Objectives

1. To explain why government policy is important for managerial decision-making.

2. To discuss the objectives of government policy.

3. To emphasize the distinction between positive and normative aspects of policy.

4. To explain the concept of market failure and its implications for both governments and businesses.

5. To explain the concept of externalities and their relevance to both governments and businesses.

6. To explain the concept of public goods and their relationship with externalities.

7. To discuss the importance of transaction costs and their implications.

8. To discuss certain social and ethical issues which are particularly relevant in business decision-making.

9. To explain why government intervention can be desirable in certain markets.

10. To explain the SCP model and its shortcomings.

11. To discuss the objectives of government policy in the areas of monopoly and competition policy.

12. To point out differences between objectives in the UK, the EU and the USA.

13. To discuss the various policy options in monopoly policy, explaining the relative advantages and disadvantages.

14. To discuss the various policy options in competition policy, explaining the relative advantages and disadvantages.

15. To describe the policies implemented by the UK, the EU and the USA, making comparisons.

Introduction

Importance of government policy

The first fundamental question here is: why should government policy be important to managers? Government policy affects firms in a multitude of ways and managers need to know what these policy effects are likely to be so that they can anticipate both the policies and their effects.