Economics

The heart of economics is

Decision-making

Offering higher wages, employee-assistance programs, and benefits are responses to limited

Human resources.

In calculating GDP, economists try to avoid double counting because it would

Inflate the value of GDP. Double counting occurs when the production of a good or service is counted more than one time. An example would be counting the production of automobile tires when they are produced and when they are sold as part of a new car. Double counting would not affect the price of products, cause legal problems, or lower the standard of living.

Any factor that causes changes in supply and demand will cause changes in

Price

When demand is greater than supply, a __________ often develops.

Seller's Market

Members of Local 999 have refused to buy products made by their company. This is an example of

Boycotting. Boycotting is a refusal to buy a company's products. Picketing occurs when union members carry signs and protest. To ratify is to approve or vote in favor of something. Striking occurs when union members refuse to work.

What may occur when employees do not see the outcome of their part in the whole job process?

Decreased pride in work. Employee pride increases when workers see and understand their part in the whole process. Increased morale and enthusiasm for the job occur as pride increases. As workers become more specialized, they are less likely to see the final outcome of their part in the whole job; therefore, interdependency increases.

A manufacturer is a type of business that

Turns raw goods into useful products. The manufacturer changes the shapes or forms of raw goods so that they will be useful to consumers. Manufacturers buy raw goods from their producers and sell finished products.

Government provides protection to business owners' property through the use of

Zoning laws. Government passes zoning laws to protect the value of business property by allowing only certain types of businesses to occupy an area. Minimum-wage laws, safety standards, and consumer-protection laws are all examples of areas of government involvement, but they are not related to protecting business property.

Which of the following is one of the main principles of the private enterprise system: a. Competition b. Exclusive agreements c. Price fixing d. Monopolies

Competition. Competition is the rivalry among two or more businesses to attract scarce customer dollars. Fair competition is essential if the private enterprise system is to work as it was intended. Monopolies are allowed to exist in a private enterprise economy only if they are regulated. Exclusive agreements and price fixing are illegal.

A builder is a type of producer that

Constructs houses, roads, and bridges. Builders use both raw and finished goods in construction. A builder may or may not encourage goodwill for her/his industry. Architects and/or engineers are responsible for developing blueprints for builders to follow.

Which of the following is an example of an economic want: a. Clothing b. Understanding c. Conversation d. Fresh air

Clothing. Economic wants are desires for things that can only be obtained by spending money. To obtain clothing, people must spend money. Fresh air, conversation, and the understanding of others are noneconomic wants because they can be obtained without spending money.

The ultimate goal of all economic activity is

Consumption. The ultimate goal of all economic activity is consumption, which is the economic process or activity of using goods and services. For consumption to occur, goods and services must be produced, or made. Producers, consumers, and resource owners exchange money payments for the use of their goods, services, and resources. Distribution examines how money payments are divided between producers and resource owners.

If a risk is small in terms of money, a business may decide to __________ the risk.

Retain. If a risk is small in terms of money, a business may find that it's less costly to retain or keep the risk than to avoid, prevent/control, or transfer it. Avoiding risk means not being exposed to risk at all. Preventing/Controlling risk is taking measures to reduce the risk. Transferring risk is passing the risk to someone else.

Excess demand and excess supply cause changes in

Market place

Friendship would be considered a( n ) __________ want.

Noneconomic wants do not have a monetary value attached to them. They are considered free goods. Friendship is an example of a free good. An economic want has a monetary value attached to it. Wants are considered unlimited rather than limited because everyone has them, they change, and people are not able to obtain enough resources to satisfy all of their wants.

A business that exists to fulfill a specific mission or undertaking is called a(n) __________ business.

Nonprofit. A business that exists to fulfill a specific mission or undertaking is called a nonprofit business. A for-profit business exists to fulfill financial goals. Mission-central and focused are not terms used for types of businesses. These terms may be used to describe a particular business, however.

Careful screening of credit customers is an example of handling business risks through

Prevention. By carefully screening applications for credit, management can prevent nonpayment issues. Screening credit customers is not an example of training, which involves teaching or developing a specific skill. Retention is the act of keeping or hanging on to something. Management is the process of coordinating resources to accomplish an organization's goals.

Demand for a good is more likely to be elastic when the good is

Luxury

A country that values qualities such as assertiveness and status is known as a(n)

"Masculine" society. A country that values qualities such as assertiveness and status is known as a "masculine" society, according to Hofstede's dimensions of national cultures. A short-term oriented society focuses on the past or present and values things such as national pride and fulfilling social obligations. An uncertainty-accepting society is open to many different opinions and avoids having too many rules. A collectivist society is strong integrated into groups.

A student purchased a laptop to use for homework assignments. In economic terms, this computer would be classified as a(n) __________ good.

Consumer

Prices set higher than the equilibrium price will result in

Excess supply

Which of the following might cause supply of a good to decrease:

Government regulations

Workers in your company have decided to join a union. As a member of management, which form of union representation will you encourage?

Open shop. Open shops are preferred by management since it permits them to discourage new employees from joining the union, thus limiting the union's bargaining power. In union shops, employees are required to join unions after their probationary period. In closed shops, prospective employees must belong to unions before the company can hire them. Closed shops are illegal in all states. In agency shops, all employees are required to pay union dues but do not have to join the union.

A union strike that stops production at a manufacturing plant is a(n) __________ risk.

Operational. Labor relations are an operational risk. If a union strike occurs, it can upset production for days, weeks, or months, making it difficult or impossible to fulfill customer orders. Financial risks are possible events or situations that directly influence a company's cash flow, strategic risks often concern the overall business environment, and hazard risks are potential events or situations that can cause injury or harm to people, property, or the environment.

One way in which government protects private property is to provide

Patents or copyrights. Government issues patents or copyrights to inventors and artists to protect their work. Although government provides local governmental programs, this response is not specific enough to be correct for protecting private property. Federal Reserve Banks are used by local banks for their banking functions. They do not provide protection for local property. Local governments provide fire protection through fire departments, not through fire insurance.

Alex owns a guitar, several books, and a telescope. Alex's possessions are examples of

Private property is anything of value that people own. It can be business or personal property. Other examples of private property include land, jewelry, buildings, and clothing. Economic resources are the human and natural resources and capital goods used to produce goods and services. Capital goods are manufactured or constructed items that are used to produce goods and services. Equal distribution of goods and services is not possible, even in economic systems set up for that purpose.

Distribution examines how income is divided between

Producers and resource owners. Incorrect

Which of the following are methods that countries use to control their trade with other nations: Select one: a. Quotas, tariffs, and subsidies b. Product standards, admission fees, and licenses c. Tariffs, economic sanctions, and royalties d. Embargoes, surplus charges, and product standards

Quotas, tariffs, and subsidies. Protectionism occurs when a nation attempts to control its trade with other countries. Governments use tariffs, quotas, licenses, product standards, and subsidies as methods of creating trade barriers. Royalties are generally associated with franchising aspects of business ownership. They are fees paid to a parent company that are often based on a percentage of the franchise's profits. Although a nation might charge a fee for imports entering its borders, admission fee is not a term widely used to describe charges encountered when describing concepts related to global trade.

When the economy is in a recession, most businesses respond by

Reducing production. A recession exists when the economy is slow for two consecutive quarters. In a period of recession, businesses tighten their purse strings and reduce production. Increasing wages, hiring more workers, and planning to expand would be responses to an upswing in the economy.

Why is the productivity of service businesses measured differently than that of manufacturing businesses?

Service businesses are concerned about the appropriateness of their products. To measure the productivity of a service business, the quantity, quality, appropriateness, and timeliness of the service must be considered. Service businesses can be as efficient as manufacturers. Both service businesses and manufacturers may measure their productivity on a regular basis. Manufacturers produce tangible goods, while service businesses produce intangible outputs.

Retailing takes place whenever goods are

Sold to the ultimate consumer. Retailing is not simply the exchange of goods or offering goods for sale. Retailing occurs only when goods are sold to those who will use them, and it may occur in the consumer's home, over the telephone, or in a variety of ways other than in a retail establishment.

Many different workers are needed to carry out the steps in processing milk before it can be distributed to consumers. This is an example of

Specialization by stages of production. This occurs when more than one stage is required to change a raw material into a finished product. The completion of the final product usually involves different workers at each of the stages of production. Specialization by profession is the type of work you do to earn a living. Job enlargement is combining job tasks so that a worker has more responsibility for the completion of a job. Job obsolescence occurs when technological advances cause a job to become outdated.

Kyle is part of a group of employees who are close friends and like to spend their lunch hours together, eating or playing cards. This group is considered a(n)

Subculture. Kyle's group is a subculture at his work—a smaller culture that develops under the dominant organizational culture. The organizational culture is the overall culture of the entire company. His group is not based on religion. A collective society strongly relies on groups, but it is not the term used within organizations.

Gross domestic product per capita is a measure of

The average worker's productivity. Gross domestic product per capita is a measure of the average productivity of individual workers. It is calculated by dividing the gross domestic product by the worker hours required to produce it. A nation's exports and imports are used to calculate just one component of gross domestic product—net exports of goods and services. Gross domestic product is a measure of everything a country produces within its borders in a year.

What motivates businesses to produce efficiently and sell effectively?

The hope of making a profit. One of the most important benefits of competition is profit. Businesses work hard to beat their competitors and attract the most customers. Those that produce efficiently and sell effectively are able to make a profit. Most businesses try to save money rather than spend it. They do not produce efficiently and sell effectively in order to be recognized or to start a trend.

Why are resources considered limited?

There are not enough available so that everyone can have as much of them as desired. People want or demand more resources than exist or can be produced easily. Economics is the study of satisfying unlimited wants with limited resources. Everyone has unlimited wants which change.

Why do unions and management experience conflicts?

They both want to keep the business operating but have different ideas about how to reach that goal. Unions attempt to increase or improve wages, fringe benefits, and working conditions for union members. Management, on the other hand, tries to increase and maximize profit. Neither management nor union members would benefit by closing businesses.

Lack of economic growth is a major problem for __________ economic systems.

Traditional. Members of traditional economies consume everything that they produce, so they are never able to save anything. Without any savings, they cannot invest in greater production. As a result, they are unable to raise their economic standards. Although communist economies are often behind socialist and market economies in terms of economic development, none of those three types of economies suffer as much economically as traditional systems.

Which of the following types of economic systems adopts the fewest new ideas or improvements: Select one: a. Traditional b. Command c. Market d. Socialist command

Traditional. One of the characteristics of a traditional economic system is that decisions in this kind of system are based on custom, traditions, and beliefs. People live at a subsistence level, and very few new ideas or improvements are adopted. Only a few countries use the traditional system. All of the other alternatives are economic systems that are more progressive.

Which of the following is a characteristic of economic services: Select one: a. Freely available to everyone b. Tangible c. Non-transferable d. Useful

Useful. Economic services are productive acts that satisfy economic wants. They must be useful, scarce, and transferable. However, services are not tangible. Instead, they are intangible activities performed by other people for a certain amount of money.

A business that produces a product should be socially responsible to the __________ of the product.

Users. Businesses should offer the users of their products safe, quality products. The business is the provider of the product, and it is generally not held liable when the user of its product abuses the product in some way. People who endorse a product are recommending it to others.

One of the freedoms provided to individuals by the private enterprise system is the freedom to choose

Where they will work. U.S. citizens are free to choose the kind of work they would like to do to make a living. They are limited by their own interests, abilities, and training. They are not, however, free to choose which taxes to pay, which laws to obey, or how much they will be paid by their employers.

Maintenance, modifications, and use of alternative sources are responses to limited

Capital Goods

When less expensive substitutes for a product are readily available, then demand for that product is likely to be more

Elastic

What do consumers, producers, and resource owners need to have in order to make economic decisions?

Information about prices. Information about prices is necessary in deciding whether to buy, what to buy, and how much to buy. Information is one of the functions of relative prices. Economic incentives are monetary motivators that encourage producers to change and reallocate their resources. In our economy, these incentives are profit. Rationing is a function of relative prices that determines who gets the goods and services produced or how scarce resources will be distributed. Limited liability is a condition in which business owners risk only the amount of their investment.

Which of the following situations involves finding an alternative resource to use in place of a nonrenewable natural resource: a. Generating energy from wind turbines instead of solar panels b. Searching for oil in new locations such as the ocean floor c. Passing legislation to prevent the killing of endangered animals d. Powering a motor vehicle with biodiesel instead of gasoline

Powering a motor vehicle with biodiesel instead of gasoline

How much a consumer is willing to pay for a product depends partly on the consumer's opinion of the product's

Value. Value is the amount of satisfaction a product can provide. A product may provide more satisfaction for one person than for another. Therefore, the value of a product can vary from person to person. Production costs are the monies that must be spent by the seller to make a product. This would include costs of raw materials, rent, and transportation. The target market is the group of customers the producer is trying to attract with the product. Products may improve the efficiency of their owners, but they are not described as having efficiency.

When supply is greater than demand, a __________ often develops.

Buyer's market. When supply is greater than demand for a particular product, producers are likely to lower their prices to sell the excess supply, creating a buyer's market. A buyer's market is the best time for consumers to buy. It's characterized by a large supply, small demand, and low prices. A seller's market is the best time for producers to sell and is characterized by large demand, small supply, and high prices. A shortage occurs when excess demand for a product exists. A price ceiling is a maximum legal price that businesses can charge for certain products.

How do societies that specialize in producing certain goods obtain the other goods that they need?

Exchange. Exchange is the process of trading one good or service for another. Societies that make the best use of their resources by specializing in the production of certain goods and services usually trade or exchange them for other needed goods and services that they do not produce. Competition is the rivalry between two or more businesses to attract scarce customer dollars. Rationing is determining how scarce resources will be distributed. Distribution is the process or activity by which income is divided among resource owners and producers.

Some businesses sell their goods and services to individuals, businesses, or governments in other countries. This is an example of

Exporting. The selling of goods and services to individuals, businesses, or governments in other countries is known as exporting. Importing is the buying of goods and services from other nations. Domestic trading is the buying and selling of goods and services within a country. Deficit trading occurs when a country imports more than it exports, and a trade deficit results.

Which of the following is an advantage to workers of having a union represent them: Select one: a. Payment of wages during strikes b. Payment of union dues c. Fair treatment of employees d. Democratic votes on issues

Fair treatment of employees. Unions help ensure fair treatment through seniority rights and qualifications. Payment of union dues, abiding by the decision on issues where the majority rules, and payment of wages during strikes are all disadvantages to workers. The union does not pay wages during a strike.

When the Pretty Pictures framing business underwent internal restructuring last year, how would its primary business activities have reacted?

They adjusted according to the internal changes. When a business undergoes internal restructuring, the primary business activities adjust according to the internal changes. They do not adjust according to external changes in this case, since the changes are internal. Primary business activities do not stay the same when a business experiences change. Also, primary business activities do not have to change radically when a business experiences change—although they might.

Janine works at the gift-wrapping booth in the local mall. During a typical eight-hour work day, Janine wraps 52 gifts. What is her productivity rate?

6.5 gifts per hour. Janine's productivity rate is 52 gifts divided by eight hours, which equals 6.5 gifts per hour.

A local neighborhood has many houses for sale at a low price, but demand for the houses is low. What kind of market most likely exists in the neighborhood?

A buyer's market is characterized by large supply, small demand, and low prices. One example of this is when many houses are for sale with few buyers. A seller's market is characterized by large demand, small supply, and high prices. Inelastic is not a type of market but a type of demand in which changes in price do not affect demand. Discretionary is used to describe the income people have left to spend or dispose of after they have paid their taxes.

An example of a noneconomic want would be the desire for Select one: a. concert tickets. b. a college education. c. a friend. d. police protection.

A friend. This want does not require you to spend money to satisfy it; therefore, it is a noneconomic want. Although police protection may appear to be a free service, it is provided through tax dollars. The desires for police protection, concert tickets, and a college education all require the consumer to spend money. d. police protection.

Because of competition, people in our society enjoy

A higher standard of living than that of people in many other countries. In our society, goods and services are being developed and improved to make our lives more convenient, easier, and perhaps even longer and healthier. As a result of competition, there are more goods and services from which to choose and more changes to existing products. Although our government monitors business activities, it does not control our economic system. Control of our economic system is found in the interaction of buyers and sellers.

Which of the following examples best exhibits a job task with high depth and low scope: Select one: a. A manager evaluates employee performance according to the owner's standards. b. A manager selects the products to be sold for a business and selects the employees who will work in each business activity. c. A manager signs employees' time cards. d. A manager makes out the weekly work schedules, hires employees, and supervises a department.

A manager selects the products to be sold for a business and selects the employees who will work in each business activity. Job scope refers to the number of different operations completed on the job. Job depth refers to the amount of control you have over the job tasks. In the example, the manager performs only a few job tasks but has a lot of control over those tasks. Making out the weekly work schedules, hiring employees, and supervising a department is an example of a job with high depth and high scope. Signing employees' time cards is a job with low depth and low scope. Evaluating employee performance according to the owner's standards is a job with low depth and high scope.

