BUSI 101 Exam 1 solutions complete answers

BUSI 101 Exam 1 solutions complete answers 

 

One advantage of a database is:

 

Which of the following statements describes a recurring theme about today's ecological environment?

 

Jane's income has remained stable over the past few years while the prices of things she buys have gone up. Nevertheless, Jane feels better off because the environment is cleaner, the crime rate has declined, she has more leisure time, and the quality of medical care has improved. If Jane's experience is typical, we can conclude that the standard of living has:

 

_______________ is/are the external and internal circumstances that surround the business.

 

Diversity is more than recruiting and keeping minorities. Diversity means appreciating and understanding other differences in our customers and in our workforce. The best description of these differences is:

 

Traditional businesses have a managerial focus rather than a customer focus.

 

In most industries, the only producers that pose a serious threat to U.S. manufacturers are those in Japan and Western Europe.

 

In some cities the number of legal and illegal immigrants has caused governments to adapt by changing signs to other languages.

 

The threat of terrorism increases the costs of operating most businesses.

 

Sarah is a recent U.S. college graduate who is interested in starting an import tea business. If she follows through with her plans, she will be a pioneer, because only a handful of women choose to start businesses in the U.S.

 

John complained to his buddy, Frank, that prices have increased a lot over the past year. Frank disagreed, saying that the prices of some goods have gone up a bit, but other prices have declined, noting that you can get some good buys on houses right now. Frank feels that the average price of consumer goods hasn't changed. Frank and John can refer to the __________ to learn how government economists currently view the price situation.

 

Patrick lives in a nation whose government embraces capitalism. He owns his own home and car, as well as his own business and building. Patrick maintains ownership due to:

 

Chase is a recent college graduate with a new job as an engineering trainee for a large defense company. Now that he is making good wages, he hopes to start saving for his first house and also contribute toward the company retirement plan. As he looks over his monthly bills, Chase is concerned about ever getting ahead of the game. His food bill, car payment, and mounting gasoline payments keep him in the "just making ends meet" category. As his mind wanders back to the "good ol' college days," he reflects on a time when gas and food seemed a lot more reasonable. Chase is experiencing the effects of:

 

__________ is the study of how a society employs its limited resources to produce goods and services and how it distributes them among competing groups and individuals.

 

The measure used to report price changes at the wholesale level is the:

 

Socialists believe that wealth should be more evenly distributed than what actually occurs in a free-market capitalistic system.

 

A free-market economic system is one in which the market of buyers and sellers decides what is produced, how much is produced, and how it is distributed.

 

The producer price index measures what is happening to prices at the wholesale level.

 

The Federal Reserve Board is responsible for controlling the money supply.

 

The CPI is based on the prices of a carefully selected market basket of goods, all of which consumers can purchase at a supermarket.

 

When AB-InBev sells Budweiser beer made in St. Louis, MO, to Germany, the sales of its product would be classified as a U.S. __________.

 

Which of the following is considered when calculating a country's balance of payments?

 

The U.S. government has announced a 5-million-pound annual limit on beef imported from Argentina. This type of trade restriction is called a(n):

 

ExxonMobil Corporation refines and markets its petroleum products in many different nations. In addition, Exxon's stockholders and managers come from many different nations. If some of the nations where it operates decided to take over the assets of the company, this act would constitute:

 

Household Appliances, Inc., has a manufacturing plant near Chicago. The company specializes in compact washers and dryers for countries where consumers have less living space. Household Appliances participates in the global market through:

 

A disadvantage of creating a foreign subsidiary is the loss of control over technology and expertise used in the production of the product.

 

The purchase of U.S.-based Anheuser-Busch by Belgian brewer InBev is an example of foreign direct investment.

 

A United States firm recently won a large contract with a company in Bangladesh by providing government officials and company officials with American cars and promises to provide monetary gifts in exchange for the business. Fortunately, U.S. law, under the Foreign Corrupt Practices Act, permits U.S. companies to operate in this manner.

 

Importing is the selling of products to another country.

 

A favorable balance of trade occurs when the value of a country's exports exceeds the value of its exports.

 

In recent years, progressive firms have embarked upon __________, where they will commit company resources and expertise toward helping out in emergency type situations.

 

The purpose of a(n) ________ is to evaluate an organization's progress toward implementing programs that are socially responsible and responsive.

 

Zach spent several months developing a good relationship with a business client. The client is now buying a significant amount of product from Zach's company, resulting in high commissions for Zach, personally. After checking the sales records for the past six months, a colleague of Zach's started visiting the same client in the hopes of capturing some of the client's business too. Although he considers it "legal and fair game," sales reps in his firm have begun to avoid him because they consider it a violation of:

 

Although college graduates would prefer to work for socially responsible companies,

 

As the number of multinational corporations increases, we are experiencing international ethical dilemmas. One very real concern during the past decade is the human rights abuses in sweatshops where several multinationals contract manufacture their products, in exchange for cheap labor. Several retailers have banned together to set ethical standards in foreign factories. Which of the following statements summarizes the challenges of companies doing business in developing countries and the concerns of their customers?

 

The brewers of Budweiser beer encourage their customers to drink responsibly. This reflects a compliance-based approach to ethics.

 

A charitable donation contributed by a corporation is an example of corporate philanthropy.

 

A corporate policy should never make a value statement about the environment or other social and political issues, because it is doubtful the company can live up to the proclamation.

 

Effective corporate values start with employees and develop throughout the organization to include top management.

 

According to the Reaching Beyond Our Borders box, corporate ethics can clash with cultural ethics, especially in global business.

 

Businesses provide goods, jobs, and services to others. 

 

Businesses seek to earn a profit by providing goods and services to others. 

 

Revenue is the amount a business earns above and beyond what it spends for expenses and costs. 

 

Profit is the amount of money a business earns above and beyond what it spends for salaries and other expenses. 

 

Since all businesses make a profit, starting a business is not risky. 

 

An entrepreneur risks time and money to start and manage a business. 

 

If a business's costs and expenses are greater than its revenue, it will suffer a loss. 

 

Profits of a business include the salaries paid to its employees. 

Revenue is the total amount of money a business takes in during a given period by selling goods and services. 

Risk is the chance an entrepreneur takes of losing time and money on a business that may not prove profitable. 

The United States has one of the highest standards of living in the world. 

 The term "standard of living" refers to the amount of debt people can incur on a given income. 

Health care availability, a clean environment, and good schools all contribute to a high quality of life. 

Maintaining a high quality of life requires the combined efforts of businesses, nonprofit organizations, and government agencies. 

 Stakeholders are all the people who stand to gain or lose by the policies and activities of a business. 

Stakeholders include customers, employees, stockholders, suppliers, dealers, bankers, government officials and environmentalists. 

Outsourcing means selling goods and services to people in other countries. 

Outsourcing has caused many complications in many states where jobs have been lost to overseas companies. 

Insourcing refers to the practice of global companies setting up design and production facilities in the United States. 

The knowledge and skills learned in business courses are seldom relevant to students who work for nonprofit organizations or volunteer groups. 

Nonprofit organizations use financial gains to meet stated social or educational goals of the organization rather than personal profit. 

Social entrepreneurs are people who start and manage organizations that are not-for-profit. Their mission is to help others improve their quality of life. 

The only real purpose of a business is to make money for entrepreneurs. 

The only way a firm can increase its profits is to increase its sales revenue. 

The amount of profit or loss earned by a business can be found by subtracting the firm's expenses from its revenues. 

Nonprofit organizations are similar to businesses in that they often provide goods and services that satisfy the needs of society. 

Unlike businesses, employees of nonprofit organizations are not required to learn the business skills of information management, marketing, or financial management. 

Business decisions should consider the interests of customers, employees, suppliers, government leaders, and stockholders. 

By balancing the demands of customers and stockholders, businesses satisfy the demands of all stakeholders. 

An effort to please one group of stakeholders eventually pleases all stakeholders. 

Insourcing creates new jobs, and helps offset the number of jobs being outsourced. 

 Robin has started her own online consulting firm. While she recognizes the risks involved in operating a business, she is still willing to invest her time, effort, and money in hopes of earning a profit. Robin is an example of an entrepreneur. 

Backstreet Books, an eclectic bookstore on a large college campus generated total revenues of $15 million while incurring expenses of $12 million. During the year Backstreet Books earned a profit of $3 million. 

Since businesses strive to earn a profit, their owners benefit at the expense of the rest of society. 

  John earned the same amount of money this year as he did last year. Thus, his standard of living must be the same as it was last year. 

Susan quit her job in a big city to take a less stressful position in a small town located in a scenic area. She earns less money at her new job and has had to cut back on her purchases of material goods, but she has more leisure time and really enjoys the clean air and scenic beauty of her new home. Susan has accepted a lower standard of living in order to enjoy a higher quality of life. 

Political freedom, quality education, access to health care, and a clean environment are all factors that contribute to an improved quality of life. 

People living in San Jose, CA on average earn more money than people living in St. Louis, MO. The citizens of San Jose enjoy a higher standard of living than the citizens of St. Louis. 

The major difference between businesses and nonprofit organizations is that only businesses can increase the standard of living, while only nonprofit organizations can improve the quality of life. 

A charitable organization, such as the American Red Cross or Salvation Army, is classified as a for-profit organization. 

It was reported by a Beijing newspaper that China succeeded in improving its people's standard of living and establishing a relatively affluent society recently. This report clearly indicates that both income levels and the price of goods and services rose significantly during that time period. 

Starting a business is a riskier path toward business success than working your way up the ranks of a large business. 

Working as an entrepreneur is the only way to succeed in business. 

Paid vacations and health care insurance are among the benefits provided by the government to entrepreneurs. 

Women currently own less than ten percent of all businesses. 

The number of businesses owned by Asians, Hispanics, and Native Americans has grown dramatically. 

 Land, sometimes called natural resources, is the most critical factor of production in explaining why some countries are poor while others are rich. 

Money is one of the five factors of production that contribute to the creation of wealth. 

Tools, machinery, and buildings are examples of capital resources. 

 The major advantage rich nations have over poor nations is an abundance of land and labor. 

Entrepreneurship is one of the five factors of production that contribute to the creation of wealth. 

Business consultant Peter Drucker said that the most important factor of production is knowledge. 

Most business experts agree that entrepreneurship and the effective use of knowledge are the most important contributors to the creation of wealth. 

The business environment refers to the surrounding factors that either help or hinder the development of businesses. 

Countries with an inadequately trained work force and few entrepreneurs often achieve the highest levels of income by relying on a large number of workers. 

If they wish to create more wealth, poor nations should focus on policies that increase entrepreneurship and the effective use of knowledge. 

To realize his passion, Alex recently opened Original Tunes, Inc., a small state of the art recording studio in Nashville, TN. He probably could have set-up shop in several major cities, but Nashville offered him the two most important factors that he learned in business school would enhance the creation of wealth: labor and political freedom. 

Greg recently completed his degree in construction management and is planning to start a business developing apartment buildings. After researching several potential areas, he chose Mexico City due to its high population. Greg felt that this factor would create a large labor pool, the most important of the five factors of production. 

Jarett is supposed to be cramming for finals but his mind keeps wandering to the Colorado slopes. Several years ago, his Uncle Mike made it big and now owns a ski lodge just north of Aspen. He promised Jarett a management trainee position and the opportunity to buy into the company by contributing a portion of his paycheck each month back into the business. As he dreams about the opportunity to be his own boss, reality bites as Jarett scans his business book and reads, "freedom to succeed also means freedom to fail." 

 Taxes and government regulations are part of the economic and legal environment in which businesses operate. 

High taxes and government restrictions help to encourage entrepreneurs by providing greater incentives for people to work hard and create profit. 

One of the best things the governments of developing countries can do to increase wealth is to minimize interference with the free exchange of goods and services. 

In countries where businesses cannot enter into binding contracts, business owners assume additional risk. 

In an effort to increase wealth and their country's standard of living, many governments are taking over major industries and operating them as nonprofit organizations. 

Corruption and illegal activities are expected in a capitalist system and can be beneficial. 

One way for a government to actively promote entrepreneurship is to establish a currency that's tradable in world markets so that you can buy and sell goods anywhere in the world using that currency. 

Honesty, integrity, and high ethical standards are essential to a capitalist economic system like the one that operates in the United States. 

Laws that allow companies to write enforceable contracts decrease the risk of doing business. 

In rich countries such as the United States, changes in the level of taxation have little impact on the incentives of entrepreneurs. 

The failure to uphold high ethical business standards by a few companies can negatively impact the entire U.S. business community. 

Several years ago, the government of the small nation of Allegro owned the nation's telephone company and landlines. This relatively poor government relied on taxes to develop this industry and provide service to its citizens. If the government desired to rapidly improve people's access to phone service, its best course of action would involve selling the telephone company to private investors. 

The government of the nation of Winstone is trying to achieve a high quality of life by imposing strict regulations to protect the environment and ensure safe working conditions in factories and mines. The government also has established ambitious programs to help the poor, financing them by setting high tax rates. These efforts by Winstone's government should create an atmosphere that encourages entrepreneurship. 

Though it has received a lot of attention, the development of the Internet has had less of an impact on the way businesses operate than many other technological changes. 

An increase in productivity indicates that more can be produced in a given time period with the same amount of resources. 

Technology can help businesses become more efficient and productive. 

Productivity is the amount of output you generate given the amount of input such as hours worked. 

Effectiveness means producing goods and services using the least amount of resources. 

Effectiveness means producing the desired result. 

Technology refers to everything that makes business operations more effective, efficient, and productive. 

E-commerce is the buying and selling of goods over the Internet. 

The B2B Internet market consists of selling goods and services to consumers. 

The rise of Internet marketing has become particularly important in doing business in the B2B markets. 

The business-to-business segment of e-commerce is of less importance than the business-to-consumer segment of e-commerce. 

Technology allows firms to be more responsive to their customers' wants and needs. 

Bar codes are a form of technology that has enhanced a company's ability to be responsive to consumer needs. 

An electronic storage file where information is kept is called a CPU. 

The databases of a business often include a great deal of information about the firm's customers. 

Information in a database allows firms to carry only the products that the local population wants. 

Identity theft is when individuals or firms access people's personal information and then use it for illegal purposes and activities. 

The main difference between B2C and B2B e-commerce is that B2C uses only the Internet, while B2B combines e-commerce with traditional (bricks-and-mortar) outlets. 

