(a) State four functions of a cartel (b) Explain three advantages and three disadvantages of public enterprises

Answer Details

(a) Four functions of a cartel

1. It fixes and regulates the prices of the members' products to avoid harmful price competition.
2. It fixes production/output quotas for each member so as to control total supply.
3. It shares or allocates markets among the members to prevent them competing in the same areas.
4. It regulates the terms and conditions of sale, and may jointly market members' output and share profits.

(b) Public enterprises

Three advantages:

1. Provision of essential services: they supply vital services such as water, electricity and transport that private firms may neglect.
2. Prevention of exploitation: being state-owned, they can charge fair prices and avoid the profiteering associated with private monopolies.
3. Large capital and economies of scale: government funding enables them to undertake huge projects and enjoy the benefits of large-scale operation, while creating employment.

Three disadvantages:

1. Inefficiency and bureaucracy: they are often poorly managed, with red tape and delays in decision-making.
2. Political interference: government control leads to appointments and decisions based on politics rather than sound business judgement.
3. Frequent losses: many run at a loss and depend on government subsidies, wasting public funds, partly because of lack of profit motive.