bba 2501 micoreconmics
Orvillejamdown
UnitVI_AssignmentWorksheet289220OrvilleStewart.docxUnit VI Assignment Background Information
Ruby Red Theater is now starting to work on its marketing plan to draw more customers into the theater. Manager Tracy has provided you with the following information and asked for your help:
· There are four movie theaters in the town (Ruby Red, Grayson's Guild, Ryne's Reel 2 Reel, and Garrett's Dollar Movies).
· The city has passed a law banning any other movie theaters from building within the city limits.
· All movie theaters offer similar types of concession stand items at similar prices.
· The average ticket prices per movie at each theater are:
|
Movie Theater |
Average Ticket Price |
|
Ruby Red Movie Theater |
$10.00 |
|
Grayson’s Guild Movie Theater |
$8.00 |
|
Ryne’s Reel 2 Reel Movie Theater |
$8.00 |
|
Garrett’s Dollar Movies |
$1.00 |
· The first movie and last movie start times for the four theaters are:
|
Movie Theater |
First Start Time |
Last Start Time |
|
Ruby Red Movie Theater |
12:00 noon |
11:00 p.m. |
|
Grayson’s Guild Movie Theater |
10:00 a.m. |
11:00 p.m. |
|
Ryne’s Reel 2 Reel Movie Theater |
10:00 a.m. |
11:00 p.m. |
|
Garrett’s Dollar Movies |
12:00 noon |
11:00 p.m. |
· The average number of people who purchase tickets at each movie theater in town per month is:
|
Movie Theater |
Average Monthly Movie Ticket Sales |
|
Ruby Red Movie Theater |
15,000 |
|
Grayson’s Guild Movie Theater |
23,000 |
|
Ryne’s Reel 2 Reel Movie Theater |
25,750 |
|
Garrett’s Dollar Movies |
25,200 |
· Grayson's Guild and Ryne's Reel 2 Reel offer a special "Two-for-One Tuesday" where you can purchase two tickets for the price of one.
· Grayson's Guild and Ryne's Reel 2 Reel just purchased the latest Goldby Surround Sound for their movie theaters.
· You recall that your economics instructor at Columbia Southern University had presented you with a table that outlined the four market structure types and their characteristics. After searching through your old notes from Columbia Southern University, you found the table, which is presented below:
|
Characteristic |
Perfect Competition |
Monopolistic Competition |
Oligopoly |
Monopoly |
|
Number of Firms |
Vast |
Many |
Few Dominant Firms |
One |
|
Type of Product |
Homogeneous |
Differentiated |
Differentiated |
Unique, Limited, No Close Substitute |
|
Size of Firm |
Relatively Small |
Relatively Small |
Average to Large |
Large |
|
Market Share |
Small |
Small |
Average/High |
Absolute |
|
Barriers to Entry and Exit |
None |
Low |
High |
Extreme |
|
Price-Setting Power |
None, Price Taker |
Low, Price Maker |
High, Price Maker |
High, Price Maker |
|
Long-Run Economic Profits |
None |
None |
Possible |
Possible |
Answer the questions on the next page. Your answers must be a minimum of 300 words in length for each question.
Unit VI Assignment
Part 1:
Using the provided table that outlined the various characteristics of each market structure type and the information provided by Manager Tracy from Ruby Red Movie Theater, define the market structure (perfectly competitive, monopolistically competitive, oligopoly, or monopoly) for the movie theater market of this town. Discuss each market structure characteristic as it either relates or does not relate to the movie theater market for this town. Make sure you address all four market structures and each market structure characteristic in your discussion.
If you need additional space, please feel free to insert an additional page.
