__________ is the amount a business earns after deducting what it spends for salaries and other expenses.
The total amount of money that businesses take in by selling goods and services is called _______.
The customers, employees, stockholders, suppliers, creditors, and others who stand to gain or lose by the policies and activities of a business represent the firm's:
Which of the following is the best example of a business whose goal is to earn a profit?
a community college
the salvation army
boy scouts of america
The resources that contribute to the creation of wealth are known as _______.
factors of production
Two factors of production that seem to contribute the most to a nation's ability to create wealth are:
land and labor.
land and labor
land and capital
entrepreneurship and labor
entrepreneurship and knowledge
he Internet and the emergence of an information-based economy are important parts of the ___________ environment in which businesses operate
economic and legal
Which of the following best describes the main difference between B2B and B2C transactions? B2B transactions:
involve transactions where the buyers and sellers are both businesses, while B2C involves transactions between businesses and consumers.
focus on financial transactions while B2C e-commerce focuses on the sale of manufactured goods.
refer to business between nonprofit organizations while B2C e-commerce is carried out by business firms seeking to earn a profit.
involve sales in foreign markets while B2C e-commerce is restricted to domestic markets.
giving employees the authority to make decisions.
making certain that employees always defer to management when making decisions.
hiring employees that do not require training due to the costly nature of this activity.
asking employees to write the policies which govern their jobs.
During the past 150 years, the U.S. has evolved from:
An agrarian economy to an information technology economy.
A business to business economy to a business to consumer economy.
An agrarian economy to a manufacturing economy to a service oriented economy.
A manufacturing economy to a service economy, to a cottage economy, and now we are trending back to an agrarian economy.
___ is considered by some to be the father of modern economics.
John Maynard Keynes
Adam Smith believed that countries would prosper if businesspeople were free to start and run their own businesses. Businesspeople 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
Most of the means of production and distribution are privately owned and operated for profit.
the primary function of the government is to distribute wealth more evenly.
Utilities, health care, education, and other important services are operated by the government.
Markets operate to carry out the decisions made by central planners.
When prices are free to adjust over time, in the long run, the market price of a good tends to:
Rise above the equilibrium price in the long run
equal the equilibrium price
fall below the equilibrium price in the long run
have no specific relationship to the equilibrium price
the presence of competition in free markets:
Is undesirable because it results in unnecessary duplication of efforts.
Usually results in better quality and lower prices.
Is rare, since most markets eventually evolve into monopolies.
Is undesirable, because one big firm can usually produce goods more efficiently than a large number of small firms.
One of the greatest concerns associated with capitalism is that:
it is not very successful at creating wealth
some businesspeople may let greed guide their behavior
the amount of economic free enjoyed by consumers is very limited
Producers are unlikely to supply the goods and services that consumers value the most.
Communism is an economic system in which:
the government and private citizens own equal shares of the economic resources.
Almost all of the productive resources are owned by private businesses.
Individual consumers make all economic decisions.
Today, the economic systems of most nations could most accurately be classified as:
The total value of final goods and services produced within a nation's borders in a given year is known as that nation's:
aggregate production quota
aggregate domestic output
index of aggregate economic output
gross domestic product
In the U.S., the __________ has the role of managing the money supply and interest rates.
United States Treasury
Federal Reserve Bank
Federal Deposit Insurance Corporation
____________ is the selling of products to another country.
_____________ is buying products from another country.
The concept of free trade means:
buyers and sellers contract with each other and offer some goods at no cost.
goods and services can be traded freely across borders without political and/or economic barriers.
there is no exchange of currency for these products.
there is no exchange of currency, but the trading partners determine the value of the product and perform a bartering process to exchange goods.
A favorable balance of trade occurs when the value of:
imports equal the value of exports.
the cash inflows equal the value of the cash outflows
the value of imports is less than the value of exports
the value of the dollar is greater than the value of the Euro
The _____________ is the total value of a nation's exports compared to its imports measured over a specific period of time.
balance of payments
balance of trade surplus
balance of trade deflict
balance of trade
_________ is the practice of selling a product in foreign countries for a lower price than the good is sold in the producing country.
