Government Response to Market Power
Market Failure: Market Power
AO3·HL
Syllabus requirement
Legislation, regulation, government ownership, and fines are tools used to curb abuse of market dominance.
Assessment objectives
AO3 Synthesis and Evaluation
Higher LevelThis topic is assessed at HL.
Summary
This topic covers how governments respond when firms hold significant market power that can lead to anti-competitive behaviour. It describes regulatory tools (legislation, merger control, promotion of contestability, forced pricing, sale/divestiture), government ownership (nationalization) and punitive measures (fines), and explains why these interventions aim to protect consumers and restore competition.
