Would closing the BBC result in market failure? Watch

cammc445
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Hi,
i am studying for AS economics and i have an essay question that i am not very sure about, it reads :

Discuss whether liquidating the BBC, closing it down and distributing its rights to air waves to commercial broadcasters would result in market failure

Just looking for some points for why it would be market failure and why not.

Any help is greatly appreciated

Thanks Cammc445
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Mad Vlad
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(Original post by cammc445)
Hi,
i am studying for AS economics and i have an essay question that i am not very sure about, it reads :

Discuss whether liquidating the BBC, closing it down and distributing its rights to air waves to commercial broadcasters would result in market failure

Just looking for some points for why it would be market failure and why not.

Any help is greatly appreciated

Thanks Cammc445
Well, what do you think, firstly?
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ActusReus
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(Original post by Mad Vlad)
Well, what do you think, firstly?
I don't think that helps...
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Mad Vlad
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(Original post by ActusReus)
I don't think that helps...
Actually it does. I'm not going to do the sodding homework myself... I'm happy to help, but I'd at least like to see that the OP has actually thought about this and I can then help them build out the discussion.

The best teachers show you where to look, not what to see, and all that...
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gr8wizard10
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(Original post by cammc445)
Hi,
i am studying for AS economics and i have an essay question that i am not very sure about, it reads :

Discuss whether liquidating the BBC, closing it down and distributing its rights to air waves to commercial broadcasters would result in market failure

Just looking for some points for why it would be market failure and why not.

Any help is greatly appreciated
Thanks Cammc445
I wouldn't regard it as market failure. It'll create increased competition in the industry (if the BBC were regarded a monopoly). Is this not AQA exam board, I don't remember getting asked questions like this in my AS exam >.<
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bad_moose
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I'm not great at economics and I don't really remember the AS stuff that well...

Obviously you need to define market failure, explain how it works etc.

Maybe talk about information failure as a results of the closure of the BBC, leading to negative externalities. Eg. People become less aware that heavy drinking is bad and therefore the cost to the NHS of treating drinking related illness increases.

This one also links to asymmetric information; the other firms in the market who are less neutral than the BBC can take advantage of the huge influx of displaced consumers to portray a certain viewpoint to them. Eg. A news company that supports the Conservative party might try to highlight the benefits of that party's policies without directly mentioning the party. The firm knows full well what's going on but the consumer does not. The news company knows more than the consumer.

You'll need to double check all the theory there because I'm not entirely sure if I'm right, haven't touched this part of micro AS for ages. It should get you started though.
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ActusReus
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(Original post by Mad Vlad)
Actually it does. I'm not going to do the sodding homework myself... I'm happy to help, but I'd at least like to see that the OP has actually thought about this and I can then help them build out the discussion.

The best teachers show you where to look, not what to see, and all that...
I appreciate the whole teacher thing but most of the time when people post on the student room they're past looking for teachers and want answers.

section leader doe yh! jheeez
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cammc445
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(Original post by bad_moose)
I'm not great at economics and I don't really remember the AS stuff that well...

Obviously you need to define market failure, explain how it works etc.

Maybe talk about information failure as a results of the closure of the BBC, leading to negative externalities. Eg. People become less aware that heavy drinking is bad and therefore the cost to the NHS of treating drinking related illness increases.

This one also links to asymmetric information; the other firms in the market who are less neutral than the BBC can take advantage of the huge influx of displaced consumers to portray a certain viewpoint to them. Eg. A news company that supports the Conservative party might try to highlight the benefits of that party's policies without directly mentioning the party. The firm knows full well what's going on but the consumer does not. The news company knows more than the consumer.

You'll need to double check all the theory there because I'm not entirely sure if I'm right, haven't touched this part of micro AS for ages. It should get you started though.
Thank you - just what i was looking for
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Economicslessons
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There are 5 main causes of market failure:

1 Monopolies - they push up prices and make high profits so they do not need to be efficient
2 Externalities - there are cost (or benefits) that the buyer does not consider as they affect someone else
3 Merit/Demerit goods - there is an externality or, some costs/benefits that people don't know about
4 Inequality - some people and signal their wants to the market better than others.
5 Public Goods - Providing the good for one person makes it impossible to prevent other people from benefiting and one person's use does not mean there is any less for someone else to use.

You can make a case for 1 - other TV firms may not be a monopoly but there are certainly not many of them. 2-there may well be external benefits to some TV programming and 5 is certainly true TV.

I hope that sets you on the right track - now you just need to make an essay out of it!
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BBCobserver
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No this would Not result in a market failure. Economically it has been proved since the introduction of ITV , back in the sixties that ITV could survive economically on the basis of advertisements. BBC is an antiquated throw back to some bygone age economically.

A TV Station is a TV station as has been proved by ITV, Channel 4,Channel 5 e.t.c
Radio is the same principle
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Huskaris
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It would not result in market failure, no. This argument is used by lefties to promote the bbc.

Look at all the various types of market failure and apply them to the BBC. Discuss elements of the BBC being disbanded that could lead to market failure. For extra points, list all the reasons that the TV licence is itself a form of market failure.
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