MHL manufactures tyres for large vehicles．It has factories in 6 countries．The business creates external costs when producing its products．Good communication with MHL＇s suppliers is important． The Managing Director knows globalisation provides many opportunities for MHL．She is reviewing data for one of MHL＇s factories as she wants to reduce the average cost of the tyres．An extract from this data is shown in Table 4．1．（c）Outline two external costs MHL might create when producing its products． External cost 1： External cost 2： .......................................................................................................................................

Business

IGCSE&ALevel

CAIE

Exam No：0450_s25_qp_12 Year：2025 Question No：4(c)

Answer:

Award 1 mark for each relevant external cost (max 2). Award 1 mark for each relevant reference to this business (max 2).

Points might include:
- Loss of space/land use/deforestation [k] for the factories [app]
- Pollution or examples such as smoke/fumes/noise/chemicals in the air [k] when making tyres [app]
- Deplete natural resources [k] to make 200000 units [app]
- Loss of wildlife \([\mathrm{k}]\) in the 6 countries [app]

Other appropriate responses should be credited.

Knowledge points:

6.2.1.1. How business activity can impact on the environment, e.g. global warming

6.2.1.2. The concept of externalities: possible external costs and external benefits of business decisions

6.2.1.3. Sustainable development; how business activity can contribute to this

6.2.1.4. How and why business might respond to environmental pressures and opportunities, e.g. pressure groups

6.2.1.5. The role of legal controls over business activity affecting the environment, e.g. pollution controls

6.2.1.6. Ethical issues a business might face: conflicts between profits and ethics

6.2.1.7. How business might react and respond to ethical issues, e.g. child labour, paying fair prices to suppliers

Answer:

Knowledge points:

Solution:

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