3.6 Government intervention

Question 1

3.6.1 A)
What is the cma

Answer 1

Competition market authority work to promote competition for benifit of consuner

Question 2

3.6.1 A)
Govt int to control mergers
when, aim

Answer 2

They look it effect competition, if 25%+ market share or £70 m + turnover investigation.
Aim is to stop 2 large companies merging and explioting power

Question 3

3.6.1 B)
types of Government intervention to control monopolies

Answer 3

Price regulation
profit regulation
quality standards
performance targets

Question 4

3.6.1 B)
Types of Government intervention to control monopolies
Price regulation
formula
adv / problems

Answer 4

Regualtion can force to charge less than PM using RPI - X formula. X representes the expected efficeny gain to consumers
can add K for investment

gives incentive to be eff as if they lower costs more than X they will get inc profit

problem, diffficult to know where to set X due to improvement asymetric infomation

Question 5

3.6.1 B)
Types of Government intervention to control monopolies
profit regulation
What
why

Answer 5

rate of return regualtion is when price set to allow covering operation and a fair rate of retun
encourages invesment
may employ too much capital to ^ profit
asymetic info and little incentive to be efficent

Question 6

3.6.1 B)
Types of Government intervention to control monopolies
performance targets

Answer 6

Allow for comparision preformance amongst region
resist rarget introduction . political will + understanding
attempts to meet target without improvement.

Question 7

3.6.1 C)
govt intervention to promote comp + contestablitly

Answer 7

Promotion of small busniesses
deregulations
competitve tendering
privitisation

Question 8

3.6.1 C)
govt intervention to promote comp + contestablitly
Promotion of small busniesses
How and why

Answer 8

Govt can give training and grants to new entreprensuires and encourage small busniess through tax incentive or subsidies

it increases innovation and efficey

Question 9

3.6.1 C)
govt intervention to promote comp + contestablitly
deregulations
How and why

Answer 9

Removal of legal barriers to entry increases efficency by allowing greater competition

govt can also privitise industry to allow comp.

Question 10

3.6.1 C)
govt intervention to promote comp + contestablitly
competitve tendering

Answer 10

Govt has to provide certain g&s becuase they are merit or puiblic goods. They are produce by priv sector and bought by public.

contract out the provision of a good servies to private companies

however it may not always be cost/time eff. priv sector doesnt aim to maximize social welfare

Question 11

3.6.1 D)
Government intervention to protect suppliers and
employees

Answer 11

restrictions on monopsony power of firms
nationalisation

Question 12

3.6.1 D)
Government intervention to protect suppliers and
employees
restrictions on monopsony power of firms

Answer 12

They can explit suppliers by ruducing price govt can stop this. Can use fines & min price

Question 13

3.6.1 D)
Def privatisation

Answer 13

sale of govt equity to private investors

Question 14

3.6.1 D)
Def nationalisation

Answer 14

Private sector is bought by state

Question 15

3.6.1 D)
Adv of privitisation

Answer 15

• encourage greater comp
  -manager becomes more accountable
  -reduce govt interferance
  -utitlies in hand of ppl through shares

Question 16

3.6.1 D)
Dadv of privitisation

Answer 16

-govt wont abuse monopoly power
-some industies like elect water transport and directly effected to performance industry
-externalities & inequalities `

Question 17

3.6.1 D)
Adv of nationalisation

Answer 17

-investment is needed in long run but in priv invesment normally SR
-govt consider externalites + inequality
- social welfare rather then profit max
- min level of servies

Question 18

3.6.1 D)
Dadv of nationalisation

Answer 18

principle agent problem moral hazard
x ineff
opp cost

Question 19

3.6.2 A)
impact of govt intervention on
prices / profit

Answer 19

prevents exessive prioce limits monoplies

Question 20

3.6.2 A)
impact of govt intervention on
eff Qual choice

Answer 20

inc comp decrease qual could inc if monop choice idk

Question 21

3.6.2 B)
Limits to government intervention

Answer 21

• regulatory capture
• asymmetric information

Question 22

3.6.2 B)
Limits to government intervention
regulatory capture

Answer 22

more likly to see from their presprective if they around so will be more lenient, example of govt failure

Question 23

3.6.2 B)
asymmetric information

Answer 23

incorrect use information provided to them by the
industries when setting price targets etc. It is in the industry’s best interest to
maximise their profits and so may provide inaccurate or limited information, meaning
regulators are unable to set correct targets, price