Question

1. Last Spring Sprint and T-Mobile announced to merge into one $146 billion company. The two companies argued that the merger will lower costs, “create competition and lower prices across wireless, video, and broadband” as well as other 5G technologies.

1. List all, and describe two of, the steps you will take to examine whether or not such a merger should be allowed to go ahead.
2. How would an economist justify (defend) government involvement in the economy?
3. Give two broad economic reasons to justify immigration into the USA, or why the US government should to fight Ebola in West Africa or international terrorism in far-away places. [To say Americans are kind people alone is not the answer!]

Answer 1

A) Some of the points that shall be taken into examination whether or not a merger should be allowed are:

• Whether the merger is beneficial to the economy or not.
• Whether the merger will lead to a monopoly kind of situation or not. If the merger results in giving the merged firms higher authority and  power in the market then that will lead to consumer losses and other producers losses as well.
• Whether the merger is benefiting the consumers or is just focused on gaining personal profits. If the customers of the product produced by the firm do not benefit then there will be inefficiency in the market.
• Whether the price of the product is reduced after the merger
• Whether efficient levels of production is taking place or not.

B) A merger leads to some advantages and disadvantages as well. This will require the government to intervene and help the economy function smoothly. Thus when the public interest is threatened or when the merger leads to undue power of the firms, the government intervenes to help the economy and market function well. The government shall enter so as to check if the interest of all is being taken care of or not.

C) Two broad economic reasons by the immigration is justified into the USA:

• The people who immigrate help the US economy by paying taxes. These taxes thus collected are used for various purposes by the government.
• The immigrants are mainly from poor developing countries and thus contribute as labors in the US market and do work that the US citizens do not like to do. Thus the labor cost ration is also well maintained.