MCQ Questions for Class 12 Business Studies Chapter 3 Business Environment

Business Environment Class 12 MCQ Questions With Answers

Question 1.

Even though the political conditions vary from country to country, they impact the sentiment of an investor in the business, if the instability of the political conditions cause uncertainty and make it difficult for him to predict the future. Which feature of the business environment is being highlighted in the above statement?

(A) Specific and general forces
(B) Dynamic nature
(C) Relativity
(D) All of the above
Answer:
(D) All of the above

Explanation:

Business environment includes both specific and general forces. Business environment is dynamic, i.e., it keeps on changing whether in terms of technological improvement, shifts in consumer preferences or entry of new competition in the market. Business environment is a relative concept since it differs from country to country and even region to region.

MCQ Questions for Class 12 Business Studies Chapter 3 Business Environment

Question 2.

“The increase in the demand for many Ayurvedic medicines, health products and services in the past few months, is related to the need for building immunity and an increased awareness for health care due to the spread of Coronavirus.” Identify the feature of business environment being described above.

(A) Specific and general forces
(B) Inter-relatedness
(C) Relativity
(D) None of the above
Answer:
(B) Inter-relatedness
Explanation:
Different forces of business environment are interrelated to each other. One component of the business environment affects the functioning of other components.

Question 3.

Which of the following is the feature of Business Environment?

(A) It is a relative concept since it differs from country to country and even region to region.
(B) It enables the firm to identify opportunities and getting the first mover advantage.
(C) It helps in tapping useful resources.
(D) All of the a bove
Answer:
(A) It is a relative concept since it differs from country to country and even region to region.

Explanation:
Business environment is a relative concept whose impact differs from country to country, region to region and firm to firm. Political conditions in the USA, for instance, differ from those in China or Pakistan. Similarly, demand for sarees may be fairly high India whereas it may be almost non-existent in France.

MCQ Questions for Class 12 Business Studies Chapter 3 Business Environment

Question 4.

The term ‘Business Environment’ means the sum total of:

(A) All individuals.
(B) Institutions.
(C) Other forces that are outside the control of a business enterprise.
(D) All of the above
Answer:
(D) All of the above

Explanation:
The economic, social, political, technological and other forces which operate outside a business enterprise are part of its environment. So also, the individual consumers or competing enterprises as well as the governments, consumer groups, competitors, courts, media and other institutions working outside an enterprise constitute its environment.

Question 5.

“The shift of demand from soft drinks to juices is an opportunity for juice companies and threat for soft drink companies.” Identify the feature of business environment:

(A) Relativity
(B) Complexity
(C) Uncertainty
(D) Dynamic
Answer:
(D) Dynamic

Explanation:
Business environment is dynamic, i.e., it keeps on changing whether in terms of technological improvement, shifts in consumer preferences or entry of new competition in the market.

MCQ Questions for Class 12 Business Studies Chapter 3 Business Environment

Question 6.

Which of the following statements is incorrect?

(A) Business environment is a relative concept.
(B) Business environment is the sum total of all things internal to business firms.
(C) Opportunities refer to the positive internal trends or changes that will help a firm to improve its performance.
(D) None of the above
Answer:
(B) Business environment is the sum total of all things internal to business firms.

Explanation:
The term ‘business environment’ means the sum total of all individuals, institutions and other forces that are outside the control of a business enterprise but that may affect its performance.

Question 7.

“The components of business environment keep on changing due to changes in various circumstances.”
This shows that business environment is

(A) Dynamic
(B) Uncertain
(C) Complex
(D) Relative
Answer:
(A) Dynamic
Explanation:
Environmental change is concerned with the degree to which an organisation’s environment is dynamic and ever-changing. Change in environment occurs in areas like product, market, law or technology. However, some environmental factors such as technological and competitive environmental factors are changing faster than g the political environment. –

MCQ Questions for Class 12 Business Studies Chapter 3 Business Environment

Question 8.

Match the FEATURES of Business Environment in Column I with the appropriate EXPLANATION in Column II.

