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Intro to Business – Section 1 Test

When people or machines provide or process something of value to customers, it is known as:
A. a tangible resource.
B. a factor of production.
C. a service.
D. an intangible resource.
The focus of all marketing activities is to:
A. satisfy customer needs.
B. ensure operating efficiency.
C. facilitate manufacturing.
D. enable healthy competition.
E. provide resources for the operation of a business.
Which of the following statements is true with regard to resources associated with a business?
A. A firm’s good reputation for quality products is a resource.
B. Being socially responsible does not constitute a resource.
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C. Human resources are the products that are made by people.
D. The funds used to acquire land can be classified as natural resources.
E. Intangible resources are those that do not provide a competitive advantage.
In a capitalist economy:
A. most businesses are owned and operated by the government.
B. individuals are free to keep profits and use them as they wish.
C. consumers have a limited choice of goods and services.
D. excess income goes to the government.
E. all decisions regarding production are taken by the government.
Which of the following statements is true of a free-enterprise system?
A. In a free-enterprise system, there is no constraint of society’s laws.
B. Individuals have the right to choose what career to pursue in a free-enterprise system.
C. In a free-enterprise system, businesses succeed or fail on the basis of central government planning.
D. A free-enterprise system is independent of competition.
E. There is no government regulation in a free-enterprise system.
The price at which the number of products that businesses are willing to supply equals the amount of products that consumers are willing to buy at a specific point in time is known as the _____ price.
A. value-based
B. stabilizing
C. mark-up
D. balance
E. equilibrium
The market for a product would be considered to be an oligopoly if:
A. there is only a single buyer for the product.
B. there are many sellers of the product.
C. there are very few businesses selling the product.
D. there are many buyers for the product.
E. there is only a single business selling the product.
_____ is a condition of the economy in which unemployment is very high, consumer spending is low, and business output is sharply reduced.
A. Inflation
B. Depression
C. Hyperinflation
D. Deflation
E. A budget deficit
The gross domestic product (GDP) is defines as:
the difference between exports and imports of a country.
A. the increase in price of consumer goods and services over specified periods of time.
B. the changes in prices of goods and services purchased for consumption by typical urban households.
C. the sum of all goods and services produced in a country during a year.
D. the amount of goods and services produced for each hour worked.
Which of the following statements is true of the agricultural economy that existed in America before the industrial revolution?
A. Money for the colonies’ burgeoning industries was supplied exclusively from within the American territory.
B. The construction of railroads allowed farmers to send their surplus crops and goods all over the nation for barter or for sale.
C. Farmers began to move to cities to find jobs in factories and have a higher standard of living.
D. Factories began to spring up along the railways to manufacture farm equipment and a variety of other goods to be shipped by rail.
E. Abundant natural resources and a moderate climate nourished industries such as fishing, shipping, and fur trading.
All the following are factors of production used to make goods and services. EXCEPT:
A. natural resources.
B. human resources.
C. customers.
D. capital.
E. financial resources.
Owners always manager their businesses.
When a nation takes more from taxes than it spends, it has a budget deficit.
The functions of organizing, staffing, planning, and controlling are most closely associated with:
A. managers.
B. assembly line workers.
C. investment advisors.
D. stockbrokers.
E. direct sales executives.
Financial resources are also known as:
A. capital
B. labor
C. barter
D. natural resources
E. exchange
Nonprofit organizations such as Habitat for Humanity do not engage in management, marketing, or finance activities.
An oligopoly exits when there are many small businesses selling one standardized product.
Advertising, personal selling, coupons, and sweepstakes are forms of the _____ aspect of marketing activities.
A. finance
B. promotion
C. production
D. fund raising
E. social responsibility
Which of the following is an example of an intangible product?
A. A movie DVD
B. A sandwich
C. A sports car
D. A music concert
E. Jewelry
Which of the following is a factor of production for a firm?
