Entrepreneurs

Module 3 Review Guide – people who take the risks associated with starting a new business and formulate

new ideas. Example... Howard Schultz and Starbucks. (Module 3.01 page 1) Most Entrepreneurs share the characteristics of HUNT (3.01 page 2):

Entrepreneurs and their contributions (3.01 Page 2):

Entrepreneur Contributions

An Wang Chinese-American computer scientist who held more than 35 patents. Hisdevelopments were critical to advancing digital information technology that we depend on today Wang Laboratories created one of the first desktop computers

Madame C.J. Walker

One of the first self-made African-American millionaires was an early entrepreneur in the beauty industry that today garners billions of dollars in annual sales

Howard Schultz It is because of him that Starbucks® has over 6,000 stores worldwide today His drive and marketing skills have made the café latte a daily habit for many Americans

James Cash Penney Launched the first chain of department stores in the United States, commonly known as

―Penney’s‖ Today Americans visit over 1,000 "Penney’s" or use the mail order and online catalogs to purchase various household goods and clothing.

Samuel F.B. Morse Patented the telegraph in 1849. paved the way for long-distance communication, reshaping America literally in terms of westward expansion, railroad safety, and business efficiency

George Washington Carver

Reshaped the American South from a society heavily focused on cotton agriculture to one that grew diverse crops and utilized crop rotation

taught these techniques for 47 years at the Tuskegee Institute discovered a number of uses for peanuts that are in many products we use to this day

Joseph A. Unanue Father founded Goya Foods®, distributor of Hispanic foods under Joseph’s direction Goya Foods® became the largest U.S. Hispanic-owned food distribution company in the United States

Margaret Hutchison Rousseau

First woman in the US to earn a doctorate in chemical engineering designed the first commercial penicillin production plant her work made it possible to produce and distribute penicillin widely, expanding Americans' access to the antibiotic drug that can cure many formerly life-threatening bacterial illnesses

Jessica Jackley Cofounder of kiva.org site allows people to give microloans to people in developing nations to help them start or expand a business

Larry Page and Sergey Brin

Cofounders of Google.com and started in 1989 out of the dorm rooms in college. Most used search engine in the world. Enables people to search text, images, and videos.

Harness your vision Take your idea and really think it out. What do you want to accomplish? What resources will be required?

Underestimate the Prevent barriers from stalling action. Find ways around the barrier whether it is roadblocks money, discouragement from others, or time.

Network Find and acquaint yourself with people who can help turn your vision into reality. Networking with other people can make roadblocks disappear.

H

U

N

T Take the first step Acting on your vision starts with a single step, and the first is the most difficult. However, once you do, you are more confident to take the second.

Factors of Production

All the resources necessary to produce goods and services (3.02 page 1)

Entrepreneurship - Intelligence, imagination, and ability to take the risks that are needed to start up and maintain a business, a component of labor - puts his/her money and ideas into starting a new business- this is a risk - business owners, managers, people who come up with advertising ideas (3.02 page 2)

Capital goods - The tools humans create to make the business more efficient—financial and physical - truck, computer, cash register (manmade objects) Investments in capital goods aim to increase productivity - buying new machinery or training workers are examples

(3.02 page 2)

Land - All the natural physical resources necessary to your product or service -oil, wood, water (natural resources) (3.02 page 2)

Labor - The human work that goes into the business—physical and mental skills - the workers,

employees (3.02 page 2)

Here are the resources needed to open a flower delivery business. Match each factor of production with the correct

category listed in the chart. Factors: delivery truck, floral designer, wedding planner, ensuring safety regulations,

cello wrap, webmaster, dirt, sunshine, packaging materials, choosing store location, flower farmer, hiring floral

designer, computer, credit card swiper, filing for business permit, flowers, water, advertising wedding service,

delivery truck, driver

Land Labor Entrepreneurship Capital

Sole proprietorship- one owner, most popular form of business. One owner makes all business decisions, but this does not protect against losing personal assets (3.03 page 2)

Partnership-two or more owners share the in making decisions and share the risks and benefits of owning and running a business. Partnership does not protect against losing personal assets but divides the risks between 2 or more owners. (3.03 page 2)

Limited Liability Company- a type of corporation; Protects personal assets. Personal assets cannot be used to pay-off debts; no problem of double taxation. Protects personal assets but you maintain control of all decision making. (3.03 page 2)

Corporation- stockholders and bondholders; easy to get more money and to expand; hard to start and stop (imagine the time it would take to stop Walmart if it went bankrupt). Protects personal assets but you lose control in decision making process. (3.03 page 2)

How to Organize a Business

Least Competitive------------------------------------Most Competitive

Price vs. Non-Price Competition Price Competition – the lowest price gets the sale. In a monopoly, the company has the advantage, since they have no competition and can set the price at whatever they want. In a pure competition, the customer has the advantage and will always go with the lowest price.

Non-Price Competition – factors other than price can effect consumer decisions.

is a non-price way to compete (rather than lowering prices, a company will advertise to raise sales)

Market Structures/Levels of Competition

Advertising Strategy Description Example/Explanation Fears Highlights a negative

outcome with or without the product

Advertisement: Do you know what’s lurking in your closet? Protect your sensitive skin with all organic, hand crafted, Sensitive Brand T-shirts! Why risk the only skin you have? All those other shirts contain fabrics that could make you break out or worse! Not with Sensitive! Consumer: ―Wow, I’d better buy the organic cotton clothing instead; I might get a rash from the other fabrics.

Emotions implies the product will help the user to avoid negative feelings or increase positive feelings

Advertisement: Wow, you really blew it big time! You forgot your girlfriend’s birthday again. Don’t feel bad; Just in Time Flowers is here to save the day when you can’t! We’re here for you when you need to say sorry the most. Consumer: ―I feel

bad I forgot my girlfriend’s birthday; I should send her flowers to make it up to her.‖

Rituals encourages people to make the product a part of their daily routine with words like “always”

Advertisement: Who says you can’t always look and feel your absolute best! Come

to Diva Salon where our motto is ―TGISD – Thank Goodness it’s Spa Day‖! Consumer: ―I love Diva! Whenever I get my haircut I always have them blow dry

and style it; it’s totally worth the extra five dollars.‖

Senses appeals to one of the five senses

Advertisement: Remember sneaking one of grandma’s famous ooey gooey cookies before dinner? Even getting caught was worth it! Grammie's Fabulous Cookies bring back your childhood memories of those soft, sweet cookies, and we promise we won’t tell even if you have one for breakfast. They look so delicious, you’d swear you could smell grandma’s oven. Consumer: ―Ooh, those look so good! I have to have

some!‖ Social Values encourages use of

products that are popular or will improve social status

Advertisement: You’ve got the car, you’ve got the girl, you’ve even got the look. So what’s missing? A Powerchord Guitar is the ONLY accessory you’ll ever need.

Forget all that other stuff. As long as you’re rocking on a Powerchord, you’ve got

―cool‖ made. Consumer: ―Powerchord is so awesome. I've got to have one. People would think I was cooler if I played the guitar."

When producing goods and services, producers must answer the 3 basic economic questions. Marginal cost analysis refers to how much they should produce. To determine this, they need to find the marginal cost and marginal revenue for a product market.

Marginal Cost – cost of producing one additional unit of a good or service (blue line) Marginal Revenue – revenue gained with the production of one additional unit of a good or service (yellow line)

Due to fixed costs, the first unit is more expensive to produce than additional units, causing marginal costs to fall. At some point, the curve shifts upward because of the Law of Diminishing Returns – at some point adding resources will result in less output per additional unit of a product. (blue line)

Business owners aim to minimize costs and maximize profits (do not hire workers or add capital unless it creates a profit). Producing where marginal cost is closest to marginal revenue without exceeding it will maximize the firm’s profits. Firms can calculate this using the chart...

Quantity Price (in Total of Video whole Revenue Game dollars) Quantity x Systems Price

252 246

240

234

228

222

216

210

204

198

0 1 x 246 = 246

2 x 240 = 480

Marginal Revenue the change of revenue for the addition of one unit

0

246 – 0 = 246

480 – 246 = 234

Total Cost Fixed + Variable Costs

Marginal Cost The change of cost for the addition of one unit

Profit (or loss) Total Revenue – Total Cost

0 1

2

3

4

5

6

7

8

9

210 408

564

642

684

774

1080

1410

1776

2178

n/a 0 – 210 = -210 408 – 210 = 198 246 – 408 = -162

564 – 408 = 156 480 – 564 = -84

Marginal Cost Analysis

In the market for labor, workers are the supply and employers represent demand

Sometimes there is a change in the demand for labor. Imagine a downturn in the economy. Businesses are not selling as much and don’t need as many workers. Demand for labor has decreased. (Shift from D1 to D2). The equilibrium also moves from point A to point B (change in quantity of labor supplied) which lowers the equilibrium price (wages) of labor.

