Important Questions
Multiple Choice questions-
1. Which one of the following is NOT the objective of the business?
A. Investment
B. Innovation
C. Creation of customers
D. Profit-making
2. Which one of the following is an economic activity in which specialized
knowledge is required?
A. Profession
B. Business
C. Employment
D. None of the above
3. Commerce includes activities relating to trade and _________________ to trade.
A. Auxiliaries
B. Subsidiaries
C. Supporting
D. None of the above
4. Bad debts due to non-payment of debt by the debtor are an example of which
type of business risk?
A. Human
B. Natural
C. Physical
D. Economic
5. Which of the following is an economic cause of business risks?
A. Demand for goods
B. Competition
C. Price
D. All of the above
6. Business risk is not likely to arise due to
A. Power failure
B. Employee dishonesty
C. Changes in government policy
D. Good management
7. The word marketing standing is concerned with __________
A. Position of an enterprise
B. Supply of the product
C. Customers
D. Competitors
8. Why a business should earn a profit?
A. To provide a return to investors
B. To increase the reputation of the business
C. To provide funds for future growth
D. All of the above
9. Which one of the following is NOT an Auxiliary to trade?
A. Mining
B. Warehousing
C. Insurance
D. Transport
10. Which of the following is not a natural cause of business risks?
A. Earthquake
B. Strikes
C. Famine
D. Heavy Rains
11. Which of the following is not concerned with the profession?
A. Manufacturing goods and services
B. Specialised body of knowledge and skill
C. Code of conduct
D. Formal Training
12. Which of the broad categories of industries covers oil refinery and sugar mills?
A. Primary
B. Secondary
C. Tertiary
D. None of the above
13. Which of the following is an instrument of exchange, which was prominent in
the subcontinent?
A. Copper
B. Hundi
C. Gold
D. Silver
14. The occupation in which people work for others and get remunerated in return
is known as:
A. Profession
B. Employment
C. Business
D. None of the above
15. The industries which provide support services to other industries are known as
A. Primary industries
B. Commercial industries
C. Tertiary industries
D. Secondary industries
Very Short:
1. What are the different types of economic activities?
2. Name one economic pursuit, in which expertise is required.
3. Name the industries that furnish support to other fellow industries.
4. Can fishing be contemplated as a primary industry?
5. What is the reward that a businessman earns for bearing risk?
6. Sort the following into a business concern, employment and profession.
• Farmer
• Clerk
• Lawyer
• Doctor
7. Under which type of industry do oil refinery and sugar mills are classified?
Short Questions:
1. What is the difference between Business and Profession?
2. Mention the risks that are involved in the business.
3. What are the objectives of the business?
4. What is Commerce and its significance in modern life?
5. What are the differences between primary and secondary industry?
6. How does a trader get rid of the hindrance of a person?
7. Insurance is known as the tertiary industry. Explain.
Long Questions:
1. Explain in detail the social objectives of the business in today’s context.
2. Can profit be the sole objective of a business? Explain the reasons in favor and against the
profit objective of the business.
Case Study Questions-
1.Read the following passage and answer the questions given below
Saransh and Vishal have their pharmaceutical factory in Jaipur. Their main focus is providing quality
products at reasonable prices. They procure the services of a renowned medicine specialist Mr. Andrews
from Germany who gives them feedback about the quality of their products. Because of increasing competition
with foreignPharmaceutical Companies, their market share is decreasing and they are suffering huge losses.
To ensure their existence in the market, their management is concentrating on full usage of machines, and reducing
wastage, and effective promotion of their products to increase the sales.
(i) ”Mr. Andrews from Germany who gives them feedback about the quality of their ........”Identify the
economic activity Mr. Andrews performs.
(a) Business
(b) Profession
(c) Employment
(d) Partnership
(ii) “Because of increasing competition with foreign Pharmaceutical Companies, their market share
is decreasing...” Name the type of risk related to the above-stated line.
(a) Speculative risk
(b) Foreign risk
(c) Pure risk
(d) All of the above
(iii)Pharmaceutical industry is an example of which of the following types of secondary industries?
(a) Genetic
(b) Analytical
(c) Synthetic
(d) Processing
(iv)Match the different manufacturing industries with their suitable examples.
Nature and Purpose of Business:
(a) 1. (i), 2. (iii), 3. (iv), 4. (ii)
(b) 1. (iii), 2. (i), 3. (iv), 4. (ii)
(c) 1. (iv), 2. (i), 3. (iii), 4. (ii)
(d) 1. (iii), 2. (i), 3. (ii), 4. (iv)
(v) ”To ensure their existence in the market, their management is concentrating...” Which economic objective
is indicated in this statement?
(a) Survival
(b) Profit
(c) Growth
(d) Diversification
2.Read the following passage and answer the questions given below.
Oorza Limited is the manufacturer and trader of electrical goods. The company’s efficient management team,
and effective marketing strategies have enabled it to carve a niche in the industry, allowing it to stand out. But,
over the past few years, its profit margins and customer loyalty have been going down. After analysis of the reasons
for lowering performance, the company executives suggested how CSR can improve profits. They understand that
CSR can promote respect for their company in the marketplace which can result in higher sales, and enhance employee
loyalty. Also, CSR activities focusing on sustainability issues may lower costs and improve efficiency as well. The
company followed the CSR initiatives and is able to regain its market position and increase its goodwill.
