KCSE Business Studies Topical Questions and Answers

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.