Spoiler:
There's a lot going on in the episode. Some of it is good, some of it is bad, but a lot of it depends on what you project onto it.
For example, a basic assumption of economics is that when prices are high, competitors enter the market. (Time is a price.) There really shouldn't be a line to Sweet Apple Acres that stretches as far as the eye can see- they ought to be buying their cider at Rich's Barnyard Bargains, which undoubtedly has more than one cashier. Wholesaling isn't as glamorous as direct sales, so I understand the creative decision there. Anyway, Flim and Flam taking advantage of an opportunity presented by Sweet Apple Acres' lack of capacity is a correct example.
The Apple family makes a lot of terrible decisions in this episode. A potential competitor shows up, and wants some apples for a demonstration? They say "borrow," but get a price first, Applejack. They offer a contest that you know you won't win, set the stakes higher than you can afford, and you say yes because of an insult? That's terrible, and at that point the Apples deserve to lose the farm. At the very least, pivot and make it a taste test!* I would probably call this a correct example, in that a bad decision leads to a bad situation, (the Apples do lose the contest). (It's problematic in that they don't actually suffer any consequences, and it's better to give examples of good decisions than examples of bad decisions. There are lots of ways to invert a bad decision, and not all of them lead to good ones.)
Flim and Flam come off as (mostly) honest businessponies, who just don't care enough about quality. Commercial competition being between mostly decent ponies is a correct example. (Also, I think, is attempting to cut your competitor's heart out and eat it.)
Notice that Twilight Sparkle mentions some ratios. The machine works at three times the rate of the Apples by themselves. Double the number of ponies working, and you get... five times the output?** That's a ludicrous amount of synergy, given that there are just twice as many ponies doing each job. (The only job that's added is Twilight Sparkle swapping out the barrels instead of Big Mac doing it. Big Mac would have to spend 60% of his time swapping barrels for that (and the doubling) to explain it, and that's clearly not the case.) Specialization of labor is massively important, but that isn't a focus here, and the speedup just comes out of thin air. That seems like a mostly incorrect example, and is unfortunately what the interaction hinges on.
That Flim and Flam's decision to sacrifice customer satisfaction in order to increase quantity bites them in the ass, hard, is a correct example. There's a whole class of businesses that have become dominant by focusing on customer satisfaction (like Southwest, Enterprise, USAA, Costco, Vanguard, and so on), and many businesses begin to lose their dominance when they become so large that it takes major effort for managers and executives to track satisfaction.
But this is a place where people can go fuzzy in the head, especially if they associate Flim and Flam with "capitalism." Capitalism is the environment Flim and Flam are operating in, and they lose, like they should. In, say, a Soviet quota system where the number of barrels was all that matters, Flim and Flam would win. As is, they could prevent the Apples from selling their cider, since the Flim Flam brothers won the contest, but decide not to because they're more interested in making money (and not paying for the apples and trees they ruined) than in ruining their competition. (Again, score a point; profit is more important than pride.)
But it's not clear why Flim and Flam don't just go to the earliest barrels they made, the ones that surprised Granny Smith with their quality, and then quietly throw out the barrels they made without quality control. It looked like they had about enough to supply all of Ponyville (especially if they appropriate the barrels the Apples made that they can't sell).
The "big business" angle is also odd. Both of them are clearly closely held family firms. If anything, Sweet Apple Acres is the bigger business!
The "handcraft over machinecraft" lesson is incorrect, or at very least, a gigantic missed opportunity. Why fight for monopoly rights for Ponyville? Why not segment the market, with Sweet Apple Acres increasing the price of its cider while Flim and Flam ensure that nobody goes thirsty with their discount product?
tl;dr: the episode is definitely Luddite in a bothersome way, and the Apples make some stupid decisions, and Twilight's assistance is unrealistically useful. But the economics isn't terrible, even if it is unimaginative. The core lesson- that integrity is valuable- is totally correct, and something that real markets reward.
*Even this is a poor decision, as shown by New Coke. Taste tests are a small portion of the entire value embodied in a product, and so optimizing a drink to win a taste test is not the same as optimizing a product to win customers.
**Think about the math for a bit here. The Apples, with help, made 32 barrels over the course of an hour, part at top speed and the rest at 5x speed. There were 24 barrels at the stand at the opening of cider season. If Twilight and Company started helping at the very start of the hour, you're looking at 6.2 barrels an hour, which implies they only make cider 4 hours a day. (If Twilight and Company only started helping at the halfway point, you're looking at 10.3 barrels an hour, which implies the Apples only make cider 2 hours a day.)
For example, a basic assumption of economics is that when prices are high, competitors enter the market. (Time is a price.) There really shouldn't be a line to Sweet Apple Acres that stretches as far as the eye can see- they ought to be buying their cider at Rich's Barnyard Bargains, which undoubtedly has more than one cashier. Wholesaling isn't as glamorous as direct sales, so I understand the creative decision there. Anyway, Flim and Flam taking advantage of an opportunity presented by Sweet Apple Acres' lack of capacity is a correct example.
