Government Intervention (Edexcel A Level Economics A)

Exam Questions

1 hour12 questions
1
Sme Calculator
1 mark

Why might a government intervene to control mergers in the business sector?

  • To promote fair competition and prevent monopolies

  • To encourage companies to merge and grow larger

  • To reduce corporate taxes for merged firms

  • To limit the freedom of businesses to make their own decisions

Did this page help you?

2
Sme Calculator
1 mark

Which of the following is a common intervention strategy to control monopolies and protect consumers?

  • Providing monopolies with tax incentives

  • Allowing monopolies to set any prices they choose

  • Regulating monopolies' prices and business practices

  • Encouraging mergers between multiple monopoly firms

Did this page help you?

3
Sme Calculator
1 mark

What is contestability in markets related to?

  • The ease with which new firms can enter and exit a market

  • The level of government control over market operations

  • The total number of regulations imposed on industries

  • The number of consumers in a market

Did this page help you?

4
Sme Calculator
1 mark

What is one of the key objectives of protecting suppliers and employees in markets?

  • To encourage unethical business practices

  • To limit the rights of workers and suppliers

  • To foster a more competitive and equitable business environment

  • To increase prices for consumers

Did this page help you?

5
Sme Calculator
1 mark

How can regulatory capture be prevented?

  • By appointing industry representatives to regulatory agencies

  • Through transparency, public oversight, and strict ethical guidelines for regulators

  • By reducing the number of regulatory agencies

  • By giving more power to the industries they regulate

Did this page help you?

6
Sme Calculator
1 mark

What is regulatory capture in economics?

  •  It is the process by which businesses take control of the regulatory agencies that oversee them

  •  It refers to government agencies capturing businesses

  • It involves the competition between different regulatory agencies

  • It is a market strategy for companies to capture consumer interest

Did this page help you?

7
Sme Calculator
1 mark

Which of the following is an example of government intervention in a monopoly market?

  • Subsidising the monopolist

  • Enforcing anti-competitive practices

  • Allowing the monopolist to set prices freely

  • Encouraging the growth of more monopolies

Did this page help you?

1
Sme Calculator
10 marks

Assess whether complete nationalisation of the rail industry might protect employees (10 marks)

Extract A

The case for nationalisation

Privatisation has not made the rail industry cheaper to operate, despite the promise from one government source that it would see private companies bringing: “more competition, greater efficiency and a wider choice of services”. One reason, suggest the critics, is fragmentation. Instead of pushing British Rail into the private sector as a single supplier the government chose to break it into three components of track, train operators and rolling stock i.e. the trains and carriages. This has encouraged each part of the rail industry to prioritise its own profits rather than collaborating to improve the system.

Privatisation, meanwhile, never really worked. The rail network of 2 500 stations and 32 000 km of tracks was renationalised in 2001. This has encouraged the government’s transport secretary, a supporter of private sector involvement, to argue that the state Network Rail monopoly should be removed so that companies can bid to build new rail lines to upgrade the railway.

The privately-owned train operators are now the subject of fierce criticism, due to overcrowding and cancelled services. Private companies are supposed to compete to win a bid to be the train operator for a region for a short number of years. However in recent years the number of private companies bidding or renewing their contract as rail operators has fallen. In May 2018 the government rescued the East Coast line by renationalising it. The line had been run by the private rail operator Virgin Rail, which was suffering lower passenger numbers and revenue than forecast.

Some argue that there is a simple solution: reunite track and train in the only feasible manner, nationalisation.

(Source adapted from: https://www.ft.com/content/d82848ca-f7ba-11e7-88f7-5465a6ce1a00)

Did this page help you?

2
Sme Calculator
8 marks

Read Extract

Examine measures the government might use to restrict the monopsony power of supermarkets.

Did this page help you?

3
Sme Calculator
5 marks

With reference to Extract C, explain one form of government intervention the Competition and Markets Authority may use to regulate monopoly power 

Extract C 

Proposed merger activity in the supermarket sector

Analysts at Société Générale, an investment bank, have recommended a merger between  Sainsbury’s and Morrisons. They claim it would lead to increased economies of scale  and market power for the combined business. Such a merger between the third and  fourth largest supermarkets in Britain would have been unrealistic a few years ago due  to concerns of its impact in reducing competition. However, the chances of getting  permission from the Competition and Markets Authority have increased following the  growth of Aldi and Lidl. Giant mergers have been approved in other sectors such as  Lloyds-HBOS (banking) and British Telecom-EE (telecommunications).  The suggested merger would have its challenges. There is considerable overlap between  the locations of the stores and the enlarged company would require the rationalisation  and co-ordination of hundreds of thousands of employees. A new expensive IT system is  likely to be required and the underlying difficult market trends would remain in the food  retailing industry.

(Source: adapted from ‘Tesco-bury and AS-Morrisons. Could Britain’s supermarkets be about  to merge?’ Graham Ruddick, in The Telegraph, 16th December, 2015. http://www.telegraph. co.uk/finance/newsbysector/retailandconsumer/11699724/Tesco-burys-and-AS-Morrisons.- Could-Britains-supermarkets-be-about-to-merge.html)

Did this page help you?

1
Sme Calculator
15 marks

Read Extract

Discuss the likely problems for Sainsbury’s and Morrisons if the suggested merger between them goes ahead. Refer to Figure 1, Extract C and your own knowledge in your answer (15)

Did this page help you?

2
Sme Calculator
15 marks

Discuss methods of government intervention to protect consumers within the utilities markets, such as energy and telecommunications.

Did this page help you?