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Q 1/13
Score 0
In 2013 the UK competition authorities forced LloydsTSB Bank to de-merge forming two separate companies. Which one of the following is the most likely reason for this decision?
60
LloydsTSB had a high market share in the retail banking industry
There was increased consumer surplus gained through horizontal integration
Retail banking can be seen as a natural monopoly
There are diseconomies of scale in the retail bank sector
The level of contestability was high in the retail bank sector
Q 2/13
Score 0
Network Rail is a firm responsible for maintaining the UK rail infrastructure. It faces a fine of £75m for failing to meet its punctuality target. Only 87% of trains arrived on time, missing the 92% target. The intended purpose of such performance targets is to increase the
60
contestability of the market where entry barriers are high
quality of service when a lack of competition might lead to poor results
x-inefficiency in the industry
government's revenue in the context of a fiscal deficit
producer surplus of the firm where shareholders will benefit
13 questions
Q.
In 2013 the UK competition authorities forced LloydsTSB Bank to de-merge forming two separate companies. Which one of the following is the most likely reason for this decision?
1
60 sec
3.6.1b
Q.
Network Rail is a firm responsible for maintaining the UK rail infrastructure. It faces a fine of £75m for failing to meet its punctuality target. Only 87% of trains arrived on time, missing the 92% target. The intended purpose of such performance targets is to increase the
2
60 sec
3.6.1b
Q.
Barr and Britvic are two of the three largest soft drink firms in the UK. In February 2013, the proposed takeover by Barr of Britvic was referred to the Competition Commission for investigation. There were likely to have been concerns that the takeover would lead to
3
60 sec
3.6.1a
Q.
Severn Trent Water is a local monopoly supplier of water in the Midlands. In 2008 it was fined by Ofwat, the water regulator, and required to reduce its planned charges. The most likely effect of this decision would be to
4
60 sec
3.6.1b
Q.
In January 2010 the Office of Fair Trading (OFT) referred the UK's local bus services to the Competition Commission over concerns about pricing. It had received complaints about the "predatory behaviour" of existing firms, designed to exclude new entrants from the market. Which characteristic was likely to have been observed?
5
60 sec
3.4.5a
Q.
In August 2009 the Competition Commission published a Groceries Supply Code of Practice. Large supermarket chains were paying very low prices to some suppliers. Which type of market power does this suggest the large supermarket chains have?
6
60 sec
3.4.6
Q.
On 1 November 2009 a new law in the UK gave financial regulators the power to impose fines on banks if they deliver poor service to customers. This method of government intervention in markets is a form of:
7
60 sec
3.6.1b
Q.
In March 2009 the UK Competition Commission required British Airports Authority to sell off three of its seven airports, starting with Gatwick and then Stansted. The most likely reason for the Commission’s decision was the
8
60 sec
3.6.1b
Q.
On 26 November 2009 the water regulator Ofwat announced that water bills must be cut by an average of £3 a year per household over the next five years and that there must be an extra £1 billion investment by water companies. The most likely reason for these decisions was
9
60 sec
3.6.1b
Q.
In 2008 the Microsoft computer software company was fined €1.68 billion by the European Competition Commission for pre-installing its browser Internet Explorer. In December 2009, Microsoft agreed to allow consumers to choose their web browser on setup. The most likely impact on the market for internet web browsers is
10
60 sec
3.6.1c
Q.
Intel is the world’s largest microchip manufacturer, supplying over 75% of the market. In May 2009 it was fined $1.44bn by the European Commission. It claimed that Intel gave secret payments to computer makers to use only Intel chips and paid a major retailer to stock only computers with its microchips. The most likely justification for this fine is that:
11
60 sec
3.6.1b
Q.
The table shows the maximum prices for making and receiving mobile phone calls permitted by the European Competition Commission. The most likely reason for these price caps is that the Commission believes that in this industry:
12
60 sec
3.6.1b
Q.
In the United States, limits have been placed on profits of recently privatised utilities, relative to the value of their capital assets. What may be considered the biggest disadvantage of this method of regulation?
