Business Exam #1

Which of the following scenarios would not be considered international business?
a. A Chinese manufacturer sells toys to a large toy retailer in the United States.
b. Intel sells its processors to a computer manufacturer in Korea.
c. A large jewelry store in England purchases its diamonds from DeBeers in South Africa.
d. A bearing manufacturer in South Carolina sells its parts to a Toyota plant in Kentucky.
e. French companies purchase crude oil from Saudi Arabia.

d. A bearing manufacturer in South Carolina sells its parts to a Toyota plant in Kentucky.

Tom stormed into the office, exclaiming, "That’s the last straw! I’ve experienced unethical behavior at this company one time too many. I’ll be calling the press immediately." It appears that Tom is about to engage in _____________________.
a. an unethical practice.
b. corporate ethics.
c. whistling.
d. trumpeting.
e. whistle-blowing.

e. whistle-blowing.

Joe would like to start his own lawn maintenance business but is not quite sure where to begin or what to do to start a business. He has come to you for advice. What would you recommend for him to do?
a. First, determine what you want, why you want to do it, and write it down.
b. Focus on one task at a time then bounce between these tasks to accomplish them all.
c. Structure your time and do all of the mundane unimportant things first so they don’t hang over your head all day.
d. Don’t leave your desk until the job is done. If you take breaks, you may forget what you were doing and have to start over.

a. First, determine what you want, why you want to do it, and write it down.

Which of the following is an advantage to the franchisor in a franchise agreement?
a. Opportunity to start a business with limited capital
b. Access to local advertising materials
c. Fast and selective distribution of products
d. Chance to participate in national advertising
e. Chance to minimize costs through cooperative buying

c. Fast and selective distribution of products

Refer to Samantha’s Dilemma. If Samantha worked for the large retail company in Philadelphia, what type of corporation would that be?
a. Foreign
b. Alien
c. International
d. Domestic
e. Global

a. Foreign

Over the past several decades, concern for the environment has
a. been relatively steady because people expect to live in a clean and safe environment.
b. increased significantly because pollution became a threat to life and health.
c. been carefully handled by businesses because they are the primary source of pollutants.
d. become stronger in the United States but not yet in the rest of the world.
e. decreased because today’s industrialized processes are naturally more environmentally friendly.

b. increased significantly because pollution became a threat to life and health.

An executive at a U.S. steel company uses growth in gross domestic product as one way to develop trends in industry steel use, so he records GDP change for each year on a graph. However, the executive’s figures are considerably higher than those of the staff economist, who also has drawn a graph. This difference is most likely the result of
a. measurement errors by the U.S. Bureau of the Census.
b. a decline in gross domestic product.
c. an increase in gross domestic product.
d. the economist adjusting the figures for the inflation rate.
e. a change in productivity.

d. the economist adjusting the figures for the inflation rate.

Despite trade restrictions, international business is
a. moving slowly.
b. growing.
c. slowing down.
d. struggling for survival.
e. decreasing.

b. growing.

The Saudi Arabian government does not allow the consumption of alcoholic beverages within its country. The Saudi Arabian government is imposing a(n)
a. import quota.
b. currency devaluation.
c. prohibition.
d. embargo.
e. dumping restriction.

c. prohibition.

______________ is the ability to produce a specific product more efficiently than any other product.
a. Absolute advantage
b. Specialization
c. Relative advantage
d. Dominant advantage
e. Comparative advantage

a. Absolute advantage

The concept of sustainability focuses on which of the following?
a. The needs of the present without compromising the future
b. The needs of the future without compromising the present
c. The needs of the firm to make a profit in the present
d. The needs of future employees
e. The needs of the government in the future

a. The needs of the present without compromising the future

Kerry wants to start a business to sell handmade jewelry. She is very competent at making the jewelry and teaching others to make it, and she has saved a reasonable amount of money to start the business. Who of the following would make the best partner for Kerry?
a. Bailey, an artist with a real flair for new-age jewelry design
b. Ashley, Kerry’s best friend who is fun to hang out with and good at solving problems
c. Natalie, who has business experience with accounting, management, and marketing
d. Janette, who used to work at the jewelry counter at a department store
e. Darla, an engineer with industrial management experience but no money

c. Natalie, who has business experience with accounting, management, and marketing

When medical research indicated that a high-fiber diet might help reduce one’s risk of colon cancer, a few producers of fiber cereals suggested in their advertisements that if you eat fiber cereal, you will not get cancer. This is an example of _____________________________.
a. an unethical organizational relationship.
b. a conflict of interest.
c. social responsibility.
d. unethical communications.
e. ethical persuasion.

d. unethical communications.

