KCSE Business Studies Topical Questions and Answers

BUSINESS STUDIES FORM 3 PAPER 2 TERM 1 2022 REVISION QUESTIONS MODEL28092022001

28/9/2022

BUSINESS STUDIES FORM 3 PAPER 2 TERM 1 2022 REVISION QUESTIONS MODEL28092022001

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Explain five features of oligopoly. (10 marks)

1/12/2021

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Explain five features of oligopoly.

Features of oligopoly include:

Firms are interdependent in decision making. Firms keenly observe each others’ actions/decision hence acting in any way triggers counter reactions (from other firm s).
Firms deal in products that are homogenous or similar. The products are close substitutes of each other and are only differentiated in terms of aspects like colour/packaging/shapes/pricing/branding.
Firms may engage in non-price competition/collusive oligopoly. The firms under oligopoly may avoid price wars hence only compete via other means like aggressive advertising/after sales services/market segmentation/fixing quotas.
Unpredictability of behaviour/uncertainty since firms under oligopoly keep reacting to market changes differently/actions taken by other firms within the market may take others by surprise.
The market is made up of a few large firms since such firms operating under oligopoly tend to have a large capital outlay/make extensive use of modem technology in their production activities/control substantial share of the market.
There are limiting factors such as large capital investment required to be a player in this market/the level of technology involved may keep off possible entrants into the market/intimidation/collusion.
Firms may engage in price wars/rivalry/cut throat competition which may lead to survival/collapse of some firms.
May lead to price rigidity/kinked demand occasioned by fear of other firms’reactions.
There may be price leadership where the dominant firm dictates the market price/rules the market.

Explain five features of oligopoly. (10 marks)

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The following trial and balance relates to business of Mali Ngumu traders as at 30th June 2008.

8/11/2021

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The following trial and balance relates to business of Mali Ngumu traders as at 30th June 2008.

Required:

(a) Prepare a trading profit and loss account as at 30th June 2009. (8mks)

(b) Calculate the following ratios:- (4mks)

(i) Rate of return on capital

(ii) Margin

(iii) Quick ratio

(iv) Rate of stock return over

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State six Characteristics of Underdeveloped Countries.

8/11/2021

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Most countries in the world are under-developed. Give six characteristics of these countries (12mks)

Characteristics of under-developed countries.

High population growth rate and dependency ratio
Have got widespread unemployment.
Have got high levels of poverty.
Usually depend on agricultural and other subsistence activities.
Have a low level of urbanization
Their natural resources are normally under-utilized.
Their income is unevenly distributed among citizens.
Spend a high proportion of their income on food and other basic necessities.
Use a low level of technology in production.

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Discuss four factors that determine the level of a country’s national income

8/11/2021

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Discuss four factors that determine the level of a country’s national income (10mks)

Four factors that determine the level of a country’s national income.

The quality and quantity of factors of production e.g labour supply, capital available and size of natural resources.
Level of technology i.e. advanced technology lead to production of high quality goods and vice versa.
Size of population - high population leads to a high national income since most resources will be exploited.
Political stability - creates a conducive environment for the exploitation of resources.
Attitude of the people towards work- a country whose people have a culture of liking work attain a high level of national income.

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Give five contributions of commercial banks in Kenya

8/11/2021

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Give five contributions of commercial banks in Kenya (10mks)

Contributions of commercial banks

Accepting deposits from the general public.
Provides a means of making payments – cheque.
Provide loan facilitates to the investors
Makes foreign exchange payments.
Provides safe keeping facilities for valuables.
Facilitates in discounting bills of exchange.
Makes payments on behalf of customers –standing orders.
Acts as customers agents in the stock exchange market.

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Explain five importance of an efficient transport system in a country

8/11/2021

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Explain five importance of an efficient transport system in a country (10mks)

Five importance of an efficient transport system.

Transport promotes trade by enabling movement of goods from production sites to consumption areas.
It facilitates the growth of industries by transporting raw materials and labour.
It creates employment opportunities.
It opens up new markets since goods produced can be moved to the consumers.
It encourages mass production since they can be taken where they are needed.
It helps in minimizing wastage of goods and services.
It helps in facilitating specialization.
It assists in adding value to goods and services by taking them to where they are needed.
It facilitates movement of labour.
It encourages interaction of communities.

