From the article, \"Business in America\" (the Economist), answer the following
ID: 1201307 • Letter: F
Question
From the article, "Business in America" (the Economist), answer the following questions. What benefits to firms get by lobbying? What does the article mean by network effects? Why does the author argue for more competition? What year did the largest merger movement begin? Why has the recent round of mergers been good for business but bad for consumers and the economy in general? From what you have learned about a monetary production economy (M-C-M*), Keynes theory of effective demand and the circular flow, what will be the outcome when "the fruits of economic growth are being hoarded"? Explain the process. What does the article mean by return on capital? What has this looked like over the past two decades? What does this article have to do with Keynes' argument about the marginal propensity to consume (MPC) for different income groups?Explanation / Answer
It would have been had the article also been attached or link provided of the same. However, I have referred to this article which i found online to answer the questions. In case the article ref which is attached is not the same which the student is referring to, pls. share the same for me to help you iwth the answers.
[http://www.economist.com/news/briefing/21695385-profits-are-too-high-america-needs-giant-dose-competition-too-much-good-thing]
1. What benefit do firms get by lobbying?
By lobbying as indicated in the article, firms are able to cut costs, which adds to the overall profits, without having to pass on the gains to the customers. Lobbying also is the key mechanism for incumbent firms to protect themselfes. Owing to these reasons the lobbying cost has seen an increase in the last decade.
2. What does the article mean by Network Effects?
The network effect is a phenomenon whereby a good or service becomes more valuable when more people use it. In the article, network effect has been mentioned with respect to Alphabet, amazon and facebook where the investors do not consider them high risk, but the investors value them because their market shares are sustainable and network effects will eventually allow them to have more monopoly-style profits.
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