BUSINESS PRINCIPLES - CHAPTER 2 - 5
How is legality different from ethics?
Ethics goes beyond obeying laws to include abiding by the moral standards accepted by society. Ethics reflect people's proper relationship with one another. Legality is more limiting; it refers only to laws written to protect people from fraud, theft, and violence.
The total amount of money a business takes in during a given period of time by selling goods and services is its profit.
False
General agreement on tariffs and trade (GATT)
a 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions.
Corporate social responsibility (CSR)
a business's concern for the welfare society
State Capitalism
a combination of freer markets and some government control
Foreign subsidiary
a company owned in a foreign country by another company, called the parent company.
Limited liability company (LLC)
a company similar to an S corporation but without the special eligibility requirements.
Franchisor
a company that develops a product concept and sells others the rights to make and sell the products.
embargo
a complete ban on the import or export of a certain product, or the stopping of all trade with a particular country.
Countertrading
a complex form of bartering in which several countries may be involved, each trading goods for goods or services for services.
How are a company's social responsibility efforts measured?
a corporate social audit measures an organization's progress toward social responsibility. Some people believe the audit should add together the organization's positive actions and then subtract the negative effects to get a net social benefit.
Which of the following exemplifies a tangible good?
a dress an automobile.
In contract manufacturing
a foreign company's production pf private-label goods to which a domestic company then attaches its brand name or trademark; part of the broad category of outsourcing.
Inflation
a general rise in the prices of goods and services over time.
Corporation
a legal entity with authority to act and have liability apart from its owners.
Import quota
a limit on the number of products in certain categories that a nation can import.
Strategic alliance
a long-term partnership between two or more companies established to help each company build competitive marked advantages.
Gross output (GO)
a measure of total sales volume at all stages of production
What s a merger?
a merger is the results of two firms forming one company. The three major types are vertical mergers, horizontal mergers, and conglomerate mergers.
Franchise agreement
an arrangement whereby someone with a good idea for a business sells the rights to use the business name and sell a product or service to others in a given territory.
leveraged buyout (LBO)
an attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing.
Ethnocentricity
an attitude that your own culture is superior to other cultures.
Producer price index (PPI)
an index that measures prices at a wholesale level.
The definition of a business is:
an organization that seeks to provide goods and services to others while operating at a profit.
General partner
an owner (partner) who has unlimited liability and is active in managing the firm
limited partner
an owner who invests money in the business but does not have any management responsibility or liability for losses beyond the investment.
Insider trading
an unethical activity in which insiders use private company information to further their own fortunes or those of their family and friends.
Nontariff barriers
are not as specific or formal as tariffs, import quotas and embargoes.
Business Cycles
are the periodic rises and falls that occur in economies over time.
The definition of _______ states: the difference between money coming into a country and money leaving the country.
balance of payments
Expenditures on the military during an economic_______ creates much debate in the country because people prefer to have the money used to stimulate the economy at home
crisis
It is important for a government to have_______ that is easily exchanged in world markets
currency
Unlimited liability
1) the responsibility of business owners for all of the debts of the business. 2) Limited financial resources. 3) Management difficulties. 4) Overwhelming time commitment. 5) Few fringe benefits. 6) Limited growth 7) Limited life span.
Which of the following rights are among those considered the foundation of a capitalist system?
1) the right to own private property 2)the right to freedom of competition
Disadvantages of partnerships
1) unlimited liability 2)division of profits 3)disagreements among partners 4)Difficulty of termination
The demand curve:
1) shows the relationship between price and the quantity of items demanded 2) falls from left to right on a graph of the goods and services that consumers are willing to buy at different prices at different times.
One of the problems facing the U.S. government in the near future is paying for Social Security because:
1) the ratio of people in the labor force for each retiree will be far lower than when the program started in the 1940's 2) the government has been draining the social security account for other purposes.
The sum of government deficits over time is called the national_____
debt
A recession occurs when there are two or more consecutive quarters of
decline in the GDP
Rising unemployment levels tend to stifle demand for goods and services which can have the effect of forcing prices downward, a condition known as __________
deflation
The situation in which prices are declining is called:
deflation
The definition of ______ _______ _______ states: the buying of permanent properties or businesses in foreign nations.
foreign direct investment.
A foreign company owned by a U.S. company would be an example of a:
foreign subsidiary
Contract manufacturing is a type of outsourcing when a _______ company produces private-label goods which a _____ company then markets under its own brand name
foreign, domestic
New technologies that connect people all over the world and the increased amount of information available to B2B customers and B2C consumers have created:
greater levers of competition among businesses than ever before
What is the total value of final goods and services produced in a country in a given year called?
gross domestic product
Entrepreneurs, unlike those who are employed by others,
have to provide their own vacation time and sick days.
Low value of the dollar
means a dollar is traded for less foreign currency
The Consumer Price Index (CPI) is important because it
measures the pace of inflation or deflation
____________ looks at the economic behavior of individual people and organizations in specific markets
microeconomics
Offering and controlling programs such as Medicare, Medicaid and social security qualify the U.S. economy as a _____ economy
mixed
The United State's free-market economy of the past now represents that of a ______ economy since the government offers and controls programs such as medicare, Medicaid and social security
mixed
In recent decades, most capitalist countries have added social programs while communist countries have reformed and permitted such liberties as the right to own private property. These developments are an example of the trend toward:
mixed economies.
