Business midterm

The Making Ethical Decisions box "Should You Stay or Should You Go?" addresses a dilemma worthy of consideration. It describes

ethical decisions that need to be considered when employees leave a faltering business to start their own, eventually competing against their previous employer.

When seeking financial backing from a venture capitalist, a small business owner should realize that the venture capitalist will:

expect an ownership stake in the company in exchange for financial backing.

Entrepreneurs applying for a bank loan should realize that bankers will

expect the entrepreneur to provide a business plan.

Enterprise zones and investor visas are examples of

government programs that encourage economic growth through entrepreneurship.

The executive summary section of the business plan contains

information that will capture the attention of bankers and other investors who receive many business plans every day.

The global environment:

is far reaching and affects all the other business environments

When starting a small business, it's important to remember:

learning from others and gaining relevant business experience improves the odds for success.

According to SBA guidelines, a manufacturing firm with 1,000 employees:

may be classified as a small business depending upon the size of other firms in the industry.

Which of the following is considered when calculating a country's balance of payments?

military expenditures

Businesses are supporting single-parent families with:

more flexible work benefits such as flextime and family leave

Free trade between nations generally results in

mutually beneficial exchange relationships

Small business employees

often find more job satisfaction than their counterparts in big business.

Economist Thomas Malthus believed that ______________ would limit economic progress.

overpopulation

A market consists of potential buyers of a good or service. However, for a market to exist:

people must have unsatisfied wants and needs as well as a willingness and ability to buy

Diversity is more than recruiting and keeping minorities. Diversity means appreciating and understanding other differences in our customers and in our workforce. The best description of these differences is:

people with disabilities, people with different sexual orientations, religious preferences, and even personality differences such as extraverts and introverts.

The immigrant population (both legal and illegal) is having the most dramatic effect on

schools, hospitals, and other services industries.

Using the analogy of boulders vs. sand for filling a hole, the textbook points out that:

small businesses can serve niche markets that larger firms do not serve well.

Enterprise zones are:

specific locations across the U.S. where entrepreneurs can set-up shop and receive tax breaks for operating in these areas

Historically entrepreneurs in the U.S.

started many small firms that later became major corporations employing thousands of workers.

Which of the following best describes the outlook for small businesses in international markets?

the world is a larger, and potentially a more lucrative market than the U.S. domestic market

Intrapreneurs make use of __________ to develop and launch new products and generate new profits.

their employer's existing human, financial, and physical resources

Small businesses are important to the U.S. economy because

they create about 65% of new jobs each year and generate over 50% of the U.S. GDP.

Although successful entrepreneurs are more tolerant of uncertainty,

they strive to take calculated risks.

Since 1975, the U.S. has had a(n) ____________.

trade deficit

The Spotlight on Small Business box "Student Startups" features students who

turned a passion into a business opportunity.

Successful small business owners are:

valuable sources for information since you can learn from their experiences.

An oligopoly is a market that is characterized by

A few large sellers who dominate the market.

Which of the following statements accurately depicts an advantage that small business has over big business?

A small business can maneuver and change quicker than most large businesses can. It can react to market conditions and customer concerns much faster.

Companies that sell goods to consumers online are engaging in ________ transactions.

B2C

Laura is typical of many U.S. businesspeople. She feels the U.S. culture defines the model for the rest of the world, and that the "American way" of doing things is the best. Laura is guilty of

Ethnocentricty

A disadvantage of corporations is that their charters are only valid for 99 years, so corporations are less permanent than other types of businesses.

False

A growing number of people feel that an employee's ethics are a personal matter, and have nothing to do with management.

False

As opposed to venture capitalists, angel investors prefer to target their investments in new firms requiring large sums of money.

False

Because of their greater financial resources and expert staffs, big corporations can almost always outperform small businesses.

False

Business behavior determines the ethics of society. We can improve society's moral and ethical behavior by first making a commitment to improving business's moral and ethical behavior.

False

From a competitive standpoint, small businesses cannot expect to successfully compete with large corporations in international markets.

False

If you go through the exercise of preparing a business plan, only to determine that you need twice the amount of money to start the business than you have, the SBA and other expert organizations encourage you to go ahead with your plans because if you understand the market, you can use the revenues you accrue to make up the shortfall.