An employer will choose how many workers to hire and how much to pay them at a level that minimizes costs and maximizes benefits, or profits.

In this case, the demand for labor has decreased, along with a decrease in the quantity supplied and a lower equilibrium price (lower wages offered).

There are many other factors that can influence a business owners decisions about wages and benefits...

education and skills required training provided by employer expected business revenues

supply and demand for the job worker productivity

size of the company Assume a fast-food place has enough resources to produce pizza and spaghetti along Curve R. The relative number of each produced every day is determined by supply and demand. The restaurant, of course, is most efficient when it produces about 12 pizzas and 7 plates of spaghetti (Point C).

However, if two of their workers fall ill and take the day off, their resources are down. The restaurant may only be able to produce pizzas and spaghetti at quantities along Curve S.

If the restaurant hires another worker, makes a good deal for cheaper noodles, or purchases an automatic cheese slicer the production possibilities may increase to Curve T or beyond.

Labor Market

Module 3 Vocabulary

Term Definition

Advertising A form of non-price competition. Uses fears, emotions, social values, and

rituals to appeal to potential buyers.

An Wang Chinese-American computer scientist who held more than 35 patents developments that were critical to advancing digital information technology that we depend on today.

Anderson, Tom He co-founded MySpace™ with Chris DeWolfe. He focused on the creative energy behind MySpace™--developing features and the look of the website.

Assets Valuable physical goods.

Capital goods The tools humans create to make the business more efficient— financial, and physical. For a bakery this would include the oven, delivery truck, mixing bowls, building, etc.

Capital Investment Investments meant to increase productivity. Example: training sessions or a new computer system.

Carver, George Washington He reshaped the American South from a society heavily focused on cotton agriculture to one that grew diverse crops and utilized crop rotation and discovered many different uses for peanut butter.

Collusion Making agreements, often in secret. For example: two dominant firms work together to set prices in an oligopoly.

Corporation Type of business with stockholders and bondholders; easy to get more money and to expand; hard to start and stop. Most expensive of the four business types to start up.

DeWolfe, Chris He co-founded MySpace™ with Tom Anderson. Under his leadership, MySpace grew from nothing to a website boasting millions of users and millions of dollars in income. Emotional - Advertisement

Technique

Makes you sad or makes you laugh to try to get you to buy their product. Example: Adds for pet shelters or raising money for hungry children.

Entrepreneur A person who takes financial risk to try new business ideas.

Entrepreneurship Intelligence, imagination, and ability to take the risks that are needed to

start up and maintain a business, a component of labor.

Factors of Production All the resources necessary to create a good or service - land, labor, capital, and entrepreneurship.

Fear - Advertisement Technique

Makes you scared something bad will happen if you do not purchase this product. Example: Use Ultra Max Deodorant! Don't be the stinky kid at the lunch table!

Financial capital The funds to pay for all other resources in a business.

Fixed Costs Costs that do not change from month to month. For example rent. Horizontal Merger When a company buys it's competition. Example: If Publix bought Winn-Dixie

Jackley, Jessica She is the cofounder of kiva.org site. This business allows people to give

microloans to people in developing nations to help them start or expand a

business.

Labor The human work that goes into the business—physical and mental skills.

Land (factors of production) All the natural physical resources necessary to your product or service – water, wood, oil, etc.

Law of Diminishing Returns At some point, adding resources will result in less output per additional unit of product (it costs less to produce something up to a certain point). This is the reason for the oddly shaped curve.

Limited Liability Company A type of corporation; no worry to have to use personal assets to pay-off debts; no problem of double taxation.

Marginal Means additional

Marginal Cost Is computed by finding the difference of previous two quantities for total cost (total cost of pair #2 - #1).

Marginal Revenue Is computed by finding the difference of the previous two quantities (total revenue of pair

#2 - #1). Market Types

Monopoly, Oligopoly, Monopolistic Competition, Purely Competitive. Least competitive to most--monopoly, oligopoly, monopolistic competition, and pure competition.

Maximum profit Producing where marginal cost is closest to marginal revenue without exceeding it will maximize the firm’s profits.

Mergers Occurs when two businesses form into one. Ways firms attempt to gain more control of the product market. Can be horizontal or vertical.

Monopolistic Competition

Market structures where many businesses produce similar but not exactly the same products. This market has relatively few barriers to entry. Rather than work together to set the price, many producers compete actively against one another to gain consumers. Pros: Consumers have more choices. Cons: Difficult for firms to present their products as unique.

