privatisation

• The primary goal of privatization is to increase efficiency
• What is privatization?

  Selling state-run organizations
• Privatization aims to reduce costs and increase competition.
• What is the main motive behind private sector efficiency in privatization?

  Profit
• Privatization is intended to move markets towards more competitive outcomes
• Privatization diagram shows a shift towards P = MC.
• What happens to consumer surplus as markets move towards competitive levels after privatization?

  Increases
• One advantage of privatization is increased allocative efficiency
• Privatization encourages firms to produce goods and services that consumers want.
• What is reduced exit efficiency likely to lead to in privatized firms?

  Lower waste
• Dynamic efficiency in privatized firms may lead to lower prices
• Limited competition after privatization can result in productive inefficiency.
• Privatized firms may not provide loss-making socially desirable goods
• Why might productive inefficiency occur after privatization?

  Limited competition
• Natural monopolies can lose economies of scale after privatization.
• What is one factor that determines the success of privatization?

  Level of competition
• Private firms are likely to consider external costs without regulation.

  False
• Strong government regulation can encourage more competitive outcomes
• What might governments use to force firms to account for negative externalities?

  Taxation