Pob Past Paper

RAYMONDS CXC BLOG
CXC PAST QUESTIONS AND ANSWERS

PRINCIPLES OF BUSINESS
May 17, 2011 at 1:00 pm (P.O.B Lessons)
1) The first question is a compulsory 10 marks question, taken from May

June 2002 past paper (General). Question
1. It involves Economic Systems and Government Control of Business Activity.
(a) List TWO types of economic systems. (2mks)
(b) Explain the differences between the types of economic systems listed in (a)
above. (4mks)
(c) Suggest two ways by which the government of your country can control business
activity. (4mks)
Total 10 marks
Before reading the discussion and guidelines to answering the question, you may
wish to plan an answer that you would give to the question. Remember, there may
be other possible answers than the ones suggested.
DISCUSSION AND GUIDELINES
(a) Any two types of economic systems can be listed, for example, the free
economic system and the planned economic system. This part of the question does
not require any expansion or explanation.
(b) The characteristics or features of the economic systems listed can be used to
show the differences between them.
Conjunctions such as whereas, on the other hand, while and however should be
used to indicate your reference to the opposite feature for the other economic
system. For example, in the free economy, most of the scarce resources are owned
and allocated by private individuals and firms while in the planned economy, scarce
resources are owned and allocated by the government.
The marks allotted for this part of the question would indicate that a minimum of
two differences is required.
(c) Governments control of business activity can come in many forms including:
* Legislation The passing of laws that businesses should abide by.
* Price controls Government stated maximum prices for selected goods and
services
* Nationalisation Direct ownership and control of industries by the Government, for
example, where monopolies are exploiting consumers.
* Increased taxation To reduce monopoly profits.
Registration and other legal requirements for setting up of businesses.
* Employment of inspectors to monitor the affairs of businesses e.g. price inspectors
and sanitary inspectors.
* Setting up of government agencies such as The Bureau of Standards to monitor
the quality of goods produced and imported.
Remember, you are asked to suggest only two ways.
2) Now lets move on to another question. CXC past paper May/June 2003
(General), Question 1.
(a) List TWO functions of a business. (2 marks)
(b) Briefly describe TWO of the following types of business organisations:
(i) Partnership
(ii) Public Limited Company
(iii) Co-operative (4 marks)
(c) State TWO advantages which the Public Limited Company has over the
Partnership type of business. (4 marks)
Total 10 marks.
DISCUSSION AND GUIDELINE ANSWER
(a) Any TWO functions of a business can be listed e.g.to sell goods and services to
satisfy peoples wants and to provide employment for people. Expansion on and
explanation of the functions is not required.
(b) The TWO types of businesses can be described by defining them and /or
outlining their features or characteristics. For e.g. in describing the partnership one
might say that a partnership is formed with two to 20 members who pool their
resources together to run a business with a view to making a profit.
Partnerships are normally required to sign a Deed of Partnership and register with
the Registrar of Companies.
(c) The advantages which the Public Limited Company has over the Partnership type
of business includes the fact that:
* A larger number of part owners, since the Public Limited Company has a minimum
of seven shareholders and no maximum.
* More capital can be raised than in a partnership since an appeal can be made to
the general public through the Stock Exchange.
* The Public Limited Company is a separate entity from the shareholder owners,
therefore, the individual shareholders cannot be sued, the company must be sued.
* The Public Limited Company has a Board of Directors elected by the shareholders.
* These companies may enjoy economies of scale.
* Risk is spread over many shareholders.

Remember, you are asked to state only TWO advantages of the Public Limited
Company over the Partnership.
3) CXC past paper May/June 2003 (General) Question 5.
The following information appeared in a daily newspaper.
Property Services, No. 56 Newpark Saletown
Public Auction Sale
On January 25, 2002 at 10:00 a.m.
I will offer for sale on the date and at the place mentioned above the following
vehicle: One l999 Toyota Mini Bus
Terms of Sale:
Strictly cash on the fall of the hammer.
Vehicle on view on the morning of the sale.
Vehicle will be sold as is where is.
- John Brown, Auctioneer.

Tom Phillip who lived 20 miles away, drove to the address on the date specified with
the intention of purchasing the minibus.
On arrival, he was told by the auctioneer that the minibus was no longer available
and was removed from the items to be auctioned.
Tom Phillip became furious, threatened to sue for breach of contract and demanded
a refund of his traveling expenses
(a) Define the term contract. (2 marks) (b) (i) By attending the public auction
sale, did Tom Phillip accept a firm offer? (1 mark)
(ii) Give ONE reason for your answer in (b)(i) above (2marks)
(c) What do you understand by vehicle will be sold as is where is? (2 marks)
(d) (i) Define the term breach of contract. (2 marks)

(ii) State ONE way in which a court may settle a breach of contract.
(1 mark)
(e) State TWO ways by which a contract can be terminated or discharged (4 marks)
(f) (i) Should John Brown refund Tom Phillips traveling expenses? (1mark)
(ii) Give ONE reason for your answer to (f)(i) above. (2 marks)
(g) (i) Advise Tom Phillip whether he will succeed in court against John Brown. (1
mark)
(ii) Give ONE reason for your advice in (g)(i) above. (2 marks)
Total 20 marks
* (a) You must be careful to define a contract, and not an agreement. A contract is
defined as a legally binding agreement or an agreement that is created with legal
intentions.
If you state that a contract is an agreement without stating any legal aspect, you
may only score half of the marks, since all contracts are agreements, but not all
agreements are contracts.
* (b) (i) The answer to this part of the question is simply NO.
(ii) The vehicle was not offered for sale, therefore, one cannot accept an offer that
was not made. An acceptance MUST be to a firm offer.
* (c) This means that the vehicle is to be sold in the condition that it is presently in
at the place or physical locality that it is at.
(d) (i) Breach of contract means that a party or parties to the contract fail to keep
their part or parts to the contract.
(ii) The court can rule that the party that has breached the contract be forced to
abide by their side of the contract. Or, with the injured parties agreement, the
existing contract can be terminated and a new one can come into existence that
satisfies all parties.
* (e) There are a number of ways in which a contract can be discharged or
terminated. You are asked to state TWO ways. Some ways are suggested below:
* By death of either party to the contract
* By bankruptcy, which must be proven in the legal sense.
* By frustration, which means that something, which was possible at the time the
contract was made, now becomes impossible .
* The agreed time for the contract to elapse has passed.
* By agreement of all concerned parties
* By breach. However, in this case the contract can only be terminated with the
permission of the injured party.
* By law. This is when something that was legal at the time the contract was made
now becomes illegal by law. Therefore, the contract must come to an end.
* (f) (i) No, John Brown should not refund Tom Phillip?s traveling expenses.
(ii) There was no contract and no breach of contract.
Tom Phillip took it upon himself to make the journey to the auction and so the cost
of doing so must fall on his own shoulders
(g) (i) Tom Phillip will NOT succeed in court against John Brown.
(ii) There was no contract and there was no breach of contract. He would win the
case if an existing contract had been breached.
4) CXC past paper May/June 2004 (General) question 4.
Tasty Fruit Ltd. is a manufacturer of several types of exotic tropical fruit juices.
Without consultation, Mr. Albert, the general manager, took a decision that with
immediate effect all breaks would be reduced from 15 minutes to five minutes. He
claimed that the change became necessary to enable the factory to process a larger
amount of fruit juices daily.
(a) What type of leadership style did Mr. Albert appear to be practising? (2 marks)
(b) (i) Name TWO other leadership styles. (2 marks)
(ii) Describe ONE of the leadership styles you named in (b)(i) above. (2 marks)
(c) Identify TWO situations that can result from the action taken by Mr. Albert. (4
marks)
(d) (i) State FIVE qualities of a good manager. (5 marks).
(ii) Give an example to show how lack of one of the qualities you mentioned at (d)(i)
above can affect the operation of the factory. (2 marks)
(e) State THREE responsibilities of management to its employees. (3 marks)
Total 20 marks
(a) Autocratic/Authoritarian leadership style.
(b) (i) Any TWO of the following can be named: laissez-faire/free reign leadership
style, democratic leadership style, charismatic leadership style.
(ii) Laissez-faire individuals are given the broad outlines, but left on their own to
carry out the major aspects of the decisions.
Democratic those who will be affected by the decision are consulted before the
decision is taken, though the leader still reserves the right to make the final
decision.
Charismatic the leader leads by virtue of his/her personality or charisma. Any ONE
of the leadership styles can be described.
(c) The following situations may result: poor management-worker relationship;

industrial action may be taken by workers; resignations by workers; workers may
become discontented; poor self-esteem of workers and reduced productivity of
workers. Any TWO situations may be used.
(d) (i) The qualities of a good manager include: honesty, flexibility, ability to carry
out management functions and responsibilities, show genuine concern for
employees and customers, ability to motivate workers, be adaptable to various
situations, able to work on own initiative, ability to use Management Information
Systems, be aggressive, but not too aggressive, be reliable etc.
(ii) If for example the manager is unable to motivate his employees, they will
become lax and productivity will fall. The business will end up loosing profits.
The negative effects of the lack of any of the qualities you listed in (d)(i) can be
explained.
(e) Responsibilities of managers to employees include: to treat them fairly, to give
them safe, clean environment to work in, to allow them the freedom to join trade
unions, to support their desires to be educated and trained, to pay fair wages and
salaries, to honour leave entitlement, to give adequate compensation for injury on
the job etc. Any THREE responsibilities can be stated.
5) CXC past paper January 2005, (General) question 5.
Recently, the employees of the telephone company have engaged in various
industrial activities in support of their trade union. The trade union was involved in
collective bargaining with the management of the company for a new three-year
industrial agreement for its members. The management retaliated by taking certain
actions against the employees who charged that their rights were being violated.
(a) Give FIVE examples of industrial activities which the employees could have
engaged in without striking. (5 marks)
(b) Identify TWO actions the management could have taken in retaliation against
the industrial activities by the workers. (2 marks)
(c) Explain the term collective bargaining. (2 marks)
(d) List FIVE responsibilities of the management to its employees. (5 marks)