Monopoly

Market structure where a single business dominates a product or service. The least business competition. Monopolies are least beneficial for consumers. Most beneficial to owners. It has high barriers to entry, meaning it is difficult to become and stay the sole producer of a good or service. Pros: Firm has price-setting ability. Cons: Consumers have only one option.

Morse, Samuel F.B. He patented the telegraph in 1849 and paved the way for long-distance communication, reshaping America literally in terms of westward expansion, railroad safety, and business efficiency.

Non-price Competition The goal of non-price competition is to get buyers to notice and purchase your product over other similar products regardless of price.

Oligopoly

The market is dominated by few firms who can exert control over the market for their products, often working together to determine price and production quantity. Pros: Firms can work together to control market. Cons: Very difficult for non-dominant firms to grow and compete.

Partnership

Two or more owners. Shared responsibility and profits. Each partner is liable for all the business’s debts. Partners increase the resources available for the business and allow the opportunity for dividing the work.

Penney, James Cash He launched the first chain of department stores in the United States, commonly

known as―Penney’s.

Perfectly Elastic Demand The demand curve is horizontal, meaning people will only demand a good at a

specific price level. Profit or Loss Total Revenue – Total Cost

Purely Competitive

Market structure where many businesses produce a standardized product. This market is easy to get into and get out of as a business owner. Most beneficial for consumers. Least beneficial for owners. Pros: Consumers have plenty of knowledge of similar products. Cons: Firms have little to no control of the market. Example: Oranges, peanuts, squash, etc.

Ritual - Advertisement

Technique Buy it because it is the way things should always be done. Example: Easter

isn’t complete without a Coco-bunny Easter egg!

Rousseau, Margaret Hutchison

She designed the first commercial penicillin production plant. Her work made it possible to produce and distribute penicillin widely, expanding Americans' access to the antibiotic drug that can cure many formerly life-threatening bacterial illnesses.

Schultz, Howard His drive and marketing skills have made the café latte a daily habit for many Americans; it is because of him that Starbucks® has over 6,000 stores worldwide today.

Social Values - Advertisement Technique

Makes you want to do something because everyone else is. Example: All cool teens wear Chucko-bucko shoes - so should you!

Sole Proprietorship

Everything is controlled by the single owner. The owner makes all the profits and makes all the choices. However, the owner is also the single person responsible for debts and challenges. Everything about the company belongs to the sole proprietor. Least expensive and easiest of the four business types to start up.

Total Cost Fixed Cost + Variable Cost

Total Revenue Quantity x Price

Types of Businesses Limited liability corporation, sole proprietorship, partnership, corporation

Unanue, Joseph A. His father founded Goya Foods®, distributor of Hispanic foods. Under Joseph’s direction Goya Foods® became the largest U.S. Hispanic-owned food distribution company in the United States.

Variable Costs Costs that change from month to month. For example the electric bill, water bills, and employee wages.

Vertical Merger When a business buys the products it sells to lower costs (ex: Lowe’s buying the companies that produce lumber, paint, and/or lawn mowers).

Walker, Madame C. J. One of the first self-made African-American millionaires who was an early entrepreneur in the beauty industry.

Module 3 Practice Exam

1. What do J. C. Penney and Madame C. J. Walker have in common?

A. They launched major department stores.

B. They were African American entrepreneurs.

C. They were early entrepreneurs in their industries.

D. They were women entrepreneurs.

2. Which of the following are shared by a typical corporation and a limited liability corporation?

A. Easy to start and stop and have shared debt liability

B. Are incorporated and have limited liability

C. Have shareholders and are easy to start and stop

D. Protect personal assets and can sell stock to the public

3. A benefit of a purely competitive market is

A. equal product information for buyers and sellers

B. government sets the product prices to be competitive

C. sellers may set their own prices

D. sellers use advertising to attract buyers

4. "Show your sweetheart how much you love her on Valentine's Day. We're having a sale on all chocolate!" This advertisement targets your

A. fears

B. senses

C. emotions

D. social values

5. The slope of curve 1 first decreases then increases because of the Law of

A. Marginal Analysis

B. the Slope of Supply

C. the Slope of Demand

D. Diminishing Marginal Returns

6. This is Pete's PPC curve for staying in touch with friends via phone vs. his weblog during one week. Which of the following is a true statement?

