CAYON HIGH SCHOOL

PROMOTION EXAMINATIONS 2014

PRINCIPLES OF BUSINESS

INSTRUCTIONS:

1. This tests consists of 40 items. You would have 75 minutes to answer them.
2. Each item in this test has four suggested answers lettered (A), (B), (C) AND (D)
3. On the answer sheet provided shade, the letter corresponding to the answer you
have chosen for each question.

1. A public good is one which is:

A. produced only by the public sector

B. limited in supply
C. regarded as a free good
D. Collectively consumed and non-rival

2. A good way to describe barter is:

A. bargaining for quality goods at a cheaper prices

B. credit sales and purchase of goods
C. exchange of goods for goods
D. exchange for goods for credit

3. Which of the following explains why a barter system restricts trade and
exchange?

I. There must be coincidence of wants

ii. the commodities used are not homogenous
Iii. It is difficult to divide certain commodities
Iv. A rate of exchange must be determined

A. i and iv only B. ii and iv only

C. i, ii, and iii D. i, iii, and iv

4. Direct satisfaction of wants entails:

A. obtaining goods through exchange
B. paying only for goods of high quality
C. producing one’s own goods and services
D. producing goods through a process of automation

5. Man is termed an ‘economic animal’ because he

A. has the ability to understand economics activities

B. lives a life which is governed by economics forces
C. studies economics in order to live a productive life
D. uses his ability to satisfy his wants from the gifts of nature

6. An example of a merit good is:

A. government subsidy
B. unemployment benefits
C. health services
D. school books

7. A country is producing a commodity at subsistence level if it:

A. produces just enough for local use

B. produces enough for local use and for export
C. imports as much as it exports
D. produces goods made of local raw materials

8. Primitive societies are known for one of the following:

A. surplus production
B. use of barter as a form of trade
C. using money of intrinsic value
D. the use of shells and salt as money

9. Consumer goods are those goods which

A. are used for personal satisfaction of wants

B. consumers have a strong preference for.
C. most consumer can afford to purchase
D. will be used to produce further goods

10. A consumer is one who:

A. window shops around the capital city

B. produces goods and services for consumption
C. manages the resources of a country to the best of their ability
D. uses goods and services to satisfy wants and needs

11. Which of the following are features of early economic systems:

A. indirect satisfaction of wants

B. the use of money as a medium of exchange
C. the direct exchange of goods for goods
D. specialization and division of labour

12. Money may be defined as:

i. A source of income
ii. A token used by individuals to pay for goods and services
iii. Something that is acceptable to everyone in settling debts
iv. Notes and coins
A. i, ii and iii B. i, ii, iii and iv
C. i, iii and iv D. ii, iii, and iv

13. Which ONE of these is the best definition of entrepreneurship?

A. Being able to make a profit from running the business

B. Producing goods and services
C. Taking risks in starting and operating a new business
D. Converting raw materials into finishing products
‘
14. In which type of economy does a central authority determines what, how
and for whom goods and services are produced?

A. Capital B. Command
C. Market D. Mixed

15. When goods are privatized, it means that:

A. The government has taken complete control of them
B. important services are taken care of by government appointed officials
C. private individuals and businesses have taken complete control of them
D. the goods are shared equally between the government and private individuals

16. Specialisation mean:

A. Dividing work into separation tasks and becoming skilled at one of these
B. Operating a system to self sufficiency
C. Dividing consumers into different groups and selling products to them
D. Employing labour and not capital to produce goods and services

17. One of the differences between a sole trader and a partnership is that:

A. A sole trader has no employees

B. A sole trader business has only one customer
C. A sole trader owner does not work within the business
D. A sole trader offers unlimited liability to its owner

18. One of the reasons for a person starting a new business is to:

A. Create a state corporation

B. Become more specialized
C. Become more dependent
D. Have more freedom

19. All of the following are roles of the business EXCEPT:

A. To produce goods and services

B. To advertise directly to children
C. To pay adequate wages to customers
D. To prevent damage to the economy

20. An economic system is:

A. the way in which governments borrow to pay off the national debt
B. a means of elevating the country beyond “third world country” status
C. the calculation of methods that can be used to pay wages and salaries
D. the way in which a society allocates scarce resources

21. Mr. Fahie worked hard all year to save for a trip to the United States.
Unfortunately, when the time got closer, he realized his visa had expired and he
decided to go to Canada since no visa was required. What is the opportunity
cost?

