Type:
Test Bank
Resource:
Business Essentials
Edition:
9th Edition
Author(s):
Ronald J. Ebert Ricky W. Griffin
Business Essentials, 9e (Ebert/Griffin) Chapter 1 The U.S. Business Environment 1) The customs, values, and demographic characteristics of the society in which an organization functions are the principal elements of the political-legal environment. Answer: FALSE Explanation: These are the main considerations of the sociocultural environment. The politicallegal environment reflects the relationship between business and government, usually in the form of government regulation of business. Page Ref: 5 Difficulty: Easy Objective: 1.2 Learning Outcome: Compare and contrast different economic systems Skill: Concept 2) Physical resources include the data and other information used by businesses. Answer: FALSE Explanation: Physical resources are the tangible resources that organizations use to conduct their business such as natural resources, raw materials, offices, storage and production facilities, parts and supplies, computers and peripherals, and a variety of other equipment. Page Ref: 8 Difficulty: Easy Objective: 1.3 Learning Outcome: Identify the different types of technologies used in business and describe their uses Skill: Concept 3) Economic systems differ in how factors of production are used. Answer: TRUE Explanation: Different types of economic systems manage the factors of production differently. In capitalism, for instance, they are managed by private individuals with capital resources, while in a command economy the government manages the factors of production. Page Ref: 9 Difficulty: Easy Objective: 1.3 Learning Outcome: Compare and contrast different economic systems Skill: Concept
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4) The point at which the supply curve and the demand curve intersect is the market price. Answer: TRUE Explanation: When demand and supply curves are plotted on the same graph, the point at which they intersect is the point at which demand matches supply, which determines the market price. Page Ref: 12 Difficulty: Easy AACSB: Analytic skills Objective: 1.4 Learning Outcome: Discuss strategies for setting and adjusting prices Skill: Concept 5) Aggregate output refers to a company's annual production of goods or services. Answer: FALSE Explanation: Aggregate output is the total quantity of goods and services produced by an economic system during a given period. Page Ref: 17 Difficulty: Moderate Objective: 1.5 Learning Outcome: Explain how economic performance is monitored Skill: Concept 6) The United States government manages the collection and spending of its revenues through monetary policy. Answer: FALSE Explanation: The United States government manages the collection and spending of its revenues through fiscal policy. Page Ref: 23 Difficulty: Moderate Objective: 1.5 Learning Outcome: Compare and contrast different economic systems Skill: Concept 7) The pursuit of profits is how a business differs from organizations such as most universities, hospitals, and government agencies. Answer: TRUE Explanation: The pursuit of profits distinguishes a business from those organizations—such as most universities, hospitals, and government agencies—that run in much the same way but that generally don't seek profits. Page Ref: 4 Difficulty: Easy Objective: 1.1 Learning Outcome: Explain the entrepreneurship process Skill: Concept
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8) The technological environment includes only electronics and telecommunications used to perform business activities. Answer: FALSE Explanation: Technology includes human knowledge, work methods, physical equipment, electronics and telecommunications, and various processing systems that are used to perform business activities. Page Ref: 6 Difficulty: Moderate AACSB: Analytic skills Objective: 1.2 Learning Outcome: Identify the different types of technologies used in business and describe their uses Skill: Concept 9) One of the four elements that are necessary for private enterprise to be carried out is reasonable prices. Answer: FALSE Explanation: The four elements that must be present in private enterprise are private property rights, freedom of choice, profits, and competition. Page Ref: 14 Difficulty: Moderate Objective: 1.4 Learning Outcome: Discuss strategies for setting and adjusting prices Skill: Concept 10) In typical modern oligopolies, the large capital investment necessary to enter the market discourages new competitors. Answer: TRUE Explanation: A major factor discouraging new competitors in current oligopolistic industries such as automobiles and large commercial aircraft is the huge capital investment that would be needed to start a new company. Page Ref: 15 Difficulty: Moderate Objective: 1.4 Learning Outcome: Compare and contrast different economic systems Skill: Concept 11) Natural monopolies exist partly because duplication of effort and resources would be wasteful in some cases. Answer: TRUE Explanation: Many electric companies, for example, are natural monopolies because they can supply all the power needed in a local area. Page Ref: 16 Difficulty: Moderate Objective: 1.4 Learning Outcome: Compare and contrast different economic systems Skill: Concept 3 .
