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TEST CODE 000851
FORM TP 22151 Signature MAY/JUNE 2002

CARIBBEAN EXAMINATIONS COUNCIL

SECONDARY EDUCATION CERTIFICATE
EXAMINATION
PRINCIPLES OF BUSINESS

.i Paper 01 - General Proficiency

I J~ lio11rs
( '04 JUNE 2002 (p.m.) )

READ THE FOLLOWING DIRECTIONS CAREFULLY

I. In addilion to this test booklet, you should have an answer sheet.

2. Each item in this test has four suggested answers lettered (A), (B), (C), (D). Read each item you
are about to answer and decide which choice is best.

3. On your answer sheet, find the number which corresponds to your item and blacken the space
having the same letter as the answer you have chose'!. Look at the sample item below.

Sample Item
The money a business receives from the sale
-
of goods or services is called its Sample Answer
(A)
(B)
assets
capital
0®•@
(C) income

-
I
(D) resources

The best answer to this item is "income", so answer space (C) has been blackened.

4. If you want to change your answer, be sure to erase your old answer completely and fill in your
new ,choice.

5. When you are told to begi,n, turn the page and work as quickly and as carefully as you can. 1f you
cannot answer an item, omit it and go on to the next one. You can come back to the harder item
later. Your score will be the total number of correct answers.
.

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1. The fact that more than one type of eco- Item 5 refers to the following information.
nomic· system exists in the world today is
attributable MAINLY to the fact that A joint stock company issued ten thousand
$2,six percent shares at a premium of 12Y,
{A) there are numerous countries in the percent, all of which were fully subscribed·
world and duly paid up.
(B) people of different countries have
different religious and political 5. How much money will be recorded as
ideologies share capital?
(C) each system is modeled to cope
with a different type of economic (A) $10 000
problem (B) $20 000
(D) different methods can be used to (C) $21 200
solve the same economic problem (D) $22 500

2. Which of the following changes will NOT 6. Broad policies for Public and Private Com-
necessarily result from a decision to have panies in the Private Sector are formulated
employc;es specialize? by the

(A) Increased standardization of goods (A) shareholders.

(B) Improvement in the efficiency of (B) board of directors.
labour . (C) company secretary.
(C) Improvement in working conditions (D) managing director.
(D) Increased production

7. Which of the following can be regarded as a

3. Private enterprise is run MAINLY to benefit to Caribbean countries from the
estab Iishment of multinational corporations?
(A) create profit.
(B) reduce inflation. {A) Employment
(C) distribute goods and services fairly. {B) Repatriation of profits
(0) provide jobs for more people. {C)· Depletion of material resources
{D) Reduction of national ownership

4. A public limited company in the pri.vate

sector is normally established by 8. Which of the following are the financial
functions of a business organization?
(A) members of the public
(B) an act of parliament I. Payment
(C) a statutory meeting of the national I[. Budgeting of the business
Chamber of Commerce [[ [. Costing all activities
(D) registration under the Companies IV. Advertising its produce
Act
(A) I and II only
(B) I, II and Ill only
(C) I, Ill and IV only
(D) II, III and IV only

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9. Which of the following is LEAST likely to 13. Which of the following management prac-
result from growth in an organization? tices would contribute to the success of a
business?
(A) Increased capital investment
(B) More division of labour I. Pricing at maximum mark-up
(C) Greater productivity II. Paying attention to the quality of
(D) Increased communication goods or services sold
Ill. Communicating with employees
IV. Earning maximum profits for
10. A major role of a trade union is to encourage owners

(A) staff to strike whenever they have (A) I and II only

problems at work (B) II and Ill only
(B) management to pay higher salaries (C) II and IV only
and give longer vacations to staff (D) II, Ill and IV only
(C) advancement of the welfare of its
members
(D) staffto become members ofthe union 14. Whichofthefollowingresponsibilitiesmust
be assumed by the management of a com-
pany?
11. For employees to produce to their maxi-
mum which of the following is important? I. Maximising efficiency and creat-
ing surpluses
I. Suitable working conditions II. Maintaining good communication
II. Holiday with pay and human relations
Ill. Good human relationship III. Producing goods of a marketable
IV. Creating surplus quality
IV. Detennining dividends to be paid
(A) I and II only to shareholders
(B) I and Ill only
(C) II and IV only (A) I only
(D) Ill and IV only (8) l and IV only
(C)" I, II and IV only
(D) I, II, III and IV
12. Mr Gyma, the General Manager of Z Co.,
never discusses problems with workers or
listens to suggestions from his employees. 15. A laissez-faire leader can be described as
His leadership style can be described as one who
being
(A) is very constructive about what he
(A) authoritarian. does
(8) democratic. (B) listens to others and takes a reason-
(C) laissez-faire. able view of what is said
(D) bureaucratic. (C) stays in the background and allows
subordinates to make their own
decisions
(D) decides what to do despite what
others may think