(e) Apart from collective bargaining, outline THREE other functions of a trade
union. (6 marks)
Total 20 marks
(a) Examples of industrial action apart from striking include: sick out, go-slow, sit-in,
overtime ban, work-to-rule and boycotting the companys products etc.
(b) The action that management could have taken includes: lockouts, black-listing,
suspensions, termination of work contracts, deductions of salary etc.
(c) Collective bargaining refers to the trade union function in which the trade union
representing the workers and the employer or employers association discuss issues
relating to employees with a view to settlement which is suitable to both sides.
(d) See answer (e) in previous question.
(e) Other functions of the trade union include: securing better wages and fringe
benefits for workers, securing better work environment, job security, ensuring that
workers get the leave they are entitled to, ensuring that workers are not exploited in
any way, education of members as to the role of trade unions, scholarships to
members and family etc. The THREE points chosen should be expanded on by brief
explanations and /or examples.
6) Past CXC paper May/June 2002, (General) question 7.
Many governments throughout the Caribbean region have been encouraging
persons to become entrepreneurs.
(a) What do you understand by the term entrepreneur? (2 marks)
(b) Suggest THREE reasons why entrepreneurship is being encouraged in your
country. (3 marks)
(c) List THREE characteristics of a successful entrepreneur. (3 marks)

(d) Discuss TWO problems an entrepreneur may encounter. (6 marks)
(e) Outline how an entrepreneur may overcome any ONE of the problems discussed
in (c) above. (2 marks)
(f) List FOUR ways in which governments may assist entrepreneurs. (4 marks)
Total 20 marks
(a) The entrepreneur is a human factor of production that is responsible for
organising the other factors of production and bearing the risks in production.
(b) Among the reasons why entrepreneurship is being encouraged are:
entrepreneurship provides opportunity for self employment, it also reduces
unemployment, it increases the production of goods and services, increases the
variety of goods and services produced, Gross National Product is increased, makes
use of idle skills, and uses up local raw materials. Any THREE reasons may be
suggested.
(c) The characteristics of a successful entrepreneur are many and varied. They
include: ability to work hard, ability to take calculated risks, ability to make effective
decisions, ability to organise, ability to motivate and the ability to think quickly and
clearly in any situation. Again, any THREE characteristics may be listed.
(d) The problems of the entrepreneur include: problems in sourcing capital, lack of
managerial skills, lack of suitable collateral, inability to assess market potential,
inability to evaluate competition, lack of appropriate technology and the inability to
procure suitable machinery and equipment.You should expand on the TWO
problems you choose to discuss by explaining them and giving examples.
(e) You should begin this part of your answer by stating the problem selected and
then outline your suggestion for overcoming the problem. For example, if you select
the problem of the difficulty in sourcing capital, you could suggest that the
entrepreneur explore several sources of capital and that he even combine different
sources of capital, such as his own savings, along with a loan from a bank or credit
union.
(f) The ways in which governments can assist entrepreneurs include: providing them
with soft loans (loans with little or no interest), providing education and training on
enterprise management, giving tax incentives, providing entrepreneurial
consultants to monitor and assist entrepreneurs, providing factory shells for them to
operate their businesses in, and providing markets for their goods and services. Any
FOUR ways can be listed.
7) CXC past paper January 2001,( General), question 2.
For many years, persons from Caribbean territories have migrated to Europe and
North America. Very often these persons only return for holidays or upon retirement.
(a) Explain what is meant by migration. (2 marks).
(b) State THREE negative effects of migration on the labour force in your country.
(3 marks).
(c) Explain TWO positive effects migration may have on your country (4 marks).
(d) Identify ONE measure your country uses to encourage nationals to return.
(1 mark).
Total 10 marks
(a) Migration refers to the permanent movement of people from one area to another
within a country (internal movement), or from one country to another (external
movement) for at least one year. The correct time period of the movement must be
included in your explanation in order to obtain full marks.
(b) The negative effects of internal or external migration or both may be given.
Internally, the negative effects of migration include: shortage of labour in one area
and surplus of labour in another area, overpopulation in one area with resulting
social disorders, e.g., crime, etc. External migration results in negative effects such
as the brain drain, families abandoned and left to fend for themselves by migrants,
lower standard of living, etc. Any three negative effects will be accepted.
(c) Migration can have positive effects on a country.
This is especially true of external migration which reduces the strain on the
government, in cases where the migrants were previously unemployed. Also, many
of these migrants return years later and contribute positively to their countries
through skills learnt in other countries and/or through money they bring back.
The points brought out must be explained accurately in order to score full marks.
(d) Governments may encourage nationals to return by offering attractive and
affordable housing, jobs for those who require them, by allowing them to return with
their personal effects without having to pay duties, or only requiring them to pay
small amounts of duty, by ensuring that their country is as close to crime-free as
possible, etc. Any one measure properly stated will be accepted.
8) CXC January 2000 paper (General) , question 6.
Rapid structural change is being experienced throughout the world, bringing with it
a growing importance of the contribution of small firms/businesses to economic
development in every country. Many industries and firms are now buying and selling
goods via the computer through a system called the Internet.
(a) Define the term small business. (2 marks).
(b) Given the following sectors in the Caribbean, indicate which FOUR are most
likely to be dominated by small businesses:
(i) bauxite production
(ii) retailing
(iii) agriculture
(iv) petroleum refining
(v) finance and banking
(vi) personal services
(vii) fishing. (4 marks).
(c) Discuss FOUR ways through which small businesspersons can use the Internet to
assist them in their business goals. (8 marks).
(d) Suggest THREE reasons why the government of your country should encourage
the growth of small businesses as a way to promote economic development. (6
marks).
Total: 20 marks
(a) There are a number of acceptable definitions of the small firm. You may wish to
use any of the three definitions from Trinidad and Tobago, or any other definition
that you are comfortable with. The Trinidad and Tobago definitions are:
* A firm whose total assets excluding land and buildings does not exceed
TT$500,000.
* According to The Central Statistical Office, a small business is a business that
employs less than 10 workers.
* A firm that employs only one top manager who should manage the business and
perform other functional duties as well.
Generally speaking, a small firm is one with virtually no middle management, i.e.,
there is hardly any supervisors or subordinate managers.
(b) The FOUR sectors most likely to be dominated by small businesses are retailing,
agriculture, personal services and fishing.
(c) The Internet allows small business persons to: communicate with others in the
same field, get information and ideas that are current in their field, advertise their
products, source raw materials and goods at reasonable prices, source
markets/outlets for their goods and services, get access to Internet buying and
selling which boosts sales, etc. The points must be discussed fully to show how the
small business benefits from the Internet in order to gain the full eight marks.
(d) Governments should encourage the growth of small businesses because:
* They provide healthy competition to larger firms and force them to sell at more
reasonable prices.
* Small businesses reduce unemployment through employing people.

* They produce goods and services that people want and this will increase standard
of living.
* They contribute towards GNP/National Income.
* They use up natural and other idle resources.
* They provide linkages to other firms so they can be certain of their sources of raw
materials and/or their outlets.
* New ideas are usually tried out in small firms.
* Small firms often grow into larger successful businesses, these firms are flexible
and can produce what is required for economic development. The THREE reasons
chosen must be developed properly in order to gain the full six marks.
9) CXC (General) paper May/June 1999, questions six and seven.
Let us start with question six:
a) Classify three types of productive activities. (3 mks)
(b) Identify three types of productive activities that are carried out in the Caribbean
and list the country in which each is carried out. (6 mks)
(c) (i) State five factors which determine the location of an industry. (5 mks)
(ii) Discuss three economic and social implications of technological
developement. (6 mks)
Total: 20 mks
(a) There are four types of productive activities: extraction, construction,
manufacturing and service activities. Any three of the four can be used for the
answer.
(b) A number of activities and countries can be used for this answer. Consider the
following:
Agriculture
Fishing
Mining
Construction
Manufacturing
Transport
Tourism
Communication
Jamaica
Barbados
Guyana
Trinidad
Trinidad
St. Lucia
Jamaica
Barbados
You should note that other activities and countries may be considered, however, you
should identify three different productive activities and the countries in which the
activities are observed.
(c) (i) The factors that influence the location of industry include: land, nearness to
markets, nearness to raw materials, nearness to a suitable labour supply, nearness
to power, climate, infrastructure and the government.
(ii) The economic and social implications of technological development include:
increased output, improved standard of living or quality of life, greater speed in
producing, improved quality of production, structural unemploy-ment, physical
impairment and stress and alienation.
Note that the points discussed can be economic or social in nature and may also be
positive or negative. Each implication must be discussed, not listed, for full marks.
10) Now for the second and final question for this lesson.
(a) Differentiate between the terms market and marketing. (2 mks)
(b) List four marketing activities. (4 mks)
(c) Identify four factors influencing the behaviour of consumers in their choice of
local hamburgers over foreign hamburgers. (8 mks)
(d) Discuss three methods a local business may use to promote local hamburgers.(6
mks)
Total: 20 mks
(a) A market refers to a situation in which buyers and sellers are in contact for the
purpose of buying and selling goods and services. Marketing, on the other hand,
refers to everything that is done to get goods and services to the right people at the
right time and priced in the most efficient manner, while making a profit.
(b) Any four marketing activities can be listed.
Included are: market research, advertising, sales promotion, branding, distribution,
sales, pricing; public relations, research and development, marketing mix, etc.
(c) Taste, tradition, quality, price, brand loyalty, income, knowledge of the owners,
convenience, the way the good is advertised, etc.
(d) Methods of promotion that can be used include: advertising, sales promotions,
publicity, public relations and competitive pricing. Each method should be
discussed, e.g., advertising may increase the demand for local hamburgers. The
business will sell more and make more profit.
11) CXC past paper, January 2001, General Proficiency, Question 6.
This question is based on economies and diseconomies of scale and mechanisation.
Company XYZ Ltd. manufactures and markets a range of candles of different shapes
and lengths. Since its incorporation in 1989, sales volume has increased tenfold. In
order to meet demand, the company has had to expand its production capacity and
support systems considerably.
(a) List FOUR internal economies of scale the company might experience. (4 marks)
(b) Identify FOUR diseconomies of scale the company might experience. (4 marks)
Expansion has invariably led to increased mechanisation of various aspects of a
business.
(c) (i) Explain FOUR benefits the company might experience because of
mechanisation. (8 marks)
(ii) Discuss TWO negative effects the introduction of mechanisation might have on
the company. (4 marks)
Total: 20 marks
DISCUSSION AND GUIDELINES ANSWER
(a) You will remember that economies of scale refers to advantage to a firm or
company from going into large-scale production. The economies of scale include:
Technical economies/economies in the use of factors of production.
Managerial economies/economies in administration.
Research and development economies.
Financial economies.
Marketing economies/commercial economies.
Social economies.
Risk-bearing economies etc.
Any FOUR economies or advantage may be listed.

