Full Study Guide Flashcards
Every chapter in one deck
Free enterprise*
The system of business in which individuals are free to decide what to produce, how to produce it, and at what price to sell it
Cultural (or workplace) diversity*
A system that recognizes and respects the differences among people because of their age, race, ethnicity, gender, sexual orientation, and ability
Business*
The organized effort of individuals to produce and sell, for a profit, the goods and services that satisfy society’s needs
The Organized Effort of Individuals
Material resources, human resources, financial resources, and informational resources
Today, businesses are organized into three specific types:
Service businesses: Produce services, such as haircuts, legal advice, or tax preparation (Example: H&R Block)
Manufacturing businesses: Process various materials into tangible goods (Example: Intel)
Marketing intermediaries: Buy products from manufacturers and then resell them (Example: Sony Corporation)
e-business*
The organized effort of individuals to produce and sell for a profit, the goods and services that satisfy society’s needs through the facilities available on the internet
Profit*
What remains after all business expenses have been deducted from sales revenue
A negative profit, which results when a firm’s expenses are greater than its sales revenue, is called a loss
Stakeholders*
All the different people or groups of people who are affected by an organization’s policies, decisions, and activities
Economics*
The study of how wealth is created and distributed
Microeconomics*
The study of the decisions made by individuals and businesses
Macroeconomics*
The study of the national economy and the global economy
Economy*
The way in which people deal with the creation and distribution of wealth
Factors of production*
Inputs and resources used to produce goods and services
Land and natural resources
Labor
Capitol
Entrepreneurship
Entrepreneur*
A person who risks time, effort, and money to start and operate a business
Today two different economic systems exist:
Command economies and Capitalism
Command economy*
An economic system in which the government decides what goods and services will be produced, how they will be produced, for whom available goods and services will be produced, and who owns and controls the major factors of production
Today, two types of economic systems serve as examples of command economies:
Socialism and Communism
Capitalism*
An economic system in which individuals own and operate the majority of businesses that provide goods and services
Invisible hand*
A term created by Adam Smith to describe how an individual’s own personal gain benefits others and a nation’s economy
Laissez-faire
Implies that there should be no government interference in the economy
Market economy*
An economic system in which businesses and individuals decide what to produce and buy, and the market determines prices and quantities sold (also known as a free-market economy)
Mixed economy*
An economy that exhibits elements of both capitalism and socialism - The US is a mixed economy
In a mixed economy, the four basic economic questions (what, how, for whom, and who) are answered through the interaction of:
Households, businesses, and governments
Productivity*
The average level of output per worker per hour
Gross domestic product (GDP)*
The total dollar value of all goods and services produced by all people within the boundaries of a country during a specified time period—usually a one-year period
Inflation*
A general rise in the level of prices
Deflation*
A general decrease in the level of prices
Unemployment rate*
The percentage of a nation’s labor force unemployed at any time
Consumer price index (CPI)*
A monthly index that measures the changes in prices of a fixed basket of goods purchased by a typical consumer in an urban area
Producer price index (PPI)*
A monthly index that measures prices that producers receive for their finished goods
Business cycle*
The recurrence of periods of growth and recession in a nation’s economic activity
Peak > Recession > Trough > Recovery
Recession*
Two or more consecutive three-month periods of decline in a country’s GDP
Depression*
A severe recession that lasts longer than a typical recession and has a larger decline in business activity when compared to a recession
Monetary policies*
Federal Reserve’s actions to promote maximum employment, stabilize prices, and increase or decrease interest rates
Fiscal policy*
Government influence on the amount of savings and expenditures; accomplished by altering the tax structure and by changing the levels of government spending
Federal deficit*
A shortfall created when the federal government spends more in a fiscal year than it receives
National debt*
The total of all federal deficits
Competition*
Rivalry among businesses for sales to potential customers
Four different types of Competition
Perfect - Number of Business Firms or Suppliers = Many
Monopolistic - Number of Business Firms or Suppliers = Many
Oligopoly - Number of Business Firms or Suppliers = Few
Monopoly - Number of Business Firms or Suppliers = One
Perfect (or pure) competition*
The market situation in which there are many buyers and sellers of a product, and no single buyer or seller is powerful enough to affect the price of that product
The market is for a single product
There are no restrictions on firms entering the industry
All sellers offer essentially the same product for sale
