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Economics

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Microeconomic Policy

Exercise 2

1. What is the aim of microeconomic policy?

   Microeconomic reforms involve government policy changes to introduce reforms in the product, service or factor markets. The aim is to support macroeconomic policy and increase the level of competition and efficiency in the domestic and international economies. Improving the performance of industry in all facets of production and distribution which increases national wealth and real standards of living.

2. Define competition policy.

   Competition policy encompasses all policy developed by the government dealing with the extent and the nature of competition in the economy. It involves the use of legislation and actions by the government to influence the competitive behaviour of firms to ensure that product and factor markets are efficient and competitive.

3. Briefly outline the main elements of the National Competition Policy (NCP).

   The National Competition Policy includes:

   • restricting anticompetitive trade practices
   • restructuring public monopolies
   • providing firms with fair access to essential facilities, e.g. water, gas and electricity.
   • monitoring the prices charged by monopolies and other dominant firms in the market
   • requiring competitive neutrality between government business and private firms.
     
     

4. Competition policy is one element of microeconomic policy. List some other elements of microeconomic policy.

   The other elements of microeconomic policy include:

   • industry policy involving tariff reform and industry assistance
   • deregulation of industry
   • structural and managerial reforms of GBEs
   • industrial relations reforms
   • taxation policy.