question

Business

answer

The organized effort of individuals to produce and sell, for a profit, the goods and services that satisy society's needs. General term business refers to all efforts within a society (I.E. American Business). A business refers to a particular organization (I.E. McDonald's).

question

Three activities of a successful business

answer

Be organized, satisfy needs and earn a profit.

question

Four resources a business should combine to be organized.

answer

It must combine four resources: material, human, financial resources and informational.

question

Material resources

answer

Include the raw materials used in the manufacturing processes as well as buildings and machinery.

question

Human resources

answer

The people who furnish their labor to the business in return for wages.

question

Financial resources

answer

The money required to pay employees, purchase materials and generally keep the business operating.

question

Information resources

answer

The resource that tells managers of the business how effectively the other three resources are being combined and used.

question

Service business

answer

Produces services, such as haircuts, legal advice or tax preparation. I.E. H&R Block.

question

Manufacturing business

answer

Process various materials into tangible goods. I.E. Delivery trucks, towels, or computers.

question

Marketing intermediaries

answer

Buy products from manufacturers and then resell them. I.E. Best Buy, Amazon, Wal-mart.

question

Satisfying Needs

answer

Consumers don't buy goods and services only to own them but to satisfy particular needs. When firms lose sight of their customers' needs, they will likely not be successful.

question

Profit

answer

What remains after all business expenses have been deducted from sales revenue. Profit is the reward business owner's receive for producing goods and services that customers want and the payment that business owner's receive for assuming the considerable risk of business ownership.

question

Negative profit

answer

When a firm's expenses are greater than its sales revenue. A business cannot continue to operate at a loss for an indefinite period of time. Management and employees must find some way to increase sales revenues and reduce expenses to return to profitability.

question

Stakeholders

answer

All the different people or groups of people who are affected by an organization's policies decisions and activities.

question

Business risks

answer

The risk of not being paid and the risk that owners undertake is the risk of losing whatever they have invested into a business.

question

Economics

answer

The study of how wealth is created and distributed. Or who gets what.

question

Scarcity

answer

Lack of resources- money, time, natural resources etc.

question

Microeconomics

answer

The study of the decisions made by individuals and businesses. I.E. Examines how the prices of homes affect the number of homes individuals will buy.

question

Macroeconomics

answer

Study of the national and global economy. I.E. Examines the economic effect of national income and employment, inflation, taxes, government spending, interest rates, and similar factors on a nation and society.

question

Economy

answer

The way in which people deal with the creation and distribution of wealth.

question

Two ways the economic systems of the world have differed.

answer

1) The ownership of the factors of production and 2) how they answer for basic economic questions that direct nations economic activity.

question

Factors of production

answer

The resources used to produce goods and services. There are four factors: land and natural resources, labor, capital, and entrepreneurship.

question

Land and natural resources

answer

Factor of production. Elements that can be used in the production process to make appliances, automobiles and other products. I.E. crude oil, forests, minerals, land, water, and air.

question

Labor

answer

Factor of production. The time and effort that we used to produce goods and services. Includes human resources such as managers and employees.

question

Capital

answer

Factor of production. The money, facilities, equipment, and machines used in the operation of organizations.

question

Entrepreneurship

answer

Factor of production. The activity that organizes land and natural resources, labor, and capital. Entrepreneurship is the willingness to take risks and the knowledge and ability to use the other factors of production efficiently.

question

Entrepreneur

answer

A person who risks his or her time, effort, and money to start and operate a business.

question

Four basic economic questions

answer

1) What goods and services- and how much of each- will be produced? 2) How will these goods and services be produced? 3) For whom will these goods and services be produced? 4) Who owns and who controls the major factors of production?

question

Capitalism

answer

An economic system in which individuals own and operate the majority of businesses that provide goods and services. Capitalism stems from the theories of the 18th century Scottish economist Adam Smith. Smith argued that a society's interests are best served when the individuals within that society are allowed to pursue their own self-interest. According to Smith, when individuals act to improve their own fortunes they indirectly promote the good of the community and people in that community.

question

Invisible hand

answer

Term created by Adam Smith to describe how an individual's own personal gain benefits others in that nation's economy. To create wealth, the shoemaker make shoes and sells those to customers. To make more wealth, the shoemaker hires employees to create even more shoes to sell to even more customers. According to the invisible hand, people in the small business owner's community not only would have shoes, but would also have jobs working for the Shoemaker. Thus, the success of people in the community, and to some extent the nation's, economy are tied indirectly to the success of the small business owner.

