A Level Economics AQA Practice Exam

Which of the following is NOT a characteristic of nationalisation?

1. The government takes over private firms

2. Private ownership is completely eliminated

3. Increased competition among previously private firms

4. State control over essential services and industries

The correct answer is: Increased competition among previously private firms

In this context, the correct answer is that increased competition among previously private firms is not a characteristic of nationalisation. Nationalisation often leads to the consolidation of industries under state control, reducing the competitive landscape that was previously present when firms operated privately. When a government nationalises an industry or firm, it typically aims to create a more unified approach to managing essential services and resources, which can actually diminish competition rather than enhance it. In contrast, nationalisation usually involves the government taking over private firms, which reflects a direct shift in control from the private sector to the public sector. It can also lead to the elimination of private ownership in the sectors being nationalised, as assets are acquired by the state to serve broader public interests. Furthermore, state control over essential services and industries is a hallmark of nationalisation, as it allows governments to oversee and regulate sectors critical to the economy and society, such as healthcare and transportation.