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Test 1

Approximately 70 percent of U.S. production consists of goods and services purchased by individuals for personal or household consumption.
True
Material resources include sand, water, wood, dump trucks, and computers.
True
In a socialist economy, the distribution of goods and services – who gets what – is controlled by the government however some smaller businesses may be privately owned.
True
If a company’s sales are higher than its expenses, the company has earned what is known as revenue.
False
The “invisible hand” was a term coined by Adam Smith.
True
Approximately 45 percent of small businesses fail within the first seven years.
False
When a firm is lacking financing, inventory, or time, it is dealing with issues of scarcity.
True
Generally, the business cycle consists of four phases: the peak, recession, the trough, and recovery.
True
A system of business where the key industries are owned and controlled by the government with private ownership of some business is known as capitalism.
False
The ________ for a particular product is the quantity that buyers are willing to purchase at each varying price.
demand
The health of a nation’s economy is actually quite unrelated to the amount of interest consumers pay for homes, automobiles, and credit card purchases.
False
Information is the resource that managers use to effectively combine human, financial, and material resources.
True
Microeconomics is the study of the economy of an entire nation as well as the global economy.
False
Best Buy, an electronics retailer, could be considered a marketing intermediary.
True
People do not simply buy goods and services to just own them; they buy goods and services to satisfy a specific need.
True
Bushels of corn, wheat, or barley that have no unique characteristics are part of a perfect competition market.
True
The only current example of a command economy is capitalism.
False
When an economy is at its highest point and unemployment is low, the economy is in a peak period.
True
Manufacturers in the auto industry operate in a monopoly setting.
False
Studies show that the incidence of innovation among small-business workers is ________ than among workers in large businesses.
b. significantly higher
Airplanes manufactured by Boeing, cars manufactured by Nissan, and Kellogg’s cereal are all examples of
oligopolies
Since we assume producers are rational people, we would expect them to offer more of a product at a higher price than to offer the product at a lower price.
True
The ability to deal effectively with individual employees as well as other managers and people outside the organization are known as conceptual skills.
False
Large emerging economies like China, Mexico, and India illustrate which of the following business environments?
a. All of these choice are correct.
Which of the following is an example of a risk an entrepreneur takes when starting a business?
a. Losing whatever investments are in the business.
Travis Henry recently started a small retail business offering specialty items from China. He realizes that economic freedom in a largely capitalist society includes which of the following rights?
d. The existence of new competitors to enter his market
John Garcia was born in the United States to parents that came from rural Oaxaca, Mexico, a community with high rates of poverty, few public services, and even fewer economic opportunities. John merged his passion for healthy food with his love of his family recipes for Mexican food and in 1998 opened Natural Mexican, the first Mexican restaurant in Portland, Oregon, that specialized in using all organic, local products. In 2005, with a favorable economic outlook and low national unemployment, John decided it was a prime time to launch two additional restaurants. Currently, all three restaurants are more profitable than their competitors. Nevertheless, increased competition from several other organic restaurants and vendors at local farmers’ markets is starting to worry him. John has narrowed his options down to two: (1) reduce his current expenses by 10 percent to increase profit margin, or (2) start looking into packaging some of his salsa and guacamole products for sale in local grocery stores.
John’s use of family recipes in his restaurants as well as the traditional tools used to authentically create them could be considered
a. material resources.
John Garcia was born in the United States to parents that came from rural Oaxaca, Mexico, a community with high rates of poverty, few public services, and even fewer economic opportunities. John merged his passion for healthy food with his love of his family recipes for Mexican food and in 1998 opened Natural Mexican, the first Mexican restaurant in Portland, Oregon, that specialized in using all organic, local products. In 2005, with a favorable economic outlook and low national unemployment, John decided it was a prime time to launch two additional restaurants. Currently, all three restaurants are more profitable than their competitors. Nevertheless, increased competition from several other organic restaurants and vendors at local farmers’ markets is starting to worry him. John has narrowed his options down to two: (1) reduce his current expenses by 10 percent to increase profit margin, or (2) start looking into packaging some of his salsa and guacamole products for sale in local grocery stores.