There is less risk involved in starting an e-commerce only business than there is in trying to add e-commerce to a traditional (bricks-and-mortar) store.

One of the major advantages to firms involved in e-commerce is that the technology is still so new that the Internet-based firms face very little competition. 

Nicki has joined with several other investors to form a new company that sells foot care products to consumers over the Internet. Nicki has invested in a B2C e-commerce company. 

Over the past several years, workers in the small nation of Rainland have enjoyed an increase in the number of holidays and a reduction in the average length of the workday that has reduced the total number of hours they work each year. However, the output per worker in Rainland is higher now than it was before the reduction in hours. These facts suggest that productivity in Rainland has increased. 

SleekWrap is a company that produces industrial coatings for the steel industry. Until recently it relied on wholesalers to distribute its products to other businesses, but now it also sells directly to its business customers through its website. This is an example of the largest and most important type of e-commerce transaction. 

As emerging technologies become widespread, businesses tend to find better uses for them. However, in the case of the Internet, businesses that sell B2B have not benefited from directly selling to their business customers in the same way that B2C companies have done. 

With the emergence of the Internet, Jasmine finds it easy to do all her gift buying online. She takes comfort in the fact that new technologies if installed properly are seldom used in unethical ways. 

Technological innovation has a ripple effect. With the advent of the Internet, Tyler, a certified tech-nerd, is being courted by companies to write the next generation of antivirus software. He tells us its big business! 

To remain competitive in today's market, firms must produce a quality product and offer outstanding service at a reasonable price. 

Producing a high quality product will ensure success in the competitive environment. 

Successful firms follow a customer-driven strategy, as opposed to the management-driven strategy used in the past. 

Zero defects means that there is a company goal of no mistakes in making products. 

Competition is fierce! One way to respond quickly to customer needs is to develop a strategy of empowering employees. 

A policy of empowerment encourages managers to make decisions quickly for their front line employees. 

Empowerment means giving frontline workers the responsibility, authority, and freedom to respond quickly to customer requests. 

The goal of empowerment in the workplace is to prevent mistakes. Therefore, giving management more control over the actions of lower-level workers will prevent mistakes. 

The primary focus of successful firms is designing and producing high quality goods. Advertising is then used to convince consumers to buy their superior products. 

It's important that firms are as efficient as possible. This is done by becoming management-driven for efficiency. 

Customer-driven organizations require managers to closely direct and control their employees. 

Bruno and Gino are worthy competitors in the bakery business in a small upscale resort town. Gino recently negotiated a contract with a supplier for really cheap cooking oil. He knows that bakery customers want cheap products. In this competitive environment, keeping the price down is all that matters. 

Brett runs a lawn care service. Although he and his employees could service eight households in one day, he averages six yards per crewmember, per day. Brett recently restructured his work crew and provided each cutter with an incentive to acquire two new customers each month through customer referrals. As a recent business graduate, you tell him he's probably on the right track. 

The statistical study of the human population to describe its size, age, gender, and income is known as diversity recognition. 

The U.S. population tends to buy the same things and spend time in roughly the same way as people did a decade ago. 

Demographic changes create new business opportunities. 

Diversity groups identified in the market today can include extroverts, introverts, atheists, and the devout. 

Companies have responded to a diverse customer base by hiring a more diverse workforce. 

Currently people between the ages of 45 and 54 are the richest group in the United States. 

 New welfare rules have made it easier for single parents to remain at home with their young children without being required to seek employment. 

The federal government requires companies to take diversity very seriously, even recommending establishing a chief diversity officer in the executive suite. 

One factor that has had a major effect on businesses is the growth of single-parent families. 

Businesses that cater to older consumers in the future will likely not be successful. 

Businesses use demographic studies to understand where people live, their lifestyles, and what they are likely to buy. 

Diversity management would not be an issue if firms would treat all of their employees the same. 

Demographic trends suggest that businesses will benefit from offering flexible work schedules, eldercare, and childcare to help employees balance the demands of job and family. 

The current Social Security system will ensure that the young people of today will have Social Security benefits in the future when they retire. 

Xavier, a recent college graduate, is thinking of investing in a home health care business. He believes this will be a profitable venture because of the increasing number of people in the U.S. that will be over 60 in the near future and more likely to need this type of service. This accurately describes a demographic trend that will affect his business choice. 

Sue is a single mother with two small children. Her employer is considering providing family leave. Since Sue is a single mom with small children, she is unlikely to benefit from this program. 

Rob is an emergency room nurse at a local hospital in Texas. On a weekly basis, he will serve a number of patients who are not legally U.S. citizens. Many of them are giving birth to babies. Fortunately, Rob speaks enough Spanish to communicate with the patients. Rob is experiencing the realities of the social environment in some states. 

 Globalization has increased among nations. 

An important environmental change in the global environment is the growth of international competition. 

 Improved distribution systems have led to more global trade. 

Global trade has suffered because of increased problems with the Internet. 

 Globalization has greatly increased living standards around the world. 

China and India have become major U.S. competitors. 

Wars are costly to all companies. 

War and terrorism have had a significant effect in drawing many resources away from the U.S. economy and led to many additional costs for businesses. 

Companies that participate in the defense industry by making weapons and other companies that make armored vehicles and even food companies do well when the U.S. is at war. 

According to the box, “Gourmet Airport Eateries Take Flight,” safety regulations have made it difficult for airport restaurants to operate. Because of this, all airport food is limited to cold sandwiches and reheated entrees. This makes an airport restaurant an unprofitable business venture. 

One of the problems with globalization is that distribution systems and communication systems lack efficiency. 

The evidence for climate change is questionable. Well-known U.S. companies are taking a wait-and-see approach toward addressing climate change. 

Carlos Gonzalez owns a small manufacturing company that makes ventilation systems used in the construction of office buildings. As the U.S. continues to be involved in wars around the globe, Carlos may notice that his business will be growing more slowly in the future as more money continues to be put into the war effort. 

Lucy owns a restaurant in Los Angeles. She heard on the radio that the homeland security threat level has been increased due to anticipated terrorist activities, especially in large cities in the U.S. She will likely not be able to get insurance to cover any losses her business may suffer should an attack occur in L.A. 

After several years of study as a part-time student, Alex recently earned a degree in marketing at a local college. The growth in global markets may increase Alex's job opportunities, but it will also require him to continually update his skills or seek further education. 

Maya is an engineer for Windy Ridge, Inc. a maker of wind turbines. Recently, a large company has shown interest in investing in this small operation. This is not surprising since firms that are creating products for alternative sources of energy are attracting the attention of governments and other businesses. 

Over many years the nature of U.S. business has changed very little from century to century. 

The number of U.S. jobs in manufacturing has increased in the past five years. 

 Technology helped the manufacturing industry to become more productive. 

While the proportion of workers employed in agriculture has remained relatively constant, the average size of farms has steadily decreased over the past century. 

 Increases in productivity have allowed fewer farmers to feed more and more people. 

The advice provided by a marriage counselor is an example of the service industry. 

Almost all of the growth in employment opportunities since the mid-1980s has been generated by the service sector. 

Although employment in the service sector has increased rapidly in recent years, the vast majority of workers are still employed in the goods producing sector. 

 There are more high-paying jobs in the service sector than in the goods-producing sector. 

The best employment strategy for today's college graduates is to search for jobs that are closely related to their college major. 

The growth in the service sector in the United States appears to be giving way to an information-based global era. 

The transition from an agricultural economy to a manufacturing economy to a service based economy has resulted in a serious increase in long-term unemployment. 

One reason given for the decline in the number of U.S. workers employed in manufacturing is that manufacturing firms in the U.S. have become more efficient. 

The continuing increase in the number of U.S. workers in the service sector means that more and more workers are employed in low-wage positions. 

Historically jobs lost in one sector of the economy have been replaced by increased employment opportunities in other sectors. 

Dee Duction is a financial planner who helps people find ways to save for retirement and lower their taxes. Dee is employed in the service sector of the economy. 

After losing her manufacturing job in the U.S. automobile industry, Juanita has found that well paid service sector jobs require retraining and further education. 

An activity which seeks to earn a profit by providing a good or service is known as a(n):

 __________ is the amount a business earns after deducting what it spends for salaries and other expenses. 



A business incurs a ___________ if its costs and expenses exceed its revenues. 



__________ is the chance a business owner will lose the time and money invested in a business that proves to be unprofitable. 



The total amount of money that businesses take in by selling goods and services is called 

A(n) ____________ is a person who assumes the risk of starting a business. 



Starting a business always involves ________. 



Often in business the greater the risk, the ____________. 



___________ is a measure of the general well-being and satisfaction derived from a variety of factors including political freedom, safety, education, and a clean environment. 



The amount of goods and services people can buy with the money they have is called their: 



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: 



The most important difference between for-profit businesses and nonprofit organizations is that: 



Last year, Adventure Enterprises reported revenues of $24 million while its total expenses were $10 million. Based on this information, Adventure reported: 



A common characteristic of most entrepreneurs is that they: 



Which of the following is the best example of a business whose goal is to earn a profit? 



In order to make an intelligent investment decision, entrepreneurs should: 



Companies that outsource research and development and design jobs: 



Honda and Toyota have used insourcing for years to produce cars in the United States. Insourcing: 



Public schools, charities and government agencies generally ___________. 



For-profit businesses and nonprofit organizations are similar in that they both: 



The standard of living for a nation's people depends mainly on: 



World-class businesses attempt to meet the needs of: 



Shelby recently started selling her invention: A bed that looks like it floats in mid- air. The bed is actually suspended by magnetic forces. Shelby is a(n): 



Ross wants to invest some money that he just inherited. He found that his bank offers a savings account paying a guaranteed .5% rate of return. However, he would like to earn a higher return. Ross should keep in mind that to earn a higher return on his money he: 



Which of the following is the most accurate statement about the impact of business on society? 



Eve and her three college friends enjoy perfumes. As a special gift to each of them last holiday season, she found a way to make scented candles with each friend's favorite perfume scent. The three friends loved her gift idea and encouraged Eve to create more and sell them online. Recently, she is filling orders from her website, and turning a profit. Eve is proof that: 



Planet Earth Developers is a large nation-wide construction company with home offices in Lansing, MI. The local media often remarks about the pristine landscaping that surrounds the home office that sits on a 30-acre complex. At the back end of the complex are several large warehouses and garages that hold large equipment. The grounds surrounding these warehouses look like a well-maintained park. Across the street from the garages are several shops and businesses. The CEO, "Planet Paul" (as his employees call him), often talks about how thankful he is that the town permits him to store the company equipment at that site, and vows to always maintain the premises for his neighbors (the other businesses that thrive in that area), not to mention that he asks 100 employees to come to work there everyday. Which of the following statements describes Planet Paul's business philosophy? 



The growth of Hispanic owned businesses: 



How is the profile of business owners changing? 



The number of businesses owned by Hispanics and Asians has: 



Which of the following entails the greatest amount of risk? 



The resources that contribute to the creation of wealth are known as ________. 



Which of the following is a factor of production? 



As a factor of production, the term capital includes: 



Two factors of production that seem to contribute the most to a nation's ability to create wealth are: 



Entrepreneurs weigh the differences between the benefits of starting a business and those things that they are likely to forego because they choose to work for themselves. Such things they are likely to pass-up on are: 



Which of the following is a benefit of owning your own business? 



Leanne owns a nursery. The trucks, handcarts, and forklift she purchased for the business are called __________ investments. 



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? 



When we compare the factors of production in wealthy and poor nations, we find: 



A nation progresses socially when it has good schools, clean air and water, and more. Which of the following statements addresses conditions for social progress? 



According to the box, “How a Food Truck Helped Rebuild a Storm-Struck Community,” Mike Diamond of the Beastie Boys teamed up with friends and started a non-profit food truck. What happened after the storm cleared? 



Which of the following statements about factors of production is the most accurate? 



Nolivia is a small and poor nation, but its current president has a genuine desire to create more wealth for Nolivia citizens. The president has received recommendations from several of her advisors. Which of the following recommendations is likely to create the most wealth for Nolivia? 



Ben and Chris combined their love of football with a business venture. They purchased a small portable cart and began selling football memorabilia outside of the hometown stadium. Their first year went well, but the past two years have been a real struggle. Due to poor economic conditions including loss of jobs, ticket sales at the stadium are down, which has significantly hurt their sales as well. As a recent business school graduate, you explain to Ben and Chris that: 



Nick is a recent finance graduate who has two passions: music and finance. Upon graduation, he was offered an opportunity to join a struggling rock band with a lot of potential, or a job at a large well-established financial services company. By joining the band, he will forego which of the following? 



China is a nation with a vast amount of land and a very large population. Another characteristic of this nation is its people's affinity for saving money. Referring to the five factors of production, the government of China has made significant progress in building its business environment by focusing on factors that needed improvement. Its strategy was to: 



Taxes and government regulations are part of the ________________ environment of business. 



Businesses favor: 



In order to create more wealth and provide better services, some nations recognize that _________________________________. 



In countries where businesses are government owned: 



High tax rates tend to: 



The capitalist system relies heavily on: 



Contemporary governments promote business development by: 



Which of the following policies would tend to foster entrepreneurship? 



When corruption is present in the business environment: 



Questionable business practices such as those followed by many mortgage-lending companies in the recent past: 



Which of the following government policies would be least likely to encourage entrepreneurship? 



It’s no secret that Blockbuster™ stores have closed, while Netflix™ is still growing. Both companies participated in the video rental business. Netflix evaluated the lifestyle needs of video customers, understanding that time, family, and work obligations called for more convenient methods to receive video entertainment. Netflix embraced the opportunity to utilize the Internet and smart TVs, to stream videos directly to customers. The company also managed to keep customer costs down, by passing along the savings it realized in labor. Blockbuster did not keep its eye on competitor movements, permitting Netflix to quickly capture video market share. In sizing up the situation, which external environment(s) probably had the least effect on Netflix’s success? 



A New York Times article about Bernie Madoff and his illegal Ponzi scheme stated, "When money goes global, fraud does too." Although the goal of investors who trusted Madoff's investment company was to earn the highest return possible on their investments, they turned a blind-eye toward the fact that some of those returns were too good to be true. Individual investors, companies, and even charities lost large sums of money by investing with Madoff's company. Which of the following statements relates to this story? 



