The nature of business activity

Which of the following does not characterize business activity?

• Production of goods & services

• Presence of risk

• Sale or exchange of goods and services

• Salary and wages

Answer explanation

Salary and wages are a result of business activity, not a characteristic of it. Business activity is defined by the production, risk, and sale of goods and services.

The possibilities of inadequate profits or even losses due to uncertainties are known as ____________

• Business contingencies

• Business risks

• Business ventures

• None of these

Answer explanation

The term 'business risks' refers to the potential for inadequate profits or losses due to uncertainties in the business environment, making it the correct choice for this question.

Which of the following cannot be classified as an objective of a business?

• Investment

• Productivity

• Innovation

• Profit earning

Answer explanation

Investment is a means to achieve business objectives, not an objective itself. Objectives like productivity, innovation, and profit earning directly relate to the goals a business aims to achieve.

Which of these is the best definition of the ‘economic problem’?

• People do not have enough money.

• There are not enough resources to satisfy people’s wants.

• There are too many factors of production.

Answer explanation

The economic problem refers to the scarcity of resources relative to unlimited wants. Thus, the best definition is that there are not enough resources to satisfy people’s wants, highlighting the core issue of economics.

Which of the following is NOT a factor ofproduction?

• oil reserves

• factory buildings

• skilled labour

• music CDs

Answer explanation

Music CDs are not a factor of production; they are a product created using factors like skilled labor, factory buildings, and raw materials such as oil reserves. The other options directly contribute to the production process.

Division of labour can be defined as:

• Workers specialise on just one task and become better at it.

• Workers become specialist in all jobs.

• All firms only have one worker

• No workers are employed as machines always do all the work.

Answer explanation

Division of labour means that workers focus on a specific task, allowing them to gain expertise and efficiency in that area. This is why the correct answer is 'Workers specialise on just one task and become better at it.'

Which of the following is NOT one of the benefits of business growth?

• Sales will increase.

• Market share will probably rise.

• The business will probably become more secure.

• Management will have less work to do.

Answer explanation

The correct choice is 'Management will have less work to do.' In fact, as a business grows, management often faces increased responsibilities and challenges, making this statement inaccurate.

Which stakeholders in a business are paid a salary by the business and lead and direct it?

• the government

• the workers

• the consumers

• the managers

Answer explanation

The managers are the stakeholders in a business who are paid a salary and are responsible for leading and directing the organization. They make strategic decisions and oversee operations, unlike the government, workers, or consumers.

The main objective of a newly formed business is most likely to be:

• survival

• maximum profit

• rapid growth

• providing a service to the community

Answer explanation

The main objective of a newly formed business is typically survival. In the early stages, businesses focus on staying afloat and establishing themselves in the market before pursuing maximum profit or rapid growth.

What is the person who risks their time, energy and money to start a business called?

• A financier

• An employer

• An innovator

• An entrepreneur

Answer explanation

An entrepreneur is someone who takes the risk of investing their time, energy, and money to start and manage a business, distinguishing them from roles like financiers or employers.