A. Pete uses weblog entries more than phone calls.

B. Pete calls friends more often than he writes weblog entries.

C. When Pete makes six phone calls he has time for four weblog entries.

D. When Pete writes one weblog entry he has time for six phone calls.

7. A country needs to decide if it will defend itself ("guns") or feed its population ("butter"). Look at the graph. Construct a plan to help the country attain Point X.

A. Add more gun makers to the labor force and decrease the number of butter makers

B. Streamline production of butter and begin assembly-line manufacturing of guns

C. Decrease the quality of guns and increase the demand for butter

D. Increase the quality of the butter and create more demand for guns

8. Use this image to answer the following question. The ice cream shop needs five pounds of strawberries for every gallon of strawberry ice cream. The shop chose to produce four gallons of chocolate ice cream. How many pounds of strawberries should the shop purchase?

A. 24

B. 30

C. 40

D. 60

9. Which of the following is the least profitable investment for a cell phone company earning $10 per plan contract?

A. Offering free $10 gift for every new plan, generating 40 new plans per day

B. Opening a new store location with $200 daily operating cost, generating 30 new plans per day

C. Redesigning website at $50 daily operating cost, generating 10 new plans per day

D. Creating television commercial at $25 daily operating cost, generating 15 new plans per day

10. Which of the following is an example of capital in a pizza shop?

A. Dough

B. Pizza Oven

C. Workers

D. Tomatoes

11. Your friends opened a restaurant. A necessary labor resource would be?

A. Servers

B. Building

C. Oven

D. Tables and chairs

12. You would like to direct all activities in a business that you start. What would be the best option for you?

A. Partnership

B. Limited Liability Company

C. Sole Proprietorship

D. Corporation

13. Differentiate between land resources and labor resources that a business would need.

A. Land resources include items that have to come from land such as oil, gold, water, and paper, but labor resources include human beings in their specific employee role.

B. Land resources will include items that can be used on land such as trucks, trains, and tractors, but labor resources will include the actual working on the land.

C. Land resources will include all items that will take up land space such as buildings, parking lots, and barns yet labor resources will include the actual working on the land.

D. Land resources will include items that can be made from land or are taking up land such as trees, buildings, and stores, but labor resources include human beings in their specific employee role.

14. A business owner has several competitors in his area. She is not willing to change the price on her product. She plans to strengthen her competition with them via other routes. Predict one way in which she will do this:

A. She will lower her price.

B. She will raise her price.

C. She will close her store.

D. She will purchase additional advertising

15. Tom has been renting a booth at the Flea market for 10 years. They are raising the rental fee to $10 per hour. He sells pirate coconuts for $5 each. How many pirate coconuts does he need to sell in one hour to earn a profit?

A. 2

B. 3

C. 4

D. 5

16. You are starting a Tree trimming business. Which of the following would be a needed land resource?

A. Oil

B. Chainsaw

C. Ladder

D. Trees

17. Why does pure competition benefit consumers over producer?

A. Companies control price through demand.

B. Competition is driven by price.

C. Supply influences production more when competition is less.

D. With a small amount of producers they have control of the prices.

18. Use this image showing the production

possibilities curve for hours of gamming and

FLVS classes to answer the following question. Andy needs about 4 hours per week for each FLVS class. If he decides to do to 8 hours of gamming each week, how many hours will he spend on his classes if working efficiently?

A. 6

B. 16

C. 4

D. 20

19. You and your best friend open a dog walking business together. Identify how your business will be classified and the capital you would need for your business

A. Sole proprietor and dogs

B. Sole proprietor and water

C. Partnership and employees

D. Partnership and a dog leash

20. Your dog walking business has become a great success. You and your best friend want to maintain control of the business, but protect your personal assets/property. Which of the following would best suit your growth

A. Limited Liability Company

B. Monopoly

C. Corporation

D. Sole Proprietor

21. You and your best friend decide to hire someone to help with the dog walking business. You pay your new employee $8 an hour and you currently charge $10 for 1 walk a day. Which of the following would be the most profitable for your business?

A. New employee will work for 2 hours a day and walk 2 dogs

B. New employee will work for 3 hours a day and walk 4 dogs

C. New employee will work for 5 hours a day and walk 6 dogs

D. New employee will work for 7 hours a day and walk 7 dogs

22. Gene decides to open a restaurant, and has plenty of money to put into his venture but has never actually worked in a restaurant in any capacity. Which would be the most ideal way to organize his business based on this information?