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: 



Jay and Jim Spears own a lawn irrigation system business. They perform installations and maintenance of these systems. Several of their customers are golf courses, but they serve a large group of residential customers as well. When they started the business ten years ago, they made a pact to always operate within the legal limits of the law, but lately, the competition is eating them alive. Local competitors have hired illegal immigrants to perform the manual labor. They do not pay taxes on these employees - they just pay them in cash at the end of the week. Employment taxes are a burden for small businesses. Jay and Jim do not want to hire illegal workers. There's a risk if you permit an illegal worker to drive a truck; or, if he/she has an accident on the job. You have just studied business ethics in your class. You inform this partnership that: 



The Internet and the emergence of an information-based economy are important parts of the ___________ environment in which businesses operate. 



Technology affects people in: 



Employers provide tools and technology for their employees in order to: 



Efficiency means: 



___________ refers to the amount of output generated with a given amount of input, e.g., the number of pizzas produced per worker per hour. 



___________ means producing the desired result. 



___________ means producing items using the least amount of resources. 



The two main types of e-commerce are: 



When businesses sell to other businesses over the Internet, these transactions are known as: 



Companies that sell goods to consumers over the Internet are engaging in: 



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: 



An electronic storage file where firms keep customer information is known as a(n) __________. 



__________ is illegally obtaining and illegally using private information about a person, such as using someone's credit card number. 



Which of the following is an advantage of utilizing technology? 



Which of the following best describes the main difference between B2B and B2C transactions? B2B transactions: 



In recent years, businesses in general have experienced a lasting impact due to the emergence of _____________. 



Ntercon is an Internet-based company that provides online support services for businesses that need help in setting up and maintaining their websites. Ntercon is an example of a company that is engaged in: 



Life of Luxury, Inc., is a mail order firm that specializes in expensive and unusual gifts for all occasions. The company keeps a large file of information on all of its regular customers, including names, addresses, and type of gifts they have ordered in the past, and the size and frequency of their orders. The electronic file which stores this information is a(n): 



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. 



Which of the following predictions about the impact of e-commerce on traditional businesses is likely to be most accurate? 



Tyrell recently noticed that he was receiving several catalogs and email advertisements than he had in the past even though he had not requested any of them. Which of the following best explains why this is happening? 



Gabriella wants to compare the price of a designer bag she saw in a local department store, with other stores that may have the same. She locates the product on three different websites, and then stumbles on a site that does the price shopping for her. Gabriella's quest is an example of how customers are using __________ to solve problems. 



Charles Malone recently renewed his card membership at DiscountMania. The card has an annual $40 fee, but Charles believes that it pays for itself because he receives good prices on electronics, contact lenses, and even tires for his car. Shortly after renewing the card, Charles began receiving calls from collection agencies claiming that he owed money. With the help of others, he learned that another Charles Malone also owned a DiscountMania card, and wrote checks with insufficient bank funds when making purchases. DiscountMania had linked Charles' personal information with the other Charles Malone's personal information. Charles experienced _______________. 



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 to: 



Opportunities and advancements in the technological environment during the past 20 years have opened the doors for a number of products that enhance the lives of consumers. Identity theft and other forms of cybercrime are also by-products of these technological advancements. Which of the following statements describes a form of identity theft? 



Andy Blake got a call yesterday from Planet Bank, the company that issued his credit card inquiring about an $85.00 charge made in Caracas, Venezuela. Upon learning that Andy had not made this purchase, the bank quickly took steps to cancel the card and issue a new one. Given the circumstances that Andy's credit card number had an illegal transaction, Andy may also want to: 



In today's competitive environment, good value means: 



Successful businesses are keenly focused on their: 



Empowerment means: 



Empowerment requires that managers focus more on __________ lower-level employees. 



To implement a policy of empowerment, the organization will restructure so that: 



Which of the following statements about the competitive environment is most accurate? 



In order to compete well and gain market share, contemporary businesses are changing to be more _________________. 



Maintaining a competitive advantage is very important to the success of today’s businesses. All of the following strategies will help a firm remain competitive, except: 



Lamar is a salesperson for Bi-State Direct. He really appreciates the amount of freedom and authority Bi-State gives its sales people in order to better meet the needs of customers. Lamar's experience suggests that Bi-State practices: 



Greg is working as a marketing trainee for an online music and video retailer. His boss called a meeting for next week with one thing on the agenda: "Bring with you your ideas about how we can gain a competitive advantage." Greg plans to provide the following response: 



It was 8:00 a.m. on Saturday morning. Liz just learned that her well-meaning cousins were headed over to help her unpack her household. She had just moved back to Chicago from the west coast. Were they really planning to work, or were they expecting brunch? A bagel and pastry shop was just up the road. She would call in a food order. When she arrived to pick up, it was not what she ordered. The store associate quickly made it right, and offered an extra dozen bagels to make-up for the mistake. There was no need to check with the supervisor, as the employee was _______________ to make decisions that translate into good customer service. 



Which of the following statements best describes how firms must treat their front-line workers in order to remain competitive? Front-line workers must be ____________. 



Max is in charge of production for a family-owned firm that makes and sells sports gloves including baseball gloves, softball gloves, golf gloves, and more. He has stated that speed of delivery is the most important factor for success in the competitive environment. Which of the following would be the best response to Max? 



The statistical study of human population to learn its size, density, and characteristics is called: 



Businesses collect ________ information on where people live, what they buy, and how they spend their time. 



Efforts are underway to serve the needs of a diverse population. Diversity means: 



Due to population shifts, 



Which of the following industries will benefit from an aging population? 



The Social Security system, 



People between the ages of 65 and 74 represent: 



Businesses are supporting single-parent families with: 



Which of the statements about demography is most accurate? Demographic studies: 



Which of the following business policies would most likely help a single-parent family? 



The immigrant population (both legal and illegal) is having a dramatic effect on: 



Retired people will be draining the U.S. economy of wealth. This is due to: 



If you were to discuss and analyze the social changes affecting the future of business, which of the following statements should be part of that conversation? 



Jill is looking into the possibility of opening up a daycare center in her community, because she is aware of many single-parent families that need a place for their children to stay while the parents work. She is concerned about the long-term prospects for such a business. Jill believes the future of her daycare will depend on whether birth rates and the number of single-parent families remain high. These concerns illustrate how businesses can be affected by: 



St. Claire Hospital is considering a program that would allow some of its workers to use flextime. One group of workers who would probably benefit from flextime is: 



Preferred Pet Care, Inc., a mobile veterinary care company is planning for the future. As a business student who has studied social trends, which of the following statements reflects the need for Preferred Pet Care's service in the future? 



The global environment: 



The threat of terrorism more often __________ the cost of operating a business. 



An increase in global trade will: 



Globalization: 



Greening refers to: 



Efficiency in distribution systems around the world has led to: 



Airline companies around the world are experiencing increased costs in part due to ___________. 



War and terrorism in many parts of the world should lead to ______. 



World trade has both benefits and costs. Which of the following statements attests to this fact? 



The green movement is: 



Mark recently graduated with honors from his college. He has bragged to his friends that his academic performance has prepared him so well for a successful career that he can forget school or training in his future. In evaluating the future of the workplace, Mark is: 



The threat of terrorism: 



Laura and Tim McNash recently moved to North Carolina on a three-acre home site. They purposefully purchased their home within biking distance to the university where they are both employed, and their bikes each have room for two cloth bags for groceries if they need to purchase food on the way home, although they plan to grow much of their own. Laura and Tim are examples of a growing number of young people whom: 



Tyler Samuels recently returned from the war in Afghanistan where he was a member of the highly skilled special operations forces. He is now in the United States where he collects the G.I. Bill in order to go to school. This is one example of: 



During the past 150 years, the U.S. has evolved from: 



Businesses that produce and sell tangible products such as steel and machines are part of the: 



The service industry represents ________ of the value of the U.S. economy. 



Healthcare, insurance, recreation and other intangible products are provided by the: 



Since the beginning of the 1900s, the agricultural sector of the United States has: 



In recent years, almost all new job creation in the U.S. has occurred in the __________ sector: 



The new era of business is likely to be dominated by the: 



Appliance repair firms, tax consultants, law firms, and insurance companies are all business firms that are part of the: 



In recent years, manufacturing firms in the U.S. have laid off workers. The best explanation of this trend is that: 



Which of the following best describes recent job growth in the service sector? 



Which of the following organizations is an example of the goods-producing sector of the economy? 



Certain industries of the U.S. economy such as farming and heavy equipment manufacturing have experienced a significant decline in employment. Which of the following best explains this job loss? 



Jenna Leigh is an information savvy, 20-something person who is trying to select between two marketing job offers. She can either join a company that makes small hammers and screwdrivers for the DIY hardware store business, or she can join a company developing the LTE phone service. She is quite impressed that the hardware business is growing quite nicely in China, Mexico, and India where people are starting to expand their living spaces. She is also aware of: 



Sergio Gonzales is employed by Bigbux National Bank, one of the largest banks in the Midwest. He is a loan officer, specializing in home equity loans. Tio Raul, Sergio's favorite (and wealthiest) uncle, passed away last month and left Sergio a sizable amount of money. Sergio is looking at the best way to invest his newly acquired wealth. He is considering many options, ranging from simply putting the money into a savings account to the possibility of starting his own business. Although his bank job pays well and offers pleasant working conditions, Sergio is frustrated because he has little freedom or flexibility to deal with customers since every decision he makes must be approved by his supervisor. Besides, he's a bit bored and looking for a challenge. He thinks he might get a lot of satisfaction from owning his own business. Sergio has not made a definite decision yet, but has talked to a lot of people searching for a good idea for a new business. If he can come up with an idea he likes, he might just quit his current job and use his inheritance to go into business for himself!

 

As he explores his options, Sergio notices that some opportunities appear to be riskier than others. When considering various opportunities, Sergio should keep in mind that: 



Sergio's frustration with his lack of freedom and flexibility at work indicates that Bigbux: 



Two of his friends approached Sergio with a proposal to start a language school. Sergio is fluent in English and Spanish, and also has an education degree. Sergio is strongly considering the idea but also wants to know if there is a growing demand for his services. He learns that an important demographic trend is: 



As he explores his options for starting a new business, Sergio has looked into the tax implications and government regulations that he would encounter. He wants to maintain an office in a different location from his home. He has discovered that some nearby communities offer tax credits and lower taxes than his town. Sergio's decision will be influenced by the: 



If Sergio starts his own business, his firm's activities and policies will impact many different groups and individuals, including employees, customers, creditors, suppliers, and people living in the community where his business is located. Which of the following statements represents how Sergio should deal with these various groups? Sergio should: 



America's business success is largely due to an economic and social climate that allows businesses to operate freely. 



Global economics and politics have no significant influence on businesses in the United States. 



The study of how society chooses to employ resources to produce goods and services and to distribute them for consumption among various competing groups and individuals is known as sociology. 



Economists study how people use resources to produce and distribute goods and services for consumption among competing groups and individuals. 



Macroeconomics is the economic perspective that looks at the operation of a nation's economy as a whole. 



Microeconomics focuses on the decisions and behavior of people and organizations in particular markets. 



Resource development is concerned with finding the best way to utilize the fixed amount of resources a society has available. 



Resource development is the study of how to increase resources and to create the conditions that will make better use of those resources. 



Peace and prosperity will flourish if we can find the one best way to divide existing resources among nations. 



Thomas Malthus believed that overpopulation was a major cause of poverty. 



In developing nations of the world, population has leveled off and is not expected to increase dramatically in the future. 



Studies about the effects of population growth on the economy are part of macroeconomics. 



Economic progress can occur when business owners provide jobs and economic growth for their employees, their communities, and themselves. 



Economist Adam Smith's important contribution was an inquiry as to why some nations are wealthy, while others remain poor. 



Adam Smith believed the self-interest of businesspeople would lead them to create needed goods, services, and jobs. 



The "invisible hand" in Adam Smith's theory turns self-directed gain into social and economic benefits for all. 



According to Adam Smith, the "invisible hand" refers to the government's effort to always keep a check on the wealth creation of individuals, so that no one business would control a market for a particular good or service. 



A contemporary economic challenge is creating profitable businesses by selling goods and services that contribute toward a healthier environment. 



An economist is examining how consumers in the automobile market have responded to recent price increases by car manufacturers. He is examining a microeconomic situation. 



Macroeconomics looks at long run economic problems while microeconomics examines short run economic problems. 



Thomas Malthus believed that people in most countries would never be able to achieve high standards of living unless the problems of overpopulation were addressed. 



Adam Smith believed that since businesspeople are motivated to improve their own prosperity, their actions are unlikely to benefit society as a whole. 



Adam Smith believed that an economic system couldn't truly prosper unless people were taught to value the welfare of others above their own personal gain. 



The concept of the invisible hand begins with the assumption that the primary motivation of entrepreneurs is that they will prosper from their own hard work. 



Adam Smith's research focused on determining the best way to distribute a fixed amount of resources, rather than on how to create more wealth. 



Large educated populations can contribute to an economy by offering knowledge and entrepreneurship. 



Adam Smith believed that incentives to seek personal gain would create wealth, but that the government must then step in to make sure that this wealth is equitably distributed. 



As indicated by the Making Ethical Decisions box, activities that lead to corruption can destroy free economic opportunities because they interfere with the right to freely compete. 



In capitalist countries, the government decides what to produce and how the goods and services will be produced. 



 

Capitalism is the foundation of the U.S. economic system. 



The most fundamental of all rights in capitalism is the right to private property. 



Under capitalism, the government prohibits people and businesses from competing with each other. 



A basic right under capitalism is the right of businesses to receive government funding. 



Free-market capitalism has made it more difficult for individuals to gain wealth. 



Due to the fundamental rights afforded to us by a free-market capitalistic system; persons are more willing to take calculated risks. 



A free-market economic system is one in which the market of buyers and sellers decides what is produced, how much is produced, and how it is distributed. 



Under the basic principle of supply, as the price goes down, manufacturers and suppliers of a product tend to supply less of the product to the market. 



Demand refers to the quantity of a good that consumers are willing and able to buy at different prices at a specific time. 



Adapting to changes in demand is easy for businesses to do. 



At the equilibrium price, the quantity consumers desire to buy equals the quantity sellers desire to sell. 



If the quantity supplied in a market exceeds the quantity demanded, a shortage will exist. 



