Chapter 2 3 The three primary factors that threaten stability are inflation

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 2—Understanding the Environments of Business

Objective: 2.2

26. The three primary factors that threaten stability are inflation, deflation, and unemployment.

a. True

b. False

Difficulty: 2 Page-Reference: 45

Question ID: 02-2-145 Skill: Knowledge

Objective: 2.2

27. Inflation occurs when there are increased goods and services for sale.

a. True

b. False

Difficulty: 1 Page-Reference: 45

Question ID: 02-2-146 Skill: Comprehension

Objective: 2.2

28. The only real effect of inflation is to increase the purchasing power of a person’s money.

a. True

b. False

Difficulty: 2 Page-Reference: 45

Question ID: 02-2-147 Skill: Comprehension

Objective: 2.2

29. The consumer price index (CPI) is a measure of the prices of typical products purchased by

consumers.

a. True

b. False

Difficulty: 1 Page-Reference: 46

Question ID: 02-2-148 Skill: Knowledge

Objective: 2.2

30. The items in the typical “basket of goods” that are included in the consumer price index has not

changed much over the years so that current figures are comparable with historical figures.

a. True

b. False

Difficulty: 1 Page-Reference: 46

Question ID: 02-2-149 Skill: Comprehension

Objective: 2.2

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 2—Understanding the Environments of Business

31. The proportion of personal income that consumers spend on necessities like food and housing

has declined during the past 40 years.

a. True

b. False

Difficulty: 2 Page-Reference: 46

Question ID: 02-2-150 Skill: Knowledge

Objective: 2.2

32. Unemployment reflects the joblessness level of the adult population in an economic system,

whether or not they are actively seeking work.

a. True

b. False

Difficulty: 1 Page-Reference: 47

Question ID: 02-2-151 Skill: Comprehension

Objective: 2.2

33. When unemployment is low, businesses tend to raise the wages that they are willing to pay.

a. True

b. False

Difficulty: 2 Page-Reference: 47

Question ID: 02-2-152 Skill: Application

Objective: 2.2

34. Levi is temporarily unemployed while he looks for a new job. Levi is experiencing frictional

unemployment.

a. True

b. False

Difficulty: 2 Page-Reference: 47

Question ID: 02-2-153 Skill: Comprehension

Objective: 2.2

35. Cyclical unemployment occurs as a result of a downturn in the business cycle.

a. True

b. False

Difficulty: 2 Page-Reference: 47

Question ID: 02-2-154 Skill: Comprehension

Objective: 2.2

36. Ted has not worked in 5 years and has given up finding a job. He is counted in the ranks of the

unemployed.

a. True

b. False

Difficulty: 2 Page-Reference: 47

Question ID: 02-2-155 Skill: Comprehension

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 2—Understanding the Environments of Business

Objective: 2.2

37. Full employment is impossible.

a. True

b. False

Difficulty: 2 Page-Reference: 47

Question ID: 02-2-156 Skill: Comprehension

Objective: 2.2

38. In order to achieve full employment, government economists require that each business establish

that as a goal.

a. True

b. False

Difficulty: 2 Page-Reference: 47

Question ID: 02-2-157 Skill: Comprehension

Objective: 2.2

39. Full employment means that everyone who wants to work has an opportunity to do so.

a. True

b. False

Difficulty: 1 Page-Reference: 47

Question ID: 02-2-158 Skill: Knowledge

Objective: 2.2

40. Sharon is unemployed while she gets training for a new job. Sharon is experiencing cyclical

unemployment.

a. True

b. False

Difficulty: 2 Page-Reference: 47

Question ID: 02-2-159 Skill: Comprehension

Objective: 2.2

41. Agricultural efficiency in Canada has shown only slight improvement in the last century because

only a small percentage of the population works in agriculture.

a. True

b. False

Difficulty: 2 Page-Reference: 39

Question ID: 02-2-160 Skill: Comprehension

Objective: 2.2

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 2—Understanding the Environments of Business

42. Stability, as an economic goal, is a condition in which there is a balance between money available

and goods produced.

a. True

b. False

Difficulty: 2 Page-Reference: 48

Question ID: 02-2-161 Skill: Comprehension

Objective: 2.2

43. Generally speaking, fiscal policy is more effective than monetary policy.

a. True

b. False

Difficulty: 2 Page-Reference: 48

Question ID: 02-2-162 Skill: Comprehension

Objective: 2.2

44. Although many people associate technology with manufacturing, it is also a significant force in the

service sector.

