Potatoes Case Study

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Potatoes are the fourth largest crop in the world behind rice, wheat, and corn, they comprise nearly three percent of all calories consumed by U.S. adults (National Potato Council 2012), and one third of them are used to produce just one product: frozen french fries. There are three sides to this staple food that now so pervades our fast food restaurants: the market, utilization, and regulation. First, the market.
In any market there are four possible models to follow: perfect competition, monopolistic competition, oligopoly, and pure monopoly. Potatoes fall into the category of perfect competition. Why? In order for perfect competition to exist you need many firms, standardized products, market controlled price, low barriers to entry, and no non-price competition. Potatoes meet this criteria. As organic produce, there is differentiation between one species and another, however consumers generally view one brand as a perfect substitute for any other. In terms of price, a single potato producer has little choice in the matter if they wish to turn a profit. If they were to raise prices, there are any number of other perfectly good substitutes at a lower price. If they were to raise prices, they would only lose revenue given that they could sell a theoretically unlimited amount at the market price. What about barriers to entry? Certainly the costs of farm equipment must be large. While equipment costs may be high, “no significant legal, technological, financial, or other obstacles prohibit new firms from selling their output…” (p.165 McConnell et. al 2012). Essentially, the ‘science’ of potato production isn’t held in just a few hands. Finally, non-price competition. Given that there is only small distinctions from one potato to anot...

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...nced by politics, much of it in the dance between sugar and corn taxes and subsidies which have riddled our food with sugar substitutes like high fructose corn syrup. It finds its way into everything, including many products sold at fast food restaurants. Personally, I tend to lean in the direction of less regulation, however when so much of the government is run by lobbyists dealing in the currency of influence, you have to wonder if anything can be changed without participating in the same system. I think a lot of America’s problems can be solved with better and further reaching education. When a relatively unhealthy, full meal at McDonald’s or a similar fast food place can be bought for the same price as a small amount of healthy fruits or vegetables we put the uneducated and poor in a difficult position when it comes to choosing where to get their daily calories.

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