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 (C)</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% (A)</p> Signup and view all the answers

What was the initial purpose of the CAP?

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

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

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

What does an HHI index of 1.0 indicate?

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

What is the objective of examining proposed mergers?

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

What is the Temporary Framework?

<p>A set of rules due to covid19 (C)</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 (A)</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. (D)</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. (B)</p> Signup and view all the answers

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

<p>24% (A)</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. (D)</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 (B)</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 (C)</p> Signup and view all the answers

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

<p>All of the above (D)</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 (B)</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 (C)</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 (A)</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 (D)</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 (D)</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 (A)</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 (C)</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 (A)</p> Signup and view all the answers

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

<p>Overproduction of EU agricultural goods (C)</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 (A)</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 (A)</p> Signup and view all the answers

What is the purpose of the Digital Market Act?

<p>To regulate ex ante digital platforms (B)</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 (A)</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 (C)</p> Signup and view all the answers

What is the purpose of examining proposed mergers?

<p>To prevent harmful effects on competition (D)</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 (B)</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 (B)</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 (A)</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 (A)</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 (B)</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 (B)</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 (B)</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 (B)</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 (A)</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 (D)</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 (B)</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 (C)</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 (B)</p> Signup and view all the answers

Flashcards

Primary goal of CAP

Increase agricultural productivity and ensure farmers' fair standard of living.

CAP's principles

Market orientation, sustainability, and simplification.

Herfindahl-Hirschman Index (HHI)

Measures market competition.

HHI Index Range

Ranges from 0% to 10,000%; higher values indicate a more concentrated market.

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HHI Index of 1.0

A single seller controls the entire market.

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Google's 2017 EU fine

Abused its dominance in the search engine market.

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Objective of Merger Examination

Ensure mergers don't impede effective competition.

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Mergers Examined by EU Commission

Companies active in several Member States surpassing specific turnover thresholds.

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Merger Remedies by EU

Prohibition, conditional clearance, and divestiture.

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Key Factor in Market Analysis

Product and geographic market.

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Purpose of Digital Market Act

Regulate digital platforms with significant market power.

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Gatekeeper Platform

A digital platform with significant market power.

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Average Share of Direct Payments in EU Agriculture

Around 30%.

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Distribution of CAP benefits

The majority of recipients of direct income support from the CAP reap roughly 80% of the benefits.

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Share of small farms

Small farms represent roughly 70% of the land and 90% of the number of farms.

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Objective of EU State Aid Control

Ensure Member States don't distort competition by providing unfair advantages.

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Leniency Programme of the EC

Provides reduced fines for companies that report a cartel.

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Incentive for Denouncing a Cartel

To avoid or reduce fines.

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Truck Cartel Case

Colluded to fix prices and reduce competition.

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Abuse of Market Position

Using a dominant position to restrict competition or exploit others.

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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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