Question

b.Establishment, beneficial C. Manipulation, excessive d.Fixing, efficiency PART TWO (each question-30 points) Short Answer Questions: please write a one paragraph response of about seven to ten sentences to each of the following 1. Why is it necessary to regulate the operation of market power in order to achieve perfect competition? Explain how economic theory (or theories) that have influenced the development of development of competition law and policy in the U.S.? <write at least one page> 2. What is a competitive economy? What are 5 competitive forces? <write at least one page>

Answer 1

1) The Economic Development is vested with the sufficient rate of GNP and GDP. GNP and GDP should always have consistent relationship with the running of Market Operations of both Primary, Secondary and Tertiary Sectors. To have a Smooth running of those sectors, proper regulation of operations are very significant.

Market Operations are described as the cluster of all necessary forces drived to achieve a deseriable results in the form of profits. It is also the function of maintaining the Price level in the Optimum level in order to reduce the Marginal Cost in the long-run. In the dynamic world of market conditions, need for regulating the Market Operations is increasing day by day. Perfect Competition is the common type of market existing in the all the sectors of the industries.

Let us discuss the necessity which influences the market operations in order to achieve perfect competition. Perfection Competition is the blended situation of More prospective buyers, Willingness of consumers to buy the products which are homogenous in nature, No any such determinant of demand and supply will decide the fixing of the prices ultimately. Here Elasticity of Demand also plays a crucial role in determining the Perfect Competition. And also the maintaining the Equilibrium of Producers Surplus of gain huge economic profit also witnessing the situation in the Perfect Competition.The above mentioned features of Perfect Competition urges the policy framers to regulate the market operations of the Perfect Competition.  

Starting from Economic Thoughts of Adam Smith's Equitable Wealth Distribution Theory, Alfred Marshall's Welfare Theory, Population theory of Malthusian had helped US Federal Government to frame the Economic Policy adherering to the Competitive Law and Policy in the US. The Competitive Law of US was generally termed as 'Anti-trust Law' which restricts the unwanted spheres of threats from Power of Economies of other Countries. In Order to cut-short the threats World Trade Organizations (WTO) was formed. WTO monitored the problems of issues raised through Cross-Competitive of other Nations like Europe and Asian Countries.

Classical Theory of Economics was considered as the base indicator to monitor the Competitive Law and Policy in the US. The US Country was witnessed many Economic crisis in different level. Economic theory like Laizze-faire propagated the value of dyanamic market competition in the long-run without intervention of Monopoly power. As it describes that the alll the firms have rights to earn profits without any single firm to dominant the market position. Like wise Neo-classical Theory of Economics propagated the idea that all Firms can involve in the producing Goods and Services in order to attain the common goal of Social Welfare. And also here Allocative Efficiency also adopted in order to acheive full utility function of Goods and Services.

2) Competitive Economy is refers to the situation of the Economy facing the threats and challenges of all types of Competition like Perfect Competition, Oligopolistic Competition, Monopoly and Imperfect Competition. In orde to produce maximum economic profit Every firms should have the optimum level of Allocation resources of Factors of Production like Land, Labour, Capital and Organization. But All new and existing Firms cannot able to acheive the desired effect of having both production surplus and the Reducing the Marginal and Average Cost in the Long-run. This will automatically disband all the necessary input cost of production technologies in order to acheive the desired results.

The five forces are 1) Threat of New Entrants 2) Threat of Substitute Products, 3) Bargaining Power of buyers 4) Bargaining Power of Suppliers and 5) Competition Rivarly among all firms.