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Chapter 01 - Taking Risks and Making Profits within the Dynamic Business Environment
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Which of the following is the most accurate statement about the impact of business on
society?
A. When businesses earn a profit for their owners, they usually do so at the expense of the
rest of society, which proves it is never a win-win situation.
B. While businesses often improve the standard of living within a society, they can do
little to improve the quality of life.
C. Businesses often improve the quality of life, but can do little to improve the standard of
living of most people due to inflation.
D. Businesses can have a positive impact on both the standard of living and the quality of
life within a society.
Feedback: Businesses are part of an economic system that helps create a higher standard of
living and quality of life for everyone.
193. Jane's income has remained stable over the past few years while the prices of things she
buys have gone up. Nevertheless, Jane feels better off because the environment is cleaner,
the crime rate has declined, she has more leisure time, and the quality of medical care has
improved. If Jane's experience is typical, we can conclude that the standard of living has:
A. increased, but the quality of life has decreased.
B. increased, and so has the quality of life.
C. declined, but the quality of life has increased.
D. declined, and so has the quality of life.
Feedback: The standard of living refers to how much people can buy with their income. Since
prices have gone up faster than her income, Jane's standard of living has declined. However,
quality of life refers to a broader measure of general wellbeing. The improved quality of the
environment, safer streets, increased leisure time, and improved medical care would all
contribute to an improvement in general wellbeing, and hence would increase the quality of
life.
194.
Chapter 01 - Taking Risks and Making Profits within the Dynamic Business Environment
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Eve and her three college friends enjoy perfumes. As a special gift to each of them last
holiday season, Eve found a way to make scented candles with each friend's favorite
perfume scent. The three friends loved her gift idea and encouraged Eve to create more
and sell them on the Internet. Recently, she is filling orders from her website, and turning
a profit. Eve is proof that:
A. me too businesses work.
B. when you successfully fill a market need, you can make money.
C. the Internet is a way to distribute just about anything.
D. the cost of supplies to make candles is relatively cheap.
Feedback: In order to stay competitive, entrepreneurs must find a market niche - something
the market needs.
195. Which of the following statements about social entrepreneurs (such as Muhammad Yunus
who won the Nobel Prize) describes their challenge?
A. Social entrepreneurs may switch social causes several times before finding their niche.
B. Social entrepreneurs understand that their business environments are less dynamic than
other businesses, especially during a recession.
C. Social entrepreneurs use different business skills than entrepreneurs who start other
businesses. They should focus on a different educational curriculum than other
entrepreneurs.
D. Using the same business skills as other entrepreneurs, social entrepreneurs develop
businesses to improve the skill(s) and/or quality of life of others.
Feedback: Social entrepreneurs develop businesses to improve the skills and quality of life of
others. Many of these businesses are organized as non-profit companies.
196.
Chapter 01 - Taking Risks and Making Profits within the Dynamic Business Environment
Planet Earth Developers is a large nation-wide construction company with home offices
in Lansing, MI. The local media often remarks about the pristine landscaping that
surrounds the home office that sits on a 30-acre complex. At the back end of the complex
are several large warehouses and garages that hold large equipment. The grounds
surrounding these warehouses look like a well-maintained park. Across the street from the
garages are several shops and businesses. The CEO, "Planet Paul" (as his employees call
him), often talks about how thankful he is that the town permits him to store the company
equipment at that site, and vows to always maintain the premises for his neighbors (the
other businesses that thrive in that area), not to mention that he asks 100 employees to
come to work there everyday. Which of the following statements describes Planet Paul's
business philosophy?
A. Planet Paul is a nice guy whose company made a lot of money, so he is willing to
spread it around.
B. Planet Paul understands that even though it may cost a little more, stakeholder
considerations are very important if you want your business to thrive.
C. Planet Paul is more concerned about town politics than about the company profits. He
should ask his employees if they would rather have that money in their pockets than on
the lawns.
D. Planet Paul is taking a business risk that his trucks and equipment will not make too
much noise as they enter and exit the garages.
Feedback: When considering the social environment of one's business, it is important to
consider all stakeholders that your business affects. Stakeholders include customers,
employees, suppliers, and even other businesses and residential areas that are located within
proximity of your business location.
197. The growth of Hispanic owned businesses:
A. remained relatively constant during the past decade.
B. slowly increased during the past decade.
C. increased dramatically in recent years.
D. decreased slightly compared to other minority groups who have stared businesses.
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198.
Chapter 01 - Taking Risks and Making Profits within the Dynamic Business Environment
How is the profile of business owners changing?
A. In the U.S., men between the ages of 18 and 24 are starting businesses at a faster rate
than men of all ages, or women of all ages.
B. Recent male immigrants, who can legally work in the U.S., are starting businesses at a
faster rate than natural-born male citizens, and at a faster rate than all women.
