U1 AOS1 - Lesson 11 - Traditional Viewpoint of Businesses

Question 1

Traditional View of Business

Answer 1

Seeks to maximise profit in both the short and long term by

• Meeting consumer demand
• Maximising sales revenue
• Minimising production costs

Question 2

Consumer Sovereignty

Answer 2

Where consumers exercise their power of chocie to determine what is produced, through price signals

Question 3

Comparative Advantage

Answer 3

When a producer/country has a lower opportunity cost of producing a good/service, relative to other producers/countries

Therefore, producers should specialise in areas which they have comparative advantages in

Question 3

Influence of Government on Business Decision Making

Answer 3

• Positive incentives - such as subsidies
• Negative incentives - such as taxes and regulations/laws
• Minimum wage setting by governement

Question 4

True/False

The traditional aims of businesses differ between small business and large businesses

Answer 4

False

Question 5

True/False

Businesses aim to improve their productive efficiency to increase their profits

Answer 5

True

Question 6

True/False

In the pursuit of higher profit, businesses can sometimes negatively impact other sections of society

Answer 6

True - for example creating additional pollution as it is cheaper for the business, given that they do not internalise the costs to the environment

Question 7

True/False

Businesses operating in a monopoly environment will work harder to reduce their costs and maximise their profits, compared to businesses operating in competitive markets

Answer 7

False

Monopoly firms do not have the same incentive to reduce thier costs as consumers lack an alternative to purchase from

Question 8

Profit

Answer 8

Revenue minus expenses