MICROECONOMICS
2. From the available facts it appears that the company enjoys preferential treatment to the exclusion of other market players. Lawmakers abused the legislative process when setting up the company in total disregard for laws on monopolistic practice and fair competition. The number of dairymen that benefit from the business is limited to a select few instead of being open to any interested party. This is unethical since Fronterra benefits from government sponsored programs funded by the taxpayers.
3. Political connections are effective for so long as the politician is in power or has the favor of the government. When the political backers fall out with the powers that be, their business deals and activities are placed under close scrutiny and any evidence of wrongdoing will culminate in serious repercussions. Businesses that thrive on political support are normally run inefficiently since they are assured of tenders and markets for their goods ( HYPERLINK httpen.wikipedia.orgwikiRobert_L._Heilbroner o Robert L. Heilbroner Heilbroner Boettke, 2007). In the absence of such support the businesses lack the competitive edge to survive in a free market and end up closing down within a short period.
4. The main characteristics of an oligopoly present in Fronterras structure include limited numbers of sellers and barriers on entry to trade. Secondly, buyers of the product are unlimited since the company is export oriented and has the whole world as its market place. Another factor is the absence of barriers for buyers to enter the market.
5. The goal of government is to ensure equitable distribution of resources and a better life for its citizens. With the inclusion of more farmers in the business, income levels in the industry will rise. Economic activity will be spurred countywide as a result of the multiplier effect and trickle down impact of increased revenues in the dairy sector (Samuelson Nordhaus, 2004). Ultimately, the standard of living will improve and the central government will have more funds to invest in social infrastructure.