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Difficulty: MediumPrivatization, Commercialization, and Deregulation of Public Enterprises

To encourage market efficiency in the energy sector, a federal government abolishes legal entry barriers and price controls, permitting private investors to freely establish power generation and distribution companies alongside existing public utilities. Which structural economic policy is illustrated by this government action?

  1. DeregulationAnswer
  2. B
    Outright privatization
  3. C
    Full commercialization
  4. D
    Partial commercialization

Answer

Deregulation
The removal of legal barriers to entry and price controls to foster private competition within an industry defines deregulation.

Step-by-Step Solution

1
Analyze the government's policy action described in the scenario
The action involves eliminating statutory monopolies and price controls to allow free market entry.
Identifying the core policy mechanism is key to classifying the reform.
2
Distinguish between market structure policies and corporate governance reforms
Opening market access and dismantling regulatory constraints defines deregulation, whereas privatization and commercialization alter equity ownership or individual firm management.
Deregulation targets industry rules and controls, whereas commercialization/privatization targets individual firm governance and equity ownership.

Key Concept

Deregulation of public sectors
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Topics

Privatization, Commercialization, and Deregulation of Public Enterprises

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