In 1770, Thomas Pine I was a tobacco merchant in Virginia. In 2014, Thomas Pine VI, the descendant of Thomas Pine I, was a tobacco merchant in Virginia. In terms of the global competitive environment, which of the following is not a difference between the competitions faced by Thomas Pine I and Thomas Pine VI?
a. The 1770 merchant has very few choices in regard to the nation to which he exported his tobacco.
b. The 1770 merchant most likely exported only the surplus of his product that he could not sell in America.
c. In 1770 there was no factory system to make tobacco production and processing more efficient and financially rewarding.
d. There were few tobacco merchants in America in 1770, but in 2014 tobacco was farmed in all of the 50 states.

a. The 1770 merchant has very few choices in regard to the nation to which he exported his tobacco.

When Ford discovered the fault with its Pinto model that caused the car to explode easily when hit from the rear, what action should it have taken to preserve basic consumer rights?
a. Ford should have performed a cost benefit analysis to determine whether it would save more money by doing nothing or by rectifying the problem.
b. Ford should have launched a campaign warning consumers of the defect so they would avoid getting in accidents.
c. Ford should have warned consumers of the explosions, recalled all of the defective automobiles, and corrected the problem.
d. Ford should have quietly ignored the problem and phased the Pinto out of its automobile lineup.
e. Ford should have redesigned the automobile to make it safer for consumers in the future.

c. Ford should have warned consumers of the explosions, recalled all of the defective automobiles, and corrected the problem.

When the owner of a sole proprietorship dies, what becomes of the business?
a. The employees take over the business.
b. It ceases to exist unless the heirs take it over or sell it.
c. It is automatically auctioned to the highest bidder.
d. It ceases to exist, and no one may legally take it over.
e. It may continue existing but only under a new name.

b. It ceases to exist unless the heirs take it over or sell it.

A natural resource, as recognized by economists, would include which of the following?
a. Crude oil
b. Buildings
c. Tools
d. Machinery
e. Equipment

a. Crude oil

Long-distance providers are becoming increasingly concerned about certain activities within their industry. Various companies come together voluntarily to implement new standards of social responsibility that members must abide by. What seems to be the primary motivation in this case for an increased interest in social responsibility?
a. Because corporations are creations of society, they are responsible for giving back to the communities in which they operate.
b. These companies have realized it is in their best interest to increase their social responsibility before they are once again subject to stricter regulations.
c. These companies are using social responsibility as a means to increase their profitability, both short term and long term.
d. Long-distance providers have started taking pride in their industry and its record for social responsibility.
e. They feel a responsibility to their stockholders, employees, the government, investors, and society as a whole.

e. They feel a responsibility to their stockholders, employees, the government, investors, and society as a whole.

Refer to Excellent Air Incorporated. To fix the ethical issue problems, EAI management should have implemented all of the following guidelines for making ethical decisions except which one?
a. Listen and learn.
b. Identify the ethical issue.
c. Create and analyze options.
d. Create an industry benchmark.
e. Explain your decision and resolve any differences that arise.

d. Create an industry benchmark.

Judy Barnes, Betty Turley, and Bob Turner want to obtain limited liability for their business, but they want to avoid double taxation. Which type of business ownership would you recommend?
a. Regular corporation
b. General partnership
c. Sole proprietorship
d. S-corporation
e. Not-for-profit corporation

d. S-corporation

Wade serves on Foot Locker’s board of directors. How did Wade get this position?
a. He volunteered for the assignment.
b. He was appointed by the chief executive officer.
c. He was assigned by the Federal Trade Commission.
d. Through default as the largest stockholder, Wade got the position.
e. He was elected by the company’s stockholders.

e. He was elected by the company’s stockholders.

