Theme 1

Question 1

Define Nationalisation

Answer 1

The transfer of assets from the private sector to public sector

Question 2

Define privatisation

Answer 2

The transfer of assets from the public sector to the private sector

Question 3

Advantages of nationalisation

Answer 3

• firm may achieve greater EOS
• government would focus on service provision over making profit
• control macroeconomic objective
• reduce poverty and inequality
• less likely to have market failures from externalities

Question 4

Disadvantages of nationalisation

Answer 4

• greater risk of moral hazard
• political priorities override commercial issues
• X inefficiency as government have a lack of incentive to minimise cost
• complacent and wasteful production
• high prices due to lack of competition
• expensive for tax payers

Question 5

Evaluation of nationalisation

Answer 5

• it is a short term fix, must fix the market structure instead
• can have a hybrid public-private partnership like NHS
• depends on the role of regulation, strong regulation may not need nationalisation
• competition in private sector
• size and objective of private firms
• business objective

Question 6

Example of nationalisation needed in the UK

Answer 6

Deloitte study - Big 6 energy firms with 85% market share is pushing their energy prices not due to economic shocks like Ukraine war.