A Level Economics AQA Practice Exam

What is often a reason for the existence of state-owned enterprises?

1. To maximize profits for private investors

2. To enhance government influence in the economy

3. To create competition with private industries

4. To operate solely for profit motives

The correct answer is: To enhance government influence in the economy

State-owned enterprises (SOEs) are often established to enhance government influence in the economy. This is because such enterprises allow the government to directly control and guide specific sectors, which can be crucial for achieving broader economic, social, and political objectives. By owning certain industries, the state can ensure that essential services, resources, and infrastructure meet public needs and align with national priorities. For example, the government may want to provide affordable utilities, transport, or healthcare, ensuring that these services are available to all citizens, regardless of their ability to pay. The presence of state-owned enterprises can also be a strategy to stabilize industries that are critical to national interests, especially in situations where private firms might prioritize profit over public welfare. In contrast, the other options do not align with the typical motivations for state ownership. While maximizing profits might be a goal of private enterprises, state-owned enterprises are often more focused on social objectives rather than profit maximization. Creating competition with private industries can be a secondary aim if it leads to better services for consumers, but it is not the primary reason for establishing SOEs. Operating solely for profit motives is also not characteristic of SOEs, as their purposes often include delivering public value, funding social programs, or ensuring employment.