12) Economic indicators help to assess the performance of an economy. Answer: TRUE Explanation: Specifically, economic growth is measured via aggregate output, standard of living, gross domestic product, and productivity; stability is reflected through levels of inflation and unemployment. Page Ref: 17 Difficulty: Moderate Objective: 1.5 Learning Outcome: Explain how economic performance is monitored Skill: Concept 13) The primary measure of growth in the business cycle is inflation. Answer: FALSE Explanation: The primary measure of growth in the business cycle is aggregate output. Page Ref: 17 Difficulty: Moderate Objective: 1.5 Learning Outcome: Compare and contrast different economic systems Skill: Concept 14) Gross domestic product (GDP) refers to the total value of goods and services produced by a national economy within a given period regardless of where the factors of production are located. Answer: FALSE Explanation: GDP refers to the total value of all goods and services produced within a given period by a national economy through domestic factors of production. Page Ref: 17 Difficulty: Moderate Objective: 1.5 Learning Outcome: Explain how economic performance is monitored Skill: Concept 15) Inflation results in increased purchasing power for the consumer. Answer: FALSE Explanation: Inflation occurs when the amount of money injected into an economy exceeds the increase in actual output. When this happens, people will have more money to spend, but there will still be the same quantity of products available for them to buy. As they compete to buy available products, prices go up. Page Ref: 22 Difficulty: Moderate Objective: 1.5 Learning Outcome: Explain how economic performance is monitored Skill: Concept
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16) Tax increases and decreases are a form of fiscal policy. Answer: TRUE Explanation: Tax rates can play an important role in fiscal policies, helping to manage the economy. Page Ref: 23 Difficulty: Moderate Objective: 1.5 Learning Outcome: Compare and contrast different economic systems Skill: Concept 17) The government can influence the availability of capital by working through the Federal Reserve System. Answer: TRUE Explanation: The interest rates set by the Federal Reserve System can influence the ability and willingness of banks throughout the country to lend money. Page Ref: 23 Difficulty: Moderate Objective: 1.5 Learning Outcome: Compare and contrast different economic systems Skill: Application 18) Stabilization policy is made up of both monetary and fiscal policy. Answer: TRUE Explanation: The purpose of monetary and fiscal policy is to smooth out fluctuations in output and unemployment and to stabilize prices. Page Ref: 23 Difficulty: Moderate Objective: 1.5 Learning Outcome: Compare and contrast different economic systems Skill: Concept 19) Product differentiation is common in a market characterized by monopolistic competition. Answer: TRUE Explanation: Product differentiation also gives sellers some control over prices. Page Ref: 15 Difficulty: Easy Objective: 1.4 Learning Outcome: Compare and contrast different economic systems Skill: Concept
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20) In a natural monopoly, prices tend to be government-regulated. Answer: TRUE Explanation: Natural monopolies occur in industries in which one company can efficiently supply all needed goods or services. Since they have little or no competition, their prices have to be regulated so that consumers do not have to pay overly high prices. Page Ref: 16 Difficulty: Moderate Objective: 1.4 Learning Outcome: Discuss strategies for setting and adjusting prices Skill: Application 21) The main measure of growth in the business cycle is aggregate output. Answer: TRUE Explanation: Aggregate output is the total quantity of goods and services produced by an economic system during a given period. When it increases, the economy is considered to be in a growth cycle. Page Ref: 17 Difficulty: Moderate Objective: 1.5 Learning Outcome: Explain how economic performance is monitored Skill: Concept 22) Deflation, an indication that the economy is contracting, is characterized by price stabilization of goods. Answer: FALSE Explanation: Deflation occurs when there are widespread price cuts. Deflation generally means that the overall economy is shrinking. Page Ref: 22 Difficulty: Easy Objective: 1.5 Learning Outcome: Explain how economic performance is monitored Skill: Concept 23) If productivity increases, prices charged to consumers will tend to increase as well. Answer: FALSE Explanation: If productivity increases, it's likely that prices of products will decrease and the standard of living will increase. Page Ref: 19 Difficulty: Moderate Objective: 1.5 Learning Outcome: Discuss strategies for setting and adjusting prices Skill: Concept
