Essay Plans Theme 3

Question 1

Monopoly

Answer 1

Pros:
- dynamic efficiency
- economies of scale
- natural monopolies

Cons:
- allocative inefficiency
- productive inefficiency
- x inefficient
- inequalities in necessity markets
- abuse of power (choice, quality, price)

Question 2

Competitive markets

Answer 2

Pros:
- allocative efficiency
- productive efficiency
- x efficiency
- jobs

Cons:
- lack of dynamic efficiency
- lack of EOS
- creative destruction
- cost cutting in dangerous areas

Question 3

Contestable markets

Answer 3

Pros:
- allocative efficiency
- productive efficiency
- x efficiency
- job creation

Cons:
- lack of dynamic efficiency
- cost cutting in dangerous areas
- creative destruction

Question 4

Privatisation (sold to private sector)

Answer 4

Advantages:
- allocative efficiency
- x-efficient
- dynamic efficiency

Disadvantages:
- limited competition initially (inefficiencies)
- loss making services out even social desirability
- loss of natural monopoly and EOS

Question 5

Deregulation (reduce barriers)

Answer 5

Advantages:
- more firms more choice
- static efficiency and x
- dynamic efficiency

Disadvantages:
- loss of natural monopoly (high costs, less efficiency)
- formation of oligopoly and local monopolies

Question 6

Nationalisation (industry into public ownership)

Answer 6

Advantages:
- EOS (p eff)
- focus on service provision (social welfare)
- macro eco control

Disadvantages:
- DEOS huge size
- lack of supernormal profit no dynamic
- burden on tax payer
- moral hazard

Question 7

Factors impacting demand of labour

Answer 7

1. Wage rates (high demand contracts)
2. Demand for product (labour derived demand)
3. Technology advances

Question 8

Factors impacting supply of labour

Answer 8

1. Wages (individual curve backward bending)
2. Education, skill levels and population
3. Non-monetary benefits (job satisfaction, area, conditions)

Question 9

Minimum wage
National living wage £11.44
Minimum wage £8.60

Answer 9

For:
- reduces poverty
- reduces gender differentials (women low pay jobs due to inflexibility)
- staff retention, motivation, productivity

Against:
- loss of jobs, increased costs
- wage spiral (high payed want increase too)
- doesn’t consider regional differences

Question 10

Tackling geographical labour immobility

Answer 10

1. Improve supply of houses, reduce property prices, make renting cheaper
2. Improve transport
3. Subsidies houses

Question 11

Tackling occupational labour immobility

Answer 11

1. Increase vocational training
2. Incentivise uni
3. Encourage spending on work training
4. Educational changes to curriculum (T LEVELS)

Question 12

Mergers (2 or more firms join under common ownership)

Answer 12

Pros:
- abnormal profits (high market share, low comp) dynamic eff
- less risks (product diversification)
- EOS

cons:
- DEOS
- abuse of monopoly power (ineff)
- CMA restrictions
- lack of dynamic eff (no expertise)