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Theme 3
Government Intervention
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T Awolaja
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Cards (23)
What is the main purpose of government intervention in promoting competition?
To
enhance
competition in the
market
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What are some instruments used to regulate monopoly power?
Price controls
,
profit controls
,
quality standards
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How can the CMA prevent firms from gaining monopoly powers?
By controlling
mergers
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What are some ways the government can encourage competition?
Promoting
small businesses
and
deregulation
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What factors does government intervention aim to influence?
Prices
,
profits
,
efficiency
,
quality
,
choice
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What can limit the effectiveness of government intervention?
Asymmetric information
and
regulatory capture
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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
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What does privatisation mean in the context of government intervention?
State-owned
firms sold to the
private sector
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How do free market economists view privatisation?
It increases
efficiency
and reduces costs
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What do socialist economists argue about private sector monopolies?
They damage
customer interests
with high prices
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What is deregulation?
Removing
government
controls from markets
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What is a potential downside of deregulation?
Encourages
'creaming'
of
profitable
market areas
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What was a significant consequence of the 1982 mortgage market deregulation?
Increased
accessibility of house ownership
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How does the government encourage the growth of small businesses?
By providing training, advice, and
grants
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What is competitive tendering?
Inviting firms to bid for
government contracts
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What is a monopsony?
A
dominant
buyer of products from suppliers
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What can governments do to protect suppliers from monopsony power?
Pass
anti-monopsony
laws and regulate practices
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How can governments protect employees from exploitation?
Through
legal protections
and
minimum wage laws
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What role do trade unions play in employee protection?
They provide significant protection from
employers
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What is the goal of government intervention in product markets?
To lower
prices
and increase
consumer choice
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What is regulatory capture?
When
firms
influence regulatory bodies in their favor
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How do firms use asymmetric information to their advantage?
By withholding unfavorable information from
regulators
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What is the impact of voluntary codes of conduct?
They often minimize compliance costs for firms
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