Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
1-21
One way for a government to actively promote entrepreneurship is to establish a currency
that’s tradable in world markets so that you can buy and sell goods anywhere in the world
using that currency.
69. Honesty, integrity, and high ethical standards are essential to a capitalist economic system
like the one that operates in the United States.
70. Laws that allow companies to write enforceable contracts decrease the risk of doing
business.
71.
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
1-22
In rich countries such as the United States, changes in the level of taxation have little
impact on the incentives of entrepreneurs.
Feedback: High taxes and excessive regulation tend to discourage entrepreneurship even in
wealthy nations. In the United States, those states with the highest taxes and most burdensome
regulations tend to drive out entrepreneurs while states with lower taxes and fewer regulations
tend to attract them.
72. The failure to uphold high ethical business standards by a few companies can negatively
impact the entire U.S. business community.
Feedback: The textbook provided the example of the failure of mortgage brokers to perform
due diligence on their customers. In their quest to capture a large home buying market, they
failed to check the credit worthiness of their customers. As interest rates on adjustable rate
mortgages increased, some homeowners were unable to pay their mortgages. The ripple effect
of these failures led to job loss, which sent many homes into foreclosure.
73.
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
Several years ago, the government of the small nation of Allegro owned the nation’s
telephone company and landlines. This relatively poor government relied on taxes to
develop this industry and provide service to its citizens. If the government desired to
rapidly improve people’s access to phone service, its best course of action would involve
selling the telephone company to private investors.
Feedback: Government can actively promote entrepreneurship by encouraging private
ownership of businesses. If the government owns the businesses there is little incentive for
people to work hard to create profits.
74. The government of the nation of Bingland is trying to achieve a high quality of life by
imposing strict regulations to protect the environment and ensure safe working conditions
in factories and mines. The government also has established ambitious programs to help
the poor, financing them by setting high tax rates. These efforts by Bingland’s government
should create an atmosphere that encourages entrepreneurship.
Feedback: One of the things a government can do to encourage entrepreneurship and the
formation of wealth is to keep regulations and taxes to a minimum.
75. Though it has received a lot of attention, the development of the Internet has had less of
an impact on the way businesses operate than many other technological changes.
1-27
91.
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
1-28
Identity theft is when individuals or firms access people’s personal information and then
use it for illegal purposes and activities.
92. The main difference between B2C and B2B e-commerce is that B2C uses only the
Internet, while B2B combines e-commerce with traditional (bricks-and-mortar) outlets.
Feedback: The major difference between B2C and B2B is the customer. B2C stands for
business-to-consumer. Businesses involved in B2C sell mainly to households. B2B stands for
business-to-business. Businesses involved in B2B sell mainly to other businesses.
93. There is less risk involved in starting an e-commerce only business than there is in trying
to add e-commerce to a traditional (bricks-and-mortar) store.
Feedback: Although there is no question that some Internet businesses will grow and prosper,
it is also evident that many e-commerce firms will fail. On the other hand, many traditional
businesses have successfully expanded by incorporating e-commerce into their plans.
94.
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
1-29
One of the major advantages to firms involved in e-commerce is that the technology is
still so new that the Internet-based firms face very little competition.
Feedback: The rise of e-commerce has led to intense competition. The rise of Internet
marketing drew hundreds of competitors into the fray.
95. Although the Internet is exciting, very few people have access to it outside the U.S.
Feedback: According to the textbook, over 450 million Chinese citizens use the Internet.
96. Niki has joined with several other investors to form a new company that sells foot care
products to consumers over the Internet. Niki has invested in a B2C e-commerce
company.
Feedback: B2C companies specialize in selling goods to consumers over the Internet.
97.
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
Over the past several years, workers in the small nation of Rainland have enjoyed an
increase in the number of holidays and a reduction in the average length of the workday
that has reduced the total number of hours they work each year. However, the output per
worker in Rainland is higher now than it was before the reduction in hours. These facts
suggest that productivity in Rainland has increased.
Feedback: Productivity is measured by dividing total output by work hours. Since output is
higher while work hours have dropped, productivity must be higher.
98. SleekWrap is a company that produces industrial coatings for the steel industry. Until
recently it relied on wholesalers to distribute its products to other businesses, but now it
also sells directly to its business customers through its website. This is an example of the
largest and most important type of e-commerce transaction.
Feedback: As important as the Internet has been in the consumer market (B2C), it has become
even more important in the business-to-business (B2B) market.
99. As emerging technologies become widespread, businesses tend to find better uses for
them. However, in the case of the Internet, businesses that sell B2B have not benefited
from directly selling to their business customers in the same way that B2C companies
have done.
Feedback: The Internet has become an important business tool in both the B2B market and
the B2C market.
1-34
113.
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
1-35
Customer-driven organizations require managers to closely direct and control their
employees.
Feedback: Customer-driven organizations will exceed their customers’ expectations by
empowering their front line employees. The movement toward empowerment suggests that
lower level workers are likely to assume more responsibility in the future, while managers
will give up some of their authority. Managers must train frontline people to make decisions
without the need to consult managers.
114. Bruno and Gino are worthy competitors in the bakery business in a small upscale resort
town. Gino recently negotiated a contract with a supplier for really cheap cooking oil. He
knows that bakery customers want cheap products. In this competitive environment,
keeping the price down is all that matters.
Feedback: In the current competitive environment of every industry, customers are looking
for high quality and good value, at competitive prices.
115.
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
Brett runs a lawn care service. Although he and his employees could service eight
households in one day, he averages six yards per crewmember, per day. Brett recently
restructured his work crew and provided each cutter with an incentive to acquire two new
customers each month through customer referrals. As a recent business graduate, you tell
him he’s probably on the right track.
Feedback: Companies now have to offer both high-quality products and good value, but also
outstanding service at competitive prices. Through restructuring, owners/managers often give-
up some of their authority and empower employees to make decisions that exceed customer’s
expectations.
116. The statistical study of the human population to describe its size, age, gender, and income
is known as diversity recognition.
117. The U.S. population tends to buy the same things and spend time in roughly the same
way as people did a decade ago.
118. Demographic changes create new business opportunities.
1-37
119. Diversity groups identified in the market today include extroverts, introverts, atheists, and
the devout.
120. Companies have responded to a diverse customer base by hiring a more diverse
workforce.
121. Currently people between the ages of 45 and 54 are the richest group in the United
States.
122. New welfare rules have made it easier for single parents to remain at home with their
young children without being required to seek employment.
123.
Chapter 01 – Taking Risks and Making Profits within the Dynamic Business Environment
In some cities the number of legal and illegal immigrants has caused governments to
adapt by changing signs to other languages.
124. The federal government requires companies to take diversity very seriously, even
recommending establishing a chief diversity officer in the executive suite.
125. One factor that has had a major effect on businesses is the growth of single-parent
families.
126. Businesses that cater to older consumers in the future will likely not be successful.
