Business chapter 3-4

Question 1

Absolute advantage

Answer 1

a country can produce more of a given product that another country given the same resources.

Question 2

comparative advantage

Answer 2

being able to produce something with a lower opportunity cost that other countries.

Question 3

exporting/importing

Answer 3

The process of receiving and removing goods from other counties.

Question 4

Embargo

Answer 4

complete halt to trading with a particular nation or in a particular product.

Question 5

tariff

Answer 5

taxes on imported goods

Question 6

currency devaluation

Answer 6

the reduction of a value of an nations currency relative to the currencies of another counties

Question 7

countertrade

Answer 7

an international barter transaction

Question 8

strategic alliance

Answer 8

partnerships formed to create competitive advantage on a worldwide basis

Question 9

joint venture

Answer 9

a partnership formed to achieve a specific goal or to operate for a specific period of time.

Question 10

bill of lading

Answer 10

issued by a transport carrier to an exporter to prove merchandise has been shipped

Question 11

letter of credit

Answer 11

issued by a bank on request of an importer stating that the bank will pay an amount of money to a stated beneficiary

Question 12

draft

Answer 12

issued by the exporter’s bank ordering the importer’s bank to pay for the merchandise thus guaranteeing payment once accepted by the importers bank

Question 13

licensing

Answer 13

a contractual agreement in which one firm permits another to produce and market its product and use its brand name in return for a royalty or other compensation

Question 14

trading company

Answer 14

firms that provide a link between buyers and sellers in different countries.

Question 15

dividend

Answer 15

a distribution of earnings to the stockholders of a corporation

Question 16

board of directors

Answer 16

people elected by stockholders to oversee management

Question 17

preferred stock

Answer 17

stock owned by individuals or firm who usually do not have voting rights but whose claims on dividend are paid before those of common stock owners.

Question 18

common stock

Answer 18

stock owned bu individuals or firms who may vote on corporate matters but whose claims on profit and assets are subordinate to the claims of others

Question 19

Partnership

Answer 19

A business that was created by 2 or more individuals

Question 20

Corporation

Answer 20

an artificial person created by law with most of the legal rights of a real person, including the right to start and operate a business, to buy or sell property, to borrow money, to be sued or to sue, and to enter into biding contracts.

Question 21

sole proprietorship

Answer 21

the business that was created an downed by one person

Question 22

double taxation

Answer 22

when the income tax is paid twice on the same source. (dividends)

Question 23

vertical merger

Answer 23

merger between firms that operate at different but related levels of production and marketing a product.

Question 24

horizontal merger

Answer 24

merger between firms that make and produce similar products.

Question 25

Conglomerate merger

Answer 25

merger between firms that have nothing in common.

Question 26

non-profit corporation

Answer 26

organizations meant to provide social, educational, religious, or other services rather than to earn a profit.

Question 27

stockholder

Answer 27

a person who owns a corporations stock

Question 28

limited liability company

Answer 28

a form of business ownership that combining the benefits of a corporation and partnership but avoids some of the restrictions and disadvantages.

Question 29

understand the balance of trade

Answer 29

the total value of a nations exports minus the total value of its imports over some period of time (imports > exports then the balance of trade = negative.)
Favoradable is more imports than export
unfavorable is more exports than imports.
balance of payment have a surplus(Positive) or a negative(deflict)

Question 30

Arguments for and against trade restrictions

Answer 30

FOR
to equalize a nations balance of payments
to produce new or weak industries
to protect national security
to protect the health of citizens
to retaliate for another nations trade restrictions
to protect domestic jobs

AGAINST
higher prices for consumers
restriction of consumer choice
misallocation of international resources
loss of jobs

Question 31

understand how and why tariffs are utilized. what are the potential results of tariffs

Answer 31

Tariffs are used to generate income for the government and to protect a domestic industry form competition by keeping the price of imports at or above the price of domestic products. Tariffs could cause for foreign products to be more expensive than domestic products.

Question 32

Discuss GATT? what was the objective?

Answer 32

General Agreements of trade
international organization made of 160 nations dedicated to reduce or eliminate tariffs and other trade barriers.
Most favored nation status (MEN) each member of GATT was to be treated equally by all other members
eight rounds of negotiations between 1947 and 1994.
the purpose was to create more competition.

Question 33

discuss limited vs unlimited liability

Answer 33

limited liability refers to a corporation since they are registered as an individual so that if anything happens within the company, the company is responsible for the expense.

unlimited liability refers to sole proprietorships and partnerships and state that if anything happens within their company, the owner is responsible for paying for all damages and expenses and come out of their own person bank account and even their own property.

Question 34

advantages and disadvantaged to a corporation, sole proprietorship, and partnership

Answer 34

Advantages of a corporation
limited liability
ease of raising capital
ease of transfer of ownership
Perpetual life
specialized management

Disadvantages of a corporation
difficult and expensive to form
government regulation and increased work paperwork
conflict within the corporation
Double taxation
lack of secrecy

advantages to a sole proprietorship
easy to start up and closure
pride of ownership
retention of all the profits
no special taxes
Flexibility of being your own boss

Disadvantages of a sole proprietorship
Unlimited liability
lack of continuity
lack of money
limited management skills
Difficulty hiring employees

advantages to a partnership
Easy to start up
Availability of capital and credit
personal interest
combined business skills and knowledge
Retention of profits
no special taxes

Disadvantages of a partnership
unlimited liability
management disagreements
lack of continuity
frozen investment

Question 35

the difference between non profit and profit corporations

Answer 35

non profit is created for more of a a social factor while a profit corporation is made to earn a profit from their goods or services.

Question 36

Determine absolute and competitive advantage from a scenario.

Answer 36

see chapter 3 notes.