3.6 Government Intervention

Question 1

Types of intervention to control monopolies

Answer 1

Price regulation
Profit regulation
quality standards
performance targets

Question 2

What is price regulation

Answer 2

when the govt use maximum pricing to lower prices and increase output

Question 3

What is profit regulation

Answer 3

when the govt limit a firms SNP by calculating their costs and adding a % of profit to it

Question 4

ways to promote competition and contestability (3)

Answer 4

Promotion of small firms
deregulation
privatisation

Question 5

what is quality standards

Answer 5

regulators can stop firms from lowering costs too much that the quality is effected

Question 6

what is performance targets

Answer 6

regulators can set targets that will help firms improve their services therefore more consumer gains

Question 7

what is privatisation

Answer 7

the sale of a government equity to private investors

Question 8

pros and cons of privatisation

Answer 8

P-encourages greater competition->reduces x inefficiencies

C- may create monopoly power abuse

Question 9

what is nationalisation

Answer 9

when a privately owned company is bought by the government

Question 10

pros and cons of nationalisation 2,2

Answer 10

P-government will consider externalities

better for a monopoly to be state run as they look to maximise social welfare over profit

C- may cause x inefficiencies which would lead to higher prices
-principle agent problem occurs as managers know any loss will be covered by government