MGMT 1 MIDTERM – Flashcards
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An economist is examining how consumers in the automobile market have responded to recent price increases by car manufacturers. He is examining a microeconomic situation.
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True
Microeconomics examines the economic behavior of consumers and organizations in particular markets.
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History shows that free-market capitalism leads to a fair and equitable distribution of wealth.
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False
In many nations, capitalism has led to an unequal distribution of wealth. In fact, some business people have sought personal gain through the exploitation of workers. Examples of this sort of exploitation include child labor, sweatshops employing immigrants for long hours at low wages under dismal working conditions, and even outright slavery.
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A major distinction between capitalism and socialism concerns the distribution of income.
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True
Under capitalism, self-interest is the driving force, so people must be rewarded for what they produce. This can result in unequal distribution of income. Under socialism, the emphasis is on a more equal distribution of income, so those earning more are often expected to share their incomes with those who earn less. This is often accomplished by placing high tax rates on people with high incomes and using the tax revenues to pay for programs that benefit people with lower incomes.
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Although changes in the CPI provide interesting insights into the overall performance of the economy, these changes have little practical impact on the lives of ordinary people.
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False
Changes in the CPI indicate whether the economy is experiencing inflation, disinflation, or deflation. For example, a significant increase in the CPI indicates that prices of a wide variety of consumer goods are rising. Moreover, changes in the CPI can directly influence the wages some people receive (through cost of living adjustments), the interest rates some people pay, the benefits the government pays to various recipients, and the tax brackets that are used to determine the income tax rate applied to earnings.
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If the government wants to jump-start the economy resulting in more consumer spending, it will raise taxes.
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False
Fiscal policy refers to the federal government's efforts to keep the economy stable by increasing or decreasing taxes or government spending. When the government raises taxes, the result is a tightening of consumer and business spending, which has the tendency of slowing the economy. This draws money away from the private sector.
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The Fed is concerned that the economy is growing too rapidly. Given these concerns, it is likely to pursue policies to restrict the supply of money and raise interest rates.
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True
The Fed is in charge of monetary policy. This involves controlling the supply of money and interest rates. When the Fed wants to slow down the economy it will restrict the money supply and increase interest rates to reduce the amount of borrowing.
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Adam Smith believed that countries would prosper if business people were free to start and run their own businesses. Business people would make a profit by providing the goods, services and ideas that others in the economy wanted, and they would hire others to help increase those profits, leading to social and economics benefits for many. This idea was called the ________.
kinked demand theory
invisible hand
spending multiplier
demand accelerator
answer
Invisible hand
Adam Smith believed that self-interest would lead profit-seeking entrepreneurs to produce goods and services wanted by consumers, and to hire others to grow their businesses. This would prove to be social and economic gain for the entrepreneur and for others.
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When the market price of a good is below the equilibrium price, and all other determinants are unchanged:
the quantity demanded will exceed the quantity supplied.
the supply curve will be to the right of the demand curve.
a surplus will exist in the market.
the government will regulate the price of the good to ensure equilibrium is attained.
answer
The quantity demanded will exceed the quantity supplied.
At the equilibrium price, quantity supplied equals quantity demanded. However, as price falls the quantity demanded of a product tends to increase, while the quantity supplied decreases. The result is that quantity demanded will exceed the quantity supplied when the market price is below the equilibrium price, so eventually a shortage will exist. Of course, the presence of a shortage will put upward pressure on prices, so that the market price will move toward the equilibrium price.
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The market price of apples is currently rising. In a free-market economy, the most likely explanation of this price change is that:
the government has decided to set a higher price so that firms competing in the market make an adequate profit.
there is a shortage in the market for apples.
the supply of money has decreased.
the equilibrium price is lower than the market price.
answer
There is a shortage in the market for apples.
In a free market, prices are the result of the interaction of supply and demand. Market prices tend to rise when there is a shortage (i.e. when the quantity demanded exceeds the quantity supplied), and fall when there is a surplus (i.e. when quantity supplied exceeds quantity demanded).
