Subject: Business and Management
Topic: ECONOMIC ANALYSIS
Language: English (U.S.)
Pages: 1
Instructions
Identify a company in your local or generalized area that you would classify as a monopoly. Explain the key reasons why you classified the company as a monopoly, and state how the company operates relative to at least two (2) characteristics of that particular market. In view of the weak economy of the last several years, explain which of the four (4) components of GDP had, or is having, the greatest positive impact in our economy. Use the following historical tables to support your response. Go to the Bureau of Economic Analysis at www.bea.gov. Navigate on the home page to where it states “National,” then select “Gross Domestic Product”. Next, select “GDP and the National Income and Product Account (NIPA) Historical Tables”. The direct Web address is http://bea.gov/national/index.htm#gdp

Economic Analysis

Question 1:

Monopolies in America are difficult to come by these days because of the Sherman Act that was passed by Congress in 1890. The law prohibited any business that participated in any anti-competitive practices. The government felt and continues to feel that monopolies as market institutions that have no viable benefits to the consumers. Competition in the market forces companies to be innovative. They also have to constantly monitor, improve, and refine their products in order for them to maintain their market shares and profitability.

A good example of a monopoly in the world today is Luxottica. The eyewear company has more than 7000 stores across the globe. The company controls nearly 80% of the world’s eyewear brands. It is estimated that nearly everyone who has ever bought glasses, has bought them indirectly from Luxottica. From designer eyewear such as Dolce and Gabbana to brands bought at the local Target Optical, Luxottica has a hand in everything eyewear. As seen, Luxottica is a monopoly because it is the sole provider of eyewear products. There is also a lack of close substitutes for the consumers to choose from.  

Question 2:

There are four major GDP components that have had the greatest impact on the U.S. economy over the last years. These components include the personal consumption expenditures, corporate investments / profits, government expenditure, and net exports. The personal consumption expenditures accounted for nearly $11.93trillion of the total $17.42 trillion produced in the country in 2014. Business investments are the purchases made by companies while producing consumer goods. In 2014, total corporate investment in the nation was $2.85 trillion compared to $2.33 trillion in 2006, its previous peak. Government expenditure injected $3.18 trillion into the economy in 2014. This was a remarkable 18% of the total GDP of that year. America imports more than it exports because of the heavy reliance on petroleum products. This creates a trade deficit in the nation. In 2014, net exports were $2.34 trillion while net imports were $2.88 trillion. This created a trade deficit of $540 billion in the GDP (U.S. Bureau of Economic Analysis, 2015).

References

U.S. Bureau of Economic Analysis. (2015). National Income and Product Accounts Tables, Table 1.1.5 Gross Domestic Product. Retrieved on 19/10/2015 from http://bea.gov/national/pdf/SNTables.pdf