Deck 1: Taking Risks and Making Profits Within the Dynamic Business Environment

Question 1

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

Answer 1

False

Question 2

Often the needs of a firm's various stakeholders will conflict.

Answer 2

True

Question 3

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

Answer 3

True

Question 4

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

Question 5

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

Question 6

Businesses provide goods,jobs,and services to others.

Question 7

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

Question 8

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

Question 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

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

Question 15

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

Question 16

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

Question 17

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

Question 18

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

Question 19

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

Question 20

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

Question 21

The only way a firm can increase its profits is to increase its sales revenue.
Revenues minus expenses = profits.A firm with stable or even declining sales might be able to improve profits by reducing expenses.

Question 22

Insourcing creates new jobs,and helps offset the number of jobs being outsourced.
Many companies are setting up design and production facilities here in the United States.For example,Hyundai is doing design and engineering work in Detroit and producing cars in Montgomery,Alabama.Such insourcing creates many new jobs,and helps offset the number of jobs being outsourced.

Question 23

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 standard of living depends on the price level as well as the income people earn.For example,as our text indicates,people in Germany and Japan may earn more money than Americans,but they have a lower standard of living because the prices they pay for goods and services are higher.

Question 24

Unlike businesses,employees of nonprofit organizations are not required to learn the business skills of information management,marketing,or financial management.
In order to achieve their goals,nonprofit organizations need people with many of the same skills required by for profit businesses.For example,even though nonprofit organizations do not seek a profit,they still may deal with large sums of money and must keep financial records.Nonprofit organizations also need people with leadership,marketing,and information management skills.

Question 25

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

Question 26

Since businesses strive to earn a profit,their owners benefit at the expense of the rest of society.
In the pursuit of profit,businesses create jobs,produce goods and services that contribute to a higher standard of living,and pay taxes that support important government programs.Thus,businesses benefit others in society as well as their owners.

Question 27

An effort to please one group of stakeholders eventually pleases all stakeholders.
Balancing the demands of all stakeholders is a tremendous challenge for organizations.Tradeoffs are common.Benefiting one group may have a negative impact on another group of stakeholders.For example,the need to stay competitive may call for outsourcing jobs to other countries,but that might do great harm to the community because many jobs would be lost.

Question 28

The only real purpose of a business is to make money for entrepreneurs.
Businesses don't just make money for entrepreneurs.Businesses provide all of us with necessities such as food,clothing,housing,medical care,and transportation,as well as other goods and services that make our lives easier and better.

Question 29

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

Question 30

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

Question 31

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.
The standard of living is the amount of goods and services people can buy with the money they have.The quality of life is a broader measure of social welfare that refers to the general well being of a nation's citizens.If citizens benefit from a cleaner environment,more political freedom,or more leisure time,their overall welfare (quality of life)may improve even if they are not able to purchase more goods and services with their incomes.

Question 32

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.

Question 33

Robin has started her own Internet 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.
An entrepreneur is someone who risks time and money to start and manage a business.

Question 34

Businesses and nonprofit organizations often strive to accomplish the same objectives.

Question 35

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.
The profit a firm earns is found by subtracting total costs from total revenue.

Question 36

Business decisions should consider the interests of customers,employees,suppliers,government leaders,and stockholders.
All stakeholders stand to gain or lose by the policies and activities of a business.A major challenge of businesses is to improve profits while trying to accommodate the interests of all stakeholders.

Question 37

By balancing the demands of customers and stockholders,businesses satisfy the demands of all stakeholders.
Customers are interested in benefiting from the products and/or services produced by businesses.Stockholders are usually profit oriented.Stakeholders encompass customers,suppliers,employees,stockholders,government organizations,environmental groups,and other organizations that are somehow affected by the business in question.

Question 38

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.
The standard of living refers to the amount of goods people can buy with the money they have.There are two factors that determine the standard of living: a person's earnings and the price of goods and services.If the prices of goods and services have increased or decreased over the past year,John's standard of living will change even if the amount of money he earns is the same.

Question 39

Political freedom,quality education,access to health care,and a clean environment are all factors that contribute to an improved quality of life.
The quality of life focuses on the general well-being of a society,and includes factors such as freedom,security,leisure time,and other factors beyond the goods and services people can buy with their incomes.

Question 40

Nonprofit organizations are similar to businesses in that they often provide goods and services that satisfy the needs of society.
Businesses are not the only organizations that produce goods and services.Government agencies,public schools,and charities such as the Salvation Army provide goods or services,but are classified as nonprofit organizations since there is no profit motive.

Question 41

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

Question 42

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

Question 43

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

Question 44

The number of businesses owned by Asians,Hispanics,and American Indians has grown dramatically.

Question 45

Women currently own less than ten percent of all businesses.

Question 46

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

Question 47

It was reported by a Beijing newspaper that China succeeded in improving its people's standard of living and establishing a relatively affluent society in the past seven years.This report clearly indicates that both income levels and the price of goods and services rose significantly during that time period.
If the people of China improved their standard of living,this means that they can purchase more with their current income than they were able to do in the past.In order to purchase the same or more goods than they were able to purchase in the past,the price of goods and services either stayed the same or decreased;or the price of goods and services stayed the same,but income levels rose.

Question 48

If they wish to create more wealth,poor nations should focus on policies that increase entrepreneurship and the effective use of knowledge.
Poor nations often have plenty of labor and land,as well as access to capital.However,the absence of entrepreneurship and knowledgeable workers seems to be the reason that most poor countries remain poor.

Question 49

Jing 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.
During the past two decades there has been a rapid increase in the number of women-owned businesses,increasing from about 3 million firms in 1980 to over 10.6 million women-owned firms today.Women currently own over a third of all businesses.

Question 50

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

Question 51

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

Question 52

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

Question 53

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.
According to leading economists and business analysts like Peter Drucker,Entrepreneurship and knowledge are the two key factors that enhance the creation of wealth.

Question 54

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

Question 55

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.
The standard of living refers to the amount of goods people can buy with their money.Both businesses and nonprofit organizations can produce and distribute goods and services,so they both affect the standard of living.Similarly,both businesses and nonprofit organizations can have an impact on the physical environment,health care,and other determinants of the quality of life.

Question 56

A charitable organization,such as the Red Cross or Salvation Army,is classified as a for-profit organization.
A charitable organization is not classified as a for-profit organization since it does not seek a profit.Charities are classified as nonprofit organizations.

Question 57

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

Question 58

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

Question 59

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.
Poor countries often have plenty of labor and access to adequate capital.However,the two factors of production that are most critical in generating national wealth are entrepreneurship and knowledge.A country found lacking in these will experience relatively low levels of income.

Question 60

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

Question 61

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.

Question 62

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

Question 63

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.

Question 64

Technology can help businesses become more efficient and productive.

Question 65

In rich countries such as the United States,changes in the level of taxation have little impact on the incentives of entrepreneurs.
High taxes and excessive regulation tend to discourage entrepreneurship even in wealthy nations.In the United States,those states with the highest taxes and most burdensome regulations tend to drive out entrepreneurs while states with lower taxes and fewer regulations tend to attract them.

Question 66

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

Question 67

Well-managed businesses will grow and prosper regardless of the business environment in which they operate.

Question 68

The failure to uphold high ethical business standards by a few companies can negatively impact the entire U.S.business community.
The textbook provided the example of the failure of mortgage brokers to perform due diligence on their customers.In their quest to capture a large home buying market,they failed to check the credit worthiness of their customers.As interest rates on adjustable rate mortgages increased,some homeowners were unable to pay their mortgages.The ripple effect of these failures led to job loss,which sent many homes into foreclosure.

Question 69

Countries that provide little or no government involvement provide the best environment for competitive businesses.

Question 70

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

Question 71

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

Question 72

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.
Government can actively promote entrepreneurship by encouraging private ownership of businesses.If the government owns the businesses there is little incentive for people to work hard to create profits.

Question 73

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

Question 74

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

Question 75

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.

Question 76

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.

Question 77

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

Question 78

Jared 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 Jared 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 Jared scans his business book and reads,"freedom to succeed also means freedom to fail."
Entrepreneurship promises its participants the opportunity for great success;however the potential of failure also looms in the process.

Question 79

The government of the nation of Bingland 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 Bingland's government should create an atmosphere that encourages entrepreneurship.
One of the things a government can do to encourage entrepreneurship and the formation of wealth is to keep regulations and taxes to a minimum.

Question 80

Greg recently completed his college degree in construction management.He is heading to Mexico City to start a business developing apartment dwellings.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.
While labor is included in the factors of production,entrepreneurship and knowledge are considered the most important factors in the creation of wealth.