False

If you were to begin gathering information on a particular type of business, it is doubtful that a community college class would benefit your search because the information you would gain is too generic in nature.

False

In today's economy, only large business enterprises should operate as corporations.

False

Kyle is a recent college graduate with a business degree. While still in school, he learned that as a potential small business owner, he should focus his sights on domestic business only.

False

Laws that protect us from fraud, theft, and violence determine ethical behavior.

False

Prior to creating a business plan, discussions with bankers and investors can help entrepreneurs determine the amount of financing available.

False

Prospective entrepreneurs turned down by private lenders have little hope of getting financial help from the Small Business Administration, since the SBA's standards are even tougher than those of private lenders.

False

Small businesses lack the resources to compete directly with big businesses.

False

State governments create new start-up business organizations called enterprise zones that are later sold to private investors.

False

Successful entrepreneurs are exclusively motivated by the desire to become rich.

False

The only real barrier preventing small businesses from exporting is insufficient knowledge of the opportunities available.

False

The organization structure of a corporation allows for stockholders to exert a significant degree of control over the company's daily operations.

False

There are several ethical considerations when starting a business, but competing against current and former work relationships is always fair game.

False

To be successful, entrepreneurs are dependent on the support of others for encouragement.

False

Unlike partnerships, if sole proprietorships find themselves in bankruptcy, they don't need to worry about a court requiring them to sell off personal assets to pay for the debts of the firm.

False

When writing a business plan, prospective entrepreneurs should remember to omit details regarding their experience and education since investors are only interested in the proposed business.

False

While the first job for many people is working for a small business, larger corporations create most of the permanent new jobs.

False

With the achievements of the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO), nearly all barriers to trade expansion are finally removed.

False

Which of the following suggestions would an experienced business owner offer to help someone who is thinking about starting a business venture?

Gain experience by working for a successful businessperson.

State and city governments have promoted facilities where new businesses can open up shop and share common services such as secretarial, accounting, and legal services. Due to their remarkable success rate, __________ continue to grow in popularity.

Incubators

Which of the following best describes the difference between an intrapreneur and an entrepreneur?

Intrapreneurs work within existing corporations while entrepreneurs assume the risks of starting their own business.

Denmark requires foreign companies that sell butter in Denmark to sell it in cubes, not tubs. This type of requirement is known as a

Nontariif barrier

Which of the following statements is the most accurate observation regarding multinational corporations?

Only those firms with a physical presence in different nations qualify as multinational corporations.

The total amount of money that businesses take in by selling goods and services is called ______.

Revenue

The amount of goods and services people can buy with the money they have is called their:

Standard of living

As students think about a career in the business world today, which of the following is a good strategic suggestion?

Study a foreign language

The quantity of a good or service that producers are willing to sell at different prices during a specific time period is known as the

Supply of that product or service.

Entrepreneurs looking for a business that gives them the best opportunity to get rich should consider starting a business in

The manufacturing sector

Small businesses often have advantages in international markets. Which best describes one those advantages?

They can provide individualized customer service as opposed to impersonal corporate bureaucracies.

Which of the following statements is characteristic of entrepreneurs?

They look at problems and see opportunities

A major advantage of preparing a formal business plan is that prospective entrepreneurs must identify the resources and activities required to successfully operate their proposed venture.

True

Entrepreneurial teams increase the cooperation between marketing, production, and other functional areas of a business venture.

True

If you are trying to prevent failure, it is a good idea to go into the business with good record-keeping techniques.

True

Independence, challenge, and opportunity are among the key reasons given by those who assume the risks of entrepreneurship.

True

The owners of a limited liability company (LLC) must pay self-employment taxes on any profits they earn, even if they did not obtain a salary from the company.

True

Last year, the island nation of Winstone imported goods totaling $300 million and exported products totaling $86 million. Winstone experienced a(n)

Unfavorable balance of trade

One reason we have seen continued growth in home-based businesses is:

affordable computer and information technology makes it easier to compete.

Successful entrepreneurs are self-nurturing. This means they

believe in themselves and their ideas.

A review of small business successes and failures indicates that the

businesses with the potential for high profit levels tend to be difficult to start and hard to keep going.

