C711-Questions.docx

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 1 1. Identify potential risks and rewards in business. a. Four kinds of resources-material, human, financial, and informational-must be comgined to start and operate a business. The three general types of businesses are service businesses, manufacturers, and marketing intermediaries profit is what remains after all business expenses are deducted from sales revenue. It is the payment that owners receive for assuming the risks of business-primarily the risks of not receiving payment and of losing whatever has been invested in the firm. Although many people believe that profit is literally the bottom line or most important goal for a business, the ultimate objective of a successful business is to satisfy the needs of its customers. In addition to profit, many corporations are careful to point out their efforts to sustain the planet, participate in the green ecological movement, and help people to live better lives. 2. Describe the two types of economic systems: capitalism and command economy. a. Capitalism (on which our economic system is based) is an economic system in which individuals own and operate the majority of businesses that provide goes. Capitalism stems from the theories of Adam Smith. Smith’s pure laissez-faire capitalism is an economic system in which the factors of production are owned by private entities and all individuals are free to use their resources as they see fit; prices are determined by workings of supply and demand in competitive markets; and the economic role of government is limited to rule maker and umpire. Our economic system today is a mixed economy and exhibits elements of both capitalism and socialism. In the circular flow that characterizes our business system, households and businesses exchange resources for goods and services, using money as the medium of exchange. In a similar manner, the government collects taxes from businesses and households and purchases products and resources with which to provide services. b. In a command economy, government, rather than individuals, owns many of the factors of production and provides the answers to the three other economic questions. Socialist and communist economies are-at least in theory-command economies. 3. Identify the ways to measure economic performance. a. One way to evaluate the performance of an economic system is to assess changes in productivity, which is the average level of output per worker per hour. Gross domestic product (GDP) can also be used to measure a nation’s economic well-being and is the total dollar value of all goods and services produced by all people within the boundaries of a country during a one-year period. It is also possible to adjust GDP for inflation and thus to measure real GDP. In addition to GDP, other economic indicators include a nation’s balance of trade, consumer confidence index, consumer price index (CPI), corporate profits, inflation rate, national income, new housing starts, prime interest rate, producer price index (PPI), and unemployment rate.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern