet their variable and fixed costs, thus leading to the firm to exit the market. Having so many different firms selling one type of product creates major instability for the people of Tap, and creating an unpredictable standard of living for all

The Mega Company starts to buy to all the corn from the local farmers. Having one buyer is a better outcome for the local farmers because they now know that no matter how much they produce, The Mega Company will take their product at the fair market price the company has established for the good. This creates stability to the firms that produce the product because they now know how to manage their total revenues more efficiently because of the now stable market for the sellers. The Mega Company has now created a monopoly on the sale of Tap’s one variety of corn. Having The Mega Company buy all of the goods from all the different firms, the company now starts to increase the price of the product because of said monopoly. This is a direct correlation between having better packaging and having a more uniform quality of the corn. The company has to increase costs because now their variable costs have increased because of the quality they are bringing to market. In the past, the product was not regulated and buying from one of the many sellers that inhabit the island, quality of the product ranged. Now having a uniform package and a certain standard that needs to be kept for the corn, this increases the costs for the firm. Therefore, the price of corn rises because of the extra variable costs