Chapter 3 Case Study

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Chapter 3 Case Assignment 1. What impact will the prospect of deprivatization have on investment managers of privatized firms? a. Most likely, investment managers of privatized firms would be less likely to invest in an organization due to the fear of being declared illegal and having transactions reversed (Brickley, Smith, & Zimmerman, 2009). 2. What effect will deprivatization have on foreign investment in Russia? a. Foreign investment would probably decline in Russia as the risk of operating there may be too high. 3. Do you think that mass deprivatization is in the long-run best interests of Russia? a. Mass deprivatization in Russia would not appear to be in the best interests of Russia in the long-run. Within the free markets, individuals within the economy have more decision power and the price system is more efficient in terms of consumption and production controls and coordination. The price system incorporates knowledge and information in economic decisions and increases the incentives for individuals to amass productive decisions (Brickley et al., 2009). 4. Who gains from deprivatization? Who loses? a. The government will gain most due to deprivatization as, "government officials decide what to produce, how to produce it, and who obtains the final output" (Brickley et al., 2009, p. 62). Ultimately, the loss goes to the consumer of the end product. Deprivatization may lead to shortages, surpluses, or other mistakes that are not produced by market economies that produce highly valued products by consumers (Brickley et al., 2009). 5. Assuming more people are hurt by deprivatization than helped, why would a local politician support such a policy? a. Assuming that the politician is truly working for his constituents; the only logical explanation would be a lack of knowledge in the benefits of markets or a misguided thought that the politician knows
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