I need an example of a firm that is operating under a competitive environment.?

Question

Is the firm experiencing negative or positive profit? Why? What changes is the firm making to increase profit?

Answer 1

Most grocery stores and, ironically, gas stations are in a competitive environment. These tend to operate in a mode called 'monopolistic competition'.

See, a monopoly can operate in two extremes. One is at very low marginal price because of their very low marginal cost, courtesy of the monopolistic condition they are in. Otherwise, the monopolistic condition can permit them to operate at a very high price, with the same low cost, also courtesy of the monopolistic condition which prohibits competitors from significantly horning in on their gravy train. Monopolistic competition is when there are too many firms selling at the cheap monopoly prices even though they do not have the cheap monopoly costs.

Now, bear in mind, whether you are talking about Safeway, Kroger, or the venerable old A&P in groceries, or any gas station in any town or city of any size, the competition is fierce. If the price goes down in one, it will be matched or bested by the others. This is the situation where 'dog eat dog' applies to business. Also bear in mind, that these conditions do not necessarily apply to big oil companies and refiners or big mills and ag companies like ArcherDaniels Midland, but individual stores.

In heavily competitive environments the less adaptive, lesser capitalized firms fold and the survivors get a recovery period until someone else takes over the old facility and starts the next round of competition. That is what closed previously profitable companies like TG&Y and K-Mart and rendered chains like Woolworth and Ben Franklin as has-beens. Other competitive environments are cell phones and cell phone services or insurance, but not necessarily banking because mergers are sweeping the field of little competitors.

There is a little gas station near where I live that is on the verge of closing. He still sells gas although it costs more for him to buy than he can sell for. Technically, that is illegal here, but when the competitors are selling for one price, the gas doesn't move unless he matches. As he said to me, "I know it looks like a gas station, but if it weren't for soda pop and cigarettes I'd have to close the doors."

Answer 2

QANTAS Airlines... The company is in an extremely competitive environment with Virgin Blue Airlines. Qantas has been sacking workers to cope with an on going price war. Qantas still has positive profit

General Motors have lost massive amounts of their dominant market share in the USA. As the oil/ petrol prices rise Japanese cars (Nissan, Toyota, Mazda) that are more fuel efficient with hybird options have become more popular and gained significant market share. General Motors has been speculated to file for bankruptcy, however they are paying out a lot of workers and moving into the lucrative Chinese car market to try and gain more sales.

Answer 3

I think the answer your teacher is looking for is that in a competitive market all firms should earn ZERO economic profit, in theory. Mind you economic profit is not the same as what we normally think of as profit.

Answer 4

if by firm you mean 'Company' then I would use the american auto industry... Ford for example... they have been experiencing negative profit lately.. mostly due to declining sales & market share (in the past their revenue was dependent upon large gas guzzling SUVs), as well as uncompetitive wage structure for union production employees in North America. They are trying to increase their profitability by changing their car design so that it is more environmentally friendly (i.e. the Ford Escape HSybrid)

Answer 5

Look for a random stock on Yahoo! Finance.

Pull up their income statement. The last line is profit.

Pull up the notes. These should tell you what the firm is up to.

Answer 6

Verbal section: every time Marginal fee could be decreased without affecting earnings (costs, call for) it may desire to continually be undertaken. This even although creates a capital investment interior the shortrun, which has an preliminary greater short-term Marginal fee and is reducing because of the fact the organisation strikes to long-term equlibrum. think of of farmers manually pulling weeds with hand kit, and then tractors are invented which accelerates the technique of weed pulling. The preliminary fee of tractors impacts marginal fee interior the quick-run, as time is going by (drawing close long-term equlibrium) the preliminary investment of tractors is unfold-out with each and each unit of production

Answer 7

Try Mr Gates going in to retirement--this could heavily influence the market-sell of stocks and cause enough ruffling in the $ flow to cause a negative impact on the company--people were comfortable with him and they may not be with his replacement.

Answer 8

There are many company like reliance,TATA etc Rest i dont know