Gov Intervention To Control Monopolies (4)

Question 1

Pros of monopolies (2)

Answer 1

Natural monopolies will ensure vital services are provided – able to exploit economies of scale
Supernormal profits can be invested to encourage dynamic efficiency

Question 2

Cons of monopolies (3)

Answer 2

Higher prices charged
Choices limited
X-inefficiency – not as large incentive to be productively efficient

Question 3

Methods used by gov (4)

Answer 3

Price Regulation
Profit Regulation
Quality Standards
Performance Targets

Question 4

What price regulation

Answer 4

Min + max price

Question 5

Pros of price regulation (4)

Answer 5

Agricultural market is volatile
Min price for cheap alcohol
+ fair prices
+ stock

Question 6

Cons of price regulation (2)

Answer 6

Excess suppply = wastes resources
Excess demand = black market, shortages and queues

Question 7

Profit regulation cons + pros (5)

Answer 7

+ restrict undesirable behaviour
+ Consumer rights act
- More money in facilities and wages = less incentive to innovate
- inflate costs
- time lag

Question 8

Quality standards pros and cons + examples (4)

Answer 8

CE mark = health and safety
Fair trade
- expensive and time consuming = strict criteria
+ competition

Question 9

Performance targets and example (4+)

Answer 9

Rail industry = train company can achieve certain number of delays on daily basis = face fines if overdoes
- can’t invest
+ consumers get best service