Discussion 3

Description

In 2-3 paragraphs (at least 6 sentences each), respond to the following: A recent study by the FDA revealed that poor inner-city consumers grocery shopped almost exclusively at convenience stores (eg. 7-11). These stores have higher prices than normal grocery stores such as Publix. They are able to charge higher prices for food because these poor consumers don’t have access to a vehicle and cannot travel to other stores for their grocery shopping. This is an example of market power over a unique subset. The convenience stores have a monopoly on inner-city consumers despite the existence of plenty of substitutes due to travel limitations. The stores use this monopoly power to disproportionately to costs increase prices and generate monopoly rent. This use of market power harms an already poor demographic and should be a concern to policy makers. Give an example of an industry with firms with market power over specific groups. Explain the mechanism of this market power and the benefit and/or detraction of this market power.