Midterm Study Questions

These are required in order to live.

Needs

Things that you can see and touch

Goods

Activities that are consumed at the same time they are produced

Services

This country is the largest producer of

goods and services in the world.

United States

What are the 4 types of economic resources? Natural: are raw materials produced by nature. Human: are the people who contribute physical

and mental energy to the production process. Capital: are the tools, equipment, and buildings

that are used to produce goods and services Entrepreneurial: the initiative to combine natural,

human, and capital resources

Process of giving up something for gaining

something elseTrade off

Value of the next-best alternative that you did not choose

Opportunity cost

What are the 6 steps in the decision making process?

Defining the problem Identifying choices Evaluating the advantages and disadvantages of

each choice Choosing one choice Acting on the choice Reviewing the decision

What are the 3 economic questions that all economies must answer?

What to produce?

How to produce?

From whom to produce?

Who makes the economic decisions in each of the types of economies?

Communist: government Market: the people Traditional: the family

What type of economy is a combination of

those?Mixed

What are the 4 principles of the U.S. economic system (capitalism)? Private property – can own, use, or dispose of

things of value. Freedom of choice – can make decisions

independently and must accept consequences of those decisions.

Profit – money left from sales after all of the costs of operating a business have been paid.

Competition – the rivalry among businesses to sell their goods and services.

Quantity of goods or services that

consumers are willing and able to buy.

Demand

Quantity of goods or services that

businesses are willing and able to provide.

Supply

The point where supply and demand

are equalEquilibrium (market) price

Country’s total dollar value of all final goods and services produced

in one yearGross Domestic Product (GDP)

This number includes the people of the labor force that are

unemployed, but that are willing AND able to work

Unemployment rate

Consumer spending is measured in what

two ways?Personal income and retail sales

Businesses can fund projects using money from what 3 things?

Savings, stocks, or bonds

What are the 4 steps in the economic/business cycle? Prosperity: Employment rate and demand for

products and services are high. Recession: Unemployment rate is increasing and

demand for products and services are lowering. Depression: Unemployment rate is high and

demand for products and services is lowering. Recovery: Unemployment rate is lowering and

demand for products and services is increasing.

When prices rise over time; demand for

products and services exceeds supply

Inflation

The change in the average price of goods and services

purchased by consumers over a period of time

Consumer Price Index (CPI)

Making, buying, and selling of goods and

service within a country

Domestic transactions

Exists when a country can produce a good or service at a lower cost than other countries

Absolute advantage

Is a situation in which a country specializes in the production of a good or

service at which it is relatively more efficient.

Comparative advantage

What is the difference between imports and

exports?Imports are goods/services brought

into the country; exports are goods/services sent out of the

country

Is the amount of money a country owes

to other countriesForeign debt

Is the difference between a country’s

total exports and total imports

Balance of trade

Is the difference between the amount of money that

comes into a country and the amount that goes out of it.

Balance of payments

Is the value of a currency in one country when

compared with the value in another

Exchange rate

Government bans the import or export of specified goods

Embargos

A limit on the quantity of good that may be imported or exported within a given

period to regulate international trade.

Quota

Taxes on certain imported products

which increases pricesTariffs

Countries that are members freely

invest in one anotherCommon market (for example, a lot of

European countries like Spain and France are a part of the European Union. They

share the same currency between countries).

Countries that are members remove duties and trade

barriers on products traded among them to increase trade between members

Free Trade Agreement (example North American Free Trade

Agreement between US, Canada, and Mexico)

Is allowing a business the rights to use another company’s name or

process in a specific way

Franchising (example: McDonalds)

Is selling the right to a company to use some intangible property (production process, trademark,

or brand name) for a fee or royalty

Licensing (example: you have to have a license to produce a Lebron

James jersey)

Happens when two or more companies agree

to share a business project

Joint venture

Provides economic aid to developing countries to fund

building communications systems, transportation

networks, and energy plans

World Bank

Settles trade disputes and enforces free-trade agreements among its

membersWorld Trade Organization

What is a sole proprietorship?

Business owned by one person

What are some advantages of a sole proprietorship?

Easy to form Complete control of business Recipient of 100% of the profit One time taxation

Anything a company owes is called a ______.

Liability

What are the 5 types of liabilities for sole proprietorships and partnerships?

Employment Example: Firing of an employing that missed significant

days from work Accidents and injuries on premises

Example: Customer breaks a leg while on business property

Company vehicle-related Example: Driver runs into a building while driving

company’s car Product-related

Example: Toys easily injure toddlers Errors and omissions

Example: Employee accidentally damages a customer’s property

How can a sole proprietorship be

terminated?Life of the owner or decision by

owner

How many people are considered a

partnership?Two or more

What’s the legal form to start a partnership and to

outline the partner’s responsibilities?