A. hard work B. USA

C. visa D. Canada

22. Farmers, fisherman and miners are examples of:

A. primary production
‘B. Tertiary production
C. commerce
D. secondary production

23. Resources used in the production of goods and services are termed:

A. free goods
B. consumer goods’
C. producer goods
D. final goods
‘

24. A human want is:

A. a demand for goods and services

B. a desire for goods and services
C. the purchase of goods and services’
D. the sale of goods and purchases

25. Choice is a basic economic activity because:

A. interest rates are too high

B. resources are too scarce
C. income are too high
D. inflation is too high
26. A mixed economy is one that consists of:

A. the provision of free social services

B. more than one political party
C. both private and public enterprise
D. no private businesses

27. Which of the following is not a function of money?

A. A measure of value
B. A store of cheques
C. A store of value
D. A medium of exchange

28. State which of the following is a feature of a controlled economy:

A. The factors of production are privately owned

B. The purchasers of goods determined demand
C. There are private and public enterprises
D. The state decides what the community needs

29. In a ‘free’ economy the most significant force in the distribution of goods is:

A. the banks B. the state

C. the shops D. the price system

30. The act of doing something that one is best at doing is called:

A. indirect production
B. specialization
C. division of labour
D. direct production

31. The term limited liability means

A. shareholders are free to withdraw their capital at will

B. a shareholder is not responsible for debts of their company beyond the value of
their shareholding
C. the company can only borrow to a certain amount
D. the firm has limited capital
32. Wealth set aside for the production of further wealth is referred to as

A. banking B. commerce
C. capital D. saving

33. The satisfaction of wants entirely by personal efforts is called

A. indirect production
B. mass production
C. direct production
D. primary production

34. Direct satisfaction of wants means:

A. production of high quality goods for sale in a store

B. producing for one’s own use
C. specializing in the production of goods and services
D. bartering to get what one needs

35. Oil drilling is classified as a/an:

A. extractive industry
B. service industry
C. manufacturing industry
D. construction industry

36. The term SCARCITY means that:

A. human desires cannot be satisfied at all

B. human desires for a product far exceed what is really available
C. conditions affect only the poor in the society and not the rich
D. a country will never be able to raise the standard of living of its people because of
the nature of scarcity

37. In early economics, surplus produce was disposed of through

A. free market systems
B. service oriented systems
C. barter systems
D. planned economic systems

38. One of the disadvantages of specialization and division of labour is

A. persons become more skilled at tasks or jobs performed

B. many workers sometimes turn out to work
C. the job gets boring or monotonous after a while
D. there is mass production of commodities

39. In a partnership

A. decision making is slower than in a sole tradership

B. the business has unlimited life
C. if a partner leaves the business can go on’
D. operating costs are very low

40. The main purpose of production is to

A. make profits
B. provide jobs
C. build more factories
D. satisfy people’s wants

41. One advantage of a money system compared to a barter system is that

A. barter never works

B. money creates the need for banks
C. Money is more efficient
D. everyone has money

42. Which of the following are features of the public sector?

I. Goods and services are produced by large public companies

II. The surplus of one enterprise may be used to finance the activities of other
enterprises
III. Productive resources are concentrated in the hands of the state
IV. A government minister has overall responsibility for the operations of the
enterprise

A. I B. II, III and IV

C. I, II and III D. I, III and IV