PRINIPLES OF BUSINESS

SPECIMEN PAPER 3 - MULTIPLE CHOICE

(1) The PRIMARY role of the personnel department of a firm is to

(a) compile a magazine highlighting outstanding workers
(b) promote recreational activities for workers
(c) hire, recruit train and motivate workers
(d) assist employees to understand industrial relations

(2) Which of the following contract must be evidenced in writing

(a) purchase a bus ticket
(b)purchase a radio
(c) purchase a plot of land
(d)purchase of a car for cash

(3) Barry decided to start his own clothing store.

He is happy working for himself BECAUSE

(a) of the long hours he has to put in

(b) any decisions he makes can be implemented quickly
(c) he wants to wear brand name clothes
(d) he wants to meet many people

(4) The MOST important feature that is basic to a specialty contract is

(a) Signature
(b) Execution
(c) Discharge
(d) Breach

(5) Tax deducted by the government from workers’ weekly salaries is called
(a) income tax
(b) corporation tax
(c) capital gains tax
(d) valued added tax

(6) When there is competition, the price of an article will depend on

(a) the relationship between its demand and supply
(b) change in the cost of living
(c) the amount of money circulating in the country
(d) changes in the value of money
(7) Which of the following BEST describes the term “advertising media?

(a) the people whom advertising

(b) the increase in sales as a result of widespread knowledge of the product
(c) market researchers, salesmen, and other personnel
(d) newspapers, periodicals, radio and television.

(8) Which of the following may be operated as a cottage industry?

(a) handicraft
(b) housing development
(c) small-scale retailing
(d) fishing

(9) The employees of Down Town Shoe Store pool their money at the end of every month and buying
groceries at wholesale prices. They are operating a form of
(a) consumer cooperative
(b) conglomerate
(c) private company
(d) partnership

(10) In a free-market economy. The two factors that usually determine price are
(a) demand and supply
(b) needs and wants
(c) government and consumer
(d) government and producer

(11) In trading, the term license means having

(a) a specific number of goods to be sold
(b) permission to bring in goods
(c) money to be paid in foreign goods
(d) a ban on goods coming in to be sold

(12) Which of the following social services are provided by the government
i. health care
ii. education
iii. welfare benefits
iv. housing

(a) i and ii only

(b) ii and iii only
(c) i, ii and iv only
 (d) i, ii, iii, and iv only

(13) Which of the following BEST assist person in satisfying their basic needs
(a) money
(b) recreation
(c) travel
(d) education

(14) Tom, a trader for ten years, plans to expand his furniture plant. What are the factors necessary for
expansion?
i. increased capital investment and personal
ii. improved internal communication
iii. employment of more unskilled workers
iv. greater specialization of labour

(a) i, ii and iii only

(b) i, ii and iv only
(c) i, iii and iv only
(d) i, ii iii and iv only

(15) Which of the following are features of early economies?

i. the use of money as a medium of exchange

ii. direct exchange of goods for goods

iii. specialization in different occupations

iv. direct satisfaction of merits

(a) i, ii and iii only

(b) i, ii and iv only
(c) i, iii and iv only
(d) ii, iii and iv only

(16) Which of the following are the functions of a business unit?

i. production of goods and services
ii. creation of jobs
iii. maximization of sales
iv. education of workers

(a) i, ii and iii only

(b) i, ii and iv only
(c) i, iii and iv only
 (d) ii, iii and iv only

(17) The monthly payments collected by an insurance company from its policyholders are known as?
(a) installments
(b) premiums
(c) deposits
(d) endowments

(18) Which of the following are the reasons for a government imposing taxes?
i. promoting economic growth
ii. redistributing of income
iii. increasing interest rates
iv. improving the balance of payments

(a) i, ii and iv only

(b) i, iii and iv only
(c) ii and iii only
(d) iii and iv only

(19) A major role of a trade union is to encourage

(a) staff to strike whenever they have problems at work
(b) management to pay higher salaries and give longer vacations to staff
(c) advancement of the welfare of its members
(d) staff to become members of the union

(20)John works in a bakery where he makes all the decisions and takes all the profits. What category of
business is he working in?
(a) sole trader
(b) partnership
(c) co-operative
(d) joint stock company

(21) Which of the following are goals of a commercial bank

i. to provide safe way in which customers cane hold their savings

ii. to provide a means of making payments
iii. to make loans to business and private individuals

