The provision of public goods by government is an example of intervention to address market failure
caused by:
A.
B.
C.
D.
market imperfection
externalities
asymmetric information
lack of equity
2
By the direct taxation of income government is seeking to:
A.
B.
C.
D.
provide public goods
provide merit goods
redistribute wealth
create demand
3
Regulation of financial reporting is an example of intervention in order to alleviate market failure caused
by:
A.
B.
C.
D.
market imperfection
externalities
asymmetric information
lack of equity
4
Grando plc operates in a market where compliance with regulations has added £1.50 to the cost of each
unit produced. As a result, Grando plc has raised its price from £12.60 per unit to £14.10. It has not
made any other changes. Grando plc's response is an example of:
A.
B.
C.
D.
mere compliance
full compliance
non-response
innovation
5
Of a market worth £12.5m, Topping plc has a £2m share and Bartholomew plc has a £3.5 million share.
They require customers to sign an agreement that they will pay a £10,000 penalty if the customer
terminates the contract within two years. This is an example of:
A. an abuse of dominant position by both companies
B. an anti-competitive agreement between the two companies
C. a cartel of the two companies
D. all of the above
6
In-depth inquiries into the regulation of major industries are conducted by:
A.
B.
C.
D.
the Financial Conduct Authority (FCA)
the Competition and Markets Authority (CMA)
the Financial Reporting Council (FRC)
the London Stock Exchange (LSE)
A UK industry has been lobbying Parliament to require goods bought from three Asian countries for sale
in the UK to be subject to additional safety checks. From the perspective of supporting free trade the UK
Government may be reluctant to agree as this would be an example of:
A.
B.
C.
D.
a tariff
a quota
dumping
an import restriction
The government has intervened to impose a limit on businesses' carbon emissions. This is an example of
regulation designed to address market failure caused by:
A.
B.
C.
D.
asymmetric information
equity
market imperfection
externalities
The government has passed regulations to change how car hire companies check whether hirers are
licensed to drive in the UK. Speedy Hire plc is a major player in the UK car hire business. In anticipation
of the new regulations the company implemented procedures which exceeded the requirements of the
regulations. Speedy Hire plc's response to the new regulations was:
A.
B.
C.
D.
innovation
entrenchment
mere compliance
full compliance
Ferndale plc is a multinational company. It has been charged with collusive behaviour in its UK
operations. If found guilty, the company could, amongst other sanctions, receive a fine of:
A.
B.
C.
D.
up to 10% of annual worldwide revenues
up to 10% of annual UK revenues
up to 20% of annual worldwide revenues
up to 20% of annual UK revenues
Government intervention in a market economy can lead to an increase in economic welfare if:
A.
B.
C.
D.
it sets a good's maximum price above its equilibrium price
the market mechanism has failed to allow for externalities
it sets a good's minimum price above its equilibrium price
the demand for inferior goods rises as incomes increase
The Fenno product is manufactured in the UK but is also imported into the UK from France. The UK
government has recently decided to apply an import quota on imports of the product from France. The
quota is below the current level of imports. This action will have the effect of:
A.
B.
C.
D.
only French suppliers suffering a lower price
both UK and French suppliers suffering a lower price
only UK suppliers enjoying a higher price
both UK and French suppliers enjoying a higher price
Anti-monopoly legislation is an example of government intervention to address market failure caused
by:
A.
B.
C.
D.
market imperfection
externality
asymmetric information
inequity
Competition legislation prohibits conduct that damages competition, including abuse by a business of
its dominant position. Which three of the following are types of conduct that will be considered as an
abuse if the business is in a dominant position?
A. Imposing transfer pricing
B. Limiting production markets or technical developments to the prejudice of consumers
C. Applying different trading conditions to equivalent transactions, thereby placing certain parties
at a competitive disadvantage
D. Attaching unrelated supplementary conditions to contracts
E. Providing public goods on behalf of the government
In which of the following circumstances would a cartel be most likely to operate?
A.
B.
C.
D.
A market with a undifferentiated product and a large number of producers
A market with differentiated products and few producers
A market with a large number of producers and where demand for the product is inelastic
A market with few producers and an undifferentiated product
The benefit of anti-monopoly enforcement is that:
A.
B.
C.
D.
it encourages firms to engage in research, which leads to new products being produced
it deters firms from engaging in collusion, price-fixing and deceptive advertising
it forces firms to produce efficiently
the revenue from fines can be used for socially worthwhile causes
Anti-monopoly laws are based on the proposition that the best way to achieve efficiency and avoid
excessive prices is through:
A.
B.
C.
D.
regulation
increased competition
public ownership
oligopoly
The following statements have been made about anti-monopoly legislation and market regulation.
Statement (1): Anti-monopoly legislation compensates for lack of competition, and market regulation
promotes competition.
Statement (2): Anti-monopoly legislation promotes competition and market regulation compensates for
lack of competition.
Statement (3) Anti-monopoly legislation and market regulation promote competition.
Are these statements true or false?
Requirement
A.
B.
C.
D.
Option 1
Option 2
Option 3
Option 4
Measures taken by government to redistribute wealth are a form of intervention aimed at addressing
problems concerned with:
A.
B.
C.
D.
asymmetric information
market imperfection
lack of equity
externalities
Two large listed companies recently colluded with each other to fix the price of a product they both sell
in the UK market. Collusion of this type is an example of market failure due to:
A.
B.
C.
D.
inequality of resources
external costs
market power
resource immobility
Jerome is a director of Newport plc, a listed company. During the year he made a loan to his sister Jane,
out of company funds that has not yet been repaid. When asked by the external auditors about this,
Jerome said that it is unlikely that Jane can repay the money because she has been experiencing
financial difficulties for several years.
Statement (1): Jerome has committed the offence of market manipulation under the Financial Services
Act 2012.
Statement (2): Jerome could be disqualified as a director under the Company Directors Disqualification
Act 1986.
Identify whether each statement is true or false.
Requirement
A.
B.
C.
D.
Statement (1) true; Statement (2) false
Statement (1) false; Statement (2) false
Statement (1) true; Statement (2) true
Statement (1) false; Statement (2) true
The government of Myland was unhappy with the prices charged to customers for mobile data by
mobile phone operators and recently conducted a review into the industry. The review recommended
that prices should be regulated and capped at a maximum daily price that is below the market price.
The impact of this pricing rule on market failure is best described as:
Requirement
A.
B.
C.
D.
failing to address market failure because there is no impact on the price charged
influencing the demand for and supply of mobile data
persuading mobile phone operators to reduce their prices
taking control of the mobile phone industry
The government of Dryland wishes to encourage more people to eat fruit and vegetables. Currently, the
price of fruit and vegetables are high in comparison to people's incomes and so the government is
seeking ways of increasing supply from producers to lower the price people pay.
Which of the following methods should the government use to increase supply of fruit and vegetables?
Requirement
A.
B.
C.
D.
Increasing indirect taxation on fruit and vegetables
Paying subsidies to fruit and vegetable producers
Persuading producers to lower their prices
Set a maximum price for fruit and vegetables