competition policy

Question 1

what does the CMA stand for

Answer 1

Competition and Markets Authority

Question 2

what are the 5 aims of competition policy

Answer 2

• prevent excessive pricing(monopoly or oligopoly)
• promote competition(deregulation)
• ensure quality and choice
• regulate natural monopolies
• promote technological innovation

Question 3

what is an example of technological innovation that could be used in an exam

Answer 3

Amazon Fresh replacing labour

Question 4

when will the CMA intervene

Answer 4

• antitrust and cartel agreements
• investigate merges/takeovers
• liberalise highly concentrated markets
• monitor state aid control(subsidies do not harm competition)

Question 5

how is state aid measured

Answer 5

making sure that subsidy schemes do not lead to unfair competition in markets

Question 6

what is the goal of price regulation for a monopoly

Answer 6

set prices at allocatively efficient level (Pc = Qc)

Question 7

what are some evaluation points for price regulation in monopolies

Answer 7

• information issues with gettin K/X, if X is toolow/high maay lead to unintended consequences
• regulatory capture(contacts in industry to lower K/X)

Question 8

what is an example of performance targets

Answer 8

GPs seeing a certain amount of patients per day

Question 9

what are some evaluation points for quality control/performance targets

Answer 9

• unintended consequences (quantity over quality)
• “game the systems”(increase joutrney times to decrease delays)

Question 10

what are the evaluation points for profit controls

Answer 10

• asymmetric information
• incentive to increase costs
• incentive to over employ capital

Question 11

what are some evaluation points for windfall taxes on profit

Answer 11

• promotes tax evasion
• risk of innovation(dynamic efficiency)
• worsens monopoly outcomes (increase price, decrease quantity)

Question 12

what is privatisation

Answer 12

when state run organisation are sold off to the private sector

Question 13

what are the aims of privatisation(in ONE sentence)

Answer 13

profit motive and competition will lead to lowered AC(lower prices) and imprved Allocative Efficiency

Question 14

what are the advantages of privatisation

Answer 14

• leads to an increase in AE and better quality fom increased competition(increased consumer satisfaction)
• profit motive leads to decreased waste(X efficiency)
• improved PE, DE , and less AC

Question 15

what are the disadvantages of privatisation

Answer 15

• in SR firms will not flock into th market (benefits of privatisation only in LR)
• missing markets if loss is made by firms
• lots of natural monopolies

Question 16

what are the evaluation points for privatisation

Answer 16

• level of competition for privatised firm (if competition is high then prices may be lower, etc.)
• level of regulation to promote competition(sharing infrastructure for water companies, lowers costs for consumers)