Question

Explain the causes responsible for inefficiency of government enterprises ?

Answer 1

The causes responsible for the inefficiency of government enterprises are as follows.

1) Corruption - Corruption results in loss of resources that would otherwise be beneficial for production. Therefore, it leads to inefficiencies in the government or public sector enterprises.

2) Lack of administration- The lack of administration by higher authorities results in misapplication of resources which ultimately results in inefficiencies.

3) Lack of competition- The government enterprises suffer from a lack of competition from private sector which is highly efficient. In such lack of competition, government does not make full efforts to minimise production costs and continues to operate with inefficiencies.