MNB1601 EXAM PACK
2025
QUESTIONS AND
ANSWERS
FOR ASSISTANCE CONTACT
EMAIL:
, lOMoARcPSD|31863004
Solutions to Multiple-choice questions for Introduction to Business Management
Johan Strydom & Sharon Rudansky-Kloppers
Chapter 1
Questions Solution Explanation
1 4 The task of business management relates to the economic
principle, namely to achieve the highest possible satisfaction of
needs with scarce resources. More specifically, it entails an
examination of factors, methods and principles that enable a
business to function as efficiently and productively as possible in
order to maximise its profits.
2 4 The question concerns the definition of the economic principle.
The economic principle can be broadly defined as the achievement
of the highest possible satisfaction of needs by means of scarce
resources. In other words, it has to do with obtaining maximum
output from existing scarce inputs. Statement 4 is therefore
correct. Defining the economic principle in any other way would
be wrong. This means that the other statements in the question are
wrong.
3 4 Since there is no economic advantage to working harder,
socialistic systems provide no inherent incentive to participate.
Not more so than in state organisations. Typically health care and
education starts to become unproductive.
4 3 The state or government keeps its interference in the system to a
minimum. The government’s role is limited to providing
legislation to protect businesses and consumers and making sure
no single business or organisation restricts competition. It also
provides essential services (like police and defence) and ensures
the country’s money supply is stable.
5 4 Public relations are seen as a functional area within a business.
The public relations function relates to the creation of a favourable
and objective image of the business. Public relations must promote
good relations and goodwill between the business and the external
groups and other businesses that are directly and indirectly
involved in the business.
6 3 In a free market system most products and services are supplied by
private organisations and individuals seeking profits in return for
the productive investment and utilisation of their assets and
capital. Therefore the driving force behind entrepreneurs and their
businesses in a free market is profit. Therefore statement (a) is
correct.
In a command economy, individuals cannot own land, factories
and equipment as the state owns and controls the community’s
resources or factors of production. Therefore statement (b) is
incorrect.
Under both the free-market system and socialism the state
intervenes to help solve the economic problems and stabilise
economic fluctuations. Therefore statement c is correct.
Within the free-market economy, the economic environment is
1 © Oxford University Press Southern Africa (Pty) Ltd 2010
, lOMoARcPSD|31863004
Solutions to Multiple-choice questions for Introduction to Business Management
Johan Strydom & Sharon Rudansky-Kloppers
Questions Solution Explanation
unstable, and so statement (d) is also correct.
7 3 Option 1 is incorrect because only in a free-market economy are
farmers, factory owners, industrialists and individuals free to do
what they like with their assets.
Option 2 is incorrect. Socialism may be regarded as a compromise
between a pure market economy and a pure command economy.
Because the socialist system is a compromise, the state does not
own and control all the businesses, as in a command economy, but
only those undertakings which have strategic value, such as those
concerned with fuel or energy and mass transport. Less important
and smaller matters such as trade and construction, and the
production of materials and services of lesser strategic importance,
are left to private initiative.
Option 3 is correct because in a socialistic system the state does
own and control many of the country’s principle industries such as
transportation, health services and energy.
Option 4 is incorrect because minimum state interference in
markets is a characteristic of a free-market economy and not
socialism.
8 1 Within socialism, the state controls general key industries, such as
transportation and communication.
Option 2 is incorrect, as the state keeps its interference in the
system to a minimum, but is not entirely excluded from activity.
The state ensures the proper maintenance of the system without
excessive regulation of the business world.
Option 3 is incorrect. Due to the limited impact of the state, and
the free competition that exists in the free-market economy, it
might occur that business organisations exploit the consumer for
the ultimate drive in profit.
Option 4 is incorrect. The statement belongs to the command
economy and not socialism.
9 2 Capital includes buildings, machinery, computers and cash
registers that are not for human consumption, but rather used for
making further production of final consumer products possible.
Capital products usually have a long working life. The cash
register and building are capital items.
10 3 The only correct description befits option 3, as the boxes and
ribbons used by Nomsa are production factors and contribute
towards the final product. Production factors are basic inputs in
the production of products and services.