A. Advertising media
B. Legal consultants
C. Customers
D. Natural resources
E. Company reputation
budget deficit
the condition in which a nation spends more than it takes in from taxes
individuals or organizations who try to earn a profit by providing products that satisfy people’s needs
capitalism or free enterprise
an economic system in which individuals own and operate the majority of businesses that provide goods and services
first described by Karl Marx as a society in which the people, without regard to class, own all the nation’s resources
the rivalry among businesses for consumers’ dollars
the number of goods and services that consumers are willing to buy at different prices at a specific time
a condition of the economy in which unemployment is very high, consumer spending is low, and business output is sharply reduced
economic contraction
a slowdown of the economy characterized by a decline in spending and during which businesses cut back on production and lay off workers
economic expansion
the situation that occurs when an economy is growing and people are spending more money; their purchases stimulate the production of goods and services, which in turn stimulates employment
economic system
a description of how a particular society distributes its resources to produce goods and services
the study of how resources are distributed for the production of goods and services within a social system
an individual who risks his or her wealth, time, and effort to develop for profit an innovative product or way of doing something
equilibrium price
the price at which the number of products that businesses are willing to supply equals the amount of products that consumers are willing to buy at a specific point in time
financial resources
the funds used to acquire the natural and human resources needed to provide products; also called capital
free-market system
pure capitalism, in which all economic decisions are made without government intervention
gross domestic product (GDP)
the sum of all goods and services produced in a country during a year
human resources
the physical and mental abilities that people use to produce goods and services; also called labor
a condition characterized by a continuing rise in prices
mixed economies
economies made up of elements from more than one economic system
monopolistic competition
the market structure that exists when there are fewer businesses than in a pure-competition environment and the differences among the goods they sell are small
the market structure that exists when there is only one business providing a product in a given market
natural resources
land, forests, minerals, water, and other things that are not made by people
nonprofit organizations
organizations that may provide goods or services but do not have the fundamental purpose of earning profits
the market structure that exists when there are very few businesses selling a product
a good or service with tangible and intangible characteristics that provide satisfaction and benefits
the difference between what it costs to make and sell a product and what a customer pays for it
pure competition
the market structure that exists when there are many small businesses selling one standardized product
a decline in production, employment, and income
an economic system in which the government owns and operates basic industries but individuals own most businesses
groups that have a stake in the success and outcomes of a business
the number of products—goods and services—that businesses are willing to sell at different prices at a specific time
the condition in which a percentage of the population wants to work but is unable to find jobs
Organizations that exhibit a high ethical culture:
A. encourage employees to act with integrity.
B. receive very low revenues and profits.
C. engage only in activities aimed at high profitability.
D. maintain weak employee relations.
E. have low returns on investments.
Which of the following statements best describes a difference between business ethics and social responsibility?
A. Business ethics relates to an individual’s or a work group’s decisions that society evaluates, whereas social responsibility concerns the impact of the entire business’s activities on society.
B. Business ethics relates to an individual’s values and standards of conduct, whereas social responsibility concerns the values and standards of conduct of society as a whole.
C. Business ethics is determined solely by an organization itself, whereas a social responsibility decision is made by the organization’s stakeholders.
D. Business ethics is a voluntary norm, whereas social responsibility is mandatory for every organization.
E. Business ethics is independent of government regulations, whereas social responsibility is greatly influenced by government regulations.
Abusive behavior in the workplace is difficult to assess and manage because:
A. of diversity in culture and lifestyle.
B. it is associated with conflict of interest.
C. employees are unwilling to recognize such behaviors.
D. of organizational hierarchy.
E. it leads to workplace discrimination.
Within the concept of abusive behavior, _____ should be a consideration.
A. work
B. time
C. hierarchy
D. authority
E. intent
It is difficult for employees to determine what conduct is acceptable within a company if:
A. the firm does not have established ethics policies.
B. there exists a diversity in workplace culture and lifestyle.
C. the rate of employee turnover is high.
D. lateral communication channels are blocked.
E. there exists a conflict of interest.
An organization that contributes to the community and quality of life is fulfilling its:
A. economic responsibility.
B. legal responsibility.
C. ethical responsibility.
D. voluntary responsibility.
E. political responsibility.
For a business, _____ responsibilities are additional activities that may not be required but which promote human welfare or goodwill.
