Principles of Business Final Study Guide

The heart of economics is

decision-making

People are considered to be __________ resources.

human

What are the three basic economic questions?

what products will be produced; how will products be produced; and how will products be allocated

An example of a non economic want would be the desire for

a friend.

Trade industries all have the same form of ownership.

False; they may be independent or belong to a chain

In business terms, what is profit?

a monetary reward

Which of the following is a general benefit profit provides:

better wages

A trade industry is a type of business that

buys and sells goods

Which of the following is an example of an economic want:

clothing

Which of the following is one of the main principles of the private enterprise system:

competition

Burger King and McDonald's are examples of

direct competitors.

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

economic

Businesses in trade industries that offer discount prices usually offer

full services

If all of the individuals who own a business share unlimited liability for the business's losses, these individuals are part of a(n)

general partnership

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

hazard

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

in limited supply

Which of the following is an example of a business risk that cannot be covered by insurance:

increase in interest rates

Business owners are usually interested in net profit because they want to know what they can

keep

"Economic votes" are cast by consumers each time they

make a purchase

A raw-goods producer is a type of business that

produces goods in their natural states

A state-chartered corporation that was developed to help small businesses by taxing them as individuals in a partnership is a(n) __________ corporation.

"S"

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

hazard

The general classifications of business risks are

hazard, operational, strategic, and financial.

Which of the following economic resources helps people to be more productive:

human resources

Which of the following economic resources is responsible for combining the other resources to produce goods and services:

human resources

Producers respond to consumers' positive economic votes by

increasing production

What do service businesses sell?

intangible activities

A producer is someone who

makes things

The two main divisions of the trade industry are

manufacturers and wholesalers

Water and air are examples of __________ resources.

natural

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

natural resources

Which of the following statements regarding economic resources is true:

natural resources, human resources, and capital goods are often referred to as factors of production.

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

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

non price competition

The American Red Cross is an example of a(n) ___________ corporation.

nonprofit

When manufacturers give back part of the purchase price of an item to the customer, the manufacturers are engaged in

offering rebates

The money spent to run a business is called

operating expense

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

operational

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

operational

John, Robert, and Charles were college friends who wanted to start a business. John has creative ability, Robert's expertise is selling, and Charles' expertise is management. However, each has limited capital. The ideal business ownership for these young men is a

partnership.

What do business owners consider when they select a business ownership structure?

personal circumstances, financial needs, and the type of business

An economic service differs from an economic good because an economic service is not

physical object

Where a product is available for purchase is referred to as

place utility.

When businesses use what they charge for their products to attract customers, they are using ___________ competition.

price

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

price and non price

What type of corporation may be owned by just a few people and does not offer its shares for sale to the general public?

private

To provide utility, a product must

provide satisfaction.

What type of corporation sells millions of shares and must furnish complete information about its earnings, assets, and debts?

public

In business terms, income is the money

received.

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

regulatory and political issues

A product that provides utility for one business may provide none for another business because utility is completely

relative.

If expenses are greater than income, there's no

reward

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

risk

Which of the following is a pure business risk:

robbery

Besides motivation, what does profit provide business owners in particular?

satisfaction

To discover a product's level of utility, businesses measure the consumer's

satisfaction

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

scarcity

Task utility is about making changes to the characteristics of a

service

If no profit is generated in the long run, a business must

shut down

"To form my business, I used all of my savings, borrowed from the bank, and I'm personally liable for all of the debts." This is an example of which of the following forms of business ownership:

sole proprietorship

Gross profit shows business owners the difference between what they've

spent and received

One of the characteristics of the form of business ownership known as an LLC is that

the owner's' personal property cannot be taken to pay the business's debts.

Why are resources considered limited?

there are not enough available so that everyone can have as much of them as desired.

Which of the following statements about wholesale trade businesses is true:

they operate from a variety of business premises.

Which of the following describes the services offered by trade industries:

they vary from day to day

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

they want.

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

A manufacturer is a type of business that

turns raw goods into useful products

A characteristic of human wants is that they are

unlimited

Which one of the following groups of words best describes wants:

unlimited, changing, and competing

In possession utility, a consumer finds a product helpful after doing what?

using the product

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

willing to pay money to get it.

Most businesses put their greatest competitive efforts into competing

with direct competitors

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

human resource

Retailing takes place whenever goods are

sold to the ultimate consumer

Which of the following is the best reason for studying economics:

to prepare for effective decision-making and responsible citizenship

One reason a physician's' practice might form a partnership as an LLP is

to protect innocent partners from the malpractice of another partner.

Each purchase strengthens the economy by encouraging

trade

Into what two categories can wants be divided?

economic and non economic

If a consumer chooses to go to the movies rather than to buy a new CD, then the movie theater and the CD business are

engaged in price competition.

Changing a good's form involves which of the following:

adding a new feature to the good

In economics, the term capital goods includes

buildings and equipment

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

capital good

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

competition.

A fixed value in a mathematical formula and the speed of light in science are examples of

constants

A builder is a type of producer that

constructs houses, roads, and bridges

Profitable businesses often help improve their local communities by

contributing to charitable causes

The Scott Company decided to sell stock to raise capital. Under what form of business organization does the company operate?

corporation

The amount of money paid for raw materials and products sold is called

cost of goods