question

Fundamental issues that make up the basis of Adam Smith's capitalism

answer

1) The creation of wealth is properly the concern of private individuals, not the government. 2) Private individuals must own private property and the resources used to create wealth. 3) Economic freedom ensures the existence of competitive markets that allow both sellers and buyers to enter and exit the market as they choose. 4) The role of government should be limited to providing defense against foreign enemies, ensuring internal order, and furnishing public works and education.

question

Market Economy

answer

A.K.A. free-market economy. An economic system in which businesses and individuals decide what to produce and buy, and the market determines prices and quantities sold. The owners of resources should he free to determine how these resources are used and also to enjoy the income, profits, and other benefits derived from ownership of these resources.

question

Mixed Economy

answer

An economy that exhibits elements of both capitalism and socialism. The four basic economic questions are answered through the interaction of households, businesses, and governments.

question

Households

answer

Made up of individuals, are the consumers of goods and services as well as owners of some of the factors of production. As resource owners, the members of households provide businesses with labor, capital, and other resources. In return, businesses pay wages, rent, and dividends and interest, which households receive as income. As consumers, household members use their income to purchase the goods and services produced by business. Consumers, as a group, are the biggest customers of American business accounting for 70% of the nation's total production.

question

Consumer Products

answer

Goods and services purchased by individuals for personal consumption.

question

Businesses

answer

Businesses exchange money for natural resources, labor and capital and use these resources to produce goods and services. Then they exchange their goods and services for sales revenue. This sales revenue is exchanged for additional resources, which are used to produce and sell more goods and services. When business profits are distributed to business owners, these profits become household income.

question

Governments

answer

Government services would either not be produced by private business firms or would be produced only for those who could afford them.. Typical services include national defense, police, fire protection, education, and construction of roads and highways. To pay for this, governments collect a variety of taxes from households (such as personal income taxes and sales taxes) and from businesses (corporate income taxes).

question

Command Economy

answer

An economic system in which the government decides, at least to some degree, the answer to all four basic economic questions. They decide what goods and services will be produced, how they will be produced, for whom available goods and services will be produced, and who owns and controls the major factors of production. Includes both Socialism and Communism.

question

Socialism

answer

Key industries are owned and controlled by the government. Private ownership of smaller business may be permitted to varying degrees. What is produced is based on national goals, which are based on projected needs and the availability of resources. Aims are the equitable distribution of income, the elimination of poverty and the distribution of social services to all who need them. Drawbacks are increased taxation and loss of incentive/motivation for both individuals and business owners.

question

Communism

answer

Karl Marx considered the father of communism. Aims for a classless society whose citizens together owned all economic resources. All workers contribute to this communist society according to their ability and would receive benefits according to their need. The economic questions are answered through centralized government plans. Emphasis is placed on the production of goods the government needs rather than on the products that consumers want, so there are frequent shortages of consumer goods.

question

Productivity

answer

The average level of output per worker per hour. An increase in productivity results in economic growth because a larger number of goods and services are produced by a given labor force.

question

Identify the ways to measure economic performance.

answer

Unemployment rate, consumer price index (CPI), producer price index (PPI), Gross Domestic Product (GDP), Consumer Confidence Index.

question

Gross Domestic Product

answer

The total dollar value of all goods and services produced by all people within the boundaries of a country during a one-year period. Allows for comparisons between the United States and other countries because it is the standard used in international guidelines for economic accounting.

question

Inflation

answer

The general rise in the level of prices.

question

Deflation

answer

a general decrease in the level of prices.

question

Unemployment Rate

answer

The percentage of a nation's labor force unemployed at any time.

question

Consumer Price Index (CPI)

answer

A monthly index that measure the changes in prices of a fixed basket of goods purchased by a typical consumer in an urban area. Goods included can be food and drinks, transportation, housing, clothing, medical care, recreation, education, communication etc. Economists use CPI to determine the effect of inflation on the nation's economy and also individual consumers.

question

Producer Price Index (PPI)

answer

Measures prices that producers receive for their finished goods. Changes in the PPI reflect price increases or decreases at the wholesale level so it is an accurate predictor of both changes int he CPI and prices that consumers will pay for many everyday necessities.

question

Consumer Confidence Index

answer

A measure of how optimistic of pessimistic consumers are about the nation's economy. This measure is usually reported on a monthly basis.

