TEST 1 REVIEW SHEET
The test will consist of 50 multiple choice questions from Chapters 1-5. Please come to class with a pencil and I will
provide the Scantron. If you have any questions please do not hesitate to ask.
Chapter 1
Value- The relationship btwn the price of a good or a
service and the benefits that it offers its customers.
Business- Any organization or activity that provides
goods and services in an effort to earn a profit.
Profit- Money that a business earns in sales or
revenue, minus expenses, such as the cost of salaries.
Revenue-Expenses+Profit (or Loss)
Loss- When a business incurs expenses greater than
its revenue.
Entrepreneurs- People who risk their time, money,
and other resources to start and manage a business.
Standard of Living- The quality and quantity of
goods and services available to a population.
Quality of Life-The overall sense of well-being
experienced by either an individual or group.
Non-profits- Business-like establishments that
employ people and produce goods and services with
the goal of contributing to the community rather than
generating financial gain.
Factors of Production- 4 fundamental elementsnatural resources, capital, human resources, and
entrepreneurship- that businesses need to achieve
their objective.
Business Environment- Setting in which business
operates. 5 key components are: economic
environments, competitive environment,
technological environment, social environment, and
global environment.
Business Technology- Any tools-especially
computers, telecommunications, and other digital
products- that businesses can use to become more
efficient and effective.
e-commerce- Business transactions conducted
online, via internet.
Demographics- Measurable characteristics of a
population. Factors include population size and
density, as well as specific traits such as age, gender,
and race.
What is the role of business in the economy? – The role of business in the economy is to produce goods and
services in order to satisfy consumers’ needs and wants. Business activity generates most of the nation’s wealth. It
creates jobs, provides most of the funds to the government via taxes.
- Business drives up the standard of living for people worldwide, contributing to a higher quality of life.
Business not only provides the products and services that people enjoy but also provides jobs people need.
Business contributes to society through innovation, also helps raise the standard of living through taxes,
which the government spends on projects that range from streetlights to environmental cleanup.
- Profit is the money that a business earns in sales, minus expenses, such as the cost of goods, and the cost of
salaries. Profit potential provides a powerful incentive for people to start their own businesses, or to become
entrepreneurs. Successful businesses create wealth, which increases the standard of living for virtually all
members of a society.
How has business evolved? – The Industrial Revolution, The Entrepreneurship Era, The Production Era, The
Marketing Era, The Relationship Era
Business historians typically divide the history of American business into five distinct eras, which overlap during the
periods
of
transition.
Industrial Revolution: From the mid-1700s to the mid-1800s, technology fueled a period of rapid industrialization.
Factories sprang up in cities, leading to mass production and specialization of labor.
Entrepreneurship Era: During the second half of the 1800s, large-scale entrepreneurs emerged, building business
empires that created enormous wealth, but often at the expense of workers and consumers.
Production Era: In the early 1900s, major businesses focused on further refining the production process, creating huge
efficiencies. The assembly line, introduced in 1913, boosted productivity and lowered costs.
Marketing Era: After World War II, consumers began to gain power. As goods and services flooded the market, the
marketing concept emerged: a consumer-first orientation as a guide to business decision making.
Relationship Era: With the technology boom in the 1990s, businesses began to look beyond the immediate transaction,
aiming to build a competitive edge through long-term customer relationships.
What is the role of nonprofits in the economy? – Working hand in hand with businesses to improve the quality
of life in our society. Focusing on areas such as health, human services, education, art, religion, culture- do not
include profits.
Nonprofits are business-like establishments that contribute to economic stability and growth. Similar to businesses,
nonprofits generate revenue and incur expenses. Their goal is to use any revenue above and beyond expenses to
advance the goals of the organization, rather than to make money for its owners. Some nonprofits—such as museums,
schools, and theaters—can act as economic magnets for communities, attracting additional investment.
What are the core factors of production? – 4 fundamental resources- to achieve their objectives.
-Natural resources (coal)
- Capital (machinery)
- Human resources (employees)
- Entrepreneurship (someone to take the risk)
Natural resources: All inputs that offer value in their natural state, such as land, fresh water, wind, and mineral deposits.
The value of natural resources tends to rise with high demand, low supply, or both.
Capital: The manmade resources that an organization needs to produce goods or services. The elements of capital
include
machines,
tools,
buildings,
and
technology.
Human resources: The physical, intellectual, and creative contributions of everyone who works within an economy.
Education and motivation have become increasingly important as technology replaces manual labor jobs.
Entrepreneurship: Entrepreneurs take the risk of launching and operating their own businesses. Entrepreneurial
enterprises can create a tidal wave of opportunity by harnessing the other factors of production.
What are the elements of the environment affecting business? – 5 key dimensions of the business environment
are:
- Economic Environment- State of the economy
- Competitive Environment – businesses competing to bring the best product
- Technological Environment – how technology is capable of helping or hurting a business
- Social Environment – demographics, values of a population
- Global Environment – global interactions have influences on businesses, war, and policies.
- Economic environment: In late 2008, the U.S. economy plunged into a deep financial crisis. The value of the
stock market plummeted, companies collapsed, and the unemployment rate soared. The president, Congress,
and the Federal Reserve took unprecedented steps—including a massive economic stimulus package—to
encourage a turnaround. The U.S. economy eventually recovered, but the entire world economy began to
stagger in early 2016 as economic instability in China caused frightening ripples around the globe.
Competitive environment: As global competition intensifies, leading-edge companies have focused on long-term
customer
satisfaction
as
never
before.
Technological environment: The recent digital technology boom has transformed business, establishing new
industries
and
burying
others.
Social environment: The U.S. population continues to diversify. Consumers are gaining power, and society has
higher standards for business behavior. Sustainability has become a core marketplace issue.
Global environment: The U.S. economy works within the context of the global environment. The worldwide
recession has dampened short-term opportunities, but China and India continue their rapid economic
development.
How are business trends impacting careers? – The fast pace of business today combined with a focus on ethics
and social responsibility will influence what careers are valued.
With automation picking up speed, many traditional career choices have become dead ends. But some things—including
empathy, creativity, change management, and great communication—can't be digitized. Having these skills can provide
you with personal and financial opportunity.
Chapter 2
Economy – A financial and social system. It
represents the flow of resources through society,
from production to distribution, to consumption.
Demand – The quantity of products that consumers
are willing to buy at different market prices.
Economics – The study of the choices that people,
companies, and government make in allocating those
resources.
Socialism – Economic system based on the principle
that the govt. should own and operate key
enterprises that directly affect public welfare, such as
utilities, telecommunications, and healthcare.
Macroeconomics- The study of a country’s overall
economic dynamics, such as the employment rate,
the gross domestic product, and taxation policies.
Communism – An economic and political system that
calls for public ownership of virtually all enterprises,
under the direction of a strong central government.
Microeconomics – Focuses on smaller economic
units such as individual consumers, families, and
individual businesses.
Mixed Economies – Economies that embody
elements of both planned and market-based
economic systems.
Economic System – A structure for allocating limited
resources.
Consumer Price Index (CPI) – A measure of
inflation that evaluates the change in the weightedaverage price of goods and services that the average
consumer buys each month.
Capitalism – An economic system-aka the private
enterprise or free market system- based on private
ownership, economic freedom, and fair competition.
Supply – The graphed relationship btwn price and
quantity from a supplier standpoint.
Producer Price Index (PPI) A measure of inflation that evaluates the change
overtime in prices that businesses pay
each other for goods and services on a weighted
average.
What is economics? – The study of the choices that people, companies, and governments make in allocating
society’s resources. —offers vital insights regarding the forces that affect every business on a daily basis. Understanding
economics helps businesspeople make better decisions, which can lead to greater profitability, both short-term and
long-term.
What is the free market system and the supply and demand relationship? – The free market allows for
consumers and producers to set the price for goods and services. Supply is the quantity of products that producers
are willing to offer for sale at diff market prices, and demand is the quantity of products that consumers are willing
to buy at diff market prices-they both have an inverse relationship.
Capitalism, also known as the free market system, is based on private ownership, economic freedom, and fair
competition. In a capitalist economy, individuals, businesses, or nonprofit organizations privately own the vast majority
of enterprises. As businesses compete against each other, quality goes up, prices remain reasonable, and choices
abound,
raising
the
overall
standard
of
living.
The interplay between the forces of supply and demand determines the selection of products and prices available in a
free market economy. Supply refers to the quantity of products that producers are willing to offer for sale at different
market prices at a specific time. Demand refers to the quantity of products that consumers are willing to buy at different
market prices at a specific time. According to economic theory, markets will naturally move toward the point at which
supply and demand are equal: the equilibrium point.
What tools are used to evaluate economic performance? – Gross Domestic Product (GDP) measures total value
of all final goods and services produced within a nation’s physical