Given the recent events in the US Airways and American Airlines merger, one has to wonder,...
Given the recent events in the US Airways and American Airlines merger, one has to wonder, is the airline industry monopolistic? Which is worse, monopolies or competition? Explain your answer.
Homework Answers
Answer - The US airline industry is made up of very few firms in the market. Thus , these firms coordinate within themselves. There are heavy restrictions on the entry of the new firms in order to prevent the competition from increasing. Thus the US airline industry is the example of Oligopoly market .
There can be two views on the market preference -
1 - From the view of the consumer , perfect competition is best because he gets a large variety of goods due to perfect substitutes , the prices are uniform all throughout the market and he is fully informed about everything.
2 - From the point of view of producer , monopolistic market is better as it gives the chance of earning the high profits which he cannot earn in competitive market.
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Given the recent events in the US Airways and American Airlines
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