3.6 Government Intervention Flashcards
What are the types of intervention in monopoly markets?
- Price regulation
- Profit regulation
- Quality standards
- Performance targets
What are the types of intervention to promote competition and contestability?
- Promotion of small business
- Deregulation
- Competitive tendering - when the government receives bids from private firms to provide a specified product
- Privatisation
What are the types of intervention to protect suppliers and employees?
Suppliers
1. Monopsony power - anti monopsony laws
2. Nationalisation
Employees
1. National minimum wage
2. Legislation on health and safety
3. Permitting trade unions
4. Encouraging firms to adopt best practice
What are the desired outcome of government intervention?
Prices: affordable and stable
Profit: Limit how much they make but still make normal profit
Efficiency: Reducing wastage of valuable resources
Quality: Ensuring products are fit for purpose and contribute to a better standard of living
Choice: Wider choice improves standard of living
What are the limits to government intervention?
- Regulatory capture - occurs when firms influence the regulators to change their decisions/ policies to align more with the interest of the firm
- Asymmetric information