Part One: The Business Environment

In a business, which of the following statements best describes profit?

a. It is the increase in the value of a firm's assets that are not resold. b. It is the income that a firm receives from its secondary business activities. c. It is the total revenue that a business generates, including the cost of salaries. d. It is the money that a business earns in sales, minus expenses. ANSWER: D

In the context of measuring economic performance, which of the following statements is true of gross domestic product (GDP)?

a. It reduces when the products produced involve high levels of pollution. b. It measures the total value of imports as compared to the exports of a nation. c. It accurately predicts when economic changes will occur or how long they will last. d. It ignores legal goods that are not reported to avoid taxation. ANSWER D

In the context of factors of production that businesses and nonprofits rely on, which of the following statements is true of natural resources?

a. They include agricultural products, which people create through planting and tending. b. They are created and upgraded by businesses using capital. c. Most of them must be extracted, purified, or harnessed. d. Most of their value tends to decline as demand increases or supply decreases. ANSWER: C

Which of the following statements best describes e-commerce?

a. A marketing claim that refers to the trade of goods that have no impact on the environment b. A production technology that focuses on refining production processes and creating greater efficiencies c. The rate at which a firm transforms designed products into actual products d. Business transactions conducted online, typically via the Internet ANSWER: D

_____ are four fundamental resources—natural resources, capital, human resources, and entrepreneurship—that both businesses and nonprofits rely on.

a. Aspects of competition b. Basics of living c. Terms of union d. Factors of production ANSWER: D

Which of the following was a reason for the collapse of financial institutions during the economic crisis in the United States?

a. Borrowers refinanced their loans to lower their payments b. There was a hike in the debt ceiling. c. Housing prices went up too quickly. d. There was a drop in mortgage values. ANSWER: D

In the context of the history of American business, which of the following statements is true of the relationship era?

a. Businesses focus on efficient production and concentrate only on each immediate transaction with a customer. b. Businesses build strategies to constantly seek new customers as it is more profitable than cultivating current ones. c. Businesses identify ways to exploit workers and manipulate prices of goods offered to customers depending on changing government laws. d. Businesses aim to build long-term relationships with customers because satisfied customers can become advocates for a business. ANSWER: D

In the context of the history of American business, which of the following statements is true of the marketing era?

a. Businesses focused on refining production processes and creating greater efficiencies. b. Businesses lost individual ownership as large factories emerged to increase production. c. Businesses that dominated their markets ousted competitors, manipulated prices, and exploited workers. d. Businesses began to develop brands to help customers understand the differences among various products. ANSWER: D

_____ are business-like establishments that employ people and produce goods and services with the fundamental goal of contributing to the community rather than generating financial gain.

a. Credit unions b. Restricted mergers c. Plutocracies d. Nonprofits ANSWER: D

Which of the following statements is true about the debt ceiling?

a. Debt ceiling hikes usually do not depend on the amount already owed by the federal government. b. Voting on the debt ceiling happens together with voting on taxes and spending. c. Debt ceiling hikes are fairly routine. d. Debt ceiling hikes are strictly decided by public policy polling. ANSWER C

The _____ is an international trade agreement that has taken bold steps to lower tariffs and promote free trade worldwide.

a. Greater American Free Trade Protocol b. General Agreement on Tariffs and Trade c. North American Integrative Trade Plan d. Trans-Atlantic Trading Partnership Agreement ANSWER: B

_____ is the total value of all final goods and services produced within a nation's physical boundaries over a given period of time.

a. Gross domestic product b. The producer price index c. Operating cost d. A budget surplus ANSWER A

Which of the following statements is true of structural unemployment?

a. It encompasses people who don't have jobs because the economy no longer needs their skills. b. It is short term, tends to be ultimately positive, and reflects the freedom to change jobs. c. It occurs when workers refuse to be retrained to migrate to other jobs in an organization. d. It is a brief span of unemployment that occurs before the business owners hire the workers back into the company. ANSWER A

In the context of the free market system, which of the following statements best describes pure competition?

a. It is a market structure with many competitors selling virtually identical products. b. It is a market structure where single producers can control the price that customers would need to pay for a product. c. It is a market structure with one business completely dominating the industry. d. It is a market structure where new producers are not allowed to enter the competitive market. ANSWER A

Which of the following statements best describes a budget surplus?

