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Lecture notes 4.2.2 Business Regulation
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These notes helped me get an A* in A Level Economics, covering all aspects of the specification, plus hints of real world context.
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4.2.2 Business Regulation Preventing anti-competitive practices & controlling mergers and takeovers
o CMA is the main regulator of competition
o Used to promote competition
o Investigate potential mergers or takeovers with large firms if they would dominate the
market when joining
o If merger or takeover is deemed to create a monopoly it is likely to be prevented
Regulation natural monopolies
o Governments intervene in the market to control monopolies
o Prevents the abuse of monopoly power
o Stop market failure from a loss of consumer surplus
Price regulation
o Governments can prevent monopolies from charging consumers exsessive prices
o Might result in a loss of allocative efficency
o RPI-X means that firms can focus on being more efficienct since they have an incenive to
lower costs
o Encourages competition which prevents monpolies
Pofit regilation
o Governent can control the profits that firms earn by ensuring they are not exsessive
o In the UK firms have to pay corporation on any profits they earn
o The UK reduced corpotation tax from 21%-20% in April to encorige investment
Quality standards
o Regulators can observe the quality of profucts
Performance targets
o Sets minimum targets to be met
o Aims to regulate quality
o NHS has monopoly so it has performance targets
Enhancing competion between firms throgh ptomoion of small businesses
o ‘Red Tape Challenge’ aims to simplify regulation in business
o Aimed towards small businesses
o Aim to make it easier to meet environmental targets & create new jobs
o SME’s are important for creating a competitive market
o Create jobs, stimulate innovation & investment, promote a competitive environment.
o Governments aim to improve acsess to finance and reduce barriers to entry, make it
easier for smaller firms to enter the market
Privitisation
o Privitise or deregulate public sector
o Deregulation is the act of reducing how much an industry is regulated
o It reduces government power and enhances competition
o Exsessive regulation is called ‘red tape’
o It can limit the quantity of output a firm produces
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