Economics 3.6 Government Intervention

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Regulation in Markets
Rules set to control the operation of firms who may have monopoly power in an industry.
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Government intervention examples to control monopolies
Remove barriers to entry, Imposing price caps, Profit regulation, Quality standards and performance targets.
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Government intervention to reduce monopsony power
Restrictions, Anti monopsony laws (minimum wage), Independent and self regulations.
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Rebates
A partial refund to someone who's paid too much.
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Nationalisation
The process of turning private assets into public ones, by bringing them under state ownership. E.g. Northern Rock after the 2008 crisis.
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Privatisation
When a government owned service is sold to the private sector, e.g. Rail and BT.
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Reasons for Privatisation
Improve efficiency, More consumer choice, More competition= better service and better deals, Governments don't have to maintain it anymore and they receive tax revenue.
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Examples of Government intervention used to promote contestability
Grants, Growth vouchers, Tax relief and Support programmes.
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Competitive Tendering
When the government contracts out certain services and projects to private businesses, and chooses which business will benefit society the most by taking it up.
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Public Private Partnerships (PPP)
Where government owned public services collaborate with the private sector to provide a service.
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Private Finance Initiative (PFI)
A form of PPP. They fund the service and then lease back any capital assets to the government for public use.
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Benefits of Competitive Tendering
Governments don't have to buy some expensive capital goods, utilise specialist skills within the private sector, best economic deal, Increase employment, Less time and money wasted for the government.
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Drawbacks of Competitive Tendering
Expensive and ongoing payments to the private sector, Private companies make big profits from taxpayer's money, Projects can often run late- adding additional costs to the government, Deals are made by inexperienced civil servants.
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Limits to Government intervention- Asymmetric information
Lack of perfect knowledge could make it harder for the government to investigate anti-competitive practises, and even to make sure firms are paying the right amount of tax.
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Limits to Government intervention- Regulatory Capture
Where regulatory agencies become dominated by the industries they were charged with regulating.
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Example of Regulatory Capture
The British Nutrition Foundation, which was funded by McDonalds and other fast food restaurants.
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Other cards in this set

Card 2

Front

Remove barriers to entry, Imposing price caps, Profit regulation, Quality standards and performance targets.

Back

Government intervention examples to control monopolies

Card 3

Front

Restrictions, Anti monopsony laws (minimum wage), Independent and self regulations.

Back

Preview of the back of card 3

Card 4

Front

A partial refund to someone who's paid too much.

Back

Preview of the back of card 4

Card 5

Front

The process of turning private assets into public ones, by bringing them under state ownership. E.g. Northern Rock after the 2008 crisis.

Back

Preview of the back of card 5
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