Here, we will discuss the summary and key facts in MCQ format of Chapter 1- Business, Trade and Commerce | Part I: Foundations of Business | Business Studies |Textbook for Class XI
1. Business starts with what?
a) Production
b) Distribution
c) Consumption
d) Requirement
Answer. a) Production
Business starts with production and ends with consumption. Making the finished products reach the consumer involves a series of steps. The work of producing goods is covered under industry, and the remaining activities belong to commerce.
2. What does business mean?
a) Selling of goods and Services
b) Production and Purchase of Goods and Services
c) Distribution and consumption of Goods and Services
d) Industry, trade and commerce
Answer. d) Includes industry, trade and commerce
In a nutshell, we call them ‘Business ’, which is a wider term and includes Industry, trade and
commerce. Business includes production, purchase, exchange, distribution, and consumption of goods and services.
3. In relation to the trade history of India, what are "Hundi and Chitties"?
a) Family-based workshops [ Karkhana]
b) Handicraft business
c) Market
d) Financial instruments and systems
Answer. d) Financial instruments and systems
Hundi literally means ‘to collect’. Hundi and Chitties were our traditional ancient financial instruments and systems used in southern India. These were used as documents to facilitate the transfer of money from one hand to another for trading activities. As an instrument of exchange, it involved a contract which — (i) warrants the payment of money, the promise or order which is unconditional; (ii) is capable of change through transfer by valid negotiation.
4. Which trade center was the commercial junction on the royal road where most routes leading to the east, west, south and north converged?
a) Pataliputra
b) Peshawar
c) Indraprastha
d) Ujjain
Answer. c) Indraprastha
Indraprastha: It was the commercial junction on the royal road where most routes leading to the east, west, south, and north converged.
5. The term business is derived from which word?
a) Production
b) Supply
c) Busy
d) Service
Answer. c) Busy
The term business is derived from the word ‘busy’. Thus, business means being busy. However, in a specific sense, business refers to an occupation in which people regularly engage in activities related to the purchase, production and/or sale of goods and services with a view to earning profits.
6. Which of the following is NOT an economic activity?
a) A health worker treating her patient.
b) A store owner sympathizes with a needy elderly person and gives medicines for his ailment.
c) A football coach giving training in football to his daughter for a forthcoming match.
d) Services of a software engineer
Answer. b) A store owner sympathizes with a needy elderly person and gives medicines for his ailment.
Option B is non-economic in nature because the medicines are given out of sympathy rather than for payment
7. Which of the following is NOT a characteristic of Business Activities?
a) Dealings in goods and services on a regular basis
b) Profit earning
c) Sale or exchange of goods and services
d) Certainty of return
Answer. d) Certainty of return
The following are some prominent characteristics of Business Activities:
1. An economic activity
2. Production or procurement of goods and services
3. Sale or exchange of goods and services
4. Dealings in goods and services on a regular basis
5. Profit earning
6. Uncertainty of return
7. Element of risk
8. What are two broad categories of business activities?
a) Industry and commerce
b) Production and Sale
c) Profit and Loss
d) Sales and Despatch
Answer. a) Industry and commerce
Various business activities may be classified into two broad categories —industry and commerce. Industry is concerned with the production or processing of goods and materials. Commerce includes all those activities which are necessary for facilitating the exchange of goods and services. On the basis of these two categories, we may classify business firms into industrial and commercial enterprises.
9. Genetic industries are involved in which activities?
a) Farming, mining, lumbering, hunting and fishing operations
b) Breeding plants and animals for their use in further reproduction
c) Textile Industry
d) Producing Drugs and Medicines
Answer. b) Breeding plants and animals for their use in further reproduction.
Primary industries are of two types-
1. Extractive industries ( Farming, mining, lumbering, hunting and fishing operations)
2. Genetic industries ( Breeding plants and animals for their use in further reproduction)
10. Activities which are meant for assisting trade are known as ------------- to trade.
a) Primary
b) Fundamental
c) Auxiliaries
d) Services
Answer. c) Auxiliaries
Activities which are meant for assisting trade are known as auxiliaries to trade. These activities are generally referred to as services because they are in the nature of facilitating the activities relating to industry and trade. Transport, banking, insurance, warehousing, and advertising are regarded as auxiliaries to trade, i.e., activities playing a supportive role.
11. Why is business considered an economic activity?
a) It is done only for social service
b) It is undertaken to earn income or profit
c) It is done only for personal satisfaction
d) It does not involve any exchange
Answer: b) It is undertaken to earn income or profit
Business involves the production, purchase, and sale of goods or services with the objective of earning income/profit.
12. Which of the following is an auxiliary to trade?
a) Mining
b) Manufacturing
c) Banking
d) Farming
Answer: c) Banking
Banking, insurance, transportation, warehousing, and communication support the smooth conduct of trade and are called auxiliaries to trade.
13. Which of the following is correctly classified as an industry?
a) Banking – Extractive industry
b) Mining – Extractive industry
c) Retailing – Manufacturing industry
d) Insurance – Construction industry
Answer: b) Mining – Extractive industry
Industries are broadly classified into primary, secondary, and tertiary industries. Mining is an extractive/primary industry because it extracts natural resources.
14. What is the primary role of profit in business?
a) To eliminate all business risks
b) To provide a return for entrepreneurial effort
c) To stop competition
d) To avoid production
Answer: b) To provide a return for entrepreneurial effort and support
Explanation: Profit is an important reward for risk-taking and entrepreneurial effort. It also helps businesses survive, expand, and invest.
15. Which of the following is a major cause of business risk?
a) Government policy
b) Natural disasters
c) Natural, human, economic and other uncertainties
d) Guaranteed market demand
Answer: c) Natural, human, economic and other uncertainties
Business risk arises because of uncertainty. Major causes include natural calamities, changes in demand, competition, government policies, technological changes, and human errors.
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