Chapter 1: Business Flashcards
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tangible products such as compiters, clothing, cars, and appliances
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goods
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intangible products (things you cant hold in your hand) such as education, insurance, recreation, etc.
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services
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an activity that seeks to provide goods and services to others while operating at a profit.
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business
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a person who risks time and money to start and manage a business
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entrepreneur
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the total amount of money a business takes in during a given period by selling goods and services
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revenue
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the amount of money a business earns above and beyond whatbit spends on salary and expenses.
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profit
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when a businesses expenses are more than its revenues.
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loss
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the chance an entrepreneur takes of losing time and money on a business that may not prove to be profitable.
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risk
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the amount of goods and services people can buy with the money they have
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standard of living
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the general well being of a society in terms of its political freedom, natural environment, health, safety , amount of leisure, etc
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quality of life
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all the people who stand to gain or lose by the policies and activities of a business who s concerns the business needs to address
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stakeholders
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contracting with other companies (often in other countries) to do some or all of the functions of a firm, like its production or accounting tasks
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outsourcing
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an organization whose goals do not include making a personal profit forits owners or organization.
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nonprofit organization
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land labor capital entrepreneurship knowledge
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factors of production
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land and other natural resouces are used to make homes, cars, and other products
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land
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people have always been an important resource in producing goods and services
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labor
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machines, tools, buildings, and other means od manufacturing.
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capital
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everything from phones and copiers to computers and programs that make businesses more effective, efficient, and productive.
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technology
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the amount of output you generate given the amount of input ( hours worked)
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productivity
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the buying and selling of goods over the internet
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e-commerce
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an electronic storage file for informayion
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database
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giving frontline workers the responsiblity, authority, freedom, training, and equipment they need to respond quickly to customerrequests
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enpowerment
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the study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics
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demography
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Answer: False LG: 1/LL: 1 Page: 4
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Any organization that produces a good or service can be classified as a business.
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Answer: True LG: 1/LL: 1 Page: 4
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Businesses seek to earn a profit by providing goods and services to others.
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Answer: True LG: 1/LL: 1 Page: 8 1-2.
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Businesses and nonprofit organizations often strive to accomplish the same objectives.
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Answer: True LG: 1/LL: 1 Page: 6 1-3.
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Stakeholders are all the people who stand to gain or lose by the policies and activities of a business.
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Answer: False LG: 1/LL: 2 Page: 5 Rationale: In the pursuit of profit, businesses create jobs, produce goods and services that contribute to a higher standard of living, and pay taxes that support important government programs. Thus, businesses benefit others in society as well as their owners. 1-4.
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Since businesses strive to earn a profit, they benefit their owners at the expense of the rest of society.
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Answer: False LG: 1/LL: 2 Page: 5 Rationale: The standard of living depends on the price level as well as the income people earn. As our text indicates, people in Germany and Japan may earn more money than Americans, but they have a lower standard of living because the prices they pay for goods and services are higher.
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People living in the nation of Carpozia earn more money than people living in the country of Wagonia. This will result in the citizens of Carpozia enjoying a higher standard of living than the citizens of Wagonia.
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Answer: False LG: 1/LL: 2 Page: 7 Rationale: Balancing the demands of all stakeholders is a tremendous challenge for organizations. Tradeoffs are common. Benefiting one group may have a negative impact on another group of stakeholders.
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An effort to please one group of stakeholders eventually pleases all stakeholders.
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Answer: False LG: 1/LL: 2 Page: 7 Rationale: A charitable organization is not classified as a business since it does not seek a profit. Charities are classified as nonprofit organizations.
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A charitable organization, such as the Red Cross or Salvation Army, is best classified as a small business.
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Answer: True LG: 1/LL: 2 Page: 7-8 Rationale: Businesses are not the only organizations that produce goods and services. Government agencies, public schools, and charities such as the Salvation Army provide goods or services, but are classified as nonprofit organizations since there is no profit motive.
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Nonprofit organizations are similar to businesses in that they often provide goods and services that satisfy the needs of society.
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Answer: False LG: 1/LL: 2 Page: 4 Rationale: Profit is determined by subtracting expenses from revenue. Thus a firm with stable or even declining sales might be able to improve profits by reducing expenses.
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The only way a firm can increase its profits is to increase its sales revenue.
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Answer: True LG: 2/LL: 1 Page: 9
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Starting a business is a riskier path toward business success than working your way up the ranks of a large business.