Although all casual clothing ultimately provides the same purpose, companies such as The Gap strive to make their brand seem unique from the many other brands available on the market. The market for casual clothing can best be characterized as
a. pure competition.
b. monopolistic competition.
c. an oligopoly.
d. a monopoly.
e. a natural monopoly.

b. monopolistic competition.

In 2001, Susan Scholz was fired from her sales clerk’s job at the Walgreens store in North Mall after refusing to work on Sundays. The Christian Reformed Church, of which she was a member, prohibited working on Sunday. Therefore, she did not go to work on those days even though she was scheduled to do so. Ms. Scholz filed a lawsuit against the company because she felt her rights had been violated. Which rights were violated?
a. The rights to be heard and to work
b. The rights to safety and to be informed
c. The rights to be informed and to be heard
d. The rights to life and to work
e. The rights to equal treatment in the workplace

c. The rights to be informed and to be heard

Dell’s global outreach programs that help bring technology to underserved communities in various parts of the world is an example of
a. social responsibility.
b. business ethics.
c. code of ethics.
d. consumerism.
e. affirmative action programs.

a. social responsibility.

All of the following are disadvantages to the franchisee except
a. a loss of control.
b. continuing royalty fees.
c. hard work.
d. a fee for advertising.
e. starting a business with limited capital.

c. hard work.

Howard believes that there should be no trade restrictions for any reason. What effect would Howard say that trade restrictions have on prices?
a. He would argue that by encouraging competition with trade restrictions, prices are likely to decrease.
b. He would argue that restrictions would cause greater competition and therefore lead to higher prices.
c. He would say that trade restrictions have no impact on prices, but they do restrict consumers’ choices.
d. He would say that restrictions reduce competition and therefore cause an increase in prices.
e. He would argue that trade restrictions increase prices because they break up domestic monopolies.

d. He would say that restrictions reduce competition and therefore cause an increase in prices.

Refer to Excellent Air Incorporated. The principles that EAI choose to pride itself on show that the company has
a. a moral minority.
b. cultural diversity.
c. social responsibility.
d. caveat emptor.
e. a social audit.

c. social responsibility.

New ways to do a job with less effort and at lower cost is the basic principle characterizing the
a. increases in productivity for the past two hundred years.
b. great desire to be an entrepreneur.
c. motivation for owning a business.
d. American way of life.
e. way small businesses fill the needs of other businesses.

a. increases in productivity for the past two hundred years.

The statement "Warning: The Surgeon General Has Determined That Cigarette Smoking Is Dangerous to Your Health" supports the consumers’ rights to
a. safety and to be informed.
b. life and to be informed.
c. choose and to safety.
d. work and to be informed.
e. safety and to be heard.

a. safety and to be informed.

Which of the following best describes the trend in social responsibility models used by companies?
a. Most companies are changing from a socioeconomic approach to an economic approach to social responsibility.
b. There has really been no pattern of change over the last century because most companies take a socioeconomic approach.
c. There has been a sporadic shift back and forth between the economic and socioeconomic model as the best business solution.
d. Relatively little transformation has left the economic model as the philosophy for most businesses.
e. More companies have been bypassing the economic model in favor of the socioeconomic model in recent years.

e. More companies have been bypassing the economic model in favor of the socioeconomic model in recent years.

____ is all activities undertaken to protect the rights of consumers.
a. Consumerism
b. Bill of rights
c. Lobbying
d. Caveat emptor
e. Protectionism

a. Consumerism

The fact that insulin and power steering both originated with individual inventors and small companies is testimony to the power of small businesses as providers of
a. employment.
b. competition.
c. technical innovation.
d. capital.
e. quality products.

c. technical innovation.

Several European countries have banded together to reduce the trade barriers between them and encourage trading among themselves. This is known as
a. a GATT.
b. the European Union.
c. a cartel.
d. a multinational.
e. an orderly marketing agreement.

b. the European Union.