In many places, trash pickup is legally controlled by just one company. This is known as

A regulated monopoly. These companies are allowed to exist when legislators believe that one large company can more efficiently serve consumers than several small ones. Price discrimination is an illegal activity in which a business charges customers different prices for similar products. Price competition occurs when businesses use prices to attract scarce customer dollars. Nonprice competition occurs when businesses compete on a basis other than price.

One way in which many businesses demonstrate their social responsibility toward employees is by providing them with

A safe working environment. Most businesses feel this is one of their most important responsibilities toward employees. Few businesses provide free meals or free entertainment on a regular basis. It is impossible to provide a stress-free atmosphere.

The U.S. produces widgets faster and cheaper than Switzerland. In this example, the U.S. has a(n) _________ advantage.

Absolute. The uneven distribution of productive resources enables one country to be able to produce a good or service more cheaply than another country can. For example, efficient factories and skilled labor may enable the United States to produce office machines more cheaply than they can be produced in Malaysia. A comparative advantage is the benefit that a country obtains from specializing in and producing goods and services at which it is relatively most efficient. Constructive advantage is not a widely used term to describe concepts related to global trade. Advantages usually are not predictable.

TeJuan's Fishing Shack demonstrates effective information management by

Accessing a list of fishing equipment appropriate for a particular customer. When TeJuan's Fishing Shack accesses a list of fishing equipment appropriate for a particular customer, the business is demonstrating effective information management. Removing wasted materials from a process is part of operations. Promoting new fishing equipment is part of marketing. Hiring fishing experts to explain how to use the goods offered is part of marketing and/or human-resources management.

Which of the following was one of government's original roles in business: a. Protecting the environment b. Regulating technology c. Ensuring a business's profitability d. Acting as a referee

Acting as a referee. When the United States was born, government was not intended to have a hand in business. Businesses would be free to act in their own best interests without government involvement. The basic role of government in business would be as a referee only. Government does not ensure a business's profitability. Regulating technology and protecting the environment are areas of responsibility that government took on as the country grew and business expanded.

Janelle's Creative Supplies is opening an additional location on the other side of town. To operate the new location, Janelle needs

Additional employees. To operate her new location, Janelle needs additional employees. Janelle does not need new carpet and paint to operate her new location—although these items would be helpful. She does not need extra free time to operate her business. She simply needs more available work time! More advertising spots might help, but they are not necessary for operating the business at the new location.

To reduce the chance of investigations and orders to cease production, businesses should

Adhere to government regulations. Businesses can reduce the chance of investigations and orders to cease production by obeying laws. Purchasing up-to-date technology is a form of capital investment used to improve productivity. Specializing means making the best use of resources in the production of goods and services. Lobbying members of Congress may result in legislation favorable to a business, but it won't necessarily reduce the chance of investigations.

GDP figures for the U.S. include the value of

All production for which money is exchanged and receipts are kept. GDP includes the production of both goods and services. It includes all production for which money is exchanged and receipts are kept. Goods that are not sold in the marketplace and transactions for which no receipts are kept are not included. Goods the U.S. produces in other countries would be part of the GDP for those countries.

Social responsibility should be part of the objectives of __________ businesses.

All. Social responsibility is the duty of businesses to contribute to the well-being of society. Government, specialized, and nonprofit businesses would be included in those businesses that should be socially responsible.

Which of the following cultures has a traditional economic system: Select one: a. Rural areas in Great Britain b. Amazon Rainforest communities c. Villages in the Rocky Mountains d. The Republic of Cuba

Amazon Rainforest communities. Traditional economic systems are based on traditions and habits passed down through the generations. For example, in remote areas within the Amazon Rainforest, people continue to produce the same products as prior generations of their families did, in much the same way. Villages in the Rocky Mountains, which are located in the United States and Canada, are not likely to have traditional economies. Rural areas in Great Britain are part of the country's socialist economy. The Republic of Cuba, also known simply as Cuba, has a communist economy.

One of the ways that government tries to improve the economy during an economic slump is by increasing the

Amount of money in circulation. The government monitors the state of the economy to keep it from growing too fast or too slowly. When the economy is in a recession, government tries to jump-start it by increasing the amount of money in circulation. This can be done by increasing government spending, reducing the prime interest rate, decreasing the discount rate for banks, or lowering taxes. Government is not ordinarily involved in the pricing of consumer products except in times of national emergency.

Which of the following is a benefit of global trade: a. Stronger trade restrictions b. An increased trade deficit c. An improved standard of living d. Higher prices for goods and services

An improved standard of living. Global trade provides important consumer goods to countries where these products are not available or are in short supply. Making these goods available to all countries improves the standard of living throughout the world. An increased trade deficit, higher prices for goods and services, and stronger trade restrictions are not benefits of global trade.

A union worker who is just beginning in the occupation is referred to as a( n )

Apprentice. A union worker who is just beginning in the occupation is referred to as an apprentice. S/He works under the direct supervision of other union members while learning the trade. While s/he may assist others, s/he is not called an assistant. A journeyman is a skilled and licensed union member. A master is a union member who is a skilled supervisor.

A non-pressure strategy that unions and management can use to reach agreement is

Arbitration. Arbitration is a non-pressure strategy that unions and management can use to reach a tentative agreement on a labor contract. In arbitration, an arbitrator reviews the situation and makes a binding decision that both the union and management must abide by. A corporate campaign is a union pressure strategy in which union members disrupt shareholder meetings or buy up stock to gain more control. A shift in production is a management pressure strategy in which the company shifts production to another location or out of the country. An injunction is a management pressure strategy in which the company obtains a court order to prevent union members from taking certain actions, such as picketing.

How would a business's computers be classified?

As equipment. Equipment is used in the operation of a business but not in the actual production of a good or service. Supplies are goods that are constantly being purchased and used up in the operation of a business. A part becomes part of a finished good without additional processing. Installations are industrial goods used to produce goods and services.

Which of the following statements about economic resources is true: Select one: a. As natural and human resources become limited, capital goods become limited. b. As human resources become limited, natural resources and capital goods become limited. c. As capital goods and human resources become limited, natural resources become limited. d. As capital goods and natural resources become limited, human resources become limited.

As natural and human resources become limited, capital goods become limited.

An advantage to companies of unionization is

Assistance in recruitment. Union officials can help the company in training and recruitment of workers. Promoting employees based on seniority and offering more fringe benefits are advantages to workers. The company would not want to give up any of its decision‑making abilities to the union.

Two factors involved in determining the value of a resource, good, or service are

Availability and demand. Resources, goods, and services that are abundant are usually less highly valued than scarce resources, goods, and services. As people's desires, or demands, for resources, goods, and services increase, so do the money payments they will be willing to make. Another factor which affects the value of a resource, good, or service is productivity.

Management decides to hold its annual meeting in one U.S. city rather than another because of crime in that city. This is an example of __________ the risk. Select one: a. transferring b. preventing or controlling c. avoiding

Avoiding. The business is avoiding the dangers of criminal activity by eliminating the risk. To retain risk is to keep it. Preventing or controlling risk is taking measures to prevent or reduce the risk, which would not be possible in this case. Transferring risk is passing the risk to someone else.

How do nations track the flow of money coming in and going out of their countries?

Balance of payments. Balance of payments is the difference between all monies coming into a country and going out of a country. Nations track their flow of money through their balance of payments. Nations need to have more money coming in than going out, which creates a favorable balance of payments. Growth in the economy and level of exports do not track a nation's money flow. Value of currency indicates the buying power of a nation's money on the world market.

Which of the following terms describes the difference between the exports and imports of a nation: a. Trade deficit b. Cash flow c. Trade surplus d. Balance of trade

Balance of trade. The difference between a nation's exports and imports is its balance of trade. When imports are greater than exports, a trade deficit exists. When exports are greater than imports, a trade surplus exists. Cash flow is the movement of money, or cash, into and out of a business.

The most common form of corruption affecting international trade is

Bribery. The most common form of corruption affecting international trade is bribery, or giving money to someone in return for some sort of favor. Bribes are often made to government officials, but government involvement in trade is not necessarily corrupt. Negotiation and nonverbal communication are also not forms of corruption.

In economics, the term capital goods includes

Buildings and equipment. Capital goods include all materials used in the production of goods and services. In fact, any manufactured or constructed item that is used to produce goods and services is considered a capital good. Labor and management are considered human resources. Mental and physical work are the types of work done by human resources. Trees and water are examples of natural resources.

Who answers the basic economic questions in a private enterprise economic system?

Businesses and individuals. In a private enterprise system, businesses and individuals own or control the economic resources. All citizens play a role in determining what will be produced, how it will be produced, and who will consume it. These decisions are not controlled by government agencies, influential citizens, entrepreneurs, or producers.

Which of the following is a true statement regarding cultural differences in international trade: Select one: a. Businesses should minimize cultural differences as much as possible. b. Trade goals should be set before researching cultural differences. c. Businesses must take action regarding cultural differences to be successful. d. Cultures that are very different from each other should not become trading partners.

Businesses must take action regarding cultural differences to be successful. Simply recognizing cultural differences is only half the battle—organizations must take action and address issues appropriately if they want to overcome potential obstacles. Businesses should consider cultural differences before setting goals for international trade. Even very different cultures can become successful trading partners if they respect each other's customs and habits. Cultural differences need not be minimized—businesses should respect and recognize other cultures and learn to work together.

Which of the following determines whether consumers can purchase goods or services: a. Buying power b. Competition c. Production costs d. Labor costs

Buying power is the amount of money that the consumer has available to spend. This determines the price the consumer can afford to pay. Production costs are all the costs of producing products, including labor costs. Competition is the rivalry between two or more businesses to attract scarce (limited) customer dollars.

What is one factor that will determine how much a customer is willing to pay for a good or service?

Buying power. Buying power is the customer's ability to purchase based on the amount of his/her disposable income. Other factors that affect the price decision are satisfaction (value) and relative prices. Incentive is a function of relative price that encourages producers to change and reallocate their resources. Rationing is a function of relative price that affects who gets the goods or services that are produced. Production costs affect how much a customer has to pay for a product versus willingness to purchase.

A trade industry is a type of business that

Buys and sells goods. The trade industries include both retail and wholesale businesses. They do not produce new products, and they do sell finished goods.

An accurate statement concerning labor specialization would be that it

Can be of different types. Specialization is making the best use of resources in the production of goods and services. Types of specialization include specialization by task, by stage of production, and by trade or profession. A disadvantage of specialization is that it increases workers' dependency on each other. Specialization means that each individual worker usually performs one portion of a job. Production rates increase as a result of specialization of labor.

One of the benefits of economic growth is that government

Can carry out its activities more easily. Government activities can be carried out more easily when the economy is strong because more tax dollars are available to fund various government programs. This may make it easier to solve problems, but it does not necessarily reduce the number of problems. Government cannot ensure workers that they will find jobs, even in a strong economy. Nations need trading partners under all economic circumstances.

When a stove is used in a restaurant kitchen, it is a

Capital good. A restaurant stove is a manufactured item that is used to produce or market other goods; therefore, it is a capital good. A stove is not a noneconomic resource since it has monetary value. Natural resources are items that are found in nature and used to produce goods and services. Human resources are people who work to provide goods and services.

Automation involves replacing human resources with

Capital goods. Automation is a production method in which machines do tasks automatically. In other words, human resources (people) are replaced by capital goods, which are manufactured or constructed items that are used in the production of goods and services. Natural resources are items found in nature that are used to produce goods and services. Raw materials are items in their natural state or condition. Consumer goods are products produced for personal consumption, not production.

Which of the following economic resources helps people to be more productive: Select one: a. Capital goods b. Natural resources c. Noneconomic resources d. Human resources

Capital goods. Capital goods help people to be more productive. In other words, capital goods help human resources to do more in less time than they could do without tools, machinery, roads, etc. People—also known as human resources—create and use capital goods to transform natural resources from their less satisfactory original state to products that better satisfy consumers. Natural resources, human resources, and capital goods are all economic resources.

The use of robots in assembly-line work is a form of specialization involving

Capital goods. The use of specialized types of machinery to do specific tasks at high rates of speed is specialization involving capital goods. Capitalism is an economic system that is characterized by free enterprise. Natural resources are resources found in nature. Human resources are the people who use their skills in different jobs.

What action do consumers take that determines what will be produced in a market economy?

Cast economic votes. An economic vote is the term used to describe consumer approval of products expressed by the purchase of those products. Consumers decide what will be produced by casting economic votes through their purchases in the marketplace. Consumers are purchasers rather than producers of products. Applying for jobs and comparison shopping would not determine what businesses will produce.

Union and management officials are meeting next week to determine the terms and conditions that will be provided to employees. This process is known as

Collective bargaining. Collective bargaining is the process in which unions and company officials engage to determine worker contracts. Strikes occur when the collective bargaining process breaks down, and the employees refuse to work. When employees picket, they stand outside the company to protest such things as company policies and pay scales. Boycotting occurs when employees of a company refuse to buy the company's products.

Sharing business goals and objectives with workers is a method of increasing productivity through

Communication. Managers should communicate business goals and customer information with employees to increase productivity. Motivation involves giving employees rewards and incentives for being productive. Mass production is the rapid production of large quantities of a few products. Specialization is the process of making the best use of resources in the production of outputs.

The government controls the economic system and does not allow private ownership of the means of production and distribution in a __________ economy.

Communist command. In a communist command economy, the government controls the economic system and does not allow private ownership of the means of production and distribution. The government does all of the economic planning and makes all economic decisions. A traditional economic system is one in which people produce only what they must have to exist, and all economic decisions are based on habit and tradition. A market economic system is one in which the means of production and distribution are owned and controlled by individuals and businesses. In a socialist command economy, the government owns part of the means of production, but there is private ownership of business as well.

Which of the following occurs when a country can produce goods at a relatively more efficient rate than another country: a. Trade deficit b. Absolute advantage c. Comparative advantage d. Trade surplus

Comparative advantage. A country has a comparative advantage when it produces and sells those goods and services for which it will earn the most money, while trading for those that will earn relatively less money. A country has an absolute advantage when it can produce a product for less than another nation can. A trade deficit exists when a nation's imports are greater than its exports. A trade surplus exists when a nation's exports are greater than its imports.

One of the reasons that countries measure GDP is to

Compare their findings to other countries around the world. One of the reasons that countries measure GDP is to compare their findings to other countries around the world. This lets countries know how they "measure up" and how much they need to improve. GDP does not indicate the types or quality of goods and services produced. It does not give any information about distribution of wealth, either.

In a private enterprise economic system, consumers can choose from a variety of products as a result of

Competition, the rivalry among businesses to attract scarce customer dollars, results in a variety of benefits. These benefits include better prices, better credit options, improved and new goods and services, and better service. Limited government control is a characteristic of a private enterprise economy. The government collects taxes to obtain funds needed to operate the system. Inflation is a rapid rise in prices usually occurring when demand exceeds supply.

When a rival's product on the market reduces sales of your company's product, your company is experiencing strategic risk caused by

Competition. Competition can be a strategic risk to a business. The company in this situation may be forced to lower its prices or to change its product. Regulatory and political issues include tax standards, environmental regulations, employee protection laws, and many other government guidelines. Customer needs change quickly, and if businesses don't pay attention to this, they may be left behind. Obsolescence is the fading away that occurs as new products or processes are introduced.

Levels of inflation and unemployment are factors that affect __________ in the world market.

Competition. Global competition is the rivalry between nations to attract a share of the world market. Levels of inflation and unemployment are factors that make the products of nations more or less competitive with each other. Specialization is making the best use of resources in the production of goods and services. Communication between countries is not affected by inflation and unemployment. Satisfaction is a state of contentment.

Which of the following is a factor affecting a product's utility to the individual customer: a. Price of other goods b. Number of consumers c. Consumer's age d. Number of producers

Consumer's age. Basic demand for a product is not determined by its price but by its utility, or usefulness. How useful products are perceived to be is based upon such things as the consumer's age, gender, occupation, education, and income. The other alternatives (numbers of producers, number of consumers, and price of other goods) don't have any bearing on product utility.

Social responsibility is the duty of business to

Contribute to the well-being of society. Businesses can show their social responsibility by maximizing their profits and/or contributing to public interests. While some businesses do provide certain social activities for employees, or may have a credit union from which employees can obtain loans for various purposes, these are not duties of social responsibility. Contributing to product development would benefit the business, not society.

Bread for a family would best be classified as a(n) __________ product.

Convenience. A convenience good or service is purchased quickly and without much thought or effort. When buying shopping goods and services, consumers compare products and stores by "shopping around" to get the best quality, price, and/or service. Specialty goods and services are items that have special or unique characteristics. Installation is a category of industrial goods and services.

Your firm is considering producing a new product. Research shows that there is definitely a demand for the product and that there are currently only two other producers of this product. Which of the following might prevent your firm from producing this product:

Cost of production. If the business determines that the cost of producing a product will be higher than its selling price, it would not be advisable to produce the product even though there is demand for it. Promotional considerations, consumer expectations, and product utility do not affect supply.

Government is involved in settling business disagreements through the use of

Courts. Government's first involvement in disputes between businesses is in the court system. Force and fines may be used to enforce a court ruling. Government is not involved in negotiation unless directed to do so by the courts.

