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Competition - Essay Example

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Running Head: COMPETITION Name Tutor Course Date University Industrial regulation The term industrial regulation means the intervention of the government to control what happens in a certain industry, like the regulation of the entrance and exit to that market…
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Download file to see previous pages The regulations are put in place to help reduce the conflicts in the commercial; procedures like those of maximizing profits. The entities may require raising the profits and the only way they find to do this is to raise the prices of their products where the burden ends up with the people. The government, therefore, comes in and regulates this to avoid conflicts as well as to ensure that the functioning of the business is taken care of. These regulations come with laws like the minimum wage laws which act in the same way as minimum price laws. When this is implemented, workers who produce less than the minimum wages are laid off leading to unnecessary unemployment. The market efficiency and transparency reduces due to these regulations especially if they work against insider trading. The result of this is that the share price becomes higher than that which would have been if the insiders were allowed to use their information. Inadvertently, the outsiders who were to be protected ends up paying higher prices for the same shares and loses more than they would actually have lost. These regulations have led to market imbalance in some cases. If the amount demanded and supplied is the same and the regulations bring about a fall in the prices, then the supply will reduce and the demand will increase. To solve these imbalances, there have arisen cases of black markets and other dubious means of avoiding the effects of the regulations. Monopoly market structures are the most affected by these regulations as they work independently. The government advocates for the customers to have access to their information, set the price controls and also regulate their operations in the countries of operations. The effect of these is that new markets are opened that bring about competition and thereby increased efficiency and quality services. There is liberalization which is promoted that leads to the mobility of labor, financial capital, goods and services. These bring about new businesses into the industry and intensify competition. [Djankov, Simeon et al, 2002] The competitive market structures are effected through the laws that govern their operations and competitive strategies. Certain acts are prohibited like setting very low prices to accrue short term losses at the expense of the other competitors so that they may even end up closing down. The regulations also govern the number of similar businesses in a certain area. The monopolistically competitive markets have been forced to provide enough information regarding their products. In these markets the consumers have relied on the advertisements which sometimes have given a super perspective of the products. The government regulation has had to control the prices in these firms because in the long run, these firms set prices that are very low to kick out their rivals from the market through their slightly differentiated products which is prohibited. Sometimes these firms set high prices especially because the marginal cost is less than the price in the long run. In a monopsony, the government works together with a monopsonist consumer to ensure that the partial regulations are in place to work at the right time. The government analyses how the consumer is to be protected and also when there should be the intervention from other sources. The second market structure that also faces regulation is an oligopoly market structure. This market structure involves a situation which falls in between perfect competition and monopoly. It refers to few firms ...Download file to see next pagesRead More
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