Final answer:
The principles discussed pertain to disruptive innovation and illustrate the challenges and considerations of small versus large firms in the market. Small 'Mom and Pop' businesses survive through non-financial motivators, while policymakers must balance the scale of production with market competition.
Step-by-step explanation:
The principles "Small markets don't solve the growth needs of large companies" and "markets that don't exist can't be analyzed" are integral to the concept of disruptive innovation. Disruptive innovation refers to the process through which smaller companies with limited resources effectively challenge established incumbent businesses. Typically, these smaller entities tend to focus on overlooked segments, offering more suitable solutions that gradually attract the incumbent's customer base.
Examining the existence of small 'Mom and Pop firms', such as inner-city grocery stores, reveals that such businesses can survive without economic profits due to various non-financial motivators. These may include community service, personal fulfillment, or maintaining a family legacy. Moreover, in terms of competition and firm size, technology can play a dual role. Enhanced information and communications technologies may enable small firms to expand their reach, while also potentially contributing to the creation of 'winner-take-all' markets that favor large firms with more resources.
Government policymakers are thus tasked with the challenge of balancing the potential advantages of large-scale production against the risks of reduced competition as businesses grow, particularly through mergers. This delicate balance is crucial in preserving a healthy market that benefits consumers and allows various sizes of firms to coexist and compete fairly.