Chapter 1: The Basics

Question 1

Describe what a Business is.

Answer 1

Any activity that seeks to provide goods and services to others while operating at a profit.

Question 2

What is the difference between Goods and Services?

Answer 2

Goods are TANGIBLE products.
Services are INTANGIBLE products.

Question 3

Explain the difference between Revenue and Profit.

Answer 3

Revenue: Total amount of income during a period of time.
Profit: What is earned after factoring in expenses.

Question 4

What is Risk; How is it related to Profit?

Answer 4

The chance of loss, the degree of probability of loss, and the amount of possible loss
Taking a Risk will effect Profit, whether good or bad. Ex: Business investing in a new idea.

Question 5

What is Standard of Living?

Answer 5

The amount of goods and services people can buy with the money they have.

Question 6

What are Stakeholders?

Answer 6

All the people who stand to gain or lose by the policies and activities of a business and whose concerns the business needs to address.

Question 7

What are the five elements of a Business Environment?

Answer 7

1. Economic & Legal
2. Technological
3. Competitive
4. Social
5. Global Business

Question 8

When a business strives for Effectiveness, what does that mean?

Answer 8

It means: To produce the desired result.

Question 9

When a business strives for Efficiency, what does that mean?

Answer 9

Producing goods and services using the LEAST amount of resources.

Question 10

When a business strives for PRODUCTIVITY, what does that mean?

Answer 10

The amount of output you generate given the amount of input (e.g., hours worked).

Question 11

What is Economics?

Answer 11

The study of how society chooses to employ resources to produce goods and services and distribute them for consumption among various competing groups and individuals.

Question 12

What is the difference between Macroeconomics and Microeconomics?

Answer 12

MACRO: The part of economics study that looks at the operation of a nation’s economy as a whole.
MICRO: The part of economics study that looks at the behavior of people and organizations in particular markets.

Question 13

Name the FIVE factors of production.

Answer 13

LAND
LABOR
CAPITAL
ENTREPRENEURSHIP
KNOWLEDGE

Question 14

Which of the factors seem most important for creating Wealth?

Answer 14

Land
Entrepreneurship
Knowledge

Question 15

Define Socialism.

Answer 15

An economic system based on the premise that some, if not most, basic businesses should be owned by the government so that profits can be more evenly distributed among the people.

Question 16

Define Communism

Answer 16

Much more intensive version of Socialism. An economic and political system in which the government makes almost all economic decisions and owns almost all the major factors of production.

Question 17

What are the four basic rights of Free-Market Capitalism?

Answer 17

The right to own Private Property.
The right to own a business and keep all that businesses profits (After taxes)
The right to freedom of Competition
The right to Freedom of Choice

Question 18

Define Mixed Economies`

Answer 18

Economic systems in which some allocation of resources is made by the market and some by the government.

Question 19

Define Fiscal Policy

Answer 19

The federal government’s efforts to keep the economy stable by increasing or decreasing taxes or government spending.

Question 20

Define Monetary Policy and what organization controls it.

Answer 20

The management of the money supply and interest rates by the Federal Reserve Bank.