A. Corporation or sole proprietorship

B. Partnership or limited liability company

C. Limited liability or corporation

D. Sole proprietorship or partnership

23. Use the production possibilities diagram of days spent doing homework and days spent playing video games to answer the following question. Tina has 3 hours of spare time each day. How many hours will Tina have for her homework if she spends 6 days playing video games?

A. 1

B. 3

C. 4

D. 10

24. If Bob wants to open a Burger restaurant, which of the following would be necessary capital resources?

A. Restaurant manager, cash register, water

B. Servers, advertisements, plates

C. A location for the shop, burgers, plates

D. Silverware, cooks, coupons in a local flyer

25. Kalli’s new jewelry store has really started to increase in sales giving Kalli enough money that she can now start looking at expanding her business to further her success . Keeping in mind that Kalli is using the business structure of a sole proprietorship, which answer below would be the best one for her to consider?

A. Offering stock options to potential investors

B. Hiring additional staff

C. Expanding her products to include more sizes and designs

D. Moving the business to a larger location

26. Lucas has been seeing a steady increase in sales with his coffee shop. He is considering some different types of capital investments that should continue to increase his profit line and hopefully allow him to open another store. Which investment would be the most beneficial to Lucas’ long term business plan?

A. Hiring more employees

B. Adding additional coffee machines

C. Allowing stock options

D. Increasing his advertising

27. Shirley Marks, a new clothing store in the mall, has just been opened. With new clothing designs, cheaper prices, and constant sales this new store is a hit! It’s also a major competitor with the other stores in the mall. In evaluating the competition, which category does Shirley Marks fit into?

A. Monopoly

B. Pure Competition

C. Monopolistically Competitive

D. Oligopoly

28. If you were to start your own restaurant, which of the following would be an example of capital?

A. The workers hired to cook and serve

B. The risk taken to open a business

C. The stoves, ovens, tables, and chairs

D. The food needed to cook and serve to paying customers

29. David is looking to open his own business. He has a significant amount of start-up cash but doesn’t want to put his personal assets that he has worked so hard to acquire, at risk if the business was to fail. What would be the best way to structure his business and why?

A. a sole-proprietorship because it is the easiest and most widely used business structure

B. an LLC because it will differentiate between personal and business assets

C. a corporation because it will allow him to raise capital and only put the money he has invested into the business at risk

D. a partnership because it will split the risk between him and another person

30. Florida Power and Lights is the only electrical provider in a particular area giving it a theoretical advantage of being able to set prices as it wants without having to worry about competition. This is an example of which type of industry structure?

A. monopoly

B. oligopoly

C. monopolistic competition

D. pure competition

31. Which of the companies below would be an example of a natural monopoly?

A. Hillsborough County Utilities (provides water/sewage)

B. Wal-Mart

C. Innerlight Surf Shop (only surf shop on the beach)

D. Comcast (provides cable, internet, phone services

32. Starbucks Coffee has been in Panama City for 10 years. Caribou Coffee now opens it first shop in Panama City and offers similar products at similar prices but also includes free Wi-Fi and an internet station for patrons without laptops. How would you characterize this scenario?

A. price competition in a purely competitive market

B. price competition in a monopolistically competitive market

C. non-price competition in a purely competitive market

D. non-price competition is a monopolistically competitive market

33. Use the chart below, determine which of the following statements are true:

A. city utility workers and accountants require the most education/training

B. accountants and teachers have the least amount of training

C. accountants are in high demand

D. fast-food cashiers are in high demand

34. (Use the marginal cost analysis graph) What point on the graph represents a situation where David is just starting out in his new business and is burdened by high initial start-up costs with very little profit in return?

A. Point 1

B. Point 2

C. Point 3

D. Point 4

35. (Use the marginal cost analysis graph) What point on the graph represents a situation where David has been operating his business for a few years and has become extremely efficient and is now maximizing his profits?

A. Point 1

B. Point 2

C. Point 3

D. Point 4

36. David finds that he has 3 employees that have been stealing food from his restaurant. He fires these 3 employees and hires two new employees with very good resumes and proven work experience. This is an example of what?

A. entrepreneurship

B. labor

C. capital

D. land

37. Use the chart below to answer the question.

David and his one employee can normally produce around 50 hamburgers an hour. He decides to hire one additional worker to help increase production. Which day probably represents that start date of the new untrained employee?

A. Day 1

B. Day 3

C. Day 5

D. Day 7

For answers to the practice exam go to: http://learn.flvs.net/educator/common/00Schmidt/Module3PracticeExamV14AnswerKey.pdf