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What are the reasons why many Kenyans are unemployed?

8/11/2021

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Describe six causes of unemployment in Kenya (12mks)

Six causes of unemployment in Kenya

Rapid population growth that surpasses the growth of the economy
In appropriate education system in the country.
Seasonality in production especially in agricultural and tourism.
Lack of capital for investment in order to generate job opportunities.
Rural-urban migration – Most labour moving to urban in search of employment.
Low demand for goods and services leading to little investment hence few employment opportunities.
Trade unions pressurizing for high salaries forcing employers to reduce their investments or use machines in production.
Use of an appropriate methods of production e.g use of machines such as ATM and Cranes.

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Briefly explain the meaning of the following forms of advertising

8/11/2021

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Briefly explain the meaning of the following forms of advertising (8mks)

(i) Celebrity advertising

This is a form of advertising that uses of a prominent person on the product to encourage people to buy the product e.g a president, athlete, a footballer etc.

(ii) Product advertising

This is a form of advertising that put emphasis on the brand name of a product.
It is meant to promote that particular product.

(iii) Informative advertising

This is an advertising that gives general information of a product to a customer e.g price quality, uses, and side effects and where it is found.

(iv) Institutional advertising

This is a form of advertising which is meant to popularize or a business.
More emphasis is put on the name of the business.

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Discuss five strategies that can be used by the government to control inflation

8/11/2021

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Discuss five strategies that can be used by the government to control inflation (10mks)

Five strategies used by the government to control inflation

Reducing government spending.
Increasing taxation in order to reduce amount of income in the hands of people.
Controlling amount of imports to reduce foreign spending
Discourage financial institutions from lending money.
Imposing a maximum on wage bills to control cost push inflation.
Imposes tariffs on imported goods to make them expensive thus reduce their demand.
Controlling foreign exchange to limit importation of goods.
Imposes imports quotas to reduce amount of imported goods.

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Discuss five advantages of a bonded warehouse

8/11/2021

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Discuss five advantages of a bonded warehouse (10mks)

Five advantages of a bonded warehouse.

Storage helps an importer to look for market.
Helps to protect goods safely against pilferage or spoilage by bad weather.
Gives a government a chance to scrutinize the goods.
It enables a government to collect taxes.
Records kept in a bonded warehouse is a source of statistics on a country’s imports.
Enable a trader to look for a market while goods are in bond.
Gives an import chance to prepare the goods before channeling them to the market.
If an importer sells goods while at bond, the burden of paying duty passes to buyer.

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Explain five external factors that influence the success of a business

8/11/2021

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Explain five external factors that influence the success of a business. (10mks)

Human resources – presence of a pool of skilled workers enables a business to perform well.
Political factors – favourable government laws favours performance of a business.
Economic conditions – favourable prices, low interest rates and good infrastructure.
Technological factors – improved technology reduce cost of operating business.
Favourable environmental factors – i.e good climate boost farming and tourism.
Level of competition.
Identification of customers needs.
Understanding social cultural factors of the consumers i.e tastes and preferences

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With the aid of a diagram, explain the effect of an increase in the supply of a commodity while its demand remains constant.

21/12/2020

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With the aid of a diagram, explain the effect of an increase in the supply of a commodity while its demand remains constant.

Other factors remaining the same, the price of a commodity will fall from P0 to P1 as the quantity supplied changes from Q0 to Q1.
This creates a new equilibrium E1 from E0 as supply curve shifts to the right from S0S0 to S1S1.
The increase in supply causes excess supply/surplus.
This lowers price to the new equilibrium price oP1 and equilibrium quantity oQ1.

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Explain four ways through which a public limited company may be dissolved.

21/12/2020

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Explain four ways through which a public limited company may be dissolved.