(b) Diseconomies of scale refers to the disadvantages to a firm or company from
large-scale production. The diseconomies include:
Increased costs, e.g. increased marketing and financial costs.
Red tape, which is the elaborate and time-consuming procedures through

which consumers must pass.
Changing techniques of production may cause expensive machinery to lay

idle.
Larger businesses often result in loss of coordination and lack of control, e.g.
communication between management and workers may slow down, wastages
of factors, etc.
Any FOUR diseconomies or disadvantages may be listed.

(c) (i) Recall that mechanisation means partially replacing human or animal muscle
power by a machine, e.g., a tailor buying a sewing machine instead of sewing by
hand. The benefits of mechanisation include:
Output increases because work is speeded up and more can be produced in

less time.
Fewer workers are needed as machines can do the work of a number of

persons.
Costs are saved. These costs that are saved can be transferred to the market
in the form of lower prices to consumers.
The quality of output often increases.
It encourages more skilled workers to enter the workforce, i.e., workers who
can operate specific machinery etc.
Any FOUR benefits can be explained. For full marks, the benefits must be brought
out clearly.
(ii) The negative effects of the introduction of mechanisation on the company might
include:
Unemployment caused by the fact that less labour is required than when
work is done entirely by hand, therefore, the excess labour is normally laid off.
Some machines are of a technical nature and require skilled persons to

operate them. In some cases these skilled persons are hard to find.
When machines are out of service, overhead cost increase.
Machines may be costly to maintain, as in some cases parts may have to be

imported with the use of scarce foreign exchange.
As in (c) (i) above, the negative effects of mechanisation must be properly

discussed in order to gain full marks.
12) CXC past paper, January 2001, General, question 8
The Caribbean island of Green Mountain is having problems with its financial
institutions. Customers of some banks are adding to the problems as many have
withdrawn their deposits from the banks. The government has asked the central
bank to do all it can to prevent a collapse of the commercial banking sector.
(a) State FOUR characteristics of money. (4 marks)
(b) List TWO functions or services offered by commercial banks. (2 marks)
(c) For EACH of the functions mentioned above, explain what benefit customers
obtain from using these functions. (4 marks)
(d) List FOUR features of central banks. (4 marks)
(e) Select THREE of the features of central banks you mentioned above, and explain
how they help to promote smooth operation of the banking system in your
country. (6 marks)
Total marks: 20
(a) You must be careful not to confuse the characteristics of money with the
functions of money.
The characteristics of money are the features of money. Money should be:
Generally acceptable
Durable or long-lasting
Homogeneous
Divisible into large and small units
Scarce or limited in supply
Portable
Any FOUR characteristics may be stated.

(b) The functions or services offered by commercial banks today are many and
varied. They include the following:
Accept deposits from customers for safekeeping and makes these deposits
available to customers when needed.
Lend money to qualified customers at interest.
Allow standing order payments at customers requests.
Make the use of the cheque as a means of payment possible.
Sell travellers cheques and buy and sell foreign currency.
Give financial advice to customers.
Help customers to open letters of credit.
Act as agents in collecting dividends on behalf of their customers.
Act as executors and trustees to the written wills of their customers.
Allow customers use of the banks safety deposit boxes and night safe
facilities etc.
Any TWO functions or services may be listed.

(c) Whichever TWO functions you choose to explain, you must ensure that you
properly explain the benefits of them to the customer. For example:
The function of accepting deposits from customers benefits the customers in that it
allows them to keep their money in a safe place instead of keeping it at home. In
addition, for most deposit accounts, the customer earns interest on his deposits and
this encourages him to save with commercial banks.
Commercial banks lend money to qualified customers by opening loan accounts, by
means of overdrafts and by discounting bills of exchange. Whatever the method,
customers are granted loans and benefit from large sums of money, which they
perhaps could not save for, while they benefit in being able to pay back loans in
small installments. Customers benefit in getting loans for various purposes including
education, vacation and for purchasing cars and other assets.
(d) The features of the central bank includes:
Carrying out governments monetary policies.
Control and monitoring of commercial banks and other financial institutions.
Issuing notes and coins and recalling them from circulation when necessary.
Being banker to commercial banks and to the government.
Negotiating on behalf of the government in international financial

agreements, e.g. with the IMF, etc.
Any FOUR features may be listed.

(e) Again, in explaining the THREE chosen features, you must be careful to show
how they promote smooth operations of the banking system. For example, in
monitoring the commercial banks and other financial institutions, the central bank
ensures that governments monetary policies are carried out and that they are not
promoting the opposite policy which would cause chaos in the financial system and
in the country. You must explain THREE features in like manner.
13) CXC past paper, May/June 2005, general, question 9
The question, reproduced below, surrounds the topic of international trade and
balance of payments:
The following information was taken from the final accounts of Tropicalo, a country
in the Caribee Isles. The figures are quoted in US ($M).
$US
Visible trade
Exports
Imports
Invisible (net)
Exports
Imports
24 000
26 000
20 000
15 000
(a) (i) Differentiate between a countrys terms of trade and its balance of trade. (3
mks)
(ii) Calculate Tropicalos balance of trade using the figures given above. (2 mks)
(b) Calculate Tropicalos current account balance using the figures given above. (3
mks)
You are not required to explain the calculations in (a) (ii) and (b).
(c) Identify two ways in which a country may have a surplus on its current
account. (4 mks)
(d) (i) Explain what is meant by balance of payment. (2 mks)
(ii) Discuss three ways by which a country would be able to finance the deficit in its
balance of payments. (6 mks)
Total 20 marks
(a) (i) A countrys terms of trade refers to the rate at which its goods and services
exchange for the goods and services of another country. It is calculated as:
Index of export prices x 100
Index of import prices
Whereas, a countrys balance of trade is the difference between the countrys

imports and exports of goods only. To properly differentiate between the two terms,
the candidate should use terms such as on the other hand, while, whereas, etc.
(ii) The balance of trade in this case is:
24,000
- 26,000
-2,000US ($M)
(minus 2,000 US($M) )
(b) The current account balance takes into consideration the visible trade balance
and the invisible trade balance. From (a) (ii) we found the visible trade balance
(balance of trade) to be minus 2,000 US ($M). The invisible trade balance is plus
5,000 US ($M). This is the difference between invisible exports and invisible imports.
The current account balance is plus 3,000 US ($M).
(c) Exporting more goods and services than it imports
Import less than it exports
If the positive visible balance exceeds the negative invisible balance
(d) (i) A countrys balance of payments is its annual record of trading with other
countries in terms of income from exports and expenditure for imports.
(ii) To finance a deficit is different from correcting the deficit. To finance the deficit,
the country must find ways to make the balance of payments balance by covering
the deficit. This includes:
Importing the deficit amount on credit
Loans from other countries
Loans from international financial institutions e.g., International Monetary