(i) Which objective will be fulfilled by the company through CSR?
(a) Economic
(b) Social
(c) Legal
(d) Personal
(ii) Identify which of these is not a role of profit as stated above.
(a) Survival of business
(b) Enhancing goodwill
(c) Increasing efficiency
(d) Enhancing customer loyalty
(iii) Match the following services to trade with the hindrances which they remove.
(a) 1. (iv), 2. (iii), 3. (ii), 4. (i)
(b) 1. (iii), 2. (ii), 3. (iv), 4. (i)
(c) 1. (iii), 2. (iv), 3. (ii), 4. (i)
(d) 1. (iii), 2. (iv), 3. (i), 4. (ii)
(iv) Identify the term which is related to uncertainties about the returns and chances of
losses in the business.
(a) Risk
(b) Market trend
(c) Natural calamities
(d) Market standing
(v)”...may lower costs and improve efficiency as well.” If the company is able to achieve it,
which business objectives are accomplished by the company?
(a) Profit maximization
(b) Social responsibility
(c) Growth and expansion
(d) All of the above
ANSWER KEY
Multiple Choice questions-
1. Investment
2. Profession
3. Auxiliaries
4. Human
5. All of the above
6. Good management
7. Position of an enterprise
8. All of the above
9. Mining
10. Strikes
11. Manufacturing goods and services
12. Secondary
13. Hundi
14. Employment
15. Tertiary industries
Very Short Answer-
1. There are various types of economic activities. Namely,
► Profession
► Business
► Employment
2. Profession is an economic pursuit, in which expertise is required.
3. Tertiary industries are involved in furnishing support to all the primary and secondary industries.
4. Yes.
5. When a businessman bears the risk, the reward that he’ll get is – earning the profit.
6.
► Farmer – Business
► Clerk – Employment
► Lawyer – Profession
► Doctor – Profession
7. Secondary industry
Short Answer-
1.
2. Every aspect has its own risk factors. So does business has too. Namely,
► Business risks arise due to a few uncertain and unexpected situations
► It is a quintessential part of any business
► However, profit is the reward for bearing the risks
3. Objectives of business are mentioned below:
► Innovation: Every business concern must come up with novice ideas, inventions and implement
them; which are helpful for survival and growth.
► Productivity: Productivity is certainly determined by contrasting the value of the output with the
value of the input.
► Earning Profits: Any business entity that is operating must earn a reasonable amount of profits in order
to sustain survival and growth.
4. Commerce is the control of business among economic agents. Usually, it refers to the exchange of commodities,
services or items of value, among companies or entities.
The significance of Commerce are:
► Commerce acts as a catalyst between the manufacturers and customers.
► It establishes employment opportunities.
► It encourages trade in the global level.
► Assists in the growth of developing the industries.
► Helps during exigencies like the natural calamities – earthquake, flood, drought etc.
5.
6.
► Getting rid of hindrance of a person by making the commodities obtainable to the customers
from the manufacturers via trade.
► Transportation removes hindrance of a location by transporting the commodities from the place
of manufacturing to the market place for selling purpose.
► However, insurance removes the hindrance of perils of loss or damage of commodities due to dire,
theft and accidents etc.,
► Advertising removes the hindrance of the data by keeping the customers informed regarding the
commodities and services that are obtainable in the market place.
7. Insurance is the support service to both the primary and secondary industries.
The tertiary industry is the section of the economy that contributes services to its customers, including
a broad array of businesses such as schools, financial institutions and restaurants. It is also called as the
tertiary sector or service industry/sector.
Long Answer-
1. Social Objectives: Business does not exist in a vacuum. It is an integral part of society and it can achieve
its economic objectives only by having deep roots in the society. According to Henry Ford, “The purpose
of business is not only earning profit but also discharging responsibilities towards the society,” A business
must be guided by social objectives since it is a part of the society and gets men, materials, and machines
from the society only.
The decision taken by the business has a great influence on the socio-economic conditions in the country.
Business is not merely an economic entity, it is a social institution as well. Therefore, it is in the interest of
business to pursue certain objectives that are expected by people.
The social objectives of the business are as follows:
1. Better Quality Goods at Fair Prices- The business must provide better quality products as desired
by the customers. Quality means purity as in the case of food items and medicines or safety as in the case
of electrical goods or durability as in the case of TV and refrigerator. Consumers prefer the products which
are of satisfactory quality and are available at reasonable prices.
In fact, consumers have become increasingly conscious of quality and want value for money. Therefore,
an important objective of a business is to produce and supply goods of proper quality to satisfy the expectations
of consumers. The prices charged for the goods should also be reasonable.
2. Fair Trade Practices- Anti-social practices include hoarding, black marketing, and adulteration.
Making false claims in advertisements to mislead and exploit people is an example of unfair trade practice.
Such practices are not only illegal but bring a bad name to the business community. Therefore, businessmen
must avoid such means of making money. The business should follow fair business practices all the time.
