3.6 Government intervention

Question 1

Deregulation

Answer 1

Deregulation involves removing government legislation and laws in a particular market. It refers to removing barriers to competition.

Question 2

PFI’s

Answer 2

Private Finance Initiative. A method of providing funds for major capital investments, where private firms are contracted to complete and manage public projects.

Question 3

Competitive tendering

Answer 3

When the government allows private firms to bid or the right to run a service or gain a certain contract

Question 4

Privatization

Answer 4

The transfer of a business, industry, or service from public ownership to private ownership and control.

Question 5

Nationalisation

Answer 5

The transfer of a major branch of industry or commerce from private ownership to state ownership or control.

Question 6

Regulatory capture

Answer 6

A form of government failure, happens when a government agency operates in favour of producers rather than consumers.

Question 7

RPI-X

Answer 7

Price regulation. The regulator believes that there have been efficiency gains in the industry which should be passed on to the consumer. X represents efficiency gains

Question 8

RPI+K

Answer 8

Price regulation. The regulator thinks firms need to be able to raise prices to invest in the industry. K is the amount prices can increase above inflation.

Question 9

Rate of return or profit regulation

Answer 9

Regulating how much profit an industry can make - trying to limit Supernormal Profits.

Question 10

Performance targets

Answer 10

Hard targets on performance set by Government to ensure consumers receive a good/improving service from firms with monopoly power.

Question 11

Competition and Markets Authority (CMA)

Answer 11

UK body that regulates mergers, tries to prevent collusion and promotes competitive markets.