Fund and the World Bank.
Debit the foreign reserves account
Grants from other countries
Sell gold reserves, etc.
Any short-term solution which results in the amount of money to cover the deficit, if
properly discussed, will earn two marks each.
14) January 2006, General past paper, question number eight
Government has a responsibility to protect consumers as well as to provide a
climate for businesses to survive.
(a) State TWO reasons why consumers need protection. (4 mks)
(b) Identify THREE ways in which the government of your country can ensure that
consumers safety and well-being are protected. (6 mks)
(c) Discuss THREE ways in which the government may help businesses to succeed.
(6 mks)
(d) State TWO ways by which the government can ensure that businesses protect
the environment. (4 mks)
Total : 20 marks
Now, for my discussion and guideline answers. I hope they will help you in getting a
fair understanding of the question.
Discussion and guideline answers.
(a) There are many reasons why consumers need to be protected. These reasons
include the fact that they receive:
Short change, short weights and short measurements
Unsafe and poor quality products
Misleading price reductions and false sales
False claims about products
Insufficient goods for their money
Unfair treatment when faulty goods are returned, etc.
In addition, consumers are not always able to make a good assessment of the goods
they buy. They cannot protect themselves and therefore need to be protected.
Candidates should state clearly any TWO reasons for consumer protection.
(b) Some of the ways in which the government can ensure that consumers? safety
and well-being are protected are:
By setting up consumer protection agencies such the Ombudsman, the

Bureau of Standards and the Consumer Affairs Commission.
By educating and advising consumers through pamphlets, radio and TV

programmes.
Through the introduction of penalties for producers and sellers who show lack
of regard for consumers.
By passing legislation/laws that ensure consumer protection, e.g., processed

food acts, Public Health Act, The Standard Act and The Food and Drugs Act.
By the control and supervision of prices.
By enforcing fair trading practices.
By supervising hire purchase and credit control, etc.
(c) Government can help businesses to succeed by:
Giving them loans with little or no interest to be paid back.
Allowing them subsidies and grants which result in the lowering of costs of
production.
Providing business educational opportunities free or at very low cost.
Allowing the importation of essential raw materials duty free.
Providing free zone areas for the location of businesses.
Reducing corporation tax which reduces overall costs and boosts profits.
Assisting businesses in finding markets and in the marketing of their

products, etc.
For this part of the question, the THREE points selected must be properly discussed
to score full marks.
(d) The protection of the environment has become increasingly important. The
government can ensure that businesses protect the environment by:
Introducing a pollution tax.
Taking over the production where businesses fail to protect the environment.
Passing legislation or laws against practices that damage the environment.
Having inspectors go around and ensure that practices are not damaging to
the environment.
Giving warnings which if not adhered to, result in the business being taken to
court or some other action.
Encouraging the location of businesses in special areas where their

production practices will not harm the environment, etc.
1. The basic needs of man are:

a) land, money, car
b) food, money, land
c) food, clothing, shelter

d) food, shelter, money
2. The most important principle upon which barter trade depends is known as:
a) insurable interest
b) indemnity principle
c) utmost good faith
d) double coincidence of wants
3. Mary lives in a country in which the state makes all the decisions about economic
activities. That country has adopted the:
a) planned economic system
b) mixed economic system
c) free economic system
d) Capitalist economic system
4. The most important role of a business in any community is to:
a) pollute the environment
b) earn foreign exchange
c) provide revenue for the government
d) provide goods and services to satisfy the wants of people
5. Consumers are those individuals who:
a) buy their goods from a consumers cooperative society
b) consume all the goods produced by manufacturers
c) provide goods and services for our satisfaction
d) utilise the goods and services provided to satisfy wants
6. The public sector comprises:
a) a body of public corporations, public companies and municipal undertakings
b) a combination of public companies and public corporations
c) an association of all public companies within the country
d) central and local government organisations and state corporations
7. Which of the following business organisations belong to the private sector?

a) municipal authority
b) nationalised industries
c) public corporations
d) public limited companies
8. In a partnership, an investor is a partner.
In a large company, an investor is a:
a) sole trader
b) manager
c) director
d) shareholder
9. What is the maximum number of share holders a private limited company can
have?
a) two
b) five
c) fifty
d) eighty
10. The relationship between the highest level of management down to the various
departments is known as:
a) flow
b) rank
c) staff
d) line
11. If X offers Y a book for $5, but Y says that he can only pay $4.50 for it, this is an
example of:
a) an offer
b) a counter offer
c) an invitation to treat
d) consideration
12. An item displayed in a store with a price tag is an example of:
a) an offer
b) a counter offer
c) an invitation to treat
d) consideration
13. John buys goods to the value of $150, but is allowed 20% trade discount on the
invoice, plus 5% cash discount. He will therefore pay:
a) $112.50
b) $114.00
c) $126.00
d) $142.50
14. If you received less goods than was ordered and paid for, your supplier would
send you:
a) a credit note
b) an invoice
c) a debit note
d) a bill of exchange
15. When a cheque is crossed, it means that:
a) something is wrong with it
b) it is cancelled and not good anymore
c) the money cannot be withdrawn immediately, but has to be lodged to an account
d) it can be taken to a bank and the money stated withdrawn at once
16. Which of the following is the most important characteristic of money?
a) acceptability
b) durability
c) limited supply
d) portability
17. The only bank which can claim to be a lender of last resort is the:
a) merchant bank
b) central bank
c) commercial bank
d) trustee savings bank
18. The document that has details of the source of goods, the raw materials from
which the goods are made, is called the:
a) shipping note
b) certificate of origin
c) bill of lading
d) bill of exchange
19. Assurance policies specifically refer to:
a) personal life coverage
b) coverage of risks involving cargo transport
c) loss of goods due to hurricane
d) loss of sale of goods
20. A man insured his property for $80,000, but its true value was $100,000. A fire
caused $10,000 worth of damage. The insurance will pay out:
a) $10,000
b) $8,000
c) $5,000
d) $6,500
The answers to multiple choice questions:
1.c
5.d
9.c
2.d
6.d
10.d
3.a
7.d
11.b
4.d
8.d
12.c
13.b
17.b
14.a
18.b
15.c
19.a
16.a
20.b.
1. Which of the following is not a factor of production?

(a) food
(b) land
(c) labour
(d) capital
2. Which one of the following will have the effect of reducing the supply of labour?
(a) a high birth rate
(b) a large population
(c) a high proportion of old people
(d) a low proportion of very young people
3. The labour force of a country is:
(a) all people below retirement age
(b) all persons who are employed or are available for work
(c) the total population
(d) all persons over the school leaving age
4. The education of the labour force is a major determinant of which of the
following?
(a) the supply of labour
(b) the labour force as a whole
(c) the mobilisation of labour
(d) the efficiency of labour
5. Which of the following does not have a direct effect on the efficiency of labour?
(a) the quality of education of the workers
(b) the wages paid to workers
(c) a countrys cultural practices
(d) working conditions
6. Labour is classified as:

(a) size, age, mobility
(b) size and mobility
(c) skilled, semi-skilled and unskilled
(d) skilled and semi-skilled
7. The rewards to the factors of production are:
(a) salaries, wages, profit and interest
(b) wages, rent, profit and interest
(c) rent, capital and profit
(d) profit, capital, rent, wages
8. Occupational mobility of labour refers to the:
(a) ease with which workers are transported to their jobs
(b) frequency with which workers move from one job to another
(c) degree of efficiency with which workers perform their tasks.
(d) willingness and stability of workers to acquire new skills.
9. Each year, some high school graduates of the Caribbean rural communities move
to the towns and cities to live and work. The movement of such persons could be
described as:
(a) expected migration
(b) external migration
(c) cross-country migration
(d) internal migration
10. People who migrated from the West Indies in the early 1950s went to all of the
following countries on a large scale except:
(a) Great Britain
(b) Japan
(c) Canada
(d) United States of America
11. Unemployment that results from a slump in the economy can be described as:
(a) frictional unemployment
(b) seasonal unemployment
(c) residual unemployment
(d) cyclical unemployment
12. The 4-H Club and the Lions Club are examples of`
(a) multinational companies
(b) community self-help organisations
(c) monopolies
(d) voluntary chain stores
13. Natural resources may also be referred to as:
(a) capital
(b) labour
(c) land
(d) Entrepreneurial skills
14. Which of the following is the best example of capital as a factor of production?
(a) machinery
(b) shares
(c) debentures
(d) money
15. Circulating capital is:
(a) money and inventory used to finance the day to day running of a business.
(b) Capital that changes from one form to another and back to its original form
(c) The money paid to workers for maintaining day to day production.
(d) Any man-made item that assists in production.
16. Which of the following is a fixed asset?
(a) A bicycle for private use
(b) A washing machine for resale
(c) A motor car for family use

(d) A truck for delivery of goods
17. The reward to capital is:
(a) profit
(b) interest and dividends
(c) rent
(d) wages
18. The term human resources refers to
(a) materials and goods made by human beings
(b) raw materials used in the manufacture of goods
(c) persons available for productive and professional services
(d) capital invested by shareholders in a company.
19. The Human Resources are:
(a) students in tertiary institutions
(b) labour and entrepreneurial skills
(c) monies used by humans in production
(d) resources produced by humans.
20. A person responsible for bringing together and organising the factors of
production is the
(a) entrepreneur
(b) trade-unionist
(c) manager
(d) financier
End of Test
1. The advantages of a sole trader over a partnership form of business include
which of the following?
i) Profits are shared.

ii) Risks are greater.
iii) The sole trader is his or her own boss.
iv) The partners can contribute capital to expand the business.
A) (i) and (ii) only
B) (i) and (iii) only
C) (iii) only
D) (i) and (iv) only
2. In a partnership, an investor is a partner. In a large company, an investor is a:
A) sole trader.
B) manager.
C) director.
D) shareholder.
3. A sleeping partner is otherwise known as a:
A) careless partner.
B) active partner.
C) dormant partner.
D) general partner.
4. Which of the following are disadvantages of a private limited company?
i) It has an independent legal status.
ii) The firm cannot raise capital on the stock exchange.
iii) The firm cannot have more than 50 shareholders.
iv) The firm has too many taxes to pay.
A) (i) and (ii) only
B) (ii) and (iii) only
C) (i) and (iv) only
D) (iii) and (iv) only
5. To comply with legal requirements to register a private limited company, the firm
must provide at least two documents. These are:
A) a prospectus and a certificate of origin.
B) a memorandum of association and articles of association.
C) a certificate of trading and tax file number.
D) a share certificate and a debenture certificate.
6. Those partners who, when their business goes bankrupt, stand to lose all their
personal possessions as well as their investments are known as:
A) unlimited liability partners.
B) limited liability partners.
C) ordinary partners.
D) sleeping partners.
7. The form of business where shares are allowed to be sold only to owners of the
business or to their relatives or employees is known as:
A) partnership.
B) private limited company.
C) public limited company.
D) multinational company.
8. The main aim of a co-operative retail society is to:
A) make a profit from its member-customers.
B) buy and sell goods retail.
C) buy goods wholesale and sell them cheaply to its members.
D) organise and plan the running of the society.
9. Company A owns all these businesses: soft drink company, bakery, shipping
company and motor-car assembly company. Company A is an example of a:
A) conglomerate.
B) multinational.
C) private limited company.