a. It is the total amount owed by high-income people in a country who are yet to repay their loans. b. It is the overage that occurs when revenue is higher than expenses over a given period of time. c. It is the losses that occur when the total value of a nation's imports is higher than the total value of its exports. d. It is the amount borrowed by a company without any guarantee. ANSWER B

Which of the following statements best describes the consumer price index (CPI)?

a. It measures the change over time in the prices that businesses pay each other for goods and services. b. It refers to the quantity of products that consumers are willing to buy at different market prices. c. It measures the change in weighted-average price over time in a consumer market basket of goods and services that the average person buys each month. d. It refers to a standard equation that is used to determine the amount of resources needed to produce certain goods depending on consumers' needs. ANSWER C

In the context of monetary policy, which of the following statements is true of the reserve requirement?

a. It refers to the requirement of having a predetermined amount of contingency money. b. It involves buying and selling of treasury bonds, notes, and bills. c. It allows banks to hold lesser funds if the Fed changes its bulk amount collection schemes. d. It helps protect depositors who may want to withdraw their money without notice. ANSWER D

Which of the following statements is true of the economy?

a. It solely indicates how resources are maintained in government-owned institutions. b. Its rise or downfall has no effect on the common man. c. It is essentially a financial and social system. d. It is inclined toward politics and rarely affects businesses. ANSWER: C

Drenexa Pharmaceuticals is based in the United States. In the context of the social environment, which of the following is most likely to be an impact of the rapidly aging population on Drenexa Pharmaceuticals?

a. It will be at a disadvantage as the focus of the state and federal government is currently on the younger population. b. It will face a loss as the rapidly aging population will cause the size of the market for pharmaceutical companies to shrink. c. It will benefit because it will have access to a larger labor pool that can drive its expansion plans. d. It will gain profits as the rapidly aging population will cause the companies that cater to the elderly to boom. ANSWER: D

In the context of factors of production that businesses and nonprofits rely on, which of the following can be classified as capital?

a. Machine b. Labor c. Money d. Land ANSWER: A

Which of the following factors of production encompasses the physical, intellectual, and creative contributions of people working within an economy?

a. Natural resources b. Human resources c. Entrepreneurship d. Capital ANSWER: B

Which of the following was an impact of the American Recovery and Reinvestment Act?

a. People traded good-paying jobs for lower-paying positions. b. Taxes were hiked. c. Economy took a downward turn as the funds deployed were insufficient. d. Employment rates fell dramatically. ANSWER A

In the context of a business environment, which of the following is a key element of the U.S. economic environment?

a. Regulations that decrease corporate accountability b. Policies that ensure high federal tax rates for businesses c. Protocols that restrict mergers between nonprofits and private businesses d. Legislation that supports enforceable contracts ANSWER: D

_____ involve buying and selling government securities, which include treasury bonds, notes, and bills.

a. Social funding processes b. Free banking services c. Open market operations d. Reserve requirement allowances ANSWER C

_____ is an economic system based on private ownership, economic freedom, and fair competition.

a. Socialism b. Capitalism c. Totalitarianism d. Communism ANSWER B

_____ is the rate of interest that the Federal Reserve charges when it loans funds to banks.

a. The discount rate b. The debt rate c. Fiscal interest d. Budget interest ANSWER A

In the context of the social environment of the United States, which of the following statements is true of diversity?

a. The growth in ethnic populations offers robust profit potential for firms pursuing them. b. Its growth in a workplace limits innovation and creativity. c. Effectively managing it in a workplace would only become tougher as time goes by. d. The population has become less ethnically diverse in recent years than it was during previous years. ANSWER: A

In the context of the U.S. economic environment, which of the following is a government policy that supports business?

a. The no-taxes policy for new firms b. The exemption of import duties c. The relatively low federal tax rate d. The exemption from trade regulations ANSWER: C

Which of the following statements is true of millennials?

a. They were born between 1975 and 1980. b. They did not feel entitled to a great job when they graduated from college. c. They shaped the Internet. d. They approached adulthood planning to work for success. ANSWER: C

In the context of the global economic crisis in mid-2000, identify a true statement about subprime loans.

a. They were preferably given to borrowers with low debt-to-income ratios. b. They were seen by the lenders as high-risk loans. c. They required a high down payment. d. They were given to borrowers with little or no documentation. ANSWER: EITHER C OR D