The Federal Reserve Bank manages the money supply and interest rate in an effort to balance the economy. This is referred to as __________ policy
monetary
The management of the money supply and raising and lowering interest rates by the Federal Reserve Bank is called _____ policy
monetary
The businesses that will succeed in today's economy will be those that are
most responsive to customer wants and needs.
A(n)____________ corporation is an organization that manufactures and markets products in many different countries and has managers and stockholders from many countries.
multinational
The amount of money the federal government spends beyond what it gathers in taxes for a given fiscal year is called the:
national deficit
An organization whose function is to serve a societal need rather than make a profit for its owners is a(n)_______ organization
nonprofit
Organizations such as the Red Cross, public school systems, and the United Way are examples of______ organizations
nonprofit
One way for government to actively promote entrepreneurship is to allow private________ of businesses
ownership
When there are many sellers in a market and none are large enough to control the price of a product, then________ competition exists.
perfect
Dumping
selling products in a foreign country at lower prices than those charged in the producing country.
It is no longer enough to provide customer with high-quality products. They also expect outstanding customer______
service
The________sector generates about 70 percent of the value of the U.S. economy.
service
Consumers today are able to find huge quantities of information about stores and products through the internet. This is a shift from traditional shopping in a storefront because it:
shifts power in the marketplace to consumers from sellers
Under monopolistic competition products are:
similar but not identical
A company's decision to outsource work may have to balance the competing stakeholder interests of job loss in a community with shareholder profits.
true.
Entrepreneurs who invest time and money in a business do so because they want to make a profit
true.
Why do people incorporate?
two important reasons for incorporating are special tax advantages and limited liability.
Which of the following products are classified as a service?
1) plane flight to ireland 2) life insurance.
Among the options being considered to reduce the future shortfall in Social Security are:
1) raising the retirement age 2)raising taxes
The trend called greening is important because it:
1) saves energy 2) reduces harm to the environment.
Advantages of corporation
1) limited liability 2)ability to raise more money for investment 3) size 4)perpetual life 5) ease of ownership change 6) ease of attracting talented employees 7) Separation of ownership from management
Advantages of franchise
1) management and marketing assistance 2) Personal ownership 3) National recognized name 4) Financial advice and assistance 5) lower failure rate
What should nations trade with other nations?
1) no country is self-sufficient, 2) other countries need products that prosperous countries produce, 3) natural resources and technological skills are not distributed evenly around the world
LLC's disadvantages
1) no stock 2) limited life span 3) fewer incentives 4) taxes 5) paperwork
Some businesses have responded to demographic changes, such as the increase in single parent households by
1) offering family leave time 2) creating flexible schedules.
Qualifying for S Corporation
1) Have no more than 100 stakeholders 2)Have shareholders that are individuals or estates 3) Have only one class of stock 4) Derive no more than 25 percent of income from passive sources.
Diversity efforts in the workplace now include which of the following groups?
1) Seniors and disabled people 2) minority and female employees.
Foundations of Capitalism
1) The right to own private property 2) The right to own a business and keep all that business's profits 3)The right to freedom of competition 4) The right to freedom of choice
Which of the following are true?
1) an economy where the economic concepts of supply and demand are disregarded is a command economy. 2) an economy where the buyers and sellers together decide what needs to be produced is a free-market economy
Which of the following are correct with regards to a free-market economy?
1) another name for capitalism 2) an economic system in which economic decisions are made by the market.
Mixed economies:
1) are a mixture between capitalist, socialist, and communist economies. 2) exist when the distribution of resources involves elements from more than one economic system.
Both socialism and communism:
1) are supposed to offer a wide array of social services 2) seem to lag behind capitalist countries in terms of innovation
An embargo
1) bans all trade of a certain product 2) bans all trade with a particular country
A good strategy for college graduates today is to:
1) be flexible 2) research where jobs are being created.
Retailers share information about customer preferences:
1) by trading or selling their databases 2) to reach customers with specific needs and wants.
Rank the three economic systems.
1) capitalism 2) socialism 3) communism
Deflation may occur if:
1) countries produce so many products that people cannon afford to buy them all. 2) too few dollars are chasing too many products
Advantages of sole proprietorship
1) ease of starting and ending a business. 2) Being your own boss. 3) Pride of ownership 4) Leaving a legacy 5) Retention of company profits 6) No special taxes.
The elements of the external business environment include the:
1) economic and legal environments. 2) technological environment 3) competitive environment 4)social environment.
Globalization has occurred because of:
1) efficient distribution systems. 2) advances in communication.
It may take many years for a company to change its culture and structure to one of empowerment because
1) employees will have to take on more responsibility. 2)Managers often resist giving up some of their authority.
Socialism has several negative outcomes such as:
1) fewer incentives to work hard 2) higher taxes 3) a brain drain
Rank the strategies
1) foreign direct investment 2) international joint ventures and strategic alliances 3) contract manufacturing 4) franchising 5) exporting 6) licensing
Some of the world's largest firms that believe in climate change are:
1) general electric, shell, and coca-cola 2)britis airways, DuPont and shanghai electronics 3) Johnson and Johnson and Nestle.
In socialism:
1) government owns and operates basic industries such as steel mills, utilities or transportation. 2) individuals own some smaller business.
A profitable business will benefit the society by:
1) hiring more employees 2) purchasing needed supplies and materials 3) hiring other small businesses to provide it with needed services such as maintenance and painting
examples of the increased organizational costs to businesses caused by wars and terrorism are
1) increased security staff and equipment 2) increased insurance
Disadvantages of corporation
1) initial cost 2) extensive paperwork 3) double taxation 4) two tax returns 5) size 6) difficulty of termination 7) possible conflict with stockholders and board of directors.
