Practice Exam 1

The foundation of the U.S. economic system is based on

capitalism

Successful small business owners are

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

Which of the following indicators provides the clearest indication that an economy is experiencing deflation?

A decrease in the CPI

An oligopoly is a market that is characterized by

A few large sellers who dominate the market.

In the U.S., the ________ has the role of managing the money supply and interest rates.

Federal Reserve Bank

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.

Investors today are realizing financial benefit by investing in

companies that are committed to a better environment.

A(n) ________-based ethics code emphasizes the prevention of unlawful behavior by increasing control and penalizing wrongdoers.

compliance

A ________ is an organization that is owned and controlled by the people who use it—producers, consumers, and workers with similar needs pool their resources for mutual gain.

cooperative

A ________ is a severe recession that is usually accompanied by deflation.

depression

The goal of an intrapreneur is to

develop new products and generate new profits for the corporation.

The new era of business is likely to be dominated by the

information-based sector.

A master limited partnership (MLP) is

A partnership that looks much like a corporation, but is taxed like a partnership and thus avoids the corporate income tax. is taxed like a partnership.

Which of the following is a characteristic of successful entrepreneurs?

Action-oriented

Which of the following business policies would most likely help a single-parent family?

Allowing family leave and flextime

When businesses sell to other businesses online, these transactions are known as:

B2B transactions.

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.

Which of the following people would tend to favor a socialist economy?

Bryan prefers to live in a country that promotes social equality.

________ is by far the most popular target for American franchisors seeking to establish franchises in other countries.

Canada

________ is the name of a free-market economic system in which most of the factors of production and distribution -- such as land, factories, railroads, and stores -- are owned by individuals.

Capitalism

Double taxation means

Corporations pay taxes on their profits. If they distribute after-tax profits to the stockholders, the stockholders also pay taxes on the distribution.

If a business fails to meet its responsibilities to its employees, which of the following is likely to occur?

Employees do the minimum needed to get by

The SBA's ________ program provides export-financing opportunities for small businesses.

Export Express loan

________ policy refers to the efforts of the federal government to keep the economy stable by increasing or decreasing taxes and/or government spending.

Fiscal

The U.S. strongly relies on GDP data. However, it is only the total value of finished goods produced by the country. Officials are looking to measure total sales volume at all stages of production. What statistic would be most useful to them?

Gross output

Which of the following questions can help us avoid a decision that would injure our self-esteem?

How will it make me feel about myself?

________ is illegally obtaining and illegally using private information about a person, such as using someone's credit card number.

Identity theft

Ethical behavior will result in which of the following?

Improved self-esteem making us feel good about our decision.

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.

As you consider the factors of production, which of the following did management theorist Peter Drucker believe to be one of the most important contributing factors to increasing our nation's wealth?

Knowledge

________ are companies that are similar to S corporations but are not restricted with similar eligibility requirements.

Limited liability companies

Which of the following is an advantage of the corporate form of business when compared to sole proprietorships and partnerships?

Limited liability of owners

Given the ethical lapses that are prevalent today in our businesses, which of the following can be done to restore trust in the free-market system and leaders in general?

New laws making accounting records transparent may help restore trust.

Global franchising offers

Opportunities for both large and small franchises.

With respect to taxes, the sole proprietorship

Pays taxes on the profits of the business, at the owner's personal tax rate.

A typical demand curve shows that

People tend to buy more of a good when its price decreases.

________ is the amount a business earns after deducting what it spends for salaries and other expenses.

Profit

________ unemployment results when the demand for labor varies during the year.

Seasonal

The Small Business Administration sponsors volunteers from industry, trade associations, and education who offer advice to small business owners. These volunteers are called:

Service Corps of Retired Executives

Which of the following government agencies is responsible for encouraging the development of small business?

Small Business Administration

Which of the following statements is the most accurate?

Sole proprietorships are taxed at the owner's personal tax rate.

What entity elects the board of directors for a corporation?

Stockholders

To many businesspeople, one of the major attractions of a sole proprietorship is

The chance to be their own boss.

Which of the following indicates that U.S. businesses are demanding socially responsible behavior from their international suppliers?

The decision of Nike to cancel orders from suppliers that violate its ethics code

Which of the following would be a topic emphasized in a macroeconomics course?

The factors that determine how fast a nation's economy is growing

Communism is an economic system in which

The government makes almost all of the major economic decisions.

Which of the following explains why individuals accept the risks of business ownership?

The sense of self-satisfaction and independence

Which of the following statements is characteristic of entrepreneurs?

They look at problems and see opportunities.

Which of the following is an important premise of Adam Smith's conclusions about economic prosperity?

