Discuss whether privatisation and an increase in competition would hinder or help the achievement of economic efficiency.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2017). The mark or mark type is shown in brackets.

1. [25] Explanation of efficiency. Competitive markets may achieve efficient outcomes but individual actions are not always best for society as a whole. Further, privatisation does not necessarily mean increased competition. Discussion of reasons for market failure and necessity/desirability of government intervention to achieve efficiency. This could be by persuasion (nudge theory) rather than by enforcement. Nudge theory, originally an ethical idea not a government manipulative tool, involves designing choices to encourage decision making in wider positive interests of society. But it can be used in government context.
2. L4 for an accurate discussion of efficiency and competition, privatisation, market failure, with examples and a conclusion about the need for government intervention. 18–25
3. L3 for a competent explanation of productive and allocative efficiency and more limited discussion of whether privatisation necessarily results in more competition, and of the reasons for market failure and the need for government. 14–17
4. L2 for a briefer analysis of efficiency and of market failure with few examples and no comment about whether privatisation is the same as increased competition and no conclusion. 10–13
5. L1 for an answer that shows some knowledge but does not indicate that the question has been fully grasped or where the answer is mostly irrelevant. 1–9