Deck 1: The Business Environment and Business Economics

Question 1

PEST is a method of analysing a firm or industrial sector by looking at

A) primary, ecological, social and technological factors.
B) strengths and weaknesses.
C) political, economic, social and technological factors.
D) profit, ecological, social and technological factors.
E) B and D

Answer 1

political, economic, social and technological factors.

Question 2

PEST analysis can be extended to PESTEL analysis with the addition of

A) environmental and long- term factors.
B) environmental and legal factors.
C) external and legal factors.
D) economic and legal factors.

Answer 2

environmental and legal factors.

Question 3

Which of the following would be classified as part of the macroeconomic environment?

A) An increase in interest rates
B) Falling costs for a textile manufacturer
C) An increase in prices in the manufacturing industry
D) The entrance of new firms into the tertiary sector

Answer 3

An increase in interest rates

Question 4

Changes in attitudes to equality would be classified as

A) a social factor.
B) an economic factor.
C) a political factor.
D) a technological factor.

Question 5

A study of how increases in the corporation tax (a tax on business profits) rate will affect the national unemployment rate is an example of

A) descriptive economics.
B) macroeconomics.
C) microeconomics.
D) normative economics.

Question 6

Primary production refers to

A) a firm's main product.
B) the output of the entire manufacturing sector.
C) the production and extraction of natural resources, plus agriculture.
D) the main product produced by a country.

Question 7

Tertiary production refers to

A) the output of the entire service sector.
B) the production and extraction of natural resources.
C) the main product produced by a country.
D) a firm's main product.

Question 8

Over the past two decades the relative size of the UK's secondary sector has and the tertiary sector has_____ .

A) risen; fallen
B) fallen; risen
C) risen; risen
D) fallen; fallen

Question 9

The extent to which an industry is dominated by large business enterprises is usually examined by a measure of

A) brand awareness.
B) advertising expenditure as a proportion of sales revenue.
C) SME employment.
D) industrial concentration.

Question 10

The output from McDonalds would be classified as

A) tertiary production.
B) quarternary production.
C) primary production.
D) secondary production.

Question 11

The decline in the share of the secondary sector in GDP is known as

A) grandfathering.
B) de- industrialisation.
C) industrialisation.
D) nationalisation.

Question 12

Which of the following statements concerning the Standard Industrial Classification (SIC) is true?

A) The SIC has 272 sections, 88 divisions, 200 groups, 50 classes and 191 subclasses.
B) The SIC has 12 sections, 20 divisions, 200 groups, 5 classes and 91 subclasses.
C) The SIC has 21 sections, 88 divisions, 272 groups, 615 classes and 191 subclasses.
D) The SIC has 21 sections, 20 divisions, 200 groups, 500 classes and 191 subclasses.

Question 13

In UK industry, large firms (i.e. those with more than 250 employees) account for about _______% of employment and SMEs (i.e. those with fewer than 250 employees) account for about ______________% of workers.

A) 90; 10
B) 75; 25
C) 25; 75
D) 50; 50

Question 14

Which of the following would explain why small and medium- sized firms account for about 98% of businesses in the gas, electricity and water supply sectors but they only account for about 15% of employment and 20% of sales?

A) A shortage of capital- intensive production
B) A shortage of labour
C) The need to access natural resources
D) A need for large- scale capital- intensive production

Question 15

Business performance could be examined by looking at

A) growth in market share.
B) change in share price.
C) current profitability.
D) all of the above

Question 16

The level of unemployment is studied by business economists and is an

A) external influence on the firm.
B) external effect of business decision- making.
C) internal decision of the firm.
D) A and B

Question 17

The development of a new production technology is an

A) internal decision of the firm.
B) external influence on the firm.
C) external effect of business decision- making.
D) A and B

Question 18

In a free- market economy_________what gets produced, how it is produced and who gets it.

A) firms but not consumers determine
B) consumers but not firms determine
C) the behaviour of buyers and sellers determines
D) the central government authority determines

Question 19

Gross Domestic Product (GDP) measures

A) the value of output produced within a country.
B) the output of a country's largest industry.
C) the number of products produced within a country.
D) economic growth.

Question 20

An example of an external influence on the firm is its marketing decisions.

Question 21

An example of an external effect of business decision- making is the level of interest rates.

Question 22

The rate of inflation is an example of an external influence on the firm.

Question 23

PEST analysis looks at how political, economic, social and technological factors shape the business environment.

Question 24

Mining is an example of primary production.

Question 25

Tertiary production involves the service sector.

Question 26

The decline in the contribution of the manufacturing industry to national output is called de- industrialisation.

Question 27

The sector of the UK economy that has not grown over the last 20 years is the tertiary sector.

Question 28

The definition of an industry following the Standard Industrial Classification (SIC) is based on the qualities that consumers attribute to products.

Question 29

Business performance cannot be measured by profitability.

Question 30

The 'structure- conduct- performance' paradigm states that the main influence on a firm's performance is organisational structure within the firm.

Question 31

Businesses will always operate in the same way irrespective of the competitiveness of the market
they are in.

Question 32

The better informed a business is about its markets, its costs of production, alternative techniques and alternative products it could make, the better it will be able to fulfil its goals.

Question 33

Business performance is entirely shaped by external factors.

Question 34

There are three stages in studying decision- making. Explain what they are.

Question 35

Microeconomics is the study of what?

Question 36

Macroeconomics is the study of what?

Question 37

Industries are often grouped into a small number of large sectors. What are these sectors and what are their main products?

Question 38

'Business economics is a science, not an art'. Discuss.

Question 39

Given that models are abstractions from reality and economists seek to explain reality, why then do economists use models?

Question 40

What is the purpose of the Standard Industrial Classification (SIC)?

Question 41

What revisions have been made to the SIC?

Question 42

According to the 'structure- conduct- performance' paradigm, what determines business performance?

Question 43

If a firm is operating in a highly competitive market, how will it tend to behave?

Question 44

How may the objectives of a firm's owners and managers differ?