a. True

b. False

Difficulty: 2 Page-Reference: 49

Question ID: 02-2-163 Skill: Comprehension

Objective: 2.3

45. Cycle time is the time, from beginning to end, that it takes a firm to accomplish some recurring

activity or function.

a. True

b. False

Difficulty: 2 Page-Reference: 51

Question ID: 02-2-164 Skill: Knowledge

Objective: 2.3

46. Businesses have found that they can be more competitive if they are able to increase cycle times.

a. True

b. False

Difficulty: 2 Page-Reference: 51

Question ID: 02-2-165 Skill: Comprehension

Objective: 2.3

47. Technology transfer is more important than R&D intensity.

a. True

b. False

Difficulty: 2 Page-Reference: 52

Question ID: 02-2-166 Skill: Comprehension

Objective: 2.3

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 2—Understanding the Environments of Business

48. R&D spending in Canada in 2010 totalled about $15 billion.

a. True

b. False

Difficulty: 2 Page-Reference: 49

Question ID: 02-2-167 Skill: Knowledge

Objective: 2.3

49. Khalid is a research chemist who is continually experimenting with how chemical compounds

behave. He knows that his activity might or might not result in a marketable product. Kahlid is engaged in

pure research.

a. True

b. False

Difficulty: 2 Page-Reference: 49

Question ID: 02-2-168 Skill: Comprehension

Objective: 2.3

50. In Canada, the private sector accounts for more than half of all R&D expenditures.

a. True

b. False

Difficulty: 2 Page-Reference: 49

Question ID: 02-2-169 Skill: Knowledge

Objective: 2.3

51. Canada’s R&D expenditures (as a percent of GDP) lag behind those of the U.S. because many

Canadian businesses are subsidiaries of large U.S. companies, and those companies carry out their R&D

in the United States.

a. True

b. False

Difficulty: 2 Page-Reference: 49

Question ID: 02-2-170 Skill: Comprehension

Objective: 2.3

52. Canada’s R&D expenditures are much smaller than those of the U.S. in total dollar terms, but

when measured as a percent of GDP, Canada’s R&D expenditures exceed those in the U.S.

a. True

b. False

Difficulty: 2 Page-Reference: 49

Question ID: 02-2-171 Skill: Comprehension

Objective: 2.3

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 2—Understanding the Environments of Business

53. Enterprise Resource Planning is an example of a process technology.

a. True

b. False

Difficulty: 1 Page-Reference: 52

Question ID: 02-2-172 Skill: Comprehension

Objective: 2.3

54. Company-wide processes, such as materials management, production planning, order

management, and financial reporting, can all be managed by enterprise resource planning.

a. True

b. False

Difficulty: 2 Page-Reference: 52

Question ID: 02-2-173 Skill: Knowledge

Objective: 2.3

55. R&D intensity refers to R&D spending as a percentage of a company’s sales revenue.

a. True

b. False

Difficulty: 2 Page-Reference: 51

Question ID: 02-2-174 Skill: Knowledge

Objective: 2.3

56. Political stability is an important factor in international firms because no business wants to set up

shop in another country unless trade relationships with that country are well defined and stable.

a. True

b. False

Difficulty: 1 Page-Reference: 54

Question ID: 02-2-175 Skill: Comprehension

Objective: 2.4

57. A product such as bicycles can be marketed in much the same way in Canada and China.

a. True

b. False

Difficulty: 2 Page-Reference: 56

Question ID: 02-2-176 Skill: Application

Objective: 2.5

58. Customer preferences must be taken into consideration across national boundaries, but not

generally within the same country.

a. True

b. False

Difficulty: 2 Page-Reference: 56

Question ID: 02-2-177 Skill: Application

Objective: 2.5

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 2—Understanding the Environments of Business

59. Whiskey, vodka, gin, and cigarettes are less commonly used today than they were just a few

years ago.

a. True

b. False

Difficulty: 1 Page-Reference: 56

Question ID: 02-2-178 Skill: Knowledge

Objective: 2.5

60. Socio-cultural factors influence the way workers in a society feel about their jobs; the job can have

meaningful social significance or it can simply be a means to an end.

a. True

b. False

Difficulty: 2 Page-Reference: 56

Question ID: 02-2-179 Skill: Comprehension

Objective: 2.5

61. Product life cycles are somewhat longer than they were 20 years ago because products have

become more complex.