In 2005 John chose to open two additional restaurants during a(n) ___ in the U.S. economy.

c. peak period
The resources required to organize a business include __________ resources.
c. material, human, financial, and information
Required questions for determining the type of economic system a country will follow include
a. what to produce, how to produce, and for whom to produce.
Which fundamental issue is not basic to capitalism?
e. The government controls the major factors of production.
Business ethics is the application of legal and regulatory standards to business situations.
False
The Clean Air Amendments, the Water Pollution Control Act Amendment, and the National Environmental Policy Act were all instituted in the
1970s
The EPA is a federal agency charged with enforcing laws intended to protect the environment.
True
All of the following are arguments for increased social responsibility except
b. social problems affect society in general, so individuals businesses should not be expected to solve these problems.
The Interstate Commerce Act was the first federal act to regulate business practices.
True
Regulations and laws were much stricter in the first quarter of the twentieth century than they are now.
False
All of the following are rights of the consumer bill of rights except
d. the right to personalized service.
Misleading advertising in print or television is illegal as well as unethical.
True
The EEOC has the power to investigate complaints of employment discrimination and can sue firms that practice discrimination.
True
A Latin phrase, caveat emptor, summarizes the vulnerable position that consumers were in the early 1900s.
True
For more than fifty years, women’s salaries have consistently been only about ________ for each dollar earned compared to men’s.
77
Which of the following government agencies issues guidelines on the use of labeling that advertisers have an obligation to follow?
d. Federal Trade Commission
The ________ investigates illegal trade practices.
a. Federal Trade Commission
Cultural norms can play a part in a person’s ethical or unethical behavior in the workplace.
True
Noise pollution might be addressed by workers being required to wear earplugs to guard against hearing damage.
true
Which of the following is not considered a step in developing and implementing a social responsibility program in a company?
c. Incorporating “buy-in” from all employees
The courts of the U.S. have ruled that quotas in affirmative action programs are unconstitutional.
True
Relationships with customers are not known to cause ethical problems for businesses.
False
Trade associations often do provide ethical guidelines for their members.
True
A responsibility audit is a comprehensive report of what an organization is going to do in regard to social issues.
False
The Wall Street Reform and Consumer Protection Act was passed in 2009.
False
Which of the following federal laws was not passed between 1887 and 1914 as were the others?
a. Fair Packaging and Labeling Act
Of the following factors, which is the least important in contributing to air pollution?
b. Pollution emitted by individual homes
Which of the following acts involving protecting the environment in some way is the most recent?
b. American Recovery and Reinvestment Act
Which of the following is the least likely option for funding a social responsibility program in a business?
d. Investors fund the program.
Fairness is considered an important ethical concern in business.
True
That the consumer was entitled to a “bill of rights” was instituted by President
c. John F. Kennedy.
In a recent survey, the majority of employees surveyed assumed that their use of technology in the workplace is not monitored.
False
The ________ Act provides sweeping legislation for reporters of corporate misconduct.
d. Sarbanes-Oxley
The ________ enlarged the solid-waste disposal program and provided for enforcement by the EPA.
d. Resource Recovery Act
Which of the following is false about business and social responsibility in the first quarter of the twentieth century?
b. The average work week was approximately 40 hours.
When Maytag provides customers with a booklet describing how to use a washing machine, the company is satisfying the consumer bill of rights to
a. be informed.
The traditional concept that businesses are responsible to their investors and that social responsibility is someone else’s job is the core of the
e. economic model of social responsibility.
Which of the following examples is least likely to be covered by federal legislation passed in the 1960s?
b. Collection agencies with harsh and abusive collection practices
Nobel laureate Milton Friedman refers to social responsibility programs as “hypocritical window-dressing”. His belief supports which social responsibility philosophy?
d. The economic model
A local bank just completed its social audit for the past year. Which statement indicates a valid attempt at responding to social responsibility by the bank?
d. Each employee completed at least 200 hours of service to community functions.
