O Level Business: Environmental and ethical issues and Business and the international economy (Cambridge 7115) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover sections 6.2 (Environmental and ethical issues) and 6.3 (Business and the international economy) of the Cambridge O Level Business Studies 7115 syllabus for examination in 2026. Marks are shown for each question and part. All businesses and figures are invented.

Before you start, read the study guide or the revision notes. For mixed questions across the whole topic, try the external influences practice set. Course links: Cambridge O Level Business hub and the printable checklist.

Questions

1. Define the term “externality”. [2]

2. Corvane Dairy opens a large milk-processing plant beside a village. The plant runs day and night and its tankers use the village road. It also buys feed from local farmers, who earn extra income. Identify one external cost and one external benefit of the plant. [2]

3. Explain one way a business could contribute to sustainable development. [3]

4. A pressure group begins a social media campaign against Corvane Dairy for dumping waste. Explain one reason why the dairy might change its behaviour in response. [3]

5. A government introduces a pollution control that limits the waste a factory may release. Explain one effect of this control on a factory owner. [3]

6. An imported kitchen blender costs a retailer Rs 640 before any tax. The government adds a 25% import tariff. A locally made blender sells for Rs 780. (a) Calculate the price of the imported blender after the tariff. [2] (b) State whether the local blender is now cheaper than the imported blender. [1]

7. Explain one reason why a government might introduce an import quota. [3]

8. Explain one benefit to a business of becoming a multinational company. [3]

9. Tresco Timber, in a country whose currency is the krona, exports sawn wood to many buyers abroad. The krona appreciates. (a) Explain what is meant by “appreciation” of a currency. [2] (b) Analyse one way the appreciation could affect Tresco Timber. [3]

10. Drummond Garments makes school uniforms. Each year it buys 25,000 metres of cotton cloth at Rs 360 per metre from a co-operative of small farmers. Its sales revenue is Rs 20,000,000 and its other costs are Rs 8,400,000. The co-operative asks for a fair price of Rs 414 per metre, saying that the farmers cannot cover their costs at the present price. Drummond can pay or look for a cheaper supplier abroad that does not share its ethical standards. (a) Calculate the percentage rise in the price asked. [1] (b) Calculate Drummond’s profit now and its profit if it pays the new price. [4] (c) Recommend whether Drummond should pay the new price. Justify your answer. [6]

11. Hartsedge Motors, based in a large country, builds a factory in a smaller country. It employs 200 local workers and 60 managers sent from its home country. In its first full year it makes a profit of Rs 5,000,000. It sends 60% to its head office. Local car makers say they are losing customers. (a) Calculate the profit repatriated in the year. [2] (b) Explain one benefit of the factory to the smaller country. [3] (c) Evaluate whether the smaller country’s government should welcome Hartsedge Motors. [6]

Answers

1. A cost or benefit of a business’s decision [1] that falls on people who are not part of the business or the transaction (third parties) [1]. [2] Examiner insight: A definition earns credit when it makes clear that the cost or benefit lands on outsiders; stating only “a cost of production” describes a private cost and is unlikely to be rewarded.

2. External cost: noise and tanker traffic disturbing villagers (or pollution of local land or water) [1]. External benefit: extra income for the local farmers who sell it feed (or local jobs) [1]. [2] Examiner insight: Pick items from the stem that fall on people outside the business. The dairy’s own profit or the price of its milk are not external, and naming them wastes the mark.

3. Any one developed route. The dairy could switch to renewable energy to run its plant [1]. This lowers the carbon released that adds to global warming [1], so resources and a stable climate are left for future generations [1]. (Also credit: recycling water, cutting packaging, using sustainably sourced materials.) [3] Examiner insight: Answers are stronger when they link the action to the future generations idea in sustainable development. A bare list of green actions stays at the first mark.

4. The campaign may reduce sales [1] because customers who see it could choose another brand or boycott the dairy [1], so the dairy may stop dumping to protect its reputation and revenue [1]. (Also credit: fear of legal action or loss of investor support.) [3] Examiner insight: Explain the chain from campaign to business consequence. Saying “the dairy will feel pressure” repeats the question and does not show the route.

5. The owner may have to buy cleaner equipment or change the process [1], which raises costs [1] and lowers profit unless the price is raised (or the owner may avoid fines and bad publicity as a gain) [1]. [3] Examiner insight: A developed answer shows a cause, a cost or gain, and the result for profit. State the control in general terms; there is no credit for inventing the name of a law.

6. (a) Tariff = 640 × 0.25 = Rs 160 [1]. New price = 640 + 160 = Rs 800 [1]. [2] (b) Yes, the local blender at Rs 780 is cheaper than Rs 800 [1]. [1] Examiner insight: Show the tariff amount and the new price. On a question asking you to compare, finish by saying which is cheaper and give the two figures.

7. A quota limits the number of imports allowed [1], so fewer foreign goods compete with local firms [1], which helps protect local jobs and sales (or may help the government cut the amount it spends on imports) [1]. [3] Examiner insight: Define the quota by quantity, not by tax. Mixing it up with a tariff is a common slip and weakens the explanation.

