UNIT-3: BUSINESS ENVIRONMENT

1. The term ‘Business Environment’ means the sum total of:

(A) All individuals.
(B) Institutions.
(C) Other forces that are outside the control of a business enterprise.
(D) All of the above
2. “The components of business environment keep on changing due to changes in various
circumstances.” This shows that business environment is _________.
(A) Dynamic
(B) Uncertain
(C) Complex
(D) Relative
3. Which of the following is not an element of social environment?
(A) Birth and death rate
(B) Constitution of the country
(C) Population shifts
(D) Life expectancy
4. ‘The current government initiated Make in India Programme which is good for the
manufacturing sector.’ Out of the following, identify the component of Business Environment
quoted in the above lines.
(A) Economic
(B) Political
(C) Legal
(D) Technological
5. Which of the following is not a part of the business environment of business?
(a) Customers
(b) Suppliers
(c) Competitors
(d) None of the above
6. Any kind of external devices, like compact discs (CD’s) for computer, have become obsolete.
Google, with its Google Drive service, Apple with its iCloud offering, enables the users store
documents, photos, music and movies on web-based servers. Identify the feature of business
environment being described in the above lines.
(a) Relativity
(b) Dynamic nature
(c) Uncertainty
(d) Interrelatedness
7. Digi Locker is the country’s first secured cloud-based platform for the storage, issuance and
verification of documents with the Driving Licence & Vehicle Registration System of the
 Road Transport Ministry. The integration of a government department with Digi Locker
since its launch last year is one of the biggest of its kind. It will spare 1 people the trouble of
carrying licences & vehicle papers, which can be accessed on phones using the Digi Locker
app. Identify the related dimension of business environment.
(a) Ecoriomic dimension
(b) Technological dimension
(c) Social dimension
(d) Political dimension
8. According to the World Health Organization, 39% of adults are overweight. Over the last 40
years, the prevalence of obesity has tripled around the world. With over half of consumers
drinking at least one sugary drink on a given day, regulations towards the beverage sector are
likely to become increasingly onerous. In the U.K., for example, a sugar tax was introduced in
2018 on beverages containing more than 5% sugar. Identify the related dimensions of business
environment.
(a) Legal dimension and social dimension
(b) Social dimension and Technological dimension
(c) Technological dimension and Legal dimension
(d) Political dimension and Technological dimension
9. “Increase in the use of mobile phones and i-pods instead of papers and radio” refers to an
example of key component of general environment of business. Identify the component of
business environment.
(A) Technological
(B) Political
(C) Legal
(D) Economic

10. The RBI reduces CRR (Cash Reserve Ratio) by 0.5% to control recession. This is related to
which dimension of Business environment?
A. political environment
B. Economic environment
C. Social environment
D. Legal environment

11. Introduction of mobile phones have negatively affected the business of cameras watches, it is
related to
A. Social environment
B. Economic environment
C. Technological environment
D. Legal environment

12. The court passed an order that all schools must have water purifier for the school children.
Identify the dimension of the business environment highlighted in this statement.
A. Social environment
 B. Economic environment
C. Social environment
D. Legal environment

13. Which component of business environment requires that advertisement of baby food must
necessarily inform the potential buyers that mother’s milk is the best?
A. Social environment
B. Economic environment
C. Social environment
D. Legal environment

14. Mr. Ram after completing MBA from USA comes to India to start a new business. He
launches a new e-learning platform for senior Secondary School students, which already has an
established market in UK and USA but not in India. Identify the importance of business
environment highlighted here.
(a) It helps the firm to identify opportunities and get the first mover advantage
(b) It helps improvement in performance
(c) It helps the firm to deal competition
(d) It helps the firm to adjust and adapt with rapid changes

15. For Covid-19 different vaccines are developed by the Indian and foreign companies such as
Covishield, Covaxin, Moderna, Pfizer etc. Identify the dimension of the business environment
highlighted in this statement.
(a) Economic environment
(b) Political Environment
(c) Legal Environment
(d) Technological Environment

16. ASSERTION (A) Business Environment scanning refers to complete awareness and
understanding of business environment
REASON(R) Efficiency of management helps to increase the profit of enterprise
(a) Both Assertion (A) and Reason(R) are True and Reason(R)is the correct explanation of(A)
(b) Both Assertion (A) and Reason(R) are True and Reason(R)is not the correct explanation
of(A)
(c) Assertion (A) is True but Reason(R) is False
(d) Assertion (A) is False but Reason(R) is True