Column I Column II
(a) Complexity (i) Very difficult to predict future happenings
(b) Specific forces (ii) Easier to understand in parts but difficult to grasp in its totality
(c) Uncertainty (iii) Affect individual enterprises directly and immediately

(A)(ii), (iii), (i)
(B) (iii), (ii), (i)
(C) (ii), (i), (iii)
(D) (iii), (i), (ii)

Answer:
(A)(ii),(iii),(i)

Question 9.

“Even after opening up of the Indian economy in 1991 foreign companies found it extremely difficult to cut through the bureaucratic red tape to get permits for doing business in India, which created a negative impact on business.”Identify the dimension of the business environment which led to creation of the negative impact on business.

(A) Social Environment
(B) Technological Environment
(C) Political Environment
(D) Legal Environment
Answer:
(C) Political Environment

Explanation:
Political Environment means that the actions were taken by the government, which potentially affect the routine activities of any business or company on a domestic or at the global level.

MCQ Questions for Class 12 Business Studies Chapter 3 Business Environment

Question 10.

Which of the following is not an element of social environment?

(A) Birth and death rate
(B) Constitution of the country
(C) Population shifts
(D) Life expectancy
Answer:
(B) Constitution of the country

Explanation:
Constitution of the country „ is an element of legal environment. Legal Environment includes various laws passed by the government, administrative orders issued by government authorities, court judgments as well as decisions rendered by the central, state or local governments.

Question 11.

Which of the following dimensions of Business Environment includes legislations passed by the government administrative orders issued by government authorities?

(A) Technological Environment
(B) Social Environment
(C) Legal Environment
(D) Economic Environment
Answer:
(C) Legal Environment

Explanation:
Legal environment consists of rules and regulations, framed by the “ Parliament, under which business must operate. To exist and grow, business is required to follow all the rules and regulations that constitute this environment.

MCQ Questions for Class 12 Business Studies Chapter 3 Business Environment

Question 12.

‘The current government initiated Make in India Programme which is good for the manufacturing sector.’
Out of the following, identify the component of Business Environment quoted in the above lines.

(A) Economic
(B) Political
(C) Legal
(D) Technological
Answer:
(B) Political

Explanation:
Political Environment consists of forces such as political stability and peace in the country and attitude of the ruling party and its representatives towards business. These forces significantly affect the functioning of business.

Question 13.

“Increase in the use of mobile phones and i-pods instead of papers and radio” refers to an example of key component of general environment of business. Identify the component of business environment.

(A) Technological
(B) Political
(C) Legal
(D) Economic
Answer:
(A) Technological

Explanation:
Technological environment includes forces relating to scientific improvements and innovations which provide new ways of producing goods and services and new methods and techniques of operating business.

MCQ Questions for Class 12 Business Studies Chapter 3 Business Environment

Question 14.

“Due to enforcement of Euro-IV emission norms, an automobile company had to phase out one of its model.” Identify the dimension of environment highlighted in the given statement.

(A) Technological
(B) Political
(C) Legal
(D) Economic
Answer:
(C) Legal
Explanation:
Legal environment consists of legislation that is passed by the Parliament and state legislatures. Legal environment consists of the legal framework within which business has to function, including legislation passed by the government, administration orders, court judgement, etc.

Question 15.

Which of the following statements is true with respect to political environment?

(A) It include the social forces like customs and traditions, values, social trends, society’s expectations from business, etc.
(B) It includes forces relating to scientific improvements and innovations.
(C) It includes political conditions such as general stability and peace in the country.
(D) None of the above
Answer:
(C) It includes political conditions such as general stability and peace in the country.

Explanation:
Political environment is the outcome of a combination of various ideologies advocated by different political parties. It includes political conditions such as general stability and peace in the country and the % political attitude of elected government towards business.

Question 16.

‘Service sector contributes to almost half of India’s GDP but employs only one-third of its workforce.’ Which of the following dimensions of Business Environment is stated in the above line?

(A) Economic
(B) Social
(C) Political
(D) Legal
Answer:
(A) Economic

Explanation:
Economic environment consists of economic factors that influence the business in a country. It consists of the factors and forces concerning with means of production and distribution of wealth, e.g. Gross Domestic Product, inflation rate, money supply, etc.

MCQ Questions for Class 12 Business Studies Chapter 3 Business Environment

Question 17.

Match the DIMENSIONS of Business Environment in Column I with their appropriate COMPONENTS in Column II.

(A) (ii), (iii), (i)
(B) (iii), (ii), (i)
(C) (iii), (i), (ii)
(D) (ii), (i), (iii)
Answer:
(B) (iii), (ii), (i)

Assertion And Reason Based MCQs

Directions: In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:
(A) Both (A) and (R) are true, and (R) is the correct explanation of (A).
(B) Both (A) and (R) are true, but (R) is not the correct explanation of (A).
(C) (A) is true, but (R) is false.
(D) (A) is false, but (R) is true.

Question 1.

Assertion (A): Changes in fashions and tastes of consumers may shift demand in the market from existing products to new ones.
Reason (R): Business environment is dynamic, i.e., it keeps on changing in consumer preferences.

Answer:
(A) Both (A) and (R) are true, and (R) is the correct explanation of (A).

Explanation:
Business environment is dynamic, i.e., it keeps on changing whether in terms of technological improvement, shifts in consumer preferences or entry of new competition in the market.

Question 2.

Assertion (A): The business environment helps in understanding the threats which are likely to happen in the future.
Reason (R): Environmental awareness can help managers to identify various threats on time and serve as an early warning signal.

Answer:
(A) Both (A) and (R) are true, and (R) is the correct explanation of (A).

Explanation:
Environment happens to be the source of many threats. Environmental awareness can help managers to identify , various threats on time and serve as an early warning signal.

Question 3.

Assertion (A): Business environment includes both specific and general forces.
Reason (R): General forces such as investors, customers, competitors and suppliers affect individual enterprises directly and immediately in their day-to-day working.

Answer:
(C) (A) is true, but (R) is false.

Explanation:
General forces such as social, political, legal and technological conditions have an impact on all business enterprises and thus, may affect an individual firm only f indirectly.

MCQ Questions for Class 12 Business Studies Chapter 3 Business Environment
Question 4.

Assertion (A): Interest rates, taxes, inflation, stock market indices, value of rupee, personal disposable income, unemployment rate, etc. are the factors which affect the economic environment.
Reason (R): The economic environment consists of an economic system, economic policies and economic conditions prevailing in a country.

Answer:
(A) Both (A) and (R) are true, and (R) is the correct explanation of (A).
Explanation:
Economic Environment consists of factors like inflation rates, interest rates, consumers’ incomes, economic policies, market conditions, etc. which affect the performance of a business firm.

Question 5.

Assertion (A): Understanding of legal knowledge is a pre-requisite for the smooth functioning of business and industry.
Reason (R): Legal environment includes various legislations passed by the Government, administrative orders issued by government authorities, court judgments as well as the decisions rendered by various commissions and agencies at every level of the government; Centre, State or Local.

Answer:
(B) Both (A) and (R) are true, but (R) is not the correct explanation of (A).
Explanation:
Non-compliance with the laws of the land can put business firms into legal problems.

Question 6.

Assertion (A): Shift in demand from propeller airplanes to jets and from typewriters to computer based word processors have all been responsible and creating new business.
Reason (R): Technological environment includes forces relating to scientific improvements and innovations, which provide new ways and techniques of operating a business.

Answer:
(A) Both (A) and (R) are true, and (R) is the correct explanation of (A).

Explanation:
Technological environment includes the discovery of new methods and techniques for the production of goods and services. Technological changes make available better methods of production and that makes the optimum use of the raw material possible.

MCQ Questions for Class 12 Business Studies Chapter 3 Business Environment

Question 7.

Assertion (A): Economic environment includes economic policies of the Government, including industrial, monetary and fiscal policies.
Reason (R): Business enterprises in India do realise the importance and impact of the economic environment on their working.
Answer:
(B) Both (A) and (R) are true, but (R) is not the correct explanation of (A).

