Competition Policy

Question 1

What is competition policy?

Answer 1

A government policy enacted through legislation to reduce market abuse and increase market efficiency by intervening in markets generating excessive monopoly power

Question 2

What is the overarching objective of competition policy?

Answer 2

To act in the consumer interest against monopoly power

Question 3

What are 5 main objectives of competition policy?

Answer 3

• To prevent or reduce monopoly price
• Promote competition (make the market contestable)
• Ensure quality and standards of goods
• Regulation of monopoly
• Promote technical innovation

Question 4

When should a market be regulated and when should it be liberalised/ remove barriers to entry?

Answer 4

Liberalise markets if it does not lead to government failure, unintended consequences and if the market is not a natural monopoly (barriers are artificial)

Regulate a market if it is a natural monopoly