In this project, you will complete a market structure analysis report for a local city government. This report will consist of two parts. In part one, you will analyze the city’s restaurant industry. In part two, you will evaluate the internet market in the city. A market analysis is an important tool to understanding the market conditions that you are working in.
In this project, you will master the following competency:
Explain how market structure impacts a business’s entry and exit from a market and its ability to generate economic profit
You work for Orizont Consulting, a small but growing economic consulting firm.
Recently, the local city government hired Orizont to help create part of its 10-year economic development plan. The city wants to grow business and increase its tax base.
Andreas Schmidt, your manager, has asked you to conduct a market structure analysis report that will inform the city’s plan.
Part 1: Restaurants
In recent years, the city has had an increase in tourism. The city sees this as an opportunity to grow its restaurant market. Currently, there are about 25 restaurants in the city making high economic profit. These restaurants offer different types of cuisine and customer experiences, and sell at a wide variety of price points. The city has a long-term goal of increasing the number of restaurants to 35.
First, read the List of Existing Restaurants and the Short-Run Equilibrium Graph documents, which are also linked in the Supporting Materials Section. Use the information from those materials to address the following questions and complete part one of your market structure analysis report:
In the short run:
What is the quantity, price, and profit for an average restaurant?
What is the equilibrium quantity and price for an average restaurant based on the Short-Run Equilibrium Graph?
How much economic profit is made?
In the long run:
How would more restaurants in the city impact the restaurant market?
Will there be entry or exit of restaurants in the market? Why?
How will the economic profit change for restaurants?
How will product choice and prices be impacted?
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