If an entrepreneur produces more goods than demand, what problem may occur?
Answer and explanation
Correct answer: Extra stock and costs may increase
When production is greater than demand, some goods may remain unsold. The business then has to store, insure, maintain, or eventually discount those goods, which can increase costs and tie up money. Unsold or outdated stock may also cause a loss. Therefore, option A is correct. Excess production does not guarantee happier customers, doubled profit, or the complete removal of business risk.
Frequently asked questions
What is the correct answer to this question?
Extra stock and costs may increase
Why is this the correct answer?
When production is greater than demand, some goods may remain unsold. The business then has to store, insure, maintain, or eventually discount those goods, which can increase costs and tie up money. Unsold or outdated stock may also cause a loss. Therefore, option A is correct. Excess production does not guarantee happier customers, doubled profit, or the complete removal of business risk.
Which subject and chapter does this question cover?
This is a Class 11 Business Studies question. Chapter: Business, Trade and Commerce. Topic: Business Risk.
