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Free «Monopolies» Essay Sample

The United States economy is the globe biggest national economy. In 2011, the United States economy was projected to be 15 trillion U.S. dollars, roughly a quarter of the world nominal gross domestic product. Measured on output levels, the nation is one of the globe wealthiest countries in addition to it being the biggest trading country worldwide.  The United States has a mixed economy, and besides, it has maintained a moderate rate of unemployment, stable gross domestic product growth rates and low interest rates and inflation. According to statistics, the unemployed rate for five years ago was 4.6 percent. Since then, the levels of unemployment have been increasing and currently, it is measured to be 8.3 percent with the number of unemployed being approximately 12.8 million. This is triggered by the fear amongst the employers of the economy being unstable in the future. Interest rates have, however, decreased greatly. Five years ago, the rate of interest rates in the United States was 5.4 percent, the highest rates since 2002, whilst currently, the interest rates are just 0.25 percent. On January 2012, the inflation rates were recorded at 2.9 percent, much higher than the five years ago when it was averaged at 2.8 percent.

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In the American economy, the role of the federal government surpasses its function as a regulator of certain industries. For instance, the federal government manages the entire economic pace with an aim of maintaining high employment levels as well as stable prices. In order to attain this, the federal government makes use of the monetary and fiscal policy. According to John Keynes, unemployment comes as a result of inadequate demand of services and goods. This is influenced by the lack of sufficient income, leading to fall in prices and bankrupt, which deteriorate unemployment further (U.S. Department of State, par. 16). The federal government in this case should increase incomes in order to enable people buy goods produced by the companies, enabling the latter to operate at full capacity, thus increasing employment levels. This can be achieved by cutting taxes and increasing spending as this would increase the levels of income (U.S. Department of State, par. 16).

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Antitrust policy is referred to as the attempts by the government used to avoid the exercise and acquisition of monopoly influence as well as to promote competition within the place of market (Stigler, 1982). The government used the antitrust policies that stopped monopoly from occurring in 1962 in the case which involved a proposed amalgamation between Brown Shoe Company and the United Shoe Machinery, one of Brown’s competitors (Stigler, 1982). The Supreme Court stopped the amalgamation since the resultant company would become so competent that it could be capable of underselling each and every one of its challengers. The court acknowledged that lesser shoe costs would benefit consumers, and instead, preferred to look after the competitors (Stigler, 1982).

The circumstances that led to the merger of these two firms were the fact that they operated in a horizontal aspect since they were performing related functions, which included the production and sale of shoes (Stigler, 1982). The government stepped in since it discovered that this union would enhance the concentration found in the shoe business, together in retailing and manufacturing. This could have resulted in the elimination of individual corporations, like a significant challenger within the field of retail, and set up a manufacturer-retailer link that would divest each and every one other than the crown companies in the business a fair chance to participate. Therefore, it possibly would result in an advance significant decrease in competition plus an improved predisposition towards domination (Stigler, 1982).

 
 
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Had the monopoly succeeded, there would be a reduction in choice of consumers since the merged company would produce the shoes according to their preferences unlike when they would be separate and would produce a variety and create competition (Stigler, 1982).

Customers are the most significant party in any company as through their purchase, they are the ones who maintain the operation of such a company. For this reason, it is essential to consider the most efficient methods of identifying consumer groups who should be given a discount for a service or product without pushing them away. First, a company should know its clients better as this is the major factor which, in fact, results in success. Initially, a company should understand what a client is as without him/her such a company may close down. Through this understanding, the company will be able to know those customers who should be given a discount as this depends on the quantity of purchase. Besides, it is essential to create a shared reference framework and service management.

Monopoly may be efficient in an economy because companies create elevated points of earnings. For that reason, they may be able to use this turnover on endowing in the development and research (Pettinger, 2005). This may lead to the improvement of the fresh commodities, which can be beneficial to consumers and to the economies of scale due to the production of large products. Therefore, they benefit from lesser average expenses. This, in turn, is transferred to customers in lower prices. Economies of scale are mainly vital in firms with elevated fixed prices, for example, plane travel and automobile industry, and finally, monopolies may help in competing on a worldwide scale (Pettinger, 2005).

On the other hand, monopolies may be inefficient because it leads to the reduction in customer surplus and a rise in costs due to the reduction of amount supplied to raise the cost. In addition, monopoly also reduces the choices for consumers and also boosts their income and creates high profit. It also reduced incentives to cut prices due to the supernormal earnings, and this leads to inefficient production, and finally, monopolies may use their monopolistic powers to disburse lower costs to those supplying them with products since the supplies do not have other alternatives (Pettinger, 2005).

   

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