Question

Using Market failure, explain any needs for Time Warner's US government intervention in the competition among the firms industry.

Answer 1

The market failure of AOL, Time-Warner demonstrates that the huge companies can also be vulnerable to competition in market when there is an open entry. AOL-Time-Warner suffered a market failure because consumers left them for rivals offering better quality and/or lower prices. The cartels and monopolies are creations of government, and not markets. There is no need by Congress in U.S. market to protect from the foreign acquisitions to entry. The governmental approach should that looks toward the future instead of the past. The regulations and taxes by government are effective means of limiting rivals in competitive industry. Big companies can afford the costs of complying with regulations and costs imposed by government which cripple their smaller rivals.