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16. Ifthe opening stock figure was overstated 20. Which of the following practices may be
by $1500, the effect on the net profit figure MOST appropriate in solving the
would be unemployment problem in developing
cou"ntries where the labour force is large?
(A) a decrease of $3 000.
(B) an increase of $1 500. I. Greater production through increased
(C) a decrease of $1 500. labour
(D) an increase of $3 000. II. Increased mechanisation
III. Increase in vocational training
programmes
17. Which of the following contracts MUST IV. Increase in salaries
be evidenced in writing?
(A) !only
(A) Purchase of a bus-ticket (B) I and III only
(B) Purchase of a radio (C) II and III only
(C) Purcha5e of a lot of land (D) II and IV only
(D) Purchase of a car for cash

21. Wealth set aside for the production of fur-

18. IfAlbert fraudulently represents himself to ther wealth is termed
be John and induces Peter to make a con-
tract with him, the contract is (A) banking.
(B) commerce.
(A) void (C) capital.
(B) voidable (D) saving.
(C) ultra vires
(D) discharged
22. What is the MOST LIKELY effect on a
developing economy when professional and
19. Which of the following is an example of skilled labour migrate to developed coun-
extractive production? tries?

(A) Agriculture (A) Unskilled labourers can demand

(B) Communication higher wages.
(C) Manufacturing (B) The demand for skilled labour and
(D) Tourism professional services will decrease.
(C) U nski lied labourers can work harder.
(D) Production levels of goods and
services will decrease.

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Items. 23 - 24 refer to the following infor- 28. Which of the following practices does NOT
mation. result from mechanization?

For each phrase, select one heading which (A) Production is increased.
is MOST closely related to it. Each head- (B) Goods are produced to ··a standard
ing may be used once, more than once, or pattern.
not at all. (C) People may be needed for manual
work.
(A) Unemployment (D) The specialist becomes more
(B) Migration skilled in his work.
(C) Underemployment
(D) Brain drain
29. The advantages which a finn may achieve
by significantly increasing the size of its
23. The movement of educated, skilled people output are known as
to settle in other industrialised countries?
(A) effects of large scale production
(B) economies of scale
24. The holtling of jobs for which employees (C) risk-bearing economies
are overqualified? (D) economies of concentration

25. Which of the following is the simplest form 30. Which of the following describes capital-
of production? intensive industry?

(A) Subsistence (A) Large amounts of capital and very

(B) Domestic consumption little labour
(C) Surplus and export (B) Large amounts of labour and very
(D) Cottage industry little capital
(C) All capital and no labour
(D) Capital and labour in the same pro-
26. Primary production is concerned with the portion

(A) distribution of goods

(B) providing goods to meet essential 31. A country has a favourable balance of trade
needs when
(C) provision ofraw materials
(D) manufacture of goods (A) it exports more than it imports
(B) it imports more than it exports
(C) there are no restrictions to trade
27. A bulk increasing industry should be sited (D) imported goods are cheaper
near its

(A) source of raw materials

(B) m;:1rket
(C) bank
(D) source of power

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32. A company wishes to introduce a new break- 35. Which of the following is responsible for
fast cereal aimed particularly at small chil- 'breaking bulk'?
dren. Which techniques of advertising are
LIKELY to make the children ask their par- (A) Manufacturer
ents to buy the cereal? (B) Wholesaler
(C) Retailer
I. Emphasize the nutritional value. (0) Consumer
II. Package it in a brightly coloured
box.
Ill. Enclose free gifts of toys and puz- 36. Before exporter B sent goods to importer A
zles. he insured the consignment and paid the
IV. Compose attractive jingles and have captain of the vessel the charge for car-
them played regularly on the radio. nage. Goods were shipped

(A) I, Ill and IV only (A) f.o.b.

(B) III, IV and II only (B) c.i.f.
(C) IV, II and I only (C) f.a.s.
(0) I, II and III only (D) c.o.d.

33. Which of the following activities carried 37. If an exporter quotes prices CIF, it means
out in a firm will NOT be under the super- that the
vision of the marketing manager?
(A) e\'porter pays the freight
(A) Packaging (B) importer pays the freight
(B) Advertising (C) exporter pays insurance and freight
(C) Distribution (D) importer pays insurance and freight
(0) Purchasing

38. If you were not sure of a customer's ability

34. Which of the following is an example ofa to pay for an order by which of the follow-
cottage industry? in_g means would you request payment?

(A) Making cabbage baskets at home [. A _crossed cheque

for sale II. A money order
(B) A car-parts business operated from III. A bank draft
home IV. A promissory note
(C) A hire-care business run from home
(D) A plant nursery run from home (A) I and IV only
(B) III, 11, 1 and IV
(C) II and Ill only
(D) I, II and III only

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Items 39 - 40 refer to the following dia- 43. Which ofthe followingtypesofinsurlince is a

gram. government likely to require each employed
individual to pay?

