(a) State four functions of a cartel
(b) Explain three advantages and three disadvantages of public enterprises
Explanation
(a) Functions of a cartel:
Regulation of production and price: A cartel regulates the production and raises the price of their products/services.
Regulation of production: The organization, to a large extent, has succeeded in allocating production quotas to member states.
Restriction of output Members of a cartel can also agree to prevent, restrict or limit the goods or services they are buying or selling or the goods or services that would likely be bought and sold.
Bid rigging: A cartel does this through an agreement among its members about who should win a bid among them.-
Market sharing: This occurs when businesses collude to carve up markets as regards the sale of a specific product, a geographical area, or a specific type of customer or consumer. among them.
(b) Advantages of public enterprises:
i. Provision of infrastructural facilities: Public enterprises provide infrastructural facilities such as roads, schools, railways, electricity, etc. to the populace.
ii. Availability of large capital: Since public enterprises are owned by the government, there is always availability of sufficient capital to ensure the expansion of the enterprises.
iii. There is continuity: Public enterprises can last for a long period of time. In other words, there is perpetual existence.
iv. Development of capital projects: The establishment of public enterprises can ensure the development of capital projects, e.g. rural electrification.
v. Avoidance of exploitation of consumers: Public enterprises are consumer-conscious as they ensure that the exploitation of consumers is greatly reduced.
vi. Creation of higher standards: The government enters into business in order to ensure higher standards, e.g provision of educational facilities.
vii. Accountability to the public: Public enterprises are accountable to the public because they have to submit their annual reports to the parliament.
viii. They cater for the interest of workers: in public enterprIses, the interest of the workers is catered for and the employees have a great sense of security
ix. Provision of employment opportunities: Public enterprises provide employment opportunities for the teeming number of the unemployed.
x. Generation of revenue: Revenue is generated by the government from public enterprises, e.g. water rate or electricity bill, to finance other projects
Disadvantages of public enterprises:
i. Large capital requirement: The cost of establishing a public Corporation is very high, i.e. large capital is involved.
ii. Government interference: Government can interfere in the activities of public enterprises through the appointment of unqualified and incompetent people as board members.
iii. Inefficiency in operation: Lack of competition can bring about inefficiency in business operations.
iv. Danger of monopoly: Public enterprises are monopolistic in nature, e.g. NEPA (now PHCN); hence, it can abuse the privileged.
v. Bureaucratic tendencies and red-tapism: Decision making may be slow because it has to pass through many people or channels before approval
vi. Corruption and mismanagement: Many public enterprises In Nigeria have become the major areas for embezzlement and mismanagement of the nation's resources
vii. Wastage: In public enterprises, wastages are usually recorded, and the taxpayers bear the brunt.