Automotive Production Levels Essay Example | Topics and Well Written Essays - 1750 words

Automotive Production Levels - Essay Example It also ensures that firms do not make profits at the expense of consumers. This essay highlights issues relating to mergers, the role of government in market economy, complexities of self-expansion, and other issues facing companies. Government regulation and importance of government involvement in a market economy Government regulation is of major importance in the creation of mergers, as a certain level of regulation is needed to enhance the functions of contemporary markets. Through regulation, the government ensures that merging industries support policy goals. Government regulates mergers to ensure that the parties to the contract have confidence in it and that the stipulated property rights are defined clearly. According to Gaughan, (2010) regulation comprises of rules, which are administered by the government with the aim of influencing business behavior and economic activities. In the light of this, regulation captures a range of government actions such as setting market fra meworks, primary legislation to detailed regulations that are enforced by specialist sectoral regulators. Government regulation of mergers has beneficial effects to the society as it provides protection. Some government regulations for instance, protect the safety and health of workers. Moreover, regulation plays a huge role in consumer protection as industries are approved and licensed. Government involvement in the market economy aims at attainment of important goals such as equity and social efficiency. In equity, the government aims at achieving fair distribution of resources while social equity is achieved by equating marginal benefits and marginal costs of consumption and production. The government also plays an important role in the market economy by formulating policies with the intent of promoting dissemination of information. To achieve this, government provides education, extension, and supports the media for the delivery of important information regarding the markets. Fu rthermore, through distribution, price assembly and labeling requirements, the government ensures that there is some truth in advertising (Gaughan, 2010). Government involvement in the market may be in order to combat externalities. According to Gaughan ( 2010), externalities arise when the activities assumed by some agents in the market affect the technologies or preferences of other agents. There are positive, negative, consumption, and production externalities. The government is also involved in the market for provision of public goods. These are goods, which are consumed concurrently by many individuals and are free to access. In case the government is not involved in the provision of these goods, the market mechanism cannot provide them, as they are not profitable. These goods include infrastructure, environmental amenities and national security. Government involvement in the market economy curtails non-competitive behavior. Non-competitive behavior arises in case of monopoly w hereby the supply of a good is controlled by a single agent and whereby a single agent controls demand. Moreover, the government checks the activities of middlemen to ensure that consumers do not suffer. In addition, the government is also involved in the market economy to ensure that equal distribution of income is attained. The government achieves this through transfer policies such as inheritance and income taxes and social security