BTF ICAEW EXAM QUESTIONS AND CORRECT ANSWERS
Why is business regulated? - Answer - to correct market failure and externalities
(external cost and benefits)
- to protect the public interest
consequence of regulation - Answer - corrects market failures
- higher or lower social standing
- collective preferences
- enhance choices
- irreversibility can be warmed up
What is irreversibility? - Answer - what is being done today will lead to consequences
wherein the future generation might not recover it at all
What is regulation? - Answer a rule created by the government or another body which
interprets a statute, a form of secondary or delegated legislation
What is market imperfection? - Answer where monopoly power is leading to inefficiency,
government will put controls on prices or profits
What are externalities? - Answer dealing with the problem of external costs and benefits
via some form of regulation< e.g. controls on emissions of pollutants
What is asymmetric information? - Answer Where consumers and producers are on
unequal footing as to the access of information in the market concerning a particular
good or service.
What is equity? - Answer Fair distribution of economic benefits
, What does regulation do? - Answer - implements a primary piece of legislation
appropriately
- takes account of particular circumstances or factors emerging during a primary piece
of legislation
What is the Porter Hypothesis? Innovation Effect, makes processes and products more
efficient, there is cost savings achieved.
What is Regulatory Compliance? Parts of a business that ensure people are aware of
and take steps towards compliance with relevant laws and regulations.
When does a Dominant Position arise? When one business can behave independently of
competitive pressures.
Who regulates competition? - Answer The Competition and Markets Authority (CMA)
What is a cartel? - Answer An agreement between businesses not to compete with each
other
(collude on prices, discounts, production etc, a party to an anti-competitive agreement)
The closer a market gets to perfect competition: - Answer the more efficient the
allocation of resources
What is wrong with monopolies? - Answer they are not in the public interest as they do
not allocate resources efficiently
How do the government seek to diminish monopolies? - Answer by fragmenting an
industry via legislation, so that market share is not concentrated in the hands of one or
two producers, also stringent testing and government approval before products
marketed
Why is business regulated? - Answer - to correct market failure and externalities
(external cost and benefits)
- to protect the public interest
consequence of regulation - Answer - corrects market failures
- higher or lower social standing
- collective preferences
- enhance choices
- irreversibility can be warmed up
What is irreversibility? - Answer - what is being done today will lead to consequences
wherein the future generation might not recover it at all
What is regulation? - Answer a rule created by the government or another body which
interprets a statute, a form of secondary or delegated legislation
What is market imperfection? - Answer where monopoly power is leading to inefficiency,
government will put controls on prices or profits
What are externalities? - Answer dealing with the problem of external costs and benefits
via some form of regulation< e.g. controls on emissions of pollutants
What is asymmetric information? - Answer Where consumers and producers are on
unequal footing as to the access of information in the market concerning a particular
good or service.
What is equity? - Answer Fair distribution of economic benefits
, What does regulation do? - Answer - implements a primary piece of legislation
appropriately
- takes account of particular circumstances or factors emerging during a primary piece
of legislation
What is the Porter Hypothesis? Innovation Effect, makes processes and products more
efficient, there is cost savings achieved.
What is Regulatory Compliance? Parts of a business that ensure people are aware of
and take steps towards compliance with relevant laws and regulations.
When does a Dominant Position arise? When one business can behave independently of
competitive pressures.
Who regulates competition? - Answer The Competition and Markets Authority (CMA)
What is a cartel? - Answer An agreement between businesses not to compete with each
other
(collude on prices, discounts, production etc, a party to an anti-competitive agreement)
The closer a market gets to perfect competition: - Answer the more efficient the
allocation of resources
What is wrong with monopolies? - Answer they are not in the public interest as they do
not allocate resources efficiently
How do the government seek to diminish monopolies? - Answer by fragmenting an
industry via legislation, so that market share is not concentrated in the hands of one or
two producers, also stringent testing and government approval before products
marketed
