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Business
Intro to business
| Question | Answer |
|---|---|
| How do businesses and not-for-profit organizations help create our standard of living? | |
| Explain the concepts of revenue, costs, and profit. | |
| What are the five factors of production? | |
| . What are the components of the internal business environment? | Employees, management, company culture, organizational structure, resources, and internal processes. |
| Entrepreneurs | |
| What are the sectors of the business environment, and how do changes in them influence business decisions? | |
| Demographic factors are | uncontrollable factor in the business environment and extremely important to managers. |
| Demography is the study of | people’s vital statistics, such as their age, gender, race and ethnicity, and location. |
| Demographics help | companies define the markets for their products and also determine the size and composition of the workforce. |
| Define the components of the internal business environments. | These are factors within the organization’s control. They shape how the business operates day‑to‑day. Such as employees, management resources, processes and policies |
| What factors within the economic environment affect businesses? | |
| Why do demographic shifts and technological developments create both challenges and new opportunities for business? | |
| Define the components of the External business environments. | These are factors outside the company’s control but that strongly influence decisions. Customers, suppliers, competitors, Economic, global, political, social environments |
| Micro (Immediate) External Environment | Customers — needs, preferences, buying behavior Competitors — pricing, innovation, market share Suppliers — cost of materials, reliability Intermediaries — distributors, retailers, logistics partner |
| Macro External Environment | Economic environment Political/legal environment Technological environment Social/cultural environment Demographic environment Natural/environmental conditions Global environment |
| What are the components of the external business environment? | Economic, political/legal, social/cultural, demographic, technological, competitive, natural, and global factors. |
| What factors within the economic environment affect businesses? | Inflation, interest rates, unemployment, consumer income, economic growth, exchange rates, and government taxation/spending. |
| Why do demographic shifts create challenges and opportunities | They change customer needs and workforce trends, creating new markets while forcing businesses to adapt |
| Why do technological developments create challenges and opportunities? | Technology disrupts old business models but enables innovation, efficiency, and new products/services. |
| How do businesses help create our standard of living? | They produce goods/services, create jobs, drive innovation, and generate economic growth. |
| How do not‑for‑profit organizations help create our standard of living? | They provide essential services, support communities, reduce inequality, and improve quality of life. |
| What is revenue? | The total money a business earns from selling goods or services. |
| What are costs? | Expenses a business pays to operate, including fixed and variable costs. |
| What is profit? | Revenue minus costs; the money left over after expenses. |
| What are the five factors of production? | Natural resources, labor, capital, entrepreneurship, and knowledge. |
| What is the role of an entrepreneur in society? | To create jobs, innovate, drive economic growth, increase competition, and strengthen communities. |
| What are the sectors of the business environment? | Economic, political/legal, social/cultural, demographic, technological, competitive, natural, and global sectors. |
| How do changes in business environment sectors influence decisions? | They affect pricing, hiring, production, marketing, investment, compliance, and strategy. |
| . What is communism? | An economic system where the government owns nearly all resources and controls all markets. |
| How are decisions made in communism? | The government centrally decides what to produce, how much, and at what price |
| Why did communist countries experience low productivity? | Strict government control limited personal choice and reduced worker motivation. |
| What problems occur in a communist system? | Supply shortages, limited consumer choice, and restricted career options. |
| What are examples of modern communist countries? | North Korea and Cuba. |
| What is socialism? | An economic system where major industries are government‑owned, but smaller businesses may be privately owned. |
| What services do socialist countries typically provide? | High levels of public services like healthcare and unemployment benefits. |
| Why are taxes often higher in socialist countries? | To fund extensive government programs and social services. |
| Do socialist systems vary between countries? | Yes — each country mixes government and private ownership differently. |
| What is a mixed economy? | An economy that blends elements of capitalism and socialism. |
| Why is the U.S. considered a mixed economy? | It uses free markets but also government policies, taxes, and social programs. |
| What industries may be government‑owned in mixed economies? | Examples include communications, transportation, utilities, and public lands |
| What social goals do mixed economies try to achieve? | Income redistribution, retirement pensions, and economic stability. |
| What is macroeconomics? | The study of the economy as a whole using aggregate data. |
| What is microeconomics? | The study of individual households, firms, and specific markets. |