If a shortage exists in a market for a good, the price of that good will tend to fall. 



A graphical representation of a demand curve for a product will show the price for any particular quantity on the X-axis. 



The point of intersection between the supply and demand curves is called the stress point. 



In the long run, the market price tends to adjust toward the equilibrium point. 



Countries that rely on a free market system are plagued by persistent shortages or surpluses of goods and services. 



One of the drawbacks of free markets is the fact that competition in such markets undermines the ability of price to adjust to its equilibrium value in the long run. 



In perfect competition, each firm produces a product that is clearly differentiated from the products of other firms in the same market. 



A monopoly occurs when there is a single seller for a product or service. 



Economists refer to a market in which a few sellers dominate the supply side as monopolistic competition. 



Product differentiation is a key to success in monopolistic competition. 



In the United States, laws prohibit the creation of most types of monopolies. 



One strength of a free-market economic system is that it emphasizes the fair and humane treatment of the less fortunate in society. 



The greed of businesspeople represents one of the greatest dangers to the operation of a free market system. 



Fetna resides in a country where the economic system is primarily based on free market capitalism. Fetna is likely to have the freedom to buy and sell property. 



A surplus currently exists for a product called widgets. In a free market system, the government must step in and buy any widgets that consumers do not buy in order to eliminate the surplus and establish equilibrium. 



In a free market economic system, the lack of government control and regulation means that businesses find it easy to take advantage of customers by offering poor quality products at high prices. 



History shows that free-market capitalism leads to a fair and equitable distribution of wealth. 



Jill owns a bakery that specializes in cheesecakes. Until recently, Jill charged a price of $12 for each cheesecake. At this price Jill's customers bought an average of 84 cheesecakes each week. For the last few weeks, she has reduced her price to $10.50 per cheesecake, and her customers have purchased an average of 96 cheesecakes each week. These results are consistent with the economic concept of demand. 



Monica notices that just a few big companies produce the vast majority of soft drinks. She would be correct in describing the soft drink industry as an oligopoly. 



GLAMOR GAL, a popular women's cosmetics company is gaining popularity among younger women. Differentiating itself from the sea of companies that compete for the same business, it focuses on products for sensitive, youthful skin. GLAMOR GAL clearly operates in an oligopolistic environment. 



GLAMOR GAL is a popular cosmetics company. Although it is gaining in popularity among younger women, its promotional strategy continues to focus on the shadow-free finish that it produces on almost any skin type. Due to the fact that its industry faces monopolistic competition, the company knows that it must continue to differentiate itself from the competition. 



As you drive to school in the morning, you will probably flip through several radio stations before deciding to settle on one for the duration of the drive. For instance: you can listen to a "fair and balanced" talk show; an "intelligent talk" program; an interactive "call-in" talk show; a "right-wing" political talk show; a "self-improvement" talk show; and, even an "all sports" talk show. With so much monopolistic competition in radio programming, radio stations focus on offering you something just a little different. 



Roland is a nation with an economic system that closely approximates pure capitalism. While Roland's economy is likely to generate a great deal of wealth, it may do a poor job of providing an acceptable level of income for the elderly or disabled. 



In the newspaper this morning, you read about the downfall of a multi-national entertainment business, and a report that the company's CEO enjoyed a 9% increase in his salary during the same year that the company's profits were down 35%. As you read further, you learn that the company's board of directors approved undeserved salary increases. Clearly, this is an example of how inequality and greed can infiltrate the free-market economic system. 



As you scan the national news online, you read about the BXY Utility Company's latest problems. The story describes an expansive retaining wall that collapsed during a flood last week, spewing toxic coal ash, burying homes, and causing a few fatalities. An editorial claims that the company will not be held accountable to the same standards as the asbestos companies of a few years back that paid severe fines and even went out of business due to their lack of attention to environmental clean-up. You agree with the writer because you recently studied about the various competitive markets and utility companies clearly fall under monopolistic competition. 



The PowerHouse Utility Company recently built a nuclear power plant in a southern state and started competing against BXY Utility Company that has served customers in that region for 65 years. Due to deregulation, consumers now have a choice among utility companies in this area. Although PowerHouse has made a sizeable capital investment, if it successfully grows market share, eventually prices for electricity may stabilize or fall. 



Socialists believe that the primary economic function of the government is to promote rapid economic growth. 



In socialist economies, the government owns some, if not most basic businesses such as telecommunications systems and utilities. 



The top tax rate on personal income in most socialist economies is usually lower than the top tax rate on personal income in capitalist economies. 



The major benefit of socialism is that it creates strong incentives to work hard and take the risks associated with starting and operating a business. 



Socialists believe that wealth should be more evenly distributed than what actually occurs in a free-market capitalistic system. 



Workers in socialist countries often get longer vacations and more social benefits than workers in free market economies. 



Over the past decade, socialist economies have proven to be more successful at creating wealth and jobs than capitalist economies. 



One drawback of socialism is that it may result in a reduction in the individual's incentive to work hard. 



Brain drain is the loss of the best and brightest people to other countries. 



High tax rates in socialist countries is a major reason these nations have experienced a brain drain. 



Incentive to own and operate businesses is high in nations whose governments are proponents of socialistic practices. 



One of the benefits of communism is that it allows individuals a great deal of freedom to make their own economic decisions. 



Communism is an economic and political system in which the state makes almost all economic decisions and owns almost all the major factors of production. 



Most communist countries today are suffering from severe economic problems. 



As indicated in "Prospering in Foreign Lands", Reaching Beyond Our Borders box: Companies founded in the U.S. under a capitalistic system are seldom successful in breaking through the communistic and socialistic systems when they go global. 



A major distinction between capitalism and socialism concerns the distribution of income. 



Countries that wish to avoid shortages and surpluses of goods should adopt a communist system. 



Workers in nations who are strong proponents of communism work much harder and longer hours. 



In the small nation of Equalia, the government owns several of the key businesses and provides a wide range of social services. The government places a great deal of emphasis on eliminating large disparities in people's incomes. These features of Equalia's economy are consistent with a socialist economic system. 



Abby left her native land in Eastern Europe in order to become a nanny for a family in a western suburb of Chicago, Illinois. One of the benefits of her arrangement was that she could attend the community college near her family's residence. When she arrived at her new job, she experienced the differences from a predominately socialist nation and a capitalist nation. Abby noted that public transportation in northern Illinois was limited and expensive, making it difficult to get to school. For a negligible fee, the government in her native country provided public transportation for everyone. Abby's native country's economic system was more characteristic of socialism. 



Socialism and communism are both variations of a free-market economy. 



In command economies, the government plays a major role in deciding which goods are produced and who will get them. 



Governments that were predominantly capitalistic are moving toward socialism, while governments that were predominantly socialistic are moving toward capitalism. 



Like most nations, the United States has a mixed economy. 



Most countries throughout the world can be classified as either purely capitalist or purely socialist. 



There is general agreement in the United States on the degree to which the government should be involved in the economy. 



Subtle differences such as the right to one's religious preference make the command economic system known as communism more like a mixed economy than a socialistic system. 



In the past, socialist nations have realized that some of the government run businesses do not grow as quickly as businesses that operate for a profit. 



Although mixed economies tend to improve economic conditions, moral values prevent communist nations such as China and Vietnam from progressing in this direction. Overall, economic progress continues to be very slow in these nations. 



According to the Reaching Beyond our Borders box, "Prospering in Foreign Lands", the success of Yum!Brands' (owner of KFC, Taco Bell, and Pizza Hut) global attempts is mixed. In some cases, opening stores in communist and socialist nations has proven to be profitable; in others, it has proven to be a more costly venture. 



In a mixed economy, the government's goal is to grow the economy and maintain some measure of social equality. 



Sweetland is a nation that publicly supports a free market economy with private ownership of businesses. Over time, the government of Sweetland has developed policies designed to help the needy and reduce the level of income inequality. It pays for these programs by levying relatively high taxes on businesses and workers. These arrangements suggest that the economy of Sweetland is trending toward pure capitalism. 



Deanne is a vocal critic of socialism. She likes to point out that in recent years the governments in many socialistic nations have cut back on government services and have reduced taxes. Deanne believes that this trend will ultimately result in all nations adopting pure capitalistic ideals. Recent evidence suggests that Deanne's views are essentially correct. 



Recently, Hugo Chavez, the Prime Minister of Venezuela announced that he is standing behind the concept of state owned utilities and public schools in 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 socialism. 



Most nations recognize that private enterprise is detrimental to business growth and what is best for consumers. Recently, a nation had the opportunity to sell its government-owned telecommunication system to a private firm. Instead it realized that it would be better off if it raised taxes so that it could maintain the status quo. 



We use indicators such as (1) the gross domestic product (GDP), (2) the interest rate, and (3) the price indexes to measure the health of our economy. 



The total value of a country's output of final goods and services in a given year is known as the gross domestic product (GDP). 



As of 2010, total GDP in the United States was around $14 trillion. 



Any output produced by U.S. firms is included in the value of U.S. GDP, even if the output was produced in a foreign country. 



GDP figures do not include the value of illegal activities. 



To be classified as unemployed, a person must be at least 16 years old and trying to find a job within the past four weeks. 



In 2010, the U.S. unemployment rate was at its lowest point in 10 years. 



Frictional unemployment occurs because the economy is experiencing a recession. 



Structural unemployment refers to unemployment caused by the restructuring of firms or by a mismatch between the skills or location of job seekers and the requirements or location of available jobs. 



Inflation refers to a general rise in the prices of goods and services over time. 



Inflation refers to the persistent rise in the purchasing power of money. 



Disinflation refers to a situation in which prices continue to rise, but not at the rate they were rising previously. 



Deflation means prices are declining. 



The consumer price index (CPI) measures what is happening to prices at the wholesale level. 



The CPI measures the pace of inflation or deflation. 



The CPI is based on the prices of a carefully selected market basket of goods, all of which consumers can purchase at a supermarket. 



Some wages, tax brackets, interest rates, and government benefits are based on the CPI. 



Core inflation figures omit healthcare prices, but not energy prices. 



The producer price index measures what is happening to prices at the wholesale level. 



Productivity of workers in the U.S. is helped by the use of better machinery. 



The higher the measurement of productivity, the higher the likely costs of production. 



An increase in productivity means that a worker is now able to produce more goods and services in the same amount of time. 



As productivity increases, the cost of producing goods and services is likely to fall. 



In the service sector of the economy, the influx of machinery such as computers increases output per worker, but does little to improve the quality of services. 



Current measures of productivity in the service sector provide an accurate measure of changes in the quality of output. 



An economy is said to be in a recession if GDP declines for two or more consecutive quarters. 



A depression is a severe recession that is often accompanied by deflation. 



A prediction that GDP will increase significantly over the next six months is bad news for most businesspeople. 



Although changes in the CPI provide interesting insights into the overall performance of the economy, these changes have little practical impact on the lives of ordinary people. 



It is understandable that productivity is rising faster in the service sector because service businesses have newer technologies than the manufacturing sector and fewer laborers. 



A rising GDP, rising unemployment rate, and rising inflation rate signify a healthy economy. 



A problem with the CPI is that it measures the price changes of only food and clothing, while ignoring what happens to the prices of such important items as medical care and energy. 



Danny was laid off from his job five months ago. At first, he looked for a new job every day. During the past six weeks, however, Danny became depressed about his employment status and quit trying to find a job. According to the criteria used by the government, Danny is a civilian whose job status is included in computing the national unemployment rate. 



Larry and Moe are having an argument. Larry believes that over the past year, the economy is experiencing rapid inflation, while Moe says that the economy actually experienced disinflation during this period. The easiest way for Larry and Moe to settle their argument is to look at GDP figures for the past year. 



Maureen is the office manager of a service company. She recently approved the installation of new computers and office equipment for all workers in her office. If Maureen's company is like most service companies, she will probably see a big jump in the productivity figures reported for workers in her office. 



The government of Velovia made progress in its efforts to bring rapid inflation under control. Although prices are still rising, the rate of increase has slowed considerably. This suggests that Velovia is experiencing disinflation. 



The nation of Desperia is reporting a significant decline in GDP for four consecutive years, with no relief in sight. With unemployment at record levels and businesses failing faster than at any time in the past century, Desperia is likely experiencing a depression. 



Yesterday, Casey received a cable company ad for bundled TV, telephone, and Internet service that cost appreciably more than what she is currently paying. At the same time, she received a notice from her utility company that summer rates would be increasing. Her school books are costing almost twice what they cost last year, and yesterday, gasoline cost her 30 cents more per gallon than it did last week. As she ponders the situation, she can't help but wonder how prices could be rising when so many people have lost their jobs and are cutting back on expenditures. She is certain that this situation characterizes her economics professor's description of stagflation. 



Sam is a recent college graduate with a lot of "firsts": First professional job, first new car, first apartment, and first time making all of his own financial decisions. As he works on his monthly budget, he can't help but wonder why he is barely "making ends meet." Each month, it takes his entire paycheck to pay his rent, his car payment, and buy food. Last month, he told his parents, "I'm sure I had more money when I was a starving student!" You recently learned about key economic indicators in your business class. You inform Sam that his problems are caused by severe deflation and lack of demand for products and services. 



Robin just graduated from college and is seeking her first job. She received a degree in engineering at a prestigious university. Robin has several leads and has heard that the market for engineers is very strong, so she is convinced that she should locate a good job in the near future. Robin's current situation is an example of structural unemployment. 



Fiscal policy refers to the federal government's efforts to keep the economy stable by controlling the amount of money in circulation. 



Fiscal policy involves the federal government's efforts to stabilize the economy by increasing or decreasing taxes and/or government spending. 



When the government attempts to stabilize the economy by changing taxes or government expenditures, it is using fiscal policy. 



The national deficit is the difference between our nation's exports and its imports. 



The size of the national debt increases when the federal government runs a deficit. 



The U.S. national debt equals the sum of all recorded years of deficits. 



In the U.S., the percentage of GDP that the government collects through taxes is approximately 28.2%. 



The Federal Reserve Board is responsible for controlling the money supply. 



Monetary policy is directly under the control of the U.S. Department of the Treasury. 



One of the major ways the Fed influences economic conditions is through its control of interest rates. 



High tax rates that put money into the government's coffers tend to slow spending, and ultimately slow the economy. 



If the government wants to jump-start the economy resulting in more consumer spending, it will raise taxes. 



