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Which of the following is not an example of a situation that increases profit in a free enterprise system?
- a)A business enterprise begins to lower its costs
- b)A producer uses the firm's resources more efficiently
- c)The cost of raw materials has increased
- d)Ambitious salespeople have increased the sales volume without reducing prices
Correct answer is option 'C'. Can you explain this answer?
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Most Upvoted Answer
Which of the following is not an example of a situation that increases...
Option C
Since in all other option lead to decreased production cost whereas increased cost of raw material will lead to increased production cost thus decrease the profit of the firm.
Since in all other option lead to decreased production cost whereas increased cost of raw material will lead to increased production cost thus decrease the profit of the firm.
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Community Answer
Which of the following is not an example of a situation that increases...
The correct answer is option C: The cost of raw materials has increased.
Explanation:
In a free enterprise system, businesses operate with the goal of maximizing profit. This system allows for competition and freedom of economic activity. Various factors can contribute to an increase in profit in a free enterprise system, such as lowering costs, using resources efficiently, and increasing sales volume. However, an increase in the cost of raw materials does not directly contribute to an increase in profit.
Lowering Costs:
a) A business enterprise begins to lower its costs
- By finding ways to reduce expenses, such as streamlining operations, negotiating better deals with suppliers, or implementing cost-cutting measures, a business can increase its profit margin.
- Lower costs mean that the business can achieve the same level of sales revenue while keeping more of it as profit.
Using Resources Efficiently:
b) A producer uses the firm's resources more efficiently
- When a producer efficiently utilizes its resources, it can produce more output with the same amount of resources or produce the same output with fewer resources.
- This increases productivity and reduces costs, leading to higher profit margins.
Increasing Sales Volume:
d) Ambitious salespeople have increased the sales volume without reducing prices
- If salespeople are able to increase the volume of sales without reducing prices, the business can generate more revenue without incurring additional costs.
- This increase in sales volume can lead to higher profits, especially if the business is operating with a healthy profit margin.
Increase in Raw Material Costs:
c) The cost of raw materials has increased
- Unlike the other options, an increase in the cost of raw materials directly affects the cost of production.
- This can squeeze profit margins as businesses may have to either absorb the higher costs or pass them onto consumers in the form of higher prices, which can potentially reduce demand.
- Increased raw material costs can also lead to a decrease in profit if businesses are unable to adjust their pricing or find alternative suppliers.
In summary, while options a), b), and d) are examples of situations that can contribute to an increase in profit in a free enterprise system, option c) (increase in raw material costs) is not.
Explanation:
In a free enterprise system, businesses operate with the goal of maximizing profit. This system allows for competition and freedom of economic activity. Various factors can contribute to an increase in profit in a free enterprise system, such as lowering costs, using resources efficiently, and increasing sales volume. However, an increase in the cost of raw materials does not directly contribute to an increase in profit.
Lowering Costs:
a) A business enterprise begins to lower its costs
- By finding ways to reduce expenses, such as streamlining operations, negotiating better deals with suppliers, or implementing cost-cutting measures, a business can increase its profit margin.
- Lower costs mean that the business can achieve the same level of sales revenue while keeping more of it as profit.
Using Resources Efficiently:
b) A producer uses the firm's resources more efficiently
- When a producer efficiently utilizes its resources, it can produce more output with the same amount of resources or produce the same output with fewer resources.
- This increases productivity and reduces costs, leading to higher profit margins.
Increasing Sales Volume:
d) Ambitious salespeople have increased the sales volume without reducing prices
- If salespeople are able to increase the volume of sales without reducing prices, the business can generate more revenue without incurring additional costs.
- This increase in sales volume can lead to higher profits, especially if the business is operating with a healthy profit margin.
Increase in Raw Material Costs:
c) The cost of raw materials has increased
- Unlike the other options, an increase in the cost of raw materials directly affects the cost of production.
- This can squeeze profit margins as businesses may have to either absorb the higher costs or pass them onto consumers in the form of higher prices, which can potentially reduce demand.
- Increased raw material costs can also lead to a decrease in profit if businesses are unable to adjust their pricing or find alternative suppliers.
In summary, while options a), b), and d) are examples of situations that can contribute to an increase in profit in a free enterprise system, option c) (increase in raw material costs) is not.
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Which of the following is not an example of a situation that increases profit in a free enterprise system?a)A business enterprise begins to lower its costsb)A producer uses the firms resources more efficientlyc)The cost of raw materials has increasedd)Ambitious salespeople have increased the sales volume without reducing pricesCorrect answer is option 'C'. Can you explain this answer?
Question Description
Which of the following is not an example of a situation that increases profit in a free enterprise system?a)A business enterprise begins to lower its costsb)A producer uses the firms resources more efficientlyc)The cost of raw materials has increasedd)Ambitious salespeople have increased the sales volume without reducing pricesCorrect answer is option 'C'. Can you explain this answer? for CA CPT 2024 is part of CA CPT preparation. The Question and answers have been prepared according to the CA CPT exam syllabus. Information about Which of the following is not an example of a situation that increases profit in a free enterprise system?a)A business enterprise begins to lower its costsb)A producer uses the firms resources more efficientlyc)The cost of raw materials has increasedd)Ambitious salespeople have increased the sales volume without reducing pricesCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for CA CPT 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following is not an example of a situation that increases profit in a free enterprise system?a)A business enterprise begins to lower its costsb)A producer uses the firms resources more efficientlyc)The cost of raw materials has increasedd)Ambitious salespeople have increased the sales volume without reducing pricesCorrect answer is option 'C'. Can you explain this answer?.
Which of the following is not an example of a situation that increases profit in a free enterprise system?a)A business enterprise begins to lower its costsb)A producer uses the firms resources more efficientlyc)The cost of raw materials has increasedd)Ambitious salespeople have increased the sales volume without reducing pricesCorrect answer is option 'C'. Can you explain this answer? for CA CPT 2024 is part of CA CPT preparation. The Question and answers have been prepared according to the CA CPT exam syllabus. Information about Which of the following is not an example of a situation that increases profit in a free enterprise system?a)A business enterprise begins to lower its costsb)A producer uses the firms resources more efficientlyc)The cost of raw materials has increasedd)Ambitious salespeople have increased the sales volume without reducing pricesCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for CA CPT 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following is not an example of a situation that increases profit in a free enterprise system?a)A business enterprise begins to lower its costsb)A producer uses the firms resources more efficientlyc)The cost of raw materials has increasedd)Ambitious salespeople have increased the sales volume without reducing pricesCorrect answer is option 'C'. Can you explain this answer?.
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