The government of Greenland Republic protects its newly privatized fir

QUESTION

The government of Greenland Republic protects its newly privatized firms from foreign competition by imposing stringent barriers to international trade and foreign direct investment. As a result of this, the newly privatized firms will:

A. continue acting like state monopolies.

B. operate at their maximum efficiency.

C. pay huge taxes.

D. import raw materials and many industrial goods at low tariffs.

E. have no control over production and pricing.

ANSWER

A
Studies of privatization in central Europe have shown that the process often fails to deliver predicted benefits if the newly privatized firms continue to receive subsidies from the state and if they are protected from foreign competition by barriers to international trade and foreign direct investment. In such cases, the newly privatized firms are sheltered from competition and continue acting like state monopolies.