| Why do businesses use both macro and microeconomics? | To make decisions about pricing, production, hiring, and new products. |
| What is the circular flow of economics? | A model showing how households, businesses, and government exchange resources, goods, services, and money. |
| What do households provide in the circular flow? | Inputs: natural resources, labor, capital, entrepreneurship, and knowledge. |
| What do businesses provide in the circular flow? | Outputs: goods and services. |
| How does government participate in the circular flow? | Provides public services and collects taxes from households and businesses. |
| What is a code of ethics? | A set of guidelines that outlines a company’s values and expected ethical behavior for employees. |
| What is corporate social responsibility (CSR)? | A business’s commitment to act ethically, contribute to economic development, and improve the quality of life for employees, communities, and society |
| What are ethics? | Moral principles that guide how individuals and organizations behave and make decisions. |
| Who are stakeholders? | Anyone affected by a company’s actions—such as employees, customers, suppliers, investors, and the community. |
| What is absolute advantage? | The ability of a country or business to produce a good more efficiently than another country or business. |
| What is devaluation? | A deliberate reduction in a country’s currency value relative to other currencies. |
| . What is an embargo? | A government order that restricts or completely bans trade with a specific country. |
| What is free trade? | International trade conducted without tariffs, quotas, or other restrictions |
| What is nationalism? | Strong loyalty and pride in one’s country, often influencing economic and political decisions. |
| What is a tariff? | A tax placed on imported goods to raise their price and protect domestic industries. |
| What is frictional unemployment? | Short‑term unemployment that occurs when people are between jobs or entering the workforce. |
| What is structural unemployment? | Unemployment caused by changes in the economy that make certain skills obsolete. |
| What is cyclical unemployment? | Unemployment caused by economic downturns or recessions. |
| What is seasonal unemployment? | Unemployment that occurs because certain jobs are only available during specific seasons. |
| What is the economic environment? | Conditions like inflation, interest rates, income levels, and unemployment. |
| What is the political/legal environment? | Laws, regulations, taxes, and government policies. |
| What is the social/cultural environment? | Values, attitudes, lifestyles, and societal trends. |
| What is the demographic environment? | Population characteristics such as age, gender, education, and location. |
| What is the technological environment? | New inventions, digital tools, automation, and scientific advancements. |
| What is the competitive environment? | Competitors, market share, pricing strategies, and product innovation. |
| What is the natural/environmental environment? | Resource availability, sustainability concerns, and environmental regulations. |
| What is communism? | An economic system where the government owns nearly all resources and controls all economic decisions. |
| What is socialism? | An economic system where major industries are government‑owned, but smaller businesses may be privately owned. |
| What are mixed economic systems? | Economies that blend capitalism and socialism, using both private enterprise and government involvement. |
| What is the Consumer Price Index (CPI)? | A measure of the average change in prices paid by consumers for goods and services over time. |
| What is Gross Domestic Product (GDP)? | The total value of all goods and services produced within a country in one year. |
| What is perfect competition? | Many sellers offering identical products; no single firm controls price. |
| What is pure monopoly? | One seller controls the entire market and sets prices. |
| What is monopolistic competition? | Many sellers offering similar but differentiated products. |
| What is an oligopoly? | A few large firms dominate a market and influence each other’s decisions. |
| What is profit? | The money left after subtracting costs from revenue. |
| What is capitalism? | An economic system where individuals and businesses own resources and operate for profit with minimal government interference. |
| What are the sectors of the business environment? | Economic, political/legal, demographic, social, competitive, global, and technological |
| How do changes in these sectors influence business decisions? | Changes affect pricing, hiring, marketing, production, and strategy based on shifts in income, laws, population, values, competition, global events, and technology |
| What are the primary features of capitalism? | Private ownership, competition, free markets, and profit‑driven production. |
| What defines communism? | Government ownership of resources and centralized economic decision‑making |
| What defines socialism? | Government ownership of major industries with some private business under strong government control |
| What is a mixed economy | A blend of capitalism and socialism with both private enterprise and government involvement. |
| How are the three sectors of the U.S. economy linked? | Households, businesses, and government exchange goods, services, labor, and taxes in two‑way flows. |
| What is GDP? | The total value of all goods and services produced in a country in one year. |
| What is full employment? | Jobs available for all who can and want to work. |
| What is the unemployment rate? | The percentage of people actively seeking work but not employed. |
| What are the four types of unemployment? | Frictional, structural, cyclical, and seasonal. |
| What is inflation? | A general rise in prices that reduces purchasing power. |