Explanation:
The economic environment in India consists of various macro level factors related to the means of production and distribution of wealth which have an impact on business and industry.

Case-Based MCQs

I. Read the following text and answer the following questions on the basis of the same:

The name and taste of Coca-Cola is known to almost each and every individual in India as well as throughout the world. This carbonated soft drink holds the most market share in the soft drink market and got itself a special seat in each and every gathering. The Coca-Cola Company has on occasion introduced other cola drinks under the Coke name. The most common of these are Diet Coke, along with others including Caffeine free Coca-Cola, Diet Coke Caffeine free, Coca-Cola Zero Sugar, CocaCola Cherry, Coca-Cola Vanilla and the list goes on.

It has capitalized on each and every opportunity to market itself effectively and place itself in the middle of every gathering. The main reason for such an outstanding placement of product goes to the way they have established the connection between every occasion and the need for Coke to be present there, product design and creative advertising.

Question 1.

In the context of the above given case, identify one valid importance of Business Environment.

(A) Enables a firm to identify opportunities and getting first mover advantage
(B) Uncertainty
(C) Delay in action
(D) Pervasive function
Answer:
(A) Enables a firm to identify opportunities and getting first mover advantage

Explanation:
Environment provides numerous opportunities for business success. Early identification of opportunities helps an enterprise to be the first to exploit them instead of losing them to competitors.

Question 2.

Identify the feature of Business Environment which the Coca-Cola Company managed to get in their favour.

(A) Complex
(B) Specific and general forces
(C) Futuristic
(D) Mental Exercise
Answer:
(B) Specific and general forces

Explanation:
Business environment includes both specific and general forces. Specific forces (such as investors, customers, competitors and suppliers) affect individual enterprises directly and immediately in their day-to-day working. General forces (such as social, political, legal and technological conditions) have an impact on all business enterprises and thus, may affect an individual firm only indirectly.

MCQ Questions for Class 12 Business Studies Chapter 3 Business Environment

Question 3.

Which business environment did Coca-Cola majorly tap into ?

(A) Technological Environment
(B) Social Environment
(C) Political Environment
(D) Economic Environment
Answer:
(B) Social Environment
Explanation:
The social environment of business include the social forces like customs and traditions, values, social trends, society’s expectations from business, etc.
Question 4.

Which of the following is not a product of COCA- COLA?

(A) Diet Coke Caffeine free
(B) Coca-Cola Zero Sugar
(C) Coca-Cola Avocado
(D) Coca-Cola Cherry
Answer:
(C) Coca-Cola Avocado

II. Read the following text and answer the questions given below:

As the government has opened up its economy to Multinational Corporations, it has encouraged foreign companies to invest in some sectors of retailing. It has also put in place new rules and regulations for FDI (Foreign Direct Investment) in the retail sector. The FDI policy allows foreign investment through two modes. It may be either under the ‘automatic route’ or under the ‘approval route’ where prior approval of the Indian Government is required for any foreign investment in an Indian company which is carrying on retailing business in India.

Moreover, the policy also talks about ‘Single brand retailing’ like Nike or ‘Multi-brand retailing’ like Walmart. The argument is that customers can afford to purchase the products of these companies as their income is rising gradually. It will increase research and innovations in the retail sector which will provide new ways of producing goods as well as increase the variety of goods in the market. This will eventually improve the quality of life.

Question 1.

“As the government has opened up its economy to Multinational Corporations, it has encouraged foreign companies to invest in some sectors of retailing.” Identify which dimension of business environment is depicted here.

(A) Political environment
(B) Legal environment
(C) Technological environment
(D) Economic environment

Answer:
(A) Political environment

Explanation:
Political environment includes political conditions such as general stability and peace in the country and specific attitudes that elected government representatives hold towards business.

MCQ Questions for Class 12 Business Studies Chapter 3 Business Environment

Question 2.

“Customers can afford to purchase the products of these companies as their income is rising gradually.” Identify which dimension of business environment is depicted here.

