Deregulation

Question 1

what is deregulation

Answer 1

gov reduce legal BTE in a given industry

Question 2

what does deregulatin incetivise

Answer 2

firms entering the mkt whihc promo comp and gov hopes promo eff

Question 3

what graph do we use to show deregulation

Answer 3

monopoly but put comp outcome and

intention is to promo omp, new firms enter which diagram shows as move from uncomp outcomes to more comp outcomes

to show cs gain

Question 4

what are the 3 positive of deregualtion

Answer 4

more firms will increase consumer choice- so icenitve for firm to be allocativley efiicent

increases productive and x efficiency

increases dynamic efficiency

Question 5

what are teh 2 negatives of deregulaion

Answer 5

loss of natural moonply = higher avg cost lower productive efiicney + wastefu duplicaitno of resources - allocative inefficeny

formation of oligopolies and local monopolies

Question 6

explain the mroe firms increase consumer choice so more inceitve for firms to beallocativley effiecnit benefit

Answer 6

more firms means more consumer choice

so more firms are prodcing g/s and satisfying needs and want

as a result of striving for allcoative efficinet

so ther is a big incentive for firms to produce where p=mc to satisyf consumers and enure ahead of comp

Question 7

explain mro firms = more consumer choice = increase productiv and x efficiency

Answer 7

big incentive ot minimse costs and max profit to try and stay ahead of comp( as can charge higher prices or do dyno eff)

therfore to produce on min AC curve is desirable as its reducing any waste within the firm

Question 8

explain how increases dynamic eficient

Answer 8

even though mkts more omp

still liekly some profit made which can be reinvested

as with hig comp any chance to get ahead will be taken

so invsting in brand new products , inovation , r&d , tech

firms will do as ot they can decrease costs decrease prices, imporve products whihc can help em be more ocmp and gain mkt share

Question 9

explain the loss of natual monoplu negative

Answer 9

if previously natural monopoly by deregulating and allowing new firms to enter

we may see loss of natual monop which isnt goodd as can lead to increases in avg costs

therfore lower productive efficieny( no longer producing on min cost curve) as EOS will no onger be realsed

becuase mroe firms are in the mkt

Question 10

explain loss of natural monopoly negative in terms of wasteful dUPE

Answer 10

May be a wasteful duplciaiton o resources

w natural monop makes more senes for 1 major firm to be dominating and providing resorce for mkt

w dereg and allowing more firms to duplciate resources you may open mkt to awste

this can elad to allcoatie ineff

as reosurces are not being best allocated to consuemr demand , if being dulplicated for no reason

Question 11

what ca we arg if we in a natural monoply

Answer 11

there is no need to deregulation cuz of lower productive eff and duplication fo resources

Question 12

explain formatin of local monoplies and oligopolies negatve arg

Answer 12

no guarntee as to wahts gonna happen after dereg

so no guarantee we’ll see huge levels of comp across the country

local olig and monop may be formed

they may abuse their power causing higher prices and lower Q

this can lead to allocative ineff and productive ineff

Question 13

give examples of dereg forming local oligopolies and monplies

Answer 13

uk bus mkt being deregulated

caused this

w higher prices than intially

Question 14

what are the 3 evluation poitns for deregulation

Answer 14

SR v LR

height of other barriers to entry

levle of gov regulation

Question 15

explainnSR LR eval

Answer 15

if you see oligop and monop forming , chances are in he ong run contestability will fall which makes the whole idea of dereg a failure as were reducing the BTE so mkts become more contestable

so this could be a failure of the policy

may be contestable in SR

Question 16

EXPLAIN TEH EVLA of height of other BTE

Answer 16

No guarantee that jsut by reducing legal BTE all of a sudden new firms nter and mkt becomes more contestable

what if ther’s other BTE e.g tehcnical or strategic that are high
this could deincentivise or prevent new firms comin g

so we wont see huge increase in comp and beenfits of comp

Question 17

explain evla of lvl of gov regulation

Answer 17

if we do have monoplies and oligopolies we need strogn gov regulation - not legal form

but to regulte against anti comp behaviour

as will prevent formationof oligoplies etc as well as minimise their behaviour

Question 18

what does more consumer surplus allow

Answer 18

conumers to purchase a wider range of g/s