When Anheuser-Busch/In Bev sells Budweiser beer made in St. Louis, MO., to Germany, the sales of its product would be classified as a U.S. ___________.
foreign aid shipment
The value of goods imported into France exceeds the value of French exports. This indicates that France:
Has an exchange rate decrease
Utilizes high tariffs
Has a budget deficit
had a trade deficit
Granting a foreign company the right to manufacture your product or to use your firm's trademark in return for a fee is called:
A joint venture
A foreign subsidiary
the 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 joint venture
an outsource agreement
A major advantage of licensing is:
these arrangements almost always lead to a joint venture.
the bulk of the revenues gained by licensee come back to the licensor
your company name does not need to be associated with the product in a foreign country
very little cost to the licensor
A disadvantage of licensing is:
it's very costly for the licensor
the licensee can decide to end the contract at a moment's notice
your company's image is never permitted to be associated with the product, even though you are the developer
the licensee may decide to use the expertise you have developed, break the agreement, and begin producing the product on his/her own.
When a company's strategy is __________ the firm makes arrangements for a foreign manufacturer to produce the product. The domestic company's label and/or trademark are attached to the completed product.
A __________ is a partnership 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.
A __________ represents a long-term partnership between two or more companies established to help each firm build competitive market advantages, without sharing the cost of risk.
rm of foreign direct investment, where a domestic company purchases a company in a foreign country to produce a similar product or service is a:
An advantage of forming a joint venture is:
no shared costs of risks
a perpetual arrangement
it's a good strategy for entering new markets where you have never had a presence.
it's a great way to enter new markets without divulging any marketing or management strategy to the other member of the joint venture.
When foreign firms build production facilities in the United States, they are engaging in:
foreign direct investment
A benefit of contracting with export trading companies is:
hey are the experts in establishing trading partners abroad, and negotiating all the details in retaining customers.
they are experts in staying out of the financial transactions of establishing new markets.
They will always assume the risk if your product does not sell to the foreign customer.
They keep you legal because they serve as the franchisor and make certain that your products meet ISO requirements.
In the Connecting Across Borders box titled "McDonald's: Over 100 Cultures Served" McDonald's, the largest food franchise in the world, continues to tweak its business and marketing model to appeal to the tastes of the markets in the 117 countries that it serves. One unique product offering adopted in Hong Kong is:
Chinese barbeque, for which the local market usually pays three times what McDonald's is charging.
extending similar play structures that it is known for in the U.S., but with Chinese dragons and other more familiar imaginary characters suitable to the local market.
international clothing that suits the international market, a place where east meets west.
McWeddings, which cater to couples who want a wedding package without going into debt.
A fast-growing form of foreign direct investment is sovereign wealth funds (SWFs). Why do these investments by governments with surplus cash flows worry trade experts?
SWFs invest in high risk start-ups with no proven history of producing goods and services that developing or developed countries need. They may likely undermine the years of development of growing economies.
SWFs have a greater risk of going bankrupt than other investments because governments are not good at running businesses.
Some fear that governments investing their SWFs in large firms may gain control of natural resources, sensitive technologies, and the decision making of management.
some trading experts believe that SWFs are supported by terrorist organizations, and their strategy is an indirect way to undermine the creation of U.S. jobs.
Which of the following terms describes the set of values, beliefs, rules, language, and institutions held by a specific group of people?
which of the following represents the value of one nation's currency relative to the currencies of another country?
standard of living
In an effort to protect domestic jobs, some countries will place a limit on the number of certain types of products that can be imported. These limits are called:
A(n) __________ refers to a complete ban on importing or exporting of products from a specific country.
________ refers to standards of moral behavior.
ethical behavior covers a ________ range of conduct than legal behavior.
