3.6 - Government intervention

Question 1

Competition and Markets Authority (CMA)

3.6.1 - Government intervention

Answer 1

Main competition policy body in the UK. Their main stated aim is to make markets work well for consumers, businesses and the economy

Question 2

Competitive tendering

3.6.1 - Government intervention

Answer 2

When a project is put out to tender so that firms can bid for the right to provide the service e.g. laundry services in hospitals, tenders to maintain public roads

Question 2

Competition Policy

3.6.1 - Government intervention

Answer 2

Any policy which seeks to promote competition & efficiency in markets and industries

Question 3

Consumption tax

3.6.1 - Government intervention

Answer 3

A tax imposed on the consumer of a good or service. This can be levied at the final sale level (sales tax), or at each state in the production

Question 4

Deregulation

3.6.1 - Government intervention

Answer 4

The opening up of markets to competition by reducing one or more barriers to entry. The aim is to increase market supply, stimulate competition and innovation and drive prices down for consumers

Question 5

Laissez-faire

3.6.1 - Government intervention

Answer 5

A doctrine that government should not interfere with actions of business and markets

Question 6

Light-touch regulation

3.6.1 - Government intervention

Answer 6

An approach of government to managing business behaviour - prefers to “influence” rather than “legislate/regulate”

Question 7

Nationalisation

3.6.1 - Government intervention

Answer 7

When a government takes over a private sector company

Question 8

Patent

3.6.1 - Government intervention

Answer 8

Right under law to produce and market a good for a specified period of time

Question 9

Performance targets

3.6.1 - Government intervention

Answer 9

These are often imposed on utility companies to ensure that the consumer is treated fairly and within a reasonable amount of time

Question 10

Price regulation

3.6.1 - Government intervention

Answer 10

Government control of prices, normally for utilities and other essential services

Question 11

Private Finance Initiative

3.6.1 - Government intervention

Answer 11

The PFI is a means of obtaining private funds for public sector projects

Question 12

Privitisation

3.6.1 - Government intervention

Answer 12

The sale of state-owned companies to the private sector, normally through a stock market listing. The opposite of nationalization

Question 13

Procurement collusion

3.6.1 - Government intervention

Answer 13

Where companies illegally bid for large contracts by rigging bids to decide which one of them gets the contract in advance

Question 14

Profit regulation

3.6.1 - Government intervention

Answer 14

Profit is markets where business have monopoly power may be regulated through interventions such as price capping or windfall taxes on monopoly profits

Question 15

Public utility

3.6.1 - Government intervention

Answer 15

A company that provides public services, such as power, water and telecommunications. Regulated by government, not neceessarily state-owned

Question 16

Quality standards

3.6.1 - Government intervention

Answer 16

These are rules about the quality of output that all businesses must conform to, for example the quality of glass for double glazed windows or the quality of electrical equipment in a microwave

Question 17

Regulated industry

3.6.1 - Government intervention

Answer 17

An industry that is closely controlled by the government

Question 18

Renationalisation

3.6.1 - Government intervention

Answer 18

When a business that had been once privatised is taken back into state-ownership. For example, Directly Operated Railways, a state-run body, rescued the East Coast main line after the collapse in 2009 of National Express’s franchise. Later the franchise was returned to the private sector - it was given to a consortium of Virgin and Stagecoach

Question 19

RPI-X Pricing Formula

3.6.1 - Government intervention

Answer 19

This formula encourages efficiency within regulated businesses by taking the retail price index (i.e. the rate of inflation) as its benchmark for the allowed changes in prices and then subtracting X - an efficency factor - from it

Question 20

Whistle blowing

3.6.1 - Government intervention

Answer 20

When one or more agents in a collusive agreement report it to the authorities

Question 21

Regulatory capture

3.6.2 - The impact of government intervention

Answer 21

When industries under the control of a regulatory body appear to operate in favour of the vested interest of monopoly producers rather than consumers

Question 22

Asymmetric information

3.6.2 - The impact of government intervention

Answer 22

Where parties have unequal access to information in a market