(a) i, ii and iii only

(b) i, ii and iv only
(c) i, iii and iv only
(d) ii, iii and iv only
(22) A stock exchange renders a useful service to companies and investors by
(a) lending money towards the purchase of their stock
(b) assisting them in exchange their stock for money
(c) accepting bills of exchange received for stocks on credit
(d) providing a market for shares, bonds and other securities

(23) Tom invests his savings by buying shares in a company. From this investments Tom expects to
receive
(a) dividends
(b) profits
(c) interest
(d) revenue

(24) A furniture manufacturer in Dominica wants to import a stock paint to keep in storage. What is the
best form of transportation he can use.
(a) through a pipeline
(b) on an airplane
(c) by truck
(d) by ship

(25) Which of the following are functions of the entrepreneur

i. providing finance needed for production
ii. co-ordinating the factors of production
iii. undertaking risks by anticipating demand
iv. ensuring that workers are unionised.

(a) i and ii only

(b) ii and iv only
(c) i, ii and iii only
(d) i, iii and iv only

(26) Which of the following factors prevents an agreement from being considered a valid contract
(a) misrepresentation
(b) consideration
(c) offer and acceptance
(d) legal purpose

(27) A country can be described as having a planned economy if

(a) most of decisions relation to the economy are made by government
(b) every individual has a role to play in decisions
(c) a few decisions of the economy are made by the government
 (d) various committees within the community are allowed to participate in the planned
economy

(28) A country is experiencing economic growth when the

(a) output of goods and services increases
(b) rate on income tax rises
(c) level of unemployment rises
(d) quantity of imported goods decreases

(29) Which of these are the distinguishing features of capital-intensive production

i. an increase in output
ii. a reduction in the unit costs
iii. a standardized product
iv. an increased labour price

(a) i, ii and iii only

(b) i, ii and iv only
(c) ii, iii and iv only
(d) i, ii, iii and iv only

(30) The main reason for the existence of the public sector are to
i. provide essential services
ii. regulate business activity
iii. compete with the private sector
iv. promote economic growth and development

(a) i, ii and iii only

(b) i, ii and iv only
(c) i, iii and iv only
(d) ii, iii and iv only

(31) In which department of a manufacturing business would you MOST likely find an engineer
(a) production
(b) personnel
(c) marketing
(d) financial

(32) A posted-dated cheque is one which

(a) was written no longer than six months ago

(b) is dated by the businessman to agree with the date of the document requesting
payment
 (c) is dated by the bank dates on the day the cheque is presented for payment
(d) is dated for payment at a future date

(33) Which of the following instruments of payment would a firm use to effect the speediest transfer of
funds from one country to another?

(a) bank draft

(b) cheque
(c) money order
(d) telegraphic transfer

(34) The manager of a factory meets with his employees and invites suggestions and recommendations
in an effort to determine policies and solve problems. The manager’s approach to decision making
could BEST be described as

(a) laissez-faire
(b) democratic
(c) autocratic
(d) tyrannical

(35) Which of the following BEST describe labour as a factor of production?

(a) the people who work for income in a country

(b) the employees below managerial level
(c) the members of a trade union
(d) the population of a country.

(36)

What does point A on the graph represent?

(a) main point

 (b) middle point
(c) average point
(d) optimum point

(37) Country X has a population of 3 million and country Y a population of 2 million. Which of the
following might explain why the labour supply in Y is higher than X?

(a) the death rate in country X may be very low

(b) the birth rate in country Y may be very low
(c) the people in country Y might enjoy higher wages
(d) country X has a large number of people over 65

Items 38-40 refers to the following

(a) Credit Note

(b) Debit Note

(c) Invoice

(d) Statement of Account

(38) When the goods have been undercharged?

(39) When the defective goods are returned by the buyer?

(40) At regular intervals to credit customer’s accounts, giving details of purchase and payments made?

Items 41-43 refers to the following function of management

(a) delegating
(b) directing
(c) motivating
(d) organizing

Which of the above functions refers to

(41) Creating an atmosphere within an organization, which require employees to perform at their
best?

(42) Establishing the objectives of the organization and structuring work schedules to achieve them.
(43) Assigning responsibility and authority for ensuring that tasks are completed?

(44) Which of the following are examples of capital goods?

i. a typing machine in the office

ii. motorcars supplied to office employees
iii. cloth used in a garment factory
iv. A computer used in a internet cafe

(a) i and iv only

(b) ii and iv only
(c) i, iii and iv only
(d) i, ii and iii only

(45) A trader invest $1875.00 in a business and realizes a net profit of $75.00 for the period. What
percentage return on capital is this?

