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Practice test 1

Starting a business always involves _______.
risk
Marla Staples is concerned with identity theft. One of the ways that she can protect her information from leaking-out to the wrong hands is:
Install antivirus software, firewalls, and anti-spyware software on her computer.
The Internet and the emergence of an information-based economy are important parts of the ___________ environment in which businesses operate.
technological
For-profit businesses and nonprofit organizations are similar in that they both:
contribute to the welfare of society.
As you consider the factors of production, which of the following did management theorist, Peter Drucker believe to be one of the most important contributing factors to increasing our nation’s wealth?
knowledge
The series of lines on a product packaging that the cashier scans when you check out at a grocery store or discount store is called a:
bar code.
The resources that contribute to the creation of wealth are known as _______.
factors of production
Which of the following policies would tend to foster entrepreneurship?
Minimize taxes and regulations.
__________ is the amount a business earns after deducting what it spends for salaries and other expenses.
Profit
As a factor of production, the term capital includes:
tools, machinery, and buildings.
Honda and Toyota have used insourcing for years to produce cars in the United States. Insourcing:
helps offset the number of jobs being outsourced.
There is evidence that the recession is coming to an end for Intelligent Engine Company. New orders are coming in at a steady pace, and management is confident that new contracts will take them through the next couple of years. The company has started investing again, but not in people. Employees total the same as when the company and its competitors faced their lowest revenues of the decade. Due to __________________, the company is producing more product and services with less people.
technological advancement
Adam Ripley sells custom bicycles. Adam buys several bike parts including wheels and tires from the Good Treads Company. Although several government-supported regulations 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.
Businesses collect ________ information on where people live, what they buy, and how they spend their time.
demographic
In a free market economic system, the mechanism of __________ is the key determinant used to signal to producers what to produce and how much to produce.
price
Reality Entertainment, Inc is a major producer of reality TV programming. The company faces fierce competition from three other major producers of similar shows. Together, Reality Entertainment and its three rivals control almost the entire reality TV programming. Their market environment is called:
An oligopoly.
Jorge Martinez is a well-educated entrepreneur who operated a small business in his home country of Florentina. At the encouragement of his American relatives, Jorge recently immigrated to the United States and applied for U.S. citizenship. “In Florentina, tax rates were very high,” Jorge complained. “The government used the taxes I paid to finance all sorts of social programs to help the less fortunate. While this is a noble goal, it has really undermined the profit incentive of individuals such as me. I really feel that these high taxes have stifled economic growth.” Jorge’s comments illustrate the reason many socialist countries are experiencing a(n):
Brain drain.
The freedom of people to buy, sell, and use land, buildings, machinery, and inventions are basic capitalist rights under:
The right to own private property.
___________ studies the operation of a nation’s economy as a whole.
Macroeconomics
Which of the following statements would a follower of Adam Smith most likely make?
If people are given the freedom to follow their own interests, theoretically their efforts will lead to economic growth that benefits society as a whole.
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:
An example of frictional unemployment.
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
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 __________.
invisible hand
Jake considers himself to be a follower of Thomas Malthus. Which of the following statements would Jake be most likely to make?
A society will not experience sustainable economic progress unless it accepts the need to limit population growth.
How is it that people working in their own self-interest produce goods, services, and wealth for others?
In order to earn money and produce goods that improve lives, self-directed gain would provide jobs, and subsequently wages for others.
A(n) _____________ curve shows the relationship between the price of a good and the quantity of that good people are willing and able to buy in a given time period.
demand
In the U.S., the __________ has the role of managing the money supply and interest rates.
Federal Reserve Bank
Over the years, the government of Montivia has focused on implementing programs that promote equality. On the short-term, though, Montivia legislators are concerned about the very slow rate of growth that has plagued its national economy. In order to address this problem, the government is likely to:
Reduce taxes and cut back on some social programs.
The U.S. government continues to be committed to free-trade agreements, as evidenced by the more recent passage of CAFTA. The future goal of U.S. free trade advocates is:
A large free trade area that would include all nations of South and North America.
_____________ is buying products from another country.
Importing
A ________ tariff is designed to raise the price of imported products so that domestic goods are more competitively priced.
protective
Country A is extremely efficient in the mining of tin. However, its climate and terrain makes it difficult to produce corn. According to the theory of comparative advantage, Country A should:
The theory of comparative advantage contends that a nation should produce and export those goods that it produces efficiently and effectively, and import those goods that other countries produce more efficiently and effectively.
U.S. recording studios are feeling the pinch in profits due to the fact that artists’ music is copied and sold overseas within 24 hours of the music selling in the U.S. market. As a student who is now aware of the challenges businesses face in global trade, which of the following statements is an accurate representation of this situation?
U.S. copyright laws do not necessarily apply globally.
______________ was an 18th century belief that a nation should try to sell more goods to other nations than it buys from them.
Mercantilism
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. ___________.
export
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.
joint venture
The European Union created a single monetary unit to replace the national currencies of twelve member nations. This common currency is known as the:
euro
Although it has experienced persistent social unrest, multinationals have shown interest in Russia due to:
the size of its natural resources.
