Public and Private Sectors

Question 1

What is the public sector?

Answer 1

Government organisations that provide goods and services in the economy

Question 2

How is the public sector mainly funded?

Answer 2

They are funded mainly by tax revenue

Question 3

What is the private sector?

Answer 3

Provision of goods and services by businesses that are owned by individuals or groups of individuals

Question 4

In many countries, what sector provides most of consumer goods?

Answer 4

The private sector

Question 5

Name 3 aims of the public sector

Answer 5

1. Minimise Costs
2. Improve Quality of Services
3. Allow For Social Costs and Benefits

Question 6

Why does the public sector aim to minimise costs?

Answer 6

Government resources are scare so it’s important to minimise both waste and costs to reduce burden on the taxpayer

Question 7

What are used to monitor service quality?

Answer 7

Performance indicators

Question 8

Name 3 aims of the private sector

Answer 8

1. Profit Satisfying
2. Profit Maximisation
3. Survival
4. Growth
5. Sales Maximisation
6. Social Responsibility

Question 9

Name the 2 roles of the government

Answer 9

To employ and produce

Question 10

Explain how the government is an employer

Answer 10

Large number of people are employed in State Owned Enterprise

Question 11

What does the government produce?

Answer 11

Merit Goods

Public Goods

Question 12

What are merit goods?

Answer 12

Goods/services that government think people should have regardless of their ability to pay for it

Question 13

What are the types of public goods?

Answer 13

1. Non-excludable

2. Non-rival

Question 14

What are public goods?

Answer 14

Goods provided by government for everyone

Question 15

What is meant by if a good is non-excludable?

Answer 15

If provided to one consumer = all other consumers will also benefit

Question 16

What is meant by if a good is non-rival?

Answer 16

As more and more people consume product = benefit to

others will not decrease

Question 17

What are key industries?

Answer 17

Most important industries that are owned/run by the government

Question 18

Give 2 examples of key industries

Answer 18

1. Essential Products

2. Natural Monopoly

Question 19

What does the government do to essential goods?

Answer 19

Government provides it for free or at subsidised prices

Question 20

Why does the government create natural monopolies?

Answer 20

So private sector cannot produce at lower prices

Question 21

Give an example of a natural monopoly

Answer 21

DEWA

Question 22

Why might government regulation be needed?

Answer 22

To control monopolies and merger activity (if a market is dominated by a one to a few very large firms, consumers may be exploited)

Question 23

How can a government influence in location of firms?

Answer 23

Via regional policy

Question 24

What is regional policy used for?

Answer 24

Used to encourage or discourage business location in particular areas

Question 25

Name 3 regional problems

Answer 25

Congestion
Unemployment
Income Inequality

Question 26

How does the government combat regional congestion ?

Answer 26

By reducing development in congested areas (i.e. where there’s a heavy burden on public services e.g. schools)

Question 27

How does the government combat regional unemployment?

Answer 27

By providing jobs in areas which are in decline (firms are offered incentives (e.g. grants) = encouraging firms to locate in poorer regions)

Question 28

How does the government combat regional income inequality?

Answer 28

By encouraging firms to locate in poorer regions

Question 29

How can a government promote competition? (name 3 ways)

Answer 29

1. Encourage the growth of small firms
2. Introduce anti-completive legislation
3. Lower barriers to entry

Question 30

Why would the government lower barriers to entry?

Answer 30

Bc more firms will join a market, thus making it more competitive

Question 31

What is meant by anti-completive legislation?

Answer 31

Laws can be made to protect consumers from exploitation by firms

Question 32

Why would the government encourage the growth of small firms?

Answer 32

If more small firms are encouraged to join markets there’ll be more competition

Question 33

Name 3 measures a government uses to influence the location of firms

Answer 33

1. Government investment in infrastructure
2. Grants for investment
3. Money for training

Question 34

How can the government reduce competition?

Answer 34

By refusing planning permission for new developments

Question 35

What is privatisation?

Answer 35

Privatisation is the transfer of public sector assets to the private sector

Question 36

Name 4 things privatisation involves

Answer 36

1. Sale of national industries
2. Deregulation
3. The sale of land and property
4. Contracting out

Question 37

What is deregulation?

Answer 37

Lifting legal restrictions that prevent competition in private sector

Question 38

Name 4 motives for privatisation

Answer 38

1. Deregulation
2. Generate Income
3. Reduce Political Interference
4. Inefficient Nationalised Industries

Question 39

How does privatisation generate income?

Answer 39

Sale of state assets raises revenue for the government

Question 40

Name 3 effects of privatisation on consumers

Answer 40

1. Some prices of services increase
2. Some prices of services decrease
3. Some new products and services have arrived due to more innovation

Question 41

Name 2 effects of privatisation on firms

Answer 41

1. Objectives change: newly privatised firms aim to make a profit
2. Many firms increase investment

Question 42

Why type of firms do merger and takeover activity often involve?

Answer 42

Newly privatised firms

Question 43

Name 2 effects of privatisation on workers

Answer 43

1. Some newly privatised businesses lay off workers

2. Some workers are forced to adopt more flexible working practices

Question 44

Name 2 effects of privatisation on government

Answer 44

1. Receive the privatisation sale proceeds

2. Burden of loss-making from nationalised industries is removed

Question 45

Why might privatisation be expensive for the government?

Answer 45

Because lots of money is spent advertising the sale of state assets

Question 46

Name 3 effects of privatisation on the economy

Answer 46

1. More competition, economy will grow
2. Job losses & higher benefit payments
3. Public monopolies may become private monopolies (consumers may be exploited)

Question 47

What will more competition lead to?

Answer 47

Costs will be lower, waste will be reduced and there’ll be more innovation

Question 48

Why might privatisation result in job losses & higher benefit payments?

Answer 48

Due to the drive for efficiency

Question 49

What is social welfare?

Answer 49

Money/allowance given to people who cannot work

Question 50

What are demerit goods?

Answer 50

Goods that are harmful to society

Question 51

What are subsides?

Answer 51

Money provided by government to business that benefits society (to reduce cost of production)

Question 52

What is direct tax?

Answer 52

Tax taken straight from income and wealth

Question 53

What is indirect tax?

Answer 53

Tax included in price of goods and services

Question 54

How will indirect tax supply?

Answer 54

Will decrease it (supply curve shifts to the left)