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24) The consumer price index is expressed as a percentage of prices as compared to a base period. Answer: TRUE Explanation: The current base period used to measure inflation is 1982-1984. Page Ref: 22 Difficulty: Moderate Objective: 1.5 Learning Outcome: Compare and contrast different economic systems Skill: Concept 25) Which environment is NOT an important dimension of a business organization's external environment? A) the political-legal environment B) the sociocultural environment C) the technological environment D) the corporate cultural environment E) the global business environment Answer: D Explanation: D) The external environment consists of everything outside an organization's boundaries that might affect it. The corporate cultural environment is internal to the organization. Page Ref: 6-7 Difficulty: Easy Objective: 1.2 Learning Outcome: Compare and contrast different economic systems Skill: Concept 26) What term denotes a nation's basis for allocating its resources among its citizens? A) capital structure B) economic system C) ownership processes D) distribution network E) national regulations Answer: B Explanation: B) An economic system is a nation's system for allocating its resources among its citizens, both individuals and organizations. Page Ref: 7 Difficulty: Easy Objective: 1.3 Learning Outcome: Compare and contrast different economic systems Skill: Concept
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27) What is the process for converting government enterprises into individually owned firms known as? A) production allocation B) privatization C) entrepreneurship D) demand assessment E) profit maximization Answer: B Explanation: B) Privatization is the process of converting government enterprises into privately owned companies, which will then have the right to run such a business for profit. Page Ref: 10 Difficulty: Easy Objective: 1.3 Learning Outcome: Compare and contrast different economic systems Skill: Concept 28) What is the point at which the supply curve and the demand curve intersect on a graph? A) equilibrium price B) decision point C) surplus price D) perfect price E) parity point Answer: A Explanation: A) The equilibrium price is determined by the shape of the supply curve and the demand curve when plotted by amount available and price. The equilibrium price is set at the point at which the supply curve and the demand curve intersect. Page Ref: 12 Difficulty: Easy Objective: 1.4 Learning Outcome: Discuss strategies for setting and adjusting prices Skill: Concept
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29) What is the price at which the quantity of goods demanded and the quantity of goods supplied are equal? A) the going rate B) the margin rate C) the market price D) the optimum price E) the cost price Answer: C Explanation: C) The market price is set by the demand and supply for a given good. It is defined as the price at which the quantity of goods demanded and the quantity of goods supplied are equal. Page Ref: 12 Difficulty: Easy Objective: 1.4 Learning Outcome: Discuss strategies for setting and adjusting prices Skill: Concept 30) What occurs when the quantity demanded exceeds the quantity supplied? A) demand deficit B) surplus C) equilibrium point D) shortage E) supply schedule Answer: D Explanation: D) When demand exceeds supply, there will not be enough goods available to meet the demand for them. This is known as a shortage. Page Ref: 12 Difficulty: Easy Objective: 1.4 Learning Outcome: Compare and contrast different economic systems Skill: Concept
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31) Which of the following does NOT represent a degree of competition in a private enterprise system? A) oligopoly B) socialism C) monopoly D) perfect competition E) monopolistic competition Answer: B Explanation: B) Competition is the economic condition in which there are certain demands that can be met by more than one business, so businesses in the same industry compete for the same resources or customers. Page Ref: 14 Difficulty: Easy Objective: 1.4 Learning Outcome: Compare and contrast different economic systems Skill: Concept 32) Which of the following exists when an industry or market has only one producer? A) competition B) oligopoly C) monopoly D) communism E) socialism Answer: C Explanation: C) A monopoly is a market or industry in which there is only one producer that supplies a certain product. Monopolies in the United States economy are either discouraged or regulated so that prices are not too high. Page Ref: 16 Difficulty: Easy Objective: 1.4 Learning Outcome: Compare and contrast different economic systems Skill: Concept 33) Which term refers to the pattern of short-term ups and downs in an economy? A) aggregate output B) business cycle C) standard of living D) balance of payments E) demand and supply schedule Answer: B Explanation: B) The business cycle is the short-term pattern of economic expansions and contractions. Page Ref: 17 Difficulty: Easy Objective: 1.5 Learning Outcome: Compare and contrast different economic systems Skill: Concept 10 .