Sandra, a purchasing agent for Friday Farms, has just secured a new vendor for tractors, plows, and harrows. The new vendor offers Sandra some small, extra pieces of equipment—rakes, shovels, and hand trowels—knowing that the hand tools are always useful as well. The new vendor also is anxious to secure future bids. Sandra needs a few hand tools for her own garden and decides that doing business with this new vendor is in everyone’s best interest. From an ethical standpoint, Sandra needs to be very aware of
d. conflict of interest.
By ensuring that products are safe and reliable, the Food and Drug Administration and the Consumer Product Safety Commission are taking part in a movement known as
consumerism
A reason against trade restrictions is the higher prices that consumers have to pay.
True
Exporting is selling and shipping raw materials or products to other states.
False
The balance of trade includes imports, exports, investments, money spent by foreign tourists, and aid to foreign governments.
False
Which of the following is true about absolute advantages?
c. Absolute advantage is the ability to produce a particular product more efficiently than any other country.
If the tiny country of Antigua & Barbuda imported $900 million worth of goods and services and exported $800 million worth, it would have a
c. trade deficit of $100 million.
Saudi Arabia and Siberia enjoy an absolute advantage in the production of crude oil and petroleum products.
True
The NAFTA agreement includes the United States, Canada, and Mexico.
True
MDB stands for Monetarily-Developed Bank.
False
Protecting new or weak national industries is a reason to institute trade restrictions.
True
Exporting is considered simpler than licensing.
False
All banks are required to be national banks; it is against international regulations for banks to cross country borders.
False
If only 100,000 tons of beef is allowed to enter the U.S. borders, the U.S. government has instituted a(n)
d. import quota.
A multinational enterprise may operate in multiple countries but the business is based in one specific country.
False
Why are revenue tariffs levied?
c. To generate income for the government
One risk of licensing is the possibility that licensees may not adhere to quality standards required and expected by the licensing company.
True
Loans by the IMF are primarily provided to fund international trade.
True
Despite the global recession, economic growth in Asia remained strong in 2011 and 2012.
True
A country’s ________ is the total flow of money into a country minus the total flow of money out of the country over a period of time.
b. balance of payments
GATT is headquartered in Washington D.C.
False
It can be said that the United States has an absolute advantage in research and development as well as high-technology.
False
Which of the following is least likely to be an economic consequence of trade restrictions?
e. Protection of the health of citizens
Trade restrictions are applied to products exported to other countries more often than to imports.
False
A trading company provides a link between buyers from one country and sellers in another country.
True
If several hundreds of thousands of computers are sold on the domestic market for a ridiculously low price, what happens to the price of domestically produced computers?
c. The price of domestic computers will not change.
A grocery chain that directly purchases a portion of its products from outside the country rather than using an American distributor is engaging in international business.
True
________ is our second largest export customer.
Mexico
The Inter-American Development Bank focuses on helping developing countries grow.
True
Which of the following statements correctly characterizes changes in trade restrictions since the global financial crisis?
c. There are increases in import licensing and tariffs.
Which one of the following reasons might a country have trade restrictions?
b. All of these choices are correct.
If Saudi Arabia were to trade crude oil for two 747 jets from U.S.-based Boeing, this international barter transaction would be known as a
countertrade
Escribo Services, a small, independent publishing company is ready to expand into international business. Since the company is committed to proceeding slowly and starting at the most simple level, Escribo Services has decided that ___ is the best approach.
licensing
In 2 Design, Inc., manufactures and sells unique kitchen and dining room table sets. The headquarters of the company is in Portland, Oregon, with manufacturing facilities in North Carolina. The owners are ready to expand their client base to Canada and Mexico, both logistically manageable with longer-term plans to expand to Europe. After some initial research, the owners of In 2 Design thought that offering their company name and logo to a foreign company to manufacture and sell their product line in return for a royalty would be beneficial for both parties. After more thought and discussion with other company owners who have contemplated doing the same thing, the owners of In 2 Design are even more unsure of what step to take next.

