Changes in the supply of enterprise result in the development of new firms. In 2016, a theme park in Hong Kong made a loss with visitor numbers falling by 9%. In 2017, the same public limited company opened another larger theme park in Shanghai. The new theme park is expected to benefit from both internal and external economies of scale.

Mark scheme

Marking points from the official mark scheme (May/June 2019). The mark or mark type is shown in brackets.

1. Costs exceed revenue (2).
2. Insufficient revenue / costs too high (1).
3. Internal economy is the benefit a firm gains from itself (1) e.g. buying economies (1).
4. External economy is the benefit a firm gains from the industry (1) e.g. ancillary industries (1).
5. The government could spend more on education and training (1) this will increase people's skills (1) may increase their ability to start up or run a business (1).
6. The government could cut the rate of the tax on profits (1) provide grants / loans / subsidies (1) this would increase the incentive to be an entrepreneur (1).
7. The government could sell off assets to the private sector / privatise (1) increasing the opportunity to be an entrepreneur (1).
8. Relax immigration laws (1) immigrants may set up new businesses (1).
9. Up to 5 marks for why they might:
10. A public corporation's main goal may be social costs and benefits (1) may be subsidised by the government (1) it may charge a low price (1) making it more affordable (1).
11. A public corporation may be less likely to go out of business (1) ensuring continuity of supplies (1).
12. A public corporation may take a longer-term view (1) investing in new technology (1).
13. A public corporation may follow health and safety rules / regulations (1) increasing the safety of products (1).
14. Up to 5 marks for why they might not:
15. A lack of profit motive (1) may increase inefficiency (1).
16. A public corporation is likely to be a monopoly (1) the lack of competition (1) may result in higher prices (1) lower quality (1).
17. A public corporation may lack funds to invest (1) during periods of recession (1).