Business Level - I

Business Environment & Economics (BL 4)

Pilot Paper

Instruction to candidates
1) Time Allowed 2 Hours
2) Total 100 marks
3) 50 Questions. All Questions are compulsory
4) Select the most suitable answer

1. _________ is a possible difference but not a common characteristic between

organizations.
a) Performance
b) Sources of finance
c) Objectives
d) Systems

2. The primary goal of a non-profit orientated organization is:

a) Maximize profit.
b) Survival.
c) Provision of goods/services.
d) Revenue.

3. _________________ is an example for the ‘high power’ and ‘high level of interest’ position
in stakeholder mapping as per the Mendelow (1991) matrix.
a) An institutional shareholder
b) A major customer
c) A community representative
d) A charity

4. “Air New Zealand in late 2005 and early 2006, axed 110 jobs from its aircraft engine
sector. In an increasingly competitive and volatile market, it also shed 470 head office
jobs”. This scenario is a good example for:
a) Merging.
b) Acquiring.
c) Downsizing.
d) Decentralizing.
5. _________________ is a code of ethics even applicable to practicing accountants.
a) Subjectivity
b) Individualism
c) Integrity
d) Competition

6. Mr. Perera works for a large-scale organization. He has a number of powers from his
area of expertise, and he exercises his power legitimately. Hence the need for job
descriptions, authorization limits. As per these basic information, Mr. Perera seems
to be a:
a) Senior Manager.
b) Middle Manager.
c) Supervisory Manager.
d) Foreman.

7. ____________ focus the arrangements for what should be done if changes or problems
occur unexpectedly in an organization.
a) Strategic Plans
b) Tactical Plans
c) Contingency Plans
d) Single Use Plans

8. Favor technology, value feedback, and respond well to teamworking are the
characteristics of ____________.
a) Baby Boomers
b) Generation Y
c) Generation X
d) None of the above

9. Mr. Silva as the HR Manager of Alpha (Pvt) Ltd spent more time in a meeting with his
peers rather than with his subordinates. In this situation, Mr. Silva seems playing the
managerial role of _______________ as per Henry Mintzberg (1989).
a) Figurehead
b) Leader
c) Monitor
d) Liaison
2
10. Select an ‘effectiveness’ measure of an organization from the following.
a) Cost per unit
b) Product quality
c) Machine set up time
d) Waste of output

11. It is an example for a single use plan in an organization.

a) Policies
b) Rules
c) Budgets
d) Procedures

12. In deciding to buy some computer equipment, a Departmental Manager might have
reservations about the willingness of his staff to accept the proposal. This involves
what non-quantifiable factor behind the decision making of managers.
a) Timing
b) Competitors
c) Suppliers
d) Feasibility

13. Which departmentation appears an exception to the unity of command principle.

a) Project
b) Functional
c) Product
d) Geographic

14. Nike Company outsources its production to sub-contractors while keeping its core
activities in house. Which of the following presents this Nike’s practice as a new
organizational form?
a) Flat Structure
b) Virtual Organization
c) Modular Organization
d) Hollow Organization

3
15. Charismatic leaders have high levels of ____________ power.
a) Expert
b) Coercive
c) Referent
d) Reward

16. A machine operator may compare his or her job inputs and outputs with another
machine operator’s job inputs and outputs. This notion has been keenly addressed by:
a) Hierarchy of Needs Theory.
b) Expectancy Theory.
c) Equity Theory.
d) Two Factor Theory.

17. A supervisor and some of his fellow supervisors in a Production Department of an

organization communicate each other about a new machine replacement
requirement. This organizational communication is referred to:
a) Vertical communication.
b) Lateral communication.
c) Intergroup communication.
d) Diagonal communication.

18. Installing nonslip floors in a newly built factory is an appropriate example for:
a) Process control.
b) Feedback control.
c) Feedforward control.
d) Concurrent control.

19. In the entertainment industry, a comedian telling a joke is considered as:

a) Input.
b) Process.
c) Transforming.
d) Output.

4
20. Number of haircuts of a salon allocated to its working units is an example to:
a) Scheduling.
b) Sequencing.
c) Loading.
d) Monitoring.