For prospective entrepreneurs, enrolling in an introduction to business or small business management course offered through their community college

can be helpful by offering them an opportunity to meet experienced small business owners.

When corruption is present in the business environment:

company leaders can threaten competitors and minimize competition.

The green movement is

concerned with depletion of natural resources

Export trading companies

connect sellers in the U.S. with buyers in other nations, and help with customs, documentation, and payments

War and terrorism in many parts of the world should lead to

consumer and economic hardship due to increased military spending

For-profit businesses and nonprofit organizations are similar in that they both:

contribute to the welfare of society.

Effective entrepreneurial teams combine:

creativity with marketing and production experience.

Efforts are under way to serve the needs of a diverse population. Diversity means:

dealing sensitively with workers and cultures around the world

A good business plan will:

describe all aspects of the business, including product, the target market, the nature of the competition, any financial resources, and the owner's qualifications.

___________ means producing items using the least amount of resources.

efficiency

When two or more people legally agree to become co-owners of a business, the form of business is called a partnership.

True

Patrick just landed a job working for an up and coming online gaming company in Palo Alto, California. In a lot of ways, this is his dream job come true—the chance to work for a company that makes gaming software and live in California at the same time. As his plane lands at San Jose International, he pictures a snazzy apartment with a palm tree right outside the front door. A few hours later, as he meets a property manager of a large apartment complex, his heart sinks. The price of apartments is outrageous! Back at the hotel, he checks the Bureau of Labor Statistics site to try to get a better picture of why the cost of housing is so high in this region of the country. Which factors may be causing the rise in the price of housing?

A low unemployment rate and increasing GDP

Last week, the Citizens for a Greener America sent a formal letter to Tee Time Golf Resort requesting that the private club measure its carbon footprint and thusly publicly disclose the amount of fertilizer and other carbon-emitting substances it's using on its two award-winning golf courses. Citizens for a Greener America is an example of

A watchdog group

A good reason why partners should spell out the details of their partnership arrangements in writing is:

A written agreement will help reduce misunderstandings and disagreements among the partners

Many business experts contend that __________ will likely be the growth market of the future.

Asia

Which of the following statements provides the most accurate comparison of socialism and communism?

Both socialism and communism strive to achieve a more equal distribution of income and wealth, but under communism, the government takes greater control.

Sasha is a well-educated entrepreneur who operated a small business in her home country of Evensplitia. At the encouragement of American relatives, Sasha recently immigrated to the United States and applied for citizenship. "In Evensplitia, tax rates were very high," Sasha complained. "The government used my taxes to finance all sorts of social programs to help the less fortunate. While I want to help, it has really undermined the profit incentive of individuals such as me. I feel those high taxes have stunted economic growth." Sasha's comments illustrate the reason many socialist countries are experiencing a(n)

Brain drain

Over dinner with his friend Nathan, Dominic complained about how prices have increased a great deal over the past year. Nathan disagreed and said that the prices of some goods have gone up a bit, but other prices have declined, noting that you can get some good buys on houses right now. Nathan feels that the average price of consumer goods hasn't changed. Nathan and Dominic can refer to the __________ to learn how government economists currently view the price situation.

CPI

EBL Industries _________________ its products in foreign countries, where labor is less expensive and production sites are owned by other companies. This strategy allows EBL Industries to experiment in new markets without incurring the large start-up costs involved with building its own production facilities.

Contract manufacturing

When a company's strategy is __________, the firm makes arrangements for a foreign manufacturer to produce the product. The domestic company's label and/or trademark are attached to the completed product.

Contract manufacturing

The management staff at Doc's Motorcycles believes the company has a social responsibility to its community. They believe that the company can have the greatest impact in this area through cash contributions to local nonprofit organizations. This is an example of

Corporate philanthropy

One way to lessen the U.S. government budget deficit is to

Cut spending

Casey is looking into opening a day care in her community. She is aware of many single-parent families that need a place for their children to stay while they work, but she is concerned about the long-term prospects for such a business. Casey thinks the future of her day care will depend on whether birth rates and the number of single-parent families keep growing. These concerns illustrate how businesses can be affected by ______ trends.