Ways through which a public limited company may be dissolved include:

A resolution by the shareholders to dissolve the company. When there is a unanimous decision by the shareholders to wind up the company during the annual general meeting.
Change in the country’s law that renders the activities of the company illegal/unlawful. When the laws of a country bars certain activities that the company may have been involved in.
Inability to repay financial debts on infringement of stakeholders’ rights.
Amalgamations/mergers - a company may be dissolved if it combines with another and a new one replaces the one combining/creates a new entity.
Take overs/acquisition/absorption - a company may be dissolved if it is taken over by another/or by the government through acquisition of majority shares hence redirection of its activities/loss of identity.
Realization of sustained / continuous losses. A company may be dissolved when it makes losses continuously to the extent of not being able to meet its recurrent expenditure/insolvency.
Court order for infringing on the law/granted to a complaint raised by stakeholders/acting ultravires.
Completion/fulfilment of task/activity/objective (for which the company was formed) hence making its continued existence unnecessary.
Failure to commence business within one year after incorporation thus contravening the company’s act.

Explain four ways through which a public limited company may be dissolved.

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Outline six circumstances under which a trader may use air transport.

21/12/2020

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Outline six circumstances under which a trader may use air transport.

Circumstances under which a trader may use air transport:

Perishable nature of goods since they go bad/get damaged.
Goods are of high per unit value since they are prone to theft.
Urgency - where goods require to arrive al the destination promptly.
Security - where security of goods is of valuable consideration.
Where other means of transport are unavailable.
Where distance to be covered is too large.
Where it ¡s the policy of the business which needs to be followed.
Where destination is remote making it inaccessible by other means.

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On 1st January 2011 , Jumo Traders had shs 22,500 in cash and shs 250,000 at bank.During the month, the following transactions took place:

21/12/2020

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On 1st January 2011 , Jumo Traders had shs 22,500 in cash and shs 250,000 at bank.During the month, the following transactions took place:

Prepare a duly balanced three column cash book. (10 marks)

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Explain five advantages of advertising to the consumer.

21/12/2020

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Explain five advantages of advertising to the consumer.

Advantages of advertising to the consumer include:

Consumers become aware of existence of a product and where it can be found.
Consumers enjoy high quality goods resulting from competitive advertising/Producers seek to maintain very high standards of quality.
Makes it easy for consumers to choose products from a variety offered in the market based on their advertised quality and contents.
Protects consumers from exploitation since they are aware of prices and quality of items and can therefore enforce their rights.
Communicates changes about the producer like new product lines, change of name and physical address. This enhances convenience for the customers.
Educates the consumers on the proper use of products where advertising messages involve demonstrations of product u sage.
Entertainment by use of drama/music/plays.
Aiding budget planning as they are made to know about price and existence of goods.
May enjoy lower prices due to competition.
Correct misconceptions hence assist in making decisions.

Explain five advantages of advertising to the consumer.

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The following balances were extracted from the books of Soilo Traders on 31 December 2010.

21/12/2020

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The following balances were extracted from the books of Soilo Traders on 31 December 2010.

Additional information:
Gross profit margin is stated at 40%.
Prepare:
(i) Trading, Profit and Loss Account for the year ended 3Pt December 2010. (5+ marks)
(ii) Balance sheet as at 3P’ December 2010.

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Explain five benefits that may be realized by a country as a result of government policy to relocate industries to rural areas.

21/12/2020

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Explain five benefits that may be realized by a country as a result of government policy to relocate industries to rural areas.

Benefits that may he realized by a country as a result of government policy to relocate industries to rural areas include:

Increased availability of variety of goods and services as a result of new businesses in the area.
Availability of auxiliary services - citizens would enjoy more and better auxiliary services like transport.
Increased job opportunities - there will be more jobs available that would reduce unemployment.
Increased utilisation of locally available resources - locally available factors of production will be used and the citizens would earn rewards associated with them.
Improved standard of living as development of the rural areas increases the quality and variety of goods and services.
Reduced congestion in towns - this would benefit the few citizens remaining in the city.
Balanced economic development as economic activities are spread throughout the country.
Transfer of technology to rural areas which leads to production of better quality goods/services.
Creation of market for goods/services produced in rural areas.

Explain five benefits that may be realized by a country as a result of government policy to relocate industries to rural areas.

