QUESTION 4: Paragraph type questions - Higher Order
4.1.1 How can an exit of firms in a perfect market affect the economy?
(8)
4.1.2 Analyse measures that may be used by the government to promote competition in the economy.
(8)
4.1.3 Outline the challenges that the competition policy in South Africa face in achieving their goals.
(8)
Answer (2)
The exit of firms from a perfect market can lead to less competition and higher prices, impacting the economy negatively. Governments can promote competition through anti-monopoly laws, subsidies for new firms, and regulatory reforms. However, South Africa's competition policy must overcome challenges like market dominance, resource limitations, and corruption to be effective. ;
The exit of firms in a perfect market reduces competition, leading to higher prices and potential job losses, which negatively affect the economy. Governments can promote competition through anti-monopoly laws, subsidies for new firms, regulatory reforms, and encouraging innovation, but face challenges like market dominance, resource limitations, and corruption. Addressing these challenges is essential for effective competition policy implementation in South Africa.
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