Understanding the concept of survival of the fittest will lead to prosperity.

Many businesses have developed internal procedures to enforce their ethical policies. Which of the following is an example of an outside group urging ethical behavior in businesses?

Union officials

Which of the following statements best describes ethical behavior in the U.S.?

We can find common moral values that many Americans uphold, including respect for human life, self-control, honesty, integrity, and courage.

Which of the following terms describes someone who reports illegal or unethical behavior?

Whistleblower

The social audit is

a company evaluation that measures the firm's social contributions inside and outside of the firm.

The difference between a merger and an acquisition is

a merger is the joining of resources of two companies, whereas an acquisition is a buyout of one firm by the other. The new company concerns itself with merging of resources.

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

a surplus will exist in the market.

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.

A common characteristic of most entrepreneurs is that they:

accept the risks involved in starting and managing a business.

The business plan will include ________.

an analysis of the competition

Small businesses must seek advice from outside experts. In order to put together official documents such as leases, contracts, and partnership agreements, it is important to seek the advice of ________.

an attorney.

The Federal Reserve Bank operates

as a semi-private organization not under the direct control of the government.

A major advantage of S corporations is that they

avoid the problem of double taxation associated with conventional corporations.

Similar to how large businesses proceed, small businesses make marketing decisions ________.

before a product is developed or store is opened.

Successful entrepreneurs are self-nurturing. This means they

believe in themselves and their ideas.

Due to population shifts,

businesses that cater to older consumers will see higher growth.

One reason limited liability companies have become so popular is that they

can be taxed either as a corporation or as a partnership, so owners can choose the tax treatment that is most advantageous for their situation.

Mary Kay owns a nursery. The trucks, handcarts, and forklift she purchased for the business are called ________ investments.

capital

Both socialism and communism are variations of

command economies

A merger involving a software producer and a clothing manufacturer is an example of a ________ merger.

conglomerate

When two companies in completely unrelated industries agree to become one firm, the result is called a

conglomerate merger.

In recent years, progressive firms have embarked upon ________, where they will commit company resources and expertise toward helping out in emergency type situations.

corporate social initiatives

A separation between ownership and management is most likely to occur in a

corporation.

________ comprise about 20% of all businesses but account for about 81% of U.S. business receipts.

corporations

Compliance-based ethics codes

create a "do-it-right" climate that emphasizes core values.**

Entrepreneurs seeking financial support from bankers and potential investors should

create a detailed business plan to help the bankers and investors understand why this business will succeed.

Effective entrepreneurial teams combine

creativity with marketing and production experience.

Successful businesses are keenly focused on their

customers.

Small businesses

deal with similar management issues that large companies face.

A(n) ________ curve shows the relationship between the price of a good and the quantity of that good people are willing and able to buy in a given time period.

demand

High tax rates tend to:

discourage entrepreneurship

Public schools, charities, and government agencies generally ________.

do not seek to earn a profit

________ is the study of how a society employs its limited resources to produce goods and services and how it distributes them among competing groups and individuals.

economics

________ means producing items using the least amount of resources.

effectiveness

________ means producing the desired result.

effectiveness

Entrepreneurs weigh the differences between the benefits of starting a business and those things that they are likely to forego because they choose to work for themselves. Such things they are likely to pass up on are:

employer-paid benefits such as paid vacation and health insurance

A(n) ________ is a person who assumes the risk of starting a business.

entrepreneur

Two factors of production that seem to contribute the most to a nation's ability to create wealth are:

entrepreneurship and knowledge.

Contemporary governments promote business development by

establishing a currency that's tradable in world markets.

Entrepreneurs applying for a bank loan should realize that bankers will

expect the entrepreneur to provide a business plan.

Since the beginning of the 1900s, the agricultural sector of the United States has:

experienced a significant drop in employment, mainly because of tremendous improvements in efficiency.

An entrepreneurial team consists of

experienced professionals from different areas of business

Often in business the greater the risk, the ________.

greater the potential reward

Three important economic indicators of the United States are the unemployment rate, the price indices, and the

gross domestic product (GDP).

One disadvantage of a limited liability company is that it

has a limited life span.

One reason many companies do not organize themselves as an S corporation is that this form of business

has a special eligibility restriction, which many businesses are unable to meet.

Compared to partnerships and sole proprietorships, a major advantage of the conventional (C) corporation as a form of business ownership is that it

has the ability to raise more money.

One difference between partnerships and sole proprietorships is that partnerships

have a greater chance of long-term survival due to the accountability of each partner to the other.

To be considered part of a market, an individual must

have both a willingness to buy and the financial resources needed to buy.