34) Which term refers to the total quantity and quality of goods and services that people living in an economic system can purchase? A) business cycle B) demand and supply schedule C) standard of living D) aggregate output E) consumer price index Answer: C Explanation: C) The standard of living is the total quantity and quality of goods and services that people can purchase with the currency used in their economic system. Standard of living is determined by economic conditions such as inflation and purchasing power. Page Ref: 17 Difficulty: Easy Objective: 1.5 Learning Outcome: Explain how economic performance is monitored Skill: Concept 35) Which term refers to the total value of all goods and services produced within a given period by a national economy? A) standard of living B) aggregate output C) gross domestic product D) gross national produce E) purchasing power parity Answer: C Explanation: C) Gross domestic product is the total value of all goods and services produced within a given period by a national economy through domestic factors of production. Page Ref: 17 Difficulty: Easy Objective: 1.5 Learning Outcome: Explain how economic performance is monitored Skill: Concept
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36) Which of the following measures indicates the prices of typical products purchased by American consumers living in urban areas? A) GDP per capita B) standard of living C) consumer price index D) purchasing power parity E) Big Mac index Answer: C Explanation: C) The consumer price index is a measure of the prices of typical products purchased by consumers living in urban areas. It is used as a comparative standard, to tell whether inflation or deflation is occurring, for example. Page Ref: 22 Difficulty: Easy Objective: 1.5 Learning Outcome: Explain how economic performance is monitored Skill: Concept 37) What does productivity measure? A) the total value of all goods and services produced by a national economy B) how much a system produces with the resources needed to produce it C) how much output is necessary to produce a certain level of demand D) the standard of living relative to purchasing power parity E) how much gross national product results from inputs of labor Answer: B Explanation: B) Productivity is a measure of economic growth that compares how much a system produces with the resources needed to produce it. Page Ref: 19 Difficulty: Easy Objective: 1.5 Learning Outcome: Explain how economic performance is monitored Skill: Concept
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38) What is the economic condition characterized by widespread increased prices without increased purchasing power? A) unemployment B) inflation C) expansion D) deflation E) recession Answer: B Explanation: B) Inflation is the condition that occurs when widespread price increases are present throughout an economic system. This happens when the amount of money in the economy grows faster than the amount of products available to buy. Page Ref: 21-22 Difficulty: Easy Objective: 1.5 Learning Outcome: Explain how economic performance is monitored Skill: Concept 39) What is the condition in an economic system in which the amount of money available and the number of goods and services produced are growing at about the same rate? A) unemployment B) stability C) deflation D) inflation E) oversupply Answer: B Explanation: B) Economic stability happens when the amount of money available in an economic system and the quantity of goods and services produced in it are growing at about the same rate. When this occurs, there is neither inflation nor deflation. Page Ref: 23 Difficulty: Easy Objective: 1.5 Learning Outcome: Explain how economic performance is monitored Skill: Concept
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40) What are profits? A) total money taken in by a corporation B) increases in income from year to year C) increases in a corporation's stock price D) revenue generated by goods and services E) difference between revenues and expenses Answer: E Explanation: E) Profits represent the difference between an organization's revenues and its expenses; profits are the goal of most businesses and allow people to open and expand businesses. Page Ref: 4 Difficulty: Moderate Objective: 1.1 Learning Outcome: Explain how economic performance is monitored Skill: Concept 41) A new U.S. company plans to introduce an inexpensive, high-quality line of shoes to the American market. It has found a manufacturer in another country that can produce the shoes at a low enough cost that they will still be cheaper than other brands of the same quality. Which of the following represents a potential ethical implication that the company should consider