Government intervention MS Flashcards
Case FOR nationalisation
Larger economies of scale, LRAC lower
less likely to result in market failures, will take into account externalities, allocative efficiency
vehicle for macro economic stability- more power over wages and unemployment level
Case AGAINST nationalisation
Cost to tax payer, opportunity cost
lack of profit incentive, lack of incentive to be efficient and reduce AC, x-inefficent
risk of diseconomies of scale, become too large and see AC increase
Inefficient- higher prices, lower consumer surplus, worse efficient outcomes ( P> MC allocative )
lower supernormal profits, less dynamically efficiency, loss of improvement of consumer welfare over time price, quality, choice
increased risk moral hazard, encourage risk taking know that fails then cushioned by the state