Exxon/Mobil and Shell are two of the relatively few sellers in the oil-refining industry. Due to the tremendous capital investment required to enter this industry, these companies are insulated significantly from the threat of new competitive entrants and thus have considerable control over price. This market situation is referred to as a(n)
a. cartel.
b. monopoly.
c. natural monopoly.
d. oligopoly.
e. trust.

c. natural monopoly.

In the last decade of the century, ____ became a major force in the economy in regard to business.
a. reduced business profits
b. high interest rates
c. high inflation
d. the Internet
e. shortage of crude oil

d. the Internet

The top governing body of a corporation is known as the
a. incorporators.
b. stockholders.
c. management.
d. officers.
e. board of directors.

e. board of directors.

Refer to Lynn Bernerd, Inc. Which of the following alternatives could have worked as a link between the managers at Lynn Bernerd, Inc. and the buyer from a different country?
a. International barter
b. Counter trade
c. Trading company
d. Comparative trader
e. Foreign-exchange control

c. Trading company

Cindy compiles a business plan for a business she hopes to start. This plan should answer all of the following questions except
a. How much will the new business cost?
b. Why is this new business a good idea?
c. What are Cindy’s goals for the business?
d. What is the nature and mission of the business?
e. How often will the business have a sale?

e. How often will the business have a sale?

Which of the following statements reflects the socioeconomic model of social responsibility?
a. "I did it my way!" —Frank Sinatra
b. "It’s easier and better to ban smoking than to risk multimillion-dollar lawsuits." —a university professor
c. "It’s an absolutely preposterous proposal. The idea that any corporation has the right to reach beyond company gates to what you could even describe as the bedroom of the employee is ridiculous." —a spokesperson for the Tobacco Institute
d. "In the private sector, employers can get away with quite a bit." —an attorney
e. "We will not allow our motion pictures to be shown in any movie house in South Africa unless it is fully integrated." —the president of United International Pictures Corporation

e. "We will not allow our motion pictures to be shown in any movie house in South Africa unless it is fully integrated." —the president of United International Pictures Corporation

Which of the following is an example of a vertical merger?
a. The purchase of TWA by American Airlines
b. The purchase of Marathon Oil Company by U.S. Steel
c. The purchase of Kentucky Fried Chicken by PepsiCo
d. The purchase of Malone’s Cost-Plus Supermarkets by the Kroger supermarket chain
e. The purchase of Gulf Oil by Standard Oil Company of California

b. The purchase of Marathon Oil Company by U.S. Steel

Lisa buys a new pillow and rips off the manufacturer’s tag. She then reads the tag and is amused at its warning that, under penalty of law, the tag should not be removed and the pillow could cause suffocation. What consumer right is the manufacturer guarding against?
a. The right to consumer education
b. The right to choose
c. The right to be informed
d. The right to be heard
e. The right to courteous service

c. The right to be informed

Refer to Home Inspirations. Hailey’s goal of offering products with unique features and special services is called
a. specialization.
b. product differentiation.
c. barter.
d. a factory system.
e. a natural monopoly.

b. product differentiation.

Maurice would like to own a train store and operate it by himself. He has enough money to open it and operate it on his own and elects to do so. What form of business is this?
a. Sole proprietorship.
b. Partnership.
c. LLC.
d. S-corporation.

a. Sole proprietorship.

Stephen decides his business will begin staying open until 7 p.m. instead of 6 p.m. The next day, the shop stays open until 7 p.m. This environment of flexibility to quickly change is characteristic of what form of business organization?
a. Corporation
b. Partnership
c. S-corporation
d. Flexible partnership
e. Sole proprietorship

e. Sole proprietorship

Unless specified in the charter, a corporation has a
a. legal life of one decade.
b. life of seventeen years, which is renewable.
c. life of fifty years.
d. perpetual life.
e. legally recognized life, which varies from state to state.

d. perpetual life.

Kayla purchases shares of ownership in General Electric. These shares are referred to as
a. ownership documents.
b. stock.
c. articles of ownership.
d. incorporation.
e. corporate certificates.

b. stock.

All of the following are franchise establishments except
a. McDonald’s.
b. Walmart.
c. Holiday Inn.
d. Avis.
e. Dairy Queen.

b. Walmart.