17. ASSERTION (A) Business environment includes both specific and general factors
REASON(R) specific forces affect business enterprises indirectly
(a) Both Assertion (A) and Reason(R) are True and Reason(R)is the correct explanation of(A)
(b) Both Assertion (A) and Reason(R) are True and Reason(R)is not the correct explanation of
(A)
(c) Assertion (A) is True but Reason(R) is False
(d) Assertion (A) is False but Reason(R) is True

18. ASSERTION (A) Business environment is dynamic

REASON(R) Business environment is highly flexible and keep changing
(a) Both Assertion (A) and Reason(R) are True and Reason(R)is the correct explanation of(A)
(b) Both Assertion (A) and Reason(R) are True and Reason(R)is not the correct explanation of
(A)
(c) Assertion (A) is True but Reason(R) is False
(d) Assertion (A) is False but Reason(R) is True

19. (A) Political environment includes political conditions such as general stability and peace in
the country and specific attitudes that elected government representatives hold towards business.
(R) The attitudes of government officials towards business may have either positive or negative
impact upon business
(a) Both Assertion (A) and Reason(R) are True and Reason(R)is the correct explanation of (A)
(b) Both Assertion (A) and Reason(R) are True and Reason(R)is not the correct explanation of
(A)
(c) Assertion (A) is True but Reason(R) is False
(d) Assertion (A) is False but Reason(R) is True

20. Assertion (A): The business environment helps in understanding the threats which are likely
to happen in the future. Reason (R): Environmental awareness can help managers to identify
various threats on time and serve as an early warning signal.
(a) Both Assertion (A) and Reason(R) are True and Reason(R)is the correct explanation of (A)
(b) Both Assertion (A) and Reason(R) are True and Reason(R) is not the correct explanation of
(A)
(c) Assertion (A) is True but Reason(R) is False
(d) Assertion (A) is False but Reason(R) is True

21. Assertion (A): Economic environment includes economic policies of the Government,
including industrial, monetary and fiscal policies.
Reason (R): Business enterprises in India do realise the importance and impact of the economic
environment on their working.
(a) Both Assertion (A) and Reason(R) are True and Reason(R)is the correct explanation of(A)
(b) Both Assertion (A) and Reason(R) are True and Reason(R) is not the correct explanation of
(A)
(c) Assertion (A) is True but Reason(R) is False
(d) Assertion (A) is False but Reason(R) is True

CASE STUDY: As the government has opened up its economy to Multinational Corporations, it
has encouraged foreign companies to invest in some sectors of retailing. It has also put in place
new rules and regulations for FDI (Foreign Direct Investment) in the retail sector. The FDI
policy allows foreign investment through two modes. It may be either under the ‘automatic
route’ or under the ‘approval route’ where prior approval of the Indian Government is required
for any foreign investment in an Indian company which is carrying on retailing business in India.
Moreover, the policy also talks about ‘Single brand retailing’ like Nike or ‘Multibrand retailing’
like Walmart. The argument is that customers can afford to purchase the products of these
companies as their income is rising gradually. It will increase research and innovations in the
retail sector which will provide new ways of producing goods as well as increase the variety of
goods in the market. This will eventually improve the quality of life.

22. “As the government has opened up its economy to Multinational Corporations, it has
encouraged foreign companies to invest in some sectors of retailing.” Identify which dimension
of business environment is depicted here.
(A) Political environment
(B) Legal environment
(C) Technological environment
(D) Economic environment
23. “Customers can afford to purchase the products of these companies as their income is rising
gradually.” Identify which dimension of business environment is depicted here.
(A) Social environment
(B) Legal environment
(C) Technological environment
(D) Economic environment

24. “It will increase research and innovations in the retail sector…” Identify which dimension of
business environment is depicted here.
(A) Social environment
(B) Political environment
(C) Technological environment
(D) Economic environment

25. “This will eventually improve the quality of life.” Identify which dimension of business
environment is depicted here.
(A) Social environment
(B) Legal environment
(C) Technological environment
(D) Economic environment
KEYS
Q1-10 D A B B D C B A A B
Q11-20 C D D A D B C A A A
Q21-25 B A D C A