The United Association of Plumbers and Pipefitters is an example of a

Craft/Trade union. The United Association of Plumbers and Pipefitters is an example of a craft union, also called a trade union. Craft unions include skilled laborers working in specific occupations, such as plumbing. Professional unions are common in the public sector and include teachers, nurses, etc. Union federations are groups of national unions working together to further their common purposes. An industrial union includes a wide range of workers across one industry.

One way that competition helps to build a prosperous society is by

Creating new jobs. Competition helps to create new businesses which make jobs available to a lot of people. Every year, more and more businesses open and employ thousands of people. This leads to a prosperous society in which people have jobs, earn an income, and spend money for more goods and services. Although small businesses may be replaced by large ones as a result of competition, such changes in the marketplace don't necessarily lead to a prosperous society. Government legislation has been created to regulate competition, but it does not necessarily lead to a prosperous society either. Increasing the money supply is unrelated to competition.

Which of the following is a true statement regarding a company's preparing its employees to deal with people from other cultures: a. All employees must take language training. b. It is most important to be culturally sensitive when meeting in person. c. Employees need to be prepared only if they are traveling overseas. d. Cultural training is a good way to teach employees the basic guidelines.

Cultural training is a good way to teach employees the basic guidelines. Many companies provide cultural training to teach employees the basic guidelines about dealing with people from different cultures, countries, and backgrounds. It is important to be culturally sensitive, not just in person, but also when dealing with people on the phone, over e-mail, etc. This is why cultural training is ideal for all employees, not just those traveling to other countries. Not all employees will need language training.

A country with a weak currency value tends to a. rely solely on trade centers to manage the flow of exports. b. experience high unemployment rates. c. gain consumer confidence which limits spending. d. decrease its imports and increase its exports.

Decrease its imports and increase its exports. A country with a weak currency must pay more to countries with strong currency values to purchase necessary goods and services. Because it is more expensive to import goods, a country with a weak currency tends to decrease its imports and increase its exports. Exports increase because nations possessing a strong currency can obtain more products at a cheaper price from the country with the weak currency. Trade centers are facilities located in most major cities throughout the world that assist exporters and importers. Governments do not depend only on trade centers to promote global trade and do not necessarily use the centers to manage the flow of goods. When certain economic and political events occur, a country's currency value can drop dramatically. When this happens, consumer confidence is often reduced (e.g., fewer tourists, less investment).

Which of the following is most likely to result from specialization of labor: Select one: a. Decreased training time b. Decreased skill level c. Decreased work quality d. Decreased production rates

Decreased training time. One of the advantages of labor specialization is that worker training is simplified. It is much easier to train employees to do one task than it is to teach multiple tasks or an entire job. Advantages associated with labor specialization include increased production rates, increased skill level, and increased work quality.

Marcy is ready to buy a new computer, and she has saved up enough money to buy the model she wants. Which of the following describes the quantity that Marcy is prepared to buy: a. Market price b. Elasticity c. Supply d. Demand

Demand

Most businesses strive to supply goods and services in direct proportion to

Demand is the quantity of a good or service that buyers are ready to buy at a given price at a particular time. Producers try to balance supply with demand so that neither a surplus nor a shortage will occur. Supply is the quantity of a good or service that sellers are able and willing to offer for sale at a specified price in a given time period. Cost of production is the total expenses associated with producing a product. Standard of living is the quality of life and general conditions to which people are accustomed.

The price of complementary products has an effect on

Demand. Some products are used together, so the demand for the main product influences the demand for the complementary product. If the price of the main product increases, demand for that product as well as for the complementary product usually decreases. The price of complementary products does not have an effect on supply, utility, or elasticity.

For the long-term success of the business, Stacey's Coffee House has decided to add a self-serve laundromat. Which of the following describes the business activity Stacey's Coffee House is likely involved in: a. Establishing a system for retrieving information b. Promoting its new service to potential customers c. Organizing itself for meeting its objectives d. Determining what will put it in reach of its goals

Determining what will put it in reach of its goals. Since Stacey's Coffee House is acting with its long-term success in mind, deciding to add a self-serve laundromat should put the business in reach of its goals. This decision is part of strategic management. Establishing a system for retrieving information is part of information management. Promoting a new service to potential customers is part of marketing. While organizing the business to meet business objectives is part of strategic management, it is not what Stacey's Coffee House demonstrated in this example. Organizing would involve setting up the business to be successful in providing the new laundromat service.

Burger King and McDonald's are examples of

Direct competitors. Direct competitors offer similar types of goods or services to the same target market. Since Burger King and McDonald's are both fast-food restaurants with similar menus, they are direct competitors. Indirect competition occurs among dissimilar or unrelated businesses. A regulated monopoly is a single business that influences the entire production of a particular good or service because it is in the best interests of the public for the business to do so.

One way that the productivity of a business can be measured is by

Dividing the dollar value of total sales by the costs of making those sales. The productivity of a business can be measured by dividing the dollar value of total sales by the costs of making those sales. The amount of time needed to gather all necessary inputs is not a measure of productivity. The total monetary cost of all inputs used is not sufficient information to measure productivity—the dollar value of total sales is also needed. Dividing the number of products sold by the cost of distributing those items does not take into consideration other costs involved in producing the items.

A country's gross domestic product is expressed in

Dollars. GDP is always expressed in dollars, not in the number of items produced. It shows the monetary value of production. GDP is not expressed as a percentage of any other figure. Transfer payments are not counted in GDP because they do not increase the total output of the economy.

When Caring Companions and Smiling Pets merged two years ago, how did the two businesses join?

Each primary business activity combined with the matching activity of the other firm. Merging businesses combine their business activities. This means that each primary business activity combines with the matching activity of the other firm. Strategic management combines with strategic management, for example, and financial analysis combines with financial analysis. The business activities do not combine into one activity—or even two. And, each business activity is not divided into two smaller activities.

A person who sells casual sportswear and can also sell formal clothing is an example of

Ease of transferring to other like jobs. Because of an employee's acquired knowledge and skill, it will probably be easier for that employee to transfer to a similar job. Increased level of skill occurs as an employee becomes more familiar with his/her job. An increase in the quality of work occurs as an employee's skill level increases. Simplified worker training makes it easier for an employee to learn a job task.

Into what two categories can wants be divided?

Economic and noneconomic. Economic wants have monetary values attached to them, while noneconomic wants are free. Economics is concerned with economic wants. Wants are considered unlimited because everyone has them, they change, and people are not able to obtain enough resources to satisfy all of their wants. Limited wants do not exist.

Seeing a movie at a theatre would be considered a( n ) __________ want.

Economic. An economic want is something which you desire that has a monetary value. Seeing a movie would have a monetary value attached to it. A noneconomic want is a desire for something that has no monetary value. Wants are unlimited because everyone has them, they change, and people are not able to obtain enough resources to satisfy all of their wants. Limited wants do not exist.

Orlando changes the price of one of his products, and this price change leads to a major change in the number of people who purchase the product. This means that demand for Orlando's product is

Elastic

Marc wants to figure out how much changes in price will affect his business's sales, so he pays attention to

Elasticity. If Marc wants to know how changes in price will affect his business's sales, he should pay attention to elasticity—an indication of how changes in price will affect changes in the amounts demanded and supplied. When there is a change in price that corresponds to a change in demand, demand is said to be elastic. Inelastic demand exists if the demand for a good or service is constant as the product's price changes. Market price is the actual price of a good or service that can be found in the market at a given point in time.

George thinks his culture is superior to all other cultures. This is known as

Ethnocentrism. Thinking your culture is superior to others is known as ethnocentrism. Collectivism refers to a society that is integrated into strong groups. Stereotyping is generalizing others based on their cultural backgrounds. Individualism refers to a society in which group ties are loose, and everyone is expected to take care of him/herself.

What exists when producers produce more than buyers are willing and able to buy?

Excess supply. When this occurs, producers will lower their prices in order to sell the excess supply. Equilibrium price is the point at which the quantity of a good that buyers want to buy and the quantity that sellers are willing to sell at a certain price are exactly equal. Excess demand is the situation that exists when demand is greater than supply. Normal price is the customary amount charged for a good, service, or resource.

What do consumers, producers, and the owners of resources do with money payments to create a flow of resources, goods, services, and money payments?

Exchange. Consumers, producers, and the owners of resources exchange money payments, which creates a circular movement, or flow, of resources, goods, services, and money payments. Consumption is the process or activity of using goods and services. Production is the making of goods and services, while distribution examines how money payments are divided between producers and resource owners.

Determine whether the following statement is true or false: Trade industries all have the same form of ownership.

False; they may be independent or belong to a chain. Trade industries are businesses that buy and sell goods without changing the form of the products. In addition to the independently owned trade industries and those that are part of a chain, there are "voluntary chains" of independent businesses that have joined together to obtain the discount prices available to chain stores.

Which of the following regulatory agencies would be concerned with price fixing and unfair competitive practices: Select one: a. Federal Communications Commission b. Federal Trade Commission c. National Labor Relations Board d. Consumer Product Safety Commission

Federal Trade Commission. This regulatory agency was established to administer and enforce antitrust laws and laws prohibiting price fixing and unfair competitive practices. The National Labor Relations Board administers labor-management relations laws, resolves labor disputes, and prevents unfair labor practices. The Consumer Product Safety Commission sets and enforces safety standards on consumer items. The Federal Communications Commission regulates interstate and international communications by radio, television, wire, satellite, and cable.

A large trade deficit in a nation often leads to __________ opportunities.

Fewer job. A trade deficit decreases the gross domestic product, which reflects the health of a nation's economy. A large trade deficit often leads to a lower standard of living and fewer job opportunities because the nation is importing more than it exports. A large trade deficit indicates a significant decrease in exports, an increase in imports, and less trade in general.

Which of the following is a potential problem in market economies: Select one: a. No competition b. Production quotas for businesses c. Total government control d. Financial loss

Financial loss. In market economies, people are free to go into business or to make any legal product. They also run the risk of financial loss if the company or product is not a success. Government control is limited. In fact, government will not step in to help a business in financial trouble unless the situation is a threat to the whole economic system. Competition exists among businesses for scarce customer dollars. Production quotas are set by the government in communist command economies.

Rather than being required to start his work day at 8:00 a.m. and end at 4:00 p.m., Tyler is allowed to start and end his work day at his convenience as long as he works 40 hours per week. This is an example of

Flextime. Flextime is a scheduling procedure in which employees select their own working hours as long as they work the required number of hours per day or per week. Since Tyler is allowed to start and end his work day at his convenience as long as he works 40 hours per week, he is benefitting from flextime. Shared time involves the use of two employees to share the responsibility for one full-time position. Lead time is the amount of time that passes between placing an order and receiving the stock. Just-in-time is an inventory control method that orders goods just in time for them to be used or sold.

The most goods and services are produced when people use their skills and abilities to do the jobs

For which they are best suited. People should do what they do best so that the most goods and services can be produced. They should use their different skills and abilities in jobs for which they are best suited. People who use their skills and abilities in the best way do not always receive the highest wages. The jobs involving the least amount of effort or requiring the most education do not necessarily allow people to use the skills for which they are best suited.

Which of the following is an action a business might take to address the issue of religion in another culture a. Engaging in stereotyping b. Setting aside money to pay bribes c. Creating price controls d. Forming a separate, independent company

Forming a separate, independent company. A business might form a separate, independent company as a way to address religious issues within a certain country or culture. Muslim law prohibits businesses from selling certain products. If a business is associated with one of these products, it might consider forming a separate company out of respect to this religious law. Stereotyping is generalizing people based on their cultural backgrounds; companies should not engage in this. Paying bribes is not related to religion, nor is setting price controls (a practice undertaken by the government).

Malinda owns a home, and instead of living in it, she decides to rent it out to make more money. Which economic freedom does this illustrate?

Freedom to own, use, buy, and sell private property. The freedom to make decisions about how your private property will be used is a very important part of private enterprise. If Malinda wants to rent her house, she can do so. She has the freedom to try to make as much income as she is able. Freedom to compete allows you to market your assets to your best advantage. This means you are free to compete for a scholarship, a job, or customers. Citizens are not able to choose which laws to obey. As a taxpayer, you don't actually have the freedom to control all the money you earn, since the government collects taxes.

Government uses some of the tax money it collects from individuals and businesses to support public welfare programs. What is the benefit of these welfare programs to businesses in a private enterprise economy?

Funds received by recipients are spent in businesses. When government provides funds for those in need, businesses benefit as well. People who receive the funds use them to purchase goods and services they otherwise could not afford to buy. It is not a benefit to any business when people are unable or unwilling to work. In a private enterprise economy, there is very little government control of how the money is spent. It is not a benefit to budget more money for taxes.

Honda is a Japanese firm that produces some of its cars in Ohio. In calculating GDP, the Ohio-produced cars would be part of

GDP for the U.S. The output of all labor and capital within a country's boundaries is included in GDP regardless of who owns those resources. This means that the value of cars produced by a Japanese firm in the U.S. would be counted in GDP for the U.S. If the U.S. produced cars in Japan, those cars would be part of the GDP for Japan. The underground economy is characterized by transactions for which no receipts are kept. Double counting is counting the production of a good or service more than once.

Which of the following situations represents an absolute advantage for the United States: Select one: a. France produces bottled water at $.80 per gallon, while the U.S. produces bottled water at $.89 per gallon. b. Canada produces paper at $3.00 a ream, while the U.S. produces it at $3.25 a ream. c. Germany produces cars at $14,000, while the U.S. produces cars at $12,000. d. Malaysia produces rubber at the same cost as the United States does.

Germany produces cars at $14,000, while the U.S. produces cars at $12,000. An absolute advantage exists when a nation can produce a product for less than another nation. In this case, the United States can produce cars for $2,000 less than Germany can. Canada and France have absolute advantages over the United States in the production of paper and bottled water, respectively. Neither Malaysia nor the United States has an absolute advantage in rubber production.

Japan and the U.S. buy and sell each other's goods and services. This is an example of

Global trade. The buying and selling of goods and services between nations is called global trade. Domestic trade is the buying and selling of goods and services within a country. Importing and exporting are activities involved in global trade.

In some cultures, creating relationships during business negotiations is key; in other cultures, negotiators want a signed contract. This illustrates cultural differences in negotiating

Goals. Different cultures have different goals when it comes to business negotiations. For some, only a signed contract will do. For others, creating relationships equals success. Different cultures also have different attitudes (win-win v. win-lose), schedules (open-ended v. time-sensitive), and styles (informal v. formal); however, achieving a contract v. achieving a relationship pertains to negotiation goals.

In a socialist economic system, who tends to answer the question of how products will be produced?

Government and business. In a socialist economy, government decides how certain basic products are produced. Other production decisions are made by private businesses. Individuals and tradition tend not to play a large role in determining how to produce products in a socialist economic system.

The way in which an economic system answers the basic economic questions depends upon the country's

Government. Each economic system must operate within the laws of the country. In some countries, government not only runs the country but also makes economic decisions. In other countries, government runs the country and allows the people to make their own economic decisions. Supply, demand, and resources aid in determining the answers to economic questions but only within the laws of the country.

n a communist command economy, who decides how the economic questions will be answered?

Government. In communist command economies, the government is responsible for determining what will be produced, how the products will be produced, and how the products will be allocated. In market economies, individuals and businesses decide how these economic questions will be answered. A venture team is a group involved in product development.

After a mild, dry winter, the supply of sleds should be __________ than demanded. Therefore, the price would be __________.

Greater; decreased. If it were an unusually mild, dry winter, few sleds would be purchased. Therefore, the supply would be greater than demand, and prices would decrease in order to sell the excess supply.

Which of the following would provide you with information about the health of the U.S. economy: a. Economic order quantity b. Population data c. Medium of exchange d. Gross domestic product

Gross domestic product. Gross domestic product, or GDP, is the final market value of the total output of all goods and services produced within a country's geographic boundaries during a year's time. GDP is used by economists to measure the health of the economy. Economic order quantity is the amount of stock that can be ordered at the greatest advantage to the business. A medium of exchange is something of value that can be used to obtain goods and services. Population data is information pertaining to the residents of an area including vital statistics, types of households, ethnic or racial background, numbers of residents, and forecasts of future increases or decreases.

Mr. Barnes has bought several rental properties. The money Mr. Barnes spent to buy these buildings would be included in which category of GDP?

Gross private domestic investment. Gross private domestic investment includes investment in both residential and nonresidential buildings and equipment as well as changes in the value of business inventories. Residential investment is the money landlords invest in the buildings and the equipment they own and rent to tenants. Government purchases of goods and services include everything purchased by local, state, and federal governments. Net exports of goods and services are the difference between what the U.S. buys from other countries and what it sells to other countries. Personal consumption expenditures include the final market value of all services and new and used goods purchased for consumption by individuals.

One of the reasons that a country needs an economic system is because it

Has a limited supply of resources. No country has enough resources to satisfy all of its people's unlimited wants and needs. As a result, choices must be made. One of the functions of an economic system is to make decisions about what can be produced, how much can be made, and who can obtain the products. People in all economic systems are interdependent and must depend on each other to obtain the things they need. Having immigrants from several countries is not a factor.