Monetary policy consists of the Federal Reserve's management of the:
1) interest rates 2) money supply
An increase in the number of retirees in the population is a demographic statistic that affects business because:
1) it increases the need for products and services to serve that population 2) it creates opportunities for new products and services to fill their needs.
Companies trade database information so they
1) known what customers buy and from whom. 2) can send you direct mail advertising products you are likely to want.
Disadvantages of franchise
1) large start-up costs. 2) Shared profit 3) Management regulation 4) Coattail effect 5) Restrictions on selling 6) fraudulent franchisors
LLC's advantages
1) limited liability 2) choice of taxation 3) flexible ownership rules 4) flexible distribution of profits and losses. 5) operating flexibility
Corporations can fit in more than one category
1)Alien corporation 2) domestic corporation 3)closed/private corporation 4) open/public corporation 5) Quasi-public corporation 6)foreign corporation 7)professional corporation 8) nonprofit corporation 9) multinacional corporation
A country's quality of life includes such elements as:
1)Education, health care, leisure time, and safety. 2) political freedom and natural environment.
Advantages of partnerships
1)More financial resources 2)Shared management and pooled/complementary skills and knowledge 3) Longer survival 4) no special taxes
Which demographic group is currently the richest in the United States?
65- to 74-year-old seniors.
Cooperative
A business owned and controlled by the people who use it - producers, consumers, or workers with similar need who pool their resources for mutual gain.
Sole proprietorship
A business that is owned, and usually managed, by one person
What is the definition of a corporation?
A corporation is a state-chartered legal entity with authority to act and have liability separate from its owners.
Oligopoly
A degree of competition in which just a few sellers dominate the market
Monopoly
A degree of competition in which only one seller controls the total supply of a product or service, and sets the price.
Trade surplus
A favorable balance of trade; occurs when the value of a country's exports exceeds that of its imports.
What is franchisee?
A franchisee is a person who buys a franchise.
Licensing
A global strategy in which a firm (the licensor) allows a foreign company (the licensee) to produce its product in exchange for a fee (a royalty)
Partnership
A legal form of business with two or more owners.
What is a master limited partnership?
A master limited partnership is a partnership that acts like a corporation but is taxed like a partnership.
What are the benefits of mixed economies?
A mixed economy has most of the benefits of wealth creating that free markers bring plus the benefits of greater social equality and concern for the environment that socialism promises.
What is a mixed economy?
A mixed economy is part capitalist and part socialist. Some businesses are privately owned, but taxes tend to be high to distribute income more evenly among the population.
Invisible hand
A phrase coined by Adam Smith to describe the process that turns self-directed gain into social and economic benefits for all.
Deflation
A situation in which prices are declining.
What is absolute advantage?
Absolute advantage exists if a country produces a specific product more efficiently than any other country. There are few examples of absolute advantage in the global market today.
Businesses must monitor the factors in their environment to:
Adapt the changes around them.
Companies that are customer-driven
Adjust their offering listen to their customers. listen to their customers
North American Free Trade Agreement (NAFTA)
Agreement that created a free trade area among the United States, Canada, and Mexico.
What is a franchise?
An arrangement to buy the rights to use the business name and sell its products or services in a given territory is called a franchise.
Communism
An economic and political system in which the government makes almost all economic decisions and owns almost all the major factors of production
Capitalism
An economic system in which all or most of the factors of production and distribution are privately owned and operated for profit.
Socialism
An economic system on the premise that some, if not most, basic businesses should be owned by the government so that profits can be more evenly distributed among the people
What is an embargo?
An embargo prohibits the importing or exporting of certain products
When the government spends money on such projects roads and bridges, it is expected that the money will trickle down to the consumers eventually leading to:
An increase in consumers spending.
Multinational corporation
An organization that manufactures and markets products in many different countries and has multinational stock ownership and multinational management.
Trade deficit
An unfavorable balance of trade; occurs when the value of a country's imports exceeds that of its exports.
How do businesses demonstrate corporate responsibility toward stakeholders?
Businesses demonstrate responsibility to stakeholders by 1) satisfying customers with goods and services of real value; 2) making money for investors. 3) creating jobs for employees, maintaining job security and seeing that hard work and talent are fairly rewarded and 4) creating a new wealth for society, promoting social justice, and contributing to making the businesses' own environment a better place.
Importing
Buying products from another country
Core inflation
CPI minus food and energy costs.
__________ is an economic system based on free markets, in which all or most of the factors of production and distribution are privately owned and more are operated for profit.
Capitalism
After experiencing capitalism, some countries adopt a more socialist approach. Why?
Capitalism has some limitations
Compliance-based ethics codes
Ethical standards that emphasize preventing unlawful behavior by increasing control and by penalizing wrondoers
What is the role of a cooperative?
Cooperatives are organizations owned by members/customers. Some people form a cooperatives to acquire more economic power than they would have as individuals. Small businesses often form cooperatives to gain more purchasing, marketing, or product development strength.
Integrity-based ethics codes
Ethical standards that define the organization's guiding values, create an environment that supports ethically sound behavior, and stress a shared accountability among employees.
What is economics?
Economics is the study of how society chooses to employ resources to produce goods and services and distribute them for consumption among various competing groups and individuals.
What terms are important in understanding world trade?