One problem with conducting a social audit is

how to determine what should be measured and how to calculate the effect on society.

Employers provide tools and technology for their employees in order to:

improve their efficiency and productivity.

An increase in global trade will:

increase global competition

Efficiency in distribution systems around the world has led to

increased world trade.

Going green means

increasing one's initiatives toward a concern for the environment.

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

An entity that seeks to earn a profit by providing a good or service is known as a(n)

industry.

The Small Business Administration's microloan program awards loans to entrepreneurs based primarily on their

integrity and sound business idea.

Insider trading involves

investors using private company information to further their own fortunes.

People need to make a living. Under this circumstance, one of the best social programs a firm can offer is

job

One of the challenges of running a home-based business is

keeping work and family tasks separate.

Which of the following is a factor of production?

knowledge

An attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing is called a(n)

leveraged buyout.

A partner (owner) who invests money in a business does not take an active role in managing the operation, and is only subject to losing the funds he/she invested is known as a(n) ________ partner.

limited

One way to eliminate some of the risk of your partners making costly mistakes that could jeopardize your personal assets is to set up a

limited liability partnership.

In a limited liability partnership, each partner's risk of losing personal assets is

limited to losses that result from his/her own acts and omissions and the acts and omissions of those who work under his/her supervision.

Some people argue that small business failures are

lower than traditionally reported.

When a firm undertakes corporate social initiatives it is

making donations that are directly related to a company's competency.

Businesses that produce and sell tangible products such as steel and machines are part of the

manufacturing industry.

Conversations with people who start their own business often reveal that

many small business owners got their entrepreneurial idea from a previous job.

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

may be classified as a small business depending upon the size of others in the same industry.

Businesses favor:

minimal government spending because it keeps taxes to a minimum.

When the government runs a continual budget deficit, it increases the

national debt.

A payoff for socially conscious behavior is

new and loyal customers.

Ethical problems and issues of social responsibility are

not unique to the United States

Ethical dilemmas in business

often force us to choose between equally unsatisfactory alternatives.

In a free-market economic system, ________ is the key determinant used to signal to producers what to produce and how much to produce.

price

Which of the statements about demography is most accurate? Demographic studies:

provide businesses and individuals with insights into business and career opportunities for the future.

In today's competitive environment, good value means:

providing quality products and services at competitive prices.

Whistleblowers have long been known as people with a universal moral calling. However, rarely did these individuals receive rewards for their efforts. In reality, they would often fall onto hard times. But in 2010, with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, a provision permits whistleblowers to

receive up to 30% of the penalty funds that exceed $1 million that the courts recover from companies proven to be in violation.*

Compliance-based ethics codes typically

rely on laws and regulations outside the firm for guidance.

A whistleblower is a person who

reports illegal or unethical behavior in the corporation.

The study of how to increase the amount of available resources and create conditions that will make better use of these resources is known as

resource development.

Corporate ________ covers issues such as treating employees fairly and ethically.

responsibility

Starting a business always involves ________.

risk

When comparing small businesses to their larger competitors, it is clear that

small firms often can offer more personalized customer services than big firms.

One of the hurdles small businesses face when deciding to export is

smaller companies must wait in line after large companies to qualify for tariffs.

An entrepreneur who wishes to start a business with little delay or hassle, and who wants to be his or her own boss, should organize the business as a

sole proprietorship

Enterprise zones are

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

An owner of a corporation is known as a

stockholder

The organizational structure of a corporation permits

stockholders to elect the board of directors.

If a group of stockholders or management obtain all the stock of a previously publicly traded firm for themselves, this is referred to as

taking the firm private

Brain drain has occurred in many socialistic nations because

tax rates on well-respected professionals such as doctors tend to be very high.

A firm's carbon footprint is

the amount of carbon it releases in its effort to do business.

One result of taking a firm private is

the firm's stock is no longer available for purchase on the open market.

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

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

The standard of living for a nation's people depends mainly on:

their income and the prices of the goods and services they buy.

Economics was called the "Dismal Science" by Thomas Carlyle because

too many people would result in food shortages and shortages of other resources.

Empowerment requires managers to focus more on ________ lower-level employees.

training

Following an ethics-based approach to decision making will normally lead to higher

trust and cooperation

One of the major disadvantages of a sole proprietorship is the

unlimited liability the owner has for the debts of the firm.

A firm or individual providing financial capital to small businesses in exchange for an ownership stake in the company is called a

venture capitalist.

When we compare the factors of production in wealthy versus poor nations, we find

wealthy nations have knowledge and entrepreneurial opportunities, while poor nations are often lacking in these areas.