FREE MARKET ECONOMY
According to Pmiranda2857 (2009), the free market economy is an economy which promotes competitions between businesses. Basically, without this market system, consumers would not have a say in price determination of goods and services. Some consumers in some African countries have suffered with regards to pricing. According to Baye (2010), consumers do not have a say in the price determination of some services because the providers of such services enjoy the market monopoly.
However, the free market economy is the best and only realistic alternative for determining the allocation of resources in an economy because of the following:

i.

Competition (Pmiranda2857, 2009; Rothbard, n.d.).

Without competition, the free market economy will not be what it is supposed to be. The competition between the producers is the driving force in this market, providing the consumers with the most favourable product at the most affordable price. According to
Pmiranda2857 (2009), a new product is priced high in the market. After sometime, the major competitors in the market begin to imitate the innovation in the market. This leads to price reduction in the once expensive product since new and similar products begin to emerge.
Pricing therefore becomes a sensitive issue in competition. Rothbard (n.d.) also concluded that competition leads to the betterment in the standards of the market competitors compared to other markets.

ii.

It promotes entrepreneurship and innovation (Pmiranda2857, 2009; Rothbard, n.d.).

The ability of a business to produce goods and services for consumers brings out the best in any business entity. Competing businesses are always busy looking out for new ways to get ahead of each other by introducing new products and technology in their quest to stay on top.
Entrepreneurship basically involves taking risks for success or failure. This possibility of winning it all becomes a motivating factor for businesses.
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iii.

Efficiency (Dineshbakshi, n.d.; S-cool, n.d.).

Industries in free market economies seek to come out with the best products out of the least available resources. Their levels of efficiency with its time implications positively affect and enhance the performance of participators. Being profit motivating, businesses are always eager to produce more at lower costs.

iv.

Quick response to consumers’ wants and needs (Dineshbakshi, n.d.).

Producers are always quick to respond to the needs of consumers. A slack in the pace of a business’s response to consumers’ needs consequentially means loss of customers and therefore loss of profits and probably future patronage by consumers.

v.

Adherence of firms to consumer choices (Dineshbakshi, n.d.; S-cool, n.d.).

This market economy promotes laxity in terms of production with regards to the fact that firms are always ready to produce what consumers need. The choices of products are therefore unlimited because the rule of business stating the customer as king is always upheld. 2

ECONOMIC EFFICIENCY AND MARKET STRUCTURES
Business dictionary (2010) defines economic efficiency as ‘The situation in which it is impossible to generate a larger welfare total from the available resources’. Commonly referred to as the Pareto efficiency, it holds the view that a person cannot be made better off without adversely affecting another (Business Dictionary, 2010; Wikipedia, 2014). Wikipedia (2014) further explains that it is the effective use of resources aimed at maximizing goods and services.
A society is therefore considered to be efficient economically if its resources are deployed to provide goods and services which are over and above the value of the resources (Economic
Efficiency, 2014). The maintenance of a balance between resources and products is the hallmark of economic efficiency. The end products of an efficient system must therefore remain equal to or exceed its resources.
Investorwords (2014) also defined market structures as ‘The collection of factors that determine how buyers and sellers interact in a market, how prices change, and how different levels of the production and selling processes interact’. Policonomics (2012) further explained market structures by their main determinants, namely the extent of the market’s products’ uniqueness, the number of the market’s buyers and sellers; and how easy or difficult it may be to enter or leave the market, arguing that these determinants have given rise to the basic types of market structures. TYPES OF MARKET STRUCTURES
i.

Perfect competition

Regardless of the fact that it is unreal, this market structure is still considered based on issues of theory and hypothesis (Policonomics, 2014). The various participants in this market structure do not have the ability to influence prices. The following characteristics prevail in a perfectly competitive market which is also known as pure competition (Wikipedia, 2014):
a. No entry or exit barriers: It is easy to enter and exit the market because of its openness.
There are no barriers of importance which prevent participants from entering or exiting the market.
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b. A large number of participants (buyers and sellers): The easy entry barriers also play a role in the large number of participants in the market such that a single participant’s decision cannot influence the market price.
c. Homogenous products: The qualities, characteristics and standardization of the market’s goods and services are identical amongst the various participating competitors.
d. Profit maximization: One of the strong points of this market is the assumption that businesses sell only when marginal cost and marginal revenue become equal. It is at this point that the highest profits are made.

ii.

Monopoly

This market structure is said to exist when the products or services of a single firm have no close substitutes, making the firm the sole producer or service provider in the market (Baye, 2010). A common example of monopoly is seen in the provision of services like electricity and water. In most communities, such utilities are provided by one a single institution. Prices are therefore determined by these companies and their consumers have no say in price determination. High market barriers and profit maximization are associated with this market. Sellers in this market can sell more product quantities at lower prices in an elastic market or sell less product quantities higher prices in an inelastic market (Wikipedia, 2014).

iii.

