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NSSCO Business Studies (6144) study materials
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NSSCO Business Studies (6144) practice questions

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Question 1The nature and purpose of business activity

A sole trader decides to expand by buying a second delivery van using her own savings. In business activity terms, which factor of production does the van represent?

  1. Land
  2. Enterprise
  3. Labour
  4. Capital Correct answer.

Explanation

Capital refers to the man-made resources such as machinery, vehicles and equipment used to produce goods and services. The van is a manufactured aid to production rather than a natural resource or a human effort. Enterprise is the risk-taking and decision-making function, which is shown by the owner's choice rather than by the vehicle itself.

Question 2The nature and purpose of business activity

Which statement best describes the basic economic problem facing every society?

  1. Consumers prefer goods that are produced cheaply and locally
  2. Businesses aim to make the largest possible profit each year
  3. Wants are unlimited while the resources available to satisfy them are limited Correct answer.
  4. Governments always own the main industries in an economy

Explanation

The economic problem arises because people's wants are infinite but the factors of production used to satisfy them are finite. This forces individuals, firms and governments to make choices about how resources are allocated. The other statements describe particular economic systems or business objectives rather than the universal problem of scarcity.

Question 3The nature and purpose of business activity

A farmer uses a field to graze cattle instead of growing maize. The maize that is not grown represents which economic concept?

  1. Specialisation
  2. Opportunity cost Correct answer.
  3. Profit
  4. Division of labour

Explanation

Opportunity cost is the value of the next best alternative given up when a choice is made. Because the field can only be used one way at a time, choosing cattle means sacrificing the maize. Specialisation and division of labour describe how production is organised, while profit is a financial return.

Question 4The nature and purpose of business activity

Which of the following is the main purpose of business activity?

  1. To guarantee that every firm makes a profit
  2. To remove the need for government taxation
  3. To ensure that all workers receive identical wages
  4. To produce goods and services that satisfy people's needs and wants Correct answer.

Explanation

Business activity exists to combine the factors of production so that goods and services are created to meet human needs and wants. In doing so firms also generate income and employment, but the core purpose is satisfying demand. Identical wages, the abolition of taxation and guaranteed profits are not purposes of business activity.

Question 5The nature and purpose of business activity

Which feature distinguishes a public limited company from a private limited company?

  1. Its shares can be offered for sale to the general public Correct answer.
  2. It cannot employ more than fifty workers
  3. It is always owned by the government
  4. It does not have to publish financial statements

Explanation

A public limited company may invite the general public to buy its shares, usually through a stock exchange, which allows it to raise large amounts of capital. A private limited company may only sell shares with the agreement of existing owners. Public limited companies are not state-owned and are subject to strict disclosure rules.

Question 6The nature and purpose of business activity

Two friends run a partnership but have not signed a partnership agreement. Which outcome is most likely?

  1. The partnership will be treated as a separate legal person
  2. Profits and losses will be shared equally between the partners Correct answer.
  3. Only the partner who invests most money will control decisions
  4. The partners will have limited liability for business debts

Explanation

Without a written deed of partnership, the default legal position is that partners share profits and losses equally and each has a say in management. A partnership is not a separate legal entity from its owners in the way a company is, and partners normally bear unlimited liability. Control therefore does not depend simply on the size of an investment.

Question 7The nature and purpose of business activity

A bakery moves from making many different breads to producing only one type of loaf on a large scale. Which benefit is most directly associated with this change?

  1. Reduction of the firm's fixed costs to zero
  2. Complete elimination of business risk
  3. Lower average costs through greater specialisation Correct answer.
  4. Immediate increase in the variety offered to customers

Explanation

Specialising in one product allows workers and machinery to become more efficient and enables economies of scale, which reduce average cost per unit. It does not remove risk, since demand may fall, and it reduces rather than increases product variety. Fixed costs such as rent and machinery remain even when output changes.

Question 8The nature and purpose of business activity

Which example best illustrates the division of labour?

  1. A consumer who compares prices before buying a shirt
  2. A trader who buys and resells imported clothing
  3. A government that sets a minimum wage for factory workers
  4. A garment factory where one worker cuts cloth, another stitches and another presses Correct answer.

Explanation

Division of labour occurs when the production process is broken into separate tasks, each performed by a different worker. This raises output per worker because each person becomes skilled at one operation. Buying and reselling, setting wages and comparing prices are not examples of splitting production into tasks.

Question 9The nature and purpose of business activity

In a mixed economy, which combination of features is normally found?

