Question

Subject: macroeconomics
Question;Monopolies
1. State and explain the macroeconomic problem . Provide detailed macroeconomic research consisting , Example ; increase the federal minimum wage? What macroeconomic problems does increase the federal minimum wage introduce?
2. What are positive and negative externalities,if any

3. What is the aggregate supply and aggregate demand concerns regarding the topic? Who will be impacted regarding the macroeconomic event? Example; the poor, the wealthy.

4. What are your recommendations ( effective/creative) Provide at least three

5. What are the alternatives (effective/creative) provide at least two- three

6. What are your solutions ( effective/ creative)

Answer 1

1. Macroeconomic problem in the case of monopolies is that there is inefficiency as the monopoly charges a higher price and produces lesser output. For example where there is an increase in the federal minimum wage, the firm will increase the prices further to pass on the wage hike to the consumers, this might increase the rate of inflation in the economy and lead to lower spending as people won't be able to afford goods and services.

2. Positive externalities are increase in consumption level of the poorest households as their wages increase, but the negative externality could also be unemployment as monopolies would hire less workers for higher pay.

3. Aggregate supply and demand would reduce as the inflation level will rise in the economy, the poorest will be impacted as they already have low savings, decline in the value of the currency they hold leads to severe impact on the purchasing power.

4. My recommendations are providing social benefit transfers so that the poor people get the necessary income to conduct their livelihood, secondly direct benefits wherein the money is transferred to their accounts when they buy necessary products such as gas and electricity so that money is not spent on other goods and services which might lead to higher inflation. Thirdly subsidizing health and education system and providing benefits directly to the organisation so that money is not misused.

5. Thus alternatives are creating an equitable system wherein instead of increasing the minimum wage, the highest earners are taxed at a much higher rate so that income is redistributed. Increasing the availability of health and education facilities so that it is at no extra cost, wherein the poorest of the poor get the same opportunities and thus get to spend their income on other non-essential items and increase their savings rate.

6. Thus the solutions are empowering the poor so that there is no minimum wage, wherein companies have to pay according to the needs of the market and that there is a living cost covered in the salary and health insurance.