All buyers and sellers know everything there is to know about the market
The overall market is not affected by the actions of any one buyer or seller
Supply*
The quantity of a product that producers are willing to sell at each of various prices
Demand*
The quantity of a product that buyers are willing to purchase at each of various prices
Market price*
The price (of any product) at which the quantity demanded is exactly equal to the quantity supplied
Monopolistic competition*
A market situation in which there are many buyers along with a relatively large number of sellers who differentiate their products from the products of competitors (Examples: Clothing, shoes, soaps, furniture)
Product differentiation*
The process of developing and promoting differences between a company’s products and all competitive products
Oligopoly*
A market (or industry) in which there are few sellers
(Examples: Automobile, airline, and car rental industries)
Monopoly*
A market (or industry) with only one seller, and customers can only buy the product or service from that seller
Except for natural monopolies and legal monopolies, federal antitrust laws discourage or prohibit both monopolies and attempts to form monopolies in order to ensure that competitive markets exist and customers have a choice for products they need or want to purchase
Natural Monopolies
Public utilities are a prime example, where each utility firm operates in a natural monopoly, an industry that requires a huge investment in capital and within which any duplication of facilities would be wasteful
Legal Monopolies
A limited (or legal) monopoly is created when a government entity issues a franchise, license, copyright, patent, or trademark
Standard of living*
A loose, subjective measure of how well off an individual or a society is, mainly in terms of want satisfaction through goods and services
Domestic system*
A method of manufacturing in which an entrepreneur distributes raw materials to various homes, where families process them into finished goods to be offered for sale by the entrepreneur
Factory system*
A system of manufacturing in which all the materials, machinery, and workers required to manufacture a product are assembled in one place
Specialization*
The separation of a manufacturing process into distinct tasks and the assignment of different tasks to different individuals
Service Economy
An economic system where the primary focus is on providing services to individuals and businesses, rather than producing tangible goods
Four Competitive Business Environments
The Competitive Environment, The Global Environment, The Technological Environment, and The Economic Environment
Social media*
The online interaction that allows people and businesses to communicate and share ideas, personal information, and information about products or services
Sustainability*
The ability to create and maintain conditions under which present and future generations can exist in productive harmony, and permit fulfilling the social, economic, and other requirements of future and present generations
Ethics*
The study of right and wrong and of the morality of the choices individuals make
Business ethics*
The application of moral standards to business situations
Plagiarism*
Knowingly taking someone else’s words, ideas, or other original material without acknowledging the source
Conflict of interest*
When businesspeople take advantage of a situation for their own personal interest rather than for the employer’s interest
Bribes
Gifts, favors, or payments offered with the intent of influencing an outcome—are illegal in the U.S. and abroad
Levels of Ethical Behavior
Individual Factors, Social Factors, and Opportunity as a Factor
Individual Factors
How much an individual knows (personal knowledge), moral values and central, value-related attitudes, and personal goals and the manner in which these goals are pursued
Social Factors
Cultural norms, actions and decisions of co-workers, values and attitudes of “significant others” (spouses, friends, and relatives), the use of the internet
Opportunity as a Factor
The amount of freedom an organization affords an employee to behave unethically if they make that choice, degree of enforcement of company policies, procedures, and ethical codes
Sarbanes-Oxley Act of 2002*
Provides sweeping legal protection for employees who report corporate misconduct
Trade Associations’ Role in Encouraging Ethics
Trade associations can and often do provide ethical guidelines for their members
Code of ethics*
A guide to acceptable and ethical behavior as defined by the organization
Whistle-blowing*
Informing the press or government officials about unethical practices within one’s organization
5 Guidelines for Making Ethical Decisions
- Listen and Learn
- Identify the ethical issue
- Create and analyze options
- Identify the best option from your point of view
- Explain your decision and resolve any differences that arise
Social responsibility*
The recognition that business activities have an impact on society and the consideration of that impact in business decision making
Corporate citizenship*
Adopting a strategic approach to fulfilling economic, ethical, environmental, and social responsibilities
Caveat emptor*
A Latin phrase meaning “let the buyer beware” (a doctrine consumers generally were subject to)
Economic model of social responsibility*
