Examples

Question 1

(OLIGOPOLY) What happened initially with the Microsoft activation merger

Answer 1

Microsoft wanted to merge with activision to develop cloud gaming technology. The CMA said Microsoft would have too much power in a growing industry
Microsoft head said UK was a bad place to do business

Question 2

(OLIGOPOLY) Why was the head of the CMA made redundant

What is the macro & micro evaluation of this

Answer 2

The government said they are too much of a barrier to growth

Macro evaluation: supports the governments heavy focus on growth by favouring business mergers that would lead to growth over other objectives (e.g. consumer interest)

Micro evaluation: The fact that the head of the CMA was made redundant as he prevented too many mergers (specifically Microsoft and activation), ie, looking out for consumer interests, this suggests that the CMA was in fact strict enough on businesses and possibly too strict, and the fact that the government has advocated for less strict regulation could be a form of government failure as they are favouring business growth over the consumer interest.

Question 3

(WAGES) Give an example of an action taken by Goldman Sachs’s showing that gender inequality may be reducing

Answer 3

Goldman Sachs’s have stated its diversity policy has ‘served its purpose’ and they have removed their diversity policy following the USA removing all DEI departments

However it can be argued that the only reason we have got to a point where the pay gap is closing, is due to these policies, and if we return to a free market structure the pay gap may widen further

Question 4

Give an example of firms returning to profit maximisation over other objectives such as the environment

Answer 4

Financial Times:
BP recently slashed renewables spending in pivot back to oil and gas

Question 6

Give an example of how the structure of the free market means regulation may not be needed in an oligopoly market

Answer 6

Aldi & Lidl
Structure of the supermarket industry changed when Aldi & Lidl entered the market. No longer the same Big 4
Other supermarkets have done ‘aldi price match’
Lower prices for consumers

Question 7

Give an example of the banking industry being more competitive due to the free market (without regulation)

Answer 7

Switch guarantee scheme - yet imperial evidence suggest little effect

Introduction of online banks due to less barriers to entry & improvements in technology means that sector is more competitive

Question 8

What is an intermediate solution between full on regulation and free market solutions to manage oligopoly behaviour

Answer 8

Increasing market contestability

Altering market conditions to make it more competitive

Creating the threat of entry through removing barriers to entry which will regulate behaviour of existing firms in the market

E.g. Airline industry:

Question 9

Give 2 examples of increased market contest ability (intermediate between free market & regulation)

Answer 9

E.g. Airline industry:
- Rise of low cost airlines such as Ryanair & easyJet
- EV open skies agreement gave new airlines access to take of and landing spots

E.g. Rise of Uber & Bolt
- Removed the need for some licensed

Question 10

How does elasticity change as you go down on a straight demand curve
Where does a monopoly produce on the curve

Answer 10

The top is more elastic, the bottom is more inelastic
The monopoly produces on the elastic part of the demand curve