4.1.8.7 Competition policy Flashcards
explain a Uk competition policy - Enhancing competition between firms through promotion of small business
The UK government has established the ‘Red Tape Challenge’, which aims to simplify regulation for businesses. It is especially aimed towards small businesses. This aims to make it cheaper and easier to meet environmental targets and create new jobs.
why are Small and Medium Sized Enterprises (SMEs) important for creating a competitive market.
they create jobs, stimulate innovation and investment and promote a competitive environment.
explain a Uk competition policy - Deregulation
By deregulating or privatising the public sector, firms can compete in a competitive market, which should also help improve economic efficiency.
Define deregulation
Deregulation is the act of reducing how much an industry is regulated. It reduces government power and enhances competition.
what are the costs of using deregulation to boost competition ?
It can limit the quantity of output that a firm produces. For example, excessive taxes, such as a high rate of corporation tax, might discourage firms earning above a certain level of profit, since they do not keep as much of it. This might limit the size that a firm chooses, or is able to, grow to.
explain a Uk competition policy - privatisation
Privatisation means that assets are transferred from the public sector to the private sector. In other words, the government sells a firm so that it is no longer in their control. The firm is left to the free market and private individuals.
benefits of privatisation as a policy?
Since they are operating on the free market, firms also have to produces the goods and services consumers want. This increases allocative efficiency and might mean goods and services are of a higher quality. Competition might also result in lower prices.
costs of privatisation as a policy?
firms which profit maximise in a competitive market might compromise on quality.
