Intro to Business Midterm Review

A monthly index that measures changes in prices that consumers pay for goods is referred to as the a. prosperity index. b. producer's price index. c. prosperity price predictor. d. inflation rate index e. consumer price index.

Consumer Price Index

T / F Adam Smith is the father of communism and advocated a classless society.

False

T / F The majority of small business firms are successful at the end of ten years.

False

T / F Under communism, individual consumers determine what will be produced

False

The process of separating work into distinct tasks is called a. bartering. b. networking. c. specialization. d. a factory system. e. a domestic system.

Specialization

invisible hand

Term created by Adam Smith that describes how a business owner's personal gain benefits others (through the product that is produced or through the wages that are paid to workers) and a nation's economy (through increased GDP, taxes, exports, etc.).

supply

The amount of goods available

Business Competition

The rivalry among companies for customers.

Microeconomics

The study of the decisions made by individuals and businesses.

Macroeconomics

The study of the national economy and the global economy.

national debt

The sum of government deficits over time.

T / F Fiscal policy determines the level of interest rates.

True

T / F Hewlett-Packard Corporation and Dell Computer use product differentiation in the marketplace.

True

T / F If a firm's sales revenues exceed its expenses, the firm has earned a profit.

True

T / F The equilibrium price means that the supply and demand for a product are in balance.

True

T / F While the goal of investing is to earn money with money, such a goal is completely useless for the individual because it is so vague and so easily attained. In reality, an investment goal must be specific and measurab

True

Land and natural resources

a factor of production - Elements in their natural state that can be used in production, such as crude oil, forests, minerals, land, water, and even air.

Labor

a factor of production- Human resources such as managers and employees.

Capital

a factor of production- Money, facilities, equipment, and machines used in the operation of organizations.

Entrepreneurship

a factor of production- The willingness to take risks and the knowledge and ability to use the other factors of production efficiently. An entrepreneur is a person who risks his or her time, effort, and money to start and operate a business.

Monopoly

a market (or industry) with only one seller. A firm in a monopoly position must consider the demand for its product and set the price at the most profitable level.

Oligopoly

a market situation (or industry) in which there are few sellers. These sellers are quite large and must make sizable investments to enter into their markets. Because there are few sellers, the market actions of each can have a strong effect on competitors' sales and prices.

monopolistic competition

a market situation in which there are many buyers along with a relatively large number of sellers. The various products available in this market are similar and intended to satisfy the same need. However, each seller attempts to make its products different.

perfect competition

a market situation in which there are many buyers and sellers of a product, and no single buyer or seller is powerful enough to affect the price of that product. buyers and sellers must accept the going price.

Depression

a severe recession that lasts longer than a recession.

federal deficit

a shortfall created when the federal government spends more in a fiscal year than it receives

The ability to produce a specific product more efficiently than any other nation.

absolute advantage

Communism

almost all economic resources are owned by the government. The basic economic questions are answered through centralized state planning. Emphasis is placed on the production of goods the government needs rather than those which consumers might want.

Capitalsim

an economic system in which individuals own and operate the majority of businesses that provide goods and services

command economy

an economic system in which the government decides what will be produced, how it will be produced, for whom available goods and services will be produced, and who owns and controls the major factors of production.

natural monopoly

an industry that requires a huge investment in capital and within which any duplication of facilities would be wasteful. Many public utilities are still classified as natural monopolies, but competition is increasing in many industries.

Wealth

anything of value

Human resources

are the people who furnish their labor to the business in return for wages.

The total flow of money into a country minus the total flow of money out of that country over the same period of time.

balance of payments

The total value of a nation's exports minus the total value of its imports over some period of time.

balance of trade

System of exchange

barter

An organized effort to produce and sell goods and services for a profit

business

marketing intermediaries

buy products from manufacturers and then resell them.

A system where individuals own and operate the majority of businesses.

capitalism

Socialism

certain key industries are owned and controlled by the government. Depending on the country, private ownership of other businesses is permitted to varying degrees. What to produce and how to produce it are determined in accordance with national goals.

The ability to produce a specific product more efficiently than any other product.

comparative advantage

market economy

economic system in which decisions on production and consumption of goods and services are based on voluntary exchange in markets

A study of how wealth is created and distributed

economics

A person who takes the risk and invests in a business.

entrepreneur

Selling and shipping raw materials or products to other nations.

exporting

Materials, machinery, and workers are assembled in one place.

factory system

The government spends more than it receives.

federal deficit

Fiscal Policy

government influence on the amount of savings and expenditures; accomplished by altering the tax structure and by changing the levels of government spending

Value of all goods and services produced within a country during a one-year period.

gross domestic product

A tax levied on a particular foreign product entering a country.

import duty

An increase in productivity results

in economic growth.

