Economics of Common Policies - Lecture 5
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Questions and Answers

Which of the following is NOT one of the objectives of the Common Agriculture Policy (CAP) according to the Treaty of Rome?

  • Guarantee a fair standard of living for farmers
  • Stabilize markets
  • Promote urbanization (correct)
  • Increase in productivity in agriculture

    • Which of the following is NOT one of the fundamental principles on which the CAP is implemented?

  • Market Unity
  • Financial solidarity
  • National competition (correct)
  • Community preference

    • Which fund provides 70% of the budget for the Common Agricultural Policy (CAP)?

  • The European agricultural fund for rural development (EAFRD)
  • The European Union budget
  • The European agricultural guarantee fund (EAGF) (correct)
  • The European Investment Bank

    • What is the 'supply problem' associated with the CAP?

    <p>The surplus of agricultural goods</p> Signup and view all the answers

    What percentage of recipients of direct income support from the CAP reap roughly 80% of the benefits?

    <p>20%</p> Signup and view all the answers

    What was the initial purpose of the CAP?

    <p>To provide higher and stable prices to farmers</p> Signup and view all the answers

    What is the Herfindahl-Hirschman Index (HHI)?

    <p>A measure of market concentration calculated by squaring the market share of each competing firm in the industry and summing the resulting numbers</p> Signup and view all the answers

    What is the range of the HHI index (in case of %) ?

    <p>0 to 10,000</p> Signup and view all the answers

    What does an HHI index of 1.0 indicate?

    <p>A market with a single monopolistic producer</p> Signup and view all the answers

    Which companies were under investigation in the truck cartel case?

    <p>The six largest truck manufacturers in the industry</p> Signup and view all the answers

    What is the definition of 'abuse of a relevant market position' according to EU law?

    <p>The exercise of economic power that prevents effective competition in a relevant market</p> Signup and view all the answers

    What was Google fined for in the 2017 case?

    <p>Anti-competitive practices in the search engine market</p> Signup and view all the answers

    What is the objective of examining proposed mergers?

    <p>To prevent harmful effects on competition</p> Signup and view all the answers

    Which authority examines mergers involving companies active in several Member States and reaching certain turnover thresholds at the European level?

    <p>European Commission</p> Signup and view all the answers

    What are the three remedies that the European Commission (and national authorities) can adopt in case of mergers?

    <p>Unconditional approval, conditional approval, and prohibition</p> Signup and view all the answers

    What is the Temporary Framework?

    <p>A set of rules due to covid19</p> Signup and view all the answers

    What are the characteristics of markets with strong network effects, economies of scale, barriers to entry and subsequent sustainability?

    <p>Discourage innovation and harm consumers</p> Signup and view all the answers

    Which of the following statements accurately describes the distribution of land and farms in the EU?

    <p>Large farms account for 63% of the land and 70% of the farms are small.</p> Signup and view all the answers

    What was a key issue of the CAP reforms implemented since the 90s?

    <p>Reducing market price support and replacing it with direct payments to producers.</p> Signup and view all the answers

    What is the average share of direct payments in agricultural factor income in the EU?

    <p>24%</p> Signup and view all the answers

    What is the difference between competitiveness and competition?

    <p>Competitiveness refers to a firm's ability to improve productivity and efficiency, while competition refers to the functioning of markets to improve welfare.</p> Signup and view all the answers

    What is the role of the National Authorities of Competition in implementing EU competition policy?

    <p>To share the practical implementation of EU competition policy with the central services of the EC</p> Signup and view all the answers

    What is the Leniency Programme of the EC?

    <p>A programme that provides partial exemption from fines to companies that report a cartel and provide documentation to dismantle it</p> Signup and view all the answers

    What are some examples of prohibited agreements under Article 101 TFEU?

    <p>All of the above</p> Signup and view all the answers

    What is a positive externality in the context of network effects?

    <p>When more people use a product, its value increases</p> Signup and view all the answers

    What is the Digital Market Act and when did it enter into force?

    <p>It is a European Commission initiative to regulate digital platforms, and it entered into force in October 2022</p> Signup and view all the answers

    What is the key factor in determining the relevant market for a competition analysis?

    <p>The degree of substitutability of products</p> Signup and view all the answers

    What is the Herfindahl-Hirschman Index (HHI) used for?

    <p>To measure the degree of market competition based on market concentration</p> Signup and view all the answers

    According to the Treaty of Rome, which of the following is NOT one of the objectives of the Common Agriculture Policy (CAP)?

    <p>Promote the use of GMOs in agriculture</p> Signup and view all the answers

    What are the three fundamental principles on which the Common Agriculture Policy (CAP) is implemented?

    <p>Market Unity, Community preference, and Financial solidarity</p> Signup and view all the answers

    What is the primary purpose of the Common Agricultural Policy (CAP)?

    <p>To provide income support schemes for farmers</p> Signup and view all the answers

    What is the main drawback of implementing a price floor with variable levies?

    <p>Consumers end up paying for the price floor</p> Signup and view all the answers

    What is the 'supply problem' associated with the CAP?

    <p>Overproduction of EU agricultural goods</p> Signup and view all the answers

    What is the trend in the CAP's share of EU spending over the past 40 years?

    <p>It has decreased despite EU enlargements</p> Signup and view all the answers

    Which of the following is a reason for a decrease in quantity produced?

    <p>Some costs are fixed</p> Signup and view all the answers

    What is the purpose of the Digital Market Act?

    <p>To regulate ex ante digital platforms</p> Signup and view all the answers

    What is a gatekeeper platform according to the Digital Market Act?

    <p>A platform that has significant impact on the internal market</p> Signup and view all the answers

    What is the most commonly used approach to measure the degree of market competition?

    <p>Herfindahl-Hirschman Index</p> Signup and view all the answers

    What is the purpose of examining proposed mergers?

    <p>To prevent harmful effects on competition</p> Signup and view all the answers

    What was the Google case fined for in 2018?

    <p>Abusive use of Android to strengthen the dominant position of its search engine</p> Signup and view all the answers

    What is the definition of 'abuse of a relevant market position' according to EU law?

    <p>The exercise of economic power that prevents effective competition in a relevant market</p> Signup and view all the answers

    What was the outcome of the truck cartel case?

    <p>The major truck manufacturers were sanctioned for a single and continuous infringement of Article 101 TFEU</p> Signup and view all the answers

    What is the share of small farms in EU agriculture in terms of land and number of farms?

    <p>70% of land and 8% of farms</p> Signup and view all the answers

    What is the main difference between market price support and direct payments in the context of the CAP reforms?

    <p>Market price support is replaced by producer support in the form of direct payments</p> Signup and view all the answers

    What was the main reason for the Treaty of Rome to establish EU competition policy?

    <p>To prevent collusion and state aid that could reduce political support for economic integration</p> Signup and view all the answers

    What is the role of the European Commission in examining mergers?

    <p>Examine mergers between companies based outside the EU if they do business within the EU</p> Signup and view all the answers

    What are the three remedies that the European Commission (EC) and national authorities can adopt in response to mergers?

    <p>Authorise the merger unconditionally, conditional approval, and prohibit the merger</p> Signup and view all the answers

    What is the objective of EU State aid control?

    <p>To ensure that State aid complies with EU rules</p> Signup and view all the answers

    What is the range of the Herfindahl-Hirschman Index (HHI)?

    <p>0 to 1.0 or 0 to 10,000 points</p> Signup and view all the answers

    Which of the following is NOT a type of anti-competitive practice prohibited under the Treaty of Rome?

    <p>Monopolistic practices</p> Signup and view all the answers

    Which of the following is responsible for the practical implementation of EU competition policy?

    <p>The European Commission</p> Signup and view all the answers

    What is the main incentive for companies to denounce the existence of a cartel under the EC's Leniency Programme?

    <p>Full or partial exemption from fines</p> Signup and view all the answers

    Study Notes

    Common Agriculture Policy (CAP)

    • The CAP's objectives do not include the protection of the environment.
    • The primary purpose of the CAP is to increase agricultural productivity and ensure a fair standard of living for farmers.
    • The CAP is implemented based on three fundamental principles: market orientation, sustainability, and simplification.

    EU Competition Policy

    • The Herfindahl-Hirschman Index (HHI) is used to measure the degree of market competition.
    • The HHI index ranges from 0% to 10,000%, with higher values indicating a more concentrated market.
    • An HHI index of 1.0 indicates a monopolistic market.
    • The European Commission fined Google in the 2017 case for abusing its dominant position in the search engine market.
    • The main objective of examining proposed mergers is to ensure that they do not significantly impede effective competition.
    • The European Commission examines mergers involving companies active in several Member States and reaching certain turnover thresholds at the European level.
    • The three remedies that the European Commission and national authorities can adopt in case of mergers are: prohibition, conditional clearance, and divestiture.

    Competition Analysis

    • The key factor in determining the relevant market for a competition analysis is the product and geographic market.
    • The Digital Market Act aims to regulate digital platforms with significant market power, and it entered into force in 2022.
    • A gatekeeper platform is a digital platform with significant market power, as defined by the Digital Market Act.

    Agriculture in the EU

    • The average share of direct payments in agricultural factor income in the EU is around 30%.
    • The majority of recipients of direct income support from the CAP reap roughly 80% of the benefits.
    • The share of small farms in EU agriculture is around 70% in terms of land and 90% in terms of the number of farms.

    EU State Aid Control

    • The objective of EU State aid control is to ensure that Member States do not distort competition by providing unfair advantages to certain companies.

    Cartels and Anti-Competitive Practices

    • The Leniency Programme of the EC provides a reduction in fines for companies that denounce the existence of a cartel.
    • The main incentive for companies to denounce the existence of a cartel under the EC's Leniency Programme is to avoid or reduce fines.
    • The truck cartel case involved companies that colluded to fix prices and reduce competition.
    • The definition of 'abuse of a relevant market position' according to EU law is the use of a dominant position to restrict competition or exploit competitors, customers, or suppliers.

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    Test your knowledge on the reasons for decrease in production costs with this quiz. Learn about fixed costs and network effects, and understand how they impact the value of a product. Explore the concept of positive externalities and the "fax effect", and discover how indirect effects can occur on a platform with multiple groups.

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