| How is inflation measured? | By the Consumer Price Index (CPI) and Producer Price Index (PPI |
| What causes inflation? | Demand‑pull (high demand) and cost‑push (higher production costs). |
| What is monetary policy? | Federal Reserve actions that control the money supply and interest rates. |
| What is fiscal policy? | Government changes in taxation and spending to influence the economy. |
| What is demand? | The quantity consumers will buy at a given price. |
| What is supply? | The quantity producers will offer at a given price. |
| What is equilibrium? | The price where quantity demanded equals quantity supplied |
| What are the four types of market structure | Perfect competition, pure monopoly, monopolistic competition, and oligopoly. |
| What trends are reshaping business and competition? | Aging workforce, five‑generation workplaces, global energy demand, technological advances, and strategic alliances. |
| What philosophies and concepts shape personal ethical standards? | justice (fairness), utilitarianism (greatest good for the greatest number), deontology (duty and obligations), and individual rights |
| How can organizations encourage ethical business behavior? | By creating a strong ethical culture, enforcing rules, training employees, discouraging unethical actions, and refusing to condone misconduct. |
| What is corporate social responsibility (CSR)? | A company’s obligation to act ethically, contribute positively to society, and consider the impact of its decisions on stakeholders. |
| How do businesses meet their social responsibilities to stakeholders? | By treating employees fairly, providing safe products to customers, acting honestly with suppliers, protecting the environment, and contributing to communities. |
| What are the trends in ethics and corporate social responsibility? | Greater transparency, stronger ethical codes, increased focus on sustainability, global labor standards, and more accountability for social and environmental impact. |
| How can organizations encourage ethical business behavior? | By leading through example, offering ethics training, and establishing formal codes of ethics. |
| How do leaders influence ethical behavior? | Employees follow the behavior modeled by managers; ethical leadership sets the tone for the entire organization. |
| How does ethics training help employees? | It teaches employees how to recognize unethical situations and practice appropriate responses. |
| What is the purpose of a formal code of ethics? | To inform employees of expected behavior toward coworkers, customers, and suppliers. |
| Why is unethical behavior costly for organizations? | It damages reputation, leads to legal penalties, and can result in bankruptcy or jail time for offenders. |
| . What is the role of top management in organizational ethics? | Top management sets the ethical tone for the entire organization by modeling ethical behavior, establishing acceptable standards, and influencing what employees view as right or wrong. |
| What is a code of ethics? | A code of ethics is a formal document that outlines a company’s expectations for employee behavior toward coworkers, customers, and suppliers. |
| What philosophies and concepts shape personal ethical standards? | Personal ethical standards are shaped by utilitarianism, justice, deontology, and individual rights. |
| How can organizations encourage ethical business behavior? | Organizations encourage ethical behavior by leading through example, offering ethics‑training programs, and establishing a formal code of ethics. |
| What is corporate social responsibility (CSR)? | CSR is a business’s obligation to act ethically and contribute to the welfare of society beyond making a profit. |
| How do businesses meet their social responsibilities to stakeholders? | They provide safe workplaces, safe products, protect the environment, support communities, empower employees, and earn fair returns for investors. |
| What are the trends in ethics and corporate social responsibility? | Trends include strategic philanthropy, shared responsibility between employers and employees, and global ethical standards for multinational companies. |
| What is global vision | Global vision means recognizing and responding to international business opportunities, understanding foreign competition, and using global distribution networks effectively. |
| Why is global vision important? | It is important because U.S. firms face strong foreign competitors and must operate in worldwide customer and supply networks. |
| What impact does international trade have on the U.S. economy? | International trade supports millions of jobs, boosts both service and manufacturing sectors, and increases economic growth across nearly every U.S. state. |
| Explain the impact of a currency devaluation. | A currency devaluation lowers the value of a nation’s currency relative to others, making its exports cheaper and helping improve the balance of payments. |
| Why do nations trade? | because they cannot efficiently produce everything they need, and they benefit what they produce best while importing what others produce more cheaply. |
| What is absolute advantage? | A country has an absolute advantage when it can produce a product at a lower cost than any other country or is the only country able to produce it. |
| What is comparative advantage? | Comparative advantage means a country should specialize in producing goods it can make most efficiently and trade for goods other countries produce more efficiently |
| What is free trade? | Free trade is the policy of allowing people and businesses to buy and sell across borders without government restrictions |
| What is protectionism | Protectionism is when a nation restricts imports to protect domestic industries, using tools like tariffs and quotas. |
