2023 exam questions

Question 1

Define monopolistic competition

Answer 1

Many relatively small businesses, no dominant businesses, few barriers to entry, similar products with some differentiation and little control over prices most likely price takers.

Question 1

Define a monopoly

Answer 1

A single or dominant business within a market (could be a pure monopoly with 100% market share or, most likely, a business with 25% or more market share, which could be regarded as a monopoly according to UK/EU competition authorities) high barriers to entry, price makers and high economies of scale

Question 2

Define oligopoly
examples are sainsburys, ASDA, Tesco etc

Answer 2

A few large companies dominate the market in terms of sales, revenue/market share as well as which there may be many small firms but only a few dominate. brand loyalty, strong brand identity and some barriers to entry do exist.

Question 3

Two types of internal economies of scale and how these can lead to a change in unit costs

Answer 3

1) Purchasing economies of scale - purchasing higher quantities of raw materials from suppliers may lead to being able to negotiate discounts for buying in bulk, which leads to a fall in average unit costs
2) Technical economies of scale - investing in more advanced technology or using new methods of production can increase productivity and efficiency and therefore result in lower average unit costs

Question 4

Outline three possible reasons for a change in profit

Answer 4

-Advertising costs
-Increase wages costs
-increased competition which decreased revenue

Question 5

Evaluate the change in profits on stakeholders (10)
PEK +HDB x 2/3 +LTQ
conclusion

Answer 5

*customers who live in the local area - If prices increase to increase profits then low income customers will not be able to afford the service. Depends on how much the price increases by and the brand loyalty - depends on if theres a change in quality

*Owner - increase stress and may -> ability to make appropriate decisions -> shut business down. Depends on her ability to work under pressure and make suitable decisions

*Competitors - likely to benefit -> more customers -> increased sales and revenue. Depends on brand loyalty -> customers may not switch to competitors

*Internal stakeholders may be impacted the most, as external e.g. customers can gain service from rivals but internal may loose jobs etc

Question 6

Benefits of bank loan

Answer 6

(+) May be able to gain advice
(+)Immediately available if agreed
(+)Control isn’t lost/compromised
(+)Allow for budgeting/cost control because of fixed monthly payments

Question 7

Draw backs of a bank loan

Answer 7

(-)Interest
(-)May not qualify

Question 8

Define the term job analysis

Answer 8

Part of the recruitment process that occurs after a vacancy has been identified. It includes identifying in detail, the skills, responsibilities, duties and knowledge required to carry out the position

Question 9

Define the term labour productivity

Answer 9

The measure of efficiency of the workforce. Can be measured by divided the output by the number of workers over a period of time.

Question 10

Labour turnover formula

Answer 10

Number of leavers/average number of employees x100

Question 11

Analyse the possible reasons for a change in labour turnover (decrease labour turnover)(6)
AO1, AO2 and AO3

Answer 11

AO1) Labour turnover is the rate at which employees leave a business. Employees may leave the business due to retirement, to work for competitors or they are unhappy with working conditions/pay.
AO2) analyse data - the lower the labour turnover the better
AO3) increase job security
increase motivation as there is a chance of promotion

Question 12

Outline the difference between quality control and quality assurance (2)

Answer 12

Quality control is based on inspection of a sample of finished products. Quality control occurs at the end of the production process

Quality assurance is a system of agreed quality standards at each stage of production. Quality checks are carried out by employees throughout the production process. It focuses on the prevention of poor quality

Question 13

Define the term lean production

Answer 13

Lean production aims to remove/eliminate waste from the production process and as a result it increases productivity by minimising the use of resources and reduces cost, whilst maintaining quality.

Question 14

How to calculate re-order quantity

Answer 14

maximum stock level - the stock level when ordering stock

Question 15

What is meant by buffer stock? How to describe the use of a buffer stock.

Answer 15

The number of units between the minimum stock level and zero.
*The buffer stock was used in week … and week…, although the buffer stock was used it did not reach 0 before it was replenished

Question 16

Recommend whether … should adopt a JIT system

Answer 16

NO - demand is variable and inconsistent and if the products are perishable this would not be suitable
Depends - on if the supplier could meet demands to deliver more frequently
Yes - May decrease costs by decreasing rent

Question 17

What are two types of JIT systems

Answer 17

Kaizen - continually making small incremental steps in the improvement of quality, design and waste reduction.
Kanban - Regular and timely supply of components. ensuring the right parts are in the right place at the right time

Question 18

Advantages and disadvantages of a JIT system

Answer 18

(+)factory space can be freed up for more productive use
(+)motivation is improved as employees are given greater responsibility and encouraged to work in teams
(+)lead times are cut
(+)Costs decrease
(-)reputation can be damaged if customers are let down by late deliveries as no buffer stocks are held
(-)a lot depends on the reliability and flexibility of suppliers
(-)Difficult to cope with unexpected, sudden increases in demand
(-)Puts pressure on staff because of added responsibility associated by a JIT system - may affect motivation