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Which of the following people would tend to favor a communist economy?
John wants to live in a country with low marginal tax rates.
Robin wants to live in a country that encourages rapid economic growth.
Liz wants to live in a country where the government makes almost all of the economic decisions.
Fred prefers to live in a country with limited government regulation.
answer
Liz wants to live in a country where the government makes almost all of the economic decisions.
Communism is an economic and political system in which the state makes almost all economic decisions and owns almost all the major factors of production.
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The next wave of marketable innovations may involve new ways to produce and conserve energy. If we can turn new technology into marketable products and services that produce energy to run our businesses and homes, the U.S. could see a surge in output of goods and services. The Department of Economic Development would document this surge by measuring the ____.
gross domestic product
consumer price index
consumer marginal index
number of workers who are frictionally employed
answer
Gross domestic product
GDP is the measure of the value of a nation's total output of final goods and services over a given year.
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One reason the CPI is monitored very closely by government, businesses, and workers is that:
it indicates whether we are running a budget surplus or a deficit.
some wages, interest rates, tax rates, and government benefits are tied to changes in the value of the CPI.
it is the best measure of worker productivity in the service sector.
the gross domestic product is computed from the reported increases in the CPI.
answer
Some wages, interest rates, tax rates, and government benefits are tied to changes in the value of the CPI.
As a measure of inflation, the CPI is an index which is often used to determine cost of living increases in wages, salaries, interest rates, and other payments. Income tax brackets and some government benefits, such as Social Security payments, are also adjusted when the CPI changes.
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Emily recently quit her job at a major corporation because she saw little chance for advancement. Although she is still searching for a new position, Emily believes the economy is healthy and she hears that several firms are hiring people with her qualifications. Which of the following statements about Emily's current situation is most accurate? Emily is:
not considered unemployed because she voluntarily quit her job.
an example of cyclical unemployment.
an example of frictional unemployment.
likely to find employment quickly if she seeks training in a different field.
answer
An example of frictional unemployment.
Frictional unemployment refers to job seekers who are entering the labor market for the first time (or after a long absence) or are temporarily between jobs. Workers who are frictionally unemployed typically have skills that are in demand, but are in the process of job search and have not yet accepted employment. This appears to be the case for Emily.
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While scanning the movies section in your local online newspaper, you click on the business section by mistake. While you're there, you quickly scan a report that says government spending will again exceed tax revenues in the current year. This means that the:
total national debt is likely to increase.
national deficit is likely to decrease.
rate of inflation is likely to fall.
monetary policies pursued by the Fed need tightening.
answer
Total national debt is likely to increase.
When its tax revenues fall short of its expenditures, the federal government runs a deficit. Since the national debt is the sum of all deficits, running another deficit will increase the debt.
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In one of his weekly broadcasts, the Federal Reserve Chairman remarked that inflation had begun to tick upward. However, unemployment in the U.S. was still quite high and economic growth had slowed. With short-term interest rates close to 0 (zero), the Chair did not visualize that ____________ policy would be able to do anything for the high unemployment problem. He felt that _______ policy would be more useful for bolstering employment, but that would require local and state governments and the federal government to provide tax breaks for corporations.
federal; state
fiscal; monetary
monetary; fiscal
fiscal; federal
answer
Monetary; fiscal
Monetary policy is the responsibility of the Federal Reserve Bank and the open market committee. Fiscal policy involves raising and lowering taxes. It is the responsibility of Congress to pass legislation, which affects the amount of taxes businesses pay.
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The only real purpose of a business is to make money for entrepreneurs.
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False
Businesses don't just make money for entrepreneurs. Businesses provide all of us with necessities such as food, clothing, housing, medical care, and transportation, as well as other goods and services that make our lives easier and better.
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The amount of profit or loss earned by a business can be found by subtracting the firm's expenses from its revenues.
