CIMA BA1 · Chapter 8 · Question 9 of 9
Which of the following is an argument AGAINST the privatisation of a state-owned utility?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) A privatised natural monopoly may exploit its market power unless it is effectively regulated
Explanation
Privatisation is argued to improve efficiency through the profit motive and capital market discipline, and raises funds for the government. A key argument against is that a natural monopoly transferred to private ownership may raise prices or cut quality unless a regulator controls it.
More Market failure, externalities and competition policy MCQs
- Q2Where the production of a good creates a negative externality such as pollution, a free market will tend to:
- Q3Which of the following is generally treated as a merit good?
- Q4A Pigouvian tax intended to correct a negative production externality should ideally be set equal to:
- Q5In the market for used cars, sellers know more about the quality of the cars than buyers do. This is an example of:
- Q6In a market, demand (marginal social benefit) is P = 120 - Q and marginal private cost is P = 20 + Q. Production causes a constant…