Eco 365 Week 3 Market Structures

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Market Structures Charles C. Nettles ECO/365 Sam Pirnazar, PhD. January 12, 2014 Market Structures Competition within a given market is established by the size and power of a company. Some companies are so large that they control how prices are set within a particular industry. A company can become positioned as a monopoly, oligopoly, or in a perfect world, perfect competition. Some of these structures makes it easy for new companies or firms to enter the market where as others make it almost impossible for a company starting out to enter into the market and compete. This essay will cover the various market structures and how these structures affect the other businesses and the competition within the market for the airline industry.…show more content…
According to Colander (2010), “Lazy monopolists are not profit maximizers; they see to it that they make enough profit so that the stockholders aren’t squealing, but they don’t push as hard as they could to hold their costs down. They perform as efficiently as is consistent with keeping their jobs. The result is what economists call X-inefficiency (firms operating far less efficiently than they could technically)” (p. 388). The lazy monopolist lack profits in the long run because they are simply content with the forceful hold that they have on the market today. They are not efficiently doing more to create profits in the long run but just doing enough to survive and restrain competition in the market today. So, when American Airlines do not push profits for the future, they are considered a lazy monopoly and their profits are not centered for the long…show more content…
A firm will always compete with an existing firm or a new firm that just entered the market. Prices will most likely fall to continue the competition. In the airline industry, Joe Shmoe Airlines can come into the market and take a percentage of American Airline’s profit share and American Airline does not have enough power to dictate price or work with another company to try to force the hand of consumers. American Airlines cannot predict what their profits are going to be in the long run because there are too many variables in place and not enough constants for them to project what their profit margins would be. Perfect competition is an ideal situation and not readily found in the market. It is an ideal situation that does not exist in
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