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True
Revenues minus expenses = profits.
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Political freedom, quality education, access to health care, and a clean environment are all factors that contribute to an improved quality of life.
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True
The quality of life focuses on the general well-being of a society, and includes factors such as freedom, security, leisure time, and other factors beyond the goods and services people can buy with their incomes.
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Nicki has joined with several other investors to form a new company that sells foot-care products to consumers over the Internet. Nicki has invested in a B2C e-commerce company.
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True
B2C companies specialize in selling goods to consumers over the Internet.
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Businesses use demographic studies to understand where people live, their lifestyles, and what they are likely to buy.
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True
Demography is the statistical study of the human population to learn its size, density and characteristics. Since many goods and services appeal to customers with specific demographic characteristics (such as age or income), studying demographic trends can help businesses determine whether the demand for a good is likely to rise or fall.
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Demographic trends suggest that businesses will benefit from offering flexible work schedules, elder care, and child care to help employees balance the demands of job and family.
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True
The increase in the number of single parent families is a powerful demographic trend. Successful organizations will adjust and accommodate these changes in their social environment.
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The current Social Security system will ensure that the young people of today will have Social Security benefits in the future when they retire.
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False
The current Social Security system means that today's workers pay for today's retirees. To date this has worked since there are more workers supporting each retiree. However, soon, less money will be coming into Social Security than will be going out and there will be a shortfall, suggesting that today's young people will not have Social Security benefits in the future.
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In most industries, the only producers that pose a serious threat to U.S. manufacturers are those in Japan and Western Europe.
T/F
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False
Producers in countries like China and India have become major U.S. competitors. For example, Lenovo, a Chinese firm, recently bought IBM's PC unit.
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One of the problems with globalization is that distribution systems and communication systems lack efficiency.
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False
Distribution systems and communication systems have improved dramatically, and have contributed toward world trade.
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Historically jobs lost in one sector of the economy have been replaced by increased employment opportunities in other sectors.
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True
The history of our nation's economy shows that as jobs were lost in agriculture earlier in the last century, displaced farm workers were often able to find employment in the growing manufacturing sector. More recently, declines in manufacturing employment have been offset by rapid growth in the service sector. The latest growth area for new jobs is in information technology.
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Dee Duction is a financial planner who helps people find ways to save for retirement and lower their taxes. Dee is employed in the service sector of the economy.
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True
The service sector produces intangible goods. Financial planning is one type of service.
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Last year, Adventure Enterprises reported revenues of $24 million while its total expenses were $10 million. Based on this information, Adventure reported:
profits of $14 million.
profits of $34 million.
losses of $14 million.
losses off $34 million.
answer
Profits of $14 million.
Profits are found by subtracting costs and expenses from revenues, so Adventure Enterprises profits are $24 million - $10 million = $14 million.
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The standard of living for a nation's people depends mainly on:
the quality of the natural environment.
how much political freedom they have.
their income and the prices of the goods and services they buy.
the amount of labor and capital available employed in the manufacturing sector.
answer
Their income and the prices of the goods and services they buy.
The standard of living of a country refers to the amount of goods and services people can buy with the money they have.
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Leanne owns a nursery. The trucks, handcarts, and forklift she purchased for the business are called __________ investments.
natural resources
intangible resources
current asset
capital
answer
Capital
As a factor of production, capital includes tools, machinery, equipment, such as the trucks, hand carts, and forklift machines mentioned in this question.
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Which of the following is an advantage of utilizing technology?
Technology increases the cost of production.
Technology reduces the need for a marketing plan.
Productivity increases.
Management becomes isolated from the demands of stakeholders.
answer
Productivity increases.
Technology is everything from phones to software programs that make businesses more efficient and productive. Productivity is the amount of output you generate given the amount of input.
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Legal behavior is directly related to our relationships with others, while ethical behavior is not.
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False
Legal behavior and ethical behavior are directly related to our relationships with others.