Partnership agreement

Advantages of partnerships? More capital and credit available Work load more evenly shared Losses are also shared

How can partnerships be

terminated?Actions of the partners, bankruptcy, death and/or court order

What are the 5 types of partners?Type of Partner

Participation in the

Business

Relationship to the Public

Degree of Liability

Dormant Not active Unknown Unlimited

General Active Known Unlimited

Limited Not active Known Limited

Secret Active Unknown Unlimited

Silent Not active Known Unlimited

What is an entity with the legal authority to

act as a single person?Corporation

How are corporations

formed?Filing an article of incorporation with

state government

Who owns a corporation?

The stockholders

How many votes does a stockholder

get?One PER share (so if you have 100

shares of stock, you have 100 votes!)

What is the lifetime of a corporation?

Unlimited! Can live on even after the person who started it dies or

moves on

If a corporation is sued, are the

stockholders liable?NO! Limited liability

What are the disadvantages of a corporation?

Double taxation: profits and earnings Government regulations Operations controlled by shareholders and board

of directors instead of original owner(s) Example: 10 years after founding Apple, Steve Jobs

was fired by the board of directors.

What does LLC stand for?

Limited Liability Company or Corporation

What are 3 types of corporations? Domestic - chartered in a specific state

Examples located in North Carolina: Bank of America Corporation Lowe’s Home Improvement Store

Foreign - chartered in one state, but doing business in another state

Alien - chartered in another nation, but doing business in a state

Whets the difference between a public corporation and a private corporation? Public-established for a governmental purposes

Examples National Science Foundation Export-Import Bank of the United States

Private-established by individuals for business or charitable purposes.Examples

Enterprise Rent-A-Car American Cancer Society

Formed by a group of individuals or businesses to serve their needs in order to

gain bargaining power against bigger businesses

Cooperatives

Grants permission to sell someone else’s products

and services in a particular manner

Franchise

What are the two types of franchises? Business-format

Requires franchisee to sell products or service in a specific format

What are some examples of business-format franchise?

Product trade-name

Allows franchisee to sell specific products. This format is usually formed by automobile, appliance, and petroleum product

Responsible for management of a business

to accomplish goals by effectively using people and

other resources

Manager

What are the 5 functions of management?

Planning To analyze information, set goals based on information, and make

decisions to accomplish the goals Organizing

To arrange resources in order to accomplish the goals of the business

Staffing To obtain, train, and compensate employees to accomplish the

goals of the business Implementing

To direct and lead people to accomplish the goals of the business Controlling

To determine whether a business is accomplishing its goals that were set in the planning stage.

What are the levels of management? Top

Executives who are responsible for the overall direction of the business

Mid-Management Specialists responsible for a specific part of the business

Supervisors First level of management in the business Responsible for the routine work of employees

Management by others Other employees who are not managers, may serve as

leaders for a group of employees

What are the 3 management styles? Tactical: Directed and controlling

Typically, use for inexperienced employees or during a crisis

Strategic: Less directed with employees helping with decision making

Typically, used with trusted and/or experienced employees

Mixed: Combination of both tactical and strategic

The ability to motivate others to effectively accomplish goals of

the business.Leadership

What are the 3 leadership styles?Autocratic

Used when a leader needs to give direct, clear, and precise orders and makes decisions

Situations to use style: During an emergency To direct the work of inexperienced employees

Democratic one who includes employees in making decisions Situations to use style:

To monitor quality of work of employees To direct the work of employees working as a team

Open or Laissez-fare one who gives little or no direction to employees Situation to use style:

To monitor achievements and communicate regularly with employees To direct the work of experienced and trained employees

What do human resource managers do?

Planning and staffing Managing compensation and benefits Managing performance of employees

What are 4 types of employments? Permanent

Long term commitment Temporary

Hired for a specific time/job Full Time

30 or more hours per week (usually 40+ hours) Part Time

Short work week

What are ways employees can be compensated?

Time Wage – Direct payment per hour Salary – Direct payment per week, bi-weekly, or

monthly Commission – Percentage of sales Piece Rate – Payment per unit produced Base plus incentive – Direct payment plus

performance based pay

What are benefits?Things companies pay all or part of

to entice good employees to a certain job. Example healthcare,

dental, vacation time

Obtaining products from nature or using natural resources to

growExtraction/cultivation

Changing and improving the form of another product

Processing

Combining raw materials and

processed goods into finished products

Manufacturing

The process of using assembly activities to

produce large quantities of identical

productsMass production

The process of producing a specific

and exclusive product for a customerCustom manufacturing

The process of changing raw materials to another form in

order to be consumed or used to make other products

Materials processing

What are the two types of product research?

Applied research is marketing research that studies existing products to develop design improvements or new product ideas.

Pure research discovers new solutions to problems.

What are the 6 steps in Continuous Process Improvement?

1. Involve everyone.

2. Identify process activities.

3. Establish quality performance standards.

4. Select measurement tools.

5. Monitor performance continuously.

6. Improve process quality.

Computers linked in a school or business so

users can share hardware, software,

and dataComputer networks

What’s the difference between a public

network and a private network?