11 2 If there is more involvement from the state in a free market
economy, it does not indicate a move towards a command
2 © Oxford University Press Southern Africa (Pty) Ltd 2010
, lOMoARcPSD|31863004
Solutions to Multiple-choice questions for Introduction to Business Management
Johan Strydom & Sharon Rudansky-Kloppers
Questions Solution Explanation
economy or centrally controlled economy. An expanding
entrepreneurial role by the state does not eventually lead to a
democracy. The only correct options are (b) and (c).
12 1 The free-market economy functions on the following assumptions:
members of the community may possess assets and earn profits on
such assets; the allocation of resources is affected by the free
market; members of the community have the free choice of
products, services and careers and the state has minimum
interference in the system.
13 3 In a market economy, most businesses are owned by private
individuals or organisations. Consumers are also free to buy what
they like and to follow whatever career they choose, therefore
there is free competition in a market economy. Therefore both
options (a) and (b) are correct. Members of the community in a
free market economy are allowed to possess assets and earn profits
on these; therefore option (c) is correct.
In a market economy, the members of the community are free to
join unions and to strike and do not have limited right to strike in
state enterprises; therefore statement (d) is incorrect.
14 4 Lower order needs are most commonly satisfied first before higher
order needs, such as self-esteem is satisfied. Basic physical and
psychological needs may also overlap. Thus making options (a)
and (b) correct.
Survival needs need to be satisfied first before security needs will
be addressed. Option (c) is thus incorrect.
Self-realisation is the highest ranked needs and is not a lower
order need. Option (d) is also incorrect.
15 1 The economic principle refers to a business’s endeavour to keep
its input costs as low as possible. Option (b) is incorrect.
The highest possible amount of profit is what is sought after when
businesses apply the economic principle. Option (c) is incorrect.
Economic systems are tried and tested means of communities to
apply the economic principle. Option (d) is incorrect.
16 1 Lower order needs need to be met first before self esteem needs
will be satisfied. Option (a) is correct. Social needs such as love
and recognition need to be satisfied first before self-realisation
needs will be satisfied. Option (b) is correct.
Survival needs have to be met before security needs will be
satisfied. Option (c) is incorrect.
Self-realisation is a higher order need. Option (d) is incorrect.
17 2 In a command economy the state controls all industries and
3
2025
QUESTIONS AND
ANSWERS
FOR ASSISTANCE CONTACT
EMAIL:
, lOMoARcPSD|31863004
Solutions to Multiple-choice questions for Introduction to Business Management
Johan Strydom & Sharon Rudansky-Kloppers
Chapter 1
Questions Solution Explanation
1 4 The task of business management relates to the economic
principle, namely to achieve the highest possible satisfaction of
needs with scarce resources. More specifically, it entails an
examination of factors, methods and principles that enable a
business to function as efficiently and productively as possible in
order to maximise its profits.
2 4 The question concerns the definition of the economic principle.
The economic principle can be broadly defined as the achievement
of the highest possible satisfaction of needs by means of scarce
resources. In other words, it has to do with obtaining maximum
output from existing scarce inputs. Statement 4 is therefore
correct. Defining the economic principle in any other way would
be wrong. This means that the other statements in the question are
wrong.
3 4 Since there is no economic advantage to working harder,
socialistic systems provide no inherent incentive to participate.
Not more so than in state organisations. Typically health care and
education starts to become unproductive.
4 3 The state or government keeps its interference in the system to a
minimum. The government’s role is limited to providing
legislation to protect businesses and consumers and making sure
no single business or organisation restricts competition. It also
provides essential services (like police and defence) and ensures
the country’s money supply is stable.
5 4 Public relations are seen as a functional area within a business.
The public relations function relates to the creation of a favourable
and objective image of the business. Public relations must promote
good relations and goodwill between the business and the external
groups and other businesses that are directly and indirectly
involved in the business.
6 3 In a free market system most products and services are supplied by
private organisations and individuals seeking profits in return for
the productive investment and utilisation of their assets and
capital. Therefore the driving force behind entrepreneurs and their
businesses in a free market is profit. Therefore statement (a) is
correct.
In a command economy, individuals cannot own land, factories
and equipment as the state owns and controls the community’s
resources or factors of production. Therefore statement (b) is
incorrect.
Under both the free-market system and socialism the state
intervenes to help solve the economic problems and stabilise
economic fluctuations. Therefore statement c is correct.
