Econ. Chapter 8 Test Review

9. What is a bond, and how is it used? A. A written promise to repay borrowed money at a later date; to raise money B. A portion of the money earned by a company; to reward investors C. A percentage of a corporation that is sold; to reduce corporate taxes D. A certificate indicating that an investor owns part of a company; to reduce corporate liability

A. A written promise to repay borrowed money at a later date; to raise money

1. Which type of business offers the best chance for quick decision-making? A. Sole proprietorship B. General partnership C. Limited partnership D. Corporation

A. Sole proprietorship

15. Which of the following is an advantage of a multinational? A. They produce tax revenue for the countries where they do business. B. They use cheap labor. C. They export scarce natural resources. D. They help preserve traditional ways of life

A. They produce tax revenue for the countries where they do business.

3. Collective bargaining occurs when A. a labor union negotiates with management about worker pay and job-related issues. B. members work together to make goods available to each other at lower prices. C. a group agrees to work together to improve the community. D. a corporation's management and board of directors agree on how to run the business

A. a labor union negotiates with management about worker pay and job-related issues.

3. A vertical merger combines firms that A. are involved with different stages of manufacturing, marketing, or sales. B. produce complementary products. C. want to keep their own identities intact. D. produce the same kinds of products

A. are involved with different stages of manufacturing, marketing, or sales.

11. The government document that grants permission to establish a corporation is called a A. charter. B. stock certificate. C. partnership agreement. D. limited liability agreement

A. charter.

15. When a union negotiates pay and other job-related matters, this is called ______ . A. collective bargaining B. going on strike C. cooperative bargaining D. accessing resources

A. collective bargaining

7. When the government has a direct role in the economy, A. it competes with other private businesses by offering goods or services. B. it benefits individuals only indirectly. C. it acts as a consumer instead of a producer. D. it regulates economic activity

A. it competes with other private businesses by offering goods or services.

7. Multinationals are distinct from other types of businesses because they A. operate and sell products in different countries. B. are characterized by having many horizontal mergers. C. have more synergy than other companies. D. must adhere to stricter regulations

A. operate and sell products in different countries.

13. A credit union is an example of a ______ . A. service cooperative B. conglomerate C. producer cooperative D. consumer cooperative

A. service cooperative

5. People who invest in a corporation by purchasing stock are known as A. shareholders. B. partners. C. proprietors. D. managers

A. shareholders.

13. Most mergers take place to improve a company's performance in the eyes of ______ . A. the shareholders B. the employees C. government regulators D. tax collectors

A. the shareholders

10. An example of the indirect role of government is A. when the government regulates firms to prevent a monopoly. B. when the government provides electric power. C. when the government provides postal service. D. when the government operates a university

A. when the government regulates firms to prevent a monopoly.

10. Which type of business involves renting or leasing a successful business model? A. Sole proprietorship B. Franchise C. Limited partnership D. Corporation

B. Franchise

2. If investors want to know about the financial health of a firm, what is one of the first things they look at? A. The amount of a firm's depreciation B. The firm's cash flow C. The firm's president D. The firm's taxes

B. The firm's cash flow

3. Which of these is an advantage of a sole proprietorship? A. It is recognized as a separate legal entity. B. The owner does not have to share the profits of the business with anyone else. C. The proprietor does not have to pay income taxes for the business. D. It is easy to attract qualified employees

B. The owner does not have to share the profits of the business with anyone else.

6. What is one of the main reasons why companies merge into large conglomerates? A. To achieve synergy with a newly acquired firm B. To diversify by not "putting all their eggs in one basket" C. To build customer loyalty towards a single brand D. To take advantage of a unified marketing team

B. To diversify by not "putting all their eggs in one basket"

9. What is one way that venture capitalists differ from angel investors? A. Angel investors offer expertise and connections that businesses can use to solve problems. B. Venture capitalists are more concerned with seeing a return on investment, whereas angel investors are acting more out of goodwill. C. Angel investors have more stringent requirements when making investments. D. Venture capitalists are primarily concerned with helping improve the community

B. Venture capitalists are more concerned with seeing a return on investment, whereas angel investors are acting more out of goodwill.