Material resources

include the raw materials used in manufacturing processes, as well as buildings and machinery.

All business activities that involve exchanges across national boundaries.

international business

Deflation

is a general decrease in the level of prices.

Inflation

is a general rise in the level of prices.

Consumer Price Index (CPI)

is a monthly index that measures the changes in prices of a fixed basket of goods purchased by a typical consumer in an urban area

limited monopoly

is created when the federal government issues a copyright, patent, or trademark.

A nation's gross domestic product (GDP)

is the total dollar value of all goods and services produced by all people within the boundaries of a country during a one-year period.

factors of production

land, labor, capital entrepreneurship; are the resources used to provide goods and services.

Businesses are usually classified as one of three types

manufacturing, service, marketing intermediaries

For a business to be organized, it must combine four kinds of resources

material, human, financial, and informational.

Producer Price Index (PPI)

measures prices that producers receive for their finished goods.

to offset the effects of recession and depression, the federal government uses both

monetary and fiscal policies.

Except for natural and limited monopolies, United States federal antitrust laws prohibit

monopolies and attempts to form monopolies.

market price

or equilibrium is the price at which the quantity demanded is exactly equal to the quantity supplied.

Generally, the business cycle consists of four states

peak (or prosperity) recession trough, and recovery (or expansion).

manufacturing business

process various materials into tangible goods.

service business

produce services.

The process of distinguishing Colgate from Crest toothpaste

product differentiation

The average level of output per worker per hour

productivity

loss

results when a firm's expenses are greater than its sales revenue

To be successful, a business must

satisfy needs, and earn a profit.

two types of command economies

socialism and communism

monetary policies

the Federal Reserve's decisions that determine the size of the supply of money in the nation and the level of interest rates, usually by setting the rate of interest the Federal Reserve charges for loans to banks.

Productivity

the average level of output per worker per hour

peak

the economy is at its highest point, unemployment is low, total income is relatively high, and consumers are willing to buy products and services. Businesses often expand and offer new products and services.

financial resources

the money required to pay employees, purchase materials, and generally keep the business operating.

recovery

the movement of the economy from depression or recession to prosperity; a greater demand for products and services results.

e-business

the organized effort of individuals to produce and sell for a profit the goods and services that satisfy society's needs through the facilities available on the Internet.

Business

the organized effort of individuals to produce and sell, for a profit, the goods and services that satisfy society's needs

Unemployment rate

the percentage of a nation's labor force unemployed at any time

Trough

the phase in which the nation's output and employment reach their lowest levels.

product differentiation

the process of developing and promoting differences between one's products and all similar products.

demand

the quantity that buyers are willing to purchase at each of various prices.

Informational resources

the resource that tells the managers of the business how effectively the other resources are being combined and used.

Economics

the study of how wealth is created and distributed.

economy

the way in which people deal with the creation and distribution of wealth

Recession

two or more consecutive three-month periods of decline in a country's gross domestic product. Unemployment rises , and total buying power declines.

Stakeholders

used to describe all the different people or groups who are affected by an organization's policies, decisions, and activities

Profit

what remains after all business expenses have been deducted from sales revenue.

How wealth is distributed

who gets what

Adam Smith

-Scottish economist who wrote the Wealth of Nations a precursor to modern Capitalism. -argued that a society's interests are best served when the individuals within that society are allowed to pursue their own self-interest.

Laissez-faire

Policy that government should interfere as little as possible in the nation's economy. " let them do"

3. The total of all federal deficits is called a. depression. b. fiscal policy. c. gross domestic product. d. national debt. e. business cycle.

National Debt

business cycle

Alternating periods of economic expansion and economic recession

Why study business?

For help in choosing a career To be a successful employee To improve your management skills To start your own business To become a better informed consumer and investor

When the level of prices in an economy rise, it's called a. prosperity. b. recession. c. depression. d. recovery. e. inflation.

Inflation

The study of the national economy and the global economy is referred to as a. factors of the economy. b. microeconomics. c. macroeconomics. d. laissez-faire capitalism. e. a command economy.

Macroeconomics

Best Buy and Walmart are both examples of a. production intermediaries. b. manufacturing businesses. c. service businesses. d. marketing intermediaries. e. small businesses.

Marketing Intermediaries

The U.S economy is a ________ because it exhibits elements of both capitalism and socialism

Mixed Economy