How does privatization help stimulate gains in economic efficiency? A

QUESTION

How does privatization help stimulate gains in economic efficiency?

A. It allows newly privatized firms to gain monopoly position in a particular industry.

B. It provides incentives to new private owners to search for increases in productivity and to enter new markets.

C. It encourages state control over price and production output.

D. It raises barriers to direct investment by foreign enterprises.

E. It results in reservation of heavy industry for state ownership and the increase of import tariffs.

ANSWER

B
Privatization is seen as a way to stimulate gains in economic efficiency by giving new private owners a powerful incentive—the reward of greater profits—to search for increases in productivity, to enter new markets, and to exit losing ones.