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. Which of the following statement is incorrect in relation to the nature of

businesses?
A. Primary objective of businesses is wealth maximization of its customers
B. The profits made by businesses maximize the owners’ wealth
C. A business is an entity separate from its owners
D. Businesses are profit-oriented and can be seen using a variety of legal
structures

2. One of the reasons for the existence of Organisations is to:

A. disable synergy
B. overcome a groups’ limitations
C. accumulate and share knowledge
D. overutilize time

3. According to Kotler the competitor response profile ‘tiger’ portrays,

A. unpredictable competitor response
B. abstaining from any response
C. response to only some threats and not all
D. aggressive response to all opposing moves

4. The application of universal ethical principles in order to arrive at rules of

conduct is concerned with:
A. Utilitarianism
B. Natural Law
C. Deontology
D. Consequentialist approach

5. Organising in the management process means:

A. making optimum use of the resources while promoting constructive
relationships
B. deciding what needs to happen in future with the available resources
C. involves checking progress of resource use against optimally designed
plans
D. involves getting people to do what is planned promoting constructive
relationships

6. Which of the following writers on Management described managerial roles,

arguing that management is a disjointed, non-systematic activity?
A. Taylor
B. Mintzberg
C. Mayo
D. Drucker

1
7. A Contingency plan is:
A. A plans that focuses on unique situations or one specific event
B. A plan formulated in advance that are implemented when certain
specific events occur
C. Plans that focus on repeated situations or overall policies, procedures
and rules
D. A plan that focuses on avoiding risks in the future

8. Which of the following are advantages of a formal planning system

A. Enforces consistency at all levels
B. Existence of rigid controls
C. Better risks management
D. Does not force managers to think

9. Functional organisation involves;

A. grouping together people with similar skills
B. grouping together people who do similar tasks
C. grouping together units which do similar tasks
D. grouping together units which have similar goals

10. “A budgetary planning and control system is essentially a system for ensuring
________________________ within an organisation.” Which of the following best
matches the blank given:
A. communication, cooperation and collaboration
B. communication, co-ordination and collaboration
C. cooperation, co-ordination and control
D. communication, co-ordination and control

11. Which of the following activities are not directly involved in strategic level
control of an organization?
A. Designing organizational structure and determining policies and codes
of conduct
B. Managing corporate governance and setting the organizational direction
C. Monitoring of progress and performance against strategic plans
D. Allocation of resources so as to meet optimal resource maximization

12. Feedforward is a type of control which:

A. aims to anticipate or detect a problem or abnormal activity before it
arises
B. aims to establish conditions in which it would be very difficult for an
abnormal activity to occur
C. takes place after a process or event has happened and as such is
historical in nature
D. takes place after a problem or abnormal activity before it arises

2
13. Organisations can be departmentalised on a:
A. functional basis, regional basis, product basis, brand basis, or a matrix
basis
B. functional basis, regional basis, operational basis, brand basis, or a
matrix basis
C. functional basis, geographical basis, industry basis, brand basis, or a
matrix basis
D. functional basis, geographical basis, product basis, brand basis, or a
matrix basis

14. According to Mintzberg’s components of organization, the preferred means of

co-ordination for the Technostructure component is:
A. Standardisation of outputs as in results
B. Standardisation of work processes or outputs
C. Standardisation of skills of technical staff
D. Mutual adjustment of technical staff

15. Functional structures in organizations create _____________to information and

work flow.
A. vertical barriers
B. horizontal barriers
C. managerial barriers
D. industry barriers

16. According to Huczynski and Buchanan, motivation is 'a decision-making process

through which;
A. the individual chooses organizational outcomes and sets in motion the
behaviour appropriate to acquiring them
B. the individual chooses national outcomes and sets in motion the
behaviour appropriate to acquiring them
C. the staff altogether chooses desired outcomes and sets in motion the
behaviour appropriate to acquiring them
D. the individual chooses desired outcomes and sets in motion the
behaviour appropriate to acquiring them

17. The transformation process model under operations management could be;
A. a physical transformation
B. a change in business registration
C. a change in senior management
D. all of the above

18. A level capacity plan is a plan used in operations management:

A. to maintain activity at a constant level over the planning period and to
ignore fluctuations in forecast demand
B. to maintain activity at an increasing rate over the planning period and to
ignore fluctuations in forecast demand
C. to maintain activity at an increasing rate over the planning period and to
accept fluctuations in forecast demand
D. to maintain activity at a declining rate over the planning period and to
ignore fluctuations in forecast demand

3
19. Job processing in a jobbing environment has the following characteristics:
A. It is complex, variable, rigid and jobs are of long duration
B. It is complex, variable, flexible and jobs are of long duration
C. It is complex, constant, flexible and jobs are of long duration
D. It is complex, variable, flexible and jobs are of short duration

20. Products such as oil, soap and many chemicals mostly undergo the production in
the form of:
A. Batch production
B. Batch Processing
C. Continuous processing
D. Batch flow processing

21. The supply chain is

A. a network of suppliers that provides raw materials to manufacture
finished goods and services
B. involved in the different processes and activities that transform raw
materials into finished goods and services
C. involved in a single process that transforms raw materials into finished
goods and services
D. a network of organizations that distributes only finished goods to
services

22. Quality in Operations Management means:

A. the degree of excellence of a thing
B. how well made is a product
C. how well performed if it is a service
D. All of the above

23. The process of setting controls for the manufacture or service delivery which is
aimed at preventing the manufacture of defective items or the provision of
defective services is called as:
A. Quality inspection
B. Quality control
C. Quality Assurance
D. Total quality management