Demographic

A problem with the CPI is that it measures the price changes of only food and clothing, while ignoring what happens to the prices of such important items as medical care and energy.

False

Adam Smith believed that an economic system couldn't truly prosper unless people were taught to value the welfare of others above their own personal gain.

False

Adam Smith's research focused on determining the best way to distribute a fixed amount of resources, rather than on how to create more wealth

False

America's business ethics can improve simply by requiring written contracts with employees, customers, and owners. This alone will do the job!

False

An ethical manager's decisions are based only on the following questions: "Is it legal?" and "Is it profitable?"

False

At a recent town hall meeting, citizens expressed concern regarding the impact of a proposed new casino. The owner of the proposed casino responded, "I don't know what all of this fuss is about. I'm just a businessman trying to earn a profit, provide new jobs, and pay taxes." His response reflects an overall commitment to corporate social responsibility.

False

Dan and Susan Greene are purchasing their first home in Savannah, Georgia. They are seeking pre-qualification on a home loan. The unemployment rate for Georgia is 10.2% and GDP is declining. Chances are pretty good that the Fed will raise interest rates in order to loosen the supply of money, resulting in a more expensive loan for Dan and Susan.

False

Digital Life Gaming has avoided contract manufacturing its consoles abroad due to the significant start-up costs in buying land and setting up its own manufacturing plants. They have made the right decision.

False

Ethical behavior refers to the standards that are accepted by society as true or false.

False

Harper has always disliked the concept that the customers, managers, and workers of a business are separate individuals with competing goals. She joined with many other people in her community who share this view to become a member, and part owner, of a childcare center. Harper and the other members operate the center for their own benefit, and each is expected to work at the center at least 12 hours each month. The type of organization Harper belongs to is known as a joint venture.

False

History shows that free-market capitalism leads to a fair and equitable distribution of wealth.

False

Janie is a general partner in a local bakery. All of her personal assets are legally protected from the debts of the business.

False

Limited partnerships are just like general partnerships, except that they are partners for a limited time period.

False

One advantage of a partnership is that there is a simple process for partners to terminate their business.

False

Senator Shulei Lee is alarmed at the state of the economy. Unemployment is high and GDP is low. Senator Lee has called for Congress to take action to increase government spending and cut taxes in order to stimulate the economy. The actions called for by Senator Lee are examples of

Fiscal policy

A form of foreign direct investment, where a domestic company purchases a company in a foreign country to produce a similar product or service, is a

Foreign subsidiary

Opportunities and advancements in the technological environment during the past 20 years have opened the doors for a number of products that enhance the lives of consumers. Identity theft and other forms of cybercrime are also by-products of these technological advancements. Which of the following statements describes a form of identity theft?

Hacking into a business's database to obtain customer credit card numbers, and then selling those numbers to others for use

China is a nation with a vast amount of land and a very large population. Another characteristic of this nation is its people's affinity for saving money. Referring to the five factors of production, the government of China has made significant progress in building its business environment by focusing on factors that needed improvement. Its best strategy would be to

Increase entrepreneurship

The S corporation is likely to be less popular in the future because:

Limited liability companies, which do not have the restrictive eligibility requirements of S corporations and offer greater flexibility in the choice of tax treatment, are now legal in all 50 states.

In the box "World Population is Popping," the textbook describes how the world's population is growing at an incredible rate and discusses the challenges that will face different countries. Which of the following statements best illustrates the challenges that can arise?

Nigeria will experience the world's fastest growth and though its continent has the world's fastest growing middle class, combating hunger and poverty, providing healthcare, and expanding education will pose a challenge.

Which of the following organizations is an example of the goods-producing sector of the economy?

Samsung electronics

A business should be managed ethically to keep existing customers and attract new customers.

True

A firm looking to enter a foreign market with a limited investment should consider licensing.

True

Actions speak louder than words!" is an old saying that refers to the fact that people's actions—how they act as opposed to what they say—are often testament to their true ethical values.

True

American businesspeople often fail to adapt to foreign markets because they feel that the American culture is superior to other cultures in the world.

True

An integrity-based ethics code moves beyond legal compliance in order to create a "do-the-right-thing" climate.

