Mixed Economy

Question 1

Mixed economy

Answer 1

When an economic system’s resources are allocated through a mixture of Public Sector involvement and the free market

Question 2

Why is a mixed economy favoured over the market economy?

Answer 2

Government are welfare maximisers and increase the amount of positive externalities

Question 3

Competition in a market based economy

Answer 3

• if have a strong market share, able to exploit consumers by charging higher prices and restricting output which damages consumer welfare

Question 4

Why do the government intervene?

Answer 4

to protect consumers and promote efficiency through competition policy

Question 5

How is competition policy achieved?

Answer 5

This is through regulation
- the government puts in laws and legislations in order to prevent consumers from being exploited
- such as product standards, lower barriers of entry and price caps
- breaking up firms so more competition

Question 6

Why does competition policy exist?

Answer 6

Exist to stop big firms from abusing their market power
- reduced barriers of entry to allow more firms that are smaller to enter the market

Question 7

Is more competition always necessarily a good thing?

Answer 7

• depends upon level of competition as one firm rate just capture complete market share
• if more competitors there’s less profits so less investments