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Answer: True LG: 2/LL: 1 Page: 11
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The two factors of production that are the most important for creating wealth are entrepreneurship and the effective use of knowledge.
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Answer: True LG: 2/LL: 2 Page: 11 Rationale: Poor nations often have plenty of labor and land, as well as access to capital. However, the absence of entrepreneurship and knowledgeable workers seems to be the reason that most poor countries remain poor.
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If they wish to create more wealth, poor nations should focus on policies that increase entrepreneurship and the effective use of knowledge.
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Answer: False LG: 3/LL: 2 Page: 13 Rationale: One of the things a government can do to encourage entrepreneurship and the formation of wealth is to keep regulations and taxes to a minimum.
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The government of the small nation of Bingland is trying to achieve a high quality of life by imposing strict regulations to protect the environment and ensure safe working conditions in factories and mines. The government also has established ambitious programs to help the poor, financing them by setting high tax rates. These efforts by Bingland's government should create an atmosphere that encourages entrepreneurship.
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Answer: True LG: 4/LL: 1 Page: 15
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An increase in productivity indicates that more can be produced in a given time period with the same amount of resources.
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Answer: True LG: 4/LL: 1 Page: 17
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Bar codes allow retailers to scan information about the products consumers buy directly into a database.
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Answer: False LG: 5/LL: 2 Page: 18 Rationale: Successful businesses are customer-driven, meaning that they listen to the wants and needs of customers and adjust their products, policies and practices to better meet customer demands.
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The primary focus of successful firms is designing and producing high quality goods. Advertising is then used to convince consumers to buy their superior products.
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Answer: False LG: 6/LL: 1 Page: 23
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A "cafeteria-style benefits" package reduces the number of benefits options offered to employees in order to simplify and standardize their choices.
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Answer: False LG: 7/LL: 1 Page: 24
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Manufacturers in China, India and Mexico pose little threat to U.S, manufacturers because they are unable to meet the quality levels demanded by American and European consumers.
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Answer: True LG: 8/LL: 1 Page: 26
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There are more high-paying jobs in the service sector than in the goods-producing sector.
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Answer: A LG: 1/LL: 1 Page: 4
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____________ is the amount a business earns over and above what it spends for salaries and other expenses. A) Profit B) Revenue C) Interest D) Dividends
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Answer: A LG: 1/LL: 1 Page: 5
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A business incurs a ___________ if its costs and expenses exceed its revenues. A) loss B) liability C) debit D) dividend
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Answer: B LG: 1/LL: 1 Page: 5
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The total amount of money that businesses earn by selling goods and services is called ________. A) profit B) revenue C) loss D) retained earnings
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Answer: A LG: 1/LL: 1 Page: 5
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Often in business the greater the risk, the: A) greater the potential reward. B) lower the expected revenues. C) lower the value provided to society. D) greater the number of stakeholders.
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Answer: A LG: 1/LL: 2 Page: 4 Rationale: An entrepreneur is a person who risks time and money to start and manage a business.
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A key characteristic of entrepreneurs is that they: A) are willing to accept the risks involved in starting and managing a business. B) have a high level of scientific and technical expertise. C) possess a great deal of personal wealth. D) have experience in running large, complex organizations.
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Answer: A LG: 1/LL: 2 Page: 8 Rationale: A business is an activity that seeks to profit by providing goods and services to others. Nonprofit organizations, such as charities and government agencies, also provide goods and services in order to satisfy the needs of people within a society, but they do not seek a profit.
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Business and nonprofit organizations are similar in that they both: A) contribute to the welfare of society. B) seek to earn a profit. C) have a limited life. D) must be controlled by a board of directors.
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Answer: C LG: 2/LL: 1 Page: 10
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As a factor of production, the term capital includes: A) stocks and bonds issued by corporations. B) natural resources such as land and water. C) tools, machinery, and buildings. D) services provided by the government that enable businesses to be more productive.
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Answer: D LG: 2/LL: 1 Page: 11
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The two factors of production that seem to contribute the most to making countries rich are: A) land and labor. B) land and capital. C) entrepreneurship and labor. D) entrepreneurship and knowledge.
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Answer: A LG: 3/LL: 1 Page: 13
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In countries where businesses are government owned: A) there is less incentive to work hard. B) the right amount of each good is produced. C) profits tend to be higher. D) the quality of goods is high but profits are low.
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Answer: C LG: 3/LL: 1 Page: 13
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High tax rates tend to: A) promote economic development. B) make a nation's currency tradable. C) discourage entrepreneurship. D) reduce the amount of money created by the government.
