1. What are social responsibilities?

Social responsibility is when a business decision benefits stakeholders other than shareholders, for
example, a decision to protect the environment by reducing pollution by using the latest and greenest
production equipment. Environment is our natural world including, for example, pure air, clean water
and undeveloped countryside.

2. What are the ways business activities damage the environment?

Business activities can harm the environment through pollution (air, water, and soil), deforestation,
excessive resource consumption, greenhouse gas emissions, and waste production.

3. What are externalities:

External costs are costs paid for by the rest of society, other than the business, as a result of business
activity.
External benefits are the gains to the rest of society, other than the business, as a result of business
activity.
Social cost = external costs + private costs. Social benefit = external benefits + private benefits.

4. What is sustainable development?

Sustainable development is development which does not put at risk the living standards of future
generations.
It requires balancing economic growth, environmental care, and social well-being.

5. What does it mean by pressure groups?

Pressure groups are groups of people who act together to try to force businesses or governments to
adopt certain policies.
They may advocate for environmental protection, fair labor practices, or consumer rights, impacting
how businesses operate.

6. What are the ways governments can use legal controls to protect the environment?

Governments can impose regulations, taxes on pollution, subsidies for green practices, emissions
standards, and penalties for non-compliance to enforce environmental protection.

7. What is an ethical issue?

Ethical decisions are based on a moral code. Sometimes referred to as doing the right thing
Ethical considerations impact decisions, as companies strive to uphold their reputations and fulfill
responsibilities to stakeholders.

28.1

a. External costs are costs paid for by the rest of society, other than the business, as a result of
business activity
b.
Local residents: They may be concerned about the health risks associated with pollution, such
as respiratory issues from smoke and fumes. Additionally, the noise from the factory could
disturb their daily lives, affecting their quality of life.
 Environmental groups: These groups might be concerned about the factory’s waste products
polluting local rivers and natural habitats. They may worry about the long-term environmental
impact, including harm to wildlife and ecosystems in the area.
c.
- Job seekers and local community: The factory will create jobs in an area with high
unemployment, providing new employment opportunities and potentially raising the income
levels of local residents.
- Government: The factory's operations could increase tax revenue, which can be used to fund
public services, such as hospitals, benefiting the community indirectly.
d.
As a government minister, I would carefully weigh the total social costs and benefits. While
the factory could provide economic benefits like job creation and increased tax revenue, the
external costs (such as environmental pollution and health risks to residents) are significant. If
measures to reduce pollution and manage waste effectively are feasible, I might allow the
factory to be built with strict regulations and monitoring. However, if the external costs are
likely to outweigh the benefits or if mitigating the harm isn’t possible, I would likely refuse
permission to protect public health and the environment.
CHAPTER 29

1. What is globalization?
Globalization is the term now widely used to describe increases in worldwide trade and movement of
people and capital between countries.
Reasons for increased globalization include advancements in technology, trade liberalization, and
global market demands.
2. What do businesses benefit from globalization?
Benefits include access to larger markets, cost savings from economies of scale, diverse resources,
and the ability to spread risks across regions.

3. What are threats brought about to businesses by globalization?

Increasing imports into home market from foreign competitors
Increasing investment from multinationals to set up operations in home country
Employees may leave businesses that cannot pay the same or more than international competitors

4. What is the difference between tariff and quota?

Tariff: A tax on imports, making foreign goods more expensive.
Quota: A limit on the quantity of goods that can be imported, restricting supply.

5. Why might governments put controls on international trade?

Governments use trade controls to protect domestic industries, prevent job losses, safeguard national
security, and ensure environmental standards.

6. What does a business benefit from becoming multinational?

Some benefits to a business from becoming a multinational are that it is able to:

- produce goods in countries with low costs, such as low wages. For example, most sports
clothing is produced in Southeast Asia because wages are lower than in Europe
- extract raw materials which the company may need for production or refining. For example,
crude oil from Saudi Arabia is needed to supply oil refineries in the USA
- produce goods nearer the market to reduce transport costs. For example, tiles and bricks are
expensive to transport so the producer sets up a factory near the market in another country
- avoid barriers to trade put up by countries to reduce the imports of goods. For example, sales
of cars made in Japan are restricted in Europe. Japanese manufacturers now make cars in
Europe too
- increase market share and expand into different market areas to spread risks. For example, if
sales are falling in one country the business may move to another country where sales are
rising
- remain competitive with rival businesses which may be expanding abroad
- gain government grants given to the business to set up operations in particular countries.

7. What are possible benefits and drawbacks to a country where multinationals operate?
Potential benefits to a country's economy where a multinational operates
- Jobs are created, which reduces the level of unemployment.
 - Increased investment - new investment in buildings and machinery increases output of goods
and services in the country. New technology can benefit the country by bringing in new ideas
and methods.
- Increased exports - some of the extra output may be sold abroad, which will increase the
exports of the country. Also, imports may be reduced as more goods are now made in the
country.
- Taxes are paid by the multinationals, which increases the funds to the government.
>>> Increased consumer choice - there is more product choice for consumers and more competition.

Potential drawbacks to a country's economy where a multinational operates

- The jobs created are often unskilled assembly-line tasks. Skilled jobs, such as those in
research and design, are not usually created in the 'host' countries receiving the
multinationals.
- Reduced sales for local businesses - local firms may be forced out of business. Multinationals
are often more efficient and have lower costs than local businesses.
- Repatriation of profits are often sent back to a multinational's 'home' country and not kept in
the country where they are earned.
- Multinationals often use up scarce and non-renewable primary resources in the host country.
>>> As multinational businesses are very large they could have a lot of influence on both the
government and the economy of the host country. They might ask the government for large grants to
keep them operating in the country - threatening to leave the country with big job losses if these are
not paid by the government.

8. What is currency appreciation and currency depreciation?

Currency appreciation occurs when the value of a currency rises - it buys more of another currency
than before.
Currency depreciation occurs when the value of a currency falls - it buys less of another currency.

9. What impact does currency depreciation of a country have on its import prices and
export prices?
Currency appreciation:
- make exports cheaper, for example, exports from Europe sell for a lower price in America as
it takes fewer dollars to buy each euro. People in America do not have to spend as many
dollars buying euros to buy the exports from Europe
- imports are more expensive and do the opposite, for example, imports into Europe now cost
more to buy from America, as more euros have to be given to buy the dollars needed for the
same amount of imports.
currency depreciation:
- raise the price of exports, for example, exports from Europe sell for a higher price in America
as it takes more dollars to buy each euro. People in America have to spend more dollars
buying euros to buy the same amount of exports from Europe

- import prices fall and demand for them might rise, for example, imports into Europe now
cost less to buy from America, as fewer euros have to be given to buy the dollars needed for
the same amount of imports.