Regardless of here the airline is currently ranked it is one of the major players in the market. The market structure was chosen because there are many barriers to enter the market. In the event the airline industry chose to use the perfect competition structure anyone could enter and exit as they pleased because there are no barriers In this structure. If the industry was In a monopoly structure there would be a lot less travel. The demand may also be low because the firm would have total control over the prices therefore more than likely have them too high.
If a monopolistic competition as chosen there would be minimal barriers and many firms therefore allowing many people to get In and create chaos. Having minimal competition the prices are manageable. Unfortunately, there are times when the prices rise due to supply and demand of things such as fuel. When the gas prices rise, so do the prices of the flights. Or, when it is around the time of the year when the organizations know consumers will be traveling and he or she will be willing to pay the higher prices.
The demand seems to rise during these times but the supply does not change therefore lowing the prices to increase and increase until consumers are no longer willing to the prices of airlines travel. The organization is number one because it has made changes to not only the prices but the overall experience to better accommodate the travelers. When an organization has competition like American Airlines or United Airlines it must find ways for it to stand out above the rest.
Many consumers think having a cheaper flight makes it the best flight but that is not always the case. Regardless, the oligopoly in the airline industry is fierce and here to stay for a while. Example firm Goods or services produced by the organization Barriers to entry Numbers of firms Firm’s control over price Price elasticity of demand Presence of economic profits in short-run Presence of economic profits in long-run Perfect Competition Natural Gas Marketer Natural Gas There are no barriers to enter the market Many The price is determined by supply and demand.
The firm only has control on mark ups Market supply and demand determine the price therefore the price is elastic because the supply and demand is affected by the change in price. Firms can produce even if the price only covers the variable costs. The fixed costs have already been covered. Profits at this point can be plus, minus or even nothing. There is a very high probability that the natural gas marketer would earn low economic profits in the long-run because of the lack of entry barriers to enter the market.
Oligopoly Verizon Cellular Service Cell service There are many barriers to enter the market. High start up costs, government regulations, and copyrights or patents. There are a small amount of large firms that make up the market. There is no absolute number. The firms have control over the price but often take to advertising or brand-name promotion. Many times these firms will compete with others by giving away free phones or minimizing the price of plans. Oligopoly are price makers therefore they price elasticity of demand is elastic and effected by the price.
The economic profits will be lower in the short-run in order to discourage new entries into the market. There is presence of economic profit in the long-run. There are fluctuations of the prices at times however the barriers make it more difficult to enter and exit the market. Monopolistic Competition Marlboro Cigarettes These firms have some restriction such as financial barriers that exist for new small genuineness therefore economic profits may continue for any existing firms There are large numbers of firms.
Product differentiation allows producers to have some control over the prices of their products. The demand curve is highly but not perfectly elastic as the seller has a lot of competition producing similar substitutes. Under monopolistic competition, firms can earn positive or negative economic profit in short-run Non-price competition is why monopolistic competitors earn zero economic profit in long-run Monopoly Electric Company Power Government tariffs, rising limits, high start-up costs. There is only one firm.