(a) 4%
(b) 6%
(c) 7.5%
(d) 12.5%

(46) Which of the following practices may be MOST appropriate in solving the unemployment
problem in developing countries where the labour force is large?

i. greater production through increased labour

ii. increased mechanisation
iii. increase in vocational training programmes
iv. increase in salaries

(a) i only
(b) i and iii only
(c) ii and iii only
(d) ii and iv only

(47) Which of the following describes capital intensive industry?

 (a) large amounts of capital and very little labour
(b) large amounts of labour and very little capital
(c) all capital and no labour
(d) capital and labour in the same proportion?

(48) Which of the following BEST describes productivity?

(a) what is produced against the cost of labour

(b) G.N.P of one year against G.N.P of another year
(c) Gross profit against costs of sales
(d) What is produced against the factors of production

(49) Which of the following are characteristics of a “perfect market”

i. there are many buyers and sellers

ii. the buyers are aware of the price of the goods
iii. the price of the goods must be fixed by supply or demand
iv. there must be several types of the commodity on sale

(a) i and iv only

(b) ii and iv only
(c) i, ii and iii only
(d) ii, iii and iv only

(50) A “line relationship” in an organization is one which

(a) exists between a senior officer and his subordinate

(b) is not connected by intermediary officers or other senior personnel
(c) exists between the manager and is connected directly to his employees
(d) involves only one superior officer

Items 51-52 refer to the following passage

Mr. Biggs ordered 1000 items from a wholesaler. The costs was $20.00 per item but Mr. Biggs was
allowed a trade discount of 20% and a cash discount of 4% since he paid within a month (30 days).

(51) What did Mr. Biggs actually pay?

 (a) $12,800
(b) $14,200
(c) $15,360
(d) $16,200

(52) If Mr. Biggs was granted only a trade discount the amount would be

(a) $16,000
(b) $17,000
(c) $18,000
(d) $19,000

(53) The term “economies of scale” refers to

(a) advantage of small-scale manufactures

(b) benefits derived from government policies
(c) benefits derived from small size population
(d) advantages, which come to a firm through optimum size

(54) Which of the following is the BEST sequence of steps for a company to follow when launching a
new product?

i. promotion
ii. pricing
iii. planning
iv. selling

(a) i, iii, ii iv
(b) i, ii, iii, iv
(c) iiii, ii, i, iv
(d) iii, i, ii, iv

Items 56-57 refer to the following information.

In a garment factory John is designing, Mary is cutting, Jane is sewing and Anne is ironing.

(55) What aspects of the production process is taking place?

(a) planning
(b) specializing
 (c) assembling
(d) managing

(56) Which of the following is MOST likely to result from this aspect of the production process

(a) a increase in production

(b) an increase in the price of the product
(c) an improvement in the quantity of the product
(d) an increase in the time spent on production

(57) Which of the following features is a disadvantage of nationalization?

(a) profits remain in the country

(b) jobs are provided for more people
(c) losses are meet by the tax payers
(d) essential services are provided at lower prices

(58) Which of the following organizations was establishes by the treaty of Chaguaramas?

(a) CAIC
(b) CARICOM
(c) CDB
(d) CIC

(59) Which of the following are nationalized in most CARICOM territories

i. food production
ii. water
iii. communication
iv. electricity

(a) i and ii only

(b) ii and iii only
(c) i, iii and iv only
(d) ii, iii and iv only
(60) Which of the following will NOT be included as part of a country’s balance of trade?

(a) earnings from the exportation of rum

(b) payments for the importation of tobacco
(c) earnings derived from tourists spending
(d) payments for the purchase of overseas equipment

ANSWERS TO SPECIMEN PAPER 3

1.C 21.A 41.C

2.C 22.D 42.D

3.B 23.A 43.A

4.A 24.D 44.C

5.A 25.C 45.A

6.A 26.A 46.B

7.D 27.A 47.A

8.A 28.A 48.D

9.A 29.A 49.C

10.A 30.B 50.A

11.B 31.A 51.C

12.D 32.D 52.A

13.A 33.D 53.D

14.B 34.B 54.C

15.D 35.A 55.B

16.C 36.D 56.A

17.B 37.D 57.C

18.A 38.B 58.B

19.C 39.A 59.D

20.A 40.D 60.C