A. voluntary
B. ethical
C. legal
D. economic
E. political
_____ involves the activities and organizational processes adopted by businesses to meet their social responsibilities.
A. Organizational support
B. Operational efficiency
C. Organizational commitment
D. Corporate justice
E. Corporate citizenship
_____ refers to conducting activities in such a way as to provide for the long-term well-being of the natural environment, including all biological entities.
A. Environmental analysis
B. Organizational justice
C. Outsourcing
D. Adaptability
E. Sustainability
Which of the following statements is true of a business entity with regard to its relations with owners, stockholders, employees, and consumers of the company?
A. Instead of concentrating on maximizing owners’ investments in the firm, a business must focus on maintaining consumer relations.
B. Consumers are forbidden from lobbying government agencies.
C. Without employees, a business cannot carry out its goals.
D. Even in a large corporation, ensuring responsibility to its owners is fairly easy.
E. A business must first be responsible to its employees.
The concept of social responsibility is universally accepted.
Only for-profit organizations have to worry about ethics scandals and social responsibility issues.
Like sexual harassment, workplace bullying creates a hostile environment, but unlike sexual harassment, workplace bullying has little legal recourse at this time.
Without a code of ethics or formal policy on ethics, employees are likely to base their decisions on how their peers and superiors behave.
A major social responsibility for business is providing equal opportunities for all employees.
One of the most difficult things for a business to restore after an ethics scandal is:
ethics training programs.
codes of conduct.
Ethics and social responsibility mean the same thing.
Since all ethical standards are universally accepted, they do not depend on the culture in which a business operates.
The most basic ethical concerns have been codified by laws and regulations that encourage businesses to conform to society’s values and norms.
legal responsibility
Obeying the law is a business’s ____.
economic responsibility
legal responsibility
ethical responsibility
business ethics
principles and standards that determine acceptable conduct in business
social responsibility
a business’s obligation to maximize its positive impact and minimize its negative impact on society
ethical issue
an identifiable problem, situation, or opportunity that requires a person to choose from among several actions that may be evaluated as right or wrong, ethical or unethical
payments, gifts, or special favors intended to influence the outcome of a decision
the act of taking someone else’s work and presenting it as your own without mentioning the source
codes of ethics
formalized rules and standards that describe what a company expects of its employees
the act of an employee exposing an employer’s wrongdoing to outsiders, such as the media or government regulatory agencies
corporate citizenship
the extent to which businesses meet the legal, ethical, economic, and voluntary responsibilities placed on them by their stakeholders
the activities that independent individuals, groups, and organizations undertake to protect their rights as consumers
conducting activities in a way that allows for the long-term well-being of the natural environment, including all biological entities. Sustainability involves the assessment and improvement of business strategies, economic sectors, work practices, technologies, and lifestyles so that they maintain the health of the natural environment.
business law
refers to the rules and regulations that govern the conduct of business
there one individual or organization takes another to court using civil laws
is the legal power of a court, through a judge, to interpret and apply the law and make a binding decision in a particular case
trial court
two tasks must be competed. First, the court must determine the facts of the case. Second, the judge must decide which law or set of laws is pertinent to the case and must then apply those laws to resolve the dispute.
appellate court
deals solely with appeals relating to the interpretation of law
is a form of negotiation to resolve a dispute by bringing in one or more third-party mediators, usually chosen by the disputing parties, to help reach a settlement
involves submission of a dispute to one or more third-party arbitrators, usually chosen by the disputing parties, whose decision usually is final
mini trial
both parties agree to present a summarized version of their case to an independent third party
private court system
is similar to arbitration in that an independent third party resolves the case after hearing both sides of the story
Federal Trade Commission
most influences business activities related to questionable practices that create disputes between businesses and their customers
Uniform Commercial Code
is a set of statutory laws covering several business law topics
express warranty
stipulates the specific terms the seller will honor
implied warranty
is imposed on the producer or seller by law, although it may not be a written document provided at the time of sale
is a private or civil wrong other than breach of contract
is a purposefully unlawful act to deceive or manipulate to damage others
product liability
businesses’ legal responsibility for any negligence in the design, production, sale and consumption of products
a mutual agreement between two or more parties that can be enforced in a court if one party chooses not comply with the terms of the contract
breach of contract
is the failure or refusal of a party to a contract to live up to his or her promises
is a common business relationship created when one person acts on behalf of another and under that persons control
is the one who wishes to have specific task accomplished
the one who acts on behalf of the principal to accomplish the task
real property
consists of real estate and everything permanently attached to it
personal property
basically is everything else
intellectual property
refers to property, such as musical works, artwork, books, and computer software, that is generated by a person’s creative activities
Sherman Antitrust Act
passed in 1890 to prevent businesses from restraining trade and monopolizing markets, condemns “every contract, combination, or conspiracy in restraint of trade”
Clayton Act
prohibits price discrimination, tying and exclusive agreements, and the acquisition of stock in another corporation when the effect may be to substantially lessen competition or tend to create a monoply
Sarbanes Oxley Act
which criminalized securities fraud and strengthened penalties for corporate fraud
Which of the following is true of absolute advantage?
