B2.01.19: Issues with Market Power

Question 1

State the 4 forms of government intervention

Answer 1

• Legislation
• Regulations
• Nationalisation
• Fines

Question 2

State what legislations do and give an example (2)

Answer 2

• Prevent monopoly powers from forming
• E.g: Prohibiting mergers of firms that would give one firm more than a certain percentage of the market share
• Pass laws that restrict the market share that the largest firms of an oligopoly can have
• E.g: A gov may rule that the 4 largest firms of an oligopoly can’t control more than 60% of the market share

Question 3

State what regulations do and what this involves (4)

Answer 3

• May set up “anti-monopoly commissions” to investigate markets and ensure market power is nothing used against the public interest

Involves:
- A process of licensing
- Setting of standards
- Inspections
- The issues of fines

Question 4

State what nationalisation does and state what the disadvantage of this is (1)

Answer 4

• Government control of certain industries which prevents the potential abuse of monopoly power

Disadvantage:
- Public firms tend to be more inefficiently managed than private ones