A friend of yours has recently received his MBA. He wants to open his own business but feels that it might be too risky at this point in his career. As an SBA counselor, you are able to advise him and explain more clearly to him some of the advantages and disadvantages of starting a small business. Which of the following statements best represents something you might tell him?
a. Although opening a small business is risky, there is practically unlimited potential.
b. The cost of opening a small business is relatively low, and financing is easily obtained.
c. Record keeping will be complicated, and public disclosure of most transactions is required.
d. Small businesses foster personal relationships and offer flexibility and independence.
e. Opening a small business is especially difficult because there is little help available for those desiring to do so.

d. Small businesses foster personal relationships and offer flexibility and independence.

Which of the following is not an advantage of a sole proprietorship?
a. It is easy to form and dissolve.
b. It has unlimited liability.
c. Profits are taxed as personal income.
d. There owner has the flexibility of being his or her own boss.
e. The owner keeps all profits.

b. It has unlimited liability.

Carmen Catucci is considering going into business. She wants to offer an income tax service. To minimize her chances of failure, she might consider
a. buying a franchise.
b. starting from scratch.
c. dealing only with wealthy people.
d. trying to enter the manufacturing industry instead.
e. borrowing money from the SBA.

e. borrowing money from the SBA.

A person who risks his or her time, effort, and money to start and operate a business is called a(n)
a. free-market specialist.
b. entrepreneur.
c. intrapreneur.
d. competitor.
e. profit taker.

b. entrepreneur.

Which of the following is not a characteristic of an oligopoly?
a. There are few sellers.
b. The seller has considerable control over price.
c. Any duplication of facilities is wasteful.
d. Sizable investments are required to enter the market.
e. The market actions of each seller can strongly affect other sellers.

c. Any duplication of facilities is wasteful.

The ___ was established in 1944 and offers low-interest loans and interest-free credit to developing countries?
a. World Bank
b. Inter-American Development Bank
c. European Bank for Reconstruction and Development
d. Small Business Administration
e. Trade Promotion Coordinating Committee

a. World Bank

Olan Okowo recently moved to the United States with many hopes and dreams. However, he realizes that economic freedom includes all of the following except the right to
a. guaranteed economic success.
b. use owned resources to produce a profit.
c. accept or reject any job offered.
d. sell a product at the price chosen.
e. buy any economic good or service producers sell.

a. guaranteed economic success.

The study of an individual’s economic decisions would be an example of
a. macroeconomics.
b. microeconomics.
c. fiscal policy.
d. monetary policy.
e. national economic policy.

b. microeconomics.

Mary’s cleaning business has several customers but is not dominant in its field. This is an example of a(n) ____ business.
a. entrepreneurship
b. unsuccessful
c. small
d. manufacturing
e. large corporate

c. small

Sarah owns a 7-Eleven franchise. What is the primary disadvantage of owning a franchise for Sarah?
a. She has to pay royalties to the franchisor.
b. She cannot use her name as the restaurant name.
c. The franchisor still retains a great deal of control.
d. Sarah is not allowed to hire her own employees.
e. Sarah may not find ways to improve operations.

c. The franchisor still retains a great deal of control.

As a limited partner in a construction business, Joe
a. has input only on major company decisions.
b. contributes only his time and not his money.
c. does not receive any portion of the profits.
d. only risks his initial investment.
e. cannot lose his investment in the partnership.

d. only risks his initial investment.

Which of the following industries would most likely have the characteristics of an oligopoly?
a. Clothing
b. Restaurants
c. Automobiles
d. Cameras
e. Make-up

c. Automobiles

When compared to partnerships and corporations, sole proprietorships account for ____ percent of total annual sales.
a. 34
b. 16
c. 9
d. 4
e. 2

d. 4

Alberto complained that it took some time to locate a distributor of an imported light bulb that he had to replace. He was further annoyed that he had to pay an artificially high price. When asked for his opinion, Alberto would probably argue
a. against trade restrictions.
b. for the trade deficit.
c. for exports.
d. for tourism.
e. against international free trade associations.

a. against trade restrictions.