The connection between the social responsibility of a business and the community in which the business operates is that the business's social responsibility __________ the community.

Has an effect on. The social responsibility of the business affects many aspects of community life by affecting the level of employment, supporting cultural activities and educational programs, and making donations to worthy community causes. The local community is not the only target for the business's social responsibility, but it is an important one. A business's social responsibility depends upon the business, not the community.

A country can often produce goods more cheaply than other nations because it

Has easy access to raw materials. Because countries have different resources, they trade with one another to get what they want and need. Countries can often produce goods more cheaply than other countries because they have easy access to raw materials, up-to-date technology, or workers with special skills. Countries are more efficient when they produce products for which their resources are best suited. Placing limits on imports, lack of tariffs and quotas, and a very high standard of living do not necessarily affect a nation's ability to produce goods cheaply.

A disadvantage to workers of having a union represent them is that they

Have to pay union dues. Employees have an added expense when they join a union because they must pay union dues themselves. Being promoted based on seniority and abiding by improved safety rules are advantages of having union representation. Employees do not have to pay supplemental unemployment benefits.

The general classifications of business risks are a. hazard, operational, strategic, and financial. b. production, hazard, operational, and strategic. c. competitive, strategic, financial, and operational. d. strategic, production, competitive, and hazard.

Hazard, operational, strategic, and financial. All business risks could most likely be listed under one of these general classifications. Competition is a strategic risk. Problems with production are considered operational risks.

A hurricane that destroys a business is an example of a(n) _______ risk.

Hazard. A hurricane is a natural disaster, which is one kind of hazard risk. Other natural disasters include tornadoes, floods, and blizzards. Financial risks are possible events or situations that directly influence a company's cash flow, strategic risks often concern the overall business environment, and operational risks are the possible events and situations that can result from employee actions, core processes, and daily business activities.

A garden store customer tripped over a plant, fell, and sued the store for damages. This is an example of a(n) __________ risk.

Hazard. Hazard risks are potential events or situations that can cause injury or harm to people, property, or the environment. In this case, the plant caused a customer to trip, which led to an injury and a lawsuit. Strategic risks often concern the overall business environment, operational risks are the possible events and situations that can result from employee actions, core processes, and daily business activities, and financial risks are possible events or situations that directly influence a company's cash flow.

Which of the following are qualities of monopolies: Select one: a. Low prices and little competition b. Low production and much competition c. High prices and much competition d. High prices and low production

High prices and low production. Monopolies are usually not allowed to exist in a private enterprise system because they can cause many problems, including high prices and low production. When a monopoly exists, there is no competition.

Which of the following is characteristic of a seller's market: a. Low profits b. High prices c. Small demand d. Large supply

High prices. A seller's market is characterized by large demand, small supply, and high prices. These prices usually create high profits for sellers because demand is so great that customers will buy regardless of high prices.

The French-Canadian culture relies heavily on nonverbal communication to get messages across. This means it is a(n)

High-context culture. Since the French-Canadian culture relies heavily on nonverbal communication to get messages across, it is a high-context culture. A low-context culture is one in which people speak more directly. Relying on nonverbal communication does not make a culture more religious, more corrupt, or more ethnocentric (believing their culture is superior).

An example of performing business activities in an "out of the ordinary" way is when a business

Hires an outside firm to perform its marketing. A business performs its activities in an "out of the ordinary" way when it uses outsourcing or when it offers virtual services. Outsourcing is acquiring assistance from outside organizations/consultants to perform primary business activities. In this case, outsourcing is demonstrated by hiring an outside firm to perform the primary business activity of marketing. Operating as a link between customers and products is the role of marketing—certainly not out of the ordinary. Long-term planning and organizing for the future are part of strategic management. Offering a new product in a popular product line is part of marketing and/or operations.

A salesclerk working part-time at a clothing store is an example of a(n)

Human resource. Human resources are the people who work to produce a good or a service. Natural resources are items found in nature and are used to produce goods or services. A capital good is any manufactured or constructed item that is used to produce goods or services. Human resources are limited by the number of people who are ready, willing, and able to work.

Which of the following occurs when the supply of individuals who are able and willing to work diminishes: a. Human resources become limited. b. Human resources become unlimited. c. Capital goods become unlimited. d. Capital goods become limited.

Human resources become limited. The supply of people who are willing to work diminishes; therefore, human resources become limited. Capital goods remain unchanged.

Which of the following economic resources is responsible for combining the other resources to produce goods and services: Select one: a. Natural resources b. Capital goods c. Human resources d. Nonrenewable resources

Human resources. Human resources, which are often considered to be the most economic resource, are responsible for combining natural resources and capital goods to produce goods and services. Human resources are required, to some extent, in the production of all goods and services. Nonrenewable resources are a type of natural resource.

People are considered to be __________ resources.

Human. In economics, people are valued for the work that they do to produce goods and services. This includes both mental and physical work. Natural resources are found in nature and are used to produce goods. Capital resources, also called capital goods, include all of the manufactured or constructed items that are used to produce goods and services.

A store sells T-shirts for $10. Which of the following would be the most likely to occur if all other factors remain the same, and there is a demand for the T-shirts at $10:

If the price is lowered, the volume of sales will go up. Usually, the lower the price of something, the more of it that will be purchased. The business's profits could go up, but only if more T-shirts are sold at the higher price. If the price is raised, profits will not necessarily go up, since fewer T-shirts may be sold.

A business that buys goods and services from a company in another nation is performing which of the following activities: a. Promoting b. Exporting c. Producing d. Importing

Importing. The buying of goods and services from other nations is known as importing. Producing is the process of growing, providing, or manufacturing goods and services. Promoting is the act of communicating information about goods, services, image, and/or ideas to achieve a desired outcome. Exporting is the selling of goods and services to individuals, businesses, or governments in other countries.

A country's net exports are a minus figure in GDP calculations whenever

Imports are greater than exports. Net exports are the difference between what a country buys from other countries and what it sells to them. Net exports are a minus figure whenever imports exceed exports. This situation is known as a trade deficit, rather than a trade surplus. The value of business inventories and uncounted production would not affect the net export figure.

One of the ways that competition benefits customers is by encouraging businesses to

Improve their existing products. In the quest for consumer dollars, businesses continually try to upgrade their existing products. This is one main reason why we often see products advertised as "new and improved." Competition encourages the development of new products, makes lower priced products available, and increases the number and quality of services.

An economic good or service that is scarce is one that is

In limited supply. People cannot obtain scarce items in unlimited amounts. They may, therefore, be willing to pay more for them. Items that are readily available are in good supply. Where an item is made or whether it has been test-marketed does not always affect its scarcity.

Which of the following is an example of a business risk that cannot be covered by insurance a. Goods lost in transit b. Increase in interest rates c. Destruction of building by fire d. Injury of employee on the job

Increase in interest rates. The increase/decrease of interest rates is an unpredictable speculative risk that is not insurable. Destruction of buildings by fire, the loss of goods in transit, and injury of employees on the job are all examples of pure, insurable risks.

A manager whose workers perform specialized job tasks decides to offer employees cash bonuses for suggesting ways to improve the work environment. This is an example of trying to

Increase job satisfaction. A disadvantage of specialization of labor is that workers become bored and dissatisfied with their jobs. To increase job satisfaction, businesses may ask for employee input, allow flexibility in schedules, offer bonuses, or use other means. Workers who perform specialized job tasks are already involved in division of labor because they are performing a small portion of a large job. Job rotation involves moving employees from job to job so that they learn new tasks and see how tasks relate to each other. Job enlargement involves combining job tasks to create a more responsible position.

A positive effect that productivity has on a business is helping it to

Increase sales and profits. A positive effect that productivity has on a business is helping it to increase sales and profits. Productivity allows a business to produce more from set resources. Greater outputs may result in lower prices, which in turn may result in higher sales and profits. Productivity can be used to measure the strength of the nation's economy, but this is not a benefit that is specifically related to businesses. Productivity can affect society by increasing the standard of living. Productivity can limit, but not stop, inflation.

Increased repetition of the same job task can result in

Increased employee boredom. Boredom can occur when workers are responsible for completing one small portion of a job. This is a disadvantage of specialization by task, which often causes employee satisfaction to decrease and interdependency and skill levels to increase.

Which of the following is a likely result of a strong or highly valued currency: a. Increased imports b. Decreased interest rates c. Increased exports d. Decreased demand for bonds

Increased imports. A strong or highly valued currency increases imports from countries with lower valued currency because the foreign goods are less expensive to buy. At the same time, it discourages exports since foreign customers would have to pay more for the goods. Rather than reducing interest rates and the demand for bonds, a highly valued currency is likely to result in an increased demand for bonds and higher interest rates.

What is a negative result of an employee's doing just one part of a total job?

Increased interdependency. Increased interdependency is caused when one employee is dependent on another to complete the whole job. Increased quality of work is a positive result of an employee's skill level increasing.

Which of the following is an advantage of specialization of labor: a. Increased production b. Income negotiations c. Increased interdependency d. Labor regulations

Increased production. Workers who specialize in one job or kind of job can produce at a faster rate as their familiarity with the job increases. This means increased worker production and increased production for the company. A disadvantage is that workers become interdependent with each other to complete a whole job. Labor regulations are legal guidelines. Income negotiations deal with salary structure.

Producers respond to consumers' positive economic votes by

Increasing production. If a certain product is wanted by consumers, its production will be increased; however, if the item is not popular, its production will be stopped. Producers would not increase their production of industrial products in response to consumers' needs since industrial products are used by businesses. Classifying goods and services helps marketers select appropriate marketing activities for the particular good or service.

Unions that do not belong to a federation are known as

Independent unions. Unions that do not belong to a federation are known as independent unions. These are typically unions that are large enough to represent themselves, such as the National Education Association. Industrial unions represent a wide range of workers across a certain industry. Local unions are chapters of national/international unions that represent workers at a specific company or in a specific geographic area. National/International unions advise local unions and help with recruitment.

If a consumer chooses to go to the movies rather than to a pizza parlor, then the movie theater and the pizza parlor are

Indirect competitors. Indirect competition occurs among businesses that offer dissimilar products. Those businesses are actually competing for the same consumer dollars, even though they offer different products. The businesses are not engaged in price competition, which focuses on price to attract customers, or in prospecting, the process of identifying and locating potential clients.

A society in which group ties are very loose is known as a(n)

Individualist society. A society in which group ties are very loose is known as an individualist society, according to Hofstede's dimensions of national cultures. A collectivist society is integrated into strong groups. An uncertainty-avoiding society is known for liking rules and structure. A "feminine" society values the qualities of caring, quality of life, etc.

Private enterprise is based on the idea that everyone is better served when

Individuals are free to set their own goals. A private enterprise system is based on the belief that when people are free to make economic choices and to set economic goals, they work harder to achieve those goals. In a private enterprise system, individuals decide where they will work, and there is limited government control. Regular increases in prices do not necessarily mean that everyone will be better served.

Though employees who work for auto companies hold a variety of different jobs, they may all belong to the same union—the United Auto Workers. This is an example of a( n )

Industrial union. Workers in the auto industry may all belong to the United Auto Workers, an industrial union. Industrial unions include a wide range of workers across an industry. Professional unions are common in the public sector and include teachers, nurses, etc. Craft unions, also called trade unions, include skilled laborers working in a specific occupation, such as plumbing.

Each day, a restaurant sends its used linens to a laundry to be cleaned and pressed. In economic terms, the laundry service would be classified as a(n) __________ service.

Industrial. Industrial goods and services are purchased by producers for resale, to make other goods and services, and/or to use in business operations. The laundry service is an industrial service because it is purchased by the restaurant as a necessary part of its daily operations. Consumer services refer to economic services used by ultimate consumers to satisfy wants and needs. Services are intangible, not tangible. There is no such thing as an "ultimate" service.

Even though gasoline prices increased 15 cents per gallon as the result of the new gas tax, Alice continued to buy gas so that she could make her 20-mile drive to work. This is an example of what type of demand?

Inelastic. Inelastic demand is a form of demand in which changes in prices do not affect demand. Some goods and services, such as gasoline, are considered necessities and will be purchased regardless of their price. Elastic demand is demand for products in which changes in price correspond to changes in demand. Luxury items usually fall into this category. Discretionary is not a type of demand but a term used to describe people's disposable income. Complementary refers to items that are used together.

This year's GDP is higher than last year's GDP even though production did not increase. The higher GDP figure is the result of

Inflation. Inflation is a rapid rise in prices that may occur when demand exceeds supply or when productivity declines and costs of labor go up. Inflation can distort GDP figures because the higher prices on products result in a higher GDP figure that does not reflect increased production. A trade deficit occurs when imports exceed exports. These increased imports would decrease GDP. Unemployment would indicate reduced production and a lower GDP.

The equipment, ingredients, and employee labor at a restaurant are all

Inputs. All the resources used in producing goods and services are known as inputs. Objectives are goals to be reached. Productivity is the amount and value of goods and services produced from set amounts of resources. Mass production is the production of a few products in large quantities.

Resources that enable businesses to operate are also known as

Inputs. Resources are items used to produce goods and services. Without resources, or inputs, there would be no outputs, or production. Revenues are income, some of which is usually from sales.

What do service businesses sell?

Intangible activities. This may be dry-cleaning service, medical attention, car rental, beauty and barber services, etc. A service business does not sell either wholesale or retail merchandise. It may use certain goods in performing the service, but the goods are considered part of the service itself, e.g., dry-cleaning fluid.

Jerry bought a new bicycle with special tires. In economic terms, the tires on this bike are considered

Intermediate products. Intermediate products are items that are part of other finished products. They are separate items, but their cost is included in the price of the bicycle and would not be counted separately. Since tires are essential to the operation of the bicycle, they are not classified as accessory items. Capital goods are materials used in the production of goods and services. Uncounted production includes goods and services which are not sold in the marketplace.

Which of the following is a public good that is provided by government: a. Interstate highways b. New automobiles c. Private schools d. Marketing research

Interstate highways. Public goods are goods and services that are used by all people and cannot be withheld from those who don't help to pay for them. Marketing research, automobiles, and private schools are goods and services provided by private businesses.

Making sure that a business has enough of a product in stock without having too much on hand is the goal of

Inventory management. Making sure that a business has enough of a product in stock without having too much on hand is the goal of inventory management. Inventory management is an important part of operations, as is production; however, production does not necessarily relate to keeping inventory levels balanced. Quality control is also a part of operations, but it involves ensuring the excellence of the good or service being produced. Human-resources management involves anything that has to do with staffing the business.

What usually happens to the demand for a good or service when the price increases?

It decreases. People may wait for lower prices; switch to a substitute item, if one is available; or decide not to buy at all, if they think prices are too high. Although the quantity demanded might vary, the trend with quantity will be to decrease as prices increase.

Which of the following is a shortcoming of GDP as an economic indicator a. It does not measure the final market value of all goods and services. b. It is not a comprehensive measure of a country's economic output. c. It does not provide meaningful information about a country's economic output. d. It does not include purchases of durable goods by individuals.

It does not provide meaningful information about a country's economic output. A shortcoming of GDP as an economic indicator is that it does not provide meaningful information about a country's economic output, such as the types or quality of goods and services produced or the distribution of wealth within the country. GDP does measure the final market value of all goods and services produced within a country during a year's time; it is a comprehensive measure. GDP does include purchases of durable goods by individuals under the category of personal consumption expenditures.

Which of the following is a benefit of the freedom to own private property: Select one: a. It allows people to do anything they want to do. b. It encourages businesses to be cooperative. c. It helps to limit our economic choices. d. It encourages people to save and to invest.

It encourages people to save and to invest. When people are free to own things that they value, they tend to save and to invest. Individuals and businesses benefit because they are free to decide how to use their private property and when and how to sell it. Society benefits because people pay taxes on their savings and investment income, and this provides the money needed to pay for public services, such as schools and highway construction. Our own choices limit us. If we choose to buy one thing, we may not have enough money to buy another. Freedom to own private property does not ensure cooperation among businesses. Although people in a private enterprise system have a great deal of economic freedom, they aren't allowed to do anything they want to do.

Which of the following statements about perfect competition is correct: a. It is used as a benchmark to compare real market structures against. b. There is a limited supply of goods and services. c. Businesses have a good deal of control over the market. d. Products vary from seller to seller.

It is used as a benchmark to compare real market structures against. Perfect competition rarely exists in the real world. Instead, it's used to compare real market structures against. For perfect competition to exist, there needs to be a plentiful supply of goods and services. No business has control over the market, and many businesses sell identical products.

To be able to charge competitive prices in our economy, producers must combine resources and technologies to produce

Items at the lowest cost possible. Producers combine resources to produce goods at the lowest cost possible in order to sell the goods at prices consumers are willing to pay. This enables producers to meet consumer demand and earn a profit. Producers do not want to produce more than consumers will buy because they will end up with a surplus they cannot sell. Producing limited quantities may not meet consumer demand. Relative price refers to one price compared to another or the ratio between them.

