L3M1 CIPS Procurement and Supply Environments Free Practice Exam Questions (2025 Updated)

Explanation

Non-tariff barriers are restraints on international trade which are not so obvious as simple duties or tariffs. Complex procedures can slow things down, reducing the incentive to export to that country resulting in protected domestic business; subsidies to one's own producers make it more difficult for foreign firms to compete - again creating a barrier to trade.

Increased import duties would be a form of tariff (potentially in breach of GATT / WTO agree-ments); reduced import duties would free up / encourage trade.

Explanation

Continuously scanning the environment can bring rewards in the form of new supply companies, new products and services, awareness of supply firm or industry difficulties, etc.

Purchasing research is a very close answer to the correct one, but is likely to be more focussed, spe-cific.

If faced with a difficult choice as to which of two options in the exam is correct, think about what was included as part of your syllabus.

In this case, environmental scanning is the first entry in your Learning Outcome 3.1

Explanation

This is true: the liability of shareholders is limited to their agreed financial commitment, not beyond that.

Explanation

To the lay person, they may look the same.

However, for a procurement professional, a fixed price may be altered in some circumstances eg 'fixed price with incentive', 'fixed price with exchange rate adjustment', etc.

A firm price on the other hand cannot be altered, and is the price which will be paid under the con-tract.

An earlier text by Patrick Behan on government contracting refers.

Explanation

The x-axis shows time. For some products, it may represent a year; for others, a century.

The other answers given could all be shown on the y-axis of the PLC, depending on circumstances.

Explanation

This is true.

The purpose of creating or entering into a trading bloc is to increase the volumes of trade between countries within that bloc. This is irrespective of trade between blocs, which may grow or not, de-pending on circumstances.

Explanation

It's a supplier quotation.

Both the RFQ and the PQQ (sometimes known as 'SQ') are issued by the buying side, not the sell-ing side.

A commercial invoice doesn't tell you what the price 'would be' - it tells you what is owed after the event (usually - an exception being with prepayment in mind; or a 'proforma invoice' which is issued in some circumstances, especially internationally).

Explanation

A market with only one buyer is called a 'monopsony'.

There may be other QUESTION NO:s in this test about the other terms shown, so I shall hold back on expla-nation(s) here.

Explanation

To gain market share and to create shareholder value (increase the value of shares) are common aims of private sector organisations.

The other two answers are the antithesis of what firms usually want.

Explanation

Gross National Product; Gross Domestic Product.

Seen by some commentators as outdated measures, although it's difficult to know what they should / would be replaced by.

Explanation

The Act was introduced in 2010. Although this is a UK-centric QUESTION NO:, it is valid for several rea-sons. Firstly, the UK was one of the first countries to introduce such a wide-ranging Act; secondly the Act is so wide-ranging that all UK managers need to be familiar with it. People who live and work outside the UK may wish to familiarise themselves with the content of the Act to have an idea of what the impact of such legislation might be like.

Interestingly, in the UK, the Act has seldom been used 'in anger'.

Explanation

This is the standard definition, widely used, and given in your textbook.

Explanation

The answer is 'not-for-profit', meaning 'third sector' (charities, co-operatives, NGOs, etc). This is not the same as 'public sector'. You should be clear on this terminology.

Explanation

Government decisions and actions regarding the level of interest rates and supply of money in the economy.

Fiscal policy relates to taxation and its relationship to government expenditure.

The other two suggested answers: exchange rates and unemployment rates are a factor of other poli-cies; the size of coins and banknotes is beyond the scope of your syllabus and my knowledge. :)

Explanation

Equilibrium price as demand and supply are perfectly balanced.

Equivalium is a made-up word. When I was studying for my MCIPS back in the 1980's it was a re-quirement to undertake a research study. My research was into the monopolistic supply of valium and librium to the UK's National Health Service by a Swiss company called Hofmann la Roche. That research endeared me neither to branded drugs, nor, possibly unfairly, to multinationals.

The likely choice of answers for people who don't know the correct answer is probably between 'equilibrium' and 'clearing'. Clearing would be a logical choice, but it's not the one your assessor re-quires.

Explanation

'Retention' - from the word 'retain', meaning to 'keep in place', 'hold back', 'keep possession of' something (Concise Oxford Dictionary, fifth edition) . In this case, 5% of the contract price.

Explanation

In 2015 an agreement was reached in Paris, France among most world nations to try to limit climate change and its effects.

The other answers shown are simply fictions.

Explanation

Competitive rivalry within an industry.

This can be quite an important point, and why I have such a dislike of the less formal title for the model - the model is about entire industries, not just about a single firm - this is commonly misun-derstood by students (and sadly, some tutors) - and the original Porter title - 'Industry Structure Analysis' - helps us understand that, I think. I find this tool of analysis to be very helpful in under-standing behaviour within sectors, despite criticism of the model and its age from some commenta-tors

The other answers shown are mere fictions.

Explanation

This should be an easy QUESTION NO:. The definition describes nicely one possible form of cost-based price. It is important to try to be able to distinguish cost from price.

The 'target cost incentive' method of pricing might have been tempting as an answer, since the defi-nition shown mentions cost, but it mentions neither target nor incentive, and can therefore be ruled out.

And whole life cost is a different concept altogether.