Government intervention Flashcards
1
Q
How can a government intervene to control monopolies?
A
- price regulation (prevent charging high prices by putting in an RPI - X aka price cap)
- profit regulation (corporate tax, UK 21% to 20%)
- quality standards
- performance targets (regulate quality)
2
Q
How can a government intervene to promote competition and contestability?
A
- enhance competition between firms through promotion of small business
- deregulation
- competitive tendering for government contracts
- privatisation (more competitive market and more efficiency) (assets transferred from public sector to private sector)
3
Q
How can a government intervene to protect suppliers and employees?
A
- restrict monopsony power of firms
- nationalisation
4
Q
What are the limits of government intervention?
A
- regulatory capture
- asymmetric information