Who are the two largest contributors to the Asian Development Bank?
a. China and Japan
b. Japan and India
c. The United States and Japan
d. Russia and China
e. China and Indonesia

c. The United States and Japan

Imagine that you want to open your own small business. You will probably be most concerned with having
a. a lot of inventory in the warehouse on opening day.
b. a really good lawyer and an even better accountant.
c. the best Madison Avenue ad agency money can buy.
d. a good source of capital and good management skills.
e. a top-notch marketing consultant and a lot of inventory in the warehouse.

d. a good source of capital and good management skills.

In the 1970s, the Pinto, a subcompact car manufactured by Ford, was known to catch on fire when rear-ended, even at inner-city speeds. This stripped consumers of their right to
a. choose.
b. be informed.
c. be protected.
d. be heard.
e. safety.

e. safety.

What is the main advantage of small business that helps retain effective employees who could earn more at a larger firm?
a. Better pay and employee benefits
b. Ability to adapt to change
c. Simplified record keeping
d. Limited ability to raise capital
e. Personal relationships with employees

e. Personal relationships with employees

The United Kingdom sells industrial supplies and materials to many nations around the world. The United Kingdom thus engages in
a. dumping.
b. tariffing.
c. importing.
d. exporting.
e. deficit trading.

d. exporting.

Public utilities are often referred to as
a. sole proprietorships.
b. monopolistic competitors.
c. monopolies.
d. oligopolies.
e. socialistic.

c. monopolies

If Japan were regarded as the best electronics manufacturer in the world, what would be true?
a. Japan would have a comparative advantage in electronics manufacturing.
b. Japan would have a positive balance of trade.
c. The United States would have a comparative advantage in electronics.
d. Japan would have an absolute advantage in electronics production.
e. Japan would have a trade deficit with the United States.

a. Japan would have a comparative advantage in electronics manufacturing.

Vicky drives a four-door sedan to work and other places everyday. How does her car affect the environment now compared to a similar car thirty years ago?
a. A car is a car, so the environmental impact is likely the same.
b. Her car is more economical today than it would have been thirty years ago.
c. There are so many cars today that air pollution laws are nearly worthless.
d. Today’s car has a pollution-control device that reduces harmful emissions.
e. Technology now produces cars that are completely harmless to the environment.

d. Today’s car has a pollution-control device that reduces harmful emissions.

Suppose the country of Gaditia wanted to join GATT and thus be treated the same as other GATT members. What GATT principle is Gaditia interested in receiving?
a. Free trade
b. Importation/exportation
c. The Tokyo Round
d. Foreign-exchange control
e. Most-favored-nation status

e. Most-favored-nation status

In the state in which it is incorporated, a business is known as a(n)
a. S-corporation.
b. resident corporation.
c. public corporation.
d. foreign corporation.
e. domestic corporation.

e. domestic corporation.

When a coffee chain in Portland, Oregon purchases coffee from Colombia, South America, it
a. is importing the coffee.
b. is exporting the coffee.
c. has an absolute advantage.
d. is decreasing the balance-of-trade deficit.
e. is making a big mistake.

a. is importing the coffee.

The form of business organization that experiences double taxation is the
a. partnership.
b. corporation.
c. venture company.
d. syndicated partnership.
e. sole proprietorship.

b. corporation.

You stop at a SUBWAY to get a sandwich for lunch and you notice that they now have TCBY yogurt. This is an example of a
a. co-branded establishment.
b. franchise.
c. small business.
d. dual-sponsored business.
e. dual-branded franchise.

e. dual-branded franchise.

University-based groups providing individual counseling and practical training to owners of small businesses are known as
a. the Small Business Administration.
b. small-business development centers.
c. small-business institutes.
d. special task forces.
e. none of the above.

b. small-business development centers.

Not-for-profit organizations must meet specific guidelines in order to obtain tax-exempt status. These guidelines are structured by the
a. board of directors.
b. U.S. Uniform Partnership Act.
c. U.S. Bureau of the Census.
d. Chamber of Commerce.
e. Internal Revenue Service.

e. Internal Revenue Service.