question

Business Cycle

answer

The recurrence of periods of growth and recession in a nation's economic activity. The changes that result from either economic growth or downturn affect the amount of products and services that consumers are willing to purchase and the amount of products and services produced by business firms. Consists of four phases: the peak (sometimes called prosperity), recession, the trough, and recovery (sometimes called expansion).

question

Peak Period (prosperity)

answer

First phase of business cycle. Economy is at its highest point and unemployment is low. total income is relatively high. As long as the economic outlook remains prosperous, consumers are willing to buy products and services. Business often expand and offer new products and services during the peak period to take advantage of consumers' increased buying power.

question

Recession

answer

Second phase of business cycle. Two or more consecutive three-month periods of decline in a country's GDP. Unemployment rises during a recession so total buying power declines. Pessimism stifles both consumer and business spending. As buying power decreases, consumers tend to become more value conscious and reluctant to purchase nonessential items. Companies and government at all levels postpone or go slow on major projects during a recession. Many business focus on producing the products and services that provide the most value to their customers.

question

Depression

answer

Severe recession that lasts longer than a typical recession and has a larger decline in business activity when compared to a recession. A depression is characterized by extremely high unemployment rates, low wages, reduced purchasing power, lack of confidence in the economy, lower stock values, and a general decrease in business activity.

question

Trough

answer

Third phase of business cycle. The trough of a recession or depression is the turning point where a nation's production and employment bottom out and reach their lowest levels.

question

Monetary Policy

answer

The Federal Reserve's decisions that determine the size of the supply of money in the nation and the level of interest rates. Measure to offset the effects of recession/depression.

question

Fiscal Policy

answer

The government can influence the amount of savings and expenditures by altering the tax structure and changing the levels of government spending. Measure to offset the effects of recession/depression.

question

Federal Deficit

answer

A shortfall created when the federal government spends more in a fiscal year than it receives.

question

National Debt

answer

The total of all federal deficits. Roughly 16 trillion.

question

Recovery (expansion)

answer

Fourth phase of the business cycle. The movement of the economy from recession or depression back to prosperity. High unemployment rates decline, income increases, and both the ability and the willingness to buy rise.

question

Business Competition

answer

A rivalry among businesses for sales to potential customers. Competition ensures that a firm will survive only if it serves its customers well by providing products and services that meet needs in a capitalistic economy.

question

Four types of business compeition

answer

Perfect competition, monopolistic competition, oligopoly, and monopoly.

question

Perfect (or pure) Competition

answer

The market situation in which there are many buyers and sellers of a product, and no single buyer or seller is powerful enough to affect the price of that product. Very rare.

question

Five concepts needed for perfect competition.

answer

1) We are discussing the market for a single product, such as bushels of wheat. 2) There are no restrictions on firms entering the industry. 3) All sellers offer essentially the same product for sale. 4) All buyers and sellers know everything there is to know about the market. 5) The overall market is not affected by the actions of any one buyer or seller.

question

Supply

answer

The quantity of a product that producers are wiling to sell at each of various prices.

question

Demand

answer

The quantity that buyers are willing to purchase at each of various prices. Buyers will buy more of a product when its price is low and buy less when its price is high.

question

Market Price

answer

Also the equilibrium point of the supply/demand curve. The price at which the quantity demanded is exactly equal to the quantity supplied. Market prices are affected by anything that affects supply and demand.

question

Monopolistic Competition

answer

A market situation in which there are many buyers along with a relatively large number of sellers. The various products available are very similar in nature, and they are all intended to satisfy the same need. However, each seller attempts to make its product different from the others by providing unique product features, an attention-getting name, unique packaging, or services such as free delivery or a lifetime warranty.

question

Product Differentiation

answer

The process of developing and promoting differences between one's products and all competitive products.

question

Oligopoly

answer

A market (or industry) situation in which there are few sellers. Usually the sellers are quite large, and sizable investments are required to enter into their market. Examples: Automobile, airline, car rental, cereal, farm implement industries. With few sellers, the market actions of each seller can have a strong effect on competitors's sales and prices. IE, if one car maker lowers their prices others will follow suit to avoid losing their market share. Product differentiation is a major competitive weapon due to the lack of price competition.

question

Monopoly

answer

A market (or industry) with only one seller, and there are barriers to keep other firms from entering the industry. There is no close substitute for the product or service. The business may seem to have complete control over price, but no firm can set its price so high just because there is no competition as they would soon find it has no customers or salves revenue. Firm must consider the demand for the product when setting the price.