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Answer: A LG: 3/LL: 2 Page: 13 Rationale: Some cities and states in the U.S. have much higher taxes and more restrictive regulations than other areas. Areas that have high taxes and restrictive regulations tend to drive entrepreneurs out; areas with lower taxes and fewer regulations tend to attract them.
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In the United States, the level of taxes and types of government regulations in different states and cities: A) influence where entrepreneurs locate their businesses. B) are standardized according to the Uniform Tax Act. C) appear to have no effect on the creation of wealth. D) have little or no effect on the incentives of entrepreneurs.
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Answer: B LG: 3/LL: 3 Page: 13 Rationale: States and local areas with high taxes or excessive regulations are losing businesses, while those with lower taxes and fewer regulations are attracting more businesses.
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A review of the decision making process as to where to locate a new business venture suggests that: A) entrepreneurs seem to like professional sports. B) entrepreneurs respond to differences in tax rates and government regulations. C) risk has no bearing on where businesses locate their operations. D) entrepreneurs almost always start their businesses within 25 miles of their hometown.
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Answer: A LG: 4/LL: 1 Page: 17
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The series of lines on a product packaging that the cashier scans when you check out at a grocery store or discount store is called a: A) bar code. B) zip code. C) scan code. D) laser code.
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Answer: A LG: 5/LL: 1 Page: 18
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Successful businesses are keenly focused on their: A) customers. B) managers. C) creditors. D) bureaucrats.
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Answer: D LG: 5/LL: 2 Page: 20 Rationale: Empowerment means giving front-line workers more freedom to respond quickly to customer requests.
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Lamar is a salesperson for Bi-State Direct. He really appreciates the amount of freedom and authority Bi-State gives its sales people in order to better meet the needs of customers. Lamar's experience suggests that Bi-State practices: A) centralized management. B) fast response theory. C) enfranchisement. D) empowerment.
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Answer: D LG: 6/LL: 1 Page: 23
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Some companies allow workers to ___________, using telephones, faxes, and e-mail to do their work at home. This benefits workers with children since it allows them to stay at home and raise a family while still earning an income. A) outsource B) subcontract C) net-work D) telecommute
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Answer: D LG: 7/LL: 1 Page: 24
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An increase in global trade will bring about a(n): A) increase in prices. B) decrease in jobs. C) increased political instability. D) increase in global competition.
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Answer: C LG: 7/LL: 2 Page: 24 Rationale: Businesses have gone beyond simply competing with organizations in other nations. They have begun to cooperate in ways that have the potential to create growing world markets and promote peace and prosperity.
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Cooperation among firms from different nations is: A) likely to become a thing of the past as competition among nations increases. B) illegal and will eventually hurt consumers. C) a way to expand world markets and achieve greater world prosperity. D) likely to result in a loss of jobs in poor nations as production shifts to wealthier countries.
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Answer: A LG: 8/LL: 1 Page: 26
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Businesses that produce and sell tangible products such as appliances, furniture, and clothing are part of the: A) manufacturing sector. B) knowledge-based sector. C) service sector. D) production sector.
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Answer: D LG: 8/LL: 2 Page: 26 Rationale: All of these companies provide an intangible product. Thus, they are included in the service sector.
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Appliance repair firms, tax consultants, law firms, and insurance companies are all business firms that are part of the: A) production sector. B) management sector. C) neo-industrial sector. D) service sector.
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Answer: B LG: 1/LL: 2 Page: 4 Rationale: An entrepreneur is a person who assumes the risk of staring a business.
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Shelley recently opened a new restaurant specializing in fast foods prepared with less fat and calories for health-conscious diners who are in a hurry. Shelley knows that there are some risks associated with opening and managing a restaurant, but she is confident that she can earn a profit. Shelley is an example of a(n): A) arbitrageur. B) entrepreneur. C) speculator. D) account manager.
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Answer: A LG: 3/LL: 1 Page: 13
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In countries where businesses are government owned: A) there is less incentive to work hard. B) the right amount of each good is produced. C) profits tend to be higher. D) the quality of goods is high but profits are low.
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Answer: B LG: 3/LL: 2 Page: 13 Rationale: Establishing regulations tends to increase the cost and red tape associated with operating a business. This would discourage entrepreneurship.
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All of the following policies would tend to foster entrepreneurship except: A) establishing a currency that is tradable on world markets. B) establishing more regulations to protect the environment. C) developing policies to reduce corruption in business and government. D) allowing private ownership of businesses.