D) partnership.
10. If one company, A, has or owns the majority shares in another company, B, then
company A can best be regarded as being a:
A) holding company.
B) partnership.
C) co-operative.
D) joint-stock company.
Now you can have a look at the answers to see how well you have done.
1. C
3. C
5. B
7. B
9. A
Related
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2. D
4. B
6. A
8. C
10. A
Answers to Past CXC papers 1In "P.O.B Lessons"

Past CXC Questions part 1In "P.O.B Lessons"
Exams 1In "1"
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The Nature of Business

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Terms and Concepts related to Business

Instruments of Exchange
Reasons Businesses are Established
Forms of Business Organizations
Economic Systems
Stakeholders and their Role in Business Activities
Functions of a Business
Role of a Business within a Community
Quiz
Internal Organizational Environment

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Functional Areas of Business

Functions of Management
Responsibilities of Management
Organizational Charts
Types of Organizational Charts
Characteristics of a Good Leader
Leadership Styles
Sources of Conflict within an Organization
Methods used to gain an upper hand during Periods of Conflict
Strategies used to resolve Conflicts
Guidelines: Good Management & Staff Relations
Role of Teamwork
Strategies for Effective Communication
Management Information System
Personal Needs Satisfied Through Employment
Quiz
Establishing a Business
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Role of an Entrepreneur
Reasons Persons Establish their own Businesses
Steps in Establishing a Business
Functional Areas in the Operation of Businesses
Sources of Research in Establishing a Business
Process between Planning and the Operation of a Business
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Regulatory Practices Instituted by Governments

Advantages & Disadvantages:Types of Businesses
Sources of Capital in Setting up a Business
Features of a Business Plan
Purpose of a Feasibility Study
Ethical and Legal Issues
Consequences of Unethical and Illegal Practices
Quiz
The Legal Aspects of Business

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Concept of a Contract
Characteristics of a Simple Contract
Differences between a Simple & a Speciality Contract
Difference between an Offer & an Invitation to Treat
Conditions under which Offer and Acceptance are Communicated
Ways in which Contracts may be Terminated
Validity of Contracts
Why Documentation is Necessary in Business Transactions
Business Documents for Various Purposes
Information on Transport Documents
Instruments of Payment
Insurance and Assurance
Insurance Principles
Types of Insurance Policies
Importance of Insurance to Businesses
Quiz
Production
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Factors of Production
Industries Developed from Natural Resources in the Caribbean
Difference between Production and Productivity
Effects of Migration
Role of the Entrepreneur : Decision Making Process
Role of Capital in Production
Levels of Production
Types of Production
Cottage Industry
Linkgae Industries
Factors that determine Business Location
Functions of a Small Business
Effects of Growth on a Business
Economical and Social Implications of Technological Development
Quiz
Marketing
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Difference between Market and Marketing

Marketing Activities
The Marketing Mix
Market Research
Factors that Influence Consumer Behaviour
Types of Market Structures
How Price is Determined
Packaging and Presentation of Goods
Copyright, Patent & Trademark
Methods of Promoting Sales
Techniques of Selling
Terms of Sale
Consumer Organizations
Links in the Distribution Chain
Methods of Retailing
Forms of Transportation
Problems of Distribution
Quiz
Business Finance
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Role of Commercial Banks

Functions of the Central Bank
Relationship between the Central Bank and Commercial Banks
Strategies to Manage Personal Income
Sources of Short & Long Term Financing
Savings and Investments
Stock Market
Quiz
Role of Government in an Economy

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Responsibilities of a Government in an Economy

Ways in which Businesses Protect the Environment
Ways By which Government Regulates Business Activities
Purpose of Taxation
Direct and Indirect Taxes
Regressive, Progressive and Proportional taxation
Government Assistance Offered to Businesses
Social Services Provided by Governments
Quiz
Social Accounting and Global Trade

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Factors that determine a Countrys Standard of Living

National Income
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Economic Growth and Development

International Trade
Balance of Trade & Balance of Payment
Balance of Payment Problems
Quiz
Regional and Global Business Environment

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Economic Institutions and Systems

Economic and Social Problems in the Caribbean
Possible solutions to Economic and Social Problems
Quiz
Quiz
Question 1
Explain two ways in which the barter system limited trade in early economies.
Answer
A common measure of value did not exist. It was difficult to ascertain the value of goods exchanged.
It therefore would hinder trade as sometimes persons would not want to feel cheated.
A double coincidence of wants must exist for trade to take place. An individual who wishes to trade
must have what other persons want to trade his goods. If this does not exist then trade cannot take
place.
Question 2
State one advantage and one disadvantage of specialization.
Answer
An advantage of specialization is that it increases output.
A disadvantage of specialization is that it discourages quality work because of monotony.
Question 3
Show how two functions of money facilitate trade.
Answer
Money is a common measure of value. Persons can therefore determine the value of commodities
and know how much to accept in exchange for goods and services.
Money is a medium of exchange and therefore accepted by everyone. Persons will not have
difficulties to buy or sell goods and services.
Question 4
Starting a business is a lot of hard work and very costly. Why would an individual want to start a
business?
Answer
An individual may wish to gain financial independence. A successful business can earn high levels of
profits.
Using the skills and knowledge acquired to operate a profitable business.
Question 5
State the form of business organization that you believe is most advantageous to form. Give two
reasons why.
Answer
Choose one of the following:
Sole trader Decisions are made quickly and there is little legal requirement to start the business.
Partnership more capital can be raised, specialization of functions is more efficient
Limited liability Company shareholders are not liable for the companys debts beyond their level of
investment, continuity of existence is assured.
Question 6
State two differences between the Free Market and the Planned economic systems.
Answer
In the free market economy the consumer is king i.e. the consumer determines what goods and
services are to be produced based on their demand. In a planned economy the government makes
decision concerning the distribution of goods and service.
Competition in a free market economy leads to efficiency and innovation.
However, in a planned economy, the lack of competition reduces innovation and the motivation to
produce quality output.
Question 7
Explain the roles of two stakeholders in business activities.
Answer
The role of the government is to monitor and regulate business activity to ensure that the consumer
is treated fairly.
Employees must work efficiently to create quality goods and services.
Employees must adhere to the rules and relations of the company.
Question 8
Identify a business activity within your community and discuss two contributions of this business to
your community.
Answer
Sallys bakery produces good quality bread in various sizes to meet the requirements of customers.
The prices are also very affordable. The bakery makes it convenient for community members as they
do not have to travel a far distance to obtain this product.
Sallys bakery also employs persons from the community. The bakery is very popular, and so workers
are paid an adequate salary to support their family.
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Home / POB / Internal Organizational Environment / Quiz

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Economic Systems
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Types of Production
Cottage Industry
Linkgae Industries
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Marketing
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The Marketing Mix
Market Research
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Terms of Sale
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Business Finance
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Stock Market
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National Income
International Trade
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NATURE OF A BUSINESS Quiz

Question 1
Explain two important activities carried out by one functional area of a business.
Answer
The marketing department promotes the firms products to encourage sales. Consumers must be
made aware of what is being offered and encouraged to buy. They also conduct market research to
identify the needs and wants of consumers. Companies depend on consumers support for their
success, and so ascertaining consumers taste is very important.
Question 2
Outline two functions of management and say how each is important to the efficient operation of a
business.
Answer
Controlling involves the continuous assessment of the work done by subordinates. Poor quality work
is a reflection of the company and so managers must ensure that quality work is done.
Planning involves outlining all future activities that are required to achieve the organizations
objectives. Planning activities involve all the programmes and policies that will guide the firms path
to success.
Question 3
Give two examples to show how managers can fulfill their responsibilities to one group of business
stakeholders.
Answer
Managers can full their responsibility to customers by proving quality goods and services. A system
that ensures standards should be implemented. Prices must also be affordable. All measures must be
taken to operate as efficiently as possible so that production cost are kept low resulting in affordable
selling prices.
Question 4
(a) Draw an organizational chart of your school or business organization.
(b) Identify the type of organizational chart drawn
(c) Identify the span of control of one person in authority on the chart
(d) Identify two persons at the same level of authority.
Answer
(a)
(b) Line organizational chart
(c) The span of control of Vice principal is the head of departments for arts and science.
(d) Two persons at the same level of authority are the heads of department for arts and science.
Question 5
Show how two important characteristics of a good leader can improve the efficiency of a group.
Answer
Good communication skills will foster good working relationships between workers and managers.
Workers are more effective in a comfortable environment. This also encourages feedback from
workers.
A devoted and committed manager will lead by example. His commitment to the tasks that are
required to achieve the organizations objectives will inspire subordinates to work hard.
Question 6
Give two differences between the autocratic and the democratic leadership styles.
Answer
An autocratic manager makes all decisions concerning the tasks to be performed by subordinates. All
directives handed down by him must be closely followed. He makes frequent checks on output of
workers. The democratic leader allows the participation of others in decision making. He allows
workers some latitude to work on their own initiative and periodically checks output from workers.
Question 7
Outline the steps for handling grievances in the organization.
Answer
The worker lodges a complaint with his or her immediate supervisor. If worker feels that the
complaint was not adequately dealt with then he may discuss the matter with the head of
department. If the worker is still not satisfied with how the matter is being dealt with, he along with
the union representative may discuss the matter with management. It may need to go a further stage
where there is mediation from Ministry of Labour or any independent body. The final stage is when
the matter has to be taken to court.
Question 8
Explain the purpose of the collective bargaining process.

