24 Government Intervention and Competition

What does 'fit for purpose' mean?

• a consumer must be ready for purchase

• a consumer needs to be able to use a purchased good for the purpose it was intended

• a producer must be ready to increase productivity

• a producer must actively consuming goods

Which of the following is an example of an anti-competitive practice a firm may engage in and a regulator would actively try and prevent?

• Buy one get one free offers

• price fixing by dominant firms in a market

• instore competitions for consumers to enter

• lowering barriers to entry in a market

What is the purpose of a Government Regulatory Body such as the Competitions Markets Authority (CMA) in the UK?

• encourage growth of dominant firms

• protect the interests of consumers

• increase the power of monopolies

• reduce competition in the market

If a whole industry is dominated by one firm, how can a Government effectively intervene to protect consumers from the firm and prevent anti-competitive activities?

• setup a meeting with the firm once a month and encourage them to think about the consumers

• Encourage consumers to write letters to the firm to ask for better prices

• setup a special industry regulatory body to control the prices charged by such firms and issue fines if quality standards are not met

Without government intervention, consumers might be exploited. The following are examples of the ways in which a firm might exploit consumers, except for....? (choose one option)

• restricting consumer choice by market sharing

• increasing prices to higher levels than they would be in a competitive market

• reducing prices to make their goods competitive and affordable for consumers

• raising barriers to entry by spending huge amounts of money on advertising, which smaller firms could not match

Mergers and takeover usually result in ……………………. competition in the market. (Pick an option to complete the sentence

• no change in

• an increase in

• a reduction of

Which of the following is an example of an anti-competitive practice?

• advertising

• product differentiation

• paying high wages to workers

• price fixing

Which of the following is a barrier to entry?

• low labour productivity

• 
  

  diseconomies of scale

• high start up costs

• inflation

Which of the following is a feature of a monopoly?

• all firms are price takers

• consumers have lots of choice

• barriers to entry

• a large number of sellers in the market

Which of the following is a possible disadvantage of oligopoly?

• collusion

• lower prices

• more choice

• more innovation