Maurice and Stanley’s train store has grown to the point that they need more capital to expand the current location and to open stores in other cities. They do not want the liability of taking out a loan and are no longer concerned about government oversight but would still like to maintain limited liability. They would most likely form a
a. corporation.
b. sole proprietorship.
c. syndicate.
d. co-op.

a. corporation.

All of the following are ways to export a product to a foreign market except
a. using an export-import merchant.
b. using an export-import agent.
c. establishing a foreign sales office.
d. establishing a foreign sales branch.
e. all of the above are ways to export a product to a foreign market.

e. all of the above are ways to export a product to a foreign market.

Refer to Lynn Bernerd, Inc. Initially, the managers believed that ____ would be the best option for entering the foreign market.
a. exporting
b. creating a joint venture
c. licensing
d. establishing a strategic alliance
e. a merger

b. creating a joint venture

Which of the following is a requirement for an S-corporation?
a. The S-corporation must be incorporated in Delaware.
b. The S-corporation can have no more than 100 stockholders.
c. Only common and preferred stock can be sold to investors.
d. At least 30 percent of the investors must be nonresident aliens.
e. Only individuals can be stockholders.

b. The S-corporation can have no more than 100 stockholders.

Prudential and several other large insurance companies have joined together to underwrite an extremely large insurance policy. This sort of association is referred to as a(n)
a. syndicate.
b. cooperative.
c. conglomerate.
d. alliance.
e. vertical merger.

a. syndicate.

Large firms generally buy parts and assemblies from smaller firms because
a. doing so creates goodwill.
b. they are required to do so by government regulations.
c. they can control small businesses this way.
d. it is less expensive than making their own.
e. large firms want to keep small firms in business.

d. it is less expensive than making their own.

All of the following are arguments against increased social responsibility except
a. social issues are the responsibility of government officials elected for that purpose.
b. companies should maximize profits, not solve society’s problems, with their time, money, and talent.
c. because social problems affect society in general, businesses should not be expected to solve these problems.
d. social responsibility by firms can prevent increased government intervention.
e. business managers are primarily responsible to stockholders and providing them a good return.

c. because social problems affect society in general, businesses should not be expected to solve these problems.

Refer to XYZ Coffee. If Nancy were Caucasian and the company employees were mostly Hispanic, the way she was treated would be referred to as
a. affirmative action.
b. legal discrimination.
c. simply unethical.
d. reverse discrimination.
e. a perfect match.

b. legal discrimination.

The form of business organization most heavily regulated by the government is the
a. partnership.
b. corporation.
c. joint venture.
d. syndicate.
e. sole proprietorship.

b. corporation.

Liz would like to study abroad for a year before graduating from college. She would like to live someplace that is close to her native country of Ireland in terms of development because she will need to use the Internet for many of her classes. She can choose from programs in three countries. What could she use to measure the economic performance of the three countries?
a. Gross Domestic Product.
b. Productivity and Gross Domestic Productivity.
c. Marketing measures.
d. Accounting processes.

a. Gross Domestic Product.

When a firm’s expenses are greater than its sales revenue, the firm has a
a. profit.
b. loss.
c. negative cash flow.
d. recession.
e. depression.

b. loss.

Dinesh lives in Phoenix where he hears almost daily reports about the high levels of ozone along with suggestions on when individuals should purchase gasoline. As he views the hazy condition in the sky, he decides the government is basically ignoring environmental problems. Which statement best describes the government’s involvement?
a. The government relies mostly on businesses to control various types of pollution and expects them to cover the costs.
b. Although the government has established several environmental agencies, actual spending on reducing pollution is only about $100 million per year.
c. The government is delegating most of the responsibility for a cleaner environment to individuals and nonprofit organizations.
d. The government is encouraging technology that will eliminate pollution but not supporting this research financially.
e. The government is spending several billions of dollars a year to reduce various types of pollution.

c. The government is delegating most of the responsibility for a cleaner environment to individuals and nonprofit organizations.