Exporting: is selling products to other countries. Importing: is buying products from other countries. Balance Trade: is the relationship of exports to imports. Balance of payments: is the balance of trade plus other money flows such as tourism and foreign aid. Dumping: is the selling products for less in a foreign country than in our own country.
Three major U.S. economic indicators are:
GDP, price indexes, the unemployment rate.
What is fiscal policy?
Fiscal policy consists of government efforts to keep the economy stable by increasing or decreasing taxes or government spending.
What are the main differences between general and limited partners?
General partners are owners (partners) who have unlimited liability and are active in managing the company. Limited partners are owners (partners) who have limited liability and are not active in the company.
____ trade is the movement of goods and services among nations without political or economic barriers.
Free
What are the key economic indicators in the United States?
Gross domestic product (DP) is the total value of final goods and services produced in a country in a given year. The unemployment rate refers to the percentage of civilians at least 16 years old who are unemployed and tried to find a job within the most recent four weeks. The consumer price index (CPI) measures changes in the price of about 400 goods and services that consumers buy.
What is gross output?
Gross output (GO) is a measure of tal sales volume at all states of production.
What are the four phases of business cycles?
In an economic boom, businesses do well. A recession occurs when two or more quarters shows declines in the GDP, prices fall, people purchase fewer products, and businesses fail. A depression in a severe recession. Recovery occurs when the economy stabilizes and starts to grow.
Who decides what to produce under capitalism?
In capitalist countries, businesspeople decide what to produce, how much to pay workers, and how much to charge for goods and services. They also decide whether to produce certain goods in their own countries, import those goods, or have them made in other countries.
Sovereign Wealth Funds (SWFs)
Investment funds controlled by governments holding investment stakes in foreign companies.
When faced with ethical dilemmas, what questions can you ask yourself that might help you make ethical decisions?
Is my proposed action legal? Is it balanced? How will it make me feel about myself?
What is the major challenge to global franchises?
It is often difficult to transfer an idea or product that worked well in the United States to another culture. It is essential to adapt to the region.
The definition of ______ ______ states: a partnership in which two or more companies, often from different countries, join to undertake a major project.
Joint venture.
What are leveraged buyouts, and what does it mean to take a company private?
Leveraged buyouts are attempts by managers and employees to borrow money and purchase the company. Individuals who, together or alone, buy all the stock for themselves are said to take the company private.
What does limited liability mean?
Limited liability means that corporate owners (stockholders) and limited partners are responsible for losses only up to the amount they invest. Their other personal property is not at risk.
Carlyle called economics the "dismal science" after reading the early work of______
Malthus
What is management's role in setting ethical standards?
Managers often set formal ethical standards, but more important are the messages they send through their actions. Management's tolerance or intolerance of ethical misconduct influences employees more than any written ethics code.
How can U.S. companies influence ethical behavior and social responsibility in global markets?
Many U.S. businesses are demanding socially responsible behavior from their international suppliers by making sure their suppliers do not violate U.S. human rights and environmental standards. Companies such as sears, PVH and Dow Chemical will not import products from companies that do no meet their ethical and social responsibility standards.
What is the importance of monetary policy to the economy?
Monetary policy is the management of the money supply and interest rates. When unemployment gets too high the Federal Reserve Bank (the Fed) may put more money into the economy and lower interest rates. That is supposed to provide a boost to the economy as businesses borrow and spend more money and hire more people.
Consumer price index (CPI)
Monthly statistics that measure the peace of inflation or deflation.
Whether a business makes a profit or a loss is determined by the differences between the total amount money a business take in from sales, known as its _______ and the money needed to operate it, known as_______
Revenue, expenses
When Apple, Nike and other companies contract with companies in other countries to manufacture their products or answer their call centers, it is known as
Outsourcing
What is offshore outsourcing? What is it major concern for the future?
Outsourcing is the purchase of goods and services from outside a firm rather than providing them inside the company. Today more businesses are outsourcing manufacturing and services offshore. Many fear that growing numbers of jobs in the United States will be lost due to offshore outsourcing and that quality of products produced could be inferior.
The index that measures prices at the whole level is called the:
PPI
What are some of the forces that can discourage participation in global business?
Potential stumbling blocks to global trade include sociocultural forces, economic and financial forces, legal and regulatory forces, and physical and environmental forces.
A major problem with communism as an economic system is that the government has no idea what should be produced because:
Prices do not reflect supply and demand as they do in free markets
The growth of the segment of the population aged 65-74, which has more wealth than others in the U.S., offers many opportunities for new ______ and ______
Products and services.
How can we be assured of having enough resources
Resource development is the study of how to increase resources and create the conditions that will make better use of them.
Although entrepreneurs expect to succeed, they must be realistic and recognize that they are taking a(n)______ because many small businesses also fail every year.
Risk
What are the advantages of S corporations?
S corporations have advantages of limited liability like a corporation and simpler taxes like partnership to quality for S corporation status a company must have fewer than 100 stockholders member of a family count as one shareholder its stockholders must be individuals or estates as us citizens or permanent residents and the company cannot derive more than 25 percent of its income from passive sources
Exporting
Selling products to another country
What are the advantages and disadvantages of socialism?
Socialism intends to create more social equity. Worker in socialist countries usually receive more education, health care, and other benefits and also work fewer hours, with longer vacations. The major disadvantage of socialism is that it lowers the incentive to start a business or to work hard. Socialist economies tend to have a higher unemployment rate and a slower growth rate than capitalist economies.
Five types of groups serve as watchdogs?
