CMA Foundation · Fundamentals of Business Economics and Management · Means of Production
An entrepreneur introduces a new method of producing low-cost water purifiers that had not been used before in the market. Which function of the entrepreneur does this best illustrate?
This illustrates the innovation function. By introducing a new low-cost production method or product not previously used in the market, the entrepreneur acts as an innovator, as Schumpeter described. Supervising workers, paying wages or arranging a loan are routine managerial or financial activities rather than innovation.
- AInnovationCorrect
- BRoutine supervision of workers
- CPayment of wages
- DRaising a bank loan
Explanation
Introducing a new product or production method is innovation, a function stressed by Schumpeter. Supervision, wage payment and borrowing are routine management or financial tasks, not the creation of something new in the market.
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