As we wrap up our semester, we\'ve covered varying levels of competition. Consid

Question

As we wrap up our semester, we've covered varying levels of competition. Consider your economic understanding of competition in terms of capitalism in the United States. One could argue that the United States is an excellent example of capitalism. On the other hand, major corporations are often criticized for engaging in anti-competitive behavior and, in turn, the government is criticized for allowing them to do so. Competition is a major ingredient in what makes capitalism efficient. Is the act of allowing giant corporations to suppress competition the natural bi-product of capitalism, or does it deny the economy the very benefits that capitalism promises? Try not to write from a political standpoint. Instead, try to use the vocabulary and language of microeconomics.

Explanation / Answer

The economy of the USA is considered to be an example of capitalism as it Is a market based economy. It has the ingredients of capitalism because the government encourages and protects the private property rights and also gives protection to copyrights, patents and other Intellectual properties. It creates an environment for the market to grow at their best and drive the capitalist economy towards the efficiency. There are cases of anti-competition and development of market power in the past and it can be inferred from the example of Microsoft’s bundled product of windows with internet explorer or M&As that lead to the market concentration and anti-competition. But, the government of the USA has never promoted the anti-competition and came up with the laws such as Clayton Act, Sherman Act and FTC act to counter such anti- competitive motives of the MNCs. The regulatory bodies have always acted against motives of the big players who drive the smaller players out of the market and restored the trust of the consumers in the economy.
The government does not intervene excessively in the market to protect the soul of the best of capitalism based economy, but the government has responded with the suitable laws to counter the anti-competitive motives that affect the smaller players in the short run and consumers in the long run. After all, it is the consumers who create demand and that demand is catered by the firms (either big or small), so protection of consumers in terms of fair competition and efficient market is very important to prevent the chaos in the society, a basic unit of the nation.
Therefore, the government intervention becomes necessary to prevent the by-product of the capitalism so that the economy can enjoy the top benefits of the capitalism based market such as low price of the product, improved quality and different alternatives to choose from. It is the reason that huge numbers of patents are filed in the USA, every year. If the big companies are allowed to exert market power, it will bring inefficiency in the market and the economy will suffer.

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