What technique is a company using to combat the disadvantages of labor specialization when it expands job tasks to include other like tasks?

Job enlargement. A company may enlarge the jobs of its employees to combat boredom and repetition. Job rotation occurs when a company rotates employees through different departments. Job enrichment occurs when a company adds interest to tasks to increase satisfaction. Job satisfaction exists when employees like what they are doing.

A disadvantage to companies of unionization is that

Job promotions are based on seniority. When employees are promoted based on seniority, the cost to the company is increased. It is an advantage to companies when the union assists with recruitment of employees. The cost of union dues is a disadvantage of unionization for workers. Unionization provides companies with a secure labor contract, which is an advantage..

Which of the following labor issues is most affected by the use of technology: a. Wages b. Job security c. Union security d. Benefits

Job security. In today's changing workplace, many workers are concerned about losing their jobs due to automation or the increasing use of technology. The union strives to protect its members' job security. Union security relates to the type of union representation that exists in a business. Benefits relate to paid vacations, sick leave, pension plans, and insurance. Unions seek higher wages for union members but not in relationship to the use of technology

For which of the following do workers compete in a private enterprise system: Select one: a. Benefits b. Profits c. Skills d. Jobs

Jobs. In a private enterprise system, competition is an important economic freedom for workers. They compete with each other for such things as jobs, promotions, and commissions. Workers can use their skills to compete. Businesses compete with each other for customers and profits. Benefits include health and disability insurance, sick leave, paid vacation time, etc., provided to workers by businesses.

What might businesses do if they expect prices to increase substantially in the future?

Keep products off the market. If businesses expect prices to increase substantially, they might wait to sell. That affects supply because businesses are keeping products off the market until the price is right. If businesses expect prices to increase in the future, they would not increase production now, ship more products to stores, or encourage consumers to buy.

Financial analysis occurs when a business

Keeps accurate expense records. Financial analysis involves obtaining funds for the business and keeping accurate records for analysis and interpretation. Marketing involves communicating with potential customers. Strategic management involves planning for long-term success. And, information management involves effectively retrieving data.

The biggest communication issue for businesses engaging in international trade is

Language. The biggest communication issue for businesses engaging in international trade is language. It is difficult to do business while speaking two different languages, and it is also difficult when the same words have different meanings in different cultures. Corruption, power distance, and religion are not communication issues.

Which of the following is a positive effect of government regulation: a. Unfair competition b. Price controls c. Legal protection d. Increased inflation

Legal protection. Government regulation has positive effects on business that include legal protection for a company's products. This protection may be in the form of patents, trademarks, or copyrights which prevent the unauthorized use of a business's goods or services by another company. Price controls are a negative effect of government regulation. Government regulations protect businesses from unfair competitive practices and often reduce inflation.

A restaurant fails to meet government regulations, so it loses its __________ and is no longer allowed to do business.

License. Licensing is the process of issuing a permit allowing an individual or a business to function in the marketplace. To obtain a license, the business or individual must meet government requirements. Licensing allows government to control who operates certain businesses and the way in which they are operated. Government can deny licenses to unqualified persons or to businesses that don't meet government regulations. Government can also cancel a business's or individual's license if the appropriate requirements are not maintained. Government occasionally regulates businesses by using wage and price controls to set ceilings on wages and prices. Tariffs are extra taxes on imported products. Disposable income is money left after taxes are paid.

If a government wants to reduce the volume of imports allowed into its country, it could limit the number of __________ issued to foreign exporters.

Licenses. Licenses are import permits that nations use to keep track of imports and regulate the level of imports by individual businesses. If a country wants to limit the number of imports allowed into the country, it can limit the number of licenses issued to foreign exporters. Tariffs are taxes on certain imported goods. Quotas limit the volume of exports or imports that move into or out of a country, but quotas are not typically issued to individual foreign exporters. Product standards are criteria for determining a product's ability to meet specified guidelines or requirements, usually pertaining to consumer and/or environment safety.

Businesses in trade industries that offer discount prices usually offer

Limited services. Services can be costly to the business, and offering very many services would necessitate raising the business's prices to customers. To maintain low prices, the business limits its services and does not offer plush interiors or elaborate fixtures.

When there is not enough of a resource available for everyone to have as much of it as desired, the resource is a(n) __________ resource.

Limited. Limited resources occur when not enough of them are available for everyone to have as much as they desire. An unlimited resource is available to everyone in any quantity desired. A natural resource is a resource found in nature. A human resource is a person who works to provide goods and services.

Union members join up at what level of a union

Local. Union members join up and pay dues at a local union. A local union is a chapter of a national or international union that represents workers at a specific company or in a specific geographic area. National/International unions are larger organizations that support local unions and help to recruit members. A union federation is a group of national unions that have joined together to further common purposes, such as public relations.

When union members of Local 654 arrived at work today, they found a sign on the door stating that the business had closed temporarily, and the employees were not allowed to work. This is a pressure strategy known as a( n )

Lockout. A lockout normally occurs when contract negotiations break down, and company officials want to force the union to bargain. An injunction is a court order forbidding the carrying out of certain acts. A strike vote is taken by union officials to determine whether union members should strike, i.e., stop working in order to force management to meet their demands. A boycott is a strategy in which union members refuse to buy a company's products.

A society that focuses on future rewards and values actions such as persistence is known as a(n)

Long-term oriented society. A society that focuses on future rewards and values actions such as persistence is known as a long-term oriented society. These are most often Eastern cultures. An uncertainty-avoiding society likes structure and rules. An individualist society is one in which group ties are loose. A "feminine" society values characteristics such as caring and quality of life.

A worker who sorts all of a business's mail every day is performing a task that has

Low depth and low scope. Scope is the number of different operations you do on the job and the frequency with which you do them. Depth is the amount of control you have over the tasks that you do. Receiving, sending, and sorting mail are routine tasks.

What do producers often do when supply is greater than demand?

Lower prices. When supply is greater than demand, producers often lower their prices in order to sell the excess supply. As prices are lowered, consumers buy more, but producers produce less. This continual process eliminates the excess supply. Increasing prices would increase the supply because consumers would not buy. Increasing or lowering quality would not have an effect on the existing supply.

Which of the following government actions is most likely to stimulate the economy: a. Printing less money b. Lowering tax rates c. Borrowing more money d. Raising the prime interest rate

Lowering tax rates. This will probably stimulate the economy because disposable income, the money people have left after paying taxes, will increase. Raising the prime interest rate, printing less money, and borrowing more money tend to depress the economy.

The goals of government are to protect the rights of individuals and businesses and to provide a stable environment, but the main goal of business is to

Make a profit. Making a profit is the main goal of business. Profit is the monetary reward a business owner receives for taking the risk involved in investing in business. By providing the best products possible, business owners increase the likelihood of making a profit. Businesses also need to be socially responsible by helping to save the environment and by providing a safe working environment.

"Economic votes" are cast by consumers each time they

Make a purchase. When consumers make purchases, they are voting for those products and against others which they did not buy. This influences which products will be produced and at what price they will be sold. Market research uses surveys, interviews, and other methods to identify consumers and their buying habits. Consumers who visit a business without making purchases do not provide the business with any information.

A producer is someone who

Makes things. Producers may be very creative, most of them do employ others, and they may sell their own products; however, the basic definition of a producer is related to making things for sale.

Individuals put limits on their own economic freedom by

Making personal economic choices. We are limited by our own choices. If we choose to buy one thing, we may not have enough money to buy another. If we sell our private property to one person, we cannot sell the same property to anyone else. Being able to compete with others is an economic freedom. Complying with the law is a limit on economic freedom imposed by government. Deciding to learn new job skills does not limit economic freedom and may increase income.

What aspect of collective bargaining signals the successful end of negotiations?

Management and union leaders have reached a tentative agreement. Both sides have agreed on the terms and working conditions; however, final approval has not been given by union members. Management and union leaders complete their research on the issues during the initial step of collective bargaining when they are preparing for negotiations. A mediator would clarify the issues and offer suggestions during the bargaining sessions when the union leaders and management meet to present their demands.

Individuals and businesses own the means of production and distribution with limited government regulation in a __________ economy.

Market. A market economic system is one in which individuals and businesses own and control the means of production and distribution with limited government regulation. An economic system in which people produce only what they must have to exist and all economic decisions are based on habit and tradition is a traditional economy. In a socialist economy, the government owns part of the means of production, but there is some private ownership of business. In a communist economy, the government owns and controls all of the means of production and distribution.

What type of economic system is used in the United States?

Market. The United States has a market economy, a system in which the means of production and distribution are owned and controlled by individuals and businesses. An economic system in which government owns the basic means of production, but there is private ownership of businesses as well, is a socialist command system. Examples of countries with this type of system are Great Britain and Sweden. A communist command system is one in which the government is in control of the economic system, and there is no private ownership of the means of production and distribution. Cuba and North Korea are examples of countries with communist command systems. A traditional economic system is one in which people produce only what they must have to exist, and all economic decisions are based on habit and tradition. Examples of traditional economies are Amazon Rainforest communities, villages in the Andes Mountains, and the Aborigines of Australia.

Which of the following represents a primary business activity: a. Supervising b. Designing c. Marketing d. Scheduling

Marketing. Marketing is one of the primary business activities—as are financial analysis, human-resources management, information management, operations, and strategic management. Scheduling, designing, and supervising can be tasks or processes within one or more of the primary business activities.

Sugar and flour that are purchased to make baked goods are classified as

Materials. Materials are items that will become part of a finished product after they have been processed. Sugar and flour need additional processing before they become baked goods. Parts are items that will become part of a finished product without any additional processing. Installations are high-cost, long-lasting items that are used to produce other goods and services. Supplies are items that are constantly being purchased and used up in the operation of a business.

One way in which a business can show its social responsibility is by __________ its profits.

Maximizing. The more profit the company makes, the more it can grow, providing better salaries to its workers, more jobs in the community, and making possible larger charitable contributions and other benefits to society. None of these would be possible if the company reduces, divides, or controls its profits.

One of the differences between private enterprise and other types of economic systems is that in other systems, workers a. can go to work for themselves if they are dissatisfied. b. are able to make a wide variety of economic choices. c. are allowed to change jobs whenever they want to do so. d. may be unable to improve their standard of living.

May be unable to improve their standard of living. Workers in some other economic systems need government permission to change jobs. If this permission is denied, these workers may have no chance for advancement, higher earnings, and an improved standard of living. These workers also make few economic choices and are not allowed to go into business for themselves.

Every society must develop a system for deciding how it will use its resources so that it can Select one: a. prevent problems. b. minimize risk. c. meet people's needs. d. control production.

Meet people's needs. Every society must develop a system for making decisions as to how it will use its resources to meet the needs and wants of the people. The system must answer the three basic economic questions of what will be produced, how it will be produced, and who will consume it. Having a system does not minimize the risk of decision making or prevent problems from developing. Controlling production would not be a goal in every society.

When government sets safety standards for the workplace, it is attempting to

Minimize risks to employees. Government's primary concern is the safety of the worker in the workplace. It would be next to impossible to set a safety rule to cover all possible events, but minimizing risks for the worker is a possibility. It is not government's intent to control businesses or business practices. Setting safety standards does not imply that government prohibits excess standards. There is no maximum number of standards that could be set. In setting safety standards, government does not address updating or modernizing work environments. The goal is to make the workplace safe, not more pleasing or attractive.

The most common medium of exchange in modern economic systems is Select one: a. barter. b. capital. c. credit. d. money.

Money. The most common medium of exchange in most parts of the world is money. Capital is all the assets of a business. Credit is the ability to obtain products or money based on a promise to pay later. Barter is trading or exchanging one item for another. It is used in underdeveloped nations and does not involve money.

What type of market structure is most commonly found in a private enterprise economy?

Monopolistic competition. This is a type of market structure in which a lot of businesses sell similar products that have only a few differences. It is most commonly found in a private enterprise economy. Perfect competition rarely exists on a large scale. A regulated monopoly is a monopoly that government allows to exist legally under controlled conditions. An oligopoly is a market structure in which there are relatively few sellers, and industry leaders usually determine prices.

How does increased business productivity benefit consumers?

More goods and services become available, so prices go down. Increased business productivity can create a greater variety of goods and services, and as more products become available, prices are likely to drop. Increased business productivity reduces inflation and increases the gross domestic product per capita.

Which of the following factors may influence supply: Select one: a. Product utility b. Standard of living c. Natural disasters d. Number of consumers

Natural Disasters

The state of technology that exists in a society can limit

Natural resources and capital goods. Natural resources and capital goods can be limited by the lack of technology in a society. Some countries are not able to tap their natural resources because they lack the technology to do so. Capital goods cannot be acquired because the society relies on primitive tools or produces only enough for personal consumption. Human resources are not limited by the state of technology.

Water and air are examples of __________ resources.

Natural resources are found in nature and are used to produce goods and services. Capital resources, also called capital goods, include all of the manufactured or constructed items that are used to produce goods and services. Mental and physical resources are aspects of human resources.

Which of the following statements regarding economic resources is true: Select one: a. Similarly sized businesses within the same industry usually use identical resources. b. As businesses grow and become more complex, they typically require fewer resources. c. Industrialized nations typically require fewer capital goods than developing countries. d. Natural resources, human resources, and capital goods are often referred to as factors of production.

Natural resources, human resources, and capital goods are often referred to as factors of production. Economic resources are also known as factors of production because they enable businesses to produce the goods and services that consumers want. As businesses grow and become more complex, they typically require more resources. Also, the resources that businesses use vary. This is true even of similarly sized businesses within the same industry. Industrialized nations typically require more capital goods than developing countries.

Using a stream to supply water to a field in order to grow crops is an example of using

Natural resources. Natural resources are found in nature and are used to produce goods and services. Human resources are the people who work to produce goods or services. Capital goods are all manufactured or constructed items that are used to produce goods or services. Nonrenewable resources are natural resources that may become entirely depleted. Nonrenewable resources cannot be replenished after use. Water is not a nonrenewable resource.

Ski instructors in Colorado are examples of workers whose jobs involve specialization by

Natural resources. The climate and terrain of Colorado make it suitable for skiing and ski resorts. Ski instructors could not find work in areas unsuitable for skiing. Obsolescence occurs when things are outdated by advances in technology. Specialization by stages of production occurs when more than one stage is required to turn a raw material into a finished product. Capital goods are manufactured or constructed items used to produce goods and services.

Weather conditions can directly affect the supply of

Natural resources. These are resources found in nature and used to produce goods and services. Natural resources are often affected by severe weather conditions or weather that is too hot, cold, or dry. Human resources and capital goods do not rely on weather conditions for their supply. Without more information, the reader cannot determine whether weather conditions would affect noneconomic resources.

A business should research corruption before it engages in trade with a particular country because it

Needs to know how corruption will affect its competitiveness there. A business should research corruption before engaging in trade with a particular country because it needs to know how to address the issue and how it will potentially affect its ability to compete within that market. A business is not necessarily required to report corruption to any international authorities. Not every culture or market requires bribes to set up business operations. A business should not hide bribes within its accounting records.

One way that competition benefits business is by encouraging the creation of

New companies. Competition encourages new businesses to enter the marketplace. When a product is popular and successful, others recognize the demand and develop similar products in order to compete. The ongoing competition leads to the creation of new products and new companies. Businesses do not benefit from more regulations. Competition usually encourages the creation of businesses that are similar or related to successful, existing businesses. Many resources are limited which means that more cannot be created.

John only had $40 to spend and couldn't decide whether to buy a new pair of jeans or to go to an amusement park. He finally decided to spend his money on the amusement park. What was the opportunity cost of his decision?

New pair of jeans. When a choice is made about the best use of resources, the alternative that is given up is called the opportunity cost. In this case, John decided to spend his money on a trip to an amusement park, rather than on a new pair of jeans. Since the pair of jeans was given up, it is the opportunity cost. Opportunity costs exist because of scarcity.

Jeremy has $15,000 to spend on a new car. He found a car that cost $14,500, but he did not think the car was worth more than $12,000. The dealer told Jeremy that he has not been able to sell this model because other customers have expressed the same opinion as Jeremy. Does demand for this car exist?

No, because consumers are not willing to pay the price being asked for this car. In order for demand to exist, consumers must desire the product, have the buying power, and be willing to exchange their money for the product. Consumers do have a desire for the car and the buying power to purchase it, but they are not willing to pay the price. As a result, there is no demand for this car.

Susan's father receives veterans' benefits, and her grandmother gets Social Security. Are these payments counted in GDP?

No, these are transfer payments. Transfer payments are not counted in GDP because they are payments of tax dollars for which the recipients do not produce goods or services. No increase in the total output of the economy is achieved. Transfer payments are part of government spending, but they are not government purchases. The purchases made by the recipients of transfer payments for their own use would be counted under personal consumption expenditures.

Offering high quality, large assortments, and free shipping are examples of

Nonprice competition. These are all examples of a business attempting to compete on a basis other than price. Rebates are part of price competition, while price fixing is an illegal practice that results in high prices. Price competition is a type of rivalry between or among businesses that focuses on the use of price to attract scarce customer dollars.

