Government Intervention

• What is the main purpose of government intervention in promoting competition?

  To enhance competition in the market
• What are some instruments used to regulate monopoly power?

  Price controls, profit controls, quality standards
• How can the CMA prevent firms from gaining monopoly powers?

  By controlling mergers
• What are some ways the government can encourage competition?

  Promoting small businesses and deregulation
• What factors does government intervention aim to influence?

  Prices, profits, efficiency, quality, choice
• What can limit the effectiveness of government intervention?

  Asymmetric information and regulatory capture
• What are the methods of government intervention to promote competition and contestability?

  • Enhancing competition through small business promotion
  • Deregulation
  • Competitive tendering for government contracts
  • Privatisation
• What does privatisation mean in the context of government intervention?

  State-owned firms sold to the private sector
• How do free market economists view privatisation?

  It increases efficiency and reduces costs
• What do socialist economists argue about private sector monopolies?

  They damage customer interests with high prices
• What is deregulation?

  Removing government controls from markets
• What is a potential downside of deregulation?

  Encourages 'creaming' of profitable market areas
• What was a significant consequence of the 1982 mortgage market deregulation?

  Increased accessibility of house ownership
• How does the government encourage the growth of small businesses?

  By providing training, advice, and grants
• What is competitive tendering?

  Inviting firms to bid for government contracts
• What is a monopsony?

  A dominant buyer of products from suppliers
• What can governments do to protect suppliers from monopsony power?

  Pass anti-monopsony laws and regulate practices
• How can governments protect employees from exploitation?

  Through legal protections and minimum wage laws
• What role do trade unions play in employee protection?

  They provide significant protection from employers
• What is the goal of government intervention in product markets?

  To lower prices and increase consumer choice
• What is regulatory capture?

  When firms influence regulatory bodies in their favor
• How do firms use asymmetric information to their advantage?

  By withholding unfavorable information from regulators
• What is the impact of voluntary codes of conduct?

  They often minimize compliance costs for firms