4.2 Market Power and Market Failure Flashcards Preview

EDEXCEL Economics B Paper 1 > 4.2 Market Power and Market Failure > Flashcards

Flashcards in 4.2 Market Power and Market Failure Deck (22)
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1
Q

Draw the graph for a Positive Externality

A

See Book
Social Cost
Social Benefit
Private Benefit

2
Q

Draw the graph for a Negative Externality

A

See Book
Social Cost
Private Cost
Social Benefit

3
Q

Define Market Failre

A

Where there is an inefficient allocation of resources, resulting in them being wasted

4
Q

Define Market Power

A

The ability of a producer to exert control over a market

5
Q

Why is there commonly market failure in Monopolies?

A

Because they don’t to be so efficient because they don’t have to compete

6
Q

Define ‘Restrictive Practises’ and give an example

A

Any action a firm may take to limit competition (e.g. Collusion)

7
Q

How are ‘Restrictive Practises’ a form of market failure?

A

It reduces competition which reduces the need to be efficient

8
Q

Explain how Cartels can be a form of Market Failure

A

They reduce the initiative to operate efficiently and innovate

9
Q

Define Monopsony Power

A

Where the buyer has power over the seller

10
Q

How is Monopsony Power a form of Market Failure?

A

Gives more room for the firm to become inefficient

11
Q

Define what is meant by ‘Power in the Labour Market’

A

A firm being able to offer pay below the free market equilibrium

12
Q

How is ‘Power in the Labour Market’ a form of market failure?

A

It forces costs down which gives more room to be inefficient and reduces the workers incentive to provide a good service

13
Q

How does Market Failure affect consumers?

A

Restricts competition and increases prices

14
Q

How does Market Failure affect the Government?

A

Economic Growth is slowed as spending decreases and goods become more expensive, reducing their international competitiveness

15
Q

What do the CMA ‘Competition and Markets Authority’ do?

A

Investigate restrictive practises and mergers to avoid market domination

16
Q

Define Privtisation

A

Government owned industries changing to be controlled by firms in the free market

17
Q

Why is Privatisation good for consumers?

A

Increases competition and thus productivity, driving own the price of the good and increasing its quality

18
Q

What is meant by the Consumer Protection Law?

A

Information has to be provided on some goods’ contents

19
Q

What is the role of the EU Competition Policy?

A

They collaborate with national competition authorities such as the CMA to retain European competition

20
Q

What is the Working Time Directive?

A

A maximum weekly hours limit

21
Q

How does employee protection impact a business?

A

Helps society which can help the business with sales later on

22
Q

Extended Question: Evaluate Arguments for and against regulation (including its impact on consumers, employers, the government and businesses)

A

See Theme 4.2 revision sheet for answers