Socially conscious investors Socially conscious research organizations Environmentalists Union officials Customers
What is the term for all of the groups that stand to gain or lose by the policies and activities of a business and whose concerns the business needs to address?
Stakeholders
The amount of goods and services people can buy with the money they have is known as the ______ of_______
Standard of living
Ethics
Standards of moral behavior, that is, behavior accepted by society as right versus wrong.
What is state capitalism?
State capitalism is a combination of freer markets and some government control.
What are tariffs?
Tariffs are taxes on foreign products. Protective tariffs raise the price of foreign products and protect domestic industries; revenue tariffs raise money for the government.
Equipment such as phones, fax machines, and computers are all examples of which of the elements of the business environment?
Technological
Is trade protectionism good for domestic producers?
That is debatable. Trade protectionism offers pluses and minuses.
Monetary Policy
The Management of the money supply and interest rates by the Federal Reserve.
What countries have mixed economies?
The United States has a mixed economy, as do most other industrialized countries.
Absolute advantage
The advantage that exists when a country produces a specific product more efficiently than all other countries.
What ae the advantages and disadvantages of partnerships?
The advantages include more financial resources, shared management and pooled knowledge, and longer survival. The disadvantages include unlimited liability, division of profits, disagreements among partners, and difficulty of termination.
What are the advantages and disadvantages of corporations?
The advantages include more money for investment, limited liability, size, perpetual life, ease of ownership change, ease of drawing talented employees, and separation of ownership from management. The disadvantages include initial cost, paperwork, size, difficulty in termination, double taxation, and possible conflict with board of directions.
What are the advantages and disadvantages of sole proprietorships?
The advantages of sole proprietorships include ease of starting and ending, ability to be your own boss, pride of ownership, and retention of profit, and no special taxes. The disadvantages include unlimited liability, limited financial resources, difficulty in management, overwhelming time commitment, few fringe benefits, limited growth, and limited life span.
What are the benefits and drawbacks of being a franchisee?
The benefits include getting a nationally recognized name and reputation, a proven management system, promotional assistance, and pride of ownership. Drawbacks include high franchise fees, managerial regulation, shared profits, and transfer of adverse effects I other franchisees fail.
Monopolistic competition
The degree of competition in which a large number of sellers produce very similar products that buyers nevertheless perceive as different.
Perfect Competition
The degree of competition in which there are many sellers in a market and none is large enough to dictate the price of a product.
Balance payments
The difference between money coming into a country from exports and money leaving the country from imports plus money flows from other factors such as tourism, foreign aid and military expenditures and foreign investment.
Corporate responsibility
The dimension of social responsibility that includes everything from hiring minority workers to making safe products.
corporate policy
The dimension of social responsibility that refers to the position a firm takes on social and political issues.
Fiscal Policy
The federal government's efforts to keep the economy stable by increasing or decreasing taxes or government spending.
What are the basic rights people have under capitalism?
The four basic rights are: 1) the right to own private property. 2) the right to own a business and to keep all of the business's profits after taxes, 3) the right to freedom of competition and 4) the right to freedom of choice. President Franklin D. Roosevelt felt that other freedoms were also important: the right to freedom of speech and expression, the right to worship in your own way, and freedom from want and fear.
How does the free market work?
The free market is one in which buyers and sellers negotiating price for goods, and services influence the decisions about what gets produced and in what quantities. Buyer's decisions in the marketplace tell sellers what to produce and in what quantity. When buyers demand more goods, the price goes up, signaling suppliers to produce more. The higher the price. the more goods and services suppliers are willing to produce. Price is the mechanism that allows free markets to work.
World trade organization (WTO)
The international organization that replaced the General Agreement on Tariffs and Trade and was assigned the duty to mediate trade disputes among nations.
Microeconomics
The part of economics study that looks at the behavior of people and organizations in particular markets.
Macroeconomics
The part of economics study that looks at the operation of a nation's economy as a whole
Market Price
The price determined by supply and demand
Supply
The quantity of products between quantity that manufacturers or owners are willing to sell at different prices at a specific time.
Demand
The quantity of products that people are willing to buy at different price at a specific time.
The sector of the economy that has more high-paying jobs than the other is:
The service sector.
Economics
The study of how society chooses to employ resources to produce goods and services and distribute them for consumption among various competing groups and individuals
Resource development
The study of how to increase resources and to create the conditions that will make better use of those resources.
What is the theory of comparative advantage?
The theory of comparative advantage contends that a country should made and then sell those products it produces most efficiently but buy those it cannot produce as efficiently.
Why do government continue such practices?
The theory of mercantilism started the practice of trade protectionism and it has persisted though in a weaker form ever since.
What are the three key elements of a general partnership?
The three key elements of a general partnership are common ownership, shared profits and losses, and the right to participate in managing in the operations of the business.
Gross domestic product (GDP)
The total value of final goods and services produced in a country in a given year.
Trade protectionism
The use of government regulations to limit the airport of goods and services.
Comparative advantage theory
Theory that states that a country should sell to other countries those products that it produces most effectively and efficiently, and buy from other countries those products that it cannot produce as effectively or efficiently
What are the two branches of economics
There are two major branches of economics: Macroeconomics studies the operation of a nation's economy as a whole, and Microeconomics studies the behavior of people and organizations in particular markets (e.g) why people buy smaller cars when gas prices go up)
One of the main reasons entrepreneurs take the risks associated with starting a business is that:
They have the freedom to make their own decisions.
What kinds of products can be imported and exported?
Though it is not necessarily easy, just about any product can be imported or exported.