question

Natural Monopoly

answer

Monopolies that are permitted to exist because the public interest is best served by their existence, but they operate under the scrutiny and control of various state and federal agencies. Public utilities are an example.

question

Legal Monopoly or Limited Monopoly

answer

Is created when a government entity issues a franchise, license, copyright, patent, or trademark. For example, a copyright exists for a specific time period and can be used to protect the owners of written materials from unauthorized use by competitors that have not shared in the time, effort, and expense required for their development. In example, Microsoft owns the rights to its software so it enjoys a legal monopoly.

question

Standard of Living

answer

Loose, subjective measure of how well of an individual or society is, mainly in terms of want satisfaction through goods and services.

question

Domestic System

answer

Method of manufacturing in which an entrepreneur distributed raw materials to various homes, where families would process them into finished goods. The entrepreneur then offered the goods for sale.

question

Factory System

answer

Method of manufacturing in which all the materials, machinery, and workers required to manufacture a product are assembled in one place.

question

Specialization

answer

The separation of a manufacturing process into distinct tasks and the assignment of different tasks to different individuals.

question

Service Economy

answer

An economy in which more effort is devoted to the production of services than to the production of goods and services. IE, restaurants, laundries, real estate, movie theaters etc.

question

Social Media

answer

An online interaction that allows people and businesses to communicate and share ideas, personal information, and information about products or services.

question

Sustainability

answer

Creating and maintaining the conditions under which humans and nature can exist in productive harmony while fulfilling the social, economic, and other requirements of present and future generations.

question

Ethics

answer

The study of right and wrong and of the morality of the choices individuals make. An ethical decision or action is one that is 'right' according to some standard of behavior.

question

Business Ethics

answer

The application of moral standards to business standards.

question

Factors that Affect the Level of Ethical Behavior in an Organization

answer

Individual factors Social factors Opportunity

question

Individual Factors (as a Factor Affecting Ethics)

answer

Individual knowledge of an issue- those well informed on an ethical issue will know to take steps to avoid it whereas a less informed person may take action unknowingly that leads to an ethical quagmire. Personal Values- An individual's moral values and central, value-related attitudes also clearly influence their business behavior. Personal Goals- The types of goals and the manner in which they are pursued have an impact on that individual's behavior in an organization.

question

Social Factors (as a Factor Affecting Ethics)

answer

Cultural Norms- these norms may vary from one culture to another. Co-workers- The actions and decisions of co-workers will shape a person's sense of business ethics. If your co-workers use company resources for personal gain then you may feel it is okay to do that as well. Significant Others- spouses, friend's and relatives moral values and attitudes affect an employee's perception of what is ethical and unethical behavior. Use of Internet- Internet presents new challenges as employees have easy access to websites and their online behavior may be offensive to co workers or the company.

question

Opportunity (as a Factor Affecting Ethics)

answer

Presence of opportunity- Opportunity refers to the amount of freedom an organization gives an employee to behave unethically. Some organizations have policies and procedures to reduce the opportunity to be unethical. Ethical Codes- The existence of an ethical code and the importance management places on this code are other detriments of opportunity. Enforcement- The degree of enforcement of company policies, procedures, and ethical codes is a major force affecting opportunity. When violations are dealt with consistently and firmly, the opportunity to be unethical is reduced.

question

Sarbanes-Oxley Act of 2002

answer

Provides sweeping legal protection for those who report corporate misconduct. Also deals with corporate responsibility, conflicts of interest, and corporate accountability.

question

Code of Ethics

answer

A written guide to acceptable and ethical behavior as defined by an organization; it outlines uniform policies, standards, and punishments for violations.

question

Whistle-blowing

answer

Informing the press or government officials about unethical practices within one's organization. Whistle-blowers who report corporate misconduct are protected by Sarbanes-Oxley Act. Any executive who retaliates against a whistle-blower can be held criminally liable. The Whistleblower Protection Act of 1989 protects federal employees who report an agency's misconduct.

question

Social Responsibility

answer

The recognition that business activities have an impact on society and the consideration of that impact in business decision making.

question

Economic Model of Social Responsibility

answer

Holds that society will benefit most when business is left alone to produce and market profitable products that society needs. A manager who adopts this attitude sees social responsibility as someone else's job. Reasoning is stockholders invest to earn a return on investment and not due to the firm's social responsibility. Also, profitable firms pay taxes that are used to meet the needs of society.

