Answer to Question #45384 in Microeconomics for Andre Vassilev

Question

I came across a company recently which farms mussels of the coast of a small town in Bulgaria, and I started thinking about its structure in the economy. I know since it produces a homogenous product along with hundreds of other mussel farmers, it must be in perfect competition, however this mussel company also sold locally on top of selling to suppliers. This means it was the only mussel supplier (locally) in the town, and as far as I know that's a monopoly. My question is, what would this company's graphs look like? Would it be more like a perfect competition, or a monopoly? Although it is the only supplier in the town, it sells the mussels at the same price if not cheaper to locals as it does to suppliers, which I know unlike monopolies. Would there be any deadweight loss in a company like this? Is it inneficient or is it more efficient than normal? Consumers can buy mussels from the supermarket, but local supermarkets all get their supply of mussels from this one local company. Please help me understand!

Answer 1

This supplier is not a monopolist, because he sells the mussels at the same price if not cheaper. There may be a deadweight loss, if the price for mussels in this town is higher, then in the other towns or supermarkets for example. But as the price is the same, there is no monopoly or inefficience, he is only a big supplier in the scale of the small town.