| Why do people fear globalization | People fear globalization because jobs may be lost to imports or outsourcing, wages may fall, and service jobs can be moved offshore. |
| What are the benefits of globalization? | Globalization increases productivity, raises living standards, keeps prices lower, encourages innovation, and helps lower‑income countries develop. |
| Describe the policy of free trade | Free trade allows people and businesses to buy and sell across borders without government restrictions. |
| Free trade policy and its relationship to comparative advantage | It supports comparative advantage because countries can specialize in producing goods they make most efficiently and trade for goods other nations produce more cheaply. |
| Why do people fear globalization? | People fear globalization because jobs may be lost to imports or outsourcing, wages may fall, and service jobs can be moved offshore. Many worry that companies will shift operations abroad unless workers accept lower pay. |
| What are the barriers to international trade? | Natural barriers, tariff barriers, and nontariff barriers |
| What are natural trade barrier | Natural barriers are physical or cultural obstacles—such as distance, climate, or language—that make trade difficult or costly. |
| What are tariff barriers? | Tariff barriers are taxes placed on imported goods, making them more expensive and less competitive than domestic products. |
| What are nontariff barriers? | Nontariff barriers include import quotas, embargoes, buy‑national regulations, customs rules, and exchange controls that restrict or limit trade without using taxes. |
| How do governments and institutions foster world trade? | They foster trade by creating antidumping laws, negotiating global trade agreements, reducing trade barriers through the WTO, and providing financial support through the World Bank and IMF. |
| What is the purpose of antidumping laws? | To prevent foreign firms from selling goods below cost in order to undercut domestic competitors and gain unfair market control. |
| What is the role of the World Trade Organization (WTO) | The WTO reduces trade barriers, enforces global trade agreements, and settles trade disputes between nations |
| What is the purpose of the Uruguay Round? | To dramatically lower global trade barriers, reduce tariffs, and expand trade rules to include services, intellectual property, and investment measures. |
| What are the roles of the World Bank in world trade | World Bank: Provides low‑interest loans and advice to developing nations to support infrastructure, reduce debt, and encourage private enterprise |
| What are the roles of the IMF in world trade? | IMF: Promotes trade by offering short‑term emergency loans to nations in financial trouble and requiring reforms that reduce trade barriers. |
| What are international economic communities? | Groups of nations that formalize trade relationships by creating common economic policies, lowering trade barriers, or forming free‑trade zones. |
| What are the pros NAFTA (now USMCA)? | Pros: Created the world’s largest free‑trade zone. Greatly increased U.S.–Mexico trade (from $80B to over $750B annually). Removed tariffs, quotas, and licensing barriers. Opened Mexican markets to U.S. companies. |
| What are the cons of NAFTA (now USMCA)? | Cons: Concerns about job losses or lower wages in some U.S. industries. Long‑standing disputes (e.g., softwood lumber) over subsidies and fairness. Benefits depend on whether wages and purchasing power rise in Mexico. |
| What is the European Union (EU) | A political and economic union of 27 European nations that created a borderless single market, eliminated trade barriers, standardized laws, and adopted a common currency (the euro) |
| Will the EU ever become a ‘United States of Europe’? | The EU has deep integration—shared institutions, pooled sovereignty, unified markets—but full political union is uncertain because member nations differ in economic priorities, political systems, and views on sovereignty. |
| Discuss several ways that a company can enter international trade. | Companies can enter global markets through exporting, licensing, franchising, contract manufacturing, joint ventures, and direct foreign investment. |
| What is exporting? | Selling domestically produced goods to buyers in another country; it is the simplest and least risky way to enter global markets |
| What is licensing? | Allowing a foreign firm to use a company’s manufacturing process, trademark, patent, or proprietary knowledge in exchange for royalties. |
| What is franchising | A specialized form of licensing where a company allows a foreign operator to use its brand, business model, and support systems. |
| What is contract manufacturing? | Hiring a foreign firm to produce goods under the domestic company’s brand name, allowing market entry without building facilities. |
| What is a joint venture? | A partnership where a domestic firm joins with or buys part of a foreign company to create a new entity. |
| What is direct foreign investment? | Active ownership of foreign facilities or companies, offering high potential reward but also high risk. |
| Explain how political factors can affect international trade. | Political factors such as nationalism, government restrictions, expropriation, and confiscation can hinder foreign business operations and reduce trade opportunities. |
| Describe several cultural factors that a company involved in international trade should consider | Companies must consider values, customs, traditions, language, business etiquette, and social norms. These influence marketing, negotiations, product naming, and customer relationships |
