First Test Flashcards
business
organization that provides goods or services to earn a profit
profits
difference between a business’s revenues and its expenses
external environment
everything outside of an organization’s boundaries that might affect it
economic system
a nation’s system for allocating its resources among citizens, both individuals and organizations
factors of production
the resources that a country’s businesses use to produce goods and services
planned economy
economy that relies on a centralized government to control all or most factors of production and allocation decisions
market economy
individual producers and consumers control production and allocation by creating combinations of supply and demand
mixed market economy
features characteristics of both planned and market economies
privatization
process of converting government enterprises into privately owned companies
demand
the willingness and ability of buyers to purchase a product
private enterprise system
one that allows individuals to pursue their own interests with minimal government restriction; private property rights, freedom of choice, profits, and competition
private property rights
ownership of the resources used to create wealth is in the hands of the individuals
freedom of choice
you can sell your labor to any employer you choose
profits
the lure of profits leads some people to abandon the security of working for someone else and assume the risks of entrepreneurship
competition
occurs when two or more businesses vie for the same resources or customers
What are the two conditions required perfect competition?
- All firms must be small
- The number of firms must be large
Many firms create equality in price and consistent customer streams
monopolistic competition
market or industry characterized by numerous buyers and sellers trying to differentiate their products from their competitiors
oligopoly
market or industry characterized by a handful of large sellers with the power to influence the prices of its products
monopoly
market or industry in which there is only one producer that can therefore set the prices of its products
natural monopoly
industry in which one company can most efficiently supply all needed goods or services
economic indicators
statistics that show whether an economic system is strengthening, weakening, or remaining stable; assesses performance of an economy
business cycle
the pattern of short-term ups and downs (or expansions and contractions) in an economy
aggregate output
the total quantity of goods and services produced by an economic system during a given period
standard of living
the total quantity and quality of goods and services that people can purchase with the currency used in their economic system
gross national product (GNP)
refers to the total value of all goods and services produced by a national economy within a given period regardless of where the factors of production are located
purchasing power parity
the principle that exchange rates are set so that the prices of similar products in different countries are about the same
productivity
measure of the economic growth that compares how much a system produces with the resources needed to produce it
balance of trade
the economic value of all products that a country exports minus the economic value of imported products
national debt
the amount of money the government owes to its creditors
stability
condition in which the amount of money available in an economic system and the quantity of goods and services produced in it are growing at the same rate
inflation
occurs when widespread price increases occur throughout an economic system
unemployment
the level of joblessness among people actively seeking work in an economic system
recession
a period during which aggregate output, as measured by GDP, declines
depression
a prolonged and deep recession
fiscal policies
policies used by a government regarding how it collects and spends revenue
monetary policies
policies used by a government to control the size of its money supply
stabilization policy
government economic policy intended to smooth out fluctuations in output and unemployment and to stabilize prices
ethics
beliefs about what is right and wrong or good and bad in actions that affect others
business ethics
refers to ethical or unethical behaviors by employees in the context of their jobs
ethical behavior
behavior that conforms to individual beliefs and social norms about what’s right and good
unethical behavior
behavior that conforms to individual beliefs and social norms about what is defined as wrong and bad
managerial ethics
standards of behavior that guide individual managers in their work (towards employees, the organization, and other economic agents
How do you assess ethical behavior?
- Gather the relevant factual
information - Analyze the facts to determine the most appropriate moral values
- Make an ethical judgement based on how right or wrong the proposed activity or policy is
What are the four ethical norms?
Utility, rights, justice, and caring
social responsibility
refers to the overall way in which a business attempts to balance its commitments to relevant groups and individuals in its social environment
organizational stakeholders
those groups, individuals, and organizations that are directly affected by the practices of an organization and who therefore have a stake in its performance
What are the five groups that companies strive to concentrate on?
Customers, employees, investors, supplies, and local communities where they do business
the concept of accountablility
the expectation of an expanded role for business in protecting and enhancing the general welfare of society
insider trading
using confidential information to gain from the purchase or sale of stocks
obstructionist stance
involves doing as little as possible and may involve attempts to deny or cover up violations
defensive stance
company meets only minimum legal requirements in its commitments to groups and individuals its social environment
accomodative stance
a company, if specifically asked to do so, exceeds legal minimums in its commitments to groups
proactive stance
a company actively seeks opportunities to contribute to the well-being of groups and individuals in its social environment
regulation
the establishment of laws and rules that dictate what organizations can and cannot do (direct and indirect)
political action committees (PACs)
special organizations created to solicit money and then distribute it to political candidates
lobbying
the use of persons or groups to formally represent an organization or group of organizations before political bodies
legal compliance
the extent to which the organization conforms to local, state, federal, and international laws
ethical compliance
the extent to which the members of the organization follow basic ethical and legal standards of behavior
philanthropic giving
the awarding of funds or gifts to charities or other worthy causes
corporate social audit
systematic analysis of a firm’s success in using finds earmarked for meeting its social responsibility goals
small business
one that is independent (not part of a larger business) and that has relatively little influence in its market
small business administration (SBA)
government agency charged with assisting small businesses
What are the three most important things about small businesses?
