Week 1: Chapter 1 & Chapter 8

Question 1

Define Business

Answer 1

Any organization that is engaged in making a product or providing a service for a profit.

Question 2

Society

Answer 2

Refers to human beings and to the social structures they collectively create.

Question 3

General systems theory

Answer 3

Argues that all organisms are open to, and interact with their external environments.

Question 4

Ownership Theory of the firm

Answer 4

The firm is seen as the property of the owners. The purpose of the firm is to maximize it’s long term value to benefit shareholders.

Question 5

Stakeholder Theory of the firm

Answer 5

Corporations serve a broad public purpose: to create value for society.

Question 6

Market stakeholders

Answer 6

Those who engage in economic transactions w/ the company.

Question 7

Nonmarket stakeholders

Answer 7

Don’t engage in economic transactions w/ firm, but are affected by its decisions. ie general public, media, competitors

Question 8

What are the 4 questions involved in stakeholder analysis?

Answer 8

1. Who are the relevant stakeholders?
2. What are the interests of each stakeholder?
3. What is the power of each stakeholder?
4. How are coalitions likely to form?

Question 9

Public Policy

Answer 9

A plan of action undertaken by government officials to achieve some broad purpose affecting a substantial segment of a nation’s citizens.

Question 10

Fiscal Policy

Answer 10

Refers to patterns of government collecting and spending funds that are intended to stimulate or support the economy.

Question 11

Monetary Policy

Answer 11

Refers to policies that affect the supply, demand, and value of a nation’s currency.

Question 12

Market Failure

Answer 12

The marketplace fails to adjust prices for the true costs of a firm’s behavior, ie pollution.

Question 13

Negative Externalities

Answer 13

Result when the manufacture or distribution of a product gives rise to unplanned or unintended costs (economic, physical, or psychological) borne by consumers, communities, competitors, etc.

Question 14

Economic Regulations

Answer 14

Aim to modify the normal operation of the free market and the forces of supply and demand.

Question 15

Antitrust laws

Answer 15

Prohibit unfair, anti-competitive practices by business. (such as predatory pricing)

Question 16

Social Regulations

Answer 16

Aimed at such important social goals as protecting consumers and the environment and providing workers with safe and healthy work conditions.