THC-329-LA-1 Answer

LEARNING ACTIVITY SHEET 1
(Module 1)
THC 329-ENTREPRENEURSHIP IN TOURISM & HOSPITALITY
Course Facilitator: RICA B. SAN ANTONIO, DBA
Name: Riza Mie A. Legaspi Course/Year: BSHM 3 Section: B

I. IDENTIFICATION. Fill in the blanks with the correct answer.
Richard Cantilion 1. An Irish economist of French descent.
Low Level Activity 2. Friedrich A. Hayek and Israel M. Kirzner explained about this kind of
activity.
Joseph A. Schumpeter 3. The person who said that the entrepreneur is someone who carries out
a new combination.
Frank H. Knight 4. The U.S. economist who distinguished between risk and uncertainty.
Frank H. Knight 5. He observed that while the entrepreneur can “lay off” risks much like
insurance companies do, he is left to bear the uncertainties himself.
Joseph A . Schumpeter 6. He was concerned with the “high-level” kind of entrepreneurship.
Frank H. Knight 7. He maintained that no owner would ever delegate a key decision to a salaried
subordinate because he implicitly assumed that subordinate cannot be
trusted.
Joseph A. Schumpeter 8. His analysis left little room for the much more common but no less
important, “low-level” entrepreneurship carried on by small firms.
Richard Cantilion 9. According to his original formulation, the entrepreneurship is a specialist in
taking on risk.
Frank H. Knight 10. According to him changes affecting the marketing of consumer products
generally falls in the uncertainty category.
II. ESSAY
1. Explain entrepreneurship according to Frank Knight. (10 points)
Knight defined entrepreneurship as the actions of a leader or someone who has

power in a production project (Gunning 1993). Knight's view on entrepreneur's role
within the market was their tactic to deal with. uncertainty, According to Knight, profit—
earned by the entrepreneur who makes decisions in an uncertain environment—is the entrepreneur's reward for
bearing insurable risk. Knight also produced a monograph entitled The Economic Organization, which became a
classic exposition of microeconomic theory. Frank H. Knight was one of the founders of the so-called
Chicago school of economics, of which milton friedman and george stiglerwere the leading members
from the 1950s to the 1980s. Knight made his reputation with his book Risk, Uncertainty, and
Profit, which was based on his Ph.D. dissertation. In it Knight set out to explain why
“perfect competition” would not necessarily eliminate profits. His explanation was “uncertainty,”
which Knight distinguished from risk. According to Knight, “risk” refers to a situation in which the
probability of an outcome can be determined, and therefore the outcome insured against.
“Uncertainty,” by contrast, refers to an event whose probability cannot be known. Knight argued that
even in long-run equilibrium, entrepreneurs would earn profits as a return for putting up with
uncertainty. Knight’s distinction between risk and uncertainty is still taught in economics classes today.
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2. Differentiate high level kind of entrepreneurship from low level kind of
entrepreneurship. (20 points)
Small businesses usually deal with known and established products and services, while
entrepreneurial ventures focus on new, innovative offerings. Because of this, small
business owners tend to deal with known risks and entrepreneurs face unknown risks.
Small business and entrepreneurship are two terms that are often confused and used
interchangeably; thus, it is important to understand the difference between small business
and entrepreneurship clearly. While most entrepreneurial ventures start out as a small
business, not all small businesses are entrepreneurships. The key difference between small
business and entrepreneurship is that a small business is a limited scale business owned and
operated by an individual or a group of individuals whereas an entrepreneurship is defined as
the process of designing, launching and operating a new business, which usually starts as
a small business and pursues growth. Many companies that are immensely successful have
started out as entrepreneurships.
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LEARNING ACTIVITY SHEET 1

Name: Riza Mie A. Legaspi Course/Year: BSHM 3 Section: B

1. Explain entrepreneurship according to Frank Knight. (10 points)

Knight defined entrepreneurship as the actions of a leader or someone who has

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2|Page THC 329 ENTREPRENEURSHIP IN TOURISM & HOSPITALITY

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