Monetary policy is implemented to ease the up and down swings of business cycles, while fiscal policy is implemented to create swings when the cycle is stalled in an economic boom. 



If the national debt is $13 trillion, the national deficit will be considerably higher. 



Government spending on defense decreases the national deficit. 



To jump-start the economy, the FED is likely to lower interest rates, in order to encourage individuals and businesses to spend money. 



The best way to avoid national budget deficits is to increase our exports and decrease our imports. 



In order to restrict spending by businesses and households, the Fed would take measures designed to lower interest rates. 



Senator Spendital made a speech deploring the continuous deficits in the federal budget. He is proposing an increase in tax rates to raise more revenue for the government and thus gradually reduce the size of the national debt over a period of several years. The strategy Senator Spendital is proposing is a common type of monetary policy. 



A professor of economics at a prominent university recently urged government policy makers to cut taxes and increase government spending in order to pull the economy out of its current downturn. The policy measures called for by the professor are examples of fiscal policy. 



Joe and Tess McGreen are purchasing their first home in Durham, North Carolina. They are seeking pre-qualification on a home loan. The unemployment rate for North Carolina is 10.2% and GDP is declining. Chances are pretty good that the Fed will raise interest rates in order to loosen the supply of money, resulting in a more expensive loan for Joe and Tess. 



Sarah owns a hair styling salon. She needs to update her shop with new customer chairs and work stations. If the Fed were to lower interest rates by 1.5 percentage points, at the same time that the government increased the tax rate by 1.5%, she could immediately determine that updating her shop would not increase or decrease her financial position. 



The Fed is concerned that the economy is growing too rapidly. Given these concerns, it is likely to pursue policies to restrict the supply of money and raise interest rates. 



Nick wants to buy a new car, and is planning to borrow the money for his purchase from a bank. He read in the newspapers that the Federal Reserve is likely to implement policies in the next few weeks that are designed to stimulate the economy. Nick would probably get a lower interest rate on his car loan if he waits until after the FED implements its new policies. 



Economics is the study of how a society _________________. 



__________ is the study of how a society employs its limited resources to produce goods and services and how it distributes them among competing groups and individuals. 



___________ studies the operation of a nation's economy as a whole. 



____________ looks at the behavior of individual people and organizations in specific markets. 



Resource development is: 



The study of how to increase the amount of available resources and create conditions that will make better use of these resources is known as: 



Economist Thomas Malthus believed that ______________ would limit economic progress. 



Neo-Malthusians (followers of Thomas Malthus) believe that the solution to poverty is: 



A key to economic growth and development is to: 



_________ is considered by some to be the father of modern economics. 



Which of the following is an important premise of Smith's conclusions about economic prosperity? 



Which of the following would be a topic emphasized in a macroeconomics course? 



Which of the following would be a topic emphasized in a microeconomics class? 



The main goal of resource development is to find ways to: 



Thomas Malthus was pessimistic about the ability of a society to achieve high standards of living for most of its citizens because he believed that: 



Economics was known as the "Dismal Science" because: 



How is it that people working in their own self-interest produce goods, services, and wealth for others? 



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 __________. 



Sue is a gifted cook. She plans to open a restaurant in which she will be the head chef. Sue is willing to work long hours because she believes that her culinary talents and hard work will allow her business to succeed and earn her sizeable profits. Sue's efforts are most consistent with the economic theory developed by: 



Jake considers himself to be a follower of Thomas Malthus. Which of the following statements would Jake be most likely to make? 



Which of the following statements would a follower of Adam Smith be most likely to make? 



Fourteen years ago, Sergio noticed that a lot of people who bought personal computers did not know much about how to use them and frequently suffered system crashes and other aggravations. He decided he could earn a nice profit by starting a consulting business to help other people overcome their computer woes. Although the business struggled at first, it has experienced a good deal of success for the past five years. Sergio has many satisfied customers, and the business has grown to the point where he now employs several workers. Sergio's experience is an example of: 



For many years, Congressman Ricardo Perez has called for more government regulation of business. "After all," the Congressman said recently, "businesspeople are ought to make a profit, not to create jobs or serve their customers. The government must pass more laws to require businesses to take the interests of consumers and workers into account." From these comments, it is clear that Congressman Perez: 



In the boxed material "Making Ethical Decisions," the textbook describes corruption practices in nations such as Mexico and the United States. These practices include payoffs to government officials in order to get an edge on competing better in one's industry. Which of the following statements best describes the ethical message of this boxed material? 



According to the invisible hand concept, the best way for a society to encourage the creation of jobs and the production of the products most wanted by consumers would be to: 



_________ is the name of a free-market economic system in which most of the factors of production and distribution - such as land, factories, railroads, and stores - are owned by individuals. 



Under capitalism: 



The foundation of the U.S. economic system is based on: 



Under a capitalistic system, decisions such as what goods and services to produce, what to charge, and how much to import or export are made by: 



Which of the following is a basic right under capitalism? 



The freedom of people to decide where they want to work and live, and what they want to buy or sell are basic capitalist rights under: 



The freedom of people to buy, sell, and use land, buildings, machinery, and inventions are basic capitalist rights under: 



A free market is one in which decisions about what to produce and in what quantities are made by: 



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. 



The quantity of a good or service that producers are willing to sell at different prices during a specific time period is known as the: 



A simple supply curve shows that an increase in the price of a good will cause the quantity supplied to: 



A simple supply curve shows a relationship between the: 



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. 



A typical demand curve shows that: 



When the supply curve and demand curve for a particular good are shown together on a single graph, the point at which the two curves intersect identifies the: 



When prices are free to adjust over time, in the long run, the market price of a good tends to: 



If a shortage exists for a good in a free-market economy, the: 



__________ is the market situation in which there are many sellers in a market and no seller is large enough to dictate the price of a product. 



___________ exists when a large number of firms produce goods that are similar but are perceived by buyers as being different. 



__________ exists when the entire supply of a good is controlled by a single seller. 



An oligopoly is a market that is characterized by: 



Which of the following statements about capitalism is the most accurate? 



Due to the rights and freedoms afforded under capitalism: 



When the market price of a good is below the equilibrium price, and all other determinants are unchanged: 



When the market price of a good is above its equilibrium value, and all other determinants are unchanged: 



The markets for laundry detergents, soft drinks, and automobiles are dominated by just a few sellers. Economists would classify these markets as examples of: 



In most large cities there are a large number of bakeries. These bakeries produce similar, but not identical, products. Some bakeries claim to have the best cheesecakes in town, while others brag about their cookies or specialty breads. The bakery market in a large city is an example of: 



The presence of competition in free markets: 



One of the benefits of a free market is that: 



One of the greatest concerns associated with capitalism is that: 



Patrick lives in a nation whose government embraces capitalism. He owns his own home and car, as well as his own business and building. Patrick maintains ownership due to: 



The "Spotlight on Small Business" box in Chapter 2 is titled, "The Key to Capitalism is Capital." Which of the following statements best describes the message of this story? 



The market price of apples is currently rising. In a free-market economy, the most likely explanation of this price change is that: 



The price of iPhones™ is falling. In a free-market economic system where everything else is equal, the most likely explanation is: 



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: 



On its website, Papa John's Pizza compares itself to the competition with the following message: "better ingredients, better pizza". The company wants to achieve: 



Which of the following statements most accurately identifies a limitation of the free-market economic system? 



The "Thinking Green" box titled, "More Profits from the Green Revolution", describes the green revolution. The auto industry is participating in this revolution. Farmers are participating in this revolution. By promoting the fact that they sell "green" products, or that they utilize "green" techniques to produce the products and services that they sell, firms who fall under a _______________ type market may have opportunity to differentiate themselves from the competition. 



A major premise of a socialist system is: 



A major benefit of socialism is the: 



Under the __________ system there is very little incentive to work hard or to produce quality goods or services. 



Under the __________ system the number of choices in the market is directly related to government involvement in markets. 



There are some restrictions on freedom of assembly and freedom of speech under a ____________ system. 



Brain drain has occurred in many socialistic nations because: 



Communism is an economic system in which: 



In recent years, countries with communist economic and political systems have: 



The economic and political system in which the government owns almost all the major factors of production is called: 



Communist values are disappearing because: 



Which of the following statements provides the most accurate comparison of socialism and communism? 



Which of the following people would tend to favor a socialist economy? 



Which of the following people would tend to favor a communist economy? 



One of the most significant problems faced by communist nations is: 



Abby left her native land in Eastern Europe to become a nanny for a family in a western suburb of Chicago, Illinois. One of the benefits of her arrangement was that she could attend the community college near her family's residence. When she arrived at her new job, she experienced some immediate differences. Abby noted that public transportation in northern Illinois was limited and expensive, making it difficult to get to school. For a negligible fee, the government in her native country provided public transportation to everyone. The economic system in Abby's native country was more characteristic of ___________. 



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): 



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: 



Mike spends a lot of time blogging. Yesterday, he left the following comment on a site where participants were discussing the pros and cons of healthcare: "If you think healthcare is expensive now, wait until it is free. The problem with free rides is, eventually everyone piles on the bus and no one is left to push it. Then the system collapses." He was responded to by Martha, who added, "Universal healthcare is not a dirty word. It's the salvation for many people. If I have to pay a little more in taxes and know that my neighbor's kids have good pre-school and can see the doctor when needed, it's worth it to me." Mike and Martha are discussing the benefits and drawbacks of: 



Today, the economic systems of most nations could most accurately be classified as: 



Both socialism and communism are variations of: 



A major trend in the world today is that: 



A command economic system is characterized by: 



The social and economic goals of __________ include private ownership of land and business. 



The "Reaching Beyond Our Borders" box in Chapter 2, explains the changing business climate in other nations. What kinds of experiences are U.S. based companies facing abroad? 



During the recession of 2008-2010, the administrations of Presidents George W. Bush and Barack Obama flooded several banking, financial services, and insurance firms with government funds in exchange (at least temporarily) for government ownership rights. The unprecedented move signaled the government's concern that the global banking system might collapse if these firms ended up in bankruptcy. The decision for active government involvement in the operations of these firms demonstrates: 



As the term "global" becomes "local", and as we see more opportunities to compete in the global market, 



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: 



In an effort to promote rapid growth, the government of Goldinia has kept taxes low, done little to regulate business activities, and implemented only modest social programs. The government is now facing political pressure to do more to clean up the environment and to reduce the inequalities of income and wealth. Which of the following statements is most accurate? Goldinia's government is currently taking: 



The prime minister of the nation of Urbania has called for Urbania's legislature to enact new legislation designed to shift his country away from socialism toward a more capitalistic system. The Prime Minister acknowledges that such a radical change will entail some hardships, and that some citizens will be unhappy with the changes. The most likely source of dissatisfaction with a move toward capitalism is: 



The National Coalition on Healthcare Reform reports that nearly 18% of the U.S. population under the age of 65 is without healthcare. If this advocacy group succeeds in convincing the current administration and Congress to vote for basic healthcare for everyone, which of the following is likely to occur? 



Several years ago, the nation of Florentina had a government-owned telecommunication system that lagged far behind other nations. In several of its rural areas, there was only one phone for an entire village of people. Government taxes collected for the purpose of maintaining the telephone system were very meager, so the notion of expanding service was almost impossible. The government of Florentina decided to sell the phone company to a private firm. The private firm expanded rapidly. It reported that even poor consumers were willing to pay for a private phone line. This government decision and subsequent sale was: 



The U.S. economic system relies on 



The total value of final goods and services produced within a nation's borders in a given year is known as that nation's: 



Three important economic indicators of the United States are the unemployment rate, the price indices, and the: 



The four basic types of unemployment are frictional, structural, seasonal, and: 



__________ unemployment refers to persons who purposefully quit their jobs and have not yet found a new job. 



__________ unemployment refers to unemployment caused by the restructuring of firms or by a mismatch between the skills of job seekers and the requirements of available jobs. 



__________ unemployment refers to loss of jobs due to a recession or a similar downturn in the economy. 



__________ unemployment results when the demand for labor varies during the year. 



The _________ is a statistic used to compute the pace of inflation or deflation. 



The measure used to report price changes at the wholesale level is the: 



_____________ refers to a general rise in the price level of goods and services over time. 



__________ is a condition in which the price increases are slowing. 



__________ is a condition in which the average level of prices is actually falling. 



__________ is a very severe recession that is usually accompanied by deflation. 



In recent years, U.S. manufacturing sector has experienced ___________ productivity. 



The next wave of marketable innovations may involve new ways to produce and conserve energy. If we can turn new technology into marketable products and services that produce energy to run our businesses and homes, the U.S. could see a surge in output of goods and services. The Department of Economic Development would document this surge by measuring the ______. 



One reason the CPI is monitored very closely by government, businesses, and workers is that: 



____________ in the service sector has not shown the significant improvement that it has in the manufacturing sector. There are significant advances in the quality of service, but workers in this sector are unable to increase the number of persons served in a given time period. 



If consumers see a measurable increase in the price of coffee, they are likely to change their consumption to less expensive tea. These substitutions would show-up in the ____________. 



Which of the following indicators provides the clearest indication that an economy is experiencing deflation? 



A collapse in Buldovia's banking system eventually led to companies unable to borrow money to run their businesses. Firms terminated employees. These circumstances cut into consumer's purchasing power, causing a severe decline in the prices of goods and services, better known as _______. 



The nation of Florentina is in the midst of a serious economic downturn. The nation's GDP has declined steadily for over five years and is now at its lowest level in over fifty years. Florentina's unemployment rate is at an all time high and the nation's CPI is falling. Florentina's economic condition is referred to as a: 



John complained to his buddy, Frank, that prices have increased a lot over the past year. Frank disagreed, saying that the prices of some goods have gone up a bit, but other prices have declined, noting that you can get some good buys on houses right now. Frank feels that the average price of consumer goods hasn't changed. Frank and John can refer to the __________ to learn how government economists currently view the price situation. 



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: 



Kathleen's company produces computer monitors and other peripheral devices for computers. About six months ago, Kathleen began to keep track of number of hours worked, and the resulting output at her particular work site. Comparing the results, she found that the number of workers (and the hours they worked) remained relatively steady over the past six months, however, the work site's output increased significantly. This indicates that: 



Which of the following statements about business cycles in the U.S. is most accurate? 



Which of the following statements about productivity in the service sector of the U.S. economy is most accurate? 