A. It is the basis of most international trade.
B. It exists when the domestic supply of a product is higher than the domestic demand.
C. It is likely to occur when a country’s exports are higher than its imports.
D. It is unlikely to occur when a country is the sole producer of a certain good.
E. It is likely to last when it is based on the availability of natural resources.
Outsourcing by domestic firms is likely to cause:
A. an increase in employment opportunities within the country.
B. an increase in immigration in the domestic country.
C. an advantage to non-English speaking developing countries.
D. a trade surplus for the country.
E. a decrease in production costs.
Balance of trade equals the difference in value between the:
A. exports and imports of a country.
B. expense and saving of a country.
C. assets and liabilities of a country.
D. flow of money into and out of a country.
E. earnings on foreign investment and the payments made to foreign investors.
Which of the following is likely to cause a trade surplus?
A. A decrease in quotas on imports
B. An increase in the currency value
C. A limit on the export of services
D. A limit on the import of products
E. A decrease in import tax
A country may experience decline in production when:
A. there is a trade surplus.
B. the balance of payment is favorable.
C. the value of exports is more than the value of imports.
D. more money flows in from tourism and other sources.
E. more money flows out of the country than into it.
Unlike the United States, most countries across the globe rely on the _____ to measure units.
A. imperial unit system
B. Planck unit system
C. metric system
D. barter system
E. Stoney unit system
Which of the following was created in 1995 by the Uruguay Round to deal with the rules of trade between nations?
A. The General Agreement on Tariffs and Trade (GATT)
B. The World Trade Organization (WTO)
C. The North American Free Trade Agreement (NAFTA)
D. The European Union (EU)
E. The Asia-Pacific Economic Cooperation (APEC)
A major advantage of using an export agent is that the company does not have to deal with:
A. a middleman.
B. rising resource prices.
C. foreign currencies.
D. the possibility of providing discounts.
E. procurement of resources
A major disadvantage of using an export agent is that the company may have to:

A. arrange for the storage of products in the export market.
B. deal with foreign currencies.
C. deal with the red tape.
D. increase the product price.
E. arrange for the transportation of products to the export market.

Which of the following is an example of a global strategy?
A. Domino’s introducing pizzas with Indian spices
B. Apple moving its Mac production to China
C. Starbucks standardizing its products across the U.S. and other countries
D. General Motors creating electric vehicles specifically for the Chinese market
E. McDonald’s refraining from using pork or beef for the Indian market
The difference between the flow of money into and out of a country is called its ____.
A. balance of trade
B. domestic gain
C. balance of payments
D. credit balance
E. exchange rate
Nations trade with other nations to obtain resources that would otherwise be unavailable to them.
Exporting is the purchase of products from another nation.
The World Trade Organization agreements are the optional ground rules for international commerce.
In most countries, participation in international business is restricted to large corporations.
Direct investment is the least risky and least expensive way to participate in foreign trade.
A favorable balance of trade exists when a country:
A. imports more than it exports.
B. exports more than it imports.
C. has more debt liabilities than assets.
D. spends more than it saves.
E. saves more than it spends.
Sociocultural differences, such as variations in spoken language and body language, usually have almost negligible impact on international business.