(A) National insurance

(B) Liability insurance
{C) Life insurance
(D) Car insurance

44. Which of the following is the MOST im-

Signed: L. Stanley portant use of collateral security to the
borrower?

(A) It can be sold if the borrower fails

to pay.
39. The document above may be described as (B) It gives the banker an idea of the
state of the business.
(A) an order cheque (C) It establishes the financial position
(B) a promissory note of the borrower.
(C) a bearer's cheque (D) It improves the borrower's chance
(D) a Bill of Exchange of getting a loan.

40. Mr. Fray, in the document, is referred to as Items 45 - 47 refer to the following:
the
The group below consists of four lettered
(A) payee headings followed by a list of numbered
(B) endorsee phrases. Select one heading which is most
(C) drawee closely related to it. Each heading may be
(D) payer used once, more than once or not at all.

(A) Income Tax

41. Tom invests his savings by buying shares (B) Corporation Tax
in a company. From this investment Tom (C) Excise duty
expects to receive (D) Customs duty

(A) dividends.
(B) profits. 45. Tax paid on wages and salaries
(C) interest.
(D) revenue. 46. Tax paid by companies

47. Tax paid on goods entering the country

42. A court order requiring an employer to
deduct money from an employee for pay-
ment of ti'is debts is known as

(A) garnishment.
(B) demand.
(C) withdrawal.
{D) [evenue.

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Item 48 is based on the following infonnation. Items 50-52 refer to the following.

Loleen lives in a country where the follow- for each numbered statement select the one
ing tax structure exists. heading which is most closely related to itand
mark the corresponding letter on the answer
sheet. Each heading may be used once, more
TYPE OF TAX % than once, or not at all.

Stamp Duties 10 (A) Pure competition

Capital Gains Tax 12 (B) Pure monopoly
Corporation Tax 25 (C) Monopolistic competition
Customs Duties 30 (D) Oligopoly

48. What percentage of tax is paid by Loleen if 50. Price is unaffected by the behaviour of the
she sells a building for a profit of$ l .Sm? individual buyer or seller and is established
for the entire industry.
(A) 10%
(B) 12% 51. The price allows the firm abnonnal profit
(C) 25% though its marginal cost equals its marginal
(D) ~0% revenue.

52. Price equals the finn' s average cost, mar-

49. ginal cost and marginal revenue.
Demand Supply

53. If a Caribbean country should devalue its

Price currency, it is MOST likely that
$
(A) its imports would become cheaper
and its exports would become more
Demand
Supply expensive
Potatoes (Kg) (B) its imports would become more
expensive and its exports would
Using infonnation from the diagram above, become cheaper
which of the following statements can be (C) both its imports and exports would
deduced? become more expensive
(D) both its imports and exports would
l. More potatoes are demanded at a become cheaper
lower price.
I
j II. Fewer potatoes are supplied at a
higher price.
V III. More potatoes are supplied at a
lower price.
IV. Fewer potatoes are demanded at a
higher price.

(A) l and ll only

(B) I and IV only
(C) l, ll and III only
(D) ll, Ill and IV only

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54. Whichofthefollowingpractices would NOT Item 58 refers to the following diagram.

contribute to the economic development and
growth ofa community?

(A) Increased use of the country's natu-

ral resources
(B) Increased importation of consumer
goods
(C) Provision of loans and technical
assistance for establishing local
businesses
(D) Provision of more infrastructure
within the country D

55. International· trade owes its origin to

58. What is the movement downwards along
(A) countries with large populations not the curve known as?
having sufficient goods
(B) the varying resources of different (A) Extension of demand
regions (B) Contraction of demand
(C) the fact that countries desired to (C) Increase in demand
have greater contact with each (D) Decrease in demand
other
(D) the great need for foreign exchange
by most countries 59. Which of the following features is a disad-
vantage of nationalisation?

56. Which of the following is the distinguish- (A) Profits remain in the country.
ing characteristic of a low standard of (B) Jobs are provided for more people.
living? (C) Losses are met by the taxpayers.
(Q) Essential services are provided at
(A) Primary school education lower prices.
(B) Short life expectancy
(C) Persistent ill health
(D) Living in unhealthy conditions 60. Which of the following are MAJOR eco-
nomic problems facing many Caribbean
countries today?
57. Most English speaking Caribbean tcrrito-
ries are members of all the following or- L High levels of unemployment
ganizations EXCEPT IL Adverse balance of payments
Ill. Low productivity in manufactur-
(A) CDB v ing
(B) OPEC .; IV. Lack of capital for investment
(C) CARICOM ~
(D) 'ACP (A) I and II only
(B) II and Ill only
(C) I, II, lil and IV
(D) I, Ill, and IV only

IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST.

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