21. Which of the following statements is correct about the implementation of Total
Quality Management (TQM) in a business organization?
a) Implementing TQM is suitable only for the large-scale organizations
b) Change management can be difficult, depending on the culture of the business
c) TQM is an old concept hence, the implementation of it is not relevant to the
modern businesses
d) It will bring fruitful results only for businesses in the manufacturing sector

22. Salespeople of Beta (Pvt) Ltd are sending emails to the targeted mailing lists of
individuals to have responses from them towards its newly launched product in the
market. This is an example for:
a) Advertising.
b) Direct marketing.
c) Sales promotion.
d) Public relations.

23. Some business organizations aim to increase profitability through the maximum
utilization of their resources. As per Kotler (2002), these business organizations seem
to be based on:
a) Product concept.
b) Marketing concept.
c) Selling concept.
d) Production concept.

24. Most retail outlets nearby the schools in Sri Lanka prefer to sell their products,
including the fast-moving items during the school opening and closing time slots to
satisfy the urgent food and beverage requirements of the buyers who come to those
schools as students and their accompanying. This segmentation of the consumer
market seems to be based on:
a) Benefit segmentation.
b) Buyer behavior.
c) Geographical area.
d) Demographic segmentation.

5
25. Which one of the following conveys a new role of the HR manager?
a) Facilitator
b) Advisor
c) Administrator
d) Negotiator

26. A HR manager of a multinational firm in planning its human resources has

emphasized on setting the programs for transferring and retaining its employees. This
kind of a subsidiary plan in the HR plan is identified as:
a) Redundancy plan.
b) Productivity plan.
c) Training plan.
d) Redevelopment plan.

27. As a world-famous firm in management consultancy and audits, PwC Hungary has
adopted the rules and principles of games in its recruitment process. This modern HR
technique used by the firm is known as:
a) Artificial Intelligence.
b) Machine Learning.
c) Gamification.
d) Game Theory.

28. The ICT Department of the Millennium PLC maintains key information on the ad-hoc
market analysis, key ratios and performance indicators and ad-hoc market analysis
for the purpose of timely decision making of the company. The above scenario
includes examples for the information used at the _______________.
a) Operational level
b) Strategic level
c) Tactical level
d) Project level

29. Flexibility, quick response time, and sophisticated data analysis and modeling tools
are the key features of:
a) Management Information Systems (MIS).
b) Executive Information Systems (EIS).
c) Transaction Processing System (TPS).
d) Knowledge Work Systems (KWS).

6
30. ______________ is a widely accepted, standard method of project management. It offers
clear management structures and planning and control methods and focus on outputs
rather than processes.
a) Enterprise Resource Planning (ERP)
b) Configuration Management
c) Work Breakdown Structure
d) PRINCE 2

31. When calculating the economic profit, an economist would consider both;
a) Fixed costs and variable costs
b) Explicit costs and implicit costs
c) Direct costs and indirect costs
d) Short-run costs and long-run costs

32. Which of the following is studied in Normative Economics?

a) Foreign reserves of Sri Lanka have been declining drastically over the last few
years.
b) The unemployment rate of the economy will rise further due to the economic
crisis.
c) Governments should formulate economic policies to provide equal opportunities
to every citizen of the country.
d) There is a strong relationship between the inflation rate and the foreign exchange
rate.

33. What are the two (02) key microeconomic concepts which are considered as the roots
of the theory of demand and the theory of supply, respectively?
a) Scarcity and opportunity cost
b) Marginal utility and marginal cost
c) Elasticity of demand and elasticity of supply
d) Short-run and long-run

34. A rational consumer’s expectation is to;

a) Maximize the marginal utility from the given money income
b) Maximize the total utility from the given money income
c) Spend more on consumption than saving
d) Save more from the income than spending on consumption

35. Which of the following will not cause a change in the demand for a good?
a) The price of the good
b) The price of a substitute product
c) The consumer income
d) The advertising expenditures
7
36. When the increase in supply is less than the increase in demand,
a) the equilibrium quantity will increase, but the equilibrium price will remain
unchanged
b) the equilibrium price will increase, but equilibrium quantity will remain
unchanged
c) both equilibrium price and quantity will decrease
d) both equilibrium price and quantity will increase

37. Which of the following statements about the elasticity of demand is incorrect?
a) The price elasticity of demand for necessity goods is inelastic.
b) The price elasticity of demand for luxury goods is elastic.
c) The cross-price elasticity of complementary goods is negative.
d) The income elasticity of inferior goods is positive.