  1. Only private ownership of all resources with no government involvement
  2. Both private enterprise and government ownership or regulation of some activity Correct answer.
  3. An economy that relies entirely on barter without money
  4. Only government ownership of all resources with no private enterprise

Explanation

A mixed economy contains a private sector where individuals and firms make decisions for profit alongside a public sector where government provides services and regulates activity. Pure market and pure planned economies are the two extremes. Barter is a method of exchange and is unrelated to the public-private mix.

Question 10The nature and purpose of business activity

A country's government decides to sell its national railway to private investors. Which term describes this action?

  1. Diversification
  2. Specialisation
  3. Privatisation Correct answer.
  4. Nationalisation

Explanation

Privatisation is the transfer of ownership of a state-owned enterprise to the private sector. Nationalisation is the opposite process, where government takes assets into public ownership. Specialisation and diversification describe how production and product ranges are organised, not changes in ownership.

Question 11The nature and purpose of business activity

A firm's revenue rises from N$80 000 to N$100 000 while its total costs rise from N$70 000 to N$85 000. What has happened to profit?

  1. It has fallen from N$10 000 to N$5 000
  2. It has remained unchanged at N$10 000
  3. It has risen from N$10 000 to N$15 000 Correct answer.
  4. It has risen from N$10 000 to N$20 000

Explanation

Profit is calculated by subtracting total costs from total revenue. Initially N$80 000 minus N$70 000 gives N$10 000, and afterwards N$100 000 minus N$85 000 gives N$15 000. Profit has therefore increased by N$5 000 even though costs also rose.

Question 12The nature and purpose of business activity

Which statement about the objectives of a private-sector firm is most accurate?

  1. Survival is never a concern for a business once it is established
  2. Every private firm aims only to maximise profit in the short term
  3. Private firms are legally barred from pursuing charitable aims
  4. Profit is important but firms may also pursue growth, survival or social aims Correct answer.

Explanation

Private-sector firms commonly pursue several objectives at once, including profit, growth, market share, survival and sometimes social or environmental goals. Profit remains central because it rewards owners and funds investment, but it is not the only aim. Firms may also adopt charitable or ethical objectives if their owners choose to.

Question 13The nature and purpose of business activity

A business that uses mainly manual labour is replaced by machinery that performs the same tasks. Which change has occurred?

  1. The business has become more labour-intensive
  2. The business has stopped producing goods
  3. The business has changed its legal structure
  4. The business has become more capital-intensive Correct answer.

Explanation

Capital-intensive production relies more heavily on machinery and equipment relative to labour. Replacing workers with machines shifts the balance away from labour towards capital. The legal structure and the type of output are unaffected by this change in production method.

Question 14The nature and purpose of business activity

Why can specialisation by a country in one export crop increase its vulnerability?

  1. It is forced to abandon trade with other countries
  2. It must import all of the food it consumes
  3. Its income depends heavily on the price of that single product Correct answer.
  4. It cannot use any machinery in production

Explanation

When a country specialises in one product, its export earnings rise and fall with that product's world price and harvest conditions. A fall in price or a poor harvest can therefore damage the whole economy. Specialisation does not require importing all food, forbid machinery or end trade; in fact it usually increases trade.

Question 15The nature and purpose of business activity

A government raises the tax on company profits. Which effect on business activity is most likely in the short term?

  1. The opportunity cost of production will disappear
  2. Firms will no longer need to pay wages to workers
  3. Retained profit available for investment may fall Correct answer.
  4. The number of consumers in the market will rise immediately

Explanation

Higher profit tax reduces the after-tax profit that a firm can keep, which may lower the funds available for reinvestment. It does not directly increase consumer numbers, remove wage costs or abolish opportunity cost, since scarce resources still have alternative uses. The effect on investment is therefore the most direct consequence.

Question 16The nature and purpose of business activity

Which pair correctly matches a business organisation with its typical owner?

  1. Sole trader - one individual who bears unlimited liability Correct answer.
  2. Cooperative - a single owner who keeps all profits
  3. Partnership - shareholders who buy shares on a stock exchange
  4. Public company - the government of the country

Explanation

A sole trader is a single owner who runs the business and is personally liable for its debts. Public companies are owned by shareholders rather than government, partnerships are owned by partners rather than stock-exchange investors, and cooperatives are owned and controlled by their members. The matching in the first option is therefore the only accurate one.

