13. competition policy Flashcards
what does competition policy do
ensures fair competition between firms, ensures that customers are treated fairly and protected from harmful or inaccurate information
promotes competition
why do we need competition policy
to protect consumers and prevent customer exploitation - to lower prices, increase quality
to allow markets to be more contestable, and stop one firm from having too much market share
to ensure prices and quality of goods and services are fair
to reduce monopoly powers and prevent monopoly behaviour
to ensure UK goods are competitive domestically and internationally to increase AD
markets work more efficiently when there is greater competition
problems with competition policy
may deter firms from setting up in the UK
higher costs for firms as they have to abide by more rules
investment in the UK may fail, shifting AD to the left
it can be difficult to tell whether firms are axting in an uncompetitive way eg. lower prices may just be to offer better prices to consumers
firms with bigger market share could benefit from economies of scale - where a natural monopoly may be desirable as it is more efficient
why do meregers have to seek permission from the government
as they may result in a monopoly, which could be inefficient for the economy and provide less choice and quality for customers