Which of the following allows the free movement of goods and services among Canada, the United States, and Mexico: Select one: a. Consumer Product Safety Commission b. World Trade Organization c. North American Free Trade Agreement d. European Union

North American Free Trade Agreement. The North American Free Trade Agreement (NAFTA) has eliminated almost all trade barriers among Canada, the U.S., and Mexico and allows the free movement of goods and services among the three countries. The European Union (EU) reduces trade barriers among its members—Europe's major industrial countries as well as many smaller nations—and has united its member nations into one economy. The World Trade Organization (WTO) is a global organization that essentially sets the rules of trade among nations throughout the world. It administers trade agreements, handles trade disputes, and acts as a forum for trade negotiations for its member nations. All of the world's strongest economies are members, including the U.S., Canada, China, Japan, and Germany. The Consumer Product Safety Commission is a U.S. regulatory agency established by the federal government to enforce product safety laws.

A country that currently has a communist command economic system is Select one: a. North Korea. b. Japan. c. India. d. Great Britain.

North Korea. In communist countries such as North Korea, government owns and controls all of the means of production and distribution. Japan and India have market economic systems. Great Britain has a socialist command economy.

Which of the following describes inelastic demand: a. Not affected by price change. b. Limited to luxury goods. c. Variable. d. Fluctuating.

Not affected by price change. Consumer demand for certain products does not fluctuate, or change, as the price of the products goes up or down. The necessities of life have inelastic demand because people's needs for them are not variable. Demand for luxury goods is elastic.

For 20 years, Don owned a small grocery store. When several big box stores that sell groceries at discounted prices moved into the area, Don's sales declined, and he had to close his business. Which of the factors that affect supply affected Don's business?

Number of producers. As more businesses offer similar goods or services, demand, quite often, cannot keep up with supply. This lower demand lowers profits and forces businesses to deal with the issue of going out of business or "changing with the times" to something more profitable. In this example, Don couldn't compete with the other producers in his area, so his grocery store went out of business. While competition can be disastrous, it is not a natural disaster, something that happens as a result of the weather or some other natural, or uncontrollable, event. There is no mention of increased government controls or labor demands that would increase the costs of production.

With Rosita's pizza shop, financial analysis is used to

Obtain funding for supplies. With Rosita's pizza shop, financial analysis is used to obtain funding for supplies. Attracting customers is part of marketing. Overseeing a process is likely to take place within operations, not financial analysis. And, developing recipes is part of operations.

What is a method that managers can use to motivate employees?

Offering performance-based financial rewards. Methods for motivating employees include offering financial rewards, treating employees with respect, and praising them for excellence. Encouraging employees to specialize is not a form of motivation. Investing in new technology is capital investment. Sharing customer information with employees is a form of communication.

When Maura purchased a new car, she was able to get part of the purchase price back from the car's manufacturer. The car's manufacturer engaged in

Offering rebates. Rebates are a type of price competition because they do, in fact, lower the price of a product. Nonprice competition involves businesses' competing on factors other than price, such as customer services, pleasant facilities, and trained personnel. Clearance sales are promotion events in which a business discounts product prices in order to move goods and decrease inventory. Giving back part of the purchase price to customers is not price fixing.

The automobile industry, the pharmaceutical industry, and the oil industry are all examples of

Oligopolies. The automobile industry, the pharmaceutical industry, and the oil industry are all examples of oligopolies. Each contains a limited number of players who have a lot of control over what is produced and how much the consumer must pay for the products. A market structure is the type of market, or environment, in which businesses operate. Perfect competition is a market structure in which there are many businesses selling a lot of identical products for about the same price to many buyers. Monopolistic competition is a type of market structure in which a lot of businesses sell similar products that have only a few differences.

Which of the following demonstrates the interrelationship among primary business activities: Select one: a. A new product is introduced, so business advertisements must adjust. b. A business changes its goals, so its strategies and tactics change, too. c. A business manager becomes vice president, so his/her department must adjust to the change. d. One business activity changes, so the others must adjust.

One business activity changes, so the others must adjust. Since the primary business activities are interrelated, when one business activity changes, the others must adjust, in response. Changes in the products introduced, changes in specific employee roles, and changes in business strategies/tactics do not represent the interrelationship of business activities, overall. They represent smaller changes that take place within specific business activities.

What category of business risk includes production problems and incompetent employees?

Operational. Production problems and incompetent employees are considered operational risks. Operational risks are the possible events and situations that can result from employee actions, core processes, and daily business activities. Strategic risks often concern the overall business environment, financial risks are possible events or situations that directly influence a company's cash flow, and hazard risks are potential events or situations that can cause injury or harm to people, property, or the environment.

Sonja works at a company with a very relaxed atmosphere among all the employees. This atmosphere is part of the company's

Organizational culture. The relaxed atmosphere in Sonja's office is part of the company's organizational culture—the customs, traditions, and habits of its employees. A subculture is a minor culture that develops under a dominant culture. Power distance refers to the inequality in society. Uncertainty avoidance refers to a society's comfort level with insecurity.

A business can be described as a(n)

Organized effort to produce goods and services. A business, whether for-profit or nonprofit, is an organized effort to produce goods and services. It is not a disorganized method of doing anything—least of all, manufacturing products. Although a business can be a reasonable means for making a profit, that is not the description of a business. Unreasonable business behavior typically decreases revenues.

Which of the following items is found in all economic systems: Select one: a. Subsistence b. Participants c. Dollars d. Technology

Participants. The four elements that all economic systems contain are participants, resources, markets, and a medium of exchange. The participants in an economic system include producers, consumers, and government. Technology is scientific applications to business objectives or the methods used to attain those objectives. Subsistence is existence at a level that barely supports life. Dollars are the medium of exchange in some economic systems but not all.

Even though Brad isn't a manager, his boss encourages him to give his input on issues affecting the company. Brad's boss is using

Participative decision making. When businesses encourage employees to give input, share suggestions, and take part in decision making, participative decision making occurs. Motivation involves giving employees rewards and incentives for being productive. Specialization is the process of making the best use of resources in the production of outputs. Quality of work life is the general conditions in which employees work.

A car manufacturer receives a shipment of bolts that are going to be used in the production of automobiles. What type of industrial product would the bolts be?

Parts. Parts are items that will be part of a finished product but do not require any additional processing. Materials are items that become part of a finished product after they have been processed. Equipment is industrial goods used in the operation of a business but not used in the actual production of a good or service. Supplies are industrial products that are constantly being purchased and used up in the operation of the business.

One of the results of freedom in the marketplace is that Select one: a. government decides how to use an individual's private property. b. people can buy anything they can afford that can legally be sold. c. people and businesses can own things of value. d. businesses use resources efficiently.

People can buy anything they can afford that can legally be sold. The marketplace is any place where buying and/or selling of products takes place. People can buy anything that can legally be sold—as long as they have the money for it. In a private enterprise system, the markets are self-regulated and self-controlled. The government's role is limited. Owning things of value and deciding how to use those things are characteristics of private property. Freedom in the marketplace does not ensure that businesses will use resources efficiently.

One of the reasons that has caused government's role in business to expand is that

People's attitudes have changed. As the marketplace became more complicated, consumers turned to government for more protection from dishonest or deceptive business practices. The technical nature of products, cost of production, and increased competition between businesses are not reasons to cause government's role to expand. Increases in cost of production become a contributing factor only when cuts are made in safety that may cause consumer-protection problems. Competition in the marketplace would be a contributing factor when a business engages in deceptive advertising or tries to limit competition.

Which of the following is a disadvantage of private enterprise: a. Equal distribution of income b. Periods of unemployment c. Elimination of poverty d. Careful use of resources

Periods of unemployment. In the United States, production levels can drop due to decreased sales. When this happens, companies may have to lay off workers and/or go out of business. Other disadvantages of private enterprise are poverty, unequal distribution of income and property, and careless use of resources.

What category of GDP would include the money Kathy's family pays to the state university for her college tuition?

Personal consumption expenditures. This category of GDP includes the final market value of all services and new and used goods purchased for consumption by individuals. This would include such payments as tuition for higher education. Gross private domestic investment includes investment in both residential and nonresidential buildings and equipment as well as changes in the value of business inventories. Government purchases of goods and services include everything purchased by local, state, and federal governments. Net exports of goods and services are the difference between what the U.S. buys from other countries and what it sells to other countries.

Strategic management is demonstrated in which of the following phrases: a. Recruiting appropriate employees b. Regularly updating business processes c. Obtaining funds for business projects d. Planning and organizing for the future

Planning and organizing for the future. Strategic management involves planning and organizing for the future. It does not involve obtaining funds. That is part of financial analysis. Recruiting appropriate employees is part of human-resources management, and regularly updating business processes is part of operations.

Communist command economies are most likely to experience which of the following problems: a. High income taxes b. Poor quality products c. Surplus of consumer goods d. Shortage of capital investment

Poor quality products. Most communist governments pay their workers based on the quantity, not the quality, of what the workers produce. As a result, workers focus on producing as many products as possible, even if that means that their products are poorly made and inferior in quality. Although the government, not the citizens, provides capital for business investment, there is not necessarily a shortage of capital investment in communist economies. Most communist countries focus on the production of industrial goods, not consumer goods. As a result, communist economies often experience shortages of consumer goods, not surpluses. High taxes are usually associated with socialist command economies.

In Hofstede's dimensions of national cultures, a country's acceptance of inequality is measured by its score in

Power distance. In Hofstede's dimensions of national cultures, a country's acceptance of inequality is measured by its score in power distance. Uncertainty avoidance refers to a country's level of comfort with insecurity. Individualism v. collectivism refers to the degree to which a country is integrated into strong groups. Masculinity v. femininity refers to how much a country values "masculine" qualities, such as assertiveness, over "feminine" qualities such as caring.

Having well-planned buildings and providing effective employee training are ways that a business can __________ business risks.

Prevent or control. Both of the examples (having well-planned buildings and providing effective employee training) involve planning that can help to prevent or control risk. Transferring risk involves passing the risk to someone else, often by purchasing insurance. Retaining risk involves keeping it.

Carefully selecting goods or services to sell is an example of handling business risks by __________ the risk.

Preventing or controlling. Making careful, wise choices of goods or services to sell is one way management can prevent or control risks. Avoiding risk means not being exposed to risk at all. Transferring risk is passing the risk to someone else. Retaining risk is keeping it.

A business that advertises a special sale as well as its delivery service is using a combination of ___________ competition.

Price and nonprice. Most businesses use a combination of price and nonprice competition. For example, a business is using price competition when it advertises a special sale. It is using nonprice competition when it advertises its delivery service. When the business uses the two together, it is combining price and nonprice competition. A business advertising a special sale and delivery service is not using a combination of direct and indirect, perfect and monopolistic, or local and national competition.

The private enterprise economic system is often described as a(n)

Price-directed system. The U.S. private enterprise economy is often called a price-directed system because price determines what consumers buy, which jobs they will take, the success or failure of businesses, and the types of products that will be produced. Prices are important in making the system work correctly. The U.S. economic system is not pure or controlled. Instead, it is considered a mixed economy because there is limited government control. An entrepreneur is someone who goes into business for him/herself. This is not a type of economic system.

An electronics store charges less for a new television than other electronics stores. The store is engaging in ________ competition.

Price. Businesses often reduce their prices in order to attract consumers. This is not unethical as long as the businesses do not attempt to restrict competition unfairly. Nonprice competition occurs when businesses compete on a basis other than price to attract scarce customer dollars. Sales are an example of price competition.

What is the amount of money for which an item sells in the competitive marketplace?

Price. Price is the amount of money that is paid for a good, service, or resource. It is affected by changes in the marketplace. A market is any circumstances under which buyers and sellers exchange goods, services, or resources for a price. Value is the amount of satisfaction the product will provide the customer. Utility is usefulness.

Every business must accomplish which of the following: a. Produce or provide goods/services b. Issue corporate bonds c. Trade or sell business assets/property d. Obtain venture capital

Produce or provide goods/services. Every business must produce or provide goods/services. While some businesses do obtain venture capital, issue corporate bonds, or trade/sell business assets/property, not all businesses are required (or encouraged) to do so.

In order for consumption to occur, goods and services must be

Produced. Production relies on consumers to provide resources, while consumption relies on producers to provide goods and services. The relationship between production and consumption should be balanced, so that enough goods and services are being produced to satisfy consumers' wants but not so many that producers are losing money. Goods and services do not need to be specialized, or unique, for consumption to occur. Individuals can produce and consume their own goods and services; therefore, exchange does not need to occur for consumption to take place.

A raw-goods producer is a type of business that

Produces goods in their natural states. These may include farm products, lumber, or minerals. The raw-goods producer does not refine, or change, the raw goods to make them into finished goods, but s/he provides the raw goods without which other producers could not make their products.

Operations is demonstrated in which of the following phrases: a. Producing goods and services b. Keeping accurate financial records c. Planning for future success d. Hiring qualified employees

Producing goods and services. Producing goods and services is a primary aim of operations. Keeping accurate financial records is part of financial analysis. Planning for future success is part of strategic management. And, hiring qualified employees is part of human-resources management.

A team of employees is responsible for researching potential demand for a business's brand-new product. The factor that is most likely to affect demand for this product is the

Product's utility. The basic demand for a product is not determined by its price but by its utility—its ability to satisfy a potential customer's wants or needs. If consumers believe the business's new product will benefit them, there is likely to be demand for it. The costs of production, government policies, and the number of producers are factors that affect supply.

The amount and value of outputs produced from set amounts of resources are known as

Productivity. Productivity is the amount and value of goods and services produced from set amounts of resources. Inputs are all the resources used in producing goods and services. Objectives are goals to be reached. Mass production is the production of a few products in large quantities.

Actors and athletes belong to what types of unions?

Professional unions. Actors and athletes belong to professional unions, such as the Screen Actors Guild or the National Hockey League Players Association. Industrial unions include a wide range of workers across a certain industry. Craft unions, also known as trade unions, include skilled laborers working in a specific occupation, such as plumbing.

What are the incentives in our economy that encourage producers to change and reallocate their resources?

Profit is the monetary return, or reward, a business owner receives for taking the risk of investing in business. Producers answer the question of what and how to produce by determining the most effective method to produce items that are most profitable. Consumers are ultimate users of economic goods and services. Stocks are shares of ownership into which a corporation is divided. Expansions are increases.

Franco's Bread Shop is introducing a new type of sandwich bread to the community this week. Which of the following describes the business activity the bread shop is likely involved in: a. Promoting the new bread through advertising b. Creating a system for storing new bread recipes c. Collecting information on last year's new breads d. Planning for the long-term results of introducing new breads

Promoting the new bread through advertising. Since Franco's Bread Shop is introducing a new type of sandwich bread to the community this week, the bread shop is now performing the business activity of marketing—by promoting the new bread through advertising. Collecting information and developing a system for storing information are both part of information management. (Collecting information can be part of marketing, too.) Planning for long-term results can be part of marketing and/or strategic management.

The basic role of the United States government is to

Protect U.S. citizens. In the United States, the government should step in only to protect citizens, and it should let them pursue their own goals. As life has become more complex, the role of government has gradually expanded. The government has been asked to solve such problems as inflation, pollution, healthcare, and unemployment. It does not, however, try to increase production, limit business startups, or maintain control of prices except in what are considered emergency situations.

Which of the following is the most likely policy that a government would follow to avoid a trade deficit:

Protectionism. Governments use protectionism to avoid a deficit balance of trade or to protect domestic industries from foreign competition. Nations attempt to limit trade through a variety of trade barriers or restrictions. Speculation is taking part in risky ventures in the hope of making large profits. Isolationism is the policy of not becoming involved in relations with other nations. Discrimination is the unfair treatment of a person or a group.

Businesses can show their social responsibility by contributing to

Public interests. Social responsibility is the duty of business to contribute to the well-being of society. These contributions in the public interest may include donations to support the arts, the environment, community centers, etc. Businesses do contribute to private causes, but this is not required by social responsibility. Contributions to promotion would benefit the company, not society, and contributing to pollution would not be socially responsible.

Which of the following is an example of using capital investment to increase productivity? a. Purchasing new computers b. Renegotiating a supplier's contract c. Giving performance-based bonuses d. Making suggestions to improve the organization

Purchasing new computers. Capital investment occurs when a business uses a portion of its profits to purchase updated equipment or technology to improve productivity. Renegotiating a supplier's contract might save the company money, but it won't necessarily increase productivity. Allowing employees to make suggestions to improve the organization is part of participative decision-making. Giving performance-based bonuses is a method of motivating employees.

Businesses can protect themselves from the risk associated with lost shipments by

Purchasing transportation insurance. A business can buy transportation insurance to cover the risk of loss or damage while goods are in transit or being stored. Selecting resale items carefully helps to protect the business from economic risks such as changes in customer demand. Training receiving personnel and inspecting shipments of goods can help prevent losses after shipments have been delivered.