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Ethical behavior involves the clear and easy choice of right and wrong actions toward others.
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False
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While telling an abusive joke about an ethnic group may not be unlawful, it is unethical.
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True
Humor at someone else's expense is an example of unfair treatment of others.
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Employers should proceed cautiously when designing an employee incentive program that rewards employees strictly on increased sales.
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True
Increased pressure on employees to meet sales quotas can create an environment where management is insensitive to ethical considerations. The text presents an example of this issue with cell phone reps.
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An integrity-based ethics code moves beyond legal compliance in order to create a "do-the-right-thing" climate.
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True
An integrity-based ethics code emphasizes ethically sound behavior and shared accountability among employees.
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Defining a socially responsible company is complicated. Businesses differ from other businesses, as well as the people they serve, on what we mean by "socially responsible."
T/F
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True
The majority of MBA students surveyed said that they would take a lower salary to work for a socially responsible company. But when asked to define a socially responsible company, things got complicated. It appears we want to be socially responsible; we just can't agree on what it involves.
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Laws represent the standards of ________ behavior.
ethical
legal
moral
socially responsible
answer
Legal
Laws are written to protect ourselves from fraud, theft, and violence. Ethics go beyond the law. Many immoral and unethical acts are well within the law.
question
Purposefully understating your firm's income to avoid paying higher taxes is an example of:
an accepted business practice.
tax accountants doing their job.
illegal behavior.
a firm's responsibility to its owners.
answer
Illegal behavior.
The first standard in business ethics is the legality of the activity. Tax evasion is illegal.
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Ethical behavior will result in which of the following?
Mistrust between employees and managers.
Agreements that create benefits for only the shareholders.
Negative publicity from the news media.
Improved self-esteem making us feel good about our decision.
answer
Improved self-esteem making us feel good about our decision.
Decisions that go against our sense of right and wrong make us feel bad-they corrode our self-esteem. Following an ethics-based approach to decision making will result in improved self-esteem.
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When managers disregard ethical concerns, the likely result is:
a reduction in employee turnover.
an improvement in overall manager morale.
a reduction in lawsuits.
a general mistrust between workers and management.
answer
A general mistrust between workers and management.
Corporate standards demonstrated by top management impact the values of the rest of the organization. People learn their standards and values from observing others. Any trust and cooperation between workers and managers must be based on fairness, honesty, openness, and moral integrity.
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The Hum-dinger Corporation recently instituted a corporate ethics code. The president of the company realizes that ethical relationships are based on:
fairness and honesty.
strict penalties for illegal activities.
a full-time compliance officer monitoring employee behavior.
watchdogs and whistleblowers.
answer
Fairness and honesty.
Ethical relationships with a spirit of trust and cooperation are based on fairness, honesty, openness, and moral integrity.
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A very critical last step in the process of establishing an ethics code is ________.
middle management support
training
enforcement
identification of the organizational ethics officer
answer
Enforcement
Enforcement of the ethics code is critical and timely. When management ignores a written code of ethics, it becomes a worthless, shelf document.
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While speaking with his sales force, the director of sales explains, "Anyone caught violating a sales law will be fired." After studying business ethics, you recognize this remark as a reference to the firm's __________ ethics.
technology-based
personal responsibility-based
compliance-based
integrity-based
answer
Compliance-based
A compliance-based ethics code emphasizes the prevention of unlawful behavior by penalizing wrongdoers.
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Business is under pressure from society to be more socially responsible. However, even the strongest advocates for corporate responsibility can't seem to agree:
on what social responsibility involves.
who should be policing businesses' behavior.
if all businesses, large and small, should be held to the same standards.
if politicians should be held to the same standards of behavior.
answer
On what social responsibility involves.
Society is demanding more ethical and moral leadership from business. However, there is uncertainty as to what being socially responsible involves.
question
Some critics of corporate social responsibility view spending money on CSR as:
a necessary evil.
stealing from investors.
important for America.
moving toward capitalism.
answer
Stealing from investors.
