Role of Government

Question 1

why should governments have an active role in the business environment?

Answer 1

so it secures fair market competition = fair play amongst companies (no monopolies etc.) + fair prices for customers (= price and quality correspondence, reasonable price)

Question 2

what is the problem of monopoly?

Answer 2

1. wealth inequality (the company gets all the money)
2. inefficiency
3. political abuse

Question 3

what is the problem of monopoly?

Answer 3

1. wealth inequality (the company gets all the money)
2. inefficiency (total utilisation could be much higher)
3. political abuse

Question 4

what are the main sources of monopoly position?

Answer 4

1. economies of scale
2. technological superiority (through M&A and joining the R&D depts)
3. contol of natural resources (also mainly through M&A) + high entry barriers

Question 5

what is the goal of competition policy?

Answer 5

promote competition –> improve markets’ efficiency

Question 6

what is the EU’s competition policy?

Answer 6

• abolishment (/control) of cartels (and other anti-competitve practices)
• prevention of market dominance
• support mergers and acquisitions
• control of direct and indirect state aids