Question 17The nature and purpose of business activity

A firm producing soft drinks buys a company that bottles water. Which reason for business growth does this best illustrate?

  1. Elimination of all competition in the market
  2. Expansion into a related stage of production to control supply Correct answer.
  3. Reduction of the firm's legal obligations
  4. Conversion of the firm into a public corporation

Explanation

Buying a supplier or a firm at a related stage of production is vertical integration, which can give the business more control over its supply chain and costs. Growth does not reduce legal obligations, cannot guarantee the removal of all competition and does not by itself change ownership into a public corporation.

Question 18The nature and purpose of business activity

What is the main reason governments provide public goods such as street lighting?

  1. Private firms cannot easily charge individual users, so the market may not supply them Correct answer.
  2. Such goods are always more profitable than private goods
  3. Consumers refuse to use any goods provided by businesses
  4. Public goods require no resources to produce

Explanation

Public goods are non-excludable and non-rival, meaning it is difficult to charge only those who benefit, so private firms lack a profit incentive to supply them. Government therefore funds them through taxation. They are not necessarily profitable, consumers do use private goods, and all production uses scarce resources.

Question 19The nature and purpose of business activity

A firm switches from making furniture by hand to using automated machines. Which statement best explains the likely effect on its costs?

  1. Fixed costs may rise while average variable costs fall as output grows Correct answer.
  2. All costs fall immediately to zero
  3. Variable costs rise in direct proportion to output
  4. Total costs are unaffected by the change

Explanation

Automated machinery is a fixed cost that must be paid regardless of output, so fixed costs rise when it is installed. However, machines can lower the variable cost per unit, especially at higher output, spreading the fixed cost over more units. Total costs are therefore affected, and no cost falls to zero.

Question 20The nature and purpose of business activity

Which situation shows a business responding to a change in consumer wants?

  1. A shop introduces online ordering after customers ask for home delivery Correct answer.
  2. A firm pays its tax bill on the date required by law
  3. A company replaces a worn-out office chair
  4. A manager records the hours worked by each employee

Explanation

Consumer wants drive demand, and a business that adapts its service to meet a request for home delivery is responding to that demand. Paying tax, recording hours and replacing furniture are routine administrative or maintenance tasks. They do not reflect a change in what customers want to buy.

Question 21Forms of business ownership and the private/public sector

A business has a separate legal personality from its owners and its shareholders have limited liability. Which form of ownership is described?

  1. A private company Correct answer.
  2. A partnership
  3. A sole proprietorship
  4. A close corporation without legal personality

Explanation

A private company is incorporated, so the law treats the company itself as a person separate from its shareholders, and shareholder liability is limited to unpaid amounts on their shares. Sole proprietorships and ordinary partnerships are unincorporated and lack this separation.

Question 22Forms of business ownership and the private/public sector

Which document, prepared when a company is being formed, sets out the internal rules for running the company such as meetings and directors' powers?

  1. The prospectus
  2. The share certificate
  3. The memorandum of association
  4. The articles of association Correct answer.

Explanation

The articles of association are the company's internal constitution governing meetings, directors and share transfers. The memorandum deals with the company's external relationship with the world, such as its name and objects.

Question 23Forms of business ownership and the private/public sector

In a public sector enterprise such as a state-owned water utility, which objective would most clearly distinguish it from a private company?

  1. Providing an essential service at an affordable price to residents Correct answer.
  2. Reducing costs by outsourcing production
  3. Increasing the market value of its shares
  4. Maximising dividends for shareholders

Explanation

Public enterprises are established primarily to provide essential goods and services to citizens, often at controlled prices, rather than to distribute profits. Profit maximisation and share value are private-sector objectives.

Question 24Forms of business ownership and the private/public sector

Which feature is common to both a sole proprietorship and an ordinary partnership?

  1. Separate legal personality
  2. Limited liability of the owners
  3. Unlimited liability of the owners Correct answer.
  4. Trading of shares on a stock exchange

Explanation

Neither a sole proprietorship nor an ordinary partnership is incorporated, so owners are personally liable for business debts without limit. Limited liability, separate personality and share trading all require incorporation.

Question 25Forms of business ownership and the private/public sector

A farmer wants to expand into dairy production and needs capital, but does not want to lose control of daily decisions. Which ownership form best matches these needs?

  1. A cooperative owned by its customers
  2. A public company selling shares to the public
  3. A state-owned enterprise
  4. A partnership with a silent partner contributing capital Correct answer.

Explanation

A silent or sleeping partner contributes capital but takes no part in management, so the farmer keeps control while gaining funds. A public company would dilute control, and the other options change ownership or decision-making.

Question 26Forms of business ownership and the private/public sector

A cooperative society is owned and controlled by its members. Which principle best describes how voting power is normally allocated?

  1. Votes held only by the board of directors
  2. One vote per member regardless of shares held Correct answer.
  3. One vote per share held
  4. Votes proportional to capital contributed

Explanation

Cooperatives follow the principle of one member, one vote, so control is shared equally among members rather than weighted by capital. This distinguishes them from companies, where votes usually follow shareholding.

Question 27Forms of business ownership and the private/public sector

Which statement best explains why a private company may choose not to become a public company?

  1. It is legally barred from ever issuing shares
  2. It is exempt from paying company tax
  3. It cannot have more than two shareholders
  4. It wishes to avoid the cost and disclosure required to offer shares to the public Correct answer.

Explanation

Public companies must publish accounts, issue a prospectus and meet stricter listing rules, which is costly. A private company can raise capital privately and keep its affairs more confidential.

Question 28Forms of business ownership and the private/public sector

A government decides to sell its majority stake in a national airline to private investors. Which term describes this action?

  1. Privatisation Correct answer.
  2. Amalgamation
  3. Municipalisation
  4. Nationalisation

Explanation

Privatisation is the transfer of ownership of a public enterprise to the private sector. Nationalisation is the reverse process, where private assets are taken into state ownership.

Question 29Forms of business ownership and the private/public sector

Two friends run a partnership. One partner signs a large supply contract without consulting the other. Under general partnership law, who is bound by the contract?

  1. No one, because both partners did not agree
  2. Only the partner who signed it
  3. Only the partnership's largest customer
  4. The partnership, because each partner can bind the firm in the ordinary course of business Correct answer.

Explanation

In an ordinary partnership each partner is an agent of the firm, so acts done in the usual course of business bind the partnership and all partners. The other partner cannot escape liability merely by not consenting.

Question 30Forms of business ownership and the private/public sector

Which body normally governs a state-owned enterprise on behalf of the public?

  1. A shareholders' meeting of private investors
  2. A creditors' committee
  3. The stock exchange listing committee
  4. A board appointed by the responsible government minister or authority Correct answer.

Explanation

Public enterprises are accountable to government, which appoints a board or management authority to run them on behalf of citizens. There are no private shareholders or stock exchange listing to govern them.

Question 31Forms of business ownership and the private/public sector

A business owner wants limited liability but also wants to keep the business small, with restrictions on who may buy shares. Which form best fits?

  1. A sole proprietorship
  2. A private company Correct answer.
  3. A public company
  4. An ordinary partnership

Explanation

A private company gives shareholders limited liability while allowing restrictions on share transfers and a private membership. A public company offers limited liability but must allow public share offers and greater disclosure.

Question 32Forms of business ownership and the private/public sector

Which is the clearest disadvantage of a sole proprietorship compared with a company?

  1. The owner bears unlimited personal liability for business debts Correct answer.
  2. The owner must publish annual audited accounts
  3. The owner must hold an annual general meeting
  4. The owner cannot employ staff

Explanation

Because a sole proprietorship is unincorporated, the owner is personally liable for all business debts, putting personal assets at risk. Publishing accounts and holding general meetings are company obligations.

Question 33Forms of business ownership and the private/public sector

Which statement correctly compares the continuity of an incorporated company with that of a sole proprietorship?

  1. The company continues to exist despite changes in membership, while the sole proprietorship ends with the owner Correct answer.
  2. Neither form has any continuity beyond one year
  3. Both end automatically when the owner dies
  4. The sole proprietorship continues indefinitely, while the company ends with its directors

Explanation

An incorporated company has perpetual succession, so it survives the death or withdrawal of members. A sole proprietorship has no separate legal existence and therefore ends when the owner dies or retires.

Question 34Forms of business ownership and the private/public sector

Which combination of features is typical of a public corporation such as a state broadcasting authority?

  1. Created by a cooperative charter and owned by customers
  2. Created by a share prospectus and owned by private shareholders
  3. Created by statute, owned by government, accountable to the public through a minister Correct answer.
  4. Created by a partnership deed and owned by its partners

Explanation

Public corporations are established by an Act or statute, are wholly or mainly state-owned, and are answerable to the public through a responsible minister. The other options describe private-sector forms.

Question 35Forms of business ownership and the private/public sector

A sole trader wishes to bring in a partner but keep the business unincorporated. Which legal consequence follows?

  1. The business must register with the stock exchange
  2. The business must issue a prospectus
  3. The business gains limited liability automatically
  4. Each partner becomes jointly liable for the debts of the partnership Correct answer.

Explanation

An ordinary partnership remains unincorporated, so partners are jointly and severally liable for partnership debts. Limited liability and prospectus requirements apply only to incorporated companies.

Question 36Forms of business ownership and the private/public sector

A government wants to keep control over a strategic industry but stop covering its annual losses. Which policy best fits this aim?

  1. Nationalisation of competing private firms
  2. Full privatisation of the industry
  3. Abolition of the enterprise's board
  4. Commercialisation of the state enterprise while retaining state ownership Correct answer.

Explanation

Commercialisation requires a state enterprise to operate on business lines and cover its costs while ownership stays with government. Full privatisation would surrender control, and nationalisation would extend state ownership rather than reduce losses.

Question 37Forms of business ownership and the private/public sector

A company's articles state that the directors may refuse to register a transfer of shares. What does this reveal about the company's type?

  1. It is a state corporation, because government controls membership
  2. It is a partnership, because partners control admission of members
  3. It is a public company, because public companies restrict transfers
  4. It is likely a private company, because private companies may restrict share transfers Correct answer.

Explanation

Restrictions on share transfers are a hallmark of private companies, which keep membership closed and controlled. Public companies must generally allow shares to be transferred freely.

Question 38Forms of business ownership and the private/public sector

An economy has many small firms owned by single traders and few large state enterprises. Which change would most increase the role of the private sector?

  1. Increasing subsidies to state enterprises
  2. Converting state enterprises into private companies through privatisation Correct answer.
  3. Creating new public corporations by statute
  4. Nationalising the small trading firms

Explanation

Privatisation shifts ownership and control from the state to private shareholders, expanding the private sector. Subsidies, new public corporations and nationalisation all enlarge the public sector instead.

Question 39Forms of business ownership and the private/public sector

Why might a small business prefer a partnership to a private company when starting up?

  1. A partnership can sell shares to the public
  2. A partnership provides limited liability to all partners
  3. A partnership avoids incorporation formalities and the publication of accounts Correct answer.
  4. A partnership has perpetual succession

Explanation

Forming a partnership requires only an agreement between the partners, with no incorporation documents or published accounts, which keeps start-up costs low. Limited liability, public share offers and perpetual succession belong to companies.

Question 40Forms of business ownership and the private/public sector

A private limited company and a public limited company both issue shares, yet only the public company may offer its shares to the general public. Which feature of the public company most directly makes this wider share offer possible?

  1. It has a separate legal personality from the people who own it.
  2. It must publish its annual financial statements and file them for public inspection. Correct answer.
  3. It is managed day to day by a board of directors elected by the shareholders.
  4. It may be formed by a single person without any minimum number of founders.

Explanation

A public company is permitted to invite the general public to subscribe for shares, and the law supports this by requiring greater disclosure, including published and filed accounts that investors can inspect. This transparency protects outside investors who cannot investigate the business directly. The other features listed apply to private companies as well, so they do not explain the wider share offer.

Question 41Business objectives, stakeholders and business growth

A sole trader who wants to retain full control of decision-making and keep all profits is most likely to choose which business objective as the main reason for staying unincorporated?

  1. Separation of ownership from control
  2. Independence and ownership control Correct answer.
  3. Market share growth through share issues
  4. Limited liability for business debts

Explanation

An unincorporated sole trader keeps complete decision-making authority and receives all profit personally. This makes independence and personal control the central objective of remaining a sole trader. The other goals listed depend on features, such as limited liability or share capital, that a sole trader does not have.

Question 42Business objectives, stakeholders and business growth

Which statement best describes the purpose of a mission statement for a business?

  1. It sets the price of each product sold by the business.
  2. It states the overall reason the business exists and its guiding values. Correct answer.
  3. It records the daily cash transactions of the business.
  4. It lists the names of all employees and their job titles.

Explanation

A mission statement expresses the long-term purpose and core values of an organisation, guiding strategy and decision-making. It is broad and inspirational rather than detailed or operational. Financial records, pricing and staff lists are operational documents, not mission statements.

Question 43Business objectives, stakeholders and business growth

A company states that it aims to 'maximise shareholder value'. Which action is most consistent with this objective?

  1. Spending all profits on staff social events
  2. Increasing long-term profitability and the share price Correct answer.
  3. Refusing to invest in new production technology
  4. Reducing dividend payments to zero permanently

Explanation

Maximising shareholder value means raising the long-term worth of shareholders' investment, usually through higher profits and a rising share price. Permanent dividend cuts or wasteful spending reduce returns to shareholders. Refusing investment can weaken future profit and therefore share value.

Question 44Business objectives, stakeholders and business growth

A government decides to build a new public hospital. Which objective best explains this decision?

  1. Increasing market share against rival firms
  2. Maximising profit for private shareholders
  3. Providing a service to improve public welfare Correct answer.
  4. Reducing competition in the healthcare industry

Explanation

Public sector organisations such as government hospitals are funded to deliver services that improve social welfare rather than to earn profit. Their success is judged by service quality and access, not by market share or shareholder returns. Profit maximisation and competitive market share are typical private sector objectives.

Question 45Business objectives, stakeholders and business growth

A bakery owner wants to grow the business but has limited capital and wants to keep personal risk low. Which method of growth best fits these constraints?

  1. A merger with a large national supermarket chain
  2. Issuing shares on a stock exchange
  3. Taking on a franchise of an established brand Correct answer.
  4. A hostile takeover of a rival bakery

Explanation

Buying a franchise lets a small owner expand using a proven brand and support system while limiting personal exposure compared with large-scale mergers or takeovers. A merger with a national chain or a hostile takeover requires substantial capital and carries high risk. A stock exchange listing is available only to larger incorporated businesses and involves significant cost.

Question 46Business objectives, stakeholders and business growth

Which of the following is an example of internal (organic) growth?

  1. A firm opening new branches funded by retained profits Correct answer.
  2. Two competing firms combining into one company
  3. A firm buying a controlling share in a supplier
  4. A firm acquiring a rival through a takeover bid

Explanation

Organic growth occurs when a business expands its own operations, for example by opening new branches using retained profit. Mergers, takeovers and buying controlling shares are external or inorganic growth because they involve combining with or acquiring other businesses.

Question 47Business objectives, stakeholders and business growth

A firm that produces soft drinks buys a company that manufactures plastic bottles. Which type of integration does this describe?

  1. Backward vertical integration Correct answer.
  2. Horizontal integration
  3. Forward vertical integration
  4. Conglomerate integration

Explanation

Backward vertical integration occurs when a business takes over a firm at an earlier stage of the supply chain, such as a supplier of components or materials. Here the soft drink producer acquires its bottle supplier, which sits upstream in production. Horizontal integration would involve a rival in the same industry, forward integration would involve a distributor, and conglomerate integration would involve an unrelated industry.

Question 48Business objectives, stakeholders and business growth

Which is the most likely benefit to a business of a merger with a competitor in the same industry?

  1. Increased market share and greater pricing power Correct answer.
  2. Automatic reduction in employee wages
  3. Immediate exemption from all taxation
  4. Guaranteed elimination of all production costs

Explanation

Merging with a competitor, known as horizontal integration, can increase market share and reduce competition, giving the combined firm more influence over prices. It does not guarantee the elimination of costs, exemption from tax, or lower wages. Those outcomes would depend on separate decisions and circumstances.

Question 49Business objectives, stakeholders and business growth

A business decides to relocate production to a country with lower labour costs. Which stakeholder group is most likely to be negatively affected by this decision?

  1. Suppliers of raw materials abroad
  2. Shareholders seeking higher profits
  3. Existing employees in the home country Correct answer.
  4. Customers benefiting from lower prices

Explanation

Relocating production abroad can reduce costs and raise profits, which benefits shareholders, and may lower prices for customers. However, workers at the original site may face redundancy or reduced job security, making them the group most directly harmed. Foreign suppliers may gain new business rather than lose it.

Question 50Business objectives, stakeholders and business growth

Which statement best explains why owners and employees may have conflicting objectives in a business?

  1. Owners want lower prices while employees want higher market share.
  2. Employees want maximum dividends while owners want shorter working hours.
  3. Owners and employees always share identical goals and rewards.
  4. Owners want high profits and dividends while employees want higher wages and better conditions. Correct answer.

Explanation

Owners typically seek higher profits and returns on investment, while employees seek better pay, security and working conditions. Because both groups draw on the same revenue, satisfying one can reduce what is available for the other, creating conflict. Claiming identical goals ignores this tension.