Questions and Answers
What are some of the advantages of working for others?
The company assumes the entrepreneurial risk and provides you with benefits.
What benefits do you lose by being an entrepreneur? What do you gain?
Low risks and low rewards; high risk and high reward.
What are the five factors of production?
Land, labor, capital, entrepreneurship, and knowledge.
What are the four ways the government can foster entrepreneurship?
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What is the difference between effectiveness, efficiency, and productivity?
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What is empowerment?
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What are some of the major issues affecting the economy today?
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What major factor caused people to move from farming to manufacturing?
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What does the future look like for tomorrow's college graduates?
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What is the difference between revenue and profit?
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What is the difference between standard of living and quality of life?
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What is risk, and how is it related to profit?
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What do the terms stakeholders, outsourcing, and insourcing mean?
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What led to the emergence of socialism?
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What are the benefits and drawbacks of socialism?
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What countries still practice communism?
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What are the characteristics of a mixed economy?
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Name the three economic indicators.
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What's the difference between a recession and a depression?
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How does the government manage the economy using fiscal policy?
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What does the term monetary policy mean?
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What are the two main arguments favoring the expansion of US companies in global markets?
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What is comparative advantage?
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How is a nation's balance of trade and balance of payments determined?
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What are the advantages of using licensing as a method of entry in global markets?
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What services are usually provided by an export-trading company?
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What is the key difference between a joint venture and a strategic alliance?
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What are four major hurdles to successful global trade?
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What does ethnocentricity mean?
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How would a low value of the dollar affect U.S. exports?
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What does the Foreign Corrupt Practices Act prohibit?
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What are the advantages and disadvantages of trade protectionism and of tariffs?
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What is the key objective of a common market like the EU?
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What three nations comprise NAFTA?
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What are the three major threats to doing business in global markets?
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What key challenges must India and Russia face before becoming global economic leaders?
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What does the acronym BRIC stand for?
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What are the two primary concerns associated with offshore outsourcing?
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Study Notes
Advantages of Employment
- Companies assume entrepreneurial risk and provide employee benefits.
Entrepreneurial Risk and Rewards
- Entrepreneurs face high risk for high potential rewards; employees typically have low risk with lower rewards.
Factors of Production
- Five factors: land, labor, capital, entrepreneurship, knowledge.
- Knowledge and entrepreneurship are interdependent, fostering economic ideas and growth.
Government Role in Entrepreneurship
- Facilitate private business ownership.
- Enable enforceable business contracts.
- Establish a globally tradable currency.
- Help minimize business corruption.
Effectiveness, Efficiency, and Productivity
- Effectiveness: achieving desired outcomes.
- Efficiency: achieving results with minimal resource use.
- Productivity: the output generated relative to input.
Empowerment
- Initiatives aimed at increasing autonomy and self-determination in individuals and communities.
Current Economic Issues
- Major concerns include war, terrorism, and global changes.
Economic Shift
- Technological advancements led to migration from farming to manufacturing and then to the service sector.
Future of College Graduates
- Increased service sector jobs expected to create more service occupations.
Revenue vs. Profit
- Revenue: total income generated by a business.
- Profit: income remaining after expenses are deducted.
Standard of Living vs. Quality of Life
- Standard of living: the quantity of goods and services accessible based on income.
- Quality of life: overall well-being and enjoyment of life in society.
Risk and Profit
- Entrepreneurs face risks of time and monetary loss, necessary for profit-making.
Stakeholders, Outsourcing, and Insourcing
- Stakeholders: individuals affected by business decisions.
- Outsourcing: contracting external firms for business functions.
- Insourcing: performing business functions internally.
Emergence of Socialism
- Socialists advocate for equitable wealth distribution and government intervention in wealth distribution.
Pros and Cons of Socialism
- Benefits: free education, healthcare, childcare.
- Drawbacks: high taxes can lead to brain drain and reduced innovation.
Nations Practicing Communism
- North Korea and Cuba explicitly espouse communism; Russia, Vietnam, and China maintain some communist principles.
Characteristics of Mixed Economy
- A mix of market-driven and government-controlled resource allocation, as seen in the U.S.
Economic Indicators
- Key indicators include GDP, unemployment rate, and price indexes.
- U.S. GDP approximates $14 trillion, indicating high living standards.
- Unemployment spiked post-2008 recession; consumer price index remains stable.
Recession vs. Depression
- Recession: two consecutive quarters of declining GDP.
- Depression: a prolonged, severe recession often marked by deflation.
Fiscal Policy
- Government's strategies to stabilize the economy through tax adjustments and spending changes.
Monetary Policy
- Management of money supply and interest rates by the Federal Reserve.
Global Market Expansion Arguments
- No single nation can meet all goods and services needs.
- Global competition and imports help maintain lower prices.
Comparative Advantage
- Countries should specialize in producing goods they can produce more efficiently.
- Example: U.S. has an advantage in software and engineering services.
Balance of Trade and Payments
- Balance of trade: exports vs. imports value over time.
- Balance of payments: net money movements including trade and other financial flows.
Licensing in Global Markets
- Advantages: generates revenue without heavy investment; lower marketing costs.
- Disadvantages: long-term rights may limit profits; risk of idea theft by licensees.
Export-Trading Company Services
- Facilitate connections between international buyers and sellers; handle customs and logistical details.
Joint Ventures vs. Strategic Alliances
- Joint venture: short-term collaboration on a specific project.
- Strategic alliance: long-term partnership for competitive advantage.
Global Trade Hurdles
- Challenges include sociocultural differences, economic forces, regulatory issues, and environmental concerns.
Ethnocentricity
- Belief in cultural superiority can hinder global business success by alienating potential markets.
Impact of Dollar Value on U.S. Exports
- A low dollar value increases production costs and reduces profits on exports.
Foreign Corrupt Practices Act
- Prohibits questionable payments to foreign officials to secure contracts.
Trade Protectionism and Tariffs
- Aimed at preserving domestic industries; tariffs can increase consumer costs.
Objective of Common Market (EU)
- Facilitate regional trade free of internal tariffs and standardized regulations.
NAFTA Countries
- Comprises the United States, Canada, and Mexico.
Global Business Threats
- Significant threats include terrorism, nuclear proliferation, and income inequality.
Challenges for Global Leadership
- Russia needs to resolve political, currency, and social challenges; India faces complex trade laws and bureaucracy.
BRIC Nations
- Acronym for Brazil, Russia, India, and China, signifying emerging economies.
Offshore Outsourcing Concerns
- Job losses primarily in manufacturing and safety issues related to products like food and drugs.
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Description
This quiz covers key concepts from the 13th edition of 'Understanding Business', focusing on the advantages of working for others, the trade-offs between entrepreneurship, and factors of production. Test your grasp of these essential business principles and enhance your knowledge in a structured format.