The view that society will benefit most when business is left alone to produce and market profitable products that society needs
Socioeconomic model of social responsibility*
The concept that business should emphasize not only profits but also the impact of its decisions on society
Consumerism*
All activities undertaken to protect the rights of consumers
The fundamental issues pursued by the consumer movement fall into three categories:
Environmental protection
Product performance and safety
Information disclosure
The Basic Rights of Consumers
The Right to Safety, The Right to Be Informed, The Right to Choose, The Right to Be Heard, The Right to Consumer Education, and The Right to Service
Major Consumerism Forces
Consumer advocates and organizations
Consumer education programs
Consumer laws
Affirmative action program*
A plan designed to increase the number of employees from underrepresented groups at all levels within an organization
Equal Employment Opportunity Commission (EEOC)*
A government agency with the power to investigate complaints of employment discrimination and the power to sue firms that practice it
Hard-core unemployed*
Workers with little education or vocational training and a long history of unemployment
Pollution*
The contamination of water, air, or land through the actions of people in an industrialized society
Recycling*
Converting used materials into new products or components for new products in order to prevent their unnecessary disposal
Green marketing*
The process of creating, making, delivering, and promoting products that are environmentally safe
Social audit*
A comprehensive report of what an organization has done and is doing with regard to social issues that affect it
International business*
All business activities that involve exchanges across national boundaries
Absolute advantage*
The ability to produce a specific product more efficiently than any other nation
Comparative advantage*
The ability to produce a specific product more efficiently than any other product
Exporting*
Selling and shipping raw materials or products to other nations
Example: The Boeing Company exports its airplanes to a number of countries for use by their airlines
Importing*
Purchasing raw materials or products in other nations and bringing them into one’s own country
Example: Buyers for Macy’s department stores purchase rugs in India and have them shipped back to the United States for resale
Balance of trade*
The total value of a nation’s exports minus the total value of its imports over a specified period of time
Trade deficit*
A negative balance of trade
Balance of payments*
The total flow of money into a country minus the total flow of money out of that country over a specified period of time
Trading company*
Provides a link between buyers and sellers in different countries
Countertrade*
An international barter transaction
Licensing*
A contractual agreement in which one firm permits another to produce and market its product and to use its brand name in return for a royalty or other compensation
Contract manufacturing*
An arrangement in which one firm contracts with another business, often in another country, to manufacture products or product components to its specifications
Outsourcing*
An arrangement in which one firm contracts manufacturing or other activities to a firm in another country that specializes in those activities and can offer them at a lower cost than domestic firms
Joint venture
A partnership formed to achieve a specific goal or to operate for a specific period of time
Strategic alliance*
A partnership formed to create competitive advantage on a worldwide basis
Multinational corporation*
A firm that operates on a worldwide scale without ties to any specific nation or region
Tariff*
A tax levied on a particular foreign product entering a country
Dumping*
Exportation of large quantities of a product at a price lower than that of the same product in the home market
Nontariff barrier*
A nontax measure imposed by a government to favor domestic over foreign suppliers
Import quota*
A limit on the amount of a particular good that may be imported into a country during a given period of time
Embargo*
A complete halt to trading with a particular nation or of a particular product
Exchange control*
A restriction on the amount of a particular foreign currency that can be purchased or sold
Currency devaluation*
The reduction of the value of a nation’s currency relative to the currencies of other countries
General Agreement on Tariffs and Trade (GATT)*
An international organization of 164 nations dedicated to reducing or eliminating tariffs and other barriers to world trade
World Trade Organization (WTO)*
Powerful successor to GATT that facilitates world trade among member nations by mediating disputes and fostering efforts to reduce trade barriers
Economic community*
An organization of nations formed to promote the free movement of resources and products among its members and to create common economic policies
Export-Import Bank of the United States*
An independent agency of the U.S. government whose function is to assist in financing the exports of American firms
Multilateral development bank (MDB)*
An internationally supported bank that provides loans to developing countries to help them grow
World Bank*
A cooperative banking institution with 189 member countries
International Monetary Fund (IMF)*
An international bank that makes short-term loans to developing countries experiencing balance-of-payment deficits
