1. A. An economic system is a nations system for allocating its resources among its citizens. Economic systems differ in terms of who owns or controls the four basic factors of production: labor, capital, entrepreneurs, and natural resources.
In planned economies, the government all or most factors. In market economies, which are based on the principles of capitalism, individuals control the factors of production. Most countries today have mixed market economies that are dominated by one of these systems but include elements of the other. The process of privatization is an important means by which many of the world’s planned economies are moving toward mixed market systems. 2. A.
The most common forms of business ownership are the sole proprietorship, the partnership, the cooperative, and the regular corporation. Each form has several advantages and disadvantages. The form under which a business chooses to organize is crucial because it affects both long-term strategy and day-to-day decision making. In addition to advantages and disadvantages, entrepreneurs must consider their preferences and long-range requirements 3.
B. The difference forms of competition advantage are critical to international business. With an absolute advantage, a country engages in international trade because it can produce a product more efficiently than any other nation. But more often, countries trade because they enjoy comparative advantages: They can produce some items more efficiently than they produce other items.
The import-export balance including the balance of trade and the balance of payments, and exchange rate differences in national currencies affect the international economic environment and are important element of international business. 4. A. Social responsibility refers to an organization’s response to social needs.
Until the second half of the nineteenth century, because business often paid little attention to these needs. Since then however both public pressure and government regulation especially as a result of the great depression of the 1930 s and the social activism of the 1960 s and the 1970 s have forced business to consider the public welfare at least to some degree. A trend toward increased social consciousness, including a heightened sense of environment activism has recently emerged. 5. A Management is the process of planning, organizing, directing, and controlling an organization’s financial, physical, human and information resources to achieve the organization’s goal.
Planning means determining what the company needs to do and how best to get to get it done. Organizing means determining how best to arrange a business’s resources and the necessary jobs into an overall structure. Directing means guiding and motivating employees to meet the firm’s objectives. Controlling means monitoring the firm’s performance to ensure that it is meeting it goals. 6. B.
In a functional organization, authority is usually distributed among such basic functions as marketing and finance. In a divisional organization, the various divisions of a large company, which may be related or unrelated, operate in a relatively autonomous fashion. In matrix organization, in which individuals report to more than one manager, a company creates teams to address specific problems or to conduct specific projects. A Company that has divisions in many countries may require an additional level of international organization to coordinate those operations. 7. A.
A small business is independently owned and managed and does not dominate its market. Small business are crucial to the economy because they create new jobs, foster entrepreneurship and innovation, and supply goods and services needed by larger businesses. 8. A.
Good human relations-the interactions between employers and employees and their attitudes toward one another-are important to business because they lead to high levels of job satisfaction (the degree of enjoyment that workers derive from their jobs) and morale (workers’ overall attitude toward their workplace). Satisfied employees generally exhibit lower levels of absenteeism and turnover. They also have fewer grievances and engage in fewer negative behaviors. 9.
B. In hiring compensating and managing workers, managers must obey a variety of federal laws. Equal employment opportunity and equal pay laws forbid discrimination other than action based on legitimate job requirements. The concept of comparable worth holds that different jobs requiring equal levels of training and skill should pay the same. Firms are also required to provide employees with safe working environments, as set down by guidelines of the Occupational Safety and Health Administration. 10.
A. Marketing segmentation is the process of dividing markets into categories of customers. Businesses have learned that marketing is more successful when it is aimed at specific target markets-groups of consumers with similar wants and needs. Markets may be segmented by geographic, demographic, psycho graphic, or product use variables. 11. B.
Each product is given an identity by its brand and the way it is packaged and labeled. The goal in developing brands-symbols to distinguish products and signal their uniform quality- is to increase the preference that consumers have for a product with a particular brand name. National brands are products that are produced and widely distributed by the same manufacturer. Licensed brands are items for whose names sellers have bought the rights from organizations or individuals. Private brands (or private labels) are developed by wholesalers or retailers and commissioned from manufacturers.
Packaging provides an attractive container and advertises a product’s features and benefits. It also reduces the risk of damage, spoilage, or theft. 12. A.
Trucks, railroads, planes, water carriers (boats and barges), and pipelines are the major transportation modes used in the distribution process. They differ in cost, availability, reliability, speed, and number of points served. Air is the fastest but most expensive mode: water carriers are the slowest but least expensive. Since transport companies were deregulated in 1980, they have become more cost efficient and competitive by developing such innovations as inter modal transportation and containerization. 13. A.
Operations managers in manufacturing classify operations processes according to the type of technology used (chemical, fabrication, assembly, transport, or clerical) to transform raw materials into finished goods. Services operations are classified according to the extent of customer contact. In high-contact systems, the customer is part of the system. In low-contact systems, customers are not in contact with he service provider while the service is provided. 14. B.
Drawing upon data form financial statements, ratios can help creditor, investors, and managers assess a firm’s finances. The current ratio measures short-term solvency-a firm’s ability to pay its debt in the short run. The debt-to-owners equity ratio measures long-term solvency. Return on equity and earnings per share both measure profitability. Inventory turnover ratios show how efficiently a firm is using it’s inventory funds.