Th3.6: Advantages of Nationalisation

Question 1

What are the five advantages of nationalisation?

Answer 1

investment is needed for the long term
natural monopoly
consider externalities
minimum level of service
dangerous

Question 2

Investment is needed for the long term

Answer 2

but in a private company investment is only short term as shareholders will see no benefit from long term investment. this may lead to a poor quality of service

Question 3

Natural monopoly

Answer 3

it is better for monopoly to be run by the state as they aim to maximise social welfare rather than a private business who will maximise profits

Question 4

Consider externalities

Answer 4

the government will consider externalities

Question 5

Minimum level of service

Answer 5

the government will guarantee a minimum level of service for people who suffer the risk of being cut off from the service, due to the lack of potential profit from providing for them

Question 6

Dangerous

Answer 6

some say it would be dangerous to allow key strategic industries to fall into private hands as this could have disastrous effects for the country