LS17- Competition, Protecting Suppliers and Workers Flashcards
1
Q
What is an SME?
A
- small and medium enterprise e.g. a local, independent pizza takeaway business
- SMEs outnumber large companies by a wide margin and employ many more people
2
Q
What is a start-up? + e.g.
A
- a company initiated by an entrepreneur to develop a scalable business model
- refers to new businesses that intend to grow large beyond the solo founder
- e.g. Uber, AirBnB
3
Q
Benefits of small-businesses and start-ups
A
- increased competition
- jobs are created
- choice is increased for consumers
- source of export revenue
- seed-bed for innovation
- may be more innovative, flexible and quick to changes in market conditions and reacting well to different needs and wants of customers
4
Q
What problems do SMEs face?
A
- credit
- business skills
- recruitment
5
Q
How can government support start-ups and SMEs?
A
- provide information on how to set up businesses
- deregulate to reduce barriers to entry
- provide training and education reforms
- provide business mentoring services
6
Q
Competitive tendering
A
- when private-sector firms compete to win contracts to perform tasks on behalf of the government - government chooses who they believe provides best quality and cost
- introducing the profit motive to economic activity previously performed by the state should lead to an increase in efficiency and quality
- the taxpayer should benefit from improved and/or cheaper public services
7
Q
Downsides of competitive tendering
A
- if gov focuses too heavyily on price, quality of key public services may decline
- the contracts often only have a few bidders therefore competition is limited
8
Q
What loss fo the government face when they support start-ups?
A
opportunity cost
9
Q
Privatisation
A
when a firm or whole industry changes from being run by the public sector to the private sector - governments enact this change e.g. thatcher’s conservative governments
10
Q
Why do supporters of privatisation argue that it increases efficiency?
A
- introduces the profit motive and competition
- therefore firms will, in theory, seek to reduce costs and improve quality to maximise profits
- gov gains rev from sale of assets e.g. royal mail - however, often sold too cheaply
11
Q
Which industries have been privatised in the UK?
A
e.g. rail, energy, water
12
Q
Disadvantages of privatisation
A
- despite profit motive, poor regulation and/or natural monopoly conditions worsen outcomes for consumers - above inflation price rises in rail and energy markets are evident of this
- social costs ignored e.g. rural public transport networks closing or being heavily reduced
- gov loses source of revenue
13
Q
Private Finance Initiative (PFI)
A
- government takes competitive bids and then buys a whole investment package e.g. construction of a hospital
- gov pays back cost over a set period of time
14
Q
PFI advantages
A
- private sctor believed to be more efficient
- extra funding can kick-start more project e.g. 22 NHS trusts use PFI -> econ growth, increased productive capacity
- private sector not paid until asset delivered - PFI firms pay tax making it cheaper for gov in theory
15
Q
PFI disadvantages
A
- financing costs of PFI are typically 3-4% over that of gov debt - some estimates found that paying off a £1bn through PFI cost taxpayer equivalent to a direct gov debt of £1.7bn
- poor value for money - some infrastructure not designed to last more than length of contract
- high administration costs on advisors and lawyers - estimate of >£11m for a PFI hospital