| How can economic conditions affect trade opportunities? | Countries with strong infrastructure, higher incomes, and advanced industries offer greater business opportunities. Lower‑income nations may have limited purchasing power and rely more on natural‑resource industries. |
| What is a multinational corporation | A multinational corporation is a company that moves resources, goods, services, and skills across national borders without regard to the country where its headquarters are located. |
| What are the advantages of multinationals? | Ability to operate across political and cultural differences Access to global markets and revenue growth Ability to sidestep regulatory problems Flexibility to shift production Access to global technology and innovation Cost savings thru shared reso, |
| What trends will foster continued growth in world trade? | The major trends driving global trade growth are market expansion, resource acquisition, and the emergence of China and India as powerful economic forces |
| Describe market expansion as a trend | Companies expand globally because domestic markets are too small to support large‑scale production, and international markets offer greater demand and profit opportunities. |
| Describe resource acquisition as a trend. | Businesses enter global markets to obtain labor, raw materials, technology, and capital more efficiently or at lower cost. |
| How are China and India influencing global trade? | China influences global trade through massive manufacturing capacity and booming exports, while India drives global innovation through software, engineering, and technology services. |
| How can businesses take advantage of these trends to ‘go global’? | Businesses can expand into foreign markets, outsource production, tap into global talent, adopt new technologies (like AI), and form partnerships or joint ventures in emerging economies. |
| Why is global trade important to the United States, and how is it measured | Global trade strengthens international relationships, boosts economies, raises living standards, and improves quality of life. It is measured through balance of trade, balance of payments, and exchange rates. |
| Why do nations trade? | Nations trade because specialization (comparative advantage) allows them to produce goods more efficiently and obtain other goods at lower prices. |
| What are the barriers to international trade? | Natural barriers (distance, language), tariff barriers (taxes on imports), and nontariff barriers (quotas, embargoes, buy‑national rules, exchange controls). |
| How do governments and institutions foster world trade? | Through the WTO (reducing barriers and enforcing agreements), the World Bank (loans for infrastructure), and the IMF (short‑term loans for nations in financial trouble) |
| What are international economic communities? | Groups of nations that reduce trade barriers among members and often set common tariffs toward nonmembers (EU, NAFTA/USMCA, CAFTA, Mercosur |
| How do companies enter the global marketplace? | Through exporting, licensing, contract manufacturing, joint ventures, and direct foreign investment. |
| What threats and opportunities exist in the global marketplace? | Companies must consider political systems, cultural differences, and economic conditions. Poor cultural understanding or weak infrastructure can create major challenges. |
| What are the advantages of multinational corporations? | They can bypass restrictive trade rules, shift operations to favorable locations, and access global technological expertise |
| What are the trends in the global marketplace? | Growing global activity driven by market expansion, resource needs, and the rise of China and India as major economic powers. |
| Why is global trade important to the United States? | It strengthens international relationships, boosts the economy, raises living standards, and improves quality of life. |
| . How is global trade measured? | By balance of trade, balance of payments, and exchange rates. |
| Why do nations trade? | Because specialization (comparative advantage) allows countries to produce efficiently and obtain other goods at lower prices. |
| What is free trade? | Trade without government restrictions. |
| What are the barriers to international trade? | Natural barriers, tariff barriers, and nontariff barriers |
| What are natural trade barriers? | Distance, language, and cultural differences. |
| What are tariff barriers? | Taxes on imported goods. |
| What are nontariff barriers? | Import quotas, embargoes, buy‑national rules, and exchange controls. |
| How do governments and institutions foster world trade? | Through the WTO, World Bank, and IMF, which reduce barriers and provide financial support |
| What trends will foster continued growth in world trade? | Market expansion, resource acquisition, and the rise of China and India. |
| Absolute advantage | Producing a product at lower cost than any other country. |
| Balance of payments | Difference between a country’s total payments to and receipts from other countries. |
| Balance of trade | Difference between export value and import value. |
| Buy‑national regulations | Rules giving preference to domestic producers. |
| Contract manufacturing | Foreign firm makes goods under a domestic brand. |
| . Countertrade | Trading goods/services for other goods/services. |
| Devaluation | Lowering a currency’s value. |
| Direct foreign investment | Owning foreign facilities or companies. |
| Dumping | Selling goods abroad below home‑market prices. |
| Embargo | Total ban on imports or exports |
| .European integration | EU members sharing sovereignty for common policies. |
| . Exchange controls | Rules requiring foreign currency earnings to be sold to a central bank. |
| Exporting | Selling domestic goods abroad. |
| . Exports | Goods/services sold to other countries. |
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