(A) Social environment
(B) Legal environment
(C) Technological environment
(D) Economic environment
Answer:
Option (D) is correct

Explanation:
Economic environment refers to factors like interest rates, inflation rates and changes in disposable income of people, etc.which have an impact on business enterprise.
Question 3.

“It will increase research and innovations in the retail sector…” Identify which dimension of business environment is depicted here.

(A) Social environment
(B) Political environment
(C) Technological environment
(D) Economic environment
Answer:
(C) Technological environment

Explanation: Technological environment includes forces relating to scientific improvements and innovations which provide new ways of producing goods and services and new methods and techniques of operating a business.
Question 4.

“This will eventually improve the quality of life.” Identify which dimension of business environment is depicted here.

(A) Social environment
(B) Legal environment
(C) Technological environment
(D) Economic environment
Answer:
(A) Social environment

Explanation:
The social environment of business includes the social forces like customs and traditions, values, social trends, society’ expectations from business, etc.

MCQ Questions for Class 12 Business Studies Chapter 3 Business Environment

III. Read the following text and answer the questions given below:

The Government is considering an innovative proposal to launch a single card having the features of both debit and credit card in order to improve the existing card facility and to increase the ease and usage for the consumers to carry out monetary transactions. The card will have unique advantages as it could be used for making a variety of payments like utility bills, metro and bus tickets, parking fee, etc., other than shopping and cash withdrawal facility. After this announcement was made, many banks decided to bring out a similar product i.e., a debit-cum-credit card.

Your Bank Ltd., a private bank became the first one to exploit this opportunity. They launched a card called ‘DRCR Card’ in this era of increasing digitization. In order to improve their sales, a unique feature was added to the card that it could also be used for making international transactions within the home country and abroad as well. In order to meet the increasing demand of the customers and to capture the market, they planned to hire more sales force and marketing personnel to reach the end customer. They also trained their staff and prepared guidelines regarding the issue, usage, renewal, withdrawal and charges related to the new card.

Question 1.

” Your Bank Ltd., a private bank became the first one to exploit this opportunity.” Identify which of the following importance of understanding the business environment is discussed here:

(A) It helps in coping with rapid changes.
(B) It enables the firm to identify opportunities and getting the first mover advantage.
(C) It helps the firm to identify threats and early warning signals.
(D) It helps in improving performance.
Answer:
(B) It enables the firm to identify opportunities and getting the first mover advantage.

Question 2.

“…order to improve the existing card facility and to increase the ease and usage …” Identify which of the following importance of understanding the business environment is discussed here:

(A) It helps in assisting in planning and policy formulation.
(B) It enables the firm to identify opportunities and getting the first mover advantage.
(C) It helps the firm to identify threats and early warning signals.
(D) It helps in improving performance.
Answer:
(C) It helps the firm to identify threats and early warning signals.

Explanation:
Environmental awareness can help managers to identify various threats on time and serve as an early warning signal.

MCQ Questions for Class 12 Business Studies Chapter 3 Business Environment

Question 3.

“In order to improve their sales, a unique feature was added to the card…” Identify which of the following importance of understanding the business environment is discussed here.

(A) It helps the firm to identify threats and early warning signals.
(B) It helps in coping with rapid changes.
(C) It helps in assisting in planning and policy formulation.
(D) It helps in improving performance.
Answer:
(D) It helps in improving performance.

Question 4.

“… they planned to hire more sales force and marketing personnel…” Identify which of the following importance of understanding the business environment is discussed here.

(A) It helps in assisting in planning and policy formulation.
(B) It enables the firm to identify opportunities and getting the first mover advantage.
(C) It helps the firm to identify threats and early warning signals.
(D) It helps in improving performance.
Answer:
(A) It helps in assisting in planning and policy formulation.

Explanation:
Since environment is a source of both opportunities and threats for a business enterprise, its understanding and analysis can be the basis for deciding the future course of action (planning) or training guidelines for decision making (policy).

MCQ Questions for Class 12 Business Studies with Answers