During the previous year, economic growth in country Y rose from 2% to 5%. Rohit is planning to set up a car washing business in country Y. He will need to select an appropriate source of finance. Rohit has worked out some data. An extract is shown in Table 4.1. He knows that every business activity creates external costs. Rohit must choose a suitable location for his business.
(a)[2]
Define the term ‘external cost’.
(b)[2]
Calculate Rohit’s predicted break-even output. Show your working.
(c)[4]
State four possible sources of finance that a start-up business could use.
(d)[6]
Explain two ways economic growth may influence Rohit’s business.
(e)[6]
Do you think rent cost is a more important location factor for a start-up business than the level of competition? Justify your answer.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “A cost borne by the rest of society, rather than by the business, because of business activity” …