38. If the government sets a maximum price which is higher than the equilibrium price,
which of the following would be possible?
a) The price will decline to the equilibrium level.
b) There will be a black market for the commodity.
c) The government has to introduce a rationing system.
d) Both (b) and (c) above are possible.

39. If a firm produces nine (09) units of output in the short-run, the average variable cost
is Rs. 5 and the marginal cost is Rs. 13. How much would be the average variable cost
when the firm is producing eight (08) units of output?
a) Rs. 5
b) Rs. 4
c) Rs. 13
d) Rs. 9

40. Which of the following is an example for a long-run business decision?

a) A commercial bank decides to open another branch in another city.
b) An airline decides to reschedule all its flight operations.
c) A supermarket decides to reschedule its business hours for customers.
d) An apparel firm decides to introduce another work shift to increase the
production.

8
41. Which of the following expressions explains, the firm incurs a loss, but continues to
produce in short-run?
a) Average total cost > Price > Average variable cost
b) Total revenue < Total variable cost > Total fixed cost
c) Average variable cost > Price < Average fixed cost
d) Total cost < Total revenue > Total variable cost

42. Which of the following statements explain the nature of an oligopoly market?
a) All the firms in the oligopoly market produce homogeneous products.
b) There are very weak entry barriers in oligopoly markets.
c) Each firm in the oligopoly market is highly interdependent in their decisions.
d) The firms in oligopoly markets do not engage in any form of collusions.

43. An oligopoly firm is said to be in kinked-demand condition when it experiences;

a) relatively inelastic demand for price hikes and elastic demand at price cuts
b) relatively elastic demand for price hikes and relatively inelastic demand at price
cuts
c) relatively inelastic demand for both price hikes and price cuts
d) relatively elastic demand for both price hikes and price cuts

44. When economists think about year-to-year movements in macroeconomic activities,

they mainly focus on the interaction between;
a) Interest rate, exchange rate and inflation rate
b) Output, demand and interest rate
c) Output, income and expenditures
d) Interest rate, inflation and unemployment

45. Which of the following activities would not create inflationary effects in an economy?
a) An increase in government expenditures
b) An increase in money supply
c) A depreciation in foreign exchange rate
d) An increase in interest rate

46. Assume that an economy decided to reduce the tax rates of the economy. Which of the
following would maintain the macroeconomic equilibrium of the economy?
a) A reduction in government expenditures
b) An increase in exports revenue
c) A reduction in imports expenditures
d) An increase in investment expenditures

9
47. When the economy moves from A to B and C to D in the below business cycle, what
are the most appropriate fiscal policy initiatives, respectively?

a) Contractionary fiscal policy and expansionary fiscal policy

b) Expansionnary fiscal policy and contractionary fiscal policy
c) Contractionary fiscal policy and contractionary fiscal policy
d) Expansionary fiscal policy and expansionary fiscal policy

48. Which of the following policy mix initiatives would be more suitable if an economy is
in a recession with a high level of government budget deficit?
a) Expansionary fiscal and monetary policies
b) Contractionary fiscal and monetary policies
c) Expansionary fiscal policy and contractionary monetary policy
d) Contractionary fiscal policy and expansionary monetary policy

49. An individual quits the job to find a better job which suits his/her qualifications. This
situation can be treated as;
a) Frictional unemployment
b) Structural unemployment
c) Seasonal unemployment
d) Cyclical unemployment

50. What would be the possible immediate consequence if the government practices an
expansionary fiscal policy when the economy is at full employment level?
a) Economic crisis
b) Trade deficit
c) Inflation
d) Unemployment

10