Privatisation & Nationalisation

Question 1

Define privatisation

Answer 1

Transfer of state owned resources to the private sector

Question 2

Define nationalisation

Answer 2

Transfer of privately owned resources to the public sector

Question 3

What are the positives of nationalisation

Answer 3

Positive externalities —> services that provide positive externalities will be underconsumed/underrpvidied by the free market
Monopolies —> public sector monopolies will not abuse its dominant position and exploit consumers with higher proces

Question 4

What are the positives of privatisation

Answer 4

Creates competition —> incentives to achieve EoS and efficiencies
Monopolies —> efficient incontestable markets
Government receives revenue form selling state owned businesses