When a country devalues its currency, this causes:
A. an increase in its imports.
B. an increase in its exports.
C. an increase in sale of international goods in domestic market.
D. an increase in sale of international services in domestic market.
E. an increase in trade deficits.
Colombia can produce coffee much more efficiently than it can produce other items; this gives Columbia a(n) ____ advantage.
A. absolute
B. competitive
C. domestic
D. marginal
E. comparative
international business
the buying, selling, and trading of goods and services across national boundaries
absolute advantage
a monopoly that exists when a country is the only source of an item, the only producer of an item, or the most efficient producer of an item
comparative advantage
the basis of most international trade, when a country specializes in products that it can supply more efficiently or at a lower cost than it can produce other items
the transferring of manufacturing or other tasks—such as data processing—to countries where labor and supplies are less expensive
the sale of goods and services to foreign markets
the purchase of goods and services from foreign sources
balance of trade
the difference in value between a nation’s exports and its imports
trade deficit
a nation’s negative balance of trade, which exists when that country imports more products than it exports
balance of payments
the difference between the flow of money into and out of a country
the physical facilities that support a country’s economic activities, such as railroads, highways, ports, airfields, utilities and power plants, schools, hospitals, communication systems, and commercial distribution systems
exchange rate
the ratio at which one nation’s currency can be exchanged for another nation’s currency
import tariff
a tax levied by a nation on goods imported into the country
exchange controls
regulations that restrict the amount of currency that can be bought or sold
a restriction on the number of units of a particular product that can be imported into a country
a prohibition on trade in a particular product
the act of a country or business selling products at less than what it costs to produce them
a group of firms or nations that agree to act as a monopoly and not compete with each other, in order to generate a competitive advantage in world markets
General Agreement on Tariffs and Trade (GATT)
a trade agreement, originally signed by 23 nations in 1947, that provided a forum for tariff negotiations and a place where international trade problems could be discussed and resolved
World Trade Organization (WTO)
international organization dealing with the rules of trade between nations
North American Free Trade Agreement (NAFTA)
agreement that eliminates most tariffs and trade restrictions on agricultural and manufactured products to encourage trade among Canada, the United States, and Mexico
European Union (EU)
a union of European nations established in 1958 to promote trade among its members; one of the largest single markets today
Asia-Pacific Economic Cooperation (APEC)
an international trade alliance that promotes open trade and economic and technical cooperation among member nations
World Bank
an organization established by the industrialized nations in 1946 to loan money to underdeveloped and developing countries; formally known as the International Bank for Reconstruction and Development
International Monetary Fund (IMF)
organization established in 1947 to promote trade among member nations by eliminating trade barriers and fostering financial cooperation
countertrade agreements
foreign trade agreements that involve bartering products for other products instead of for currency
trading company
a firm that buys goods in one country and sells them to buyers in another country
a trade agreement in which one company—the licensor—allows another company—the licensee—to use its company name, products, patents, brands, trademarks, raw materials, and/or production processes in exchange for a fee or royalty
a form of licensing in which a company—the franchiser—agrees to provide a franchisee a name, logo, methods of operation, advertising, products, and other elements associated with a franchiser’s business, in return for a financial commitment and the agreement to conduct business in accordance with the franchiser’s standard of operations
contract manufacturing.
the hiring of a foreign company to produce a specified volume of the initiating company’s product to specification; the final product carries the domestic firm’s name
the relocation of business processes by a company or subsidiary to another country. Offshoring is different than outsourcing because the company retains control of the offshored processes.
joint venture
the sharing of the costs and operation of a business between a foreign company and a local partner
strategic alliance
a partnership formed to create competitive advantage on a worldwide basis
direct investment
the ownership of overseas facilities
multinational corporation (MNC)
a corporation that operates on a worldwide scale, without significant ties to any one nation or region
multinational strategy
a plan, used by international companies, that involves customizing products, promotion, and distribution according to cultural, technological, regional, and national differences
global strategy (globalization)
a strategy that involves standardizing products (and, as much as possible, their promotion and distribution) for the whole world, as if it were a single entity

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