3. Generation of Employment- Every business should grow and expand its operations to create new
frontiers of employment for society. The business has tremendous scope for the generation of employment
opportunities. Business must provide employment without any discrimination on account of caste, creed,
religion, or sex. Business is expected to give special consideration to handicapped and weaker sections of
society in the matter of employment. Business firms that pursue this objective can improve their public image.
4. Employment Welfare- Employees are a valuable asset and they make significant contributions towards
the success of the business. It is an important responsibility’ of the business to promote the welfare of the
employees. Businesses must recognize the dignity of labor and treat employees as partners rather than as mere
working hands. Businesses must provide good working conditions, housing, transport, and medical facilities
besides fair wages to their employees.
2. Can profit be the sole objective of a business? – Despite the indispensable role in business, profit cannot be the
all and all of the business. Profit maximization objective is undesirable and social accountability is also the
responsibility of business. According to Urwick, “Earning of profits cannot be the objective of a business any
more than eating is the objective of living.”
A business unit is an economic entity in which various factors of production are used. Capital is one of the factors
of production and the reward for investing capital is given in the form of profit. Therefore, a business should not be
run only to maximize the reward of one factor of production, i.e., the capital. Besides’earning profits, it should also
aim at the satisfaction of customers, the welfare of workers, community service, etc.
The argument in favor of profit as the sole objective: Earning profits is essential for a business due to the
following reasons:
1. It is a sign of healthy business as profit is the chief motivating factor in business.
2. It would provide sufficient return to the investors of capital. Profit is considered to be an index of success in business.
3. It would provide funds for reinvestment in the business.
4. A profit-making concern enjoys goodwill in society.
5. The assets of the business would be used for maximizing profits. Misuse of assets would thus be avoided.
Arguments against profit maximization: Profit maximization should not be the sole motive of any business.
The arguments against profit maximization are as under:
1. Profit maximization ignores the interests of labor, customers, and society.
2. Unfair means such as hoarding, black marketing, or adulteration may be followed to maximize profits.
3. The long-term interest of the business may-be ignored to maximize profits in the short-run.
4. In the present-day environment, a business can’t be effective with the sole objective of profit maximization.
It must also set objectives in areas like customer satisfaction, social responsibility, environmental protection
, research, and development, etc.
The profit-making and social service objectives of the business are not contradictory to each other, they go hand
in hand. According to Henery Ford, “Mere money chasing is not business. The businessman who keeps his customers
satisfied by service will definitely earn good profits.
To conclude earning profits through service to society is the real objective of the business.
Case StudyAnswers-
1.
(i)(b) Profession
Explanation:A profession is an occupation founded upon specialized educational training, the purpose of which is
to supply disinterested objective counsel and service to others, for a direct and definite compensation, wholly apart
from expectation of other business gain. A profession is not a trade and not an industry.
(ii) (a) Speculative risk
Explanation:Speculative risk is a category of risk that, when undertaken, results in an uncertain degree of gain or
loss. In particular, speculative risk is the possibility that an investment will not appreciate in value. Speculative risks
are made as conscious choices and are not just a result of uncontrollable circumstances.
(iii)(d) Processing
Explanation:Secondary Industries which are essentially manufacturing or assembling industries. It receives raw
materials from primary industries and processes them to commodities for the customers. Example: Food manufacturing,
Textile manufacturing etc.
(iv)(b) 1. (iii), 2. (i), 3. (iv), 4. (ii)
Explanation:Analytical industry is the industry which analysis and separates different elements from the same materials.
Synthetic industries are those industries that combine various ingredients and make a new product like Cement, fragrance
and plastics.
The process industries are those industries where the primary production processes are either continuous, or occur on a
batch of materials that is indistinguishable.
Assembling industry: These industries are engaged in bringing together various components or parts of bicycles, television,
radio and these are some examples of assembling industries.
(v)(a) Survival
Explanation:Business survival refers to keeping the business operating for a certain amount of time. Most businesses
initially aim to survive their first year. Profit refers to any money left over after all costs have been taken away from any
revenue made by a business.
2.
(i)(b) Social
Explanation:Corporate Social Responsibility is a management concept whereby companies integrate social and
environmental concerns in their business operations and interactions with their stakeholders.
(ii)(d) Enhancing customer loyalty
Explanation:Customer loyalty is an ongoing positive relationship between a customer and a business. It's what
drives repeat purchases and prompts existing customers to choose your company over a competitor offering similar benefits.
(iii) (c) 1. (iii), 2. (iv), 3. (ii), 4. (i)
Explanation:Traders act as link between consumers and producers. Traders remove hindrance of persons by making
goods available to consumer from producers.
(iv)(a) Risk
Explanation:Business risk is the exposure a company or organization has to factor(s) that will lower its profits or
lead it to fail. Anything that threatens a company's ability to achieve its financial goals is considered a business risk.
There are many factors that can converge to create business risk.
(v)(a) Profit maximization
Explanation:Profit maximisation is a process business firms undergo to ensure the best output and price levels are
achieved in order to maximise its returns. Influential factors such as sale price, production cost and output levels are
adjusted by the firm as a way of realising its profit goals.