CSR critics believe that managers who pursue CSR are doing so with other people's money-money they invested to make more money, not to improve society. They view spending money on CSR activities as stealing from their investors.
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An example of a U.S. import would be the purchase of oil by U.S. companies from Saudi Arabia.
T/F
answer
True
U.S. imports include goods and services that originate in another country purchased by a U.S. citizen or government.
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In order to enjoy the highest standard of living possible, comparative advantage theory states that all nations should strive to become self-sufficient.
T/F
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False
The theory of comparative advantage states that a country should export those goods that it produces most efficiently and import those goods that it cannot produce as efficiently.
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In any given year, the United States' cash outflow to other nations exceeds its cash inflow from other nations.
T/F
answer
True
The U.S. has bought more goods from other nations than it has sold to other nations. Thus it owes more money to other nations than other nations owe the U.S. Its cash outflow exceeds its cash inflow.
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The country of Hasastan exports $250 of goods and services and imports $170 of goods and services. Hasastan has an unfavorable balance of trade of $80.
T/F
answer
False
An unfavorable balance of trade, or trade deficit, occurs when the value of imports exceeds that of exports. In this case, Hasastan has a favorable balance of trade of $80.
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Governments directly participate in global markets through sovereign wealth funds.
T/F
answer
True
Foreign investment in the U.S. indicates foreign investors' preferences over investment in other countries by investing in permanent property and businesses in the U.S.
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The purchase of U.S.-based Anheuser-Busch by Belgian brewer InBev is an example of foreign direct investment.
T/F
answer
True
Foreign direct investment involves the purchase of property, business(s), or another form of investment by a foreign company in another nation other than where the company originates. In this situation, a large Belgian company purchased the assets of another company, in the same industry.
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Since patent and copyright laws are the same in all nations, they are not of much impact to firms that compete globally.
T/F
answer
False
Unfortunately there is no universal set of laws that govern the global market. Companies often must adapt legally market-by-market.
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According to the theory of mercantilism, a country should develop policies that encourage a favorable balance of trade.
T/F
answer
True
The basic idea of mercantilism is to sell more goods to other nations than you buy from them.
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Carrie, a U.S. resident, says that her home computer was made in Japan. Carrie purchased a(n):
imported item.
exported item.
protected good.
generic good.
answer
Imported item.
Importing is buying products made in another country.
question
As a business strategy, the strategy behind "dumping" is to __________.
gain a foothold in a new market
better utilize e-commerce opportunities
avoid trade protectionist laws
achieve eligibility for foreign aid
answer
Gain a foothold in a new market
Dumping is sometimes used to unload surplus products in foreign markets or gain a foothold in a new market by offering products for lower prices than domestic competitors do.
question
Reviewing the recent experience of the United States in global markets reveals that the U.S. has:
a merchandise trade surplus with the rest of the world.
a large trade deficit with China.
avoided becoming a debtor nation.
attracted very little foreign direct investment.
answer
A large trade deficit with China.
Recently, the U.S. ran its highest trade deficit with China.
question
When entering a foreign market, Mountain Stream Brewery entered into an agreement with a local firm to brew and market Mountain Stream's beer. This is an example of:
licensing.
franchising.
foreign direct investment.
foreign subsidiaries.
answer
Licensing
Licensing reduces the risk of entering foreign markets. In this case, Mountain Stream spends little money to produce and market its product in foreign markets. The foreign-based licensee incurs these costs.
question
If a Swiss chocolate firm purchases an American ice cream manufacturer, the American ice cream manufacturer becomes a:
global franchise.
a global joint venture.
foreign subsidiary.
contract manufacturer.
answer
Foreign subsidiary.
A foreign subsidiary is a company that is owned and operated in a foreign nation by another company called the parent company. The Swiss firm Nestl?'s purchase of U.S.-based Dreyer's Ice Cream is an example a Swiss-owned foreign subsidiary operating in the United States.
question
_________________ differences such as insufficient electrical power and transportation systems can present special problems for U.S. firms when attempting to enter global markets.
Physical and environmental
Legal and regulatory
Economic
Governmental
answer
Physical and environmental
Technological and infrastructure differences and other physical environmental challenges impact the type of products that can be successfully exported to various regions of the world. Many less developed countries do not have adequate electricity, while other countries do not use the U.S. standard of 110 volts. Inadequate transportation systems can cause distribution problems for perishable food items.
question
U.S. firms that produce sophisticated military hardware are prohibited from exporting that equipment to "unfriendly" governments, such as Iran. This complete ban on exporting sensitive technology to specific countries is an example of a(n):
import quota.
boycott.
tariff.
embargo.
answer
Embargo
An embargo is a complete ban on the import or export of certain products.
question
If a sole proprietorship fails, the owner may lose whatever was invested in the business; however, the owner's personal assets are not at risk.
T/F
answer
False
Sole proprietors have unlimited liability for the debts of their business. This means that if their business gets into financial trouble they can lose their personal assets.
question
In a limited partnership, the general partners should encourage the limited partners to take a more active role in the operations of the business. After all, the limited partner has comparable liability in the business, even though he/she may not be a partner for as long a period of time as the general partners.
T/F
answer
False
By definition, a limited partnership will consist of one or more general partners and one or more limited partners. The limited partners are passive investors. By law, they do not take an active role in the management of the business, yet they may share in the profits of the business and remain a partner for as long as the partnership exists.
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Ted and Mark are partners in a dry cleaning business. They would like their brother Todd to join them. Unfortunately, partnership law states that only two partners can participate in a partnership.
T/F
answer
False
A partnership consists of two or more owners. Unless explicitly written in the original partnership agreement, the partnership can add partners.
question
In order to establish a C corporation, it is a requirement that investors run the company, whereas in an S corporation, this is not the case.
T/F
answer
False
In a C corporation, the investors elect the Board of Directors. The Board of Directors appoints the officers and management team. It is not a requirement that investors run the company. S corporations also have stockholders, directors, and employees, but S corporations are taxed differently from C corporations.
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A merger is a mutual agreement where a firm joins together with another firm, whereas an acquisition is when one firm purchases the assets and obligations of another firm.
T/F
answer
True
When companies merge, there is a mutual agreement to join forces. Although the assets and obligations are combined, there is no offering of funds or stock by one company, for the other, as in an acquisition.
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Taking a firm private means turning a profit-seeking corporation into a nonprofit corporation in order to avoid a hostile takeover.
T/F
answer
False
Taking a firm private involves an effort by a group of stockholders or managers to gain control of all of a corporation's outstanding stock.
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Joshua wants to run his own business. A friend suggested that an inexpensive way to get started is to buy a franchise, where he will have the freedom to run it exactly as he sees fit. As a recent student of business, you concur with this advice.
T/F
answer
False
The start-up costs of franchising can be quite high, so becoming a franchisee is not necessarily an inexpensive way to start a business. Moreover, although they have some authority to run their franchise, franchisees generally follow a set of rules and procedures and meet certain standards established by the franchiser. This would limit Joshua's freedom to run his business the way he wants.
question
Any debts or damages incurred by a firm organized as a sole proprietorship are:
the responsibility of the owner.
limited to the amount the owner has invested in the firm.
paid for out of a reserve contingency fund that sole proprietors are required by law to set up.
normally covered by liability insurance.
answer
The responsibility of the owner.
A sole proprietor accepts unlimited liability. This means that he/she is responsible for all debts of the business. If the firm should land in bankruptcy court, the judge could liquidate the owner's personal assets to pay the debts of the business.
question
Javier is the sole proprietor of a golf shop. Because he is a sole proprietor, any profit Javier's business earns is:
totally tax-free.
taxed only as Javier's personal income.
taxed twice, once as business income, then again as Javier's personal income.
taxed only if and when it is distributed to investors.
answer
Taxed only as Javier's personal income.
A tax advantage of sole proprietorships is that their earnings are only taxed once, as personal income to the owner.
question
Zach and Mac own an auto repair business that they operate as co-owners. Both take an active role in the management of the business, and each accepts unlimited liability. Zach and Mac operate as a ________.
joint venture
general partnership
limited partnership
cooperative
answer
General partnership
Since Zach and Mac operate the business as co-owners, they have formed a general partnership. Since both will manage the firm and accept unlimited liability, they are both general partners.
question
Travis has agreed to invest $16,000 in a partnership with his sister and brother-in-law. He does not intend to actively work in the partnership, nor does he wish to risk any of his own assets other than the $16,000 he initially invests. The partnership has agreed to permit him to share in the profits. As an expert on forms of business ownership, you know that Travis is a ______________ in this partnership.
general partner
preferred stockholder
secondary partner
limited partner
answer
Limited partner
A limited partner invests in a partnership, but has limited liability and does not take an active role in managing the business.
question
The organizational structure of a corporation permits:
the company management to elect the Board of Directors.
stockholders to elect the Board of Directors.
stockholders to elect the officers and management team.
employees (by committee) to elect the officers of the company.
answer
Stockholders to elect the Board of Directors.
Stockholders elect the Board of Directors. The Board of Directors selects the officers and top management of the firm. Officers hire managers that supervise employees.
question
Maria recently purchased 100 shares of stock in Idle Time Gaming, Inc. Maria is a(n) ______________ of this company.
owner
manager
creditor
partner
answer
Owner
Stock represents shares of ownership in a corporation.
question
When two firms which do not participate in the same industries, for example, a software company and a fast food restaurant company, decide to merge, the result is called a ____________ merger.
vertical
horizontal
linear
conglomerate
answer
Conglomerate
A conglomerate merger involves two firms from different industries.
question
The strategy of investors who are attempting a leveraged buyout is to:
shape up the company for quick resale.
use debt to finance the buyout of the firm's stockholders and gain control of the firm themselves.
secure ownership of all of the existing stock in a company by issuing and selling large amounts of new stock.
use investment tax credits from the government to acquire all of the physical assets owned by the firm.
answer
Use debt to finance the buyout of the firm's stockholders and gain control of the firm themselves.
In a leveraged buyout, the objective of the investors is to use debt financing to gain control of the firm's stock for themselves.
question
Independence, challenge, and opportunity are among the key reasons given by those who assume the risks of entrepreneurship.
T/F
answer
True
Many factors encourage people to accept the risks associated with entrepreneurship, including the opportunities, independence, and challenges associated with starting and operating a business. Clearly the potential of profits is also a great motivator for entrepreneurs.
question
Jacques has eliminated the risk of entrepreneurship by preparing a detailed business plan.
T/F
answer
False
Entrepreneurs must be able to take calculated risk because there are no guarantees of success. Successful entrepreneurs must be willing to accept uncertainty. However, they should take only calculated risks if they can help it.
question
An effective business plan analyzes the competition and identifies the resources required to profitably serve a target market.
T/F
answer
True
An effective business plan must consider all the aspects of operating a new business in detail.
question
When writing a business plan, prospective entrepreneurs should remember to omit details regarding their experience and education since investors are only interested in the proposed business.
T/F
answer
False
A business plan should include information about the resources and qualifications of the owner.
question
As opposed to venture capitalists, angel investors prefer to target their investments in new firms requiring large sums of money.
T/F
answer
False
Venture capitalists often invest in businesses in need of large sums of money. Angel investors are private individuals investing their own money. The amount of money invested by angel investors tends to be less than amounts invested by venture capital firms.
question
If you plan to meet face-to-face with a banker or venture capitalist, it is not necessary to submit a business plan.
