Government in the Market Economy Term Paper

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B. In market economies, governments are supposed to provide economic conditions for private enterprises to function effectively. However, the main purpose is to create an environment for a healthy national economy, in which all the parties are prosperous, not only private enterprises (USINFO, 2007). The main difference between market economies and planned economies lies on whether the influence of the government is used to preclude private decision (Wikipedia, 2007). The fact that the Mercedes bidding process took place at the state and local level of governments probably influenced the inducements for this project. In other words, a federal government probably would not have offered such favorable tax condition for the Mercedes plant implementation, being more preoccupied on the social welfare.

C. The state and local governments were definitely in favor of the Alabama Mercedes project, and the enormous amounts of money invested in this project by the Alabama government prove it. A benefit/cost analysis will seem more than favorable for any state government, leading to tax breaks that would positively influence industrial development.

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In other words, the local tax base at the state and local level would significantly change, in favor of investors.

D. Critics that are against the Alabama Mercedes project certainly have a point. Although Mercedes provides a lot of jobs in the Alabama region, public and private investment cannot be directed only towards Mercedes. Other smaller enterprises should benefit from these investments, as the region does not rely only on the Mercedes project.

Reference List

Hirschey, Mark. Case Study: Oh, Lord, Won't You Buy Me a Mercedes-Benz (Factory)? Fundamentals of Managerial Economics.

Government in a Market Economy (2007). U.S. Department of State. Retrieved July 17, 2007 at http://usinfo.state.gov/products/pubs/market/mktec8.htm.

Market Economy Introduction (2007). U.S. Department of State. Retrieved July 17, 2007 at http://usinfo.state.gov/products/pubs/market/mktec1.htm.

Market economy (2007). Wikipedia, the free encyclopedia. Retrieved July 17, 2007 at http://en.wikipedia.org/wiki/Market_economy#Government_intervention......

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