True

At Fisher Financial Services, clients have a right to do business with whichever consultant they choose. It is not out of the ordinary for a financial consultant to lose a client to another consultant in the same office. If it is a high-net worth client, with the potential for high commissions on sales, the incentive to steal a fellow worker's client exists because the firm's culture has not established integrity-based ethics to deter this activity.

True

Bonnie runs a house cleaning service. Although she and her employees could service 12 households in one day, they average eight homes per day. Bonnie recently restructured her crew and provided each housekeeper with an incentive to acquire two new customers each month through customer referrals. As a recent business graduate, you would tell her she's probably on the right track.

True

Ethical behavior focuses on treating others fairly.

True

Ethical behavior requires more than following the law.

True

It is usually easy to start and end a sole proprietorship.

True

Jeff is an emergency room nurse at a regional hospital in Arizona. On a weekly basis, he will serve a number of patients who are not legally U.S. citizens. Fortunately, he speaks enough Spanish to communicate with the patients. Jeff is experiencing the realities of the social environment in some states.

True

Overly ambitious business goals and employee incentives can lead to unethical behavior.

True

The government of Ativa has made great progress in its efforts to control its rapid inflation. Although prices are still on the rise, the rate of increase has slowed considerably. This suggests that Ativa is experiencing disinflation.

True

The government of the small nation of Gordonia owned the nation's telephone company and landlines. This relatively poor government relied on taxes to develop this industry and provide service to its citizens. If the government wanted to improve people's access to phone service, its best course of action would involve selling the telephone company to private investors.

True

The job of an ethics officer is to serve as a counselor for employees and as an investigator for the company.

True

The major differences between an S corporation and a limited liability company are limits on the number of owners and the citizenship status of individuals who are owners.

True

Two long-time competitors, Freddie's Market and Greta's Groceries, recently issued an announcement stating their decision to merge. The statement claimed that the new company would have more financial resources, which would enable it to expand services and broaden offerings to customers. This proposed merger is an example of a horizontal merger.

True

__________ is a condition in which the average level of prices is actually falling.

deflation

Honda and Hyundai have insourced for years to design and manufacture cars in the United States. Insourcing

helps offset the number of jobs being outsourced.

According to the box, "Services Expand the Circular Economy," technology is helping turn products into services by

offering new ways to access items like movies or music and by adding sensors to allow companies to develop new business models

Before it was publicly known that IBM was going to take over Lotus Development, an IBM secretary told her husband, who told two co-workers, who told friends, relatives, business associates, and even a pizza delivery man. A total of 25 people received the information and traded on this tip to make a profit. These people were

participating in insider trading.

Although sole proprietors do not pay any special taxes, as the owner of the business you are also an employee of the business, which requires you to

pay self-employment taxes.

__________ is the market situation in which there are many sellers in a market and no seller is large enough to dictate the price of a product.

perfect competition

James's family business, J&J Interiors, sells and installs tile in bathrooms and kitchens. More and more of J&J's customers are asking for heater coils under bathroom floors, and James thinks there is a greater opportunity in heated tiles. In his effort to avoid domestic competition, he sets his sights on the vast Hasalot market. Much to his surprise, most of Hasalot's citizens do not yet have indoor plumbing and are accustomed to government-run communal baths. James realizes that his global marketing effort is hampered by

physical and environmental constraints

The customers, employees, stockholders, suppliers, creditors, and others who stand to gain or lose by the policies and activities of a business represent the firm's:

stakeholders

An incredibly rare stone known as Diamontite is used in many consumer products, including watch faces, smartphones, computer monitors, and tablets. In one year, the price of Diamontite has gone from $8/lb. to $107/lb. Under these circumstances and the fact that more companies are looking to use Diamontite in their products, a graph of the supply and demand for this product would show

the price of Diamontite to be above the equilibrium price for this rare gem.

When the market price of a good is below the equilibrium price, and all other determinants are unchanged

the quantity demanded will exceed the quantity supplied

The benefits of protective tarrifs are

they protect domestic jobs by encouraging cost-sensitive consumers to purchase domestic products

An American company recently won a huge contract with a company in Indonesia, by gifting the Indonesian government officials with American cars and an assurance of monetary gifts. Clearly, this procedure

violates the Foreign Corrupt Practices Act.