Goverment Intervention For Increasing Competition And Protectign Workers Flashcards

1
Q

What is a sme (example) and what are benefits of smes (amount)

A
  • A sme is a small medium enterprise
    An example is a local pizza takeaway
  • there are more smes so they employ more people
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2
Q

What is a start up (example)

A
  • A start up refers to a business initiated by an entrepreneur which aims to develop into a scale bale business and further than the solo founder
  • example of a start up is Uber and Airbnb
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3
Q

Why should governments support smes and start ups

A

By supporting smes and start ups -> it increases the amount of firms who rise to the challenge of competing with established firms -> this leads to increased competition which leads to benefits for the consumers

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4
Q

What benefits do sme and start ups provide for consumers

A

More competition which leads to lower prices, more choice and higher quality

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5
Q

Give an example of how supporting smes can be beneficial (audit)

A

Auditing in the uk is an oligopoly -> by supporting smaller auditing companies there is more firms who compete with the oligopoly which increases efficiency

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6
Q

What are the overall of benefits of smes and start ups

A
  • provide competition -> increased efficiency
  • more jobs and increased employment
  • increased choice
  • can be a seedbed for innovation
  • may be more flexible and efficient into responding to consumer needs
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7
Q

What are some disadvantages of smes

A
  • hard to get credit for finance -> small businesses are seen as risky borrowers so banks are reluctant to lend to them
  • business skills -> many people believe that they do not have the business skills to operate a business
  • recruitment -> hard to find competent employees
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8
Q

What can governments do to Support smes

A
  • provide information
  • deregulate to make it easier to enter markets
  • streamline the process of setting up a business
  • provide training for business owners
  • educational reforms to increase the skills of overall workforce
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9
Q

What is competitive tendering

A
  • competitive tendering is when private sector firms compete for contracts to carry out tasks on behalf of the government
  • examples include catering for schools and constructing hospitals
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10
Q

What is the rationale behind competitive tendering

A

Competitive tendering brings back the profit motive to jobs previously done by the government with increased efficiency and quality -> tax payers benefit from lower prices and higher quality services

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11
Q

What are the benefits of competitive tendering

A
  • if there is a competitive market for government contracts, more private sector firms will be responsible for allocating resources into the economy -> increased efficient and lower prices and higher quality
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12
Q

What are some disadvantages of competitive tendering

A
  • if governments focus too much on the price aspect of contracts -> firms may lower quality of projects which will lower tax payers
  • there is also Normally a lack of bidders
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13
Q

What is privatisation

A

Privatisation is the process of when public sectors companies change over to the private sector. This change is enacted by the government

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14
Q

What is the rationale behind privatisation

A

Privatisation brings back the profit incentive and competition which leads to increased efficiency and higher quality products

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15
Q

What are disadvantages of privatisation

A
  • governments lose out on a source of income
  • some things such as infrastructure are better off under state provision
  • privatisation with poor regulation and a natural monopoly situation may lead consumers worse off -> example of this is higher prices in energy markets and railways
  • less attention is paid to social objectives
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16
Q

What are some advantages of privatisation

A
  • private sector brings back the profit motive which incentivises cost cutting, increased efficiency and increasing productivity
  • the selling of public companies bring lots of money to the government
  • a state monopoly can be reduced to several firms which would increase comeption which would lead to higher quality goods at lower prices
17
Q

What is deregulation

A

Deregulation is the removal of government regulations

18
Q

What is the aim of deregulation

A

Deregulation makes it easier to enter and exit markets -> lower barriers to entry -> this makes the market more contestable
- increase the number of firms in the market
- or make incumbent firms fearful of entry

19
Q

How does deregulation affect contestability

A

Increases contest ability

20
Q

What effect does increased contest ability have on price

A
  • downward impact on price
  • incumbent firms are less likely to profit maximise as they are fearful of hit and run entry
  • if more firms join, this has a downward pressure on price
21
Q

How does contest-ability affect quality

A

Contestability puts pressure on firms to increase quality as the threat of new firms and jointing of new firms put pressure on them to maintain market position

22
Q

How does contestability affect innovation

A

Easier for start ups to enter markets which increases innovation

23
Q

How can we protect suppliers

A
  • fines and jail time for people with exploitative practices
  • increase contestability -> helps combat monopsony power -> more buyers equals less monopsony power -> done by increasing no of firms in market
  • set a minimum price -> price floor which prices cannot fall under -> less exploitation
24
Q

How can we protect workers

A
  • minimum wages