Analyze the effect of externalities on market outcomes
An externality refers to an effect of a production, investment, and consumption decision on an intermediary party that is not considered by the party making the decision. For instance, opening a new business in an area. The decision of the place to station a new Wal-Mart is a crucial decision for the company. However, in the process of making this decision, the company will not consider every available alternative. An example of these externalities is that many of the other businesses in an area may experience larger or increased sales since the introduction of Wal-Mart will bring more people in the area either as employees or for any other reason. There are both positive and negative externalities. A negative externality refers to a situation where the decision is damaging on those outside the decision, for instance, a polluter might ignore consequences on the other people, but only consider the economic benefits of his action on his firm. On the other hand, a positive externality refers to a situation where the decision brings about beneficial effects to the other people outside the decision.
Differentiate among horizontal, vertical, and conglomerate mergers
A horizontal merger refers to the combining of two firms in the same industry especially between competing firms such as the merger of Standard Oil, AT&T and Cingular. A vertical merger on the other hand refers to the merger of two firms involved in different production phases of the production of a product for instance a supplier merging with a reseller of the same product such as the merger of DuPont/General Motors. However, a conglomerate merger refers to the combining of two firms operating in separate unrelated industries aimed at sharing assets as well as reducing business threat alongside several other advantages.
Analyze the effect of government interventions, taxation, and regulations on economic behavior.
Government interferences through the use of taxation, regulation, and policies have very strong effects on economic behavior. Higher taxation increases the price of commodities in a move to maximize profits by the production firms thereby reducing the purchasing power of the consumers. On the companies, higher taxation increases the costs of production, which might limit their competitive abilities with other firms that are less taxed. This might make these companies go under or move to economies that favor production in terms of taxation. Government regulations especially those regulations imposed on drugs might discourage consumption. For instance, regulations on the tobacco industry not only curb the consumption of these products, but also encourages cross border transactions of the products.
Discuss this week’s objectives with your team. Include the topics you feel comfortable with, any topics you struggled with, and how the topics relate to your field
In my opinion, this week’s objective was to explain the relationship between the government and businesses as well as among the businesses themselves. These reading explain the interrelation and interdependency between the actions of one business entity on the other businesses as well as the consequences of government policies on the business environment. I was comfortable with all the topics discussed this week, and strongly believe that they all relate to my field. However, I believe that taxation topic and government intervention strongly coincides with my field as it discusses the relationship between the government and different business organizations.