Public-Internet, WWW

Private-Just within a home or a company (Intranet)

Software that enables computers to reason learn and

make decisionsArtificial intelligence

Computer programs that help people solve technical problems

including medical services, financial planning, and legal

matters

Expert systems

Conducting business transactions using the

Internet or other technology

E-commerce

What are the 4 models of e-commerce?

B2C: Business-to-Consumer Example: Lands’ End.com selling swimwear to expecting

mothers B2B: Business-to-Business

Example: Staples.com ships office supplies to local hospitals C2B: Consumer-to-Business

Example: Customers completing on-line surveys in order to provide feedback to Dunkin’ Donuts

C2C: Consumer-to-Consumer Example: Customer buying electronics from other customers

through eBay.com

An ordered system for processing and

reporting information in an organization

Management Information System

Workers use computers off-site to

do a job, saving travel time and costs

Telecommuting

A hidden program code in a system that

can do damage to software or stored data

Computer virus

An illegal act carried out by office or professional workers

while at work including stealing money, information, or computer time through

improper use of computer systems

White collar crime

Stealing or illegally copying software

packages or information

Piracy

This agency enforces and provides standards

for air and water quality

Environmental Protection Agency

Exists in a company when the employees represent a variety of groups including women,

ethnic groups, physically challenged, and older workers

Workplace diversity

Protects employees of the age 40 and over from employment decisions based on

their ageThe Age Discrimination in

Employment Act

Gives surety to safe and healthful working conditions for men and

womenThe Occupational Safety and Health

Administration (OSHA)

An agreement usually between two parties to

exchange goods or services for something of value,

usually money

Contract

4 elements of a contract: Agreement: offer must be made, and accepted Competent parties: legal age and mentally

competent Consideration: something of measurable value

must be exchanged Legality: must be for product/service that can be

legally sold; no fraud or deception exists in agreement

Protect the creative works of artists, authors, and composers. In the United States, originators are

protected during their lifetime plus 70 years to publish and exhibit their

works

Copyrights

Provide originators the exclusive right to

make, use, or sell the item for 17 years

Patent

Protect registered words, letters, or symbols connected with a

company or product

Trademark

What are the 7 Consumer Rights? Be informed To safety To choose To be heard To a remedy To consumer education To service

Encourage competition and fairness among businesses and avoid monopolies. These laws

avert false advertising, deceptive pricing, and misleading labeling

Antitrust laws

What companies are legal monopolies in the US because they are regulated by the

government?Utility

What are the 7 functions of marketing? Product/service management Distribution Selling Marketing-information management Financing Pricing Promotion

What are the 5 steps in marketing research?

Define the marketing problem. Study the situation. Develop a data collection procedure. Gather and analyze information. Propose a solution.

What are the 6 parts of a product? Basic product is simplest form of a product or service. Product features include additions and improvements to the

product or service. Options include choices of the product or service. Brand name is a company’s unique identification for a

product or service. Packaging is the protection and security of a product or

service before it is used. Warranty is an offer to repair, replace, or provide a refund a

product or service in order to build the confidence of consumers in a business.

What 6 factors determine price? Supply and demand Uniqueness Age Season Complexity Convenience

What’s the pricing formula?

Selling price=product costs+operating expenses+profit

The amount charged of the selling price to cover the operating expenses and profit usually stated as a

percent

Markup

How products and services reach final customers and the

businesses involvedChannel of distribution

What are the two channels of distribution?

Direct: the exchange of products and services between producer and consumer only

Example-UPS delivers packages for Ann Taylor. Indirect: exchange of products and services with

one or more business and consumer.

Example-Tonya makes and sells drapes to local customers.

What are some types of mass promotion?

AdvertisementPublicity

Public relationsSales promotion

Provides vital information on how a business will meet

its goals of satisfying customers that will result in

making sales and profits

Marketing strategy

Two steps in a marketing strategy? Identify a target market

A target market consists of a group of people that have similar needs and wants.

Create a marketing mix A marketing mix consist of a blending of the

marketing elements (product, price, distribution, and promotion)

5 Steps in the Consumer Decision Making Process

Recognize a need or want Gather information Select and evaluate alternatives Make a purchase decision Determine the effectiveness of the decision

Stores that provide broad product lines and highlight their

serviceDepartment

Stores that highlight their offering of lower

prices for productsDiscount

Stores that provide a special line of

productsSpecialty

Large, full service store that offer many brands of products

Supermarket

Stores that provide popular items, offer long operating

hours, and are usually located in highly accessible

areas

Convenience Store

Provide wide variety of limited products

at low pricesSpecialty Superstores

Provide a wide variety products in the retail services such as food,

bakery, auto, and electronics

Superstores

Provide products in large quantities at

practical pricesWarehouse club

Provide high-quality products at low

prices.Factory Outlets