Fair salaries and wages, competitive benefits, and safe and healthful working conditions are all important in creating a good

Quality of work life. The general conditions in which employees work, including fair salaries and wages, competitive benefits, and safe and healthful working conditions, are all part of the quality of work life. Standard of living is the general conditions in which people live, not where they work, specifically. Competitive advantage is the edge achieved by businesses that offer something better than their competitors. Division of labor involves breaking a large job into smaller tasks that are assigned to different people.

Which of the following is an example of a change in the relative price ratio when the original price of red apples is 60¢ per pound, and the original price of green apples is 80¢ per pound: Select one: a. Red apples @ 45¢ per pound; green apples @ 60¢ per pound b. Red apples @ 30¢ per pound; green apples @ 40¢ per pound c. Red apples @ $1.20 per pound; green apples @ $1.60 per pound d. Red apples @ 90¢ per pound; green apples @ 80¢ per pound

Red apples @ 90¢ per pound; green apples @ 80¢ per pound. This is the only combination that resulted in a change in the relative price ratio. When red apples sold for 30¢ per pound and green apples for 40¢ per pound, the price of each was cut in half, and the ratio remained the same. When red apples sold for $1.20 per pound and green apples for $1.60 per pound, the price of each was doubled and the ratio remained the same. When red apples sold for 45¢ per pound and green apples for 60¢, the price of each was cut one-fourth, and the ratio remained the same.

Government can prevent unqualified persons from operating a business by

Refusing to grant them a license. In some types of businesses, owners/operators must meet certain standards to obtain a license to operate the business. Government can refuse to grant a license to unqualified applicants. Government cannot use unfair practices such as helping competitors or raising individual taxes. The holder of a bank account has control of the account.

Government tries to protect competition by

Regulating monopolies. A monopoly is a business that influences the entire production of a particular good or service. Controlling product prices and restricting production of certain products are actions that monopolies can take to increase product prices. Government does not prevent all forms of monopolies since it allows natural monopolies—monopolies that are in the best interest of the public.

Financial loss from investing time and money to comply with accounting standards is an example of which strategic risk:

Regulatory and political issues. Revenues and profits are affected by what governments require. Companies often have to invest time and money to comply with tax standards, environmental regulations, employee protection laws, and many other government guidelines. Financial loss from complying with accounting standards does not result from reputation damage, changing customer needs, or obsolescence.

Which of the following is a business comparing when it analyzes the cost of buying wood desks versus the cost of buying metal desks: a. Excess demand b. Relative price c. Incentives d. Inflated price

Relative price. Relative price refers to one price compared to another, that is, to the ratio between them. In deciding what to buy, consumers often compare one price to another. Inflation is an increase in the average level of prices. In our economy, profits are the incentives which encourage producers to change and reallocate their resources. Excess demand is the situation that exists when supply is greater than demand.

Which of the following is a true statement regarding the impact of religion on international trade: a. Religion affects only work hours and holidays. b. Religion is an issue only when operating in Muslim countries. c. Religion is more important in some cultures than in others. d. Religion does not have a significant impact on business.

Religion is more important in some cultures than in others. Religion is more important in some cultures than in others; therefore, a business must learn about the significance of religion in each and every country it operates in. Religion can certainly have a big impact on business, and not just in Muslim countries. Religion affects work hours, holidays, delivery schedules, types of products to offer, types of marketing campaigns to pursue, etc.

When a business keeps a risk because management is unaware of it, the business is __________ the risk.

Retaining. Sometimes management is unaware of a risk and keeps the risk—doing nothing about it. Since management is unaware of the risk, it is not avoiding, preventing/controlling, or transferring the risk. Avoiding risk means not being exposed to the risk at all. Preventing/Controlling risk means taking measures to reduce the risk. Transferring risk means passing the risk to someone else.

Which of the following factors has influenced the geographical development of unions: a. Availability of capital goods b. Right-to-work laws c. Availability of natural resources d. Right to bargain collectively

Right-to-work laws. These laws, which are legislated by individual states, give employees the right to work without being required to join a union. In states with right-to-work laws, union activity is limited. Workers' right to bargain collectively is guaranteed by law; therefore, workers can use the collective-bargaining process at any geographical location. The availability of natural resources and capital goods are not related to the geographical development of unions.

People who go into business know that the business may not succeed. This possibility is referred to as business

Risk. Business risk is the possibility of loss (failure) or gain (success) inherent in conducting business. People who go into business know they are taking a chance. They may make a fortune or lose everything. Downsizing reduces the size of a business. Economizing is deciding how scarce resources will be used. Retention is the act of keeping or hanging on to something.

Which of the following is a pure business risk: a. Obsolescence b. Robbery c. Competition d. Inflation

Robbery. A pure risk is one that carries the possibility of loss or no loss. Robbery is a pure business risk that can be covered by insurance. Obsolescence, competition, and inflation are speculative risks because they could bring gain.

As a management trainee in a large business, Ron spends three weeks working in each of the various departments. This is an example of job

Rotation. Job rotation occurs when a company rotates employees through various departments. Job orientation prepares new employees by acquainting them with their surroundings and giving them general information about the company and specific information about their jobs. Job enrichment occurs when a company adds interest to tasks to increase satisfaction. Interdependency occurs when persons rely on each other to accomplish something.

Consumers are typically most willing to pay more for goods and services that bring them greater

Satisfaction. Consumers are typically most willing to pay more for goods and services that bring them greater satisfaction. On the other hand, goods and services that give consumers less satisfaction are usually less expensive. While some consumers are willing to pay more for goods and services that will make them popular, the amount of satisfaction that the good or service brings usually has a greater impact on the good's or service's purchase price. Consumers look for ways to minimize their opportunity costs and trade-offs, not maximize them.

A gap between unlimited wants and limited resources creates a condition known as

Scarcity. Scarcity occurs when there are not enough resources to meet people's wants. Resources are considered limited because there are not enough of them so that everyone can have as much of them as they wish. Economics is the study of how to meet unlimited, competing wants with limited resources.

Which of the following situations involves finding another source of a limited natural resource: Select one: a. Searching for oil on the ocean floor b. Conserving the oil that we use c. Paying a higher price for oil d. Replacing oil with natural gas

Searching for oil on the ocean floor

Which of the following pieces of legislation prevents monopolies from forming and hinders price fixing: Select one: a. Robinson-Patman Act b. Celler-Kefauver Antimerger Act c. Clayton Act d. Sherman Antitrust Act

Sherman Antitrust Act. This legislation, passed in 1890, was our government's first attempt to protect competition. The Celler-Kefauver Antimerger Act protects competitors from takeovers if the acquisition would hinder competition. The Robinson-Patman Act prohibits discriminatory price concessions, while the Clayton Act prevents business actions such as price discrimination that might restrict competition.

George has decided to purchase a dishwasher. He is checking the newspaper ads for the best place to get quality goods and services at a reasonable price. What type of product is the dishwasher?

Shopping. Shopping goods are consumer products that are purchased by consumers after comparing products and stores to get the best quality, price, and/or service. Capital goods are manufactured or constructed items used in the production of goods and services. Convenience goods and services are purchased quickly and without much thought or effort by ultimate consumers. Specialty goods are consumer products with special or unique characteristics consumers are willing to exert special efforts to obtain.

Research and development speed up production by

Simplifying existing products. Researchers can speed up production by simplifying existing products, developing new products, and determining better processes. Management should provide employees with adequate job training. Overall, national productivity can limit inflation. Communication between management and labor involves reviewing company goals with employees.

All night-shift workers at a hotel have reported for work, but they are refusing to do their assigned jobs. What kind of pressure strategy is being used by the workers?

Sit-down strike. A sit-down strike is a pressure strategy in which employees stay on the job but refuse to work. A sympathetic strike is a pressure strategy in which employees of one local union walk off the job to support another union that is on strike. An injunction is a court order used by management to prohibit certain acts such as picketing. A lockout is a pressure strategy used by management in which management temporarily closes a business and stops production.

Government owns the basic means of production, but there is some private ownership of businesses under

Socialism is an economy in which the government owns part of the means of production, but there is some private ownership of business as well. Communism is a command economic system in which the government is in control of the economic system, and there is no private ownership of the means of production and distribution. Capitalism is a free market economic system in which individuals and groups, rather than government, own the means of production and distribution. An entrepreneur is a person who owns and operates his/her own business.

A company produces only one type of shoe, since this is the product it is best able to produce with its resources. This is an example of

Specialization. Making the best use of resources in the production of goods and services is known as specialization. Division of labor involves dividing a large job into smaller job tasks that are assigned to different workers. Productivity is the amount and value of goods and services produced from set amounts of resources. Competitive advantage is the edge achieved by businesses that offer something better than the competition.

Susan is willing to pay a high price for the brand of china that she wants for her home. This china would be classified as a(n) __________ product.

Specialty. Specialty goods and services have special or unique characteristics that motivate consumers to exert special efforts to obtain them. In many cases, the special characteristic relates to the item's brand name. Convenience goods and services are purchased with little thought or effort by consumers. Shopping goods and services are items for which the consumer has shopped around to get the best quality, price, and/or service. Industrial goods and services are purchased by producers.

Inflation can occur when the economy is growing too fast. One of the ways the government might respond is by

Spending less on goods and services. One of the ways the government can fight inflation is by spending less on goods and services. Decreasing the discount rate for banks, making tax cuts, and lowering the prime interest rate are all methods of dealing with a recession, not inflation.

People often buy goods and services in order to maintain the quality of life and general living conditions to which they are accustomed. This influence on demand is referred to as

Standard of living. People often make buying decisions based on their particular standard of living. Quality control is an effort to maintain quality standards. Personal selling is planned, personalized communication intended to influence purchase decisions.

Millie deals with customers from a certain country on a regular basis. When she meets people from this country in a social setting, she assumes they will be just like all her customers. This is an example of

Stereotyping. Millie is stereotyping her new acquaintances—generalizing them based on their cultural background. Power distance refers to the inequality in society. Uncertainty avoidance refers to a society's comfort level with insecurity. Ethnocentrism is a belief that your culture is superior to others.

An example of information management is demonstrated when a business uses a working system for

Storing and retrieving information. Information management includes/requires an effective system for storing and retrieving information. A system for researching customers' needs would be used in marketing. Systems for hiring appropriate employees and for conducting employee evaluations would be used in human-resources management.

Avoiding the use of slang falls under which guideline for dealing effectively with people from different cultures?

Strive to communicate clearly. Avoiding the use of slang is a way to communicate more clearly with those from other cultures, who might not understand the hidden meaning of the words. This is a communication issue, not necessarily an issue of respect, patience, or expecting differences to arise.

Cash-register tapes and shipping forms used by a business would be classified as industrial

Supplies. Supplies are goods that are constantly being purchased and used up in the operation of a business. Parts are items that will become part of a final product without additional processing. Materials become part of a finished good after they have been processed. Equipment is industrial goods used in the operation of a business but not in the actual production of a good or service.

Many cellular phone companies offer free minutes at night and on weekends because during those times

Supply is greater than demand

The quantity of a good or service that producers are able and willing to offer for sale at a specified price in a given period of time is

Supply is the quantity of a good or service that producers are able and willing to offer for sale at a specified price in a given period of time. Demand is the quantity of a good or service that consumers are ready to buy at a given price at a particular time. Supply is not the same as quantity sold or quantity demanded.

An example of a country that has a socialist command economy is Select one: a. North Korea. b. China. c. Sweden. d. Japan.

Sweden. A socialist command economy means that the government owns the major means of production, but there is private ownership of business as well. Japan has a market economy. Although China has historically had a communist economy, communism in China is gradually being replaced with a much more market-oriented economic system. North Korea has a communist command economy system.

Local 476 of the UAW walked off the job in support of Local 477 of the UAW, which was striking. This is known as a __________ strike.

Sympathetic. A sympathetic strike occurs when one union walks off the job to support a strike by another union. Wildcat strikes are strikes called without the approval of union officials. A sit‑down strike occurs when union members go to work but refuse to perform their job duties. A jurisdictional strike occurs when two unions cannot agree as to which one should perform the job. Jurisdictional strikes are illegal.

To encourage people to buy domestic goods, a country wants foreign goods to be more costly. It imposes a tax on imported products to increase their selling prices. This tax is known as a(n)

Tariff. A tax on imported goods to raise their prices is a tariff. A quota is a limit on the number of foreign goods that can be imported into a country. An idiom is a figure of speech. A bribe is a payment made to someone to gain favor (usually illegal).

An employee in a gift store is assigned to handle all incoming phone orders. This specific assignment is considered to be specialization by

Task. Specialization by task allows the worker to become highly skilled in one, very small portion of a job. Specialization by trade/profession is the type of work that you perform to earn a living. Specialization by stage of production occurs when more than one stage is required to change a raw material into a finished product.

Lack of standardization occurs when

Tasks and processes are done differently every time. To achieve standardization, work must be organized so that it is always done in the same way. When employees don't understand how to use a machine or tool, there is a lack of worker knowledge and education. Poor product design can result in products that are complex and difficult to assemble. Personality conflicts arise when team members do not get along with each other.

One of the factors that directly limits the economic freedom of individuals in a private enterprise system is government

Taxation. To have the money necessary to run the country and to provide the services people need, government collects taxes from individuals and businesses. This restricts economic freedom since taxpayers cannot use all of their income for their own purposes. Other limits to individuals' economic freedom include not being able to buy everything that we'd like to buy, being limited by our own choices, and being limited by laws which have been created to protect us. Government indecision and production are not direct limits on the economic freedom of individuals.

The two main sources of revenue used to pay the costs of government regulation are

Taxes and borrowing. Government collects taxes from taxpayers to pay the costs of regulating business and providing services. The taxes collected are not sufficient to cover government expenses which make government borrowing necessary. Nontaxpayers don't provide money to government. Business, labor, and industry are types of taxpayers.

A major problem for individuals and private businesses in a socialist command economy is

Taxes are a heavy burden in socialist command economies. The high taxes that have been imposed to pay for government human-services programs reduce individuals' incomes and make the costs of production higher for businesses. Privately owned businesses are allowed to compete with state-owned businesses in socialist economies, but they must abide by the state's master plan in whatever way is necessary. Profit is the financial gain of a business after all expenses have been paid.

One reason why the supply of certain products has been eliminated is because of

Technology

Hershey's produces some of its chocolate products in Mexico. In calculating GDP, these products would be a part of

The GDP for Mexico. Hershey's chocolate produced in Mexico would be part of Mexico's GDP, not the United States', because their production occurred outside the boundaries of the U.S. Residential investment is the money landlords invest in the buildings and equipment they own and rent to tenants. Government purchases include everything purchased by local, state, and federal governments.

A socially responsible business will attempt to give customers

The best products at the best prices. A socially responsible business will attempt to operate in such a way as to make this possible. Producing lower quality products to sell at reduced prices may harm the image of the business. Producing high-quality products to sell at high prices will limit the business's market. Producing the best products without regard to their cost will eventually lead to financial ruin.

Marketing is demonstrated in which of the following statements: a. The business expects to merge with another business in the industry. b. The business meets customers' needs by offering appropriate products. c. The business prepares for long-term success by planning and organizing. d. The business hires qualified employees to perform complex job duties.

The business meets customers' needs by offering appropriate products. Marketing is demonstrated when a business meets customers' needs by offering appropriate products. Preparing for long-term success is part of strategic management. Hiring qualified employees is part of human-resources management. And, expecting to merge (or actually merging) is part of business change, which requires the business activities to adjust in response.

Human-resources management is demonstrated in which of the following statements: a. The business takes care of the responsibilities associated with having employees. b. The business acts on new information about a competitor. c. The business gives its preferred customers a special discount. d. The business includes top-level managers in long-term planning.

The business takes care of the responsibilities associated with having employees. Human-resources management involves taking care of the responsibilities associated with having employees. Giving preferred customers a special discount is part of marketing. Including top-level managers in long-term planning is part of strategic management. And, acting on new information about a competitor can be marketing and/or operations.

When the price of DVD players increases, the quantity of DVD players offered for sale will increase. This is an example of the law of

The law of supply states that the quantity of a product that will be offered for sale varies in direct relation to its price. The law of demand states the quantity of a product that buyers are ready to buy varies inversely with the price of the product. Cost of production is the total amount of money spent on materials, labor, etc., to manufacture economic goods and services. Standardization is not a law.

One of the benefits of economic freedom is that it provides individuals with

The opportunity for success. Economic freedom does not guarantee success to individuals or to businesses, but it does provide the opportunity for success. Individuals must still work to earn a good standard of living and to bring about equality in the workplace. Individuals do not have the right to buy anything they can afford if what they want to buy is illegal.

Which of the following is an example of the substitution effect: Select one: a. The mayor recently instituted a price ceiling on the monthly rent that apartment landlords can charge their tenants. b. A candy bar costs $0.50, and the price of a pack of gum is $1.00. The relative price ratio is 1 to 2. c. The price of Blu-ray Disc players went up recently, so Francis decided to buy a standard DVD player instead. d. The demand price of a ticket at the local amusement park is exactly equal to its supply price.

The price of Blu-ray Disc players went up recently, so Francis decided to buy a standard DVD player instead.