Within the free-market economy, the economic environment is
1 © Oxford University Press Southern Africa (Pty) Ltd 2010
, lOMoARcPSD|31863004
Solutions to Multiple-choice questions for Introduction to Business Management
Johan Strydom & Sharon Rudansky-Kloppers
Questions Solution Explanation
unstable, and so statement (d) is also correct.
7 3 Option 1 is incorrect because only in a free-market economy are
farmers, factory owners, industrialists and individuals free to do
what they like with their assets.
Option 2 is incorrect. Socialism may be regarded as a compromise
between a pure market economy and a pure command economy.
Because the socialist system is a compromise, the state does not
own and control all the businesses, as in a command economy, but
only those undertakings which have strategic value, such as those
concerned with fuel or energy and mass transport. Less important
and smaller matters such as trade and construction, and the
production of materials and services of lesser strategic importance,
are left to private initiative.
Option 3 is correct because in a socialistic system the state does
own and control many of the country’s principle industries such as
transportation, health services and energy.
Option 4 is incorrect because minimum state interference in
markets is a characteristic of a free-market economy and not
socialism.
8 1 Within socialism, the state controls general key industries, such as
transportation and communication.
Option 2 is incorrect, as the state keeps its interference in the
system to a minimum, but is not entirely excluded from activity.
The state ensures the proper maintenance of the system without
excessive regulation of the business world.
Option 3 is incorrect. Due to the limited impact of the state, and
the free competition that exists in the free-market economy, it
might occur that business organisations exploit the consumer for
the ultimate drive in profit.
Option 4 is incorrect. The statement belongs to the command
economy and not socialism.
9 2 Capital includes buildings, machinery, computers and cash
registers that are not for human consumption, but rather used for
making further production of final consumer products possible.
Capital products usually have a long working life. The cash
register and building are capital items.
10 3 The only correct description befits option 3, as the boxes and
ribbons used by Nomsa are production factors and contribute
towards the final product. Production factors are basic inputs in
the production of products and services.
11 2 If there is more involvement from the state in a free market
economy, it does not indicate a move towards a command
2 © Oxford University Press Southern Africa (Pty) Ltd 2010
, lOMoARcPSD|31863004
Solutions to Multiple-choice questions for Introduction to Business Management
Johan Strydom & Sharon Rudansky-Kloppers
Questions Solution Explanation
economy or centrally controlled economy. An expanding
entrepreneurial role by the state does not eventually lead to a
democracy. The only correct options are (b) and (c).
12 1 The free-market economy functions on the following assumptions:
members of the community may possess assets and earn profits on
such assets; the allocation of resources is affected by the free
market; members of the community have the free choice of
products, services and careers and the state has minimum
interference in the system.
13 3 In a market economy, most businesses are owned by private
individuals or organisations. Consumers are also free to buy what
they like and to follow whatever career they choose, therefore
there is free competition in a market economy. Therefore both
options (a) and (b) are correct. Members of the community in a
free market economy are allowed to possess assets and earn profits
on these; therefore option (c) is correct.
In a market economy, the members of the community are free to
join unions and to strike and do not have limited right to strike in
state enterprises; therefore statement (d) is incorrect.
14 4 Lower order needs are most commonly satisfied first before higher
order needs, such as self-esteem is satisfied. Basic physical and
psychological needs may also overlap. Thus making options (a)
and (b) correct.
Survival needs need to be satisfied first before security needs will
be addressed. Option (c) is thus incorrect.
Self-realisation is the highest ranked needs and is not a lower
order need. Option (d) is also incorrect.
15 1 The economic principle refers to a business’s endeavour to keep
its input costs as low as possible. Option (b) is incorrect.
The highest possible amount of profit is what is sought after when
businesses apply the economic principle. Option (c) is incorrect.
Economic systems are tried and tested means of communities to
apply the economic principle. Option (d) is incorrect.
16 1 Lower order needs need to be met first before self esteem needs
will be satisfied. Option (a) is correct. Social needs such as love
and recognition need to be satisfied first before self-realisation
needs will be satisfied. Option (b) is correct.
Survival needs have to be met before security needs will be
satisfied. Option (c) is incorrect.
Self-realisation is a higher order need. Option (d) is incorrect.
17 2 In a command economy the state controls all industries and
3
