Question

Economic profits have risen in the US economy since economic structures we are currently studying, the models of pure competition and monopolistic competition predict that in such an environment we will observe competitive firms emerging to capture a share of these increased profits, but then for there to be an eventual return to normal profit levels. the financial crisis of 2008. Among the four Instead, we have observed increased consoli the past decade. This continued the trend toward oligopoly we had been experiencing during the previous decade. Thus, instead of observing firms aggressively entering the markets, we have watched the rate of small-firm creation dip close to the lowest level it has been since the 1970s. idation and, hence, increased ownership concentration over The reality is we have observed a signifcant increase in industry concentration ratios in most of our major economic sectors since 2008 (indeed, over $12 trillion in mergers have transpired since 2008). In particular, measured four-firm concentration ratios have now risen to almost 50% in the IT, telecom, media and manufacturing sectors. This movement towards increased concentration has not occurred without some governmental help. For instance, Alphabet li.e., Googlel alone spent close to $20 million in lobbying efforts just last year to gain favorable legislation and improve its market share; and Alphabet is not an isolated case in the lobbying efforts of firms seeking to bend the rules to meet their needs. In whole, since 1997 the industry-wide four-firm concentration ratio for our entire economy has risen from 25% to its current mark of approximately 33%. Only the arts, recreation, education, professional services, hospitality, health care, and a few other similar service areas have concentration ratios still sitting below 20%; and, except for education and health care, even these concentration ratios have been increasing.

Answer 1

No it will not be fruitful. We should promote competition. The benefits are that American companies can face foreign competition and withstand assault if they are large. They can also gain international market. The costs are loss in consumer surplus, inequality etc. Poor might not afford goods and large corporations will influence domestic politics by bribery, election funding etc. We can move towards competition and reverse trend by making strict regulations and enforcing them. Current threshold limit for measuring market power is quite high. We should decrease it. Also Govt needs to give incentives to new and small firms