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Difficulty: HardPrivatization, Commercialization, and Deregulation of Public Enterprises

A government abolished statutory entry barriers and price controls in the domestic aviation sector, permitting private operators to compete freely, while continuing to maintain 100% equity ownership in the existing national airline. Which economic policy framework is illustrated by this reform?

  1. A
    Outright privatization of the aviation sector through equity divestment
  2. Market deregulation of the aviation industry while retaining state ownership of the national carrierAnswer
  3. C
    Partial commercialization involving state subsidy transfers to private airlines
  4. D
    Nationalization of domestic routes to consolidate government monopoly control

Answer

Market deregulation of the aviation industry while retaining state ownership of the national carrier
Removing statutory monopolies and price controls to allow private market entry is the definition of deregulation. Because the government did not sell any of its shares in the national airline, the enterprise itself was not privatized.

Step-by-Step Solution

1
Analyze the policy action regarding market entry and pricing controls
Removing legal barriers to entry and price controls allows free market forces and private participation, which defines deregulation.
Deregulation focuses on removing administrative restrictions and statutory monopolies in an industry.
2
Examine the equity ownership status of the public enterprise
The government retains 100% equity in the national carrier, meaning no privatization (divestment of equity) took place.
Privatization specifically requires transferring public share ownership or assets to private individuals or corporate entities.
3
Synthesize the findings to select the matching policy combination
The reform represents market deregulation combined with continued state ownership.
The intervention transforms the industry structure (deregulation) without altering the ownership structure of the public firm (privatization).

Key Concept

Distinction between Deregulation and Privatization
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Topics

Privatization, Commercialization, and Deregulation of Public Enterprises

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