Answer
The purpose of collective bargaining is a means to reach an amicable agreement between
management and workers. Workers bargain collectively through their union representative with
management until an agreement is reached.
Question 9
Discuss two ways in which teamwork can improve the efficiency of an organization.
Answer
Teamwork gives workers the opportunity to make collaborative decisions and support each other to
accomplish tasks more effectively.
Teamwork allows for specialization in various parts of a task based on the skill of each team member.
Specialization increases output.
Question 10
Discuss two benefits that a business will derive from using Management Information Systems.
Answer
It reduces labour costs as the computer compiles and analyses all the data. This increases the
efficiency of employees and reduces production costs. It provides timely information that helps the
business. This allows for better decision making as information is available when needed.
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PRODUCTION Quiz
Question 1
Discuss the importance of one natural resource to the survival, economic growth and development of
your Caribbean country.
Answer
Bauxite is a natural resource found in Guyana and Jamaica. The bauxite industry provides
employment for thousands of workers. It is also a main export product and foreign exchange earner.
The growth of this industry will impact on the growth and development of these countries.
Question 2
Explain the importance of productivity to a business organization and state two ways by which
productivity can be achieved.
Answer
Productivity is measured by the output of each worker. If workers are very productive, output will
rise and unit cost of production will decline. This will result in higher profit margins for a business.
Workers can be made more productive by training to improve skill and by the introduction of
machinery and equipment to increase output.
Question 3
State one positive and one negative effect of external migration.
Answer
External migration deprives Caribbean countries of nationals who are professionals and those who
posses a high level of skill. However, an advantage of external migration is that foreign exchange is
remitted to Caribbean countries.
Question 4
Discuss the importance of two factors of production to the production process.
Answer
Capital is very important to the production process. Machinery, tools and equipment are needed for
production as they increase the efficiency of workers.
Labour as a factor of production is also important. Labour combines raw materials and machinery to
create goods and services. Methods applied to increase the productivity of labour will increase
output.
Question 5
Differentiate between subsistence and surplus levels of production and explain the importance of
surplus level production to an economy.
Answer
Subsistence level of production refers to a level of output that is just enough to ensure survival.
However, surplus production refers to a production level that is greater than what is demanded
locally.
Surplus production is important as it allows countries to export and earn foreign exchange.
Foreign exchange earned can be used to import goods and services that are not produced locally.
Question 6
Give two examples of items made by cottage industries in your country and explain how these
activities contribute to your economys growth.
Answer
Handcraft jewellery and T-shirt are popular cottage industry products in my country. Both these
items are sold locally in many popular boutiques and therefore provide income for producers and
retailers. They are also sold to visiting tourists and thus contribute to foreign exchange earnings.
Output from cottage industries contributes to the GDP of the economy and thus economic growth as
these industries expand to meet rising demand.
Question 7
State three factors to be considered when identifying a suitable location to set up a new business and
give a reason for each.
Answer
Proximity to ones customers A new business should be located where it will be seen by its most
likely customers.
Available supply of labour- A new business will require the best quality workers to ensure that it
makes a positive impact on the market.
Adequate infrastructure- A new business will need to be located in an area that is supported by
infrastructure such as good roads, communication and transportation services so that customers and
suppliers will have easy access.
Question 8
Differentiate between a forward and a backward linkage and give one example of each in your
country.
Answer
A forward linkage refers to the industries that are linked in such a way so that the finished product of
one becomes the raw material of another. For example, lumber from saw mills are used in the
construction of houses and furniture.
A backward linkage refers to industries that are established to meet the needs of other already
established industries. For example, hotels will backward link to the entertainment and
transportation industries.
Question 9
Explain the importance of mechanization for the growth of small businesses in the Caribbean.
Answer
Mechanization is the use of mainly machinery in a production process. Machinery increases output.
This will mean lower cost of production and therefore higher profits. Small businesses owners should
endeavour to mechanize in order to increase output and be more competitive with large and medium
sized business.
Question 10
What are the social and economic implications of mechanization and automation on Caribbean
countries?
Answer
Mechanization increases the productivity of workers. High productivity as a result of machinery may
cause job losses as fewer workers will be needed to produce the levels of output required.
Automation also results in job losses as this process involves little human intervention.
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MARKEGTING Quiz
Question 1
Outline three marketing activities.
Answer
Advertising
Advertising is used to make customers aware of goods and services being offered by suppliers. It
usually involves messages that persuade consumers to buy.
Branding
Brands are created to differentiate a product from its competitors. Branded products are created to
develop a loyal following.
Distribution
Distribution channels move goods from producers to consumers. A business can either sell directly
to consumers or sell goods and services through middlemen such as retailers and wholesalers.
Question 2
Explain what is meant by the marketing mix.
Answer
The marketing mix refers to four categories of marketing activities. These categories are:
-product which includes the product design, package and brand
-place which refers to the distribution channels
-promotion which includes advertising and sales promotional method
-pricing includes various methods used to suit the target market e.g. penetration pricing.
Question 3
Outline two factors that influence consumer behaviour.
Answer
Consumers purchase products to a large extent based on their prices. Consumers seek value for
money and therefore will purchase a substitute for a product if its price increases.
Consumers taste and preferences will also determine what products they buy. Taste and preferences
will depend on culture, religion and changes in fashion.
Question 4
Differentiate between monopoly and monopolistic competition.
Answer
A market that is controlled by one supplier is a monopoly. The monopolist produces a unique
product for which there are no close substitutes. Monopolistic competition differs from monopoly as
it involves several suppliers in a market of a similar product, but each supplier sells a particular
brand. Therefore, although competition exists each supplier has a monopoly over his own brand.
Question 5
(a) Define the term demand.
(b) Define the term supply.
(c) Explain the role these play in determining price.
Answer
(a) The demand for a particular product is the amount that consumers are willing and able to buy at
a given price.
(b) The supply of a particular commodity is the amount that firms are willing and able to supply at a
given price.
(c) In a market economy the demand and supply of particular commodities determine
their prices.
Consumer will demand increasing amounts at lower prices and decreasing amounts at higher prices.
However, producers are willing to sell more at higher prices and less at lower market prices. The
market price at which both buyers and sellers wish to trade at is the market equilibrium price.
Question 6
Differentiate between copyright, patent and trade mark.
Answer
Copyright is a one form of intellectual property right that protects creators expressions such as
music, painting, movie, photograph, writings etc.
Patent protects innovation by excluding others from making and selling an invention for a number of
years.
Trademark legally protects brand names by giving the seller exclusive rights to this name.
Question 7
Outline three methods of sale promotion.
Answer
Loss Leader: This form of sale promotion is used to attract customer to a location that offers a
product for sale at an extremely low cost. The business will lose profits on this loss-leader but it is
expected that this will be made up on the high sales from other products
Bargain packs offer consumers free products or discounted products if a particular item is
purchased.
Coupons allow discounts to customers on particular items when presented at a particular business
location.
Question 8
Show how two selling techniques can be used to increase sales.
Answer
Good customer relations will encourage customers to purchase a companys goods and services and
also make recommendations to other customers. This involves being very helpful, efficient and
polite when dealing with customers.
Offering after sales services will encourage customers to buy and they will not incur this extra cost
after buying the product. These services include: delivery, installation and warranty.
Question 9
(a) Outline two ways in which consumers may be exploited.
(b) Discuss how consumers might seek redress for each way mentioned above.
Answer
(a)Consumers are exploited when they are sold poor quality goods and services. They are also
exploited when they are not given the correct weight or measure for products as stipulated on the
package or what was asked for.
(b)To seek redress consumers may contact the offending firm concerning the complaint and require
compensation. The Fair Trading Commission may be contacted if the offending firm does not
compensate the consumer. Radio talk shows have also been very effective to obtain redress from
offending firms for consumers.
Question 10
Discuss the importance of transportation to the distribution of goods from manufacturer through
middle men to consumers.
Answer
Transportation is integral to distribution. Transportation must efficiently move goods from
manufacturers through middlemen to consumers. Goods may be transported by road rail, sea or air.
The choice of transportation is determined by the type of product, for example heavy and bulky
products are transported by rail or sea. Perishable products are transported by sea or by road in a
speedy manner.
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Quiz
Question 1
Outline three marketing activities.
Answer
Advertising
Advertising is used to make customers aware of goods and services being offered by suppliers. It
usually involves messages that persuade consumers to buy.
Branding
Brands are created to differentiate a product from its competitors. Branded products are created to
develop a loyal following.
Distribution
Distribution channels move goods from producers to consumers. A business can either sell directly
to consumers or sell goods and services through middlemen such as retailers and wholesalers.
Question 2
Explain what is meant by the marketing mix.
Answer
The marketing mix refers to four categories of marketing activities. These categories are:
-product which includes the product design, package and brand
-place which refers to the distribution channels
-promotion which includes advertising and sales promotional method
-pricing includes various methods used to suit the target market e.g. penetration pricing.
Question 3
Outline two factors that influence consumer behaviour.
Answer
Consumers purchase products to a large extent based on their prices. Consumers seek value for
money and therefore will purchase a substitute for a product if its price increases.
Consumers taste and preferences will also determine what products they buy. Taste and preferences
will depend on culture, religion and changes in fashion.
Question 4
Differentiate between monopoly and monopolistic competition.
Answer
A market that is controlled by one supplier is a monopoly. The monopolist produces a unique
product for which there are no close substitutes. Monopolistic competition differs from monopoly as
it involves several suppliers in a market of a similar product, but each supplier sells a particular
brand. Therefore, although competition exists each supplier has a monopoly over his own brand.
Question 5
(a) Define the term demand.
(b) Define the term supply.
(c) Explain the role these play in determining price.
Answer
(a) The demand for a particular product is the amount that consumers are willing and able to buy at
a given price.
(b) The supply of a particular commodity is the amount that firms are willing and able to supply at a
given price.
(c) In a market economy the demand and supply of particular commodities determine
their prices.
Consumer will demand increasing amounts at lower prices and decreasing amounts at higher prices.
However, producers are willing to sell more at higher prices and less at lower market prices. The
market price at which both buyers and sellers wish to trade at is the market equilibrium price.
Question 6
Differentiate between copyright, patent and trade mark.
Answer
Copyright is a one form of intellectual property right that protects creators expressions such as
music, painting, movie, photograph, writings etc.
Patent protects innovation by excluding others from making and selling an invention for a number of
years.
Trademark legally protects brand names by giving the seller exclusive rights to this name.
Question 7
Outline three methods of sale promotion.
Answer
Loss Leader: This form of sale promotion is used to attract customer to a location that offers a
product for sale at an extremely low cost. The business will lose profits on this loss-leader but it is
expected that this will be made up on the high sales from other products
Bargain packs offer consumers free products or discounted products if a particular item is
purchased.
Coupons allow discounts to customers on particular items when presented at a particular business
location.
Question 8
Show how two selling techniques can be used to increase sales.
Answer
Good customer relations will encourage customers to purchase a companys goods and services and
also make recommendations to other customers. This involves being very helpful, efficient and
polite when dealing with customers.
Offering after sales services will encourage customers to buy and they will not incur this extra cost
after buying the product. These services include: delivery, installation and warranty.
Question 9
(a) Outline two ways in which consumers may be exploited.
(b) Discuss how consumers might seek redress for each way mentioned above.
Answer
(a)Consumers are exploited when they are sold poor quality goods and services. They are also
exploited when they are not given the correct weight or measure for products as stipulated on the
package or what was asked for.
(b)To seek redress consumers may contact the offending firm concerning the complaint and require
compensation. The Fair Trading Commission may be contacted if the offending firm does not
compensate the consumer. Radio talk shows have also been very effective to obtain redress from
offending firms for consumers.
Question 10
Discuss the importance of transportation to the distribution of goods from manufacturer through
middle men to consumers.
Answer
Transportation is integral to distribution. Transportation must efficiently move goods from
manufacturers through middlemen to consumers. Goods may be transported by road rail, sea or air.
The choice of transportation is determined by the type of product, for example heavy and bulky
products are transported by rail or sea. Perishable products are transported by sea or by road in a
speedy manner.
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Home / POB / Establishing a Business / Quiz

