An industry or firm

Select an industry or firm. State its market structure (pure competition, monopoly, monopolistic, or oligopoly). Next, please define the characteristics of the industry or firm that support your selection of market structure. Lastly, describe and illustrate graphically the firm’s profit maximizing behavior in particular MR=MC under the above-mentioned market structures or conditions.

Submission:
In this written assignment, the quality of your writing and the application of APA format will be evaluated in addition to your content. Evaluation based on these criteria is designed to help you prepare your college projects, which must be well-written and follow APA guidelines. Each written assignment should contain a minimum of 300 words, but no more than 400 words. Make sure that you use correct spelling, grammar, and punctuation

ANSWER

Market Structures

The following study discusses the airline industry—the airline industry has an oligopoly market structure. The study will define the characteristics of the airline structure that make it an oligopoly market structure. The MR is equal to MC graph has also been drawn to illustrate further the airline industry’s profit-maximizing behavior under the mentioned market structures.

Airline Industry (Oligopoly) Market Structure

Three significant characteristics make the airline industry to be categorized under the oligopoly market structure. The three characteristics include high barriers to entry, the similarity of the products, in the market domination by a small number of large firms.

Barriers to Entry

The airline industry has many barriers to entry. Most firms are, therefore, able to obtain and retain their market control via these barriers. One of the most common barriers within this industry is its high start-up cost. Much capital is required to venture into the airline industry businesses. Existing firms, therefore, take advantage of this barrier and maintain greater market control as new firms are likely to exhibit due to high operational costs.

Differentiation of Products

Most companies in the airline industry offer both similar and differentiated services and products. Similar services include the flight classes such as the business and the economic classes in the commuter planes—differentiated services and products range from in-flight nourishment in the entertainment of the passengers.

A few Large Firms

The airline industries have a small number of large companies. The large companies can, therefore, effectively text substantial market control. There are only for airlines dominating the United States. These airlines are few numbers but large. The airlines include the United airlines the delta airlines the American airlines and the southwest airlines.

MR=MC Graphical Representation

Firms in the airline industry equate in all cost with marginal revenue to maximize their profits. This is independent of the increase or decrease in the marginal cost. From the above graph, the profits are maximized at Q1 and P1.