Oligopoly

An oligopoly is usually dominated by a number of firms in the market and its kind is very similar to monopoly with the difference in the latter having more than one firm controlling the market
(Investopedia, 2014). Economicshelp (n.d.) has described it as the most common market structure. The following are the main features of oligopoly (Economicshelp, n.d; Welch and
Welch, 2007):
a. Price control by the firms in the market.
b. The phenomenon of mutual interdependence whereby the competing firms monitor each other’s actions with regards to pricing and policies.
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c. The products of the competing firms may be either identical or different, requiring advertisement. d. Entry barriers make it difficult for other firms to enter the market. However, these barriers are less than those in the monopolistic market.

iv.

Monopsony

The market of monopsony is differentiated from monopoly as a result of the control of prices by a buyer who is the only purchaser of goods and services in the market. In other words, many firms sell the same products or services to a major buyer who has the pleasure of influencing prices (Policonomics, 2012; Wikipedia, 2014). A typical example is the Bangladesh story told by
Wikipedia (2014). Through the private sector of this nation, a dozen of power generating companies has been formed and the Bangladeshi government is the sole buyer for these companies. 5

EM PLOYMENT REGULATION
The Ontario Ministry of Labour (2013) defined the minimum wage as ‘The lowest rate an employer can pay an employee’. According to the ministry, most employees deserve minimum wage regardless of their employment terms. However, there are a number of employees whose jobs do not qualify for the minimum wage under the Ontario Employment Standards Act of
2000. Huebsch (2014) asserted that the modern purpose of the minimum wage seeks to cater for the welfare of low class families whose major sources of income are through manual jobs which pay the least.
Currently, minimum wage laws have been enacted in some United States localities. The table below gives the details of the laws and their respective localities (Reich et al., 2014):

Locality

Date

How

Date

Passed

Implemented

Implemented

Scope

Value

1/1/2004

City

$10.74

4/24/2014

Unincorporated

$10.66

San Francisco, 11/4/2003 Ballot

First Geographic

Current

CA
Santa

Fe 2/25/2014 Legislative

County, NM

(in

areas outside city April 2014) limits Washington DC 1/15/2014 Legislative

7/1/2014

City

$9.50

(in

July 2014)
San Jose, CA

11/6/2012 Ballot

3/11/2013

City

$10.15

With the founding rationale of stopping employee exploitation, the minimum wage laws and regulations have favourable and adverse effects on any economy and the businesses in that economy. 6

EFFECTS ON BUSINESSES
i.

Finances of smaller businesses (Richason IV, 2014):

Employee wages and benefits are one of the major operation expenses in small businesses. The upward review of the minimum wage also means higher employee wages and benefits. This can have serious cost implications on small businesses that will either have to downsize to maintain the minimum wage rate or employ a few.

ii.

Productivity

Higher wages also means workers have an obligation of higher productivity (Thornton, 1996).
For example, with unemployment rates higher in smaller businesses (Richason IV, 2014), those who get the opportunity to work will have to do more to merit their retention. This has a resultant effect on rising revenue levels as stipulated by Thornton (1996).

iii.

Insignificant change in employment cost for some industries.

Contrary to view of Richason IV (2014) concerning employee wages and benefits, Reich et al.
(2014) think that the effect of the minimum wage employment costs differs from industry to industry. They are of the view even if the number of low wage earners in an industry is higher and labour takes a smaller fraction of the firm’s total costs, an increase in the minimum wage will not yield any significant increase in total cost. According to them, if labour turnover increases, firms can use that as an opportunity to save recruitment and training cost as well as benefiting from the effect of working with an experienced and productive workforce.
Alternatively, firms can also decide to increase their prices to make up for any increase.

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iv.

Other effects.

The following are the other effects of the minimum wage law (Thornton, 1996; Wilson, 2012):
a. Reduction or cutting off of untaxed benefits by employers.
b. An increase in the hiring of illegal immigrants.
c. Reduction of attendance to school and discouragement of part time employment.
d. Reduction in the quality of the general working conditions.
e. Installation of labour saving devices by employers.

EFFECTS ON THE ECONOMY
i.

Huebsch (2014) asserted that the minimum wage has a negative consequence of working against the free market system. With the intervention of the government in employment issues, the ability of the two parties to establish an employment agreement will be flouted, thereby infringing on the principles of the free market economy in which buyers and sellers can mutually do business without legislative interventions. ii.

