Business Essay about Mergers Example | Topics and Well Written Essays - 1000 words

Business about Mergers - Essay Example It is vital to note that federal and state laws are controlling systems for mergers. This occurs for notable reasons. To begin with, the government regulates such arrangements because of the elimination to competition (Halibozek & Kovacich, 2005). Competition is beneficial for the government because it drives entrepreneurship. Large firms motivate smaller firms to strive to their levels. In the event of the same, the smaller firms expand to generate substantial revenues for the governments (Truitt, 2004). In addition, such firms expand their marketing scope by improving on aspects such as advertising. This means that there is an interrelation, of firms, that create mutual benefits among the same. In turn, industries provide employment to population and accord social benefits to particular countries. In the sense of mergers, the same minimizes competition between the bigger and small firm. It is vital to note that mergers benefit the bigger firms in terms of pushing the same towards m aintaining their market capture. On the other hand, it is vital to note that mergers could result controlled market power. This relates to the power of monopolies. In this aspect, monopolies could exploit the market in two notable ways. To begin with, they would minimize on their output. This results into deficient products for consumers. In addition, monopolies would constrain output and raise prices. This reduces on the relative income of consumers because their previous income affords fewer goods. The monopolies ensure interaction of these two aspects in order that they generate super normal profits. The reason why the same is exploitation relates to the idea that consumers pay for products at a value that exceeds the production costs of the same. It is vital to note that consumer welfare demands production at a level whereby production costs equal prices. Production costs relates to marginal costs in economics (Mankiw, 2006). Mergers cause monopolies that may create other econom ical dangers. This relates to the idea that they could prevent growth of other firms. Monopolies acquire expansion advantages in the form of economies of scale. In this sense, other firms experience a difficulty in reaching the minimum efficient scale. It is vital to note that the minimum efficient scale refers to the state of production where a firm acquires maximum benefits out of the same (Mankiw, 2006). It is the most prominent level of production. This means that the merged firms would become the sole operators in the market. In the end, smaller firms would strive to rise and extinguish sooner. In case of an industry’s decision towards self-expansion, there would be notable obstacle to the same. This relates to the idea that such a firm would expand by use of capital projects. The benefits of self-expansion relates to the idea of self-dependence. In this sense, an industry faces limited obstacle form actions of other firms. It is vital to note that self-expansion leads t o maximum benefits because a firm enjoys all its revenues (Truitt, 2004). However, the aspect, of capital projects, constrains the same in the quest for independent expansion. To begin with, capital projects consume significant resources in the same. This poses notable dangers. For instance, the industry would require huge amounts of capital for expansion. In case it utilizes its own capital, it will constrain the advancement of