September 2013 Q36

[rlsrachaellouisesmith]

Hi again,

I wonder if these two points would be acceptable explanations for how governments could intervene to increase competition:
1) To increase competition the government could reduce taxes for small to medium size businesses. This would decrease costs for small/medium size businesses who are trying to compete with larger firms.
2) Encourage financing for new businesses to set up, whether this be through low interest rates generally, or specially arranged rates with financial institutions if they are lending to new businesses.
Thank you

 

[Richie Holway]

Hi Rachael,

In practice, those are examples of policies that the government could use to try and achieve greater competition. Given the examiner’s report ends with the statement ‘Other relevant points were awarded credit’, you may have scored some marks. However, the question did ask for the ‘main types of policies that government can use…’, so it was important to demonstrate a good knowledge of the core reading in order to score well. There are 2 different sections of the textbook which are very relevant here, so you should try to include those points within your answer. The first relevant section is competition policy from Module 13 (which includes policies to regulate and control monopolies, mergers and restrictive practices, and the second relevant section is policies to encourage competition under the market-orientated supply-side policies from Module 14 (which includes policies such as privatisation, deregulation, introducing market relationships into the public sector, introducing private-public partnerships and free trade & capital movements.

This will be my final forum post before Monday - good luck for the exam!

Thanks,
Richie