Answer:
|
Perfect competition is a market structure with a lot of fully informed buyers and sellers. The business product is all exact, and all businesses must take or accept the market price. Meaning other companies can not influence the market price of their products. These business prices would be accurate among all in the same industries. So they have the opportunity to enter the market without any penalty. And no transaction cost. Furthermore, with perfect competition, since there are many buyers and sellers, the price will reflect the supply and demand(McEachern, 2019). When looking at Monopolistic competition, many businesses will have the same products or services that are just the same but not a complete substitute. These barriers to entry and exit would be low, and other business decisions would not affect another business. Also, they do not have the authority to raise their product prices to profit their companies. With Monopolistic competition, these business uses heavy advertising and marketing strategies(McEachern, 2019). For an Oligopoly, this is a small number of companies, and this business can not prevent other companies from influence. For a business in an oligopoly category, no one business will enjoy a significant share in their market industry. These business will be able to control prices and also lift their barriers for entry. All this is to protect themselves from any new companies that would try to come in the market share(McEachern, 2019). A monopoly is when a company will sell individual products in the market space, and this business will have total or near-total control of that particular market industry. Monopolies businesses have no competition, resulting in customers getting hurt that need products (McEachern, 2019). When looking at the town movie theaters, these are under an oligopoly structure because there are not enough movie theaters in town and a barrier established to enter the market. When looking at the monopoly structure, this would not workout out for the town. And this is because there is more than one movie theater, and the competition is fierce. McEachern, W. A. (2019). Micro ECON6: Principles of microeconomics. Cengage Learning. https://online.vitalsource.com/#/books/9781337671828 |
Part 2:
Given the market structure you have identified for the movie theater industry in this town, what marketing ideas would you recommend for Ruby Red Movie Theater?
If you need additional space, please feel free to insert an additional page.
Answer:
|
The market structure for Ruby Red Movie Theater and the movie industry in the town is an oligopoly. So the first thing is to make your business stand out in a crowd. Next, make sure your customer has a great experience when they come to your business. This allows those customers to return and spread the word to their friends and family about the great experience. When individuals spread your business by word of mouth, this is still the best way to increase your business sales. Also, with the changing technology in today's society, the movie theater can use social media outlets and email newsletters to get information that will show upcoming trailers or previews playing at the movie theater for that week. Also, implementing a reward program in which a person buys a portion of movie tickets or concession stand items would be able to get some free goodies and discounts on their next purchase. The next thing is for the movie theater to have comfortable seats and invest in some recliner chairs. Also, a clean and tidy for each movie showing in the theater. Customers do not want to enter a movie theater and see leftover loose popcorn, candy wrappers, and soda cups on the floor or in the seats. It would be a good idea also to expand the theater concession stand items with the new products that hit the market. And make sure all the favorite theater items like hot dogs, nachos, ice cream, slushes, and have these items at a reduced price. One major move is to have discounted prices if customers visit the movie theater before 5:00 pm. Also, have a discount for kids and some adult combos. The movie theater can offer healthy drinks other than sodas because you will find some customer does not drink sodas all the time. And make sure the popcorn is freshly done. After all, the worst thing is to get cold, stale popcorn. The movie theater can also have midnight movies for the weekends for adults. McEachern, W. A. (2019). Micro ECON6: Principles of microeconomics. Cengage Learning. https://online.vitalsource.com/#/books/9781337671828 |
Part 3
Grayson’s Guild Movie Theater has made an offer to purchase Ryne’s Reel 2 Reel Movie Theater. The merger would result in both theaters operating under the same business ownership. What problems would this merger cause for Ruby Red Movie Theater? Could the government have issues with this merger?
If you need additional space, please feel free to insert an additional page.
Answer:
|
Most businesses used merges to control their market share and also to cut costs. Grayson' Guild Movie Theater and Ryne' Reel 2 Movies operate under the same management if the offer is accepted and the deal is made. The merger could cause a huge problem for Ruby Red Movie Theater. Both movie theater companies merging would be more prominent and allow their market share to increase and gain more power in the industry. This merger would be horizontal because both movie theaters operate in the same industry. Now both theaters are under the same management. The result of the merger would lead to an increase in market share and revenue because of this merger. This merger would be a Horizontal merger. When understanding Horizontal mergers, this is a way to cut out other competitions in your industries, which can result in having one powerful company instead of two competitors(McEachern, 2019). But there is a safeguard for these mergers by the government. The Department of Justice or the FTC typically reviews these types of mergers. In some cases, they will challenge the merger in courts if they believe the citizens will be at a loss from a lack of competition.
McEachern, W. A. (2019). Micro ECON6: Principles of microeconomics. Cengage Learning. https://online.vitalsource.com/#/books/9781337671828
|
