Which principle encourages businesses to operate efficiently?

• A. Consumer sovereignty
• B. Government regulation
• C. Profit motive
• D. Market stabilization

Answer: (C)

The profit motive is a fundamental principle that drives businesses to operate efficiently. This principle is rooted in the idea that businesses aim to maximize their profits, which encourages them to streamline operations, reduce costs, and improve productivity. When companies focus on generating profits, they are incentivized to find innovative solutions and make strategic decisions that enhance efficiency. This leads to better resource allocation within the economy and stimulates competition, as companies strive to offer better products and services at lower prices, ultimately benefiting consumers.

In contrast, consumer sovereignty, while important, emphasizes the power of consumers to dictate what is produced based on their preferences rather than directly pushing for efficiency in business operations. Government regulation can impose constraints and guidelines on businesses, but it may not inherently drive efficiency as companies might adjust to comply without prioritizing operational improvements. Market stabilization refers to actions that maintain balance in the market, but this concept does not inherently promote the efficiency of individual business operations.