Chase is a recent college graduate with a new job as an engineering trainee for a large defense company. Now that he is making good wages, he hopes to start saving for his first house and also contribute toward the company retirement plan. As he looks over his monthly bills, Chase is concerned about ever getting ahead of the game. His food bill, car payment, and mounting gasoline payments keep him in the "just making ends meet" category. As his mind wanders back to the good old college days, he reflects on a time when gas and food seemed a lot more reasonable. Chase is experiencing the effects of: 



Gabby and Gus Malloy recently got pre-approved on a loan for their first house purchase. They are speculating on how much they should bid on their number one choice - a small, three-bedroom bungalow near a major college town. Which of the following indicators may be an important factor in whether they are able to successfully put in a low bid? 



Patrick just landed a job working for a major online gaming company in Silicon Valley. In a lot of ways, this is his dream job come true - the chance to work for a company that makes gaming software and live in California at the same time. As his plane lands at San Jose International, he pictures a snazzy apartment with a palm tree right outside the front door. A few hours later, as he meets a property manager of a large apartment complex, his heart sinks. The price of apartments is out of sight! Back at the hotel, he logs on to the Bureau of Labor Statistics to try to get a better picture of why the cost of housing is so high in this region of the U.S. Which factors may be causing the rise in the price of housing? 



At the onset of the 2008 - 2010 economic slowdown, prices at the grocery stores continued to rise. In some cases, products such as milk and bread almost doubled in price. In March 2008, a Boston newspaper reported, "The price of eggs was up 40% and milk was up 26%." Consumers were already being hit with high energy costs, and now their confidence in the economy was further shaken with job cuts and a loss of discretionary income due to increases in food prices. The economy was slowing, but prices were rising, signifying the potential for ___________. 



John is creating a presentation on the consumer price index for his business class. He wants students to understand that food and energy prices have risen more rapidly than other market items that the government traditionally measures for inclusion in the CPI calculation. He will show students that the core inflation figure will be _______ than the CPI. He will then inform the class that if consumers begin substituting, for example: If the prices at full service hair styling salons get too exorbitant, consumers may substitute by going to cheaper hair cutting salons. This will make the ___________ calculation lower. 



Recently the U.S. national debt was a little more than: 



____________ refers to the efforts of the federal government to keep the economy stable by increasing or decreasing taxes and/or government spending. 



Fiscal policy involves increases or decreases in: 



When the federal government's collection of tax revenues is less than what it spends in a given year, it results in a: 



When the government runs a continual budget deficit, it increases the: 



In the U.S., the __________ has the role of managing the money supply and interest rates. 



On average, what percentage of the GDP does the U.S. government collects through taxes? 



One way to lessen the U.S. government budget deficit is to: 



Efforts by the Federal Reserve Bank (the Fed) to control the money supply and interest rates are known as: 



The Federal Reserve Bank operates: 



Which of the following statements about government deficit spending is most accurate? 



While scanning the movies section in your local online newspaper, you click on the business section by mistake. While you're there, you quickly scan a report that says government spending will again exceed tax revenues in the current year. This means that the: 



Which of the following statements about the Federal Reserve Bank (the Fed) is most accurate? 



During the economic crisis of 2008-2010, Presidents George W. Bush and Barack Obama increased government spending by $2 trillion, in order to revive the ailing economy. Their strategy followed the economic theory known as: 



Keynesian economic theory suggests: 



Senator Gong Lee is alarmed at the state of the economy. Unemployment is high and GDP is low. Senator Lee has called for Congress to take action to increase government spending and cut taxes in order to stimulate the economy. The actions called for by Senator Lee are examples of: 



Your professor showed you an Internet video of the chair of the Federal Reserve Bank speaking to the American public. The message he is conveying indicates that Fed economists are worried about inflation and believe the best course of action would be to slow the economy. Which of the following policies is the Fed most likely to pursue? 



Ben recently lost his job at a major U.S. auto plant in one of the rust belt states. After looking unsuccessfully for work in a similar industry for several months, he plans to start interviewing with road and bridge repair companies. He speculates that if the government begins to contract with companies that repair highways and bridges, he may find steady work, at least in the short-term. Which of the following statements best describes the strategy behind his thoughts? 



Lance owns Lance Lawns Irrigation Systems, LLC, a company that installs and maintains underground lawn irrigation systems. Business is down due to new housing starts being negatively impacted by a deep recession. To make things worse, his bank called yesterday to inform him that his credit limit (interest fee of 12.5%) will be cut from $30,000 per year to $15,000 per year, unless he is willing to pay a higher interest rate of 20%. As Lance drives to the first job this morning, he knows that his last task of the day will be to reduce the hours for his two employees. He can't afford to work employees eight hours per day, with only a $15,000 line of credit. Which of the following strategies will help Lance's situation? 



If businesses are producing at capacity, and the nation is experiencing almost full employment (a very low rate of unemployment - less than 2%), the Fed may decide to: 



Gig Abite is a bright, hard-working engineer who once owned a successful engineering consulting firm in his native country of Frinezia. Gig became discouraged by the high tax rates in Frinezia, so he immigrated to the United States eleven years ago. Soon after moving to the U.S., Gig again started his own business, which he named Giganeers Consulting. The company struggled at first, and almost went under midway through its second year. However, Gig never lost faith, the company survived, and it soon developed a growing reputation for quality work and dependable service. Giganeers began experiencing sustained growth early in its fourth year. In fact, Gig hired additional employees over the next few years to keep up with the increasing workload. His company, which started with only Gig and 2 other full time workers, now provides jobs for 43 full-time employees as well as many part time workers.
Despite these past successes, some clouds are on the horizon. The company recently suffered its first drop in business since its very early years. Gig is convinced that the problem is not with his company, but rather due to a downturn in the U.S. economy. He heard a national broadcast last week reporting that the value of the total output of final goods and services in the U.S. declined over the last quarter. The news anchor went on to state that many economists believe that this downward trend is likely to continue for several more months. Gig is concerned that he will have to lay off some of his employees if the economy doesn't improve. He hopes that the government does something soon to put the economy back on track.

 

Gig started Giganeers to earn a profit, but by working hard and increasing his market share, he was able to create jobs for others. This is an example of the ______________ concept. 



Gig's native country of Frinezia was much different from the United States. In addition to its higher tax rates, the government offered more extensive social programs that were designed to redistribute income and reduce inequality. Although small businesses were privately owned and operated in Frinezia, many basic industries were owned and operated by the government. From this information, you would classify Frinezia's economic system as ___________. 



The broadcast that reported a decline in total output for the United States probably got some of its information from the government's measurement of ___________. 



The broadcast cited forecasts that national output might continue to fall in the future. If total output shows decline for two consecutive quarters, economists would classify this as a _____________. 



Gig recently heard a radio report that the Fed will try to help get the U.S. economy back on track. If the Fed takes action, Gig would likely see: 



Besides the slowdown in the general economy, Giganeers faces threats of competition from several other companies that provide engineering consulting services. In order to gain more business, Gig tries to convince potential clients that his company offers better service than the competition. He has advertised heavily in professional magazines, often quoting some of his highly satisfied clients. The market Giganeers operates in is an example of: 



Today, over 90% of the companies doing business globally believe it is important for their employees to have experience working in other countries.

 

Importing is the selling of products to another country.

 

Exporting is the selling of products to another country.

 

The United States imports more products and services than any nation in the world.

 

The United States is the largest exporter in the world.

 

While the U.S. is a large exporter, Germany exports a higher percentage of their GDP.

 

Competition in exporting is very intense.

 

One reason countries trade with other countries is that even technologically advanced nations cannot produce all the products their people want and need.

 

Free trade is the movement of goods and services between nations without political or economic barriers.

 

Global trade is the exchange of goods and services between countries.

 

Global trade includes the exchange of art, sports, and cultural events.

 

Absolute advantage is the basis for most global trade today.

 

Comparative advantage theory states that a country should sell to other countries those products that it produces most efficiently and buy from other countries those products it cannot produce as efficiently.

 

A country has an absolute advantage if it has a monopoly in the production of a specific product or is able to produce it more efficiently than all other nations.

 

Today, there are more countries that have some form of absolute advantage in a product or service, than years ago.

 

Free trade results in a mutually beneficial exchange between and among nations. Answer: 

 

With respect to free trade, many U.S. citizens prefer "fair trade, not free trade."

 

Opportunities for college graduates in international business continue to decrease as it gets more expensive to travel abroad.

 

An example of a U.S. import would be the purchase of oil by U.S. companies from Saudi Arabia.

 

According to the theory of comparative advantage, a country should buy from other countries those goods it produces most efficiently.

 

In order to enjoy the highest standard of living possible, comparative advantage theory states that all nations should strive to become self-sufficient.

 

Products made in Canada are sold in the U.S. because these two nations agree to eliminate economic and political barriers between nations. They participate in free trade.

 

After finishing college, Nathan joined his uncle's company in Miami, FL, a company that buys bauxite, copper, and other minerals from the country of Chile, and brings them into the U.S. Everyday, he brokers trades with mines in Chile. His uncle's company is in the export business.

 

In southern California, there are banana plantations. These plantations cannot produce all the bananas consumed by persons in the U.S. The fact that the U.S. grows and sells bananas gives it a comparative advantage in bananas. It is not an absolute advantage and that is why we choose to import bananas from other countries, as well.

 

Small businesses are less involved in global trade today than in the past.

 

Many foreign students in U.S. colleges and universities have discovered profitable opportunities by importing goods from their home countries into the United States.

 

International trade is not limited to multinational corporations. Small businesses do about 30% of all exporting out of the U.S.

 

Just about anything that can be sold in the United States can also be sold to buyers in other countries.

 

Foreign travel can help in identifying global business opportunities.

 

If your business has an outstanding product, exporting offers a quick, easy, no hassle way to improve your profitability.

 

U.S. exports boost the U.S. economy.

 

A favorable balance of trade occurs when the value of a country's imports exceeds the value of its exports.

 

A favorable balance of trade occurs when the value of a country's exports exceeds the value of its exports.

 

The balance of payments measures the inflows and outflows of money from tourism, foreign aid, military expenditures and foreign investments as well as flows resulting from exports and imports.

 

A trade deficit is the same as a favorable balance of trade.

 

The United States enjoys a trade surplus in the global market.

 

Recently the United States has experienced its highest trade deficits with China.

 

Even though the U.S. exports a vast amount of goods globally, it exports a much lower percentage of its products than other countries do.

 

Dumping is the practice of selling products in foreign markets at lower prices than what domestic firms are charging for the same product.

 

In order to prevent dumping, U.S. law stipulates that foreign firms selling similar products as domestic firms to U.S. customers must charge at least 10% more than what U.S. firms charge.

 

When trading in global markets, most countries prefer to import more than they export.

 

Compared to many other industrialized countries, the United States has historically exported a lower percentage of its products than other countries do.

 

Compared to many other industrialized countries, the United States has historically exported a much higher percentage of its products than other countries do.

 

The United States currently enjoys a favorable balance of trade with the rest of the world.

 

A favorable balance of trade occurs when the value of a nation's exports exceeds its imports.

 

In any given year, the United States' cash outflow to other nations exceeds its cash inflow from other nations.

 

Some firms will practice "dumping" in order to gain a foothold in a new market.

 

As the most powerful economy in the world, the United States does not need to concern itself with having an unfavorable balance of payments.

 

The country of Nelly exports $250 of goods and services and imports $170 of goods and services. Nelly has an unfavorable balance of trade of $80.

 

If visitors from Germany spend money at Orlando, Florida's Disney World, it will increase the U.S.'s unfavorable balance of payments.

 

A Chinese steel manufacturer is selling certain types of steel in the United States at a price significantly lower than it sells the same steel in its home market. This practice may be a violation of U.S. law.

 

Japanese auto manufacturers, such as Toyota and Nissan, have invested billions of dollars in the United States by building new factories, warehouses, and offices. These investments increase "favorably" the balance of payments for the United States.

 

When the U.S. provides foreign aid to Israel and Egypt, a balance of payments outflow occurs.

 

The value of Chinese exports coming to the United States is greater than the value of goods China buys from the United States. This results in a U.S. trade deficit with China.

 

The country of New Florentina mines more fluorite each year than it needs for its own manufacturing purposes. Recently, a neighboring country complained that its manufacturing sites could buy fluorite from New Florentina cheaper than they could buy it from its own mines. A government trading expert's claim that New Florentina is dumping fluorite onto its neighbor's market is probably accurate.

 

When competing in global markets, business organizations utilize a variety of strategies to reach foreign buyers.

 

Through licensing, domestic firms give foreign manufacturers/producers the right to produce their product and use their trademark in exchange for royalties.

 

When a firm agrees to license its product, it gains notoriety but gives up all revenues.

 

Franchising is popular both domestically and internationally.

 

An advantage of licensing is that licensors spend little or no money to produce and market their products. These costs are born by the licensees.

 

The Enron scandal illustrates the difference between unethical behavior and illegal behavior.

 

Ethical behavior requires more than following the law.

 

Legal behavior and ethical behavior are basically the same.

 

A society gets into trouble when people consider only what is illegal and not also what is ethical or unethical.

 

Ethical behavior refers to the standards that are accepted by society as right or wrong.

 

People should look at each situation individually and decide for themselves if it is right or wrong.

 

Given the level of diversity within the United States, agreement on common standards of ethical behavior is unachievable.

 

An accurate statement regarding this chapter is: "Business law establishes ethical behavior."

 

Legal behavior is directly related to our relationships with others, while ethical behavior is not.

 

Legal behavior is a first step toward ethical behavior.

 

Laws that protect us from fraud, theft and violence determine ethical behavior.

 

Moral behavior refers to behavior that is accepted by society as right versus wrong.

 

Ethical behavior focuses on treating others fairly.

 

Making accounting records more transparent may help restore trust in the free-market system and leaders in general.

 

Punishing business leaders who have broken the law may help restore trust in the freemarket system and leaders in general.

 

Making businesspeople more accountable for company actions may help restore trust in the free-market system and leaders in general.

 

People involved in business may be tempted to do something unethical in order to increase sales and profits, but rarely do because if they are caught, our legal system will deal harshly with them.

 

Jake and his college friends frequent a small pub on weekends. Last weekend, after a few beers, one of his friends decided to take the salt and pepper shakers from their table because they needed a set at their apartment. In this situation, this was not a particularly questionable activity because it was a restaurant where one pays for these extras.