question

Socioeconomic Model of Social Responsibility

answer

The concept that business should emphasize not only profits but also the impact of its decisions on society. This has been recently adopted due to three reasons: 1) business is dominated by the corporate form of ownership, and the corporation is the creation of society, of the corporation doe snot perform as a good citizen, society can and will demand changes. 2) Many firms have begun to take pride in their social responsibility records. 3)Many business people believe that it is in their best interest to take initiative in this area, the alternative can lead to legal action brought against the firm.

question

Arguments for Increased Social Responsibility

answer

1) Because business is a part of our society, it cannot ignore social issues. 2) Business has the technical, financial, and managerial resources needed to tackle today's complex social issues. 3) By helping resolve social issues, business can create a more stable environment for long-term profitability. 4) Socially responsible decision making by firms can prevent increased government intervention, which would force businesses to do what they fail to do voluntarily. These arguments are based on the assumption that a business has a responsibility not only to its stockholders but also to its customers, employees, suppliers, and the general public.

question

Arguments Against Increased Social Responsibility

answer

1) Business managers are responsible primarily to stockholders, so management must be concerns with providing a return on owners' investments. 2) Corporate time, money, and talent should be used to maximize profits, not to solve society's problems. 3) Social problems affect society in general, so individual businesses should not be expected to solve these problems. 4) Social issues are the responsibility of government officials who are elected for that purpose and who are accountable to the voters for their decisions. These arguments are based on the assumption that the primary objective of business is to earn profits and that government and social institutions should deal with social problems.

question

International Business

answer

Encompasses all business activities that involve exchanges across national boundaries.

question

Absolute Advantage

answer

The ability or produce a specific product more efficiently than any other nation.

question

Comparative Advantage

answer

The ability to produce a specific product more efficiently than any other product.

question

Exporting

answer

Selling and shipping raw materials or other products to other nations.

question

Importing

answer

Purchasing raw materials or products in other nations and bringing them into one's own country.

question

Balance of Trade

answer

The total value of its exports minus the total value of its imports over some period of time. If a country imports more than it exports, its balance of trade is negative and said to be unfavorable (because the country must export money to pay for its excess imports).

question

Trade Deficit

answer

Negative balance of trade.

question

Balance of Payments

answer

The total flow of money into a country minus the total flow of money out of that country over some period of time. Includes not only imports and exports, but also investments, money spent by foreign tourists, payments by foreign governments, aid to foreign governments and all other receipts and payments.

question

Trade restrictions

answer

Barriers to free trade. Usually imposed on imports as nations want to export as much as possible.

question

Import Duty or Tariff

answer

Tax levied on a particular foreign product entering a country.

question

Revenue Tariffs

answer

Imposed solely to generate income for the government.

question

Protective Tariffs

answer

Imposed to protect a domestic industry from competition by keeping the price of competing imports level with or higher than the price of similar domestic products.

question

Dumping

answer

Exportation of large quantities of a product at a price lower than that of the same product in the home market. Dumping drives down the price of the domestic item.

question

Nontariff Barrier

answer

A nontax measure imposed by a government to favor domestic over foreign suppliers. Create obstacles to the marketing of foreign goods in a country and increase costs for exporters.

question

Import Quota

answer

A limit on the amount of a particular good that may be imported into a country during a given time period. May be set in terms of quantity or value.

question

Emargo

answer

Complete halt to trading with a particular nation or of a particular product. Often used as a political weapon.

question

Foreign-Exchange Control

answer

A Restriction on the amount of a particular foreign currency that can be purchased or sold. Has the effect of limiting imports from the country whose foreign exchange is being controlled.

question

Currency Devaluation

answer

The reduction of value of a nation's currency relative to the currencies of

question

Cultural Barriers

answer

Can impede the acceptance of products in foreign countries.

question

Reasons for Trade Restrictions

answer

1) To equalize a nation's balance of payments. 2) To protect new or weak industries. 3) To protect national security- to keep technological products that must be kept out of the hands of potential enemies, so no defense-related goods can be exported to unfriendly nations. 4)To protect heal of citizens. 5) To protect domestic jobs.

question

Reasons against Trade Restrictions

answer

1) Higher prices for consumers. 2) Restriction of consumers' choices. 3) Misallocation of intentional resources- the protection of weak industries results in the inefficient use of limited resources. 4) Loss of jobs- the restriction of imports by one nation leads to cutbacks and loss of jobs of the other nation.

C711 WGU Unit 1 – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards