Principles of Business Exam 1

Flashcard maker : Lily Taylor
What is the amount a business earns after deducting what it spends for salaries and other expenses?
What is the chance a business owner will lose the time and money invested in a business that provers to be unprofitable?
What is a person who assumes the risk of starting a business?
Often in business the great the risk, the
greater the potential award
The amount of good and services people can buy with the month they have is call their:
standard of living
The most important difference between for-profit business and nonprofit organizations is that:
nonprofit organizations do not seek a profit for its owners or organizers
A common characteristic of most entrepreneurs is that they:
accept the risks involved in starting and managing a business
In order to make an intelligent investment decision, entrepreneurs should:
compare the risks of potential investments to their expected profits and find the right balance between profit and risk
Honda and Toyota have used “insourcing” for years to produce cars in the United States. Insourcing:
helps offset the number of jobs being outsourced
For-profit businesses and nonprofit organizations are similar in that they both:
contribute to the welfare of society
World-class businesses attempt to meet the needs of:
all of their stakeholders
Ross wants to invest some money that he just inherited. He found that his bank offers a savings account paying a guaranteed 3% rate of return. However, he would like to earn a higher return. Ross should keep in mind that to earn a higher return on his money he:
will probably have to accept a higher level of risk
Jane’s income has remained stable over the past few years while the rices of things she buys have gone up. Nevertheless, Jane feels better off because the environment is cleaner, the crime rate has declined, she has more leisure time, and the quality of medical care has improved. If Jane’s experience is typical, we can conclude that the standard of living has:
declined, but the quality of life has increased
Which of the following statements about social entrepreneurs (such as Muhammad Yunus who won the Nobel Prize) describes their challenge?
Using the same business skills as other entrepreneurs, social entrepreneurs develop businesses to improve the skill and or quality of life of others.
The growth of Hispanic owned businesses:
decreased slightly compared to there minority groups who have started businesses.
Which of the following entails the greatest amount of risk?
starting a business
The world market is approximately
7 billion potential customers
What occurs when a country has a monopoly on producing a product or is able to produce it at a cost well below that of all other countries?
absolute advantage
The concept of free trade means:
goods and services can be traded freely across borders without political and or economic barriers
Household appliances, Inc. has a manufacturing plant near Chicago. The company specializes in compact washers and dryers for countries where consumers have less living space. Household Appliances participates in the global market through:
The United States currently enjoys a comparative advantage in:
software services
Which economic theory refers to the potential gains from trade for individuals, firms, or nations that arise from differences in their factor endowments or technological progress?
comparative advantage
What is the practice of selling a product in foreign countries for a lower price than the good sold in the producing country?
An American firm reentry criticized a Chinese steel producer for charging a lower prices for its steel in in the United States than it charges in China. If proven to be true, the Chinese firm has engages in
Monique’s Unique Tile Boutique offers decorative tile from around the world. The owner regularly travels overseas to locate the best and most unusual tile that foreign producers have to offer. What does Monique participate in?
Reviewing the recent experience of the U.S. in global markets reveals that the U.S. has:
a large trade deficit with China
Lis the 5 factors of production:
land, labor, capital, entrepreneurship, and technology
What are the inputs to the production process?
factors of production
Which two factors of production seem to contribute the most to a nation’s ability to create wealth?
entrepreneurship and knowledge
In order to create more wealth and provide better services, some nations recognize that a good strategy is to
minimize interference with the free exchange of goods and services.
Adam Ripley sells custom bicycles. Adam buys a several bike parts including wheels and tires from the Good Treads Company. Although several government-supported regulation help Adam in his business, regulations that make it easy for Adam’s business to enjoy good vendor relationships are:
laws that support enforceable contracts between firms
What refers to the output generated with a given amount of input, e.g., the number of pizzas produced in an hour?
What means producing items using the least amount of resources?
When businesses sell to other business over the Internet, these transactions are known as:
B2B transactions
What met the needs of our nations when it was conceived, but needs an overhaul?
the social security system
What has greatly improved living standards around the world?
What is the study of how a society employs resources to produce goods and services and distribute them among competing groups and individual?
What looks at the behavior of individual people and organizations in specific markets?
Economist Thomas Malthus believed that this would limit economic progress:
Who is considered to be the father of modern economics?
Adam Smith
In which type of class would the topic emphasize how the market conditions determine the price of a specific product?
What was economics known as because too many people would result in food shortages and shortages of other resources?
dismal science
What is the name of a free-market economic system in which most of the factor of production and distribution- such as land, factories, railroads, and stores- are owned by individuals?
Under a capitalistic system, decisions such as what goods and services to produce, what to charge, and how much to import or export are made by?
A free market is one in which decisions about what to produce and in what quantities are made by:
the market
A simply supply curve shows that an increase in the price of a good will cause the quantity supplied to:
What demand curve shows that people tend to buy more of a good when its price decreases?
typical demand curve
What is characterized by unequal distribution of wealth and income?
Usually in free markets that result in better quality and lower prices are due to the presence of what?
Patrick lives in a nation whose government embraces capitalism. He owns his own home and car, as well as his own business and building. Patrick maintains ownership due to:
the right to own private property
In which type of systems the major premise to reduce the inequality in the distribution of wealth?
socialist system
Recently, Hugo Chavez, the Prime Minister of Venezuela, announced that he is standing behind the concept of state owned utilities, public schools, and the communications industry of his nation. Although not all industry is owned and managed by the government, his ideas would lead one to believe that he has a preference for:
a socialistic state
The “Reaching Beyond Our Borders” box in Ch. 2, explains the changing business climate in other nations. What kinds of experiences are U.S. based companies facing abroad?
For some food franchisors such as Yum Brands, the economic and political systems are not preventing them from growing the business abroad.
What type of unemployment refers to loss of jobs due to a recession or a similar downturn in the economy?
The measure used to report price changes at the wholesale level is the:
producer price index or PPI
What is one reason the CPI is monitored very closely by government, businesses, and workers is that:
Some wages, interest rates, tax rates, and government benefits are tired to changes in the value of the CPI
If consumers see a measurable increase in the price of coffee, they are likely to change their consumption to less expensive tea. The substitutions would show up in the:
chained consumer price index
True or false. Measures of productivity in the service sector of the U.S. economy do a poor job of taking quality improvements into account.
Recently, the U.S.national debt was a little more than:
10 trillion
Which economic theory suggests that short-term increases in government spending to stimulate the economy?
If businesses are producing at capacity, and the nation is experiencing almost full employment (a very low rate of unemployment <2%), the Fed mad decide to:
increase interest rates
A fee paid to a firm in a licensing agreement that gives another firm the right to manufacture their product or use its trademark is called a:
What did the federal government create to help small and medium sized businesses get involved in exporting?
Export Assistance Centers
Which partnership is in which two or more companies (often from different countries) join together and share the risk and costs in order to undertake a major project?
join venture
A form of foreign direct investment, where a domestic company purchases a company in a foreign country to produce a similar product or service is a:
foreign subsidiary
Using contract manufacturing as a strategy to reach global markets offers firms the advantage of:
reduced financial risks
Pepsi Cola entered into a long-term contract with a South African beverage company. The contract calls for the South African firm to produce and market Pepsi Cola in South Africa. Pepsi will receive royalties on each case of beverage sold. This is an example of:
Nike _________________ its products in foreign countries, where labor is cheap and production sites are owned by other companies. This strategy allows Nike to experiment in new markets without incurring large start-up costs involved with building their own production facilities.
contract manufactures
ExxonMobil Corporation refines and markets its petroleum products in many different nations. In addition, Exxon’s stockholders and managers come from many different nations. If some of the nations where it operates decided to take over the assets of the company, this act would constitute:
An article published in the journal of “Modern Healthcare” reported that in 2007, the governments of the following nations held sizeable investments in U.S. companies, (including U.S. healthcare providers): These investments are called _____________ and some experts fear that the strategy behind these governments sinking large amounts of capital in U.S. companies may have ____________________.
Sovereign Wealth Funds (SWFs); geopolitical objectives
What is lovering the value of a nation’s currency relative to other currencies called?
The legislation that prohibits U.S. businesses from making “questionable” or “dubious” payments to foreign officials, to secure business contracts is the:
Foreign Corrupt Practices Act
A major force that often impeded global trade occurs when government regulations limit the import of goods and services. We call this:
trade protectionism
Idle Time Gaming, Inc. needed silicon wafers that it knew could be massed produced efficiently by Silicon City, Inc., a start-up firm in India. The Indian company needed MSG (metallurgical grade silicon) in order to make the wafers which it knew it could get from a Chinese firm. The Chinese firm (mostly owned by the Chinese government) agreed to supply the silicon to the Indian company if it could get a certain quantity of gaming hardware from Idle Time. This beneficial exchange is described as:
What is the use of government regulations to limit the import of goods and services.
trade protectionism
The two basic types of tariffs are:
revenue and protective
What represents the first attempt to establish a truly global mediation center to resolve international trade disputes?
World Trade Organization
The three countries participating in NAFTA are:
Canada, Mexico, and the United States
The keiretsu tradition in Japan serves as a:
nontariff barrier
According to the Legal Briefcase box, titled, “NAFTA or SHAFTA?”:
NAFTA has increased U.S. food exports, despite a decrease in manufacturing jobs.
Promote conditions of fair competition for the three trading partners is an objective for:

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