Lesson 3.7.4

3.7.4 Analysing external environment: political and legal change Quiz: AQA Business, Unit 7

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

In partnership with Revision Ninja

Lesson 3.7.4, Analysing external environment: political and legal change: 20 multiple choice questions for the AQA Business (7132), Unit 7: Analysing the strategic position of a business, written with Revision Ninja.

Host it live on the board and students join with a game code on their own devices, or revise alone with Free Play. The answers are revealed in the game.

Host this setFree Play

The 20 questions

  1. What is the main purpose of competition law in the UK?

    • To set the prices that all businesses must charge their customers for their goods and services
    • To prevent firms from abusing market power and forming cartels that harm consumers and other businesses
    • To require every business to export a fixed share of its output to overseas markets
    • To guarantee that every firm in an industry earns the same level of profit each year

  2. Which body is responsible for regulating the water industry in England and Wales?

    • The Bank of England, which sets interest rates for the whole UK economy
    • The Competition and Markets Authority, which regulates all public sector pay
    • Ofgem, which regulates the gas and electricity markets for the whole country
    • Ofwat, which regulates water companies on behalf of consumers

  3. Which of the following is an example of labour market legislation affecting businesses?

    • A tariff imposed on imported goods from countries outside the trading bloc
    • The national minimum wage, which sets a legal floor for hourly pay
    • A reduction in corporation tax rates that is set out in the annual budget
    • A government grant for research into renewable energy technologies

  4. Which type of policy is designed to encourage new business start-ups and growth?

    • Trade policy, such as quotas that limit the volume of goods imported into the country
    • Environmental policy, such as limits on emissions from factories and power stations
    • Competition policy, such as rules that prevent mergers between large firms in an industry
    • Enterprise policy, such as grants, tax reliefs and support for small firms

  5. Why does infrastructure investment by government affect businesses?

    • Infrastructure spending reduces the need for businesses to hold stock or to employ any staff at all
    • Infrastructure has no effect on business costs because all firms pay for their own transport and utilities
    • Better roads, rail and broadband can lower transport and communication costs and influence where firms choose to locate
    • Infrastructure investment directly sets the prices that businesses charge to their customers each year

  6. A government raises the national minimum wage. What is the most likely effect on a low-margin retailer?

    • Labour costs fall because staff are paid more and therefore work faster and need less supervision
    • The retailer must close all of its stores because the minimum wage applies only to large firms
    • Profits increase automatically because higher wages raise consumer spending in every market segment
    • Labour costs rise, which may squeeze profit, lead to higher prices or reduce the number of staff employed

  7. A business has 30 staff. The minimum wage rises by 0.50 pounds an hour, and each person works 37.5 hours a week for 52 weeks. What is the extra annual wage cost?

    • 975 pounds
    • 29,250 pounds
    • 15,600 pounds
    • 1,500 pounds

  8. A manufacturer must meet new emissions rules. Which effect is most likely in the short term?

    • Capital spending is no longer needed because the rules are paid for directly by the government
    • Profit rises at once because the firm can charge higher prices for its products to every customer
    • The firm is forced to stop producing any goods, because the rules cover every type of production
    • Capital spending on cleaner equipment is needed, which raises costs and may reduce short-term profit

  9. Which is the most accurate evaluation of stronger competition regulation?

    • It only affects multinationals, so smaller firms face no costs or obligations under the rules
    • It removes all risk for businesses because firms no longer have to compete with rivals in any market
    • It can protect consumers and encourage efficiency, but compliance costs may burden smaller firms and slow some beneficial mergers
    • It always harms consumers because competition lowers quality and stops firms from investing in better products

  10. A 10% tariff is imposed on imports worth 2 million pounds a year. What is the extra annual cost to importers before any price changes?

    • 20,000 pounds
    • 2,000,000 pounds
    • 200,000 pounds
    • 2,200,000 pounds

  11. Which is an example of a political factor affecting business decisions?

    • A change of government that introduces a new policy on trade or taxation
    • A change in the size of the population in a region over the period
    • A shift in consumer tastes towards healthier food products in the market
    • A rise in the average level of income of households across the economy

  12. Why does political uncertainty often discourage long-term investment?

    • Uncertainty makes all borrowing cheaper, so firms are encouraged to take on large long-term projects
    • Political uncertainty has no effect on investment because firms ignore government policy in their planning
    • Firms cannot predict future rules or taxes, so they may delay or cancel projects with long payback periods
    • Uncertainty always increases the demand for goods, so firms invest more quickly to meet higher sales

  13. Which change in the legal environment would most directly affect a firm's employment costs?

    • A change to the rules on the size of advertising billboards on public roads
    • A change to the rules governing the registration of trademarks with the authorities
    • A change to the rules on working time limits or holiday entitlement
    • A change to the rules on the packaging of food products sold in shops

  14. A government introduces a price cap on a regulated utility. Which is the most likely effect on the utility's strategy?

    • It will be forced to leave the market altogether because price caps make all investment impossible
    • Its profit margins increase because the cap guarantees higher prices for every customer in the market
    • Its profit margins may be limited, so it may focus on cost reduction and efficiency to protect returns
    • It can raise its prices above the cap by adding extra charges, with no regulatory response at all

  15. Which factor is an example of a legal change affecting a business's competitive environment?

    • A fall in the price of a raw material on world markets because of a good harvest
    • A new law restricting anti-competitive mergers between large firms in a sector
    • A rise in the average number of hours worked per week by employees in the economy
    • An increase in the number of people choosing to shop online each year across Britain

  16. Which best explains why a government might offer subsidies to a renewable energy business?

    • To encourage investment in cleaner technology that supports environmental policy goals
    • To reduce the wages of employees working in the renewable energy sector across the country
    • To raise the prices of all fossil fuels so that consumers switch to a cheaper alternative source
    • To protect the business from all future competition from foreign firms entering the market

  17. Evaluate the impact of a government's decision to reduce regulation of a sector.

    • It guarantees that all firms in the sector will earn higher profits, with no change in consumer or environmental risk
    • It may lower compliance costs and encourage investment, but it can increase risks for consumers and the environment if protections weaken
    • It always harms the sector because firms are never able to invest without strict government rules in place
    • It has no effect because regulation never influences the decisions of businesses in any sector of the economy

  18. What is meant by a trade barrier?

    • A physical wall built between two countries to prevent people from travelling across their shared border
    • A requirement that all firms must be listed on a stock exchange before they can export
    • A government measure, such as a tariff or quota, that restricts the flow of goods between countries
    • A legal limit on the number of staff that a business can employ in any given year in the UK

  19. Which is the most likely short-term impact of a new trade agreement that removes tariffs between two countries?

    • Exporters may gain access to new markets at lower cost, though increased competition from imports may follow
    • The agreement has no effect on trade because tariffs are only a minor part of the cost of doing business overseas
    • Exporters lose all customers in the partner country because tariffs are removed for everyone at the same time
    • Domestic prices rise sharply because the agreement removes all competition from foreign firms in the market

  20. Which factor in a business's political environment is most likely to affect its international location decision?

    • The number of television stations available in the host country to advertise the firm's products
    • The stability of the host government and the predictability of its trade and investment rules
    • The colour of the flag used by the host country on its public buildings and official documents
    • The height of the tallest building in the capital city of the host country

All AQA Business quizzes