Since 1975 the United States has bought more goods from other nations than it has sold resulting in a :
Trade deficit
What is trade protectionism?
Trade protectionism is the use of government regulations to limit import of goods and services. Advocates believe it allows domestic producers to grow, producing more jobs. The key tools of protectionism are tariffs, import quotas, and embargoes.
Common markets are also referred to as what?
Trading blocs
Recession
Two or more consecutive quarters of decline in the GDP
How does capitalism create a climate for economic growth?
Under capitalism, bussinespeople don't often deliberately set out to help others; they work mostly for their own prosperity and growth. Yet people's efforts to improve their own situation in life act like an invisible hand to help economy grow and prosper through the production of needed goods, services, and ideas.
How does socialism differ from communism?
Under communism the government owns almost all major production facilities and dictates what gets produce and by whom. Communism is also more restrictive when it comes to personal freedoms, such as religious freedom.
Business agreements such as contracts and warranties are regulated and enforceable in the United States because of the__________________
Uniform Commercial Code
How do multinational corporations differ from other companies that participate in global business?
Unlike companies that only export or import, multinational corporations also have manufacturing facilities or other physical presence abroad.
What does unlimited liability mean?
Unlimited liability means that sole proprietors and general partners must pay all debts and damages caused by their business. They may have to sell their houses, cars, or other personal possessions to pay business debts.
Disadvantages of sole proprietorships
Unlimited liability- the risk of personal losses.
What are some ways in which a company can engage in global business?
Ways of entering world trade include licensing, exporting, franchising, contract manufacturing, joint ventures, and strategic alliances and direct foreign investment.
How can we tell if our business decisions are ethical?
We can put our business decisions through an ethics check by asking three questions: 1) is it legal? 2) is it balanced? 3) how will it make me feel?
What is the difference between compliance- based and integrity-based ethics codes?
Whereas compliance-based ethics codes are concerned with avoiding legal punishment, integrity-based codes define the organization's guiding values, create an environment that supports ethically sound behavior, and stress a shared accountability among employees.
General partnership
a partnership in which all owners share in operating the business and in assuming liability for the business's debts.
Joint Venture
a partnership in which two or more companies (often from different countries) join to undertake a major project
limited liability partnership (LLP)
a partnership that limits partners' risk of losing their personal assets to only their own acts and omissions and to the acts and omissions of people under their supervision.
master limited partnership (MLP)
a partnership that looks much like a corporation (in that it acts like a corporation and is traded on a stock exchange) but is taxed like a partnership and thus avoids the corporate.
Limited partnership
a partnership with one or more general partners and one or more limited partners.
Franchisee
a person who buys a franchise
Common Market
a regional group of countries that have a common external tariff, no internal tariffs, and a coordination of laws to facilitate exchange; also called a trading bloc.
Depression
a severe recession, usually accompanied by deflation
Stagflation
a situation when the economy is slowing but prices are going up anyhow.
Conventional (C) corporation
a state-chartered legal entity with authority to act and have liability separate from its owners.
Tariff
a tax imposed on imports
S Corporation
a unique government creation that looks like a corporation but is taxed like a sole proprietorships and partnerships.
By increasing or decreasing taxes or government spending, the government is affecting_____ policy to keep the economy stable.
fiscal
The definition of _________ advantage is the advantage that exists when a country has a monopoly on producing or is able to produce something more efficiently than all other countries.
absolute
Examples of high-paying service jobs are in:
accounting, health care, and telecommunications.
A benefit of globalization is that it has greatly improved the standard of living
around the world.
Many improvements in productivity are due to improved technology:
because the same or greater amounts are produced with fewer workers.
In a recent speech, House Representative Chavez called for less government regulation of business because regulation reduces profit and "private business owners pursuing wealth generate jobs." it is clear that Representative Chavez:
believes free markets provide incentives for businesses
Entrepreneurs have to provide themselves and their employees any_______ they receive such as sick days or insurance
benefits
Businesses use bar codes on products that you purchase in order to:
build databases about customer preferences.
The economy has _______ _______ which are the rising and falling of the economy as the whole over time.
business cycles
The periodic rises and falls that occur in economies over time are called:
business cycles.
Importing is
buying products from another country
An economic system based on freedom of choice and privately owned factors of production is _______
capitalism
In many developed nations such as the United States, the UL, Australia and Canada_______ is the foundational economic system.
capitalism
____________ is the economic system that has led to wealth creating in much of the developed world.
capitalism
Hugo lives in a country where individuals own all or most of the factors of production. Clearly Hugo lives in a _______ country
capitalist
An economic system in which the government determines what products get produced, who gets them, and how the economy grows in a(n) _______ economy
command
The three different types of economic systems are free-market, _____ and ______ economies.
command, mixed
When the government makes almost all economic decisions and owns almost all the major factors of production, the country is considered to be under the political system called:
communism
Acting illegally or unethically by bribing an official to get a permit or avoid regulations can threaten the free-market system because it unfairly reduces________
competition
Changes in the environment and world wide_____ in all sectors of the economy create exciting challenges for future leaders
competition
Despite laws to prevent it, many companies have acted illegally by using corrupt practices to reduce____ or make illegal profits
competition
Global trade also means global_______
competition
Global trade means more markets and opportunities, but there is also more_______ for those markets.
competition
The monthly statistic that measures the pace of inflation or deflation is called the ______ price index
consumer
The pace of inflation or deflation can be measured using monthly statistics from the _______ ________ _______
consumer price index
_______ measures changes in prices of goods and services purchased for consumption by typical urban households
consumer price index (CPI)
The definition of ______ _______ states: a foreign company produces private-label goods to which a domestic company then attaches its own brand name on trademark.
contract manufacturing
Governments reduce the risk of entrepreneurship by passing laws that enable businesspeople to write enforceable___________
contracts
Governments reduce the risks of entrepreneurship by passing laws that enable businesspeople to write enforceable_______
contracts
What is corporate social responsibility?
corporate social responsibility is the concern businesses have for society.
