Privatisation

Question 1

what is privatisation

Answer 1

when a state run organisation or activity is sold off to the private sector

Question 2

whats the idea behind privatisation

2 points

Answer 2

when priv sector in charge of org

ggonna run it more efficient as ogot more profit motive

more comp allowed to occur in mkt - therfore lower costs and £ and increased efficiency

Question 3

whats a sig +ve of privatisation we forgot to talm bout

Answer 3

as gove privatise a state-owned firm, they can, over the short term, gain a considerable source of revenue that can be utilised to finance other projects.

or simply imporves their fiscal stance

Question 4

whats a -ve of increased comp

Answer 4

firms may create socia harm and ignoer cost /benefits to make profit

Question 5

sumup simply the idea behind privatisation

Answer 5

greater efficieny ainss through more comp and profit motives

Question 6

what graph are we gonna show

Answer 6

monopoly diagram

sa intentions of priv ar eto make a mkt more comp and effiicent

we move to more comp outcomes

so put p= mc QC,Pc

As a result we get a consumer suplus fain

Question 7

whta are the 3 pros of privatisation

Answer 7

allocative efficieny

lower X inefficney

efficieny incentive whihc drives dyanmic efficicney

Question 8

what are the 3 cons of privatisation

Answer 8

limited commp can lead to prod and allcoative ineff

loss making services may be cut even if socially desirable

loss of natural monoply and loss of economies of sclae benefits such as P efficiench

Question 9

explain the allocative efficiny pro

Answer 9

rivatisation icnreases allcoative efificney

as more comp means greater drive for efficiency

so frims strive to produce g/s consumers want + hgih quality g.s

good for consumers theyre satifaction increases and maximimses

get g/s they want at high Q and choices as well as higher quality

Question 10

explain the x inefficney reduced benefit

Answer 10

this is reduced as firms need to reduce costs to remian competiive and maximise profits

can lead to lwoer prices too/ allow to amke hihger prof as tc decreasing which increases dyno eff potential

Question 11

explain efficiney incentive whihc drives dynamic efficney

Answer 11

due to profit motive big inenitve for firms to be as efficient as possible

can lead to dynamic efificeny gains which will occur OT

as for frms to gin advantage in higly comp mky s they may need to invest (DE

good for consumers as decrease 3 overtime + means they get better quality goods and services

increases satisfacion - whic is beneficial

Question 12

explain the -ve of limted comp amy lead to productive and allocative inefficney

Answer 12

we make assumption as soon as gov privatise industy theyll be flock of firm entering (as lower BTE)

But more liekly to be ltd comp in the SR

as takes time for firms to set up and enter

this could lead to P and A inefificney

Question 13

explain why thers is P inefificney in ltd comp piitn

Answer 13

fimrs wont op on min point of AC curve as ltd comp so dont need to reduce costs and price to be comp and gain market share

Question 14

explain why there is A inefficient in the ltd comp argument

so why is the levle of comp significant

Answer 14

firms dont need to strive ot hit higest quality , produce where price = mc

withotu high comp we dont have incentives and no guarantee firm will flock ot industry

Question 15

explain con of loss making services cut even if its socially desirbale

Answer 15

firms dont wanna run and provide loss makin serivces if socilly desirable

as they are profit maxers so if not gonna make a profit , not gonna provide

big problem as consumers want them= missing mkt? ask miss

Question 16

explain con of los making natual monopoly and loss of EOS beneifts/p efficiency

Answer 16

if before hand theere was a state run natural monopoly benefiiting from huge EOS

by opening it up to more comp you loose EOS , more firms are entering

lead to productive einefficney as AC cnat be minimised becasue

each indi firmcant produce as much so wont be able to exploit all potential EOS

lead to hgiher prices OT
or less profit = no dyno eff = no innovatino beter /cheaoer product OT

Question 17

WHAT ARE THE 3 POINTS FOR EVAL SUCCES

Answer 17

lvl of comp post privatisation

lvl of gov regulation

what is success

Question 18

lvl of comp post priv explanatino

Answer 18

if lots of firms dont enter (likely in SR) not inreased comp so we dont see incenitve and beenfits being priduced

if got ltd comp we cna see local monopolies and oligopolies and more -ve social outcomes

Question 19

how can lvl of comp post priv be overcome

Answer 19

gov reglation

+ in LT more firms lieklt to enter

if gov reg is tight we’ll see more comp outcomes and less monoply/oligopol

if weka we see existence of monp and oligop which not good

Question 20

explain eval gov reg

Answer 20

gov can refulate wehther firms forced to provide socially desirable g/s may overcome the loss making g/s arg

gov may be strict in terms of firms having to tke into acount EC/EB

Question 21

Going on from gov reg argument why wont firms take into account EC or benefits

Answer 21

they have a profit motive so ifgnoe it

due to self interest

but if gov reg increses frims may have to take em into account through tax /reg which reduces that problem

Question 22

explain eval of what is success

Answer 22

are we looking at whether gov , firms or consumers succeed

who is most important to suceed

privatisation is a gov action so ultimatley they want consumers to succeed which with slight regulation they will

more ouptu = more jobs