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Questions and Answers
Which of the following is NOT an advantage of public sector funding?
Which of the following is NOT an advantage of public sector funding?
Nationalization aims to decrease efficiency in the economy.
Nationalization aims to decrease efficiency in the economy.
False
What is one primary motive that drives the private sector?
What is one primary motive that drives the private sector?
Profit
In a planned economy, all resources are owned by the __________.
In a planned economy, all resources are owned by the __________.
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What is a common drawback of nationalization?
What is a common drawback of nationalization?
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Match the following economic systems with their characteristics:
Match the following economic systems with their characteristics:
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Public sector businesses typically aim to make a profit.
Public sector businesses typically aim to make a profit.
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What is one reason for nationalization of industries?
What is one reason for nationalization of industries?
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What is the main purpose of specialization in labor?
What is the main purpose of specialization in labor?
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Barter allowed individuals to exchange goods without the use of money.
Barter allowed individuals to exchange goods without the use of money.
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List two problems associated with the barter system.
List two problems associated with the barter system.
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The earliest form of trade was known as the __________ economy.
The earliest form of trade was known as the __________ economy.
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Match the following instruments of early exchange with their characteristics:
Match the following instruments of early exchange with their characteristics:
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Which of the following is NOT a limitation of the barter system?
Which of the following is NOT a limitation of the barter system?
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Money in the present day only exists as physical notes and coins.
Money in the present day only exists as physical notes and coins.
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As production increased, the need for a system of __________ arose to resolve trade issues.
As production increased, the need for a system of __________ arose to resolve trade issues.
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What is the main goal of entrepreneurship?
What is the main goal of entrepreneurship?
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Barter involves the exchange of goods and services without using money.
Barter involves the exchange of goods and services without using money.
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Define 'producer' in the context of business.
Define 'producer' in the context of business.
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________ refers to the situation when total sales are insufficient to cover all expenses.
________ refers to the situation when total sales are insufficient to cover all expenses.
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Match each term with its correct definition:
Match each term with its correct definition:
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Which of the following describes public goods?
Which of the following describes public goods?
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Economy refers to the private mechanisms of production and exchange.
Economy refers to the private mechanisms of production and exchange.
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What is capital in the context of a business organization?
What is capital in the context of a business organization?
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What is a disadvantage of social/public goods production?
What is a disadvantage of social/public goods production?
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In a free economy, government intervention is minimal.
In a free economy, government intervention is minimal.
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What is the primary goal of a mixed economy?
What is the primary goal of a mixed economy?
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In a traditional economy, people grow most of their own _____ to meet basic needs.
In a traditional economy, people grow most of their own _____ to meet basic needs.
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Match the types of economies with their characteristics:
Match the types of economies with their characteristics:
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Which statement is true regarding the roles of employees?
Which statement is true regarding the roles of employees?
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The roles of owners include providing jobs and ensuring environmental protection.
The roles of owners include providing jobs and ensuring environmental protection.
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What role does the government play in business activities?
What role does the government play in business activities?
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What is the maximum number of partners allowed in a partnership?
What is the maximum number of partners allowed in a partnership?
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Limited partners are allowed to take part in the management of the partnership.
Limited partners are allowed to take part in the management of the partnership.
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What document is typically written to establish a partnership?
What document is typically written to establish a partnership?
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In a co-operative, profits are distributed among ______.
In a co-operative, profits are distributed among ______.
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Match the types of co-operatives with their descriptions:
Match the types of co-operatives with their descriptions:
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Which of the following is an advantage of forming a partnership?
Which of the following is an advantage of forming a partnership?
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In a co-operative, all members have an equal vote.
In a co-operative, all members have an equal vote.
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What is one disadvantage of co-operatives related to management?
What is one disadvantage of co-operatives related to management?
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What is a primary feature of a sole trader business?
What is a primary feature of a sole trader business?
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A debit card allows payments to be made directly from a credit account.
A debit card allows payments to be made directly from a credit account.
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Name one reason why a person may start a business.
Name one reason why a person may start a business.
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A ________ allows multiple individuals to share profits and losses in a business.
A ________ allows multiple individuals to share profits and losses in a business.
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Match the payment methods to their descriptions:
Match the payment methods to their descriptions:
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Which of the following is NOT a characteristic of a sole trader?
Which of the following is NOT a characteristic of a sole trader?
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In a limited partnership, limited partners are liable for debts beyond their investment.
In a limited partnership, limited partners are liable for debts beyond their investment.
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What financial advantage do sole traders have compared to companies?
What financial advantage do sole traders have compared to companies?