T/F
answer
False
A business plan is mandatory when talking to bankers and investors.
question
Successful entrepreneurs are self-nurturing. This means they:
look to others for strength and encouragement.
self-finance their business with no assistance from others.
perform all business operations by themselves.
believe in themselves and their ideas.
answer
Believe in themselves and their ideas.
Self-nurturing individuals have the ability to believe in an idea when no one else does, and to replenish their enthusiasm.
question
Which of the following statements is characteristic of entrepreneurs?
They like certainty.
They have the ability to visualize a clear path.
They look at problems and see opportunities.
They prefer to be inventive rather than worry about whether the invention solves a customer need.
answer
They look at problems and see opportunities.
A common characteristic of entrepreneurs is that they like to solve problems. They view a problem or a need as an opportunity.
question
Successful entrepreneurial teams:
quickly organize themselves like large corporations.
assign only one person to new product innovation.
bring a variety of talent to the business venture.
outsource most of the details of innovation.
answer
Bring a variety of talent to the business venture.
As its name implies, members of an entrepreneurial team operate as a team. Everyone works together to conceive, develop, and market the product. Team members can combine their talents and creative skills, and bring a variety of expertise to the team.
question
Which of the following best describes the difference between an intrapreneur and an entrepreneur?
Intrapreneurs start nonprofit organizations while entrepreneurs start profit-seeking businesses.
Intraprenuers are practical while entrepreneurs are creative.
Intrapreneurs work within existing corporations while entrepreneurs assume the risks of starting their own business.
Intrapreneurs limit their efforts to financial investments, while entrepreneurs are involved in the management of all areas of a business.
answer
Intrapreneurs work within existing corporations while entrepreneurs assume the risks of starting their own business.
Intrapreneurs are creative people who work within a corporation to develop new products and generate new profits for the firm. Entrepreneurs start their own businesses, without any financial tie to a larger company.
question
Enterprise zones are:
government-owned properties that are available for entrepreneurial ventures at a reduced cost.
similar to incubator facilities but strictly run by city and state governments.
blighted areas that contain toxic materials making them unsuitable for business operations.
specific locations across the U.S. where entrepreneurs can set up shop and receive tax breaks for operating in these areas.
answer
Specific locations across the U.S. where entrepreneurs can set up shop and receive tax breaks for operating in these areas.
Enterprise zones are geographic areas where the government would like to encourage business development. City and state governments will provide business owners tax concessions for developing businesses in these area.
question
State and city governments have promoted facilities where new businesses can open up shop and share common services such as secretarial, accounting, and legal services. Due to their remarkable success rate, _______________ continue to grow in popularity.
enterprise zones
incubators
intrapreneurial development centers
venture farms
answer
Incubators
Incubator facilities offer new businesses low-cost office space with shared receptionist/secretarial, legal, and accounting services.
question
Kyra recently quit a job with a large corporation to start her own business. While she realizes that her decision comes with risk, she is excited at the chance to be independent and by the challenges of running her own firm. Kyra is an example of a(n):
intrapreneur.
entrepreneur.
venture capitalist.
raconteur.
answer
Entrepreneur
An entrepreneur is someone who accepts the risks of starting and running a business.
question
Keaton is an intrapreneur for a multinational electronics company. As an intrapreneur Keaton:
is expected to recruit new managerial talent for his firm.
will use the firm's existing resources to develop new products.
is concerned mainly with improving the firm's public image.
will concentrate on creating new ventures that can be spun off to become independent firms.
answer
Will use the firm's existing resources to develop new products.
An intrapreneur uses a firm's existing financial, human, and physical resources to create new products and generate new profits.
question
Entrepreneurs applying for a bank loan should realize that bankers will:
expect to receive a share of ownership in the business in exchange for their loan.
expect the entrepreneur to provide a business plan.
generally make loans only to small businesses in dot-com related industries.
offer only short-term financing.
answer
Expect the entrepreneur to provide a business plan.
A well-prepared business plan is mandatory when seeking financial assistance from a bank or other investors.
