New Horizon Business, Accounting and Financial Studies

Mindset for Examination – Compulsory Part

Compulsory Part Business Environment

Relevant Chapter CH1 Hong Kong Business Environment

1. Which of the following is NOT a characteristic of the Hong Kong economy?

A. It can easily be affected by external factors

B. A general sales tax has not been implemented

C. There is no primary industry

D. Free trade is advocated

Students have little knowledge about the Hong Kong tax system.

Option (A) is not correct. Hong Kong is an open economy, which is easily affected by
other countries.
Option (B) is not correct. Hong Kong's tax system is simple. Business owners
There is stillonly
some primary industry in
consider profits tax in Hong Kong. Hong Kong, such as farming. However, the
proportion compared with other
Option (D) is not correct. Hong Kong follows a free trade policy. industries is very low.

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New Horizon Business, Accounting and Financial Studies
Mindset for Examination – Compulsory Part

2. Many retail shops have reduced the number of their branches or become online shops
in recent years. This is because ________________ and it is a/an ______________.

A. Hong Kong has an independent judicial system …… legal factor

B. Hong Kong has well-established information technology …… technology

factor

C. the rent in Hong Kong is rising …… social factor

D. the rent in Hong Kong is rising …… economic factor

Students may think that online shopping is very popular in Hong Kong especially when
buying foreign products. They may consider that well-established information
technology is the reason business owners have started selling online.

Option (A) is not correct. Although Hong Kong’s independent judicial system is a legal
factor, this does not explain why many retail shops are now online shops.
Option (B) is not correct. Although Hong Kong has well-established information
technology, it does not explain why retail shops have reduced their scale of operation
and become online shops. Students should identify the correct reasons
and familiarise themselves with the types of
Option (C) is not correct. Rent levels are not a social factor. factors affecting business decisions.

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New Horizon Business, Accounting and Financial Studies
Mindset for Examination – Compulsory Part

3. Which of the following statements regarding the Asia-Pacific Economic Cooperation

(APEC) are correct?

(1) All of its members are located in Asia.

(2) Its members sign free trade agreements to promote free trade.

(3) Its goal is to support sustainable economic growth and prosperity in the Asia-
Pacific region.

A. (1) and (2) only

B. (1) and (3) only

C. (2) and (3) only

D. (1), (2) and (3)

APEC includes non-Asian countries, such

as Canada and the United States.

Students may think that all dealings connected with APEC are restricted to Asia Pacific.

(1) is not correct. Members of APEC are not restricted to Asia Pacific.
(2) is correct. The members of APEC sign free trade agreements, promising to remove
trade barriers.
Students should understand the goals of
(3) is correct. This is APEC’s goal. each international trade organisation.

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New Horizon Business, Accounting and Financial Studies
Mindset for Examination – Compulsory Part

4. Explain one technological factor and one economic factor that are favourable to
online shopping companies. (4 marks)

Technological factor: Hong Kong people are more

The acceptance of online shopping is a social
acceptable to online shopping. factor rather than a technological factor.
Economic factor: Hong Kong people are rich.

Technological factor: The online payment technology of Hong Kong is becoming more
established. It is more convenient for Hong Kong people to pay via the Internet.
Economic factor: Hong Kong has adopted the linked exchange rate system. The stable
currency reduces the risk to online shopping companies of purchasing goods
Students should answer with reference to the
from other countries. characteristics of an online shopping company.

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New Horizon Business, Accounting and Financial Studies
Mindset for Examination – Compulsory Part

5. Explain two roles of business in the Hong Kong economy. (4 marks)

- Business can make a lot of money for me. Students should consider the roles of business
- Businesses provide places for me to go shopping. in the Hong Kong economy rather than
personal gain.

- To provide tax revenue for the government: Businesses which make a profit have
to pay profits tax to the government.
- To provide job opportunities: Businesses employ Hong Kong people. They provide
a lot of job opportunities.
- To provide the goods and services that Hong Kong people need. Businesses
provide the goods and services people needed while making a profit.
- Earning foreign currency: Through exports of services and re-exports, Hong Kong
can earn a lot of foreign currency paying for imported goods.
(2 marks for each relevant role, max. 4 marks)

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