Economics in an International Context

Qs No. 3 Cartels and Public Interest:

Cartel is a term used to describe a non formal (non-written) secretive business agreement between two or more parties (countries, states, enterprises or individuals) to wave out trade competitions between them (Mankiw 2010). A cartel is basically aimed at removing business competition between/amongst the parties involved or under agreement. Despite the point that cartels are illegal, the parties under agreement may agree on issues of execution like pricing of products, levels of output, and areas to supply among other terms (Utton 2011).

Cartels are seen as not being in the public interest since it is a scheme or conspiracy against them. They (cartels) have discriminative motives of delivering goods and services because once in application some of products may not get to some destinations depending on the clauses of agreement. It may give in to oligopolistic competition which in turn yields to the hike in prices of goods and services. Smaller non influential businesses may suffer from cartels since their impact on the delivery of goods and services are seldom to be felt (Utton 2011).

As the statement goes, the public has little concern over cartels since the whole business is conducted by firms; however the effect is likely to trickle down to consumers. The intervention of the government in removing cartels will depend on the type, either public or private cartel. Generally the public has little or no say over cartels because at times they have no choice of the goods and services rendered to them (Mankiw 2010).

Qs No 4; Externalities: positive and negative externalities.

Externalities have no reflection in the market value of goods and services in terms of payback or benefit. They are like spillages which come about due to the processes of producing or consuming of goods and services and for which case there is no payback achieved from them. The effects of externalities are felt by third parties or outside firms (Utton 2011).

Negative externalities:

These are externalities whose effect and cost are felt by those not involved in the production or consumption of goods and services. Examples of negative externalities are;

i) Road congestion; road congestion make some users incur the cost in terms of production time wasted in traffic jams. Employees and employers may suffer some reasonable loss in production if they report to work late (economiconline.com. n.d).

ii) Industrial pollution; industrial firms or plants involved in production of goods emit poisonous gases like carbon gases in the atmosphere and other waste products in the environment. Those within the surrounding will have there health affected due to pollution which make them incur costs in seeking medical services. Cleaning agents also incur clean up costs from the dumping of the production firms (economiconline.com. n.d).