Businesses that strongly focus on customer satisfaction tend to:

a. be less successful as there is deterioration in the quality of the products they offer to their customers. b. transform their current customers into loyal advocates for themselves. c. believe that the cheapest product represents the best value for customers. d. develop new products for customers while compromising on its features when competition is tough. ANSWER: B

In the country of Harashimin, the government strongly backs the labor class of the country. It is authoritarian in nature and believes in exploiting wealthy citizens to fulfill its agenda of bringing social and financial equality in the society. In this scenario, the government of Harashimin has most likely adopted the political philosophy called _____.

a. capitalism b. totalitarianism c. communism d. socialism ANSWER C

During the production era, in the early part of the 1900s, major businesses focused on:

a. creating wealth by manipulating prices and exploiting workers. b. customer satisfaction and building long-term relationships with customers. c. differentiating themselves from their competitors. d. refining the production process and creating greater efficiencies. ANSWER: D

In the context of evaluating economic performance, productivity is calculated by:

a. dividing the amount of output by the amount of input. b. multiplying the amount of input with the amount of output. c. subtracting the amount of input from the amount of output. d. adding the amount of output to the amount of input. ANSWER A

Jason set up a textile mill in his hometown in 1865. He became a rich businessman by the time his son Earl took over the business in 1895. Soon after Earl started heading the business, the government passed laws to regulate business and protect consumers and workers. Due to this move by the government, the textile mill had to introduce a fixed salary structure for its employees and implement quality checks for the products manufactured. In the context of the history of American business, Jason had set up this textile mill in the _____.

a. entrepreneurship era b. production era c. marketing era d. relationship era ANSWER: A

The term _____ refers to the sum of all the money that the federal government has borrowed over the years and not yet repaid.

a. federal debt b. budget surplus c. federal surfeit d. budget slippage ANSWER: A

In the context of the global environment, the _____ has lowered prices and increased quality across virtually every product category, as competition becomes truly global.

a. federal sales act b. bulk-pack protocol c. free-trade movement d. foreign globalization measure ANSWER: C

When making a career choice, experts often advise graduating students to:

a. focus on the sector that promises quick career growth. b. focus only on careers with the highest income potential. c. find a career they love as it will tend to be more rewarding. d. concentrate on performing routine tasks as this will improve their employability. ANSWER: C

During the _____, as mass production took hold, huge factories replaced skilled artisan workshops.

a. marketing revolution b. entrepreneurship era c. relationship era d. industrial revolution ANSWER: D

In the context of mixed economies, pure planned economies are practically nonexistent in today's world because they would:

a. not provide sufficiently for the old and the sick. b. not enable the government to exercise control over the market. c. curtail people's individual freedom to choose a source of livelihood. d. not create enough value to support their people over the long term. ANSWER D

The Krakozhian fashion market has many brands that sell clothing. However, each brand sells clothing designed for different niches in the market. In this scenario, the market structure prevalent in the Krakozhian fashion market is _____.

a. oligopoly b. monopolistic competition c. monopoly d. pure competition ANSWER: B

In the context of the production era, the "hard sell" refers to the:

a. outcome when a business incurs expenses that are greater than its revenue. b. outcome when businesses focus on contributing to the society rather than on profits. c. aggressive persuasion designed to separate consumers from their cash. d. relationship between the price of a good and the benefits offered. ANSWER: C

The term _____ refers to government efforts to influence the economy through taxation and spending decisions that are designed to encourage growth, boost employment, and curb inflation.

a. reservation requirement b. monetary policy c. open market operation d. fiscal policy ANSWER D

Perggy's Bakes, a bakery in New Orleans that exclusively sells its confectionery products online, makes its products only when it receives an order. The bakery produces the products as per the order and delivers to the customer's homes. It does not produce any excess products. In the given scenario, the price associated with the demand and supply of the products at Perggy's Bakes reflects the _____.

a. skimmed price b. parity price c. grounded price d. equilibrium price ANSWER D

In the context of planned economies, _____ tend to have high taxes, which are designed to distribute wealth more evenly through the public.

a. socialist economies b. capitalist economies c. communist economies d. monarchist economies ANSWER A

In the context of the business cycle, _____ is an economic downturn marked by a decrease in the gross domestic product (GDP) for two consecutive quarters.

a. stagnation b. a credit crunch c. inflation d. a recession ANSWER D