Job creation, innovation, and contributions to big business
entrepreneur
businessperson who accepts both the risks and the opportunities involved in creating and operating a new business venture
entrepreneurship
the process of seeking business opportunities under conditions of risk
established market
one in which many firms compete according to relatively well-defined criteria
niche
a segment of a market that is not currently being exploited
first-mover advantage
any advantage that comes to a firm because it exploits an opportunity before any firm does
business plan
document in which the entrepreneur describes her or his business strategy for the new venture and demonstrates how it will be implemented
franchise
arrangement in which a buyer (franchisee) purchases the right to sell the good or service of the seller (franchiser)
venture capital company
group of small investors who invest money in companies with rapid growth potential
small-business investment company (SBIC)
government-regulated investment company that borrows money from the SBA to invest in or lend to a small business
e-commerce
the Internet provides fundamentally new ways of doing business
sole proprietorship
business owned and usually operated by one person who is responsible for all of its debts
general proprietorship
business with two or more owners who share in both the operation of the firm and the financial responsibility for its debts
limited partnership
allows for limited partners who invest money but are liable to debts only to the extent of their investments
master limited partnership
master partner has majority ownership and runs the businesses; minority partners have no management voice
corporation
business that is legally considered an entity separate from its owners and is liable for its own debts; owners’ liability extends to the limits of their investments
closely held/private corporation
a corporation whose stock is held by only a few people and is not available for sale to the general public
publicly held/public corporation
a corporation whose stock is widely held and available for sale to the general public
S corporation
a hybrid of a closely held corporation and a partnership, organized and operated like a corporation but treated as a partnership for tax purposes
limited liability corporation (LLC)
hybrid of a publicly held corporation and a partnership in which owners are taxed as partners but enjoy the benefits of limited liability
multinational/transnational corporation
form of corporation spanning national boundaries
corporate governance
roles of shareholders, directors, and other managers in corporate decision making and accountability
stock/shareholder
owner of share of stock in a corporation
board of directors
governing body of a corporation that reports to its shareholders and delegates power to run its day-to-day operations while remaining responsible for sustaining its assets
officers
top management team of a corporation
What are the four special issues in corporate ownership?
Joint ventures and strategic alliances, employee stock ownership plans, institutional ownership plans, mergers and acquisitions
globalization
process by which the world economy is becoming a single interdependent system
import
product made or grown abroad but sold domestically
export
product made or grown domestically but shipped or sold abroad
What are the four distinctions based on wealth?
- High-income countries
- Upper-middle-income countries
- Lower-middle-income countries
- Low-income countries
North American Free Trade Association (NAFTA)
agreement to gradually eliminate tariffs and other trade barriers among the United States, Canada, and Mexico
European Union (EU)
agreement among major European nations to eliminate or make uniform most trade barriers affecting group members
Association of Southeast Asian Nations (ASEAN)
organization for economic, political, social, and cultural cooperation among Southeast Asian nations
General Agreement on Tariffs and Trade (GATT)
international trade agreement to encourage the multilateral reduction or elimination of trade barriers
World Trade Organization (WTO)
organization through which member nations negotiate trade agreements and resolve disputes about trade policies and practices
trade deficit
situation in which a country’s imports exceed its exports, creating a negative balance of trade
trade surplus
situation in which a country’s exports exceed its imports, creating a positive balance of trade
balance of payments
flow of all money into or out of a country
exchange rate
rate at which the currency of one nation can be exchanged for the currency of another nation
euro
a common currency shared among most of the European Union (excluding Denmark, Sweden, and the UK)
absolute advantage
the ability to produce something more efficiently than any other country can
comparative advantage
the ability to produce some products more efficiently than others
exporter
firm that distributes and sells products to one or more foreign countries
importer
firm that buys products in foreign markets and then imports them for resale in its home country
international firm
firm that conducts a significant portion of its business in foreign countries
multinational firm
firm that designs, produces, and markets products in many nations
independent agent
foreign individual or organization that agrees to represent an exporter’s interests
quota
restriction on the number of products that can be imported into a country
embargo
government order banning exportation and/or importation of a particular product or all products from a particular country
tariff
tax levied on imported products
subsidy
government payment to help a domestic business compete with foreign firms
protectionism
the practice of protecting domestic business at the expense of free market competition; may drive up prices by reducing competition
local content law
law requiring that products sold in a particular country be at least partly made there
business practice law
law or regulation governing business practices in a given countries
cartel
association of producers whose purpose is to control supply and prices
dumping
practice of selling a product abroad for less than the cost of production
