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Ebook Economics (7th edition): Part 2

(BQ) Part 2 book "Economics" has contents: Government policy towards business, the national economy, the roots of modern macroeconomics, money and interest rates, fiscal and monetary policy, economic problems of developing countries, global and regional interdependence,.and other contents. | ECON_C13.qxd 3/04/2009 11:20 Page 367 Chapter 13 Government Policy towards Business CHAPTER MAP 13.1 Competition policy 368 Competition, monopoly and the public interest The targets of competition policy Oligopolistic collusion: restrictive practice policy Competition policy in the European Union UK competition policy Assessment of competition policy 368 368 369 369 370 373 13.2 Privatisation and regulation 375 Nationalisation and privatisation How desirable is privatisation? Regulation: identifying the short-run optimum price and output Regulation: identifying the long-run optimum price and output Regulation in the UK Increasing competition in the privatised industries 375 375 377 378 378 382 In this chapter we continue our examination of government policy to tackle market imperfections. The focus here is on the problem of market power. We examine various policies the government or its agencies can use to prevent firms abusing a monopolistic or oligopolistic position. In section 13.1 we examine ‘competition policy’. We will see that the targets of such policy include the abuse of monopoly power, the problem of oligopolistic collusion, and mergers that will result in the firm having a dominant position in the market. Then in section 13.2, we look at privatisation and the extent to which privatised industries should be regulated to prevent them abusing their market power. We also consider whether it is possible to introduce enough competition into these industries to make regulation unnecessary. The relationship between government and business is always likely to be complex. Governments face the twin pressures of having to ensure consumer protection while needing a dynamic and profitable business environment that will ensure high levels of employment, output and growth. In this chapter we see the conflicts that can arise as a consequence. ECON_C13.qxd 3/04/2009 11:20 Page 368 368 13 GOVERNMENT POLICY TOWARDS BUSINESS 13.1 COMPETITION .