The Ozark Bike Company recently entered into an agreement with a large Japanese retailer to distribute its bicycles in Japan. Ozark Bike Company sees itself in a favorable position because:
the yen is gaining strength compared to the U.S. dollar making it cheaper for Japanese customers to buy U.S. products.
Reviewing the recent experience of the United States in global markets reveals that the U.S has:
a large trade deficit with China.
As surgical procedures become extremely costly (upwards of $100,000 per surgery), which of the following health benefits strategies is being considered, if not implemented, by American companies? According to the Making Ethical Decisions box titled “Need an Operation? Take a Vacation”:
Patients who elect to have surgeries performed abroad are finding the quality of these surgeries to be sub-standard compared to the quality and care they receive in the U.S. The lesson is to think twice about a company whose benefits prescribe that you have your surgeries abroad.
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.
Which of the following terms describes someone who reports illegal or unethical behavior?
whistleblower
After a few years of being in business, employees who worked for a start-up software company noticed that the owner overlooked certain questionable actions of high billing associates, versus other employees who worked hard but only brought in an average number of new clients each month. With respect to what you learned in this chapter about the ethical behavior of many Americans, which of the following statements applies here?
As is often the case today, some leaders will look at each situation individually when making value judgments.
Obeying the law is ________ ethical behavior.
the first step towards
Blake Mycoskie started a shoe business known as TOMS. As a social entrepreneur, Mr. Mycoskie takes the concept of ___________________ to a new level. TOMS social causes are directly related to the firm’s expertise: selling shoes.
corporate social initiative
The Connecting through Social Media box titled “Facebook or Fakebook” depicts the social media sites’ widespread popularity. It asks members to consider:
The ethical and unethical activities of social media sites and how to remain an ethical participant.
Top management at Big Bend Motorcycle Company is convinced that the company has a social responsibility to its community. Management believes that the firm can have the greatest impact in this area through cash contributions to nonprofit organizations. This is an example of:
corporate philanthropy.
The position a firm takes on issues that affect the corporation as well as society is known as its:
corporate policy.
Cigarette producers refused to voluntarily place health warnings on their packages. In response, the federal government passed laws requiring health warnings on all cigarette packages. With respect to ethical behavior, this sequence of events is:
Not the desired approach.
Compliance based ethics codes typically:
rely on laws and regulations outside the firm for guidance.
Given the ethical lapses that are prevalent today in our businesses, which of the following can be done to restore trust in the free-market system and leaders in general?
New laws making accounting records transparent may help restore trust.
Which of the following is an unresolved ethical issue that surrounds global trade?
Labor standards
According to the Connecting Across Borders box, which of the following is true?
Corporate ethics can clash with cultural ethics.
Corporate ________ covers issues such as setting minority hiring practices, manufacturing safe products, and minimizing pollution.
responsibility
Which of the following is a reason why a business should be managed ethically?
It is the right thing to do.
The limited liability provided to limited partners means that they are not responsible for the debts of the business beyond:
The amount they have invested in the company.
In rural areas electrical power is often sold by ____________ that take advantage of the government’s policy to sell them electricity at wholesale rates.
cooperatives
One difference between partnerships and sole proprietorships is that partnerships:
Have a greater chance of long term survival due to the accountability of each partner to the other.
An attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing is called a(n):
Leveraged buyout.
“Double taxation” means:
Corporations pay taxes on their profits. If they distribute after-tax profits to the stockholders, the stockholders also pay taxes on the distribution.
Selma owns a roofing business. She enjoys being her own boss, but her satisfaction comes at a price. Her days are filled with organizing the activities of her employees and soliciting new customers. She often misses activities with friends and family because of the obligations of running her own business. She also knows that she has unlimited personal liability for any of her firm’s debts. Selma’s business is organized as a(n):
Sole proprietorship.
A(n) ___________________ is a state-chartered legal entity with authority to act and to have liability separate from its owners.
conventional corporation
Compared to partnerships and sole proprietorships, a major advantage of the C (conventional) corporation as a form of business ownership is that it:
Has the ability to raise more money.
Double taxation is a phenomenon that occurs with corporations that pay dividends. Which of the following scenarios is an accurate example of double taxation?
If Idle Time Gaming, Inc., distributes 20% of its net profit after taxes to its stockholders; these funds will be taxed again, when each individual stockholder claims his/her portion as earnings.
One reason many companies do not organize themselves as an S corporation is that this form of business:
Has a special eligibility restriction, which many businesses are unable to meet.
The organizational structure of a corporation permits:
Stockholders to elect the Board of Directors.
Franchised businesses are successful (both domestically and internationally) because:
Customers like the predictability of the product and/or service.
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.
franchise agreement
The form of business ownership that usually requires the most detailed record keeping is the:
Corporation.
The strategy of investors who are attempting a leveraged buyout is to:
Use debt to finance the buyout of the firm’s stockholders and gain control of the firm themselves.

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