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Study Notes
Business Concepts and Definitions
- Enterprise: Taking risks in starting a business
- Entrepreneurship: Combining production factors (land, labor, capital) for profitable goods/services
- Barter: Trading one good or service for another
- Profit: Funds remaining after all expenses are covered
- Loss: When total sales are less than total expenses
- Trade: Buying and selling goods/services
- Economy: A country's system for production, exchange, and consumption of goods/services
- Producer: Individuals/organizations that create goods/services
- Consumer: Individuals/organizations that use goods/services
- Exchange: Voluntary trading of goods/services
-
Goods: Tangible products (e.g., cars, clothing)
- Free goods: Available without charge (e.g., air, sunlight)
- Public goods: Consumed by all, paid for by taxes (e.g., national defense)
- Service: Intangible products (e.g., banking, transportation)
- Market: Place where buyers and sellers meet to trade (demand)
- Commodity: Any good used for a specific purpose
- Capital: Money used in a business to acquire assets (equipment)
- Labor: Physical and mental contribution to produce goods/services
- Specialization: Dividing labor into specific tasks to increase productivity and decrease unit cost
Development of Instruments of Exchange
- Early trade was through barter (one good for another)
- Problems with barter: Double coincidence of wants, difficulty in storing wealth, lack of divisibility of goods
- Money systems developed (shells, beads, metals) to solve these problems
- Modern methods of exchange include credit cards, debit cards, cheques, electronic transfers, tele-banking, and online commerce
Reasons to Start a Business
- Financial independence
- Seeking ownership and control
- Personal fulfillment
- Unmet market need
- Career change/redundancy
- Job market instability
Forms of Business Organizations
- Sole Trader: Owned and operated by one person. Easy to set up, owner keeps all profits, but has limited capital and personal liability
- Partnership: Owned by two or more people. Easy to set up, can pool more capital compared to sole trader, shared profits, but faces unlimited liability and potential conflicts between partners
- Co-operatives: Owned and operated by members. Focuses on member benefits, profit sharing, but can face challenges in attracting talent and experienced management
- Companies (Private Limited & Public Limited): Businesses separate from their owners. Enjoy limited liability, often easier to raise capital as shareholders invest and may be easier to oversee
Management of Business Organizations
- Sole trader: Directly managed by the owner
- Partnership: Usually managed jointly by the partners.
- Co-operative: Managed by members through an elected board.
- Companies: Managed by a board of directors elected by shareholders
Types of Economic Systems
- Planned Economy (socialist): Government controls resources and production. The government decides what, how, and for whom to produce.
- Free Economy (capitalist): Private individuals and companies own resources and decide what, how, and for whom to produce. The government role is less prominent
- Mixed Economy: Combines elements of both planned and free economies, with varying degrees of government involvement in the economy.
Nationalized Industries
- Features: Government ownership, management by government-appointed board, reporting to government, and funded by government.
- Advantages: Ensures production of necessary goods / services, usually at affordable costs / easier access
- Disadvantages: Monopoly / Lack of competition, lower levels of efficiency or service, can lead to delays / lack of innovation.
Public vs Private Sector
- Public sector: Owned and operated by the government. Often focused on social needs, not solely profit.
- Private sector: Owned and operated by private individuals or companies, and focused on profit-making.
Multinational Companies
- Features: Operate in multiple countries, with the parent company making decisions.
- Advantages: Provides investment, training, employment, and pay higher wages in various countries.
- Disadvantages: Potential for conflict between the parent company and subsidiary, or with local political / social factors, profits may not be reinvested locally, risk of large amounts of funds leaving the country.
Franchises
- Features: A business model that grants a license to operate a business which a franchisor, who in return pays fees.
- Advantages: May attract customers and marketing through the franchisor's network and name recognition.
- Disadvantages: May come with high upfront costs as well as franchise fees, less autonomy, potential for less profitability / loss if the firm goes under.
Conglomerates
- Features: A collection of companies operating in different industries.
- Advantages: Diverse industries could mean a spread of risk, but profit motives may detract from certain issues like lack of industry-specificity
- Disadvantages: Potential conflicts and inefficiencies among the various companies in the conglomerate, but there could be greater market share due to diversification.
Ethical Role of Business
- Businesses should ensure that their products are reliable to customers, with no hidden costs such as defects or infringements on copyrights, and without misleading statements or false advertising. They are also required to remedy any issues promptly where issues arise
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Description
Test your knowledge on essential business terms such as enterprise, entrepreneurship, barter, and more. This quiz covers the foundational concepts that are crucial for understanding the functioning of any economy. Challenge yourself and see how well you comprehend these vital definitions!
