The jumbo jet market is not characterized as a perfectly competitive market. This is important because this means that there are significant obstales preventing ‘just any’ firm from entering and exiting the industry. The short run costs would, in most cases in a jumbo jet market, overcome the profits and the firm would be forced to discontinue. Jumbo jets specifically have an naturally high total resource cost, meaning that without underlying advantages such as materials deals, entering the market would be an unwise economic decision for most entrepeneurs.

When a firm becomes too big for its own good, it means that the firm is experiencing diseconomies of scale – ATC is rising and workers in the newly opened plant, for example, are becoming less efficient. One of the possible causes for this might be the company’s inability to manage the firm in its allocation of resources – for example labor not utilizing capital efficiently. A real-life example would be Wal-Mart. About 1 or 2 years ago, Wal-Mart was about to face a disceconomy of scale as they were opening up new outlets. However, as far as I know, the executives at Wal-Mart came to realize that fairly quickly and decided to focus on their existing retail outlets and slow down with their global expansion of outlets.

When a firm becomes “too big for its own good”, this means that it is entering diseconomies of scale. At a certain point, a firm will not be able to manage effectively, and as the firm gets bigger and bigger, it gets more and more difficult to effectively manage it, hence be competitive. With additional plants and factories, the firm will not get more productive; on the contrary, as management of the whole firm goes down, the average cost will rise. A good non-economic example of this is the Roman Empire. As the empire got bigger and bigger and bigger, it was becoming impossible to manage from Rome, and eventually the Empire split into two, the Occidental and Oriental Roman Empires. However, this system did not last very long, and eventually the Roman Empire was crushed.

My hometown only has one electricity company, because it takes time to built a big company like electricity. Also everybody uses the other firm it needs time to spread that a new company is built. For example windows and mac. Windows is spread worldwide and windows almost bought every game for the computer. So for different games you need windows. So companys like mac maybe produce good software and computers, but all the games and softwares on the market work with windows, because they bought them. Those industries are a monopoly, so it has barriers to enter this market. It’s not easy to enter the market.

It can be very difficult to start a large company like a jumbo jet producer. At low production, costs are very high, because there is a massive fixed cost (factories, techniques,etc.) The only way that some jumbo jet companies can make a profit is by ’spreading the overhead’. When the firm splits the cost of the expensive equipment and techniques required to build jumbo jets among many planes, the Average Total Cost is much lower, and if the company sells them at a price higher than the ATC, they can make a profit. However, it is very hard to start up a company like this, especially when others already are in it, and willing to sell at a lower price and higher quality than a start-up jumbo jet company can.