Your business is selling more and more large-screen televisions each month. Applying the law of supply and demand, what do you expect to happen to the price and supply of these televisions over the next few months?

The price will increase, and supply will increase.

The economic basis for the private enterprise economic system is Select one: a. the marketplace. b. the profit motive. c. supply and demand. d. competition.

The profit motive is the desire to make a profit which moves people to invest in business. It forms the economic basis for the private enterprise system. If a business did not make a profit, it would eventually cease to exist. A marketplace is any place where the buying and/or selling of goods and services takes place. Competition is the rivalry between two or more businesses to attract scarce customer dollars. The law of supply and demand is the economic principle which states that the supply of a good or service will increase when demand is great and decrease when demand is low.

Excess demand is eliminated when the selling price reaches the point at which consumers are willing to buy __________ producers have to sell.

The same quantities that

George agreed to paint Joe's car for him and asked to be paid in cash so that there would be no record of the transaction. The money George earned is part of

The underground economy. The underground economy is characterized by transactions for which no receipts are kept. One form of underground transaction occurs when independent workers ask to be paid in cash because they don't want to pay income tax on the money they earn. Failure to report income on which income tax is owed is illegal. Nonresidential investment is the money U.S. businesses invest in buildings, equipment, vehicles, furniture, etc. Transfer payments are government payments of tax dollars for which the recipients do not produce goods or services. Uncounted production is all goods and services that are produced but not sold in the marketplace.

Why are entrepreneurs important in a private enterprise system? a. They are responsible for deceptive advertising. b. They get rid of competition. c. They encourage the development of new products. d. They use resources inefficiently.

They encourage the development of new products. Entrepreneurs are people who take all the risks and receive the profits from starting their own businesses. Because of the entrepreneurs, the private enterprise system changes, has more new products, and uses resources more efficiently. The government keeps businesses from using deceptive advertising and from limiting competition.

Why are unions a powerful force in business?

They increase the bargaining power of workers. By working together, employees encourage management to be more willing to listen to their demands. The union assumes the role of the official bargaining representative for a group of workers and negotiates with company officials to determine the terms and conditions under which employees will work. Management closes businesses temporarily during labor conflicts as a pressure strategy to gain an advantage over workers. This type of pressure strategy is known as a lockout. Unions discourage nonstriking employees from working for striking employees. Requiring more employees to be hired than are actually needed to complete a job is illegal.

Which of the following describes the services offered by trade industries: Select one: a. They may be limited or full line. b. They are always full line. c. They vary from day to day. d. They are always limited.

They may be limited or full line. Each trade industry must decide how broad the range of services it offers to customers will be. They are not always limited or always full line, but they are not changed on a daily basis as this would be confusing to customers and cause problems for the business.

Which of the following statements about wholesale trade businesses is true: Select one: a. They operate from a variety of business premises. b. What do service businesses sell? c. They operate only from distribution centers. d. They operate only from mail-order warehouses.

They operate from a variety of business premises. Wholesale trade businesses are operated in a variety of types of business premises. These include distribution centers, warehouses, trucks, and offices. Traditionally, wholesale trade businesses do not sell to ultimate consumers.

How do producers answer the economic question of WHAT to produce in a market economy?

They produce products that are the most profitable. Producers will sell goods and services at the highest prices the market will bear at the lowest cost possible. They are driven by incentives, or profits, and want the most profit possible. They need information to decide whether to buy, what to buy, and how much to buy.

Which of the following is true of employees whose jobs have high depth: a. They make very few decisions. b. They follow strict guidelines. c. They set their own pace. d. They perform only one task.

They set their own pace. High-depth jobs usually allow decision making, have only general guidelines, and allow employees to set their own pace. Jobs have high depth if they encourage independent thinking and self-regulation. Jobs with low depth have strict guidelines and do not allow employees to make many decisions. Performing only one task is a feature of job scope.

Why are better trained and educated workers often more productive?

They tend to be more organized and able to manage their time wisely. Better trained and educated workers are often more productive and efficient because they are more organized, better able to manage their time, more willing to adapt, and more creative. Being more likely to become a manager doesn't cause a person to be more productive. Nearly all employees take vacation and sick days at some point. Gross domestic product per capita is the average productivity of individual workers within an entire nation. It is not the measure of one specific person's productivity.

When producers use the best combination of resources, consumers are more likely to get goods and services that

They want. Producers are responsible for choosing and using the best combination of resources. As examples, they must decide if the number of workers is adequate; if the buildings, supplies, and equipment are suitable; and if there are enough raw materials to produce their goods. Through such actions, producers provide consumers with the types and quality of goods and services that they want. Producers should try to keep their costs down but should not always purchase the least expensive products if quality will be sacrificed. Likewise, purchasing the best-known resources may not be appropriate for some businesses.

Which of the following is an industrial good: Select one: a. Matt's cell phone b. Emily's home computer c. Holiday flowers d. Tires for a tow truck

Tires for a tow truck. The tires have been purchased by the towing company for use in the operation of the business. To determine whether a good or service is a consumer or industrial item, you need to know who made the purchase and for what purpose. If the product was purchased by a business for use in its operations, then it is industrial. On the other hand, if the product was purchased by an individual to satisfy his/her personal needs and wants, then it is classified as a consumer product. The other alternatives are consumer products.

Why do marketers classify goods and services?

To aid in marketing planning. Classifying goods and services helps marketers select appropriate marketing activities for a particular product. The types of promotion, distribution, and selling that a marketer uses are affected by the product's classification. Production increases are not based on a product's classification. Determining promotional budgets and prices are aspects of marketing planning.

What is the primary responsibility of a national union?

To assist in contract negotiations for all its local unions. A national union is made up of representatives from local unions that are similar in nature. In addition to assisting with contract negotiations, it helps to establish new locals and recruit new members. Local unions are responsible for electing local leaders. A union federation provides financial support for political candidates who favor labor. The use of picketing is one of a union's last resorts and would not be encouraged unless absolutely necessary.

What is the purpose of government regulation of business activities that might cause air or water pollution?

To conserve the environment. Government has passed laws that prohibit business activities that harm the environment. These laws may prohibit the use of dangerous substances, require the use of safe substances, or provide economic incentives for voluntary conservation efforts. Government fiscal policy is intended to stabilize the economy. Laws regulating monopolies protect competition. Government provides public goods—goods and services we all need and use that business could not afford to provide.

Why does government set and collect taxes?

To help pay the expenses of government. Some of these taxes are set and collected on products sold by businesses. Increasing technology, providing economic security, and helping businesses grow and prosper can be goals of a political party or government administration but are not reasons that government sets and collects taxes.

Which of the following is the best reason for studying economics: Select one: a. To learn how to invest money and express social responsibility b. To prepare for effective decision-making and responsible citizenship c. To determine which occupations interest you d. To find the best use for resources and supplies

To prepare for effective decision-making and responsible citizenship

How are prices used in our economy?

To ration limited resources. Prices ration limited resources, goods, and services to those most willing and able to pay for them. Generally, the higher the price of anything, the less of it consumers will buy. The lower the price, the more consumers will be willing and able to buy. Equilibrium in the market rarely exists when supply and demand are the same. Excess supply exists when supply is greater than demand. When this situation occurs, producers lower their prices to sell the excess supply. Excess demand exists when demand is greater than supply. When this situation occurs, producers raise their prices. Elimination of excess supply and demand is a continual process; neither situation is desired by both buyers and sellers.

Why should productivity be measured?

To see whether the business's objectives are being met. Productivity may be measured to see whether a business's goals and objectives are being reached. Productivity doesn't aid in the location of new sources of inputs. Members of the finance department are responsible for determining the best ways to invest company profits. Research and development may find new ways to meet customer needs.

What does a nation develop when its imports are greater than its exports?

Trade deficit. A trade deficit exists when imports are greater than exports. A trade deficit decreases the gross domestic product, which can lead to a lower standard of living and fewer job opportunities. A trade surplus exists when exports are greater than imports. A balance of trade is the difference between the exports and imports of a nation. Weak currency means that a country's currency has a low value on the world market.

Bricklayers, science teachers, dentists, and truck drivers are examples of specialization of labor by

Trade or profession. Specialization by trade or profession is the type of work individuals perform to earn a living. It is the most common type of specialization. Specialization by stages of production occurs when more than one stage is required to change a raw material into a finished product, and different people are involved at the different stages. Specialization by job task is becoming highly skilled in one, very small portion of a job. The geographic area in which a worker lives may affect his/her choice of job or specialty, but it is not a form of specialization.

A nation that exports more than it imports maintains a a. balance of trade. b. trade deficit. c. trade surplus. d. lower standard of living.

Trade surplus. A trade surplus exists when a nation's exports are greater than its imports. A trade surplus increases the gross domestic product and can lead to a higher standard of living and more job opportunities. A balance of trade is the difference between the exports and imports of a nation. A trade deficit exists when imports are greater than exports.

A manager is willing to accept the production of fewer quantities of a product as long as her workers produce higher quality products. The manager is making a( n )

Trade-off. All economic choices, including the manager's, involve trade-offs. Trade-offs involve giving up all or part of one thing in order to get something else. The trade-offs that a person or organization is willing to accept should be based on the opportunity costs involved. The manager would prefer that her workers produce higher quality products, even if that means that they can't produce as many products as they would have otherwise. The opportunity cost of the manager's decision is the lost benefits and income that additional products would have generated. Producers, consumers, and resource owners exchange money payments for the use of their goods, services, and resources. A capital good is a manufactured or constructed item that is used in production. Distribution is an economic process or activity by which income is divided among resource owners and producers.

Contractual agreements such as guarantees, surety bonds, and leases are examples of business risks being handled through

Transfer. Contractual agreements that pass part or all of a risk to someone else are examples of transferring the risk. Management transfers risk by signing a contract. Avoidance involves completely eliminating the risk. Prevention or control involves attempting to reduce the risk.

Requiring a contractor to purchase a surety bond is an example of handling business risk by __________ the risk.

Transferring. Requiring a contractor to purchase a surety bond is an example of transferring risk—shifting the risk to someone else. If the contract is not fulfilled as expected, the surety bond is paid to the business that stands to lose. Retaining risk is keeping it. Reducing risk is preventing or controlling it. Preventing risk is taking measures to reduce the risk.

The act of reducing or removing risks by shifting the risk factor to another person or business is referred to as __________ risk.

Transferring. Three ways of transferring risk are through contractual agreements, business organization, and insurance. Retaining risk is keeping it. Avoiding risk is taking measures to eliminate the risk completely. Controlling risk is taking measures to reduce the risk.

Determine whether the following statement is true or false: Government has become an active participant in the world of business.

True; government produces goods and services. It sells these goods and services to consumers. Government also employs thousands of workers and buys supplies from businesses for those workers. Government helps individuals as well as businesses. It tries to prohibit or control monopolies rather than encouraging their development.

The degree of unionization in the United States varies based on a business's

Type of industry and geographical location. In some types of industries, almost all employees are union members. Union membership is much stronger in certain parts of the country than in others. The level of union organization and the use of pressure strategies do not affect the degree of unionization in the United States.

According to Hofstede's dimensions of national cultures, a certain country has a high comfort level with insecurity and avoids having too many rules. This country would have a low score in

Uncertainty avoidance. A country that is comfortable with insecurity and avoids having too many rules would have a low score on Hofstede's dimension of uncertainty avoidance. Long-term v. short-term orientation refers to the subtle differences between Eastern and Western thinking. Power distance refers to a country's acceptance of inequality in society. Individualism v. collectivism refers to the degree to which a country is integrated into strong groups.

As a favor, Felicia agreed to clean house for her mother each week. In terms of GDP, the work Felicia does would be part of

Uncounted production. Uncounted production includes all goods and services which are not sold in the marketplace. No record is kept of the value of this production, and it is not part of GDP. The underground economy involves transactions in which money changes hands, but no receipts are kept. Total output is all production activities for which money is exchanged. Residential investment is the money landlords invest in the buildings and the equipment they own and rent to others.

Which of the following types of legal union representation is preferred by unions in states without right-to-work laws: Select one: a. Agency shops b. Closed shops c. Open shops d. Union shops

Union shops. In union shops, employees are required to join unions after their probationary period, which usually lasts 30 to 90 days. Closed shops require all employees to belong to the union before they can be hired, but closed shops are illegal in all states. In agency shops, all employees are required to pay union dues but do not have to join unions. In open shops, employees do not have to join unions and do not have to pay union dues.

Which one of the following groups of words best describes wants: Select one: a. Limited, unchanging, and competing b. Limited, changing, and compensating c. Unlimited, changing, and competing d. Unlimited, unchanging, and compensating

Unlimited, changing, and competing. Wants are considered unlimited because people always have them. People's desires change with different situations or circumstances. Wants are considered competing because people must choose which wants to satisfy at any one time.

A characteristic of human wants is that they are

Unlimited. In other words, when one want is satisfied, there are other wants waiting to take its place. Wants are not consistent but vary from person to person and from age group to age group. This means that your wants will change, not remain the same. Your wants are also competing. In other words, you might want more than one thing at the same time.

What is the government doing when it buys wheat to keep the price high enough for farmers to make a profit?

Using price supports. Price supports are assistance by government to maintain the price of a good or service to enable producers to earn a profit. Maintaining and protecting individual businesses is more important than producing more wheat. This does not industrialize the economy or help to conserve energy.

A factory that mass produces clothing increases productivity because it reduces

Wasted resources. Mass production increases productivity because it reduces wasted resources, including time and energy. Mass production does not affect employee wages, research and development costs, or levels of management.

In a traditional economic system, the question of what to produce is answered by producing Select one: a. what has always been produced. b. what the government chooses. c. what consumers need and want. d. what supply dictates.

What has always been produced. A traditional economic system is one in which people produce only what they must have in order to exist. All economic decisions are based on habit and tradition, and the people produce the same things that were produced by their ancestors. Producing what the government decides or dictates answers the question for command economic systems. Producing what consumers need and want answers the question in a market economic system. Both supply and demand affect what is produced.

What are the three basic economic questions?

What products will be produced; how will products be produced; and how will products be allocated. These are questions which all economies must answer. Societies must determine what and how many goods and services to produce. They must determine the best, most efficient ways of producing goods and services, and they must decide how the goods and services will be divided among the members of their societies.

What determines whether an economic product is an industrial product or a consumer product?

Who buys and uses the product. Industrial products are purchased by producers for resale, to use in making other goods and services, or for use in their operations. Consumer goods and services are purchased and used by the ultimate consumer. Price, origin, and producer have no bearing on whether a product is a consumer or an industrial item.

Who gets the goods and services produced in our economy?

Whoever is willing and able to pay the price. Prices ration limited resources, goods, and services to those most willing to pay for them. Costliness, efficiency, and availability of information affect prices but do not determine who gets goods and services.

The two main divisions of the trade industry are

Wholesalers and retailers. Trade industries are businesses that buy and sell goods to others. Wholesalers sell goods to retailers, who sell them to ultimate consumers. Manufacturers, or producers, are not part of the trade industries.

Which of the following is a direct benefit to consumers of the effects of competition: a. Wise use of resources b. Wider product selection c. Fewer new businesses in the market d. Higher product prices

Wider product selection. The effects that competition has on businesses result in many direct benefits to consumers. These benefits include lower prices, better quality goods and services, new and/or improved products, more businesses from which to buy, wider product selection, and more and better customer services. The wise use of resources benefits consumers indirectly by keeping down the costs of production.

If a good or service is scarce, consumers will usually be

Willing to pay money to get it. A good or service is considered scarce when not everyone can have as much of it as desired. This makes consumers willing to pay for the item to obtain it. Since scarce items may be hard to locate, consumers may be more interested in owning them and willing to buy them.

Most businesses put their greatest competitive efforts into competing

With direct competitors. Direct competition is competition between or among businesses that offer similar types of goods or services. They are the easiest for a business to identify. Whether a business puts most of its efforts into competing locally or nationally would depend on the particular business.

Over the next few years, members of Generation X and Generation Y are expected to fill many job positions vacated by retiring Baby Boomers. This is an example of a change in

Workforce demographics. As the Baby Boomers exit the workforce and members of Generation X and Generation Y fill many of the Boomers' old jobs, the makeup of the workforce will change. Since demographics consist of information used to describe a population, we can say that workforce demographics will change when the Baby Boomer Generation retires. Nonrenewable resources are natural resources that may become entirely depleted and cannot be replenished after use. Automated processes are activities that are completed by machines versus humans. Capital goods are manufactured or constructed items that are used in the production of goods and services.

Which of the following statements best describes the way that the U.S. economic system functions: Select one: a. The government is the primary decision maker, and occasionally it becomes the regulator. b. Individuals and businesses are the primary decision makers, and there is no regulator. c. Individuals are the primary decision makers, while businesses are the regulators. d. Individuals and businesses are the primary decision makers, while the government is the regulator.

ndividuals and businesses are the primary decision makers, while the government is the regulator. The private enterprise system in the United States is not a pure private enterprise system because there is limited government control. The government's primary purpose is to protect its citizens. However, the role of government has expanded as life has become more complex. The government acts as a referee and ensures that individuals and businesses play by the rules.