a. True

b. False

Difficulty: 1 Page-Reference: 57

Question ID: 02-2-180 Skill: Comprehension

Objective: 2.6

62. Viral marketing uses word of mouth to spread information from customer to customer.

a. True

b. False

Difficulty: 2 Page-Reference: 61

Question ID: 02-2-181 Skill: Knowledge

Objective: 2.6

63. An example of a merger would be the joining of Canadian National Railways with the Illinois

Central Railroad.

a. True

b. False

Difficulty: 2 Page-Reference: 61–62

Question ID: 02-2-182 Skill: Comprehension

Objective: 2.7

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 2—Understanding the Environments of Business

64. A hostile takeover occurs when one organization buys enough of another company’s shares to

take control of that company even though that company may be opposed to the takeover.

a. True

b. False

Difficulty: 2 Page-Reference: 63

Question ID: 02-2-183 Skill: Knowledge

Objective: 2.7

65. In an acquisition, one firm simply buys another firm, whereas in a merger the consolidation is

more collaborative.

a. True

b. False

Difficulty: 1 Page-Reference: 61

Question ID: 02-2-184 Skill: Knowledge

Objective: 2.7

66. When Agricore and United Grain Growers merged to form Agricore United, this was an example

of a vertical merger.

a. True

b. False

Difficulty: 1 Page-Reference: 62

Question ID: 02-2-185 Skill: Comprehension

Objective: 2.7

67. When Adolph Coors Co. merged with Molson Inc., this was an example of a horizontal merger.

a. True

b. False

Difficulty: 1 Page-Reference: 62

Question ID: 02-2-186 Skill: Comprehension

Objective: 2.7

68. The majority of companies that have adopted ESOPs have experienced improvement in both

sales and profits.

a. True

b. False

Difficulty: 1 Page-Reference: 63

Question ID: 02-2-187 Skill: Knowledge

Objective: 2.7

1. What is an organizational boundary?

Difficulty: 2 Page-Reference: 38

Question ID: 02-3-188 Skill: Knowledge

Objective: 2.1

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 2—Understanding the Environments of Business

2. List five dimensions of the external environment of business organizations.

Difficulty: 2 Page-Reference: 39–40

Question ID: 02-3-189 Skill: Knowledge

Objective: 2.1

3. What is the main measure of growth in the business cycle?

Difficulty: 2 Page-Reference: 41

Question ID: 02-3-190 Skill: Knowledge

Objective: 2.2

4. How is GDP per capita calculated?

Difficulty: 2 Page-Reference: 43

Question ID: 02-3-191 Skill: Application

Objective: 2.2

5. List the three key goals of the Canadian economic system.

Difficulty: 1 Page-Reference: 39

Question ID: 02-3-192 Skill: Knowledge

Objective: 2.2

6. Under what circumstances can inflation be a positive factor?

Difficulty: 2 Page-Reference: 45

Question ID: 02-3-193 Skill: Comprehension

Objective: 2.2

7. What is the national debt?

Difficulty: 1 Page-Reference: 44

Question ID: 02-3-194 Skill: Comprehension

Objective: 2.2

8. What are the three primary factors that threaten economic stability?

Difficulty: 1 Page-Reference: 45

Question ID: 02-3-195 Skill: Knowledge

Objective: 2.2

9. What is measured by the consumer price index (CPI)?

Difficulty: 1 Page-Reference: 46

Question ID: 02-3-196 Skill: Comprehension

Objective: 2.2

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 2—Understanding the Environments of Business

10. What is reflected in the real GDP?

Difficulty: 2 Page-Reference: 43

Question ID: 02-3-197 Skill: Comprehension

Objective: 2.2

11. What is the national debt?

Difficulty: 2 Page-Reference: 44

Question ID: 02-3-198 Skill: Comprehension

Objective: 2.2

12. Define the term unemployment.

Difficulty: 2 Page-Reference: 47

Question ID: 02-3-199 Skill: Knowledge

Objective: 2.2

13. What is cyclical unemployment?

Difficulty: 2 Page-Reference: 47

Question ID: 02-3-200 Skill: Knowledge

Objective: 2.2

14. What is a recession?

Difficulty: 2 Page-Reference: 40

Question ID: 02-3-201 Skill: Knowledge

Objective: 2.2

15. What is R&D intensity?

Difficulty: 1 Page-Reference: 51

Question ID: 02-3-202 Skill: Knowledge

Objective: 2.3

16. Why are customer preferences and tastes important to business?

Difficulty: 1 Page-Reference: 56

Question ID: 02-3-203 Skill: Comprehension

Objective: 2.4

17. List the five forces in Porter‘s model.

Difficulty: 1 Page-Reference: 58–60

Question ID: 02-3-204 Skill: Knowledge

Objective: 2.6

18. What is meant by the term core competencies?

Difficulty: 2 Page-Reference: 60

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 2—Understanding the Environments of Business

