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ACCA Applied Knowledge · Business and Technology · Political and legal factors affecting business

A government agency investigates a single firm that supplies 85% of the national market for a product and charges high prices because customers have no realistic alternative. Which concern is the agency most directly addressing?

The agency is addressing abuse of a dominant market position. A firm holding 85% of the market can set high prices because customers lack alternatives, and competition policy exists to prevent this exploitation of market power and protect consumers.

  1. AAbuse of a dominant market positionCorrect
  2. BFailure to publish an integrated report
  3. CBreach of employee health and safety rules
  4. DExcessive use of just-in-time inventory systems

Explanation

A firm with a very large market share that exploits customers through high prices is exhibiting abuse of a dominant position, which competition policy targets. The other options concern reporting, workplace safety and inventory methods, which are unrelated to market power.

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