The Apple family makes a lot of terrible decisions in this episode. A potential competitor shows up, and wants some apples for a demonstration? They say "borrow," but get a price first, Applejack. They offer a contest that you know you won't win, set the stakes higher than you can afford, and you say yes because of an insult? That's terrible, and at that point the Apples deserve to lose the farm. At the very least, pivot and make it a taste test!* I would probably call this a correct example, in that a bad decision leads to a bad situation, (the Apples do lose the contest). (It's problematic in that they don't actually suffer any consequences, and it's better to give examples of good decisions than examples of bad decisions. There are lots of ways to invert a bad decision, and not all of them lead to good ones.)
Flim and Flam come off as (mostly) honest businessponies, who just don't care enough about quality. Commercial competition being between mostly decent ponies is a correct example. (Also, I think, is attempting to cut your competitor's heart out and eat it.)
Notice that Twilight Sparkle mentions some ratios. The machine works at three times the rate of the Apples by themselves. Double the number of ponies working, and you get... five times the output?** That's a ludicrous amount of synergy, given that there are just twice as many ponies doing each job. (The only job that's added is Twilight Sparkle swapping out the barrels instead of Big Mac doing it. Big Mac would have to spend 60% of his time swapping barrels for that (and the doubling) to explain it, and that's clearly not the case.) Specialization of labor is massively important, but that isn't a focus here, and the speedup just comes out of thin air. That seems like a mostly incorrect example, and is unfortunately what the interaction hinges on.
That Flim and Flam's decision to sacrifice customer satisfaction in order to increase quantity bites them in the ass, hard, is a correct example. There's a whole class of businesses that have become dominant by focusing on customer satisfaction (like Southwest, Enterprise, USAA, Costco, Vanguard, and so on), and many businesses begin to lose their dominance when they become so large that it takes major effort for managers and executives to track satisfaction.
But this is a place where people can go fuzzy in the head, especially if they associate Flim and Flam with "capitalism." Capitalism is the environment Flim and Flam are operating in, and they lose, like they should. In, say, a Soviet quota system where the number of barrels was all that matters, Flim and Flam would win. As is, they could prevent the Apples from selling their cider, since the Flim Flam brothers won the contest, but decide not to because they're more interested in making money (and not paying for the apples and trees they ruined) than in ruining their competition. (Again, score a point; profit is more important than pride.)
But it's not clear why Flim and Flam don't just go to the earliest barrels they made, the ones that surprised Granny Smith with their quality, and then quietly throw out the barrels they made without quality control. It looked like they had about enough to supply all of Ponyville (especially if they appropriate the barrels the Apples made that they can't sell).
The "big business" angle is also odd. Both of them are clearly closely held family firms. If anything, Sweet Apple Acres is the bigger business!
The "handcraft over machinecraft" lesson is incorrect, or at very least, a gigantic missed opportunity. Why fight for monopoly rights for Ponyville? Why not segment the market, with Sweet Apple Acres increasing the price of its cider while Flim and Flam ensure that nobody goes thirsty with their discount product?
tl;dr: the episode is definitely Luddite in a bothersome way, and the Apples make some stupid decisions, and Twilight's assistance is unrealistically useful. But the economics isn't terrible, even if it is unimaginative. The core lesson- that integrity is valuable- is totally correct, and something that real markets reward.
*Even this is a poor decision, as shown by New Coke. Taste tests are a small portion of the entire value embodied in a product, and so optimizing a drink to win a taste test is not the same as optimizing a product to win customers.
**Think about the math for a bit here. The Apples, with help, made 32 barrels over the course of an hour, part at top speed and the rest at 5x speed. There were 24 barrels at the stand at the opening of cider season. If Twilight and Company started helping at the very start of the hour, you're looking at 6.2 barrels an hour, which implies they only make cider 4 hours a day. (If Twilight and Company only started helping at the halfway point, you're looking at 10.3 barrels an hour, which implies the Apples only make cider 2 hours a day.)
EDIT:
Spoiler:
Another thing I forgot: Applebloom's message at the end, that competition benefits consumers, is another correct message.
My primary complaint is that the episode is a 'villain gets run out of town' episode like Boast Busters and not a 'everybody goes home happy' episode like Over a Barrel. Flim and Flam are clearly meant to be traveling salesmen in the American Huckster tradition, and so it's appropriate they get run out of town when their product fails, but it would have been nice if their product was uniformly bad, not that they made the 'pride over profit' mistake too.
My primary complaint is that the episode is a 'villain gets run out of town' episode like Boast Busters and not a 'everybody goes home happy' episode like Over a Barrel. Flim and Flam are clearly meant to be traveling salesmen in the American Huckster tradition, and so it's appropriate they get run out of town when their product fails, but it would have been nice if their product was uniformly bad, not that they made the 'pride over profit' mistake too.