Many Americans define ethical behavior according to the situation in which they find themselves. This suggests that there may be situations where ________ to cheat, steal, or lie.
it is absolutely wrong
it might be OK
business people are expected
capitalism forces people
When WorldCom used intentional accounting irregularities to make the company look more profitable than it actually was, it:
provided its stockholders profit through a tax-loophole
acted in an acceptable business manner
engaged in illegal behavior
executed its responsibility to its owners
Which of the following terms describes someone who reports illegal or unethical behavior?
watch tower sentinel
corporate social responsibility describes the firm's:
exclusive responsibility to its stockholders.
ability to plan for the unexpected.
commitment to a management training program.
concern for the welfare of society
Going green means:
increased global warming.
increasing one's bottom line, before any other social considerations.
increasing one's carbon footprint
increasing one's initiatives toward a concern for the environment.
The social audit is:
a company report that always include a net social contribution.
a government mandated report required of all firms who have a business license.
a company report that measures the firm's social contributions inside and outside of the firm.
a recent development that creates a ratio to compare a firm's corporate philanthropy to its profits.
According to the Connecting Across Borders box, which of the following is true?
Corporate ethics are intended to be consistent with cultural ethics.
Corporate ethics have priority over corporate profit.
corporate profits have priority over corporate ethics.
Corporate ethics can clash with cultural ethics.
Sharon, a CPA for a large firm noticed that the company's accounting records drastically overstated the amount of inventory on hand, which led to overstating the assets of the firm. Initially, she brought it to the attention of her supervisor, but when nothing was done to correct the mistake in a timely manner; she decided the best course of action was to report it to the appropriate government official. Although her actions took her outside the company, she was counting on current law, under the ____________ to protect her against company retaliation.
A ___________ is a form of business that is owned, and usually managed, by one person.
subchapter S corporation
One of the major disadvantages of a sole proprietorship is the:
Possibility of disagreements between owners.
Unlimited liability the owner has for the debts of the firm.
Fact that any income earned by this type of business is taxed twice.
High cost of starting or ending the company.
In a sole proprietorship, the profits earned by the business are:
Taxed as income for the business, but is exempt from the personal income tax paid by the owner.
Taxed at the lowest corporate rate.
the property of the owner, except for taxes owed to the government.
tax-free if the appropriate exemption is filed with the local government.
A type of partnership called a ___________ acts much like a corporation and is traded on stock exchanges, but it is taxed like a partnership with profits passing through to the owners and taxed as the owner's personal income.
combined general partnership
master limited partnership
A(n) ___________________ is a state-chartered legal entity with authority to act and to have liability separate from its owners.
Which of the following is an advantage of the corporate form of business when compared to sole proprietorships and partnerships?
Ease of formation
limited liability of owners
Which of the following is normally considered a disadvantage of the corporate form of business?
Unlimited liability of owners.
difficult transfer of ownership
double taxation of earnings
The board of directors for a corporation is elected by its:
one reason many companies do not organize themselves as an S corporation is that this form of business:
is subject to a higher tax rate than a general partnership
does not provide owners with limited liability
has a special eligibility restriction, wich many businesses are unable to meet
is much more difficult to set up than C corporations
"Double taxation" means:
If stockholders decide to sell their shares, they are subject to paying twice the amount of taxes on any capital gains.
as the owner of the company, you pay twice the amount in employment taxes on yourself, as you do on your employees.
Corporations pay taxes on their profits. If they distribute after-tax profits to the stockholders, the stockholders also pay taxes on the distribution.
If the corporation doubles its profits from the previous year, the firm's tax rate (the percentage it pays in taxes) will also double.
A ____________ is two firms combining to form one company.
tenancy in common
A(n) _________ occurs when one company buys the property and obligations of another company.
Three types of corporate mergers are:
Economic, geographic, and financial.
Vertical, horizontal, and conglomerate.
Flexible, differentiated, and conditional.
Explicit, implicit, and intrinsic.