 

Ethical behavior involves the clear and easy choice of right and wrong actions toward others.

 

Both managers and workers cite low managerial ethics as a major cause of American businesses' competitive woes.

 

A common form of cheating in schools today is plagiarizing online material.

 

Making ethical choices is always easy.

 

Two recent studies found a strong correlation between academic dishonesty among undergraduates and dishonesty at work.

 

The question "Is it legal?" establishes ethical behavior.

 

It can be very difficult to maintain a balance between ethics and goals such as pleasing stakeholders.

 

Trying to make decisions that will benefit all parties involved is consistent with the question "How will it make me feel about myself?"

 

While telling an abusive joke about an ethnic group may not be unlawful, it is unethical.

 

An ethical manager's decisions are based only on the following questions: "Is it legal?" and "Is it profitable?"

 

Behavior that is in conflict with your values and sense of right and wrong can damage your self-esteem.

 

When facing an ethical dilemma, it is often helpful to discuss the situation with your supervisor because ethical decisions will always withstand scrutiny.

 

Business behavior determines the ethics of society. We can improve society's moral and ethical behavior by first making a commitment to improving business's moral and ethical behavior.

 

Utilizing the phrase "the ends justify the means" as a corporate value system can negatively impact company morale and competitiveness.

 

According to the Making Ethical Decisions box, after ex-cons have completed their sentences, they should not be allowed to start their own businesses.

 

Barney extends his lunch break beyond the allotted time. Wilma uses the office telephone for unauthorized personal phone calls. Fred misrepresents his product to a potential customer. All of these are examples of unethical behavior.

 

In reality, ethical behavior depends on the situation. For example, in negotiating a contract with your employees, the way they win higher wages is by your losing the fight to hold down labor costs. You realize it is a win-lose relationship.

 

You are in a business meeting at work that requires your group to make an ethical decision. Your willingness to post the final decision on the bulletin board in the break room for all to see passes the test: "How will it make me feel about myself?"

 

As the human resources director for your company, it is your job to evaluate the company's benefits plan. Although several workers utilize the company day care facility, the facility costs the firm considerably more than another benefit might cost, such as having an on-site physician. The on-site physician services are supported by insurance, and the physician actually rents space from the company. Under these circumstances, eliminating the day care is a balanced decision.

 

On her company website, Ali asks customers who fill orders to place a check-mark in a box if they are willing to let her share their information with her suppliers. By asking this question, Ali is addressing privacy issues, and covering her actions in case someone should try to sue her for sharing private information. She is responding to the question, "Are my proposed actions legal?"

 

Trust between workers and managers must be based on a foundation of fairness, honesty, openness, and moral integrity.

 

A growing number of people feel that an employee's ethics are a personal matter, and have nothing to do with management.

 

The majority of CEOs believe that employee misconduct results from the failure of organizational leadership to establish ethical standards.

 

Management can create an environment in which unethical behavior can develop.

 

Corporate values, like personal values, are learned by observing what others do.

 

Effective corporate values start with employees and develop throughout the organization to include top management.

 

In order to maintain a good reputation, it is good strategy to manage your business ethically.

 

A business should be managed ethically to keep existing customers and attract new customers.

 

One good reason for managing a business ethically is to help reduce employee turnover.

 

In order to do the right thing for all stakeholders, a business should be managed ethically.

 

Overly ambitious business goals and employee incentives can lead to unethical behavior.

 

An ethic of justice is based on a sense of responsibility to reduce actual harm or suffering.

 

An ethic of care is based on a sense of responsibility to reduce actual harm or suffering.

 

An ethic of care is based on principles like justice, fairness, equality, or authority.

 

Employers should proceed cautiously when designing an employee incentive program that rewards employees strictly on increased sales.

 

"Do what I say, not what I do" can be an effective code of conduct to instill corporate values.

 

Employees observe behavior and adopt standards of right and wrong.

 

"Actions speak louder than words!" is an old saying that refers to the fact that people's actions—how they act as opposed to what they say—are often testament to their true ethical values.

 

As a manager, you have a responsibility for the unethical behavior of your employees.

 

In order to avoid the costly act of being sued in court, it makes good sense to manage your business ethically.

 

Several years ago, the garment and soft goods industry agreed to adopt higher ethical standards with respect to contract manufacturers that produce their goods. The leadership agreed that this was a good approach in order to avoid the U.S. government’s intervening and creating new laws to force the industry to only work with foreign manufacturers who operate with high ethical standards. This was sensible strategy on the part of the garment and soft goods industry.

 

Integrity-based ethics codes are based on avoiding legal punishment.

 

Compliance-based ethics codes are based on preventing unlawful behavior.

 

Businesses with a formal code of ethics are less common now than in the past.

 

Compliance-based ethics codes focus on preventing unlawful behavior by increasing control and by penalizing wrongdoers.

 

In order to be successful, efforts to improve the ethical behavior of businesses must begin with top management's support of a corporate code of conduct.

 

People who report illegal or unethical behavior are called whistleblowers.

 

As a result of pressure from business lobbyists, Congress failed to pass legislation protecting whistleblowers.

 

The job of an ethics officer is to serve as a counselor for employees and as an investigator for the company.

 

Enforcement is perhaps the most important step in an effective code of ethics.

 

A code of ethics designed to avoid criminal misconduct is an example of a compliancebased ethics code.

 

An integrity-based ethics code moves beyond legal compliance in order to create a "dothe- right-thing" climate.

 

To be effective, an organization's code of ethics needs to be communicated to outsiders such as suppliers, subcontractors, and customers.

 

Since most ethics violations are small and rather insignificant in nature, employees need to understand that addressing these issues is secondary to making profits. CEOs may be justified in putting these on the back-burner, waiting for more convenient moments to address them.

 

America's business ethics can improve simply by requiring written contracts with employees, customers, and owners. This alone will do the job!

 

An important step in improving U.S. business ethics is for companies to hire whistleblowers.

 

Dewy Cheatum encourages his employees to create and use legal loopholes to gain a competitive advantage. In keeping within the legal limits of the law, the employees are within their compliance-based ethics rights.

 

The brewers of Budweiser beer encourage their customers to drink responsibly. This reflects a compliance-based approach to ethics.

 

Cigarette producers label their products with warnings of potential health hazards. Due to the fact that this is a government-mandated disclosure, it is part of the industry's compliance-based ethics.

 

In light of the fact that over 60% of all theft in retail stores is committed by employees, New Generations Clothier, Inc., requires that managers personally unlock fitting rooms for all sales associates and count the number of items associates take to the fitting rooms. This policy is written in the company manual. Breaking with the policy is grounds for dismissal. It is correct to say that this is part of New Generations' compliance-based ethics.

 

At Fast-Track Financial Services, it is not unusual for a financial consultant to lose a client to another consultant working out of the same office. Clients have a right to do business with whomever they choose. If it is a high–net worth client, with the potential for high commissions on sales, the incentive to steal a fellow worker's client exists because the firm's culture has not established integrity-based ethics to deter this activity.

 

Corporate social responsibility refers to the concern businesses have for the welfare of society.

 

Corporate philanthropy refers to the position a firm takes on issues that affect society.

 

A charitable donation contributed by a corporation is an example of corporate philanthropy.

 

Business issues such as minority hiring practices and pollution control fall under the umbrella of corporate responsibility.

 

As a show of corporate responsibility to your customers, your firm may elect to provide more information regarding your product than the law demands.

 

Corporate philanthropy refers to the position a firm takes on social and political issues.

 

When stating a firm position on various social and political issues, corporate policies often commit company profits to back these positions.

 

Recent surveys indicate that students are willing to agree to lower salaries if they know their employer is participating in socially responsible activities.

 

In the discussion of corporate social responsibility, stakeholders and stockholders refer to the same group.

 

One responsibility of business is to satisfy customers by offering them goods and services with real value.

 

Studies show that consumers are not concerned about the socially conscious behavior of the firms with which they do business.

 

Customers learn to trust companies that consistently demonstrate good behavior. Those same companies can lose this position with one socially irresponsible activity.

 

Some investors believe it makes financial as well as moral sense to invest in companies whose practices promote sensitivity toward the environment.

 

"Fair disclosure" refers to a Securities and Exchange Commission rule that states when a publicly traded firm discloses information, it must share it with everyone.

 

Insider trading occurs when employees of publicly traded companies use private company information to profit in the stock market.

 

Insider trading provides the information needed for the securities markets to operate fairly and efficiently.

 

Businesses have a social responsibility to create jobs.

 

Promoting social justice is a responsibility of society, but not business.

 

In the long run, a firm's loyalty to their employees can pay off financially.

 

Getting even is one of the most powerful incentives for good people to do bad things.

 

A recent study revealed that employee fraud causes 30% of all business failures.

 

The green movement has turned the heads of very few firms.

 

A social audit is a systematic evaluation of an organization's progress toward implementing programs that are profitable.

 

The green movement has resulted in a positive impact on U.S. jobs.

 

A firm's net social contribution is a company report that measures the difference between its positive social contributions and its negative social impact.

 

A public good is one that everyone gets to enjoy regardless of who pays for it.

 

When it comes to ethics and social responsibility, the public's perception of a firm is as important as what the firm does.

 

A social audit measures a firm's progress in the area of worker-management relations.

 

A list of "watchdogs" (including customers, socially conscious investors, and environmentalists) monitor how well firms enforce their ethical and social responsibility policies.

 

A business that takes a public position on a political issue that affects the welfare of society is exercising corporate social responsibility.

 

Defining a socially responsible company is complicated. Businesses differ from other businesses, as well as the people they serve, on what we mean by "socially responsible."

 

Opponents of corporate social responsibility argue that firms which use their profits to promote social causes are not being fair to investors who provided the funds for the purpose of financial gain.

 

A corporate policy should never make a value statement about the environment or other social and political issues, because it is doubtful the company can live up to the proclamation.

 

Corporate social responsibility covers all those social issues outside our businesses that affect customers and the environment, but not internal issues such as employee considerations and work safety. Internal issues are covered by business laws.

 

Some experts feel that corporate social responsibility means solely making money for stockholders.

 

As a response to the Enron scandal, the federal government now requires social audits of all U.S. businesses.

 

In a famous speech, former President John F. Kennedy proposed that businesses had four basic rights, and in his own words, he proclaimed that "each one of them leads us back to the right to keep the profits from one's business."

 

Often it is the threat of negative publicity that pressures businesses to enforce their corporate code of ethics.

 

Although the green movement is a social trend, it is difficult to predict its future contributions to society.

 

Out-Tel, a computer chip manufacturer, knowingly sold defective chips and failed to notify customers of the potential problems. When the problem became public knowledge, the firm's stock price fell dramatically. This illustrates the value that investors place on the ethical behavior of businesses.

 

At a recent town hall meeting, citizens expressed concern regarding the impact of a proposed new gambling casino. The owner of the proposed casino responded, "I don't know what all of this fuss is about. I'm just a businessman trying to earn a profit, provide new jobs, and pay taxes." His response reflects an overall commitment to corporate social responsibility.

 

Recently, a large insurance company in the Midwest made a public commitment toward corporate philanthropy when it dedicated 3% of its profits toward the cultural and environmental concerns of the large metropolitan area that houses its corporate headquarters. The CEO stated, "In honor of several hundred employees that come to work here every day, we want to give something back." In light of the fact that this is only helping one metropolitan area, the donation falls outside the realm of corporate social responsibility.

 

Fresh Walls Paint Company promotes its products as nontoxic and made from natural, organic substances that are safe for all persons including those with asthma and other lung conditions. In order to live up to customer expectations, it must walk the walk and not just talk the talk! If consumers learn that Fresh Walls' paints do not meet their expectations, their reaction is likely to tarnish the company's image.

 

About 10 years ago, there were several bank mergers. Shortly after Big Bucks Bank bid on The Bank of Plenty, a story hit the local newspapers about the investigation into the purchase of several thousand shares of stock of the Bank of Plenty by three of its top executives, just prior to the announcement that Big Bucks Bank planned to buy Bank of Plenty. Upon close examination by the SEC (Securities and Exchange Commission) it was determined that the stock purchases were an illegal maneuver on the part of these executives. This is an example of insider trading. The executives were "banking" on the stock price rising sharply when the purchase announcement was made public.

 

Abby is a stockbroker for a large financial services company. A client who works at Sixth Generation Software, Ltd., just called to purchase several thousand shares of his company's stock. He reveals to her that the company is about to announce the appointment of a new CEO. Abby asks her client if this information is public knowledge. The reason she asks is to make certain that her client, her company, and she remain in compliance with Regulation FD, the Fair Disclosure rule.

 

Recently, Bob was trying to choose among three mutual fund investments for his retirement account. As a socially conscious investor, he will prefer to invest in funds that hold the stocks of oil and coal companies, as opposed to wind-turbine and renewable energy companies.

 

U.S. businesses claim that unethical business practices are common outside the U.S.

 

The ethical standards by which international political leaders are judged are more lenient today than they were in years past.

 

Many U.S. companies are demanding socially responsible behavior from their international suppliers.

 

Due to the fact that American ethical standards are very clear-cut, international suppliers do not have difficulty adhering to them.

 

The objective of the Inter-American Convention Against Corruption document formulated and signed by the Organization of American States is to identify common global ethics.

 

The International Organization for Standardization (ISO) plans to publish a standard on social responsibility called ISO 26000.

 

U.S. businesses consider The Foreign Corrupt Practices Act as legislation that has helped increase their profits abroad.

 

All U.S. companies practice the same ethical standards when dealing with suppliers and contract manufacturers abroad.

 

Due to their significant economic power, large multinational firms can ignore the ethical standards of a society without consequences.

 

U.S. businesses have little influence over the behavior of businesses from other countries.

 

Applying the ethical standards of the U.S. to foreign firms is a difficult process for U.S. firms.

 

"Hear no evil, see no evil, speak no evil" is the best policy for U.S. firms to follow in their dealings with corrupt foreign suppliers.

 

While "doing the right thing" is an admirable code of ethics, there are no international organizations dealing with global ethics and corruption.

 

Due to the complicated laws and ethical standards abroad, U.S. businesses are encouraged to adopt a "don't ask, don't tell" policy.

 

According to the Reaching Beyond Our Borders box, corporate ethics can clash with cultural ethics, especially in global business.

