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unit 1

Not all corporations are large. In recent years, about 24 percent of corporations have reported less than _____ in total sales revenue.





A limited liability partnership (LLP) is attractive to partners because

it allows “full shield” protection no matter in what state you operate.

there is no distinction between limited and general partners.

only the partner who provides the capital has limited liability.

professional businesses can form LLPs in any state.

Which of the following would be considered a business, according to the definition in the text?

A firm that specializes in providing consultations for at-risk teens, funded by the state.

A private charity that is sitting on a $2B endowment.

A Web design company that needs to make changes in staffing and deployment, because of a change in tax law, before it can become profitable.

A federal agency that writes and enforces environmental regulations.

A _____ is any activity that provides goods and services in an effort to earn a profit.

core goal



all of the above

In regard to the history of American business, what environment typified the Industrial Revolution?


Technology, environmental responsibility, and the customer were the impetus for all businesses. Firms were local, small, and adhered to just principles and sound ethics.

There was unprecedented production efficiency, but also a loss of individual ownership and personal pride in the production process.

The assembly line was largely responsible for the end of the skilled, highly paid worker. A new unskilled labor force was needed, and typically did not earn as much as a result.

Industrial titans built business empires and raised the overall standard of living across the country.

A negative aspect of the entrepreneurship era was that

powerful businesses gained the ability to manipulate prices and exploit workers.

productivity declined in many key industries as work shifted away from mass production to more labor intensive methods.

governments began running huge deficits.

inflation spiraled out of control, resulting in a decline in the standard of living.

The evolution of business included the

technological era.

economic era.

competitive era.

entrepreneurship era.

It was during this era that many businesses began to dominate their markets, forcing out competitors, manipulating prices, and exploiting workers, which lead the government to pass laws regulating business.

Industrial Revolution

Entrepreneurship Era

Production Era

Marketing Era

The production era is recognized for

increasingly specialized jobs, resulting in higher productivity and lower costs and prices.

power shifting away from business toward consumers.

the rise of monopoly power giving big business the ability to raise prices almost at will.

creating satisfied customers who act as advocates for business.

During the marketing era consumers found

fewer choices for goods and services.

fewer businesses offering goods and services.

more limits on spending.

more choices for goods and services.

Which of the following statements is most consistent with the marketing concept?

The primary purpose of a business is to dominate its market.

Consumers always care more about price than about quality.

All aspects of a business organization should focus on the needs of the customer.

Controlling the market for natural resources can give a firm a huge competitive advantage.

Macroeconomics focuses on

the major issues facing the national economy, but has little or no relevance to individuals.

smaller economic units such as individual consumers, families, and individual businesses operating within the economy.

the major issues facing the national economy that may seem abstract, but directly affect an individual’s day-to-day life.

the role of government, while microeconomics focuses on the private sector.

In _____, many firms compete by selling differentiated products.


a monopoly

monopolistic competition

an oligopoly

a natural monopoly

A competitor decided to drop its prices by 15% across the board, in an effort to increase market share. In response, its primary competitor dropped its prices by 20%. In which of the Four Degrees of Competition would this be undesirable, even disastrous?


pure competition

natural monopoly



Firms in oligopolistic markets tend to


keep prices as low as possible.

avoid price competition whenever possible.

be very concerned about the possibility of new firms entering their market.

be very concerned about the possibility of new firms entering their market

What cause is attributable to the failure of socialism and communism wherever they have been attempted throughout the world?


Lack of opportunity. Clearly communism could have worked if it had been better executed, especially with today’s technology.

The corruption of powerful central governments has been their downfall. If a stronger mandate for police power were present in these countries, they would have survived, strong and intact.

The social burden of entitlement programs, at some point, outstrips the ability of the people to produce. If these programs were better funded through higher taxes, they would have been sustainable.

Capitalism, with its agility and potential for a country’s economic growth, has been largely responsible for the failure of both communism and socialism.

The main economic goal of the government in a socialist economy is to

keep taxes as low as possible.

operate key economic enterprises in the best interests of the general public.

achieve the highest possible rate of economic growth.

provide the widest array of economic freedoms to its citizens.

In late 2010, in order to increase their growth, many socialistic economies have decided to


increase government spending.

eliminate some public benefits.

increase some public benefits.

increase government spending by eliminating public benefits

One reason pure market economies are nonexistent is because they


are too expensive to maintain.

don’t adequately provide for the sick, the young, the elderly, and the environment.

result in very high tax rates that undermine incentives.

don’t do enough to encourage entrepreneurship.

Most business enterprises in the United States are privately owned, but the federal government owns a number of major enterprises, e.g., the U.S. Postal Service. This suggests that the U.S. economy is best classified as a


pure market economy.

mixed economy.

true command economy.

pure planned economy.

To stimulate competition and protect both consumers and workers, the federal government

places heavy taxes on firms in monopolistic competition.

places limits on international trade in order to stimulate domestic production.

creates regulations to intervene in the free market.

creates business systems to meet the needs of all consumers.

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