Question ID: 02-3-205 Skill: Knowledge

Objective: 2.6

19. What is outsourcing?

Difficulty: 2 Page-Reference: 60

Question ID: 02-3-206 Skill: Knowledge

Objective: 2.6

20. What is a process?

Difficulty: 2 Page-Reference: 61

Question ID: 02-3-207 Skill: Knowledge

Objective: 2.6

21. What is a vertical merger?

Difficulty: 2 Page-Reference: 62

Question ID: 02-3-208 Skill: Knowledge

Objective: 2.7

1. How might moderate unemployment and low inflation affect a McDonald’s restaurant?

Difficulty: 3 Page-Reference: 45–47

Question ID: 02-4-209 Skill: Application

Objective: 2.2

2. How does GNP differ from GDP? Give an example of a product that would be included in Canada’s

GNP, but not its GDP.

Difficulty: 3 Page-Reference: 41–42

Question ID: 02-4-210 Skill: Comprehension

Objective: 2.2

3. How does the national debt affect economic growth?

Difficulty: 3 Page-Reference: 44

Question ID: 02-4-211 Skill: Comprehension

Objective: 2.2

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 2—Understanding the Environments of Business

4. What is inflation and how does it threaten economic stability?

Difficulty: 3 Page-Reference: 45–46

Question ID: 02-4-212 Skill: Comprehension

Objective: 2.2

5. What is unemployment? How does low unemployment threaten economic stability?

Difficulty: 3 Page-Reference: 47

Question ID: 02-4-213 Skill: Comprehension

Objective: 2.2

6. What are some of the solutions to Canada’s low productivity growth rate problem?

Difficulty: 3 Page-Reference: 50

Question ID: 02-4-214 Skill: Application

Objective: 2.2

7. How is the effectiveness of the government’s attempts to manage Canada’s economy measured?

Briefly explain each tool.

Difficulty: 2 Page-Reference: 41–45

Question ID: 02-4-215 Skill: Comprehension

Objective: 2.2

8. Draw a model of the business cycle that depicts each of its four phases.

Difficulty: 2 Page-Reference: 42

Question ID: 02-4-216 Skill: Knowledge

Objective: 2.2

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 2—Understanding the Environments of Business

9. What are the pros and cons of prolonged economic stability?

Difficulty: 2 Page-Reference: 48

Question ID: 02-4-217 Skill: Comprehension

Objective: 2.2

10. List and describe the three factors that threaten stability.

Difficulty: 1 Page-Reference: 45–47

Question ID: 02-4-218 Skill: Knowledge

Objective: 2.2

2. deflation—a period of generally falling prices

3. unemployment—the level of joblessness among people actively seeking work in an economic system

11. List and discuss the 4 different types of unemployment, using examples to demonstrate the

different types.

Difficulty: 2 Page-Reference: 47

Question ID: 02-4-219 Skill: Comprehension

Objective: 2.2

12. Why is it important for businesses to be aware of trends in the political-legal environment?

Difficulty: 3 Page-Reference: 54–55

Question ID: 02-4-220 Skill: Application

Objective: 2.3

13. What is outsourcing? Give an example of outsourcing.

Difficulty: 3 Page-Reference: 60

Question ID: 02-4-221 Skill: Comprehension

Objective: 2.6

14. Describe three advantages of outsourcing.

Difficulty: 3 Page-Reference: 60

Question ID: 02-4-222 Skill: Comprehension

Objective: 2.6

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 2—Understanding the Environments of Business

15. Describe at least three disadvantages of outsourcing.

Difficulty: 3 Page-Reference: 60

Question ID: 02-4-223 Skill: Comprehension

Objective: 2.6

16. What is viral marketing and why do firms use it?

Difficulty: 3 Page-Reference: 61

Question ID: 02-4-224 Skill: Comprehension

Objective: 2.6

17. What is a vertical merger? Provide an example.

Difficulty: 3 Page-Reference: 62

Question ID: 02-4-225 Skill: Comprehension

Objective: 2.7

18. How does poison pill strategy work?

Difficulty: 3 Page-Reference: 63

Question ID: 02-4-226 Skill: Comprehension

Objective: 2.7