Market Intevention - Privitisation

Question 1

What is privatisation

Answer 1

The transfer of assets from the public (state or government) sector to the private sector of an economy

Question 2

Case for privatisation

Answer 2

• incentive for businesses to be run efficiently
• reducing trade union power (privatised businesses were now free to raise finance through the stock market)
• drive competition and improve productive and dynamic efficiency

Question 3

Counter-arguments for privatisation: the case for nationalisation

Answer 3

• firms in the public sector follow social objectives
• some state assets are sold off at too low of a price (decrease in investment)
• some state owned enterprises had already faced competition when part of the public sector

Question 4

In recent years what has there been a strong growth in

Answer 4

The number of private sector businesses that are used to provide public services

Question 5

What is contracting-out

Answer 5

Private sector businesses that are used to provide public services

Question 6

Benefits for contracting out

Answer 6

• save tax payer money and help to reduce a country’s fiscal deficit
• more likely to achieve productive efficiency improvements and cost savings
• more innovative

Question 7

Arguments against contracting out

Answer 7

• sacrifice quality of service
• doubts about employment conditions and pay
• requires high levels of monitoring