Understanding Business 13th Edition

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?

Allow private ownership of business, enable enforceable contracts, establish a tradable currency, minimize corruption. Signup and view all the answers

What is the difference between effectiveness, efficiency, and productivity?

Effectiveness is producing the desired result, efficiency is using the least resources, and productivity measures output relative to input. Signup and view all the answers

What is empowerment?

Measures taken to increase autonomy and self-determination in people and communities. Signup and view all the answers

What are some of the major issues affecting the economy today?

War and terrorism, global changes. Signup and view all the answers

What major factor caused people to move from farming to manufacturing?

Technologies became advanced, making farming extremely efficient. Signup and view all the answers

What does the future look like for tomorrow's college graduates?

More occupations in the service sector will lead to more service jobs. Signup and view all the answers

What is the difference between revenue and profit?

Revenue is the total amount a business takes in; profit is the money earned above expenditures. Signup and view all the answers

What is the difference between standard of living and quality of life?

Standard of living measures goods and services accessible to individuals; quality of life assesses overall well-being. Signup and view all the answers

What is risk, and how is it related to profit?

Risk is the chance of losing time and money; it must be taken to make a profit. Signup and view all the answers

What do the terms stakeholders, outsourcing, and insourcing mean?

Stakeholders are those who could benefit from business activities. Outsourcing is contracting outside firms; insourcing is within the company. Signup and view all the answers

What led to the emergence of socialism?

Beliefs that wealth distribution should be more even and that government should manage this distribution. Signup and view all the answers

What are the benefits and drawbacks of socialism?

Benefits include free education and healthcare; drawbacks involve high taxes and less innovation. Signup and view all the answers

What countries still practice communism?

North Korea and Cuba primarily, with some communist ideals in Russia, Vietnam, and China. Signup and view all the answers

What are the characteristics of a mixed economy?

Resource allocation is managed by both the market and the government. Signup and view all the answers

Name the three economic indicators.

Gross Domestic Product (GDP), unemployment rate, and price indexes. Signup and view all the answers

What's the difference between a recession and a depression?

A recession is two consecutive quarters of decline in GDP; a depression is a severe recession. Signup and view all the answers

How does the government manage the economy using fiscal policy?

Fiscal policy involves modifying taxes and government spending to stabilize the economy. Signup and view all the answers

What does the term monetary policy mean?

Monetary policy manages the money supply and interest rates; the Federal Reserve is responsible for this. Signup and view all the answers

What are the two main arguments favoring the expansion of US companies in global markets?

No single nation can provide all goods; global competition keeps prices down. Signup and view all the answers

What is comparative advantage?

It is the theory that a country should sell products it produces most effectively. Signup and view all the answers

How is a nation's balance of trade and balance of payments determined?

By comparing exports to imports, including all money flows like tourism and foreign aid. Signup and view all the answers

What are the advantages of using licensing as a method of entry in global markets?

Licensors can gain revenue without significant expenses; however, profits may largely go to licensees. Signup and view all the answers

What services are usually provided by an export-trading company?

Matching buyers and sellers, dealing with customs, documentation, and warehousing. Signup and view all the answers

What is the key difference between a joint venture and a strategic alliance?

A joint venture is for short-term projects; a strategic alliance is a long-term partnership. Signup and view all the answers

What are four major hurdles to successful global trade?

Sociocultural differences, economic forces, legal regulations, and environmental challenges. Signup and view all the answers

What does ethnocentricity mean?

An attitude of believing one's culture is superior, which can affect global success. Signup and view all the answers

How would a low value of the dollar affect U.S. exports?

A low dollar value means higher production costs relative to selling price, leading to lower profits. Signup and view all the answers

What does the Foreign Corrupt Practices Act prohibit?

Prohibits dubious payments to foreign officials for securing business contracts. Signup and view all the answers

What are the advantages and disadvantages of trade protectionism and of tariffs?

They help domestic industries but can raise consumer costs. Signup and view all the answers

What is the key objective of a common market like the EU?

To enable regional trade without internal tariffs and regulatory barriers. Signup and view all the answers

What three nations comprise NAFTA?

United States, Canada, Mexico. Signup and view all the answers

What are the three major threats to doing business in global markets?

Terrorism, nuclear proliferation, and income inequality. Signup and view all the answers

What key challenges must India and Russia face before becoming global economic leaders?

Russia needs to solve political and currency issues; India must address trade laws and bureaucracy. Signup and view all the answers

What does the acronym BRIC stand for?

Brazil, Russia, India, China. Signup and view all the answers

What are the two primary concerns associated with offshore outsourcing?

Loss of jobs and safety issues (in foods, drugs, toys). Signup and view all the answers

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.