A severe recession usually accompanied by deflation is called a(n)__________
depression
A_________ is a severe recession usually accompanied by deflation
depression
________ lowers the value of a nation's currency relative to others.
devaluation
Export Assistance Centers work on with small and medium-sized businesses who are hesitant to do:
direct exporting
a situation in which prices are increasing, but the rate of price increase is slowing is called
disinflation
The wars in Iraq and Afghanistan have_______ billions of dollars from the U.S. economy
drained
The buying and selling of goods over the internet is known as_____
e-commerce
Mixed economies
economic system in which some allocation of resources is made by the market and some by the government.
Businesses are part of a country's___________system that distributes its resources and contributes to the standard of living and quality of life of its citizen.
economic.
The study of how resources are distributed for production of goods and services within a social system is called:
economics
Giving front-line employees the training, authority, responsibility and equipment they need to respond quickly to customer needs is known as _______
empowerment
Corporate social initiatives
enhanced forms of corporate philanthropy directly related to the company's competencies
A(n)______ is a person who risks time and money to start and manage a business
entrepreneur
Both rich and poor countries may have many of the needed factors of production. The factor that seems to make the difference is that rich countries have:
entrepreneurs who use their knowledge to grow a business
Companies must monitor all of the factors in the global business_______________ so they can adapt to changes as needed
environment
For businesses to succeed and provide social benefit such as good schools and low crime rates, the:
environment mus be healthy enough to support job creating and accumulation of wealth.
The _____ ______ is the value of one nation's currency relative to the currencies of other countries.
exchange rate
Command economies
exist when the government largely decides what goods and services will be produce, who gets them, and how economy will grow. Socialism and communism are variations on this economic system.
Free- Market economies
exist when the market largely determines what goods and services get produced, who gets them, and how the economy grows. Capitalism is the popular term for this economic system.
A trade surplus occurs when a country's:
exports are greater than imports.
a trade deficit occurs when a country's:
exports are less than imports.
The balance of payments is the difference between money from _______ and money from _______
exports, imports
The definition of ______ states: a contractual agreement whereby someone with a good idea for a business sells others the right to use a business name and sell a product or service in a given territory in a specified manner.
franchising
An economic system in which the market largely determines what products get produced, who gets them, and how the economy grows is a _______ economy
free-market
When the market largely determines what goods and services to produce, a _______-_______ economy exists.
free-market
The people who respond most directly to customer needs are _____ workers
frontline
Businesses provide help to the communities they are in by providing______ services and jobs
goods
Businesses provide communities with:
goods and services jobs
In a free-market system the buyers and sellers together decide how many goods and services to produce while in command economies the _______ decides what and how much should be produced.
government
For businesses to succeed in today's environment, they need support from
government and social leaders
A limit on the quantity of products in a certain category that a nation can import is called a(n)
import quota
The increase in farm productivity as a result of the invention of the harvester and other farm equipment has:
increased the world's food supplies
___________ is a general rise in the prices of goods and services over time.
inflation
Whistleblowers
insiders who report illegal or unethical behavior
Services can be defined as
intangible products
According to Adam Smith, the process that turns self-directed gain into social and economic benefits for all is the ______
invisible hand
Social audit
is a systematic evaluation of an organization's progress toward implementing socially responsible and responsive programs.
What is socialism?
is an economic system based on the premise that some business should be owned by the government.
Economic boom
is just what is sounds like - business is booming.
What is Capitalism?
is the economic system in which all or most of the means of production and distribution are privately owned and operated for profit.
National Debt
is the sum of government deficits over time.
Balance of trade
is the total value of a nation's exports compared to its imports measured over a particular period.
The Uniform Commercial Code is important to businesses in the United States because:
it makes business agreements such as contracts enforceable by law.
Horizontal merger
joins two firms in the same industry and allows them to diversify or expand their products. A soft drink company and a mineral water company that merge can now supply a variety of beverage products.
One drawback of an international _____ _______ is that one partner can learn the other's technology and business practices and then use what it has learned to its own advantage.
joint venture
An oligopoly is a degree of competition in which:
just a few sellers dominate the market
The factors of production include land,_______capital, entrepreneurship and knowledge.
labor
Problems created by differences between countries' antitrust rules, labor laws, patents, copyrights, taxes, product liability and child labor laws relate to which forces in the global business environment?
legal and regulatory forces
A licensor may compete by licensing the right to manufacture its product or use its trademark to a foreign company, known as a ______
licensee
Of all the strategies for reaching global markets, _________ offers the least amount of commitment, control, risk, and profit potential.
licensing
The definition of_________states: a global strategy in which a firm allows a foreign company to produce its product in an exchange of fee
licensing
What is the global strategy in which a firm allows a foreign company to produce its product in exchange for a fee?
licensing
What are the advantages of limited liability companies?
limited liability companies have he advantage of limited liability without the hassles of forming a corporation or the limitations imposed by S corporations. LLCs may choose whether to be taxes as partnerships or corporations.
