Causes and Effects of Monopoly Power and Subprime Mortgages Crisis

Causes and Effects of Monopoly Power

Introduction

The goal of the present study is to analyze the causes and effects of the monopoly power of companies.

Causes of Monopoly Power

• Incentives for companies to have monopoly power:
• High levels of benefit leading to investment in Research and Development
• Economies of Scale
• Efficient production and success

Effects of Monopoly Power

• Less competition and higher prices
• Allocative inefficiency and diseconomies of scale
• Lower prices to suppliers

Conclusion

Monopolies generally lead to higher prices and are more inefficient. However, may be the best outcome for some industries with substantial economies of scale. This investigation has a number of limitations to be considered in evaluating its findings.

Problems and Solutions of Subprime Mortgages Crisis

Introduction

The goal of the present paper is to analyze problems and solutions of the Subprime Mortgages Crisis. This paper will focus on the events of the crisis occurred between 2007 and 2010 in the USA.

Problems of Subprime Mortgages Crisis

• Slowdown in the USA economy
• Large increase in unemployment levels
• Billions in bank losses

The crisis resulted in profound decline in output and employment.

Solutions to reduce the Subprime Mortgages Crisis effects

• Reduction of interest rates by central Banks
• Financial rescue plan with 900 billion dollars
• Injection of capitals to the financial market
• Cooperation between countries to reduce lack of liquidity

Conclusion

This study has illustrated the subprime mortgage crisis and the measures adopted by the US government and the Federal Reserve Bank. This investigation has a number of limitations to be considered in evaluating its findings.