Business Studies Paper 1 Questions and Answers - Form 3 Term 2 Opener Exams 2023

Instructions

• Answer All Questions in section A and Any three in section B.

1. Outline four assumptions that are associated with perfect competition. (4mks)
2. Highlight four circumstances under which a trader may wish to hire an office machine rather than purchasing it. (4mks)
3. State four gaps that an entrepreneur can exploit. (4mks)
4. Assuming you are a human resource manager in an institution, outline four measures you can take to improve employees productivity. (4mks)
5. Land is a basic factor in production. Outline four characteristics that describe it. (4mks)
6. Outline four limitation of using free samples in product promotion. (4mks)
7. State four characteristic of a good filling system. (4mks)
8. Outline four uses of a delivery note in trade. (4mks)
9. Define the following terms. (4mks)
   1. Monopoly –
   2. Duopoly-
   3. Product differentiation –
   4. Market –
10. Name the type of business organization described in each of the following. (4mks)
    

    Description	Business Organization
    Formed by act of parliament
    May have infinite members
    Managed by a committee
    Formed between two to fifty partners

SECTION B

11. Explain five sources of monopoly power. (10mks)
12. Explain five factors that need to be considered before a firm start producing a certain production. (10mks)
13. Outline five disadvantages of localization of firms. (10mks)
14. Explain five factors influencing the choice of distribution channel. (10mks)

MARKING SCHEME

1. Outline four assumptions that are associated with perfect competition. (4mks)
   • Large number of sellers and buyers
   • Products are homogeneous
   • There is no government interference
   • There is free entry and exit from the industry
   • Uniformity of buyers and sellers
2. Highlight four circumstances under which a trader may wish to hire an office machine rather than purchasing it. (4mks)
   • If cost of hiring is lower than cost of buying the machine
   • If the machine is required for a short time only
   • If there is no money to buy the machine
   • Where the business does not have qualified personal to handle the machines
   • If the procedure for buying the machine is lengthy and complicated as compared to hiring one
   • If the machine is not available for buying in the market.
3. State four gaps that an entrepreneur can exploit. (4mks)
   • Poor quality goods and services produced
   • Insufficient quantity
   • Unaffordable prices
   • In availability of goods and services
   • Poor services.
4. Assuming you are a human resource manager in an institution, outline four measures you can take to improve employees productivity. (4mks)
   • Proper personnel administration
   • Fair remuneration
   • Giving fair and equal opportunities for promotion
   • Exposing employees to areas where they can abstain more experience.
   • Training
   • Appreciating special talents and jobs extraordinarily done
   • Pay increase.
5. Land is a basic factor in production. Outline four characteristics that describe it. (4mks)
   • Supply is fixed
   • It lack geographical/ mobility
   • Basics factor of production
   • It’s a natural resource
   • Quality is not homogeneous
6. Outline four limitation of using free samples in product promotion. (4mks)
   • Not appropriate methods for very expensive commodities
   • Sample may be given to people who are not potential customer
   • Free samples is an expensive methods
   • If samples are not appealing the product may not be bought.
7. State four characteristic of a good filling system. (4mks)
   • Compact /occupy less space
   • Adaptable/ flexible/ capable of coping with future changes
   • Simple to operate
   • Provide safety for documents
   • Economical
   • Easily accessible
   • Appropriate for the needs of the business.
8. Outline four uses of a delivery note in trade. (4mks)
   • Can be used as a source document by the seller
   • Can be used in a recording stock received in the store
   • A prove that goods have been delivered
   • Counter – checking goods by the buyer on their receipt
9. Define the following terms. (4mks)
   1. Monopoly – Market served by one firm selling products with no close substitutes
   2. Duopoly – This is an oligopoly market structure comprising of two firms
   3. Product differentiation – Process by which similar products solid by many seller are made to appear different through packing, branding
   4. Market – place where buyers and sellers can meet to facilitate the exchange or transaction of goods and services.
10. Name the type of business organization described in each of the following. (4mks)
    
    

    Description	Business Organization
    Formed by act of parliament	Public co-operation/ statutory company
    May have infinite members	Public limited company
    Managed by a committee	Co –operative society
    Formed between two to fifty partners	Special partnership eg medicen and law

SECTION B

11. Explain five sources of monopoly power. (10mks)
    1. Financial factors – where the initial capital is very high, it becomes difficult for new firm to enter the market giving the existing firm to operate as a monopoly.
    2. Where a group of firms combine to act as one- firm may combine for the purpose of controlling the market of their product.
    3. Size of the market – size of the market may be such that it is best served by one person or firm. Where having may suppliers may led to all of them incurring losser
    4. Ownership of production right- where production right or ownership ie patent right, copyrights and royalties belong to one firm then that creates monopoly.
    5. Control of an important input in production – a firm may have sole control of a certain raw material or knowledge of how to produce a certain commodity making them a monopoly
    6. Internal economies of scale – Firm may reduce its cost of production to levelother firms cannont forcing other firm out of the busines
12. Explain five factors that need to be considered before a firm start producing a certain production. (10mks)
    1. Profitability – Business should provide goods and services that yield maximum profit
    2. Demand/ Market – a firm should produce a product that has the highest demand
    3. Availability of resources – A firm can only produce commodities for which the necessary resources are available eg. Raw material, equipment etc
    4. Government policy – A firm should produce commodities that are favoured by government policy
    5. Level of competition - a firm should provide good that meets least competition.
13. Outline five disadvantages of localization of firms. (10mks)
    • It may lead to regional imbalance in development
    • Concentration of firms in one region contribute to rural urban migration
    • It may be risky because if any undesirable thing to the region eg wars, earthquake or terrorism may destroy a country economic base
    • A fall in demand for product produced by local firms, would results in wide spread un employment in the affected area
    • Negative impact o the environment
    • Social problem eg prostitution, congestion, spread of HIV and AIDs
14. Explain five factors influencing the choice of distribution channel. (10mks)
    1. Nature of the products eg perishable goods need to be sold directly to consumers to avoid loses. Bulky products need short channels to reduce transport and handling cost.
    2. Competition - a firm may use a channel that is used by the competitors to have its product compete directly with that competitor. A firm can also use a different channel from that of its competitor to avoid direct competition
    3. Government policy – Various requlations may influence selection of channels of distribution
    4. Marketing risk – A firm may want to avoid risks involved in distribution
    5. Size and resources of the firm – the size of the firm determine the size of the market and the type of distribution channel.