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The Marketing Mix
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ESTABLISHING A BUSINESS Quiz
Question 1
Explain the importance of encouraging entrepreneurial skills and abilities in Caribbean schools.
Answer
Entrepreneurship is important to Caribbean economies. Businesses create jobs, add to GDP and
foreign exchange earnings. They also provide revenue for government in the form of taxes.
Therefore, entrepreneurship skills must be taught in schools. Our students should be prepared to
enter the workplace and to also start businesses. An investment in a programme that prepares
students for entrepreneurship will have longterm impact on a countrys economic growth and
development.
Question 2
Outline and explain the importance of two characteristics required for a successful entrepreneur.
Answer
Creativity is an important characteristic of an entrepreneur. Creativity helps entrepreneurs to
innovate new products and ideas for the success of the business. Entrepreneurs must have the drive
and determination to be successful. Operating a business requires a lot of effort and will to succeed.
Question 3
Three of your past high school friends request your assistance in starting a small business. Advise
them on three important steps that they must take.
Answer
Do a feasibility study to ascertain the viability/feasibility of a business idea. It assesses the
operational costs, expected revenue flows, level of competition etc. Its main purpose is to find out if
the business idea is practical. The business must be registered. This is a legal requirement. Decisions
must be taken on the type of business that you wish to form i.e. either a partnership or a private
limited liability company. Identify sources of capital to purchase machinery, equipment, fixtures and
raw materials.
Question 4
James & Sons has been operating as a partnership for five years. They have decided to expand
through offering shares to the public. Outline the steps that must be taken by the owners of James &
Sons to establish a public limited liability company.
Answer
Documents that must be submitted to the registrar of companies are the memorandum and articles
of association and statutory declaration. A prospectus must then be published inviting the public to
subscribe for shares. Collecting the capital required as outlined in the memorandum of association,
to be issued with a certificate of trading allowing the company to start trading as a public limited
liability company.
Question 5
Compare two advantages and two disadvantages of a sole trading business and a public liability
company.
Answer
One advantage of a sole trading business is that the owner receives all the profits made. However,
profits are shared among members of a public limited liability company.
The sole trader can also implement new ideas quickly as he does not have to consult anyone else
concerning business decisions. However, new ideas must be ratified by the board of public limited
entities and therefore may take much longer to implement.
One disadvantage is that the sole trader must find all the capital to invest into a business.
A public limited liability company raises capital from shareholders. The sole trader will lose all his
personal assets if the business goes bankrupt. Shareholders in a public limited liability company have
limited liability and therefore will not lose their personal assets if the company goes bankrupt.
Question 6
Outline three features of a business plan.
Answer
The executive summary is a synopsis of the full business plan. It outlines information on the purpose
of the business, its methods of operation and future expectations.
The mission statement conveys the overall goals and value of a business. It speaks to how a company
operates. For example: providing the highest quality goods and services.
A SWOT Analysis outlines the strengths and weaknesses of the business. For example,
Strengths low overhead costs and large market share
Weakness difficulty in sourcing raw materials and sourcing skilled workers.
Question 7
Differentiate between primary and secondary data and give two examples of each.
Answer
Primary data is originally collected data. This data will be obtained by interviewing, observing or
distributing questionnaires to the sample population.
Secondary data is information that has already been collected by someone else originally. This data
will be therefore obtained from books, newspapers, magazines, libraries and publications of various
institutions.
Question 8
Explain how government may intervene to curtail unethical and illegal practices of business.
Answer
Government uses legislation to guide business practice thus protecting consumers. Laws outlining
accepted standard for manufactured goods and packaging and storing of goods protect consumers.
Taxes are also charged to curb activities such as pollution as a result of production.
Question 9
Explain the importance of a feasibility study to the start up of a business.
Answer
A feasibility study helps individuals to ascertain whether or not a business will be profitable, it also
assesses the possibilities of future income earnings and overall operational costs.
Question 10
List two forms of collateral and explain their importance to the acquisition of funds for a business.
Answer
Collateral is anything of value that is used to secure a loan. It is required by financial institutions for
the approval of loans. If the loan is not repaid then the financial institution has the authority to seize
the borrowers collateral. Forms of collateral include: bank balances, motor vehicle, dwelling house,
land, machinery and equipment etc.
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ROLE OF GOVT Quiz

Question 1
(a) Identify two responsibilities of government to an economy.
(b) Show how the government of your country carries out these two responsibilities.
Answer
(a) Protection and general welfare of citizens, and protecting the environment.
(b) The government of my country protects vulnerable citizens through welfare programms. These
include food stamps and cash grants.
The government of my country protects the environment by legislation to prevent degradation of
wetlands and the extinction of certain species.
Question 2
Give two reasons why government should be the chief guardians of the environment.
Answer
For the well-being of citizens; health issues can be a consequence of pollution. This is very costly for
the economy.
Eco-tourism is a market niche that can earn foreign exchange for an economy.
Question 3
Discuss two consequences of unregulated business activity in an economy.
Answer
If businesses are not regulated by government agencies then consumers may receive poor quality
goods and services. Acceptable standards are outlined by government agencies which business must
abide by.
Businesses may also overcharge for goods such as basic food items. If basic food items are
unaffordable to the very poor and vulnerable, the consequence might be malnutrition.
Question 4
List two consumer protection laws.

