Competition Policy

Question 1

Five economic problems governments deal with

Answer 1

• Monopoly and Oligopoly
• Externalities
• The underprovision of public goods
• The use of common resources
• Income inequality

Question 2

Why are monopolies and oligopolies disadvantageous to society?

Answer 2

Prevent the efficient allocation of resources which causes a deadweight loss.

Question 3

4 Means of government intervention

Answer 3

• Regulation
• Competition policy
• Taxes
• Government ownership

Question 4

Regulation

Answer 4

Consists of rules administered by government to influence economic activity by determining prices, product standards and the conditions under which new firms may enter an industry.

Question 5

Competition policy

Answer 5

Law that regulates or prohibits certain kinds of market behavior.

Question 6

Aims of the SA competition policies

Answer 6

• Promotion of efficiency & development of the economy
• Providing consumers with competitive prices & choices
• Promoting employment
• Promoting participation by small and medium-sized firms
• Promoting a wider spread of ownership

Question 7

SA Competition policy in practice

Answer 7

• Prevents existing monopolies and other large firms from abusing their market power
• Regulates the growth of market concentration through mergers and acquisitions.
• Prevents the application of restrictive practices, particularly by oligopolies.

Question 8

Restrictive practices

Answer 8

Fixing of selling prices;
Collusion with regards to tenders;
Collusion with respect to market shares