Lesson 2.3.6

2.3.6 Product Development and Innovation Quiz: NCFE Business & Enterprise, Unit 2

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

In partnership with Revision Ninja

This lesson covers how businesses keep products fresh and stay ahead. It looks at product development and innovation, patents, legislation forcing change, diversification to spread risk, extending a product's life, and how a firm can win an advantage through product, price, place or promotion.

Key points

  • Product development turns an invention or idea into a finished item, through costing, testing, packaging and launch.
  • Innovation, such as a better-performing kettle or a new flavour, can win customers from rivals and raise sales revenue.
  • A patent gives the owner a legal right to stop others copying an invention for a set time.
  • A patent is also a valuable asset because it can be sold or licensed to rivals for a fee.
  • Changes in the law, such as a banned ingredient or a vehicle ban, can force a firm to redesign its products.
  • Diversification spreads risk because a downturn in one market affects only part of the business.
  • A business can gain advantage through product, price, place or promotion, such as better value or easier delivery.

Key terms

Innovation
Creating something new or improving a product so it does something it could not before.
Product development
The process of costing, testing and launching an idea so customers can buy it.
Patent
A legal right preventing others from copying an invention for a limited period.
Legislation
Laws that businesses must follow, which can force them to change products.
Diversification
Selling into more than one market or product area to spread risk.
Competitive advantage
An edge over rivals, gained through product, price, place or promotion.

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.

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The 20 questions

  1. What is the main benefit of offering a unique selling point on a product?

    • Lowering fixed costs
    • Stopping all debt
    • Reducing tax bills
    • Beating rival products

  2. What is the primary business benefit of diversification?

    • Spreading risk
    • Halting all borrowing
    • Removing wage bills
    • Eliminating variable costs

  3. How is launching an improved product most likely to boost sales revenue?

    • Cutting supplier fees
    • Lowering corporation tax
    • Reducing staff wages
    • Winning rival customers

  4. How must a firm typically respond when legislation bans an ingredient in its product?

    • Increase output speed
    • Change the formula
    • Lower retail prices
    • Ignore the law

  5. What legal protection does a patent provide for an invention?

    • Free raw materials
    • Preventing rival copying
    • Exemption from tax
    • Guaranteed high profits

  6. What legal protection gives a firm exclusive rights to sell its new invention?

    • Patent
    • Subsidy
    • Copyright
    • Trademark

  7. Which action is a valid extension strategy for a declining chocolate bar?

    • Stopping all adverts
    • Launching new flavours
    • Lowering production staff
    • Cutting factory wages

  8. What financial benefit does a business gain from successful diversification?

    • Free business loans
    • A second income stream
    • Zero business rates
    • Exemption from VAT

  9. Which activity is the best example of business innovation?

    • Advertising a brand
    • Selling existing stock
    • Copying a rival item
    • Improving energy efficiency

  10. What is the likely result if a phone maker stops updating its handsets?

    • Sales increase rapidly
    • Market share grows
    • Profits double instantly
    • Customers switch brands

  11. A drinks firm takes a recipe out of its test kitchen and gets it onto shop shelves. What is this called?

    • Product development
    • Market segmentation
    • Invention
    • Diversification

  12. Adding new flavours to a declining product to boost sales is known as what?

    • Penetration pricing
    • Market skimming
    • Cost-plus pricing
    • Extension strategy

  13. What metric compares one firm's sales revenue to the total industry sales?

    • Gross profit
    • Net profit margin
    • Break-even output
    • Market share

  14. Offering a lower price for a similar item compared to rivals creates what?

    • Price advantage
    • Venture capital
    • High cost strategy
    • Inward investment

  15. What gives a business a 'place' advantage over competitors?

    • Easier product access
    • Lower selling prices
    • Better product quality
    • Stronger brand image

  16. Which factor gives a firm a product advantage?

    • Faster delivery
    • Unique features
    • Celebrity backing
    • Lower prices

  17. A firm uses a famous celebrity in adverts. What advantage is it building?

    • Place advantage
    • Price advantage
    • Product advantage
    • Promotion advantage

  18. What is the main benefit to a business of diversification across markets?

    • Lower staff costs
    • Higher tax relief
    • Faster production
    • Lower portfolio risk

  19. Why do new government laws banning petrol cars force innovation?

    • Raw materials get cheaper
    • Factory rent decreases
    • Current models become illegal
    • Staff wages rise automatically

  20. What legal protection does a patent give a business?

    • Removes all taxes
    • Guarantees profit levels
    • Extends factory leases
    • Stops rivals copying

All NCFE Business & Enterprise quizzes