14. Which of the following phrases best defines the term limited partnership? A. an organization that limits liability to the corporation rather than the individual owners B. a partnership in which at least one partner has less responsibility in the business operations and less liability for business losses C. a business that is limited to three or fewer investors D. a business model that combines aspects of corporations and partnerships

B. a partnership in which at least one partner has less responsibility in the business operations and less liability for business losses

2. A cooperative is intended to benefit A. only its board of directors. B. all of its members. C. the entire community. D. investors from other nations

B. all of its members.

12. Which of the following is a noncash charge? A. wages B. depreciation C. dividends D. horizontal merger

B. depreciation

12. If the activities of a nonprofit organization produce revenues, the organization uses the money to ______ . A. pay dividends to its members B. further its work C. join a chamber of commerce D. grow the business

B. further its work

13. In a retail business, the stock held in reserve is called A. raw materials. B. inventory. C. capital. D. profits.

B. inventory.

2. Day-to-day operations within a corporation are most likely controlled by the company's A. proprietors. B. president and vice presidents. C. stockholders. D. board of directors

B. president and vice presidents.

5. A difference between a professional association and a labor union is that A. labor unions primarily focus on public perception of their members. B. professional associations are more concerned about standards of conduct and legal issues that might affect them. C. labor unions serve the entire community. D. professional associations lead strikes.

B. professional associations are more concerned about standards of conduct and legal issues that might affect them.

15. A document certifying ownership of part of a corporation is a A. charter. B. stock certificate. C. dividend check. D. bond

B. stock certificate.

4. This form of business provides limited liability for the owners. A. Proprietorship B. General partnership C. Corporation D. Sole proprietorship

C. Corporation

1. How does depreciation differ from other operational expenses? A. It is paid only after taxes have been paid. B. It is an extraordinary expense that is not included on income statements. C. It both lowers a firm's taxable income and increases the firm's cash flow. D. It is paid out to individual employees rather than to banks or suppliers

C. It both lowers a firm's taxable income and increases the firm's cash flow.

10. How has social media changed the business-financing landscape? A. It has provided a way for angel investors to vet and select businesses to fund. B. It has contributed to the expansion of businesses to other countries. C. It has made it possible for companies to reach out directly to a crowd of interested investors. D. It has made it easier for companies to run background checks on employees.

C. It has made it possible for companies to reach out directly to a crowd of interested investors.

7. Which of these is an advantage of a corporation? A. Corporate profits are taxed twice. B. A corporation has limited life. C. It is easier to raise financial capital. D. Shareholders help make business decisions

C. It is easier to raise financial capital.

6. Which of the following is NOT an example of a business association? A. Chamber of commerce B. Business roundtable C. The AFL-CIO D. Better Business Bureau

C. The AFL-CIO

8. Why might someone want to purchase a franchise? A. The start-up costs are relatively low. B. The franchisee will own the business at the end of the lease term. C. The franchisee will have the opportunity to sell an established product with a national reputation. D. The franchisee will face minimal costs if he or she wants to back out of the lease agreement after two or three years

C. The franchisee will have the opportunity to sell an established product with a national reputation.

14. A company with four or more businesses that make unrelated products is called a ______ . A. horizontal merger B. vertical merger C. conglomerate D. multinational

C. conglomerate

14. An organization that buys bulk amounts of goods to distribute to members is a ______ . A. producer cooperative B. service cooperative C. consumer cooperative D. labor union

C. consumer cooperative

11. Schools, churches, and community organizations are examples of ______ . A. cooperatives B. conglomerates C. nonprofit organizations D. labor unions

C. nonprofit organizations

8. Incubators provide assistance for entrepreneurs by A. locating applicable government subsidies. B. creating new business start-up kits. C. providing start-up training and guidance with obtaining potential financing. D. researching and developing new products

C. providing start-up training and guidance with obtaining potential financing.

4. The role of a labor union is to A. advocate against shareholder dividends. B. support a corporation's board of directors. C. represent the interests of workers in employment matters. D. serve as the spokesperson for a company's management.

C. represent the interests of workers in employment matters.

12. A business run by a single person is a A. partnership. B. corporation. C. sole proprietorship. D. limited liability corporation

C. sole proprietorship.

9. Which level(s) of government play a direct role in the economy? A. Only local governments B. Only state levels of government C. Only the federal level of government D. All levels of government

D. All levels of government

6. Which of these is the price that an individual or a corporation pays for the use of another's money? A. Dividends B. Principal C. Capital D. Interest

D. Interest

5. Reasons for merging might include all but which of the following? A. To achieve economies of scale B. To diversify the product line C. To eliminate a rival D. To get more venture capital funding

D. To get more venture capital funding

8. The FDIC's role in insuring the deposits in banks is an example of the A. cooperative role of government. B. regulatory role of government. C. indirect role of government. D. direct role of government

D. direct role of government

11. To get a picture of a business's overall expenses and profits, you should look at its ______ . A. inventories B. depreciation C. dividends D. income statement

D. income statement

4. When merging firms strive to take advantage of the best characteristics of each to create a stronger, better company, they are trying to achieve A. conglomeration. B. economies of scale. C. diversification. D. synergy

D. synergy

1. One reason that community organizations may be legally incorporated is A. to maximize profits for shareholders. B. to cut costs of supplying goods and services. C. for convenience in paying taxes. D. to take advantage of unlimited life and limited liability

D. to take advantage of unlimited life and limited liability