Question 19

Cost-plus pricing definition

Answer 19

price is determined by adding a profit percentage to the average cost of producing the good

Question 20

Cost-plus pricing evaluation

Answer 20

(+)Ensures all costs are covered
(+)Niche market - may be willing to pay more (-)doesn’t aim for mass market
(-)May affect demand - depends on price/income elasticity
(-)Completely ignores the market

Question 21

Competitive pricing definition

Answer 21

Involves the producer offering goods for sale at a price at or below that set by competitors.Prices tend to be broadly in line with competitors

Question 22

Competitive pricing evaluation

Answer 22

(+)In line with customer expectations - customer satisfaction
(+)Easy to implement compared to cost-plus - only requires basic research into what other competitors are charging
(-)Customers may be used to buying from competitors so revenue might not change / customers may not switch from rivals - depends on brand/customer loyalty
(-)Product may blend in with others and may loose potential benefits. Differentiation

Question 23

pricing strategy - depends on

Answer 23

-objectives
-market
-competition
-if the business is new (competitive may be safer, however depends on whether they can break even/ make a profit)
-market research

Question 24

Control vs empowerment

Answer 24

Empowerment gives employees the power to use their initiative make decisions and be creative. May lead to increase job satisfaction and motivation.
Control involves more monitoring and support.

Question 25

Control vs empowerment evaluation

Answer 25

Control:
(+)Mc Gregors Theory X explains the importance of heightened supervision, external rewards, and penalties. May b useful when employees have little ambition. Can ensure quality and quantity doesn’t fall.
(+)May mean having improved communication and support
(-)May give employees less opportunity to be creative and work in a way that best suits them
(-)May not always be beneficial or useful to control a workforce- employees may feel they are not being listened to/ not valued if the control is too strict and non-cooperative

Empowerment:
(+)increased productivity and quality
(+)decreased staff turnover increase job satisfaction
(-)Theory y managers may give their employees too much freedom - loose focus and steer away from business objectives
(-)Less- motivated employees may take advantage of the freedom and not be productive - decrease reputation, quality, quantity etc

Question 26

Control vs empowerment depends on

Answer 26

*The market
*Staff experience, skills and knowledge
*The employees - e.g. their moivation/what they are motivated by (Mcgregors theory - theory X managers assume employees are only motivated by money)

Question 27

What are three reasons why consumers sometimes need protection from exploitation by businesses

Answer 27

-Ensure product is fit for purpose
-some consumers are especially vulnerable e.g. elderly people and people with disabilities
-Prevent being mislead about a product/service and ensure its so a standard quality

Question 28

formula for net cash flow

Answer 28

TR-TE or inflows - outflows

Question 29

Formula for break even

Answer 29

FC/CPU

Question 30

CPU formula

Answer 30

selling price per unit - variable costs per unit

Question 31

Gross profit formula

Answer 31

sales revenue - cost of sales

Question 32

Net profit formula

Answer 32

GP - expenses

Question 33

Gross profit margin formula

Answer 33

GP/revenue x 100

Question 34

Net profit margin formula

Answer 34

NP/Revenue x100

Question 35

PED formula

Answer 35

%change in quantity demanded/ %change in price

Question 36

YED formula

Answer 36

%change in quantity demanded / %change in income

Question 37

Labour productivity formula

Answer 37

output per time period / number of employees

Question 38

Two impacts on a business if they don’t control its cash flow

Answer 38

-unable to generate a desirable amount of profit
-may affect their ability to get a loan

Question 39

Two ways cash flow can be improved

Answer 39

1) Increasing revenue e.g. increase selling price
2)Decreasing costs e.g.changing suppliers or negotiating a cheaper/ better price

Question 40

Two reasons why entrepreneurs are important to the UK economy

Answer 40

1)Increasing spending in local economies can improve facilities, increase employment and provide incomes, and pay tax to government
2)Entrepreneurs operating in the secondary sector can buy resources from the primary sector and sell finished goods to the tertiary sector

Question 41

Inferior products

Answer 41

-Have negative income elasticity of demand, demand rises when income falls e.g.supermarket own brand products
-An increase in income may lead to a decrease in demand for inferior products as some people may switch to more expensive/branded and higher quality alternatives, as they become more affordable

Question 42

Although consumer incomes affect the demand for products, what else affects demand?

Answer 42

• a change in consumer taste

Question 43

Advantages and disadvantages of using management by objectives (MBO)

Answer 43

(+)Improved management control of the organisation. Managers know who is doing
what and what they are supposed to be achieving. Clarity of goals.The work of departments and managers are co-ordinated. Everyone is working together towards a common goal.
(+)It can motivate the workforce. When managers at all levels are involved in setting and agreeing on objectives, they will have a commitment to ensuring that objectives and goals are achieved. Involving all employees in the whole process of goal setting will give employee empowerment. This increases employee job satisfaction and
commitment
(-)Management time is spent on the process of setting objectives rather than managing the organisation.
(-)loss of focus means managers concentrate on short-term objectives at the cost of
ignoring the long-term goals.