Employment

The submission by Richason IV (2014) also explains the consequences of its impact on smaller businesses as leading to the problem of unemployment because people will lose their jobs and will be difficult for the already unemployed to get jobs. This is further corroborated by Wilson (2012) in the sense that an increase means someone has to pay for that increase because the decision is not cost free. He mentioned evidence of employment after an earlier deployment of the minimum wage in 1938. A 25 cent minimum wage that year resulted in job losses for 10 to 13 percent of employees whose minimum wages were previously below the price floor. Reich et al. (2014) are also of the view that employment cannot be

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determined by theories but rather on empirical testing. Their argument was on the fact that businesses can absorb increased labour costs through other means.

iii.

The labour market

Government employment legislations can lead to unskilled employees having an unfair advantage over their educated and skilled counterparts in the sense that their remunerations will be boosted. This will also lead to higher market volatility because their educated counterparts will review their employment packages which might not be acceptable to many employers, (Richason IV, 2014). iv. Poverty

Thornton (1996) argued that the minimum wage has a serious implication on the general standards of living. In his analysis, he argued that even though the minimum wage will raise the earnings of employees, they end up paying more taxes with the increment, enabling the government to make billions of dollars every year. Dube (2013) also has a different view in the sense that higher minimum wages result in the positive effect of extreme poverty reduction. Richason IV (2014) agrees with Heritage Foundation’s research in 2003 which found that a rise in the minimum wage does not curtail poverty.

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MERGERS AND ACQUISITIONS
Mergers and acquisitions in recent times have taken different trends of anti-competition. These anti-competitive business activities have led to a variety of adverse factors, some of which are as follows: 1. Effects on pricing
Mergers give the firms overwhelming power of monopoly to control prices and reduce outputs.
When these firms have less competition, there is the tendency to escalate their prices, thereby forcing consumers to buy at these prices which flout the principles of demand and supply (World
Finance, 2012).

2. Limited choice
As a result of reduced competition, consumers will be limited with regards to their choices of consumption (Pettinger, 2002).

3. Employee Downsizing
Some employees of the acquired firm can have a propensity to lose their jobs which can be a cause for alarm if the company taking over is the kind which does so with the intention to do away with the non performing aspects of the target company (Pettinger, 2002).
For many years, the United States through the anti-trust has regulated mergers and acquisitions in their bid to curtail anti-competition in mergers.

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THE UNITED STATES ANTITRUST LAW
These are a set of regulations aimed at monitoring and controlling the activities of businesses with the sole purpose of protecting consumers (Wikipedia, 2014). The main statutes of the law are as follows:
i.

Sherman Act of 1890

ii.

Clayton Act of 1914

iii.

Federal Trade Commission Act 1914

Over the years, the efficacies of these laws have been proven. The following are some of the effects of these laws:
1. They prevent the occurrence of monopoly in the market (Wikipedia, 2014).
Monopoly and the abuse of its power are issues the laws address. By reducing anti-competition, monopoly is likely to be curtailed.

2. Creation of equal opportunities (Amen, n.d.).
By restricting the mergers of some businesses whose alliance could lessen competition, the laws pave way for equal opportunities and therefore put them in competitive positions (Amen, n.d.;
Wikipedia, 2014).

3. Prohibition of collusive alliance.
The formation of Cartels which can be an avenue to monopolize the market is curtailed.
Businesses are therefore prevented from engaging in collusive practices which will only be in their favour (Wikipedia, 2014).

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REFERENCES
Amen, J.H. (n.d.) Efficacy of the Antitrust Laws. [Online] Available from: http://www.baruch.cuny.edu/library/alumni/online_exhibits/digital/2001/history/exhibit/chap_03 /the_bar/anti_trust.htm [accessed 28 August 2014]
Baye M.R. (2010) Managerial Economics and Business Strategy. 7th edition. New York:
McGraw-Hill/Irwin.
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2014]
Dineshbakshi (n.d.) Market Economic System, Features, Advantages and Disadvantages.
[Online] Available from: http://www.dineshbakshi.com/as-a-level-economics/basic-economicideas/117-revision-notes/1350-market-economic-system [accessed 9 August 2014]
Dube, A. (2013) Minimum Wages and the Distribution of Family Income. [Online] Available from: https://dl.dropboxusercontent.com/u/15038936/Dube_MinimumWagesFamilyIncomes.pdf.
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Ministry of Labour. (2013) Your Guide to the Employment Standards Act, 2000. Canada:
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August 2014]
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Wikipedia (2014) Antitrust Law. [Online] Available from: http://en.wikipedia.org/wiki/United_States_antitrust_law [accessed 28 August 2014]
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