 

A few years ago, several U.S. clothing manufacturers were sued in Los Angeles courts by watchdog groups who learned of poor working conditions in manufacturing plants on a U.S. territory known as the Marianas Islands. Customers are concerned with human rights abuses and other problems with supplier relationships abroad.

 

Olivia is ordering trendy necklaces and earrings made with semi-precious stones from a supplier in Belize, for her city boutique. Due to low paying wages in Belize, the supplier has promised an excellent wholesale price for these goods. You concur with Olivia when she explains to you that international business law is very clear-cut with these dealings. As long as the supplier is not breaking any labor laws in his country, Olivia's social responsibility is covered.

 

In the Reaching Beyond Our Borders box, the story proves that a large multi-national company can ask its employees to follow, and should expect them to follow, the same ethical standards they would practice if living and working within the U.S. borders.

 

In the Reaching Beyond Our Borders box, the story demonstrates the many ethical similarities between North and South American businesses. This is fortunate for large firms that do business south of the U.S. border. They can depend on their subsidiary firms to have no problems when implementing U.S. company employee policies.

 

Obeying the law is ________ ethical behavior.

 

________ refers to standards of moral behavior.

 

A recent study revealed that most Americans have:

 

Which of the following statements describes ethical behavior in the U.S.?

 

The danger in writing new laws to correct behavior is that:

 

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?

 

Laws represent the standards of ________ behavior.

 

Ethical behavior covers a ________ range of conduct than legal behavior.

 

Many individuals today believe that ethical behavior is determined by what is best for them at the time. This is an example of:

 

Considering the potential impact on others prior to making a decision is consistent with ________ 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.

 

Bernie Madoff’s Ponzi scheme swindled about $65 million from customers who invested with his firm. Enron and WorldCom participated in inappropriate accounting methods. According to the Making Ethical Decisions box:

 

Purposefully understating your firm's income to avoid paying higher taxes is an example of:

 

The purpose of sobriety checkpoints that are set up by community and state police is to deter drunk driving and ultimately save lives. While not mandated, the makers of Blackberry have complied with the public request of several legislators and have obediently removed apps that permit smartphone users to navigate around the checkpoints. Google and Apple have elected not to honor such requests. After studying about ethics and social responsibility, which of the following statements applies to this situation?

 

When WorldCom used intentional accounting irregularities to make the company look more profitable than it actually was, it:

 

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:

 

When Angela graduated with a degree in computer science and started her software company, she posted a sign that read, "This company will always operate within the legal limits of the law." Posted where all employees could clearly see it each day, this demonstrated:

 

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?

 

Which of the following questions will help individuals and organizations when deciding if their decisions are ethical?

 

When discussing moral and ethical issues, it is helpful to remember that ethical behavior begins with ___________________.

 

The first step when facing an ethical dilemma is to ask:

 

Which of the following questions can help us avoid a decision that would injure our selfesteem?

 

Ethical dilemmas in business:

 

Ethical behavior will result in which of the following?

 

Business relationships often present ethical dilemmas that are:

 

An ethical dilemma refers to a situation where you must:

 

A U.S. government official has indicated that for a generous contribution to his reelection fund, he would ignore your firm's apparent violation of several anti-pollution laws. Which of the following "ethics check questions" would you consider first?

 

A friend offers to share with you a term paper previously prepared for her Introduction to Business class last semester. When you tell her that it wouldn't be fair, she reminds you of your habit of reading an entire Harry Potter book at the local bookstore without paying for the book. Which ethics-based question would be most helpful in evaluating these situations?

 

A high-level manager gathers his team of supervisors together to create a new office policy that will affect all employees at the company. After receiving a verbal okay from the supervisors, he then proceeds to pass around a written form of the new policy and asks all members of the team to initial it. He explains to the supervisors that the new policy will be posted in the break rooms on each floor of corporate headquarters. If you were a part of this work team, which question would you ultimately ask yourself before initialing your approval of this policy?

 

The majority of CEOs blame unethical employee conduct on:

 

Ethical behavior at work is learned by:

 

Which of the following is a reason why a business should be managed ethically?

 

Relationships between businesses and among nations:

 

Corporate values are:

 

When managers disregard ethical concerns, the likely result is:

 

Creating competition between employees within the corporation:

 

Following an ethics-based approach to decision making will normally lead to higher:

 

Following an ethics-based approach to decision making will normally lead to:

 

The Hum-dinger Corporation recently instituted a corporate ethics code. The president of the company realizes that ethical relationships are based on:

 

Which of the following would most likely involve ethical concerns?

 

With respect to business ethics, it can be said that "it takes two to tango." This indicates that:

 

Establishing a formal code of ethics is:

 

A(n) ________-based ethics code emphasizes the prevention of unlawful behavior by increasing control and penalizing wrongdoers.

 

Which of the following terms describes someone who reports illegal or unethical behavior?

 

A(n) ________-based ethics code defines corporate values; creates a supportive environment, and, stresses shared accountability among employees.

 

Compliance-based ethics codes:

 

To improve America's business ethics:

 

After developing a code of ethics, it should be communicated to:

 

A whistleblower is a person who:

 

Which of the following is a characteristic of an effective ethics officer?

 

Compliance-based ethics codes typically:

 

A very critical last step in the process of establishing an ethics code is __________.

 

Which of the following would be a unique focus of an integrity-based ethics code?

 

Which of the following statements is not one of the six steps recommended by experts for improving ethical behavior at work?

 

In the past, whistleblowers were known as persons with a universal moral calling. However, seldom did these individuals receive tangible rewards for their efforts. When it was all said and done, they often fell into hard times. Whistleblowers got a boost in 2010, with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act. A provision of this act permits whistleblowers to_____________________.

 

What is the benefit of employing an ethics officer?

 

While speaking with his sales force, the director of sales explains, "Anyone caught violating a sales law will be fired." After studying business ethics, you recognize this remark as a reference to the firm's __________ ethics.

 

In an effort to promote the importance of a valuable education, the faculty and staff at the local community college are trained to ask each student about their career preferences, rather than suggest courses that may not benefit the student's future goals. Although it would be tempting to suggest courses just to increase the college's enrollment, employees know that it is more important to serve each student well, even if it means suggesting courses and/or degrees offered at other institutions. This approach is consistent with:

 

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 phone call to a government official by an employee of the Enron Corporation disclosed the deception and dishonesty of the firm's accounting records. This employee played the role of a:

 

Zach spent several months developing a good relationship with a business client. The client is now buying a significant amount of product from Zach's company, resulting in high commissions for Zach, personally. After checking the sales records for the past six months, a colleague of Zach's started visiting the same client in the hopes of capturing some of the client's business too. Although he considers it "legal and fair game," sales reps in his firm have begun to avoid him because they consider it a violation of:

 

John was recently hired by Backstreet Books. At the beginning of the first day on the job, his store manager handed him a small booklet consisting of company rules. He was asked to read it and sign and submit the last page, before starting work. Among other things, the rules explicitly discussed reprimands for grievous behavior and dismissal if the firm could prove that the employee was stealing product from the store. This booklet represented the ___________ of the store.

 

Corporate social responsibility describes the firm's:

 

All else held equal, socially responsible firms:

 

We describe charitable donations by corporations to nonprofit organizations as __________.

 

The position a firm takes on issues that affect the corporation as well as society is known as its:

 

In recent years, progressive firms have embarked upon ____________, where they will commit company resources and expertise toward helping out in emergency type situations.

 

Corporate ________ covers issues such as setting minority hiring practices, manufacturing safe products, and minimizing pollution.

 

Determining what is involved for a firm to be socially responsible:

 

Which of the following is not a basic right proposed by former President John F. Kennedy?

 

A payoff for socially conscious behavior is:

 

Which of the following statements best describes a firm's commitment to its customers?

 

Companies are using _____________ to communicate their corporate social responsibility actions to their customers.

 

Investors, today are realizing financial benefit by:

 

Insider trading involves:

 

If a business fails to meet its responsibilities to its employees, which of the following is likely to occur?

 

In order to avoid insider trading, the SEC (Securities and Exchange Commission) has adopted a new rule called _____________ that requires publicly traded companies to release information to everyone in a timely manner, rather than just to a few persons.

 

People need to make a living. Under this circumstance, one of the best social programs a firm can offer is:

 

The difference between an organization's positive social contributions and its negative social impacts is called their:

 

The purpose of a(n) ________ is to evaluate an organization's progress toward implementing programs that are socially responsible and responsive.

 

Going green means:

 

The green movement:

 

Business is under pressure from society to be more socially responsible. However, even the strongest advocates for corporate responsibility can't seem to agree:

 

One factor causing businesses to vigorously enforce ethical standards is the:

 

When it comes to social responsibility, some people feel that "before you can do good, you must do well." This reflects a firm's primary responsibility to its:

 

Some critics of corporate social responsibility view spending money on CSR as:

 

When a firm undertakes corporate social initiatives it is:

 

Although college graduates would prefer to work for socially responsible companies,

 

Environmental quality is considered to be a public good. This means that:

 

Many businesses have developed internal procedures to enforce their ethical policies. Which of the following is an example of an outside group urging ethical behavior in businesses?

 

A firm's carbon footprint is:

 

One problem with conducting a social audit is:

 

The social audit is:

 

An important source of public scrutiny is "watchdogs." These are:

 

When Donut Plaza employs in-store recycling and composting, and uses nontoxic cleaners, Donut Plaza is participating in:

 

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:

 

Hendry HVAC, a heating and cooling company headquartered in Milwaukee, Wisconsin, permits its employees to volunteer for nonprofit organizations, as part of their paid company time. According to recent findings, which of the following statements best explains this company’s action?

 

Before it was publicly known that IBM was going to take over Lotus Development, an IBM secretary told her husband, who told two co-workers, who told friends, relatives, business associates, and even a pizza delivery man. A total of 25 people received the information and traded on this tip to make a profit. These people were:

 

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.

 

Management's philosophy at Apple, Inc., has often stated that a fit body contributes to more productivity at work. Apple provides exercise facilities at most of its sites across America, and permits employees to use a half-hour of work time each day to relieve stress through exercise. This serious position on physical fitness is part of Apple's ___________.

 

Idle Time Gaming, Inc., would like its employees, customers, and the general public to be aware of the activities and programs it has achieved for the community over the past year. The company might consider performing a:

 

Several outside groups regularly monitor the activities of Metro Chemical Corporation. These groups are interested in the firm's involvement and enforcement of their ethical and social responsibility policies. Who of the following is the least likely to be among the "watchdog" groups?

 

Last week, the Local Citizens for a Greener America sent a formal document to Chipper's Golf Resort asking the private club to measure its carbon footprint and publicly disclose the amount of fertilizer and other carbon-emitting substances that it uses on its two awardwinning golf courses. LCGA is an example of ___________.

 

Last year the Bank of Plenty, Inc., made an all-out effort to go paperless. The bank's public relations arm promoted the strategy both internally and externally. Customers were strongly encouraged to utilize the bank's online banking for all their banking needs. Customers could sign up for local workshops where employees were dedicated to showing them how to navigate the bank's new website and find the information they required. The bank's initiative demonstrates:

 

Enrollment at Tradewinds College has increased by about 3% each year for three years, even though tuition and fees have gone up to help defray the cost of new wind turbines installed on campus to generate enough power to serve the campus buildings and to sell to local business establishments. As a recent student of contemporary corporate social responsibility, you conclude:

 

Ethical problems and issues of social responsibility are:

 

When working with international firms, U.S. businesses:

 

Top leaders in government and business today are:

 

Which of the following is an unresolved ethical issue that surrounds global trade?

 

The Foreign Corrupt Practices Act deals with:

 

International issues of social responsibility and ethical behavior are:

 

Which of the following indicates that U.S. businesses are demanding socially responsible behavior from their international suppliers?

 

According to the Reaching Beyond Our Borders box, which of the following is true?

 

The boxed material entitled Reaching Beyond Our Borders that told the story about Joe, the telecommunication employee, suggests that U.S. firms operating overseas are:

 

J. D. started working for an export trading company right out of college. His job took him to Asia on several occasions, where he interacted with manufacturers and got to practice his limited Chinese. He was amazed to see the difference in working conditions in the developing nations where he visited, compared to similar operations in the U.S. The expectations of workers were not the same. J.D.'s experience is an example of:

 

As the number of multinational corporations increases, we are experiencing international ethical dilemmas. One very real concern during the past decade is the human rights abuses in sweatshops where several multinationals contract manufacture their products, in exchange for cheap labor. Several retailers have banned together to set ethical standards in foreign factories. Which of the following statements summarizes the challenges of companies doing business in developing countries and the concerns of their customers?

 

Harry, Sirly, and Bo are in the midst of a heated discussion. As the chief operating officers of the U-Scream Ice Cream Corporation, they are reviewing the latest financial reports. Intense competition has resulted in deceased profits. Each of the three officers has his own view of how to reverse the current trend.

Harry suggests cutting costs by firing union employees and hiring replacement workers at lower wages. He has directed the firm's attorney to find a loophole in the contract that will allow for this action. Sirly protests, stating that Harry's proposal is unethical and unfair. Sirly feels that every stakeholder should be treated equally, and that profiting at the expense of others is foolhardy.

Bo, agreeing in part with Sirly, states, "We must be sensitive to all affected parties, but clearly our primary goal is to make a profit for our owners." In an attempt to resolve the conflict between Harry and Sirly, Bo offers an alternative suggestion: reduce the firm's charitable contributions until acceptable profit levels are realized. Sirly is outraged and reminds Bo of the social responsibilities that U-Scream Ice Cream has to the community, environment, suppliers, employees, and stockholders.

 

Harry is concerned about the legality of his idea of firing union workers in order to hire workers willing to work for less pay. Harry values ______________ ethics, but has little concern for other types.

 

If management adopts Bo's suggestion of reducing U-Scream Ice Cream's charitable donations until profits stabilize, the company will essentially reduce its ___________.

 

Sirly recommends a marketing strategy aimed at increasing sales through the development of a positive corporate image. He suggests the first step toward this goal is to identify and evaluate the firm's programs for community involvement. Sirly is calling for a ________ to be completed.

 

On which of the three ethics check questions would Harry primarily focus?

 

Bo's view tends to lean toward the concerns of investors, first and foremost. This is the view taken by __________________.