Chapter 12 Flashcards
The Fenno product is manufactured in the UK but is also imported into the UK from France. The UK
government has recently decided to apply an import quota on imports of the product from France.
The quota is below the current level of imports. This action will have the effect of:
A only French suppliers suffering a lower price
B both UK and French suppliers suffering a lower price
C only UK suppliers enjoying a higher price
D both UK and French suppliers enjoying a higher price
D
restricting supply causes prices to increase
Competition legislation prohibits conduct that damages competition, including abuse by a business
of its dominant position. Which three of the following are types of conduct that will be considered as
an abuse if the business is in a dominant position?
A Imposing transfer pricing
B Limiting production markets or technical developments to the prejudice of consumers
C Applying different trading conditions to equivalent transactions, thereby placing certain parties
at a competitive disadvantage
D Attaching unrelated supplementary conditions to contracts
E Providing public goods on behalf of the government
B C D
In which of the following circumstances would a cartel be most likely to operate?
A A market with a undifferentiated product and a large number of producers
B A market with differentiated products and few producers
C A market with a large number of producers and where demand for the product is inelastic
D A market with few producers and an undifferentiated product
D
few producers in the market, each of them producing a similar product
cocaine - few dealers, each producing similar cocaine - dominate the market and keep prices high + competition low
cartel = a group of independent market participants who collude with each other in order to improve their profits and dominate the market; purpose = high prices, restrict competition
The following statements have been made about anti-monopoly legislation and market regulation.
Statement (1): Anti-monopoly legislation compensates for lack of competition, and market regulation
promotes competition.
Statement (2): Anti-monopoly legislation promotes competition and market regulation compensates
for lack of competition.
(3) Anti-monopoly legislation and market regulation promote competition.
Are these statements true or false?
Statement 2 = true
-anti-monopoly legislation promotes competition
-market regulation compensates for lack of competition (where competition is not possible)
Two large listed companies recently colluded with each other to fix the price of a product they both
sell in the UK market. Collusion of this type is an example of market failure due to:
A inequality of resources
B external costs
C market power
D resource immobility
C
Jerome is a director of Newport plc, a listed company. During the year he made a loan to his sister
Jane, out of company funds that has not yet been repaid. When asked by the external auditors about
this, Jerome said that it is unlikely that Jane can repay the money because she has been experiencing
financial difficulties for several years.
Statement (1): Jerome has committed the offence of market manipulation under the Financial
Services Act 2012.
Statement (2): Jerome could be disqualified as a director under the Company Directors
Disqualification Act 1986.
Identify whether each statement is true or false.
false + true
market manipulation - a person deals in shares when they have access to inside info that would affect the share price + which is not known generally
could be disqualified for making loans from company funds that were unlikely to be repaid
The government of Myland was unhappy with the prices charged to customers for mobile data by
mobile phone operators and recently conducted a review into the industry. The review
recommended that prices should be regulated and capped at a maximum daily price that is below
the market price.
The impact of this pricing rule on market failure is best described as:
Requirement
A failing to address market failure because there is no impact on the price charged
B influencing the demand for and supply of mobile data
C persuading mobile phone operators to reduce their prices
D taking control of the mobile phone industry
B