24. Which one of the following is not a problem which arises from the
implementation of Total Quality Management (TQM) in an organisation
A. It can be demotivating because 'perfection' is hard to achieve
B. It relies heavily on the quality of suppliers
C. Change management can be difficult, depending on the culture of the
business
D. the organization will be expected to meet the exact needs and
expectations of the customers

25. As per the core concepts of marketing obtaining a product by offering something
in return is known as:
A. Selling
B. Transaction
C. Exchange
D. Marketing

4
26. The role of marketing is to __________________ satisfactions to customers, to
facilitate mutually beneficial exchanges.
A. identify, anticipate and sustain
B. identify, ascertain and supply
C. identify, ascertain and sustain
D. identify, anticipate and supply

27. Armstrong (2003) defined Human Resource Management as:

A. a strategic approach to the acquisition, motivation, development and
management of the organisation's human resources
B. a strategic approach to the acceptance, motivation, development and
management of the organisation's human resources
C. a strategic approach to the acquisition, motivation, training and
motivation of the organisation's human resources
D. a strategic approach to the acceptance, motivation, training and
management of the organisation's human resources

28. Human resource planning is also known as:

A. Workforce planning
B. Workforce rostering
C. Workforce management
D. None of the above

29. Which of the following is a computer system which is designed to increase the
productivity of data and information workers?
A. Executive information system
B. Office automation system
C. Knowledge work system
D. Decision support system

30. What is considered as the application of processes, methods, knowledge, skills

and experience to achieve the project objectives in a timely, cost-effective
manner?
A. Project management
B. Project planning
C. Project budgeting
D. None of the above

31. In terms of economic systems, the decisions and choices about resource
allocation are left to market forces of supply and demand in a:
A. Command economy
B. Centrally planned economy
C. Free market economy
D. Mixed economy

32. What is a Veblen good?

A. It is a good or service whose demand increases when its income
increases
B. It is a good or service whose demand decreases when its income
increases
C. It is a good or service whose demand increases when its price increases
D. It is a good or service whose demand decreases when its price
increases

5
33. “Economic profits differ from accounting profits by allowing ______________to vary
and including the opportunity cost of profits foregone.”
A. total cost
B. average cost
C. marginal cost
D. None of the above

34. As per Consumer Behaviour theory, marginal utility is:

A. satisfaction that people derive from spending their income and
consuming goods
B. satisfaction that people derive from selecting one good over another
C. the satisfaction gained from consuming one additional unit of a good
D. the satisfaction forgone by consuming one unit more

35. Which of the following is a factor that affects coefficient of own price elasticity of
demand?
A. Price level of the own product
B. Availability of substitutes
C. Consumer’s income
D. Consumer’s tastes and preferences

36. Given the change in Quantity Demanded (QD) is 40 and change in price is 10,
what would be price elasticity of demand for this product, at the point where
quantity demanded is 80 and price is Rs.60?
A. -30
B. -3
C. -0.3
D. -0.03

37. Goods whose demand eventually falls as income rises are called as:
A. inferior goods
B. normal goods
C. Veblen goods
D. Luxury goods

38. Which of the following factors does not affect the elasticity of supply?
A. Spare capacity
B. Price of the product
C. Availability of labour
D. Barriers to entry

39. The market clearing price in demand and supply analysis is also known as the:
A. Equilibrium price
B. Producer’s price
C. Buyer’s price
D. None of the above

40. Which one of the following is not a cause of Deadweight loss?

A. monopoly pricing
B. price floors
C. taxes
D. regulations

6
41. The amount of profit necessary to keep an entrepreneur in his or her present
activity is known as:
A. Normal Profit
B. Zero Profit
C. Abnormal Profit
D. Supernormal Profit

42. The extra cost or the incremental cost of producing one more unit of output is
called:
A. Marginal cost
B. Average cost
C. Fixed cost
D. Variable cost

43. The law which says that if one or more factors of production are fixed (the short
run applies), but the input of another factor is increased, the extra output
generated by each extra unit of the variable input will eventually begin to fall, is;
A. marginal returns
B. diminishing returns to scale
C. diminishing marginal returns
D. returns to scale

44. Minimum efficient scale is the

A. highest level of output at which the firm can achieve minimum average
cost
B. lowest level of output at which the firm can achieve minimum average
cost
C. lowest level of output at which the firm can achieve maximum profit
D. highest level of output at which the firm can achieve maximum profit

45. The process of circulation of income in the national economy, whereby an

injection of a certain size leads to a much larger increase in national income is
called as:
A. Withdrawals
B. Injections
C. Multiplier
D. Circular flow

46. As per Aggregate Demand and Supply interactions, an inflationary gap will occur
in a situation where:
A. a decrease in demand will cause price changes, but no variations in real
output
B. an increase in demand will cause price changes, but no variations in real
output
C. an increase in demand will cause output changes, but no variations in
price
D. a decrease in demand will cause output changes, but no variations in
price

7
47. The continual sequence of rapid growth in national income, followed by a
slowdown in growth and then a fall in national income can be effectively
depicted by:
A. Trade cycles
B. Economic Trends
C. Business Trends
D. Economic Phases

48. Demand-pull inflation arises when there is:

A. an excess of aggregate supply over the productive capacity of the
economy
B. a shortage of aggregate supply over the productive capacity of the
economy
C. a shortage of aggregate demand over the productive capacity of the
economy
D. an excess of aggregate demand over the productive capacity of the
economy

49. Which of the following acts will not reduce the risk of foreign exchange losses
for international trading companies?
A. Buying a currency forward
B. Invoicing in the domestic currency
C. Dealing in a soft currency
D. Outsourcing activities to the local market

50. Which economic indicator provides information about economic conditions that
may occur in the future?
A. A leading indicator
B. A coincident indicator
C. A lagging indicator
D. None of the above