8. Any one developed benefit. The business reaches customers in new countries [1], which raises sales and spreads risk if one market falls [1], so it is less reliant on its home economy [1]. (Also credit: lower labour or material costs; avoiding import tariffs by producing locally.) [3] Examiner insight: Develop the benefit into a result for the business, such as higher revenue or lower risk. A one-line “it sells more” is a statement, not an explanation.

9. (a) The currency buys more of other currencies than before [1], so its value rises against them [1]. [2] (b) The sawn wood costs more in foreign currency [1], so Tresco becomes less competitive against foreign rivals [1] and export sales and profit may fall [1]. [3] Examiner insight: Check the direction before writing. Reversing appreciation and depreciation is the usual way to lose all the marks. Link to price, competitiveness and profitability as the stem is about an exporter.

10. (a) (414 − 360)/360 × 100 = 15% [1]. [1] (b) Current cloth cost = 25,000 × 360 = Rs 9,000,000 [1]. Current profit = 20,000,000 − 9,000,000 − 8,400,000 = Rs 2,600,000 [1]. New cloth cost = 25,000 × 414 = Rs 10,350,000 [1]. New profit = 20,000,000 − 10,350,000 − 8,400,000 = Rs 1,250,000 [1]. [4] (c) For paying: it supports the farmers, protects the supply of cloth and avoids bad publicity [1]. A school-uniform brand relies on trust from parents and schools [1]. Profit would still be Rs 1,250,000, so the business stays profitable [1]. Against: profit falls by about 52% [1], and the extra Rs 1,350,000 is a large cost that may need a price rise, which could lose sales [1]. Judgement: pay the new price, because the business stays profitable and the ethical gain is large; it could raise prices a little or look for savings elsewhere to protect profit [1]. (Accept a reasoned judgement the other way if it weighs both sides.) [6] Examiner insight: A justification gains credit when it uses the case figures, weighs both sides and ends with a reasoned decision. Using only general ideas about ethics, with no use of the numbers, leaves the answer thin.

11. (a) 60% of 5,000,000 = 0.60 × 5,000,000 [1] = Rs 3,000,000 [1]. [2] (b) The factory gives 200 local workers jobs [1], so they earn wages [1] and spend in local shops, which supports other businesses [1]. (Also credit: exports, investment, skills, more choice.) [3] (c) For welcoming: 200 jobs and wages; investment; training and technology; possible exports [1]. Against: Rs 3,000,000 of the profit leaves the country [1], 60 of the 260 jobs go to outsiders [1], and local car makers lose customers, which could cost local jobs [1]. The size of the gain depends on how many suppliers and shops benefit, and on whether the profit retained (Rs 2,000,000) is reinvested [1]. Judgement: the government should welcome the factory on balance if it also pushes for local hiring and reinvestment, because the jobs are real, but the benefits are reduced by the loss of profit and local sales [1]. [6] Examiner insight: An evaluation needs both sides applied to the case and a final judgement saying which side is stronger and why. Listing benefits and drawbacks without a conclusion is weaker.

Where marks are usually lost

• Writing about costs to the business when the question asks for an external cost.
• Using “pressure” without explaining how the group’s action reaches the business.
• Treating a tariff and a quota as the same thing.
• Reversing the effect of appreciation and depreciation.
• Giving a list of MNC benefits with no link to the host country in the case.
• Leaving calculations without showing the working or the unit (Rs).
• Writing a one-sided answer to an “evaluate”, “justify” or “recommend” question.
• Ending a long answer without a judgement.

Frequently asked questions

Are these Cambridge O Level Business Studies 7115 past paper questions? No. They are original practice questions written for Marlbridge on sections 6.2 (Environmental and ethical issues) and 6.3 (Business and the international economy). Use them alongside the official past papers.

Are exchange rate calculations assessed in O Level Business 7115? No. The syllabus states that exchange rate calculations will not be assessed. You need the direction of the change and the reasoning about prices, competitiveness and profit, not conversions.

How do you answer a question comparing prices after an import tariff? Show the tariff amount and the new price of the imported good, then finish by saying which product is cheaper, quoting both figures and the unit.

Why do answers on external costs lose marks? They often describe costs to the business itself, such as its own wages or profit, when the question asks about costs that fall on outsiders. Pick items from the stem that affect people outside the business and its customers.

How do you evaluate the impact of a multinational on a host country? Apply both the benefits and the drawbacks to the case, such as local jobs created and profits sent home, then give a final judgement saying which side is stronger and why.

Next steps

• Re-read the revision notes and the study guide.
• Mixed practice for the whole topic: external influences practice.
• Course hub: Cambridge O Level Business and the printable checklist.
• Find weak areas with all free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

Cambridge O Level Business Studies 7115, syllabus for examination in 2026, Cambridge University Press and Assessment (Cambridge International Education).