The In 2 Design owners have ultimately chosen that a joint venture is their best strategy. All of the following are characteristics a joint venture would offer the company that licensing would not except

e. a much less complex arrangement.
What set the stage in 2001 for WTO members to take an important step toward multilateral trade liberalization?
d. The Doha Round
A complete halt to trading with a particular nation is known as
b. an embargo.
When a South American country produces coffee and exports the coffee to the rest of the world, what type of advantage might it have?
a. Absolute advantage
Once a not-for-profit corporation is approved it must meet guidelines of the ______ to obtain tax-exempt status.
c. Internal Revenue Service.
At least one general partner must be responsible for the debts of the limited partnership.
True
Small businesses generally only issue common stock.
True
There are approximately ________ partnerships in the United States.
b. 3 million
A joint venture can occur with a minimum of three groups or partners.
False
A major disadvantage of sole proprietorships is that profits earned by a sole proprietorship are subject to the special state and federal income taxes that corporations pay.
False
A vertical merger occurs between firms that operate at different but related levels of production and marketing.
True
Which form of business has unlimited liability for all owners?
b. sole proprietorship
The vast majority of economists and financial analysts agree that mergers are good for the U.S. economy.
False
Which of the following types of business ownership is the easiest to start?
b. Sole proprietorship
A sole proprietorship is usually operated by more than one person.
False
Banks are more open to lending money to sole proprietorships than to any other type of business.
False
Most businesses incorporate in the states where they do most of their business.
True
A syndicate is a long-term, permanent association of individuals or firms.
False
In the eyes of the law, the owner of a sole proprietorship and the business are one and the same.
True
Limited partners participate in day-to-day business activities and operations.
False
Shares of ownership of a corporation are called stock.
True
A partnership can have a legal limit of no more than 12 partners.
False
Which of the following is not a right of corporations?
d. The right to all profits
Corporate officers are appointed by the board of directors.
True
Double taxation is a drawback of corporation business ownership.
True
Corporations make up about ________ percent of all business and account for ________ of all sales revenues.
c. 19; 82
There are approximately ________ million nonfarm sole proprietorships in the United States.
23
If you earn 90 cents for each stock share that you own in XYZ corporation, you have earned a
dividend
Most corporations grow by expanding their own present operations.
True
A way for a firm to grow is through the takeover of another firm.
True
One or more members of a board of directors are required for a corporation.
True
A way for the firm to grow is through the takeover of another firm.
True
Non-profit laws are only federal and thus, the same laws exist in all fifty states.
False
Which of the following is not a disadvantage of a corporation?
a. Raising money
Which of the following is not a qualification for S-corporation status?
d. No more than 12 stockholders
Which of the following is a false statement regarding limited-liability companies?
a. LLCs are not recognized in all 50 states.
One of the two major reasons more than 700 New Hampshire corporations have converted to LLCs is to eliminate:
b. double taxation.
All of the following are benefits of the LLC form of ownership except:
a. required annual meetings to provide information to owners.
During college, Elyssa Wood earned extra money by using her computer skills to prepare papers for students. After graduation, she decided to turn her part-time job into a full-time business that she plans to expand in the future. In the meantime, she wants to maintain complete control of the business. She will most likely organize the business as a
e. sole proprietorship.
How are taxes calculated for a sole proprietorship?
d. As with a partnership, the sole proprietorship pays no income tax but the profit is reported as personal income of the owner.
Which item is NOT typically included in the articles of partnership agreement?
d. A description of the target market.
Stockholders directly
a. elect the board of directors.
Which of the following is true about an LLC?
c. LLCs enjoy pass-through taxation.
A country’s ________ is the total flow of money into a country minus the total flow of money out of the country over a period of time.
b. balance of payments

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