C. Businesses owned by minority women are growing at a faster rate than businesses
owned by men or nonminority women.
D. It is difficult to collect information on the profile of business owners. Most new
businesses do not file so they don’t have to pay taxes.
199. The number of businesses owned by Hispanics and Asians has:
A. has decreased after the 9-11 terrorist attack.
B. slowly increased.
C. significantly increased.
D. remained relatively constant.
200. Which of the following entails the greatest amount of risk?
A. Working for the government
B. Working for a large business
C. Working for a small business
D. Starting a business
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204. Two factors of production that seem to contribute the most to a nation's ability to create
wealth are:
A. land and labor.
B. land and capital.
C. entrepreneurship and labor.
D. entrepreneurship and knowledge.
205. _______________ is/are the external and internal circumstances that surround the
business.
A. The business environment
B. The factors of production
C. The business corral
D. The business disciplines
206.
Chapter 01 - Taking Risks and Making Profits within the Dynamic Business Environment
Entrepreneurs weigh the differences between the benefits of starting a business and those
things that they are likely to forego because they choose to work for themselves. Such
things they are likely to pass-up on are:
A. the freedom to make their own decisions.
B. local government benefits such as enterprise zone tax credits.
C. employer paid benefits such as paid vacation and health insurance.
D. tickets to sporting events that trading partners may provide.
Feedback: Entrepreneurs and small business owners do not receive the employer paid benefits
that a large firm can offer, including such things as paid vacations and health insurance
benefits. They give-up these opportunities for the freedom to work for themselves and keep
the profits that their businesses realize.
207. Which of the following is a benefit of owning your own business?
A. Freedom to keep the profits from your business
B. Government supported health insurance
C. More camaraderie with employees
D. Shorter work hours
Feedback: One of the benefits of owning your own business is the freedom to keep the profits
after taxes. Another is the enjoyment of being your own boss.
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227. Which of the following government policies would be least likely to encourage
entrepreneurship?
A. Passage of laws that enable businesspeople to write enforceable contracts.
B. Establishment of a currency that is tradable in world markets.
C. Establishment of strict regulations specifying exactly how products should be made to
ensure safety and affordability.
D. Passage of laws that eliminate corruption in government and business.
Feedback: One of the things governments can do to encourage entrepreneurship is keep
business regulations to a minimum. Regulations may be desirable in other respects, but they
tend to discourage entrepreneurship by making the formation and management of businesses
more difficult and expensive.
228.
Chapter 01 - Taking Risks and Making Profits within the Dynamic Business Environment
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It’s no secret that Blockbuster™ stores are closing, while Netflix™ is growing like
gangbusters! Both companies participate in the video rental business. Netflix evaluated
the lifestyle needs of video customers, understanding that time, family, and work
obligations called for more convenient methods to receive video entertainment. Netflix
embraced the opportunity to utilize the Internet, and TVs with special modems, to stream
videos directly to customers. The company also managed to keep customer costs down, by
passing along the savings it realized in labor. Blockbuster did not keep its eye on
competitor movements, permitting Netflix to quickly capture video market share. In
sizing up the situation, which external environment(s) probably had the least effect on
Netflix’s success?
A. Social environment
B. Competitive environment
C. Economic and legal environment
D. Technological environment
Feedback: Netflix embraced new opportunities in TV technology permitting video to stream
through the Internet and through the modem. Netflix also saw opportunities in the social
environment. With single and dual income families pressed for time, customers are seeking
added conveniences. Netflix differentiates its product, positioning itself as friendlier and
cheaper. Blockbuster was very slow to react to competitive pressures. Although customers
enjoyed the cheaper prices, the technological environment made it cheaper for Netflix to keep
costs down and pass along savings to the customer. The economic downturn had little effect
on this situation; and the firms operate within the legal limits of the law.
229.
Chapter 01 - Taking Risks and Making Profits within the Dynamic Business Environment
A recent New York Times article about Bernard Madoff and his illegal Ponzi scheme
stated, "When money goes global, fraud does too." Although the goal of investors who
trusted Madoff's investment company was to earn the highest return possible on their
investments, they turned a blind-eye toward the fact that some of those returns were too
good to be true. Individual investors, companies, and even charities lost large sums of
money by investing with Madoff's company. Which of the following statements relates to
this story?
A. The unethical behavior of one company had a worldwide ripple effect that can impact
the well being of an economy.
B. Too much regulation caused the capitalistic nature of Mr. Madoff's business model to
fail.
C. People lost money because of the fluctuations in world trading currencies, questioning
the legitimacy of trading abroad.
D. Investors did not sign contracts with Mr. Madoff's company. The government can only
protect individuals and companies who sign enforceable contracts.
Feedback: Unethical behavior can have a steamrolling effect on business as consumers lose
confidence and the overall effect on the economy turns negative.