The manager of a successful local restaurant believes his responsibilities are to provide delicious meals and excellent service, provide jobs, comply with laws and the IRS, and earn a respectable profit on the restaurant. These are the manager’s only concerns. What concept does this indicate?
a. Socialism
b. The economic model of social responsibility
c. The socioeconomic model of social responsibility
d. Consumer protectionism
e. A lack of social responsibility

b. The economic model of social responsibility

If Germany exports $100,000 of sauerkraut to Jamaica and purchases $100,000 of Blue Mountain coffee beans from Jamaica, Germany has
a. an overall favorable balance of trade.
b. an overall unfavorable balance of trade.
c. a favorable balance of trade with Jamaica.
d. neither a favorable nor an unfavorable balance of trade with Jamaica.
e. an unfavorable balance of trade with Jamaica.

c. a favorable balance of trade with Jamaica.

Genetech, a biotechnology firm engaging in the new field of genetic engineering, has asked your advice about remaining independent and temporarily gaining access to the marketing and manufacturing expertise it lacks from another firm. You would suggest
a. forming a limited-liability company.
b. forming a joint venture
c. forming an S-corporation.
d. merging with a company with the necessary expertise.
e. starting a cooperative.

a. forming a limited-liability company.

Eric decides to purchase and operate a Subway restaurant. Eric is the
a. franchise.
b. franchisee.
c. licensor.
d. franchisor.
e. trainer.

b. franchisee

A hostile takeover is a situation in which
a. the management and board of directors of the targeted firm disapprove of the proposed merger.
b. stockholders are paid a golden parachute.
c. the targeted firm is dismantled to avoid the merger.
d. the government makes the decision that the corporate raider can purchase the targeted firm.
e. the corporate raider receives a sum of money to leave the targeted firm alone.

a. the management and board of directors of the targeted firm disapprove of the proposed merger.

As a farmer, Gary Forsythe is familiar with the economics of perfect competition. How is the price at which he sells his corn determined?
a. It is determined by Gary because he has the product that many people want.
b. The price is determined by combining the actions of all buyers and all sellers together.
c. The price he will receive is primarily determined by the buyer at the local grain bin.
d. The government sets the price of the corn to level the playing field for everyone.
e. The price will be approximately 25 percent higher than what other farmers are selling the same corn for because Gary is an astute businessperson.

b. The price is determined by combining the actions of all buyers and all sellers together.

Refer to Home Inspirations. Home Inspirations currently operates in a ____ environment.
a. purely competitive
b. demand
c. monopolistically competitive
d. command
e. supply

a. purely competitive

Boeing is incorporated in Seattle, Washington. It has a large facility in Huntsville, Alabama, and is considered a(n) ____ because it conducts business within Alabama.
a. outsider
b. domestic corporation
c. foreign corporation
d. tax write-off
e. alien corporation

c. foreign corporation

Which statement best characterizes the relationship between franchisor and franchisee in recent years?
a. Disagreements between the two parties have increased, and contract disputes are the cause of many lawsuits.
b. The relationship between franchisor and franchisee has become so hostile that it is threatening the continued existence of franchised businesses.
c. Occasional disputes arise between franchisor and franchisee, but legal action is rarely taken.
d. The relationship between these two parties is good because both parties benefit when the franchisee is successful.
e. Once the franchise agreement is finalized, these two parties have very little to do with one another.

d. The relationship between these two parties is good because both parties benefit when the franchisee is successful.

Nathan’s business constructs storage sheds for new housing developments as requested by the builders. Nathan’s business would best be classified as a
a. service business.
b. retailer.
c. distribution business.
d. production business.
e. wholesaler.

d. production business.

MasterCard sends a customer a memo that discloses the true cost of borrowing with each billing statement. It does this because it realizes that the customer has the right to
a. choose.
b. obtain credit.
c. be heard.
d. be informed.
e. safety.

d. be informed.

The ultimate objective of every firm, such as IBM, Hewlett-Packard, JC Penney, and Cengage Learning, must be to
a. sell either to other firms or to consumers.
b. satisfy the needs of its customers.
c. pay out money to cover the various expenses of doing business.
d. know that people generally buy a product and store it.
e. make it impossible to satisfy customers.

b. satisfy the needs of its customers.