When a business's expenses are greater than its revenues, the business is operating at a(n)
loss
Devaluation
lowering the value of a nation's currency relative to other currencies
An examination of the overall economic conditions within a country requires a(n)_______ perspective
macroeconomic
_________studies the operation of a nation's economy as a whole
macroeconomics
An example of the effect of globalization on U.S. consumer is:
many goods and services are provided more cheaply by outsourcing their production to India or China
Disinflation
occurs when price increases are slowing (the inflation rate declining)
Recovery
occurs when the economy stabilizes and starts to grow.
Having only a few sellers dominate a market indicate a(n)
oligopoly
Perfect competition, monopolistic competition, ______ and monopoly are the four degrees of competition.
oligopoly
acquisition
one company's purchase of te property and obligations of another company.
As the economy evolves, the use of the new technologies means the need to jobs in some industries disappear and there are new____________ in others
opportunities
In free market
prices are not determined by sellers
Producers are likely to be interested in a measurement of prices at the wholesale level so they will refer to the ______ price index
producer
The United States has experienced economic growth and increased_________since the 1800's
productivity
The amount of output you generate for the amount of input is:
productivity
The amount of output you generate for the amount of input is____
productivity
The increase in farm__________as a result of the invention of the harvester and other farm equipment has increased the world's food supplies
productivity
The united states has experienced economic growth and increased ________since the 1800's
productivity
What is the term used by employers for the amount of output generated by the inputs used?
productivity
Skills such as information management, leadership, marketing, and financial management are needed to manage:
profit and not for profit organizations.
The difference between revenues and the expenses needed to operate the business is its:
profit or loss
Private ownership of business promotes entrepreneurship because the owners expect to keep the _______ in exchange for risking their time and money
profits
Private ownership of business promotes entrepreneurship because the owners expect to keep the ___________ in exchange for risking their time and money
profits
In a _______ prices fall, people purchase fewer products, and business fall.
recession
Two or more consecutive quarters of decline in the GDP define
recession
Culture
refers to the set of values, beliefs, rules, and institutions held by a specific group of people.
One of the challenges for future leaders is that the information-based global revolution is moving the economy in new directions that:
require innovation to succeed in global markets.
The study of how to increase resources or create conditions that will make better use of them is_____
resource development
The total amount of money a business takes in a during a given period by selling goods and services is its_______
revenue
The total amount of money a business takes in during a given period by selling goods and services is its_____________
revenue
Export Assistance Centers provide hands-on exporting assistance and trade-finance support for _____ and_____-sized businesses.
small and medium
A positive goal of ___________ is social equality while a negative outcome is taking income from citizens at rates as high as 60% lending itself to social inequality
socialism
Free education, free health care, and more free time are some benefits of _______ while a brain drain is one of its negative outcomes.
socialism
The economic system based on the premise that some, if not most, basic industries should be owned by the government so that profits can be more evenly distributed among the people is called______
socialism
The idea that some basic businesses such as steel mills, coal mines and utilities, should be owned and controlled by the government is indicative of________
socialism
If the prices continue to rise as the economy is slowing, then _______ is occurring.
stagflation
All of the people, including its employees, neighbors, customers, and supplies, who may gain or lose by the activities and policies of a business are known as:
stakeholders
A company must balance the needs of its stakeholders. For instance, although the government and environmentalists want pollutants disposed of safely,
stockholders may not want to pay the increased costs.
Entrepreneurs take risks with their time and money to start a business. They are also able to build their own wealth if they:
successfully fill a market need at a profit
Goods are _______ products such as shoes or cars, while services are _______ products such as insurance and travel
tangible, intangible.
A(n) ______ is a tax imposed on imports
tariff
Governments can encourage the growth of new businesses by keeping_______ and regulation to a minimum
taxes
Climate change can be defined as the movement of the ________ of the planet up or down over time.
temperature
An alternative definition of economics involve
the allocation of scarce resources
Foreign direct investment (FDI)
the buying of permanent property and businesses in foreign nations.
Corporate philanthropy
the dimension of social responsibility that includes charitable donations.
Demography is the statistical study of
the human population's characteristics such as size, density, age, gender and income.
Conglomerate merger
the joining of firms in completely unrelated industries.
Vertical merger
the joining of two companies involved in different stages of related businesses.
Many countries have large quantities of one or more factors of production, but have not been successful in accumulating wealth because:
the lack of entrepreneurship and knowledge to use the other resources effectively.
Brain drain
the loss of the best brightest people to other countries.
Free trade
the movement of goods and services among nations without political or economic barriers
Unemployment rate
the number of civilians at least 16 years old who are unemployed and tried to find a job within the prior four weeks.
limited liability
the responsibility of a business's owners for losses only up to the amount they invest; limited partners and shareholders (stakeholders) have limited liability
Merger
the result of two firms forming one company
Franchise
the right to use a specific business's name and sell its products or services in a given territory.
Keynesian Economic Theory
the theory that a government policy of increasing spending could stimulate the economy in a recession.
Exchange rate
the value of one nation's currency relative to the currencies of other countries.
Managers today must be sensitive to differing cultural backgrounds because:
the workforce is increasingly diverse, with workers around the world.
An important effect of changed communication technology is that
those with fewer resources are able to compete with large companies through the internet.
An entrepreneur risks both______and______ in the hope of earning a profit.
time and money
Cell phones and computers are examples of:
tools that make businesses more productive.
U.S. business people are often accused of ethnocentricity which is a belief that:
your own culture is superior to other cultures.
