Question

Entrepreneurs develop new goods and services to start a business. Why is entrepreneurship often difficult?

Answer 1

Answer:

The answer is A

Explanation:

There is a risk that the new business may fail, which makes entrepreneurship very difficult (and risky).

Answer 2

The correct answer is A.

Starting a new business, as any investment project, entails a certain level of risk. Even tough an entrepeneur is able to develop a product that he believes would be attractive for consumers, there are many aspects that should be examined before deciding to start a business: market environment (number of competitors, elasticity of the demand, profits obtained in the industry), or inner factors (type of technology needed, how to produce efficiently, human resources policies, etc).

Even tough many things can be studied and plans and strategies need to be defined, there are factors which are unpredictable and can lead a firm to bankruptcy: a global economic crisis starts, there is a rise in input prices, there is a sharp decline of the demand on the product, etc. This uncertainty (risk) makes entrepeneurship highly volatile, very large profits can be earned but also heavy losses can be incurred.