When two companies in the same industry agree to become one firm, the result is called a:
When two companies in completely unrelated industries agree to become one firm, the result is called a:
One result of taking a firm private is:
the firm's stock is no longer available for purchase on the open market
managers lose some control as the number of stockholders increases
the public image of the firm will suffer
the firm will have access to more capital
A ___________ is an arrangement whereby someone with proven idea for a business sells the rights to use the business model, to sell a product or service to others in a given territory.
extended ownership agreement
A person who buys the right to use a business name and sell a product within a given territory is called a:
One reason franchises have become so popular is that this arrangement provides the franchisee with:
a nationally recognized name and product
a low cost way to start a business
the right to retain all profits earned by their franchise
managing businesses for others.
a controlling interest in the ownership of a corporation.
managing businesses that operate in multiple countries
accepting the risk of starting and running a business.
Business owners who prefer to maintain their businesses at a manageable size are called:
a creative person working within a corporation to launch new products and generate new profits is known as a(n):
Enterprise zones are specific geographic areas that:
the government has set aside for major corporations that promise to spend at least $10 million to create new jobs.
attract business investment by offering lower taxes and government support for development.
the government has recognized as having the fastest growth rates in the country.
are characterized by government ownership of small businesses.
Business incubators are usually government-funded facilities intended to:
provide health care benefits for small business owners and their families.
offer startup firms low-cost office space and basic business services
help rebuild the nation's infrastructure
assist foreign investors in identifying business opportunities in the U.S.
Historically entrepreneurs in the U.S.
created wealth for themselves, but have had a minor impact on the economy as a whole.
started many small firms that later became major corporations employing thousands of workers.
experienced success only when they worked in partnership with the federal government.
played an important role, but are less important now in creating jobs and wealth.
Affiliate marketing is a web-based business strategy that:
relies on customers that enter the sites of large companies such as GAP™ and Nike™.
asks you to offer the names and emails of ten of your friends who may be interested in the products or services the web-site is selling.
is currently illegal, but difficult to stop.
Rewards individuals who are willing to link a company's website to their blog or social network page.
Small Business Administration defines a small business as a firm that:
has fewer than 100 partners
is independently owned bot not dominant in its industry
is dominant in its industry, but small in the numbers of works it employs
has annual receipts of more than a specified amount demanding upon the industry
According to SBA guidelines, a manufacturing firm with 1,000 employees:
would be classified as a large firm in the industrial sector
may be classified as a small business depending upon the size of other firms in the industry.
is too small to achieve the efficiencies of large scale production.
is classified as an S corporation
Which of the following statements accurately depicts an advantage that small business has over big business?
if the small business owner can project his business as being big, if not very similar to big businesses that sell in the same industry, then he will realize a significant advantage.
The size of the business (small being better in this case) is an important consideration in the management of legal, payroll, and tax concerns
A small business can maneuver and change quicker than most large businesses can. It can react to market conditions and customer concerns much faster.
The slower pace of small businesses translates into better quality for its customers.
Two key management functions that need particular attention when starting a business are:
human relations and accounting
planning and financing
marketing and public relations
staffing and controlling
A __________ is a written document that details the business idea, the target market and the business's competitive advantage, financial resources available for the business, and the qualification of the management.
statement of intent
________ are private individuals who invest their own money in potentially hot new companies before these firms become larger, publicly traded companies.
leveraged buyout specialists
corporate raider investors
A firm or individual providing financial capital to small businesses in exchange for an ownership stake in the company is called a:
Which of the following government agencies is responsible for encouraging the development of small business?
small business administration
federal trade comission
entrepreneur assistance center
federal microloan authority
A Small Business Investment Company (SBIC) is a(n):
agency of the federal government that loans money to high tech firms.
private investment company that is licensed by the SBA to make loans to small businesses.
private firm that offers loans to small businesses in return for a share of ownership in the firm.
agency set up by state governments to provide managerial advice and support to small businesses.
One of the best places for young entrepreneurs to start shopping for a SBA loan is a:
Small Business Development Center.
financial institution specializing in business loans.
college or university financial aid office
the internet webpage of the venture capitalists association
Labels Plus, LLC, exports specialty printing equipment for the labeling, flexible packaging, and carton industry. Due to increased support from _______, this company's sales to Brazilian companies and other global opportunities have significantly increased.
its newly revised web site
department of Commerce's Bureau of Industry and Security