Topic 12

Question 1

Economic reasosn for gov. intervention

Answer 1

• Market failures (nature of goods, nature of market, nature of exchange)
• Social equality
• Corrective measures for financial crisis.

Question 2

Drawbacks to intervention:

Answer 2

• Shortages & surpluses
• Poor information
• Bureaucracy & inefficiency
• Lack of market incentives
• Shifts in g policy
• lack of inv. freedom

Question 3

Emperical evidence for privitisation:

Answer 3

• Competitive industries, priv. is generally (but not universally) prefered.
• In sectors of natural monopolies, the results are mixed. Major factor at play is regulatory policy.