Answer
The Standards Act and The weights and measures Act.
Question 5
Identify two purposes of taxation and discuss the importance of each.
Answer
Taxation may be used to discourage behaviour. Taxing firms that pollute the atmosphere, rivers and
seas will reduce pollution. Also taxing the consumption of harmful goods such as cigarettes will
reduce its consumption.
Taxation can also redistribute income by providing welfare programs and cash grants to the very
poor and vulnerable in the society.
Question 6
Differentiate between direct and indirect taxes and give two examples of each.
Answer
Direct taxes are paid by individuals directly from income earned or on the value of assets owned to
the income tax department. Examples of direct taxes are: income tax, corporate tax and capital gains
tax. Indirect taxes differ from direct taxes as they are paid to the income tax department through the
suppliers of goods and services. These taxes are levied on consumption and therefore are paid by
individuals when purchasing commodities. Examples of indirect taxes include: value added tax,
purchase tax and excise and custom duties tax.
Question 7
Distinguish between progressive and regressive taxation.
Answer
A progressive tax system levies a higher percentage of tax on high income earners compared to lower
income earners. This ensures that higher income earners pay a larger proportion of their income in
taxes than lower income earners. However, a regressive tax system allows higher income earners to
pay a smaller proportion of their income compared to low income earners who pay a higher
proportion of their income in taxes.
Question 8
The regressive tax system is unfair and places a greater burden on the lower income earners. Discuss.
Answer
An examples of a regressive tax is a value added tax where each persons pays a fixed percentage on
the cost of a good or service. Therefore, if $10 is the tax amount to be paid for a particular item
charged, a high income earner who receives $1000 will pay 1% of his income in taxes while another
income earner who receives $100 will pay 10% of his income in taxes. The regressive tax system is
unfair as low income earners will pay a higher proportion of their income in taxes than a high income
earner.
Question 9
Outline two ways in which governments provide assistance for businesses.
Answer
Governments assist small businesses with soft loans. They provide loans at low interest rates through
financial institutions and government agencies.
Governments also provide information, training and advice through various agencies for small
business.
Question 10
Discuss the importance of the provision of one social service by a government.
Answer
Education is a very important social service. High levels of literacy, numeracy, and skills will increase
productivity. A highly skilled workforce is also attractive to international investors who seek new
locations to expand their businesses.
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SOCIAL ACCOUNTING AND GLOBAL

Quiz
Question1
Explain the difference between a countrys Gross National Product and National Income statistics.
Answer
GDP is the total money value of all output produced within a country over a year. National Income
figures includes (GDP + income from nationals abroad) Depreciation. Therefore net National
product/NI adds overseas earnings to earnings from local production. Depreciation is subtracted to
give final National Income figures.
Question 2
What is the standard of living?
Answer
The standard of living a country is determined by level of goods and services available, ownership of
capital equipment and access to modern technology.
Question 3
Outline two methods that can be used to achieve economic growth.
Answer
Economic growth is the expansion of national income. Two methods to increase the productivity of
industrial and commercial activities include: a training of human resources and the introduction of
technology.
Question 4
Differentiate between the balance of trade and the balance of payments
Answer
The balance of trade is the difference between earnings from exports and payments for imports. The
balance of payments is a summation of the balance of trade, net invisible earnings and capital flows.
Question 5
The balance of payments always balances. Explain this statement.
Answer
The balance of payments account is governed by accounting principles. For every debit entry there is
a corresponding credit entry. Outflows are matched by inflows. The summation of the current and
capital account is zero.
Question 6
State three measures used to correct balance of payments problems.
Answer
Balance of payment problems may be corrected by tariffs, quotas and export incentives to encourage
local production for export.
Question 7
Explain the term per capita GNP.
Answer
Per Capita GNP is the value of a countrys output from local production divided by its population. Per
capita GNP figures give an idea of the average income enjoyed by each individual in a country.
Question 8
Distinguish between visible and invisible trade.
Answer
Visible trade is the export and import of physical goods and services for example, sugar, coffee and
bauxite. Invisible trade refers to the trade of services for example, tourism and shipping.
Question 9
Explain two reasons why countries engage in international trade.
Answer
Countries engage in international trade to obtain goods that they lack the necessary raw materials to
produce.
Countries also engage in trade to obtain goods for which they do not have a comparative advantage.
Question 10
Differentiate between economic growth and economic development.

Answer
Economic growth refers to an increase in national income and economic development is sustained
growth that is accompanied by policies established to ensure continuous growth. These include an
increase in exportation, decrease in importation, lesser dependence on foreign aid and important
infrastructural development.
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REGIONAL AND GLOBAL BUSINESS ENVIRONMENT Quiz

Question 1
List three objectives of CARICOM.
Answer
Three objectives of CARICOM are:
-joint negotiations internationally
-economic integration of the region
-improved standard of living for the region
Question 2
Explain how the CSME differs from CARICOM.
Answer
This transforms the common market into a single market and economy. It establishes a single
currency for the region and the free movement of human and capital resources throughout the
region.
Question 3
Outline the main objective of the World Bank.
Answer
The World Bank provides long-term loan for developmental projects. Its main aim is the reduction of
poverty in worldwide. Loans are provided for purposes such as infrastructure and industry.
Question 4
(a) Identify two economic problems that affect Caribbean countries.
(b) Discuss one method that can be used to solve one of these problems.
Answer
(a) Two economic problems that affect Caribbean countries are unemployment and high debt
burdens.
(b) High debt burdens can be reduced by methods that increase foreign exchange earnings and
reduce dependency on imports. Support for local industries in the form of tax holidays, duty free
imports and low interest loans will reduce cost of production and thus encourage output. Lower
market prices will encourage local consumption and increase the competitiveness of products on the
international market.
Question 5
Explain the role of the Caribbean Development bank.
Answer
The Caribbean Development bank was set up to finances regional projects that contribute to the
economic growth and development of the region. For example: providing funds for roads, education
and business development.
Question 6
Give two methods that can be used to increase FDI.
Answer
Caribbean government can encourage FDI incentives with methods such as tax holidays, affordable
operating costs (labour and utility) and availability of human and natural resources.
Question 7
What is the role of the WTO?
Answer
The WTO was set up to monitor and regulate trade among nations of the world based on their
collective agreements.
Question 8
List three international trade agreements.
Answer
Three international trade agreements are:
-The Caribbean Basin Initiative (CBI)
-CARIBCAN
-North American Free Trade agreement (NAFTA)
Question 9
Outline one trade agreement that involve Caribbean countries and explain the long term benefits of
these agreements to the Caribbean.
Answer
CARIBCAN gives Caribbean countries duty free access to markets in Canada. It ensures a steady
market for Caribbean products and thus long-term development of local industries. Other benefits
include: employment and linkage industries.
Question 10
Write brief notes on ECLAC.
Answer
The ELAC is an organization of Latin American and Caribbean countries. They aim to reinforce
economic ties among the countries of Latin America and the Caribbean.
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Comment
1.
kimmy said,
May 6, 2013 at 6:11 pm
thats was good am ready for cxc pob exam
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RAYMONDS CXC BLOG

CXC PAST QUESTIONS AND ANSWERS

1) The first question is a compulsory 10 marks question, taken from May

* Risk is spread over many shareholders.

Strictly cash on the fall of the hammer.

Vehicle on view on the morning of the sale.

Vehicle will be sold as is where is.

- John Brown, Auctioneer.

(d) (i) Define the term breach of contract. (2 marks)

(c) The following situations may result: poor management-worker relationship;

(d) List FIVE responsibilities of the management to its employees. (5 marks)

(c) List THREE characteristics of a successful entrepreneur. (3 marks)

* Small businesses reduce unemployment through employing people.

Technical economies/economies in the use of factors of production.

Managerial economies/economies in administration.

Research and development economies.

Marketing economies/commercial economies.

Risk-bearing economies etc.

Any FOUR economies or advantage may be listed.

Increased costs, e.g. increased marketing and financial costs.

Red tape, which is the elaborate and time-consuming procedures through

Changing techniques of production may cause expensive machinery to lay

Any FOUR diseconomies or disadvantages may be listed.

Output increases because work is speeded up and more can be produced in

Fewer workers are needed as machines can do the work of a number of

The quality of output often increases.

Some machines are of a technical nature and require skilled persons to

When machines are out of service, overhead cost increase.

Machines may be costly to maintain, as in some cases parts may have to be

As in (c) (i) above, the negative effects of mechanisation must be properly

Divisible into large and small units

Scarce or limited in supply

Any FOUR characteristics may be stated.

Lend money to qualified customers at interest.

Allow standing order payments at customers requests.

Make the use of the cheque as a means of payment possible.

Sell travellers cheques and buy and sell foreign currency.

Give financial advice to customers.

Help customers to open letters of credit.

Act as agents in collecting dividends on behalf of their customers.

Act as executors and trustees to the written wills of their customers.

Any TWO functions or services may be listed.

Carrying out governments monetary policies.

Control and monitoring of commercial banks and other financial institutions.

Being banker to commercial banks and to the government.

Negotiating on behalf of the government in international financial

Any FOUR features may be listed.

Whereas, a countrys balance of trade is the difference between the countrys

(c) Exporting more goods and services than it imports

Import less than it exports

If the positive visible balance exceeds the negative invisible balance

Importing the deficit amount on credit

Loans from other countries

Loans from international financial institutions e.g., International Monetary

Debit the foreign reserves account

Grants from other countries

Sell gold reserves, etc.

Short change, short weights and short measurements

Unsafe and poor quality products

Misleading price reductions and false sales

False claims about products

Insufficient goods for their money

Unfair treatment when faulty goods are returned, etc.

By setting up consumer protection agencies such the Ombudsman, the