before beginning production? A) the country's existing labor laws and the factory working conditions B) the average exchange rate of the country's currency over a ten-year period C) the challenges of doing business in a country with a nonconvertible currency D) the energy demands of the manufacturer's facility E) the basic international business strategy it will use Answer: A Explanation: A) When choosing a country to outsource to, a company should not only consider the financial implications of offshoring, but also the ethical implications of conducting business in a country that may have very different laws and legal standards. Page Ref: 6 Difficulty: Moderate AACSB: Reflective thinking skills Objective: 1.1 Learning Outcome: Compare and contrast different economic systems Skill: Application
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42) What marks the key difference between economic systems? A) the way they manage the factors of production B) the way they transport goods within their borders C) the way rules and regulations are legislated D) the way workers are relocated to different regions E) the way basic necessities are determined Answer: A Explanation: A) Economic systems manage the factors of production differently; management of these factors often revolves around the degree of government control of them. Page Ref: 7 Difficulty: Moderate Objective: 1.3 Learning Outcome: Compare and contrast different economic systems Skill: Concept 43) What does a planned economy rely on a centralized government to do? A) support free enterprise in every way possible B) allocate all or most factors of production C) encourage citizens to buy shares of stock in small companies D) keep its control activities to a minimum E) direct workers to start their own small businesses Answer: B Explanation: B) A centralized government controls all or most of the factors of production. Page Ref: 10 Difficulty: Moderate AACSB: Dynamics of the global economy Objective: 1.3 Learning Outcome: Compare and contrast different economic systems Skill: Concept 44) Which economic system emphasizes the private ownership of most factors of production? A) socialism B) communism C) capitalism D) Marxism E) federalism Answer: C Explanation: C) Capitalism makes use of the profit incentive for private ownership of the factors of production and encourages entrepreneurship by offering profits as an incentive. Page Ref: 10 Difficulty: Easy AACSB: Dynamics of the global economy Objective: 1.3 Learning Outcome: Compare and contrast different economic systems Skill: Concept
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45) A city of 150,000 people has a large commercial sector bringing in businesses from the surrounding region. In 2005, there was 2.75 million square feet of commercial space available. Five years later, after a building boom, there was 5.5 million square feet of commercial space available. Which effect will most likely occur? A) The equilibrium price of commercial real estate will not be effected. B) The increase in the supply of commercial real estate will lead to a corresponding increase in its price. C) The price of commercial real estate will decrease, absent a dramatic increase in demand. D) The increase in the supply of commercial real estate will lead to an increase in resource prices. E) The increase in supply will cause a corresponding increase in demand. Answer: C Explanation: C) Since the supply of commercial real estate has dramatically increased, unless there was a dramatic increase in demand we would expect the price of commercial real estate to decrease. Page Ref: 12 Difficulty: Moderate AACSB: Reflective thinking skills Objective: 1.4 Learning Outcome: Discuss strategies for setting and adjusting prices Skill: Application 46) A new watch manufacturer would like to determine the market price of a new line of watches. How could the manufacturer most effectively determine the market price? A) Place several of the new watches on sale at a watch store and see which sells most quickly. B) Arrange to sell the watches in a number of diverse auctions. C) Set the price of one watch higher than another and see which sells the most quickly. D) Survey potential customers and retailers on what they think the price should be. E) Canvass executives from competing companies about what they think the price should be. Answer: B Explanation: B) Auctions are an effective way to determine market prices because consumers determine the selling price. Page Ref: 16 Difficulty: Moderate AACSB: Reflective thinking skills Objective: 1.4 Learning Outcome: Discuss strategies for setting and adjusting prices Skill: Application
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