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Explain five factors that may hinder economic development in Kenya.

21/12/2020

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Explain five factors that may hinder economic development in Kenya.

Factors that may hinder economic development in Kenya include:

Inaccessibility to appropriate technology leading to low quality/quantity.
Inadequate research data. .
Poor development planning.
Inadequate skilled labour force.
inadequate natural resource endowment.
Brain drain-skilled man power seeking greener pastures elsewhere.
Low demand for goods/services.
Negative socio-cultural practices.
Inadequate/lack of foreign exchange.
Poor governance/corruption.

Explain five factors that may hinder economic development in Kenya.

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Explain five benefits that Kenya may get as a member of C.O.M.E.S.A.(10 marks)

21/12/2020

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Explain five benefits that Kenya may get as a member of C.O.M.E.S.A.

Benefits that Kenya may get as a member of COMESA include:

Free flow of goods and services.
Expanded market for goods and services.
Reduced costs of operating businesses as a result of increased scale of operation.
Production of competitive/quality goods and services.
Possibility of political cooperation.
Increased variety of goods to choose from.
Improved infrastructure to facilitate conduct of business.
Creation of employment opportunities due to increased trading.
Attracts investment due to greater demand.
Lower prices of goods due to abolition of tarrifs.
Encourages specialization where countries enjoy comparative advantage.

Explain five benefits that Kenya may get as a member of C.O.M.E.S.A.(10 marks)

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Outline five characteristics of an efficient tax system.

21/12/2020

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Outline five characteristics of an efficient tax system.

Characteristics of an efficient tax system are:

Equity - the tax should be fair and just/people should be taxed according to their income.
Economical - it should be cheap and easy to administer/cost effective/cost of collecting should be lower than the revenue.
Convenient - method of payment should be convenient to the tax payer/favourable to tax payer.
Certainty - tax payer/collector should know what, when and how to pay/collect.
Flexibility - where tax is used as an instrument of national policy, it should be adaptable to all circumstances.
Simplicity - it should be easily understood.
Elasticity - proceeds from taxation should be capable of expanding/contracting in line with changes in income/population.
Diversity/wide base. There should be wide range/variety of taxes/should net many tax payers.
Difficult to evade. Should not create loopholes for people to avoid.
Should regulate the economy.

Outline five characteristics of an efficient tax system.

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Explain five benefits that may accrue to a country with a large proportion of skilled labour force.

21/12/2020

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Explain five benefits that may accrue to a country with a large proportion of skilled labour force.

Benefits that may accrue to a country with a large proportion of skilled labour force Include :

Saving on foreign exchange that would have been used to pay expartriates/imported labour.
Production of high quality goods/services as the workers are experts in their respective areas.
Increased output of goods/services as the workers are competent due to exploitation of resources.
Reduction in cost of production since the labour tends to be efficient/less wasteful.
Increase in purchasing power/demand due to higher incomes/salaries earned.
Reduction in dependency ratio since the employment rate is higher.
Enhances creativity/innovation/research leading to new/improved/variety of goods? services.
Promotes specialization/division of labour leading to faster production.
Easen/simplify setting of wage/employment policy due to abundance/availability of skilled labour/may reduce labour stife/unrest.
Increased government revenue due to income taxes levied.
Increased foreign exchange due to export of skilled labour.
Enhances entrepreneurial culture since skilled labour is more willing to undertake risks.
Adaptability/flexibility as they are ready to embrace changes

Explain five benefits that may accrue to a country with a large proportion of skilled labour force.

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Explain five circumstances in which a firm may acquire monopoly power (10 marks)

20/12/2020

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Explain five circumstances in which a firm may acquire monopoly power

Circumstances in which a firm may acquire monopoly power include:

If the firm has the sole right to a production technique. This denies other firms the use of the technique.
If the firm has control over strategic inputs. This makes the firm to have sole access to inputs used in the production of the commodity.
If the firm is the only one with large capital required for the venture. Other firms may not be able to raise the capital leaving the field to one firm.
If the firm enjoys economies of scale. This enables the firm to produce at a lower cost than the other firms.
If the firm is set up as a parastatal and given exclusive rights of production of a particular product by the government.
If firms merge. When firms join together to form one large firm, this gives them advantage due to size.
If it is the first firm in a small market that is served by one firm more economically. New firms entering the market may make losses due to low sales hence the original firm remains dominant.
Lithe firm has patent rights/copyright which bars other firms from producing) selling the products.

Explain five circumstances in which a firm may acquire monopoly power (10 marks)

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A school leaver plans to start a retail business. Explain five types of small scale retail shops the person may start.

20/12/2020

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A school leaver plans to start a retail business. Explain five types of small scale retail shops the person may start.

Types of small scale retail shops that a school leaver may start include:

Single/unit shops - where the person can sell a wide range of goods in a small fixed shop.
Kiosk - the person can put up a simple semi-permanent structure and sell fast moving goods.
lied shop - the person can operate from a permanent building but sell products of a particular manufacturer.
Market stall - the person can hire a permanent bench/stall from the county council/municipal market from where to sell goods.
Canteen - the person can rent a room from an institution and stock goods from different manufacturers.
Mobile shop - the person can acquire or hire a vehicle from where to sell goods by moving from one place to another.
Automatic vending machines - can hire or buy coin-operated machines for selling goods.

A school leaver plans to start a retail business. Explain five types of small scale retail shops the person may start.

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Explain five features of oligopoly.

​The following trial and balance relates to business of Mali Ngumu traders as at 30th June 2008.

​Required:

(a) Prepare a trading profit and loss account as at 30th June 2009. ​ (8mks)

​(b) Calculate the following ratios:- (4mks)

​(i) Rate of return on capital

​(ii) Margin

​(iii) Quick ratio

​(iv) Rate of stock return over

Most countries in the world are under-developed. Give six characteristics of these countries (12mks)

​Discuss four factors that determine the level of a country’s national income (10mks)

​Give five contributions of commercial banks in Kenya (10mks)

​Explain five importance of an efficient transport system in a country (10mks)

Describe six causes of unemployment in Kenya (12mks)

Briefly explain the meaning of the following forms of advertising (8mks)

​(i) Celebrity advertising

​(ii) Product advertising

(iii) Informative advertising

​(iv) Institutional advertising

Discuss five strategies that can be used by the government to control inflation (10mks)

​Discuss five advantages of a bonded warehouse (10mks)

​Explain five external factors that influence the success of a business. (10mks)

With the aid of a diagram, explain the effect of an increase in the supply of a commodity while its demand remains constant.

Explain four ways through which a public limited company may be dissolved.

Outline six circumstances under which a trader may use air transport.

On 1st January 2011 , Jumo Traders had shs 22,500 in cash and shs 250,000 at bank.During the month, the following transactions took place:

Explain five advantages of advertising to the consumer.

The following balances were extracted from the books of Soilo Traders on 31 December 2010.

Explain five benefits that may be realized by a country as a result of government policy to relocate industries to rural areas.

Explain five factors that may hinder economic development in Kenya.

Explain five benefits that Kenya may get as a member of C.O.M.E.S.A.

Outline five characteristics of an efficient tax system.

Explain five benefits that may accrue to a country with a large proportion of skilled labour force.

Explain five circumstances in which a firm may acquire monopoly power

A school leaver plans to start a retail business. Explain five types of small scale retail shops the person may start.

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The following trial and balance relates to business of Mali Ngumu traders as at 30th June 2008.

Required:

(a) Prepare a trading profit and loss account as at 30th June 2009. (8mks)

(b) Calculate the following ratios:- (4mks)

(i) Rate of return on capital

(ii) Margin

(iii) Quick ratio

(iv) Rate of stock return over

Discuss four factors that determine the level of a country’s national income (10mks)

Give five contributions of commercial banks in Kenya (10mks)

Explain five importance of an efficient transport system in a country (10mks)

(i) Celebrity advertising

(ii) Product advertising

(iv) Institutional advertising

Discuss five advantages of a bonded warehouse (10mks)

Explain five external factors that influence the success of a business. (10mks)