3.6.1 Government intervention

Question 1

Controlling monopolies: Price regulation

Answer 1

A limit imposed on the amount by which a firm can increase prices.

Question 2

Controlling monopolies: Profit regulation

Answer 2

A limit on the amount by which firms can increase profits.

Question 3

Controlling monopolies: Quality standards

Question 4

Controlling monopolies: Performance targets

Answer 4

A goal set by the government or regulator for firms to achieve.

Question 5

Promotion of competition and contestability: Promotion of small business

Answer 5

The government can increase the rate of business start-ups through:
- Grants to entrepreneurs
- Tax incentives and subsidies
-> As a result, more firms will join the market, increasing competition.

Examples:
The government has set up:
-Enterprise investment schemes
-Seed Investment Schemes
-> These offer tax relief for people who buy shares in smaller businesses, allowing for them to grow.

Question 6

Promotion of competition and contestability: Deregulation

Answer 6

Deregulation is the removal of legal barriers to entry to allow new firms to enter the market.

The government deregulates through:
-Reducing licensing and Permit Requirements
-Privatisation
-> As a result, more firms will join the market, increasing competition.

Examples:
The privatisation of the Royal Mail, opened up the postal industry, to private firms, such as Yodel, Evri, Whistl etc.

Question 7

Promotion of competition and contestability: Competitive tendering

Answer 7

Competitive tendering is a process where the government contracts out the provision of a good or service to private firms.
-> As a result, when a government contract is tendered, any supplier can make a bid, this encourages firms to compete for the same contract.

Examples

Question 8

Promotion of competition and contestability: Privatisation

Answer 8

Privatisation is the sale of government