1

1 Define ‘opportunity cost’.

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[Total: 2]

2 After identifying a gap in the soft drinks market, Jerome developed a low sugar drink. He borrowed
$5 000 from family and friends to start-up a business and to provide working capital. Jerome operates as a
sole trader. To promote his product, Jerome handed out free samples in the town centre. In the first year,
Jerome’s business sold 10 000 units. This is 200 units more than his break-even output. Jerome is considering
ways to increase added value.

Explain how each of the following can help Jerome increase added value:

Change the packaging: ............................................................................................................................

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Use cheaper materials: .............................................................................................................................

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[Total: 6]
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3 The economy of country C is experiencing economic growth. Based on secondary market research data,
Samuel started a plumbing business. His business installs and repairs bathroom equipment. Samuel operates
as a sole trader. He used all his $500 savings to buy the tools needed. Samuel had to decide on a suitable
pricing method to use. He thinks that providing a good quality service could help his business to increase
added value.

Outline how providing a good quality service could help Samuel’s business increase added value.

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[Total: 4]

4 Define ‘opportunity cost’

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[Total: 2]

5 Define ‘competitive pricing’.

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[Total: 2]
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6 Define ‘primary sector’.

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[Total: 2]

7 Identify two examples of business activity in the tertiary sector.

Example 1:................................................................................................................................................

Example 2:................................................................................................................................................ [2]

[Total: 2]

8 What is meant by ‘private sector’?

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[Total: 2]

9 Identify two examples of business activity in the primary sector.

Example 1:................................................................................................................................................

Example 2:................................................................................................................................................ [2]

[Total: 2]

10 What is meant by the ‘primary sector’?

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[Total: 2]
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11 Identify two limitations of using the number of employees to measure the size of a business.

Limitation 1: ............................................................................................................................................

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Limitation 2: ............................................................................................................................................

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[Total: 2]

12 Identify four reasons why a new business might be at greater risk of failure than an established business.

Reason 1: .................................................................................................................................................

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Reason 2: .................................................................................................................................................

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Reason 3: .................................................................................................................................................

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Reason 4: .................................................................................................................................................

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[Total: 4]
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13 Pamela is a successful entrepreneur. She is the owner of a gift shop selling celebration cards, toys and candy
(sweets). When Pamela started her business 30 years ago she had no help to manage the shop. She now has
5 employees. Pamela knows maintaining customer loyalty is important. She uses competitive pricing. Most
of her marketing budget is spent on sales promotion. Pamela does not use e-commerce.

Do you think being a risk-taker is a more important characteristic of a successful entrepreneur than being
creative? Justify your answer.

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[Total: 6]
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14 Gareth is planning to start a car washing business using government support. He is analysing market research
data to help him make important decisions about his business. Extracts from this data are shown in Figure
A and Figure B. Gareth said: ‘I will need to set business objectives.’ He plans to keep his business small.
Gareth is worried about the possible effects of higher taxes.

Do you have a car? Average price paid for car wash

23% $6.34
77%

Yes No

Figure A Figure B

Do you think offering financial help, such as grants, is the best way for a government to support business
start-ups? Justify your answer.

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[Total: 6]
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15 Identify two possible reasons why an owner might want their business to remain small.

Reason 1: .................................................................................................................................................

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Reason 2: .................................................................................................................................................

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[Total: 2]
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16 Nancy wants to be an entrepreneur. She has analysed market research data and decided to start up a book
shop. Nancy has identified a suitable location and prepared a business plan. Nancy is calculating her total
costs. She will use this information to help her complete a break-even chart as shown in the figure below.
Nancy is also considering using e-commerce.

Explain two ways having a business plan could help Nancy.

Way 1: ......................................................................................................................................................

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Explanation: ............................................................................................................................................

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Way 2: ......................................................................................................................................................

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Explanation: ............................................................................................................................................

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[Total: 6]
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17 Tom started ALB 5 years ago making trainers (sneakers) out of sustainable materials such as wool. One of
ALB’s objectives is to protect the environment. ALB uses retailers to distribute its products. Tom thinks a
successful entrepreneur has to be a good manager.

Do you think a successful entrepreneur has to be a good manager? Justify your answer.

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[Total: 6]

18 Identify two reasons why a government might support business activity.

Reason 1: .................................................................................................................................................

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Reason 2: .................................................................................................................................................

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[Total: 2]
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19 GCF is a public limited company. It provides a range of computer services to businesses including designing
websites and creating apps. The Human Resources Director use ideas based on Maslow’s Hierarchy of Needs
to help keep GCF’s 250 employees well-motivated. GCF plans to expand by taking over one of its competitors.
This will cost $50m. To finance the takeover, GCF is considering issuing new shares.

Do you think the number of employees is the best way to measure the size of a tertiary sector business?
Justify your answer.

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[Total: 6]
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20 CPK operates 5 sports clubs. Each club offers a range of activities including gym and yoga classes. CPK
uses job enrichment to keep its 60 employees well-motivated. Having the right marketing mix is important
to CPK’s success. The Finance Director is analysing CPK’s financial statements. An extract is shown in the
table below. He wants to know how an increase in taxation might affect CPK’s business.

Extract from CPK’s financial statements

2020 2021

Current ratio 1.6 1.3

Profit margin 12% 10%

Non-current assets $2m $2m

Outline two ways CPK might be affected by an increase in taxation.

Way 1: ......................................................................................................................................................

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Way 2: ......................................................................................................................................................

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[Total: 4]

21 Define ‘recession’.

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[Total: 2]
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22 CTF is a public limited company. It manufactures beds using batch production. The Operations Director is
using break-even analysis to calculate the margin of safety for children’s beds. An extract from CTF’s output
data is shown in the table below. The Operations Director wants to know how an increase in inflation might
affect CTF. She knows there are many environmental pressures that a manufacturing business could respond
to.

Extract from CTF’s output data (children’s beds per month)

Break-even output 14 000

Current level of output 18 000

Maximum factory output 25 000

Outline two ways an increase in inflation might affect CTF.

Way 1: ......................................................................................................................................................

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Way 2: ......................................................................................................................................................

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[Total: 4]
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23 Gareth is planning to start a car washing business using government support. He is analysing market research
data to help him make important decisions about his business. Extracts from this data are shown in Figure
A and Figure B. Gareth said: ‘I will need to set business objectives.’ He plans to keep his business small.
Gareth is worried about the possible effects of higher taxes.

Do you have a car? Average price paid for car wash

23% $6.34
77%

Yes No

Figure A Figure B

Outline two ways higher taxes might affect Gareth’s business.

Way 1: ......................................................................................................................................................

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Way 2: ......................................................................................................................................................

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[Total: 4]
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24 Aurelie is a sole trader. She started her small hotel 1 year ago using government support. Aurelie knew it
would be important to build good customer relationships. Aurelie wants to analyse her financial statements
using ratio analysis. An extract is shown in the Table. She is worried about how the Government’s plan to
introduce a new tourist tax of $1 per tourist per night might affect her business.

Extract of Aurelie’s Income statement for 2020 ($)

Revenue 5 600

Cost of sales 1 800

Gross profit X

Expenses 2 400

Profit Y

Explain two ways that the introduction of a new tourist tax might affect Aurelie’s business.

Way 1:.......................................................................................................................................................

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Explanation:.............................................................................................................................................

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Way 2:.......................................................................................................................................................

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Explanation:.............................................................................................................................................

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[Total: 6]