Mega Corporation and BIG Enterprises are sugar producers in

Mega Corporation and BIG Enterprises are sugar producers in Brazil. The two companies decide to merge and become one new company called Mega-Big Corporation. If they complete their merger the new firm would control more than 80% of the market share in the country, and thus would be classified as a monopoly. Suppose you are hired by the Brazilian government to debate on whether the government should step in to limit the formation of the monopoly. Discuss pros and cons of the government action, and use the concepts of \"efficiency\" and \"equality\" in your arguments.

Develop a response that includes examples and evidence to support your ideas, and which clearly communicates the required message to your audience. Organize your response in a clear and logical manner as appropriate for the genre of writing. Use well-structured sentences, audience-appropriate language, and correct conventions of standard American English.

Solution

In a free economy, government intervention should be strictly limited as it tends to cause an inefficient allocation of resources, Government intervention should be for greater equality in the redistribution of income and wealth to improve equality of opportunity and equality of outcome. Generally, markets fail to take into account externalities and are likely to under-produce public or merit goods. For example, government can subsidize or provide goods with positive externalities. Government can intervene only to overcome macroeconomic conditions like prolonged recession and reduce unemployment.

Efficiency is a by-product of a good idea, and ideas that are faulty will collapse as long as corruption is held at bay. Efficiency in a market economy will provide checks and balances to its working system. The government needs to intervene only when there seem to be an imbalance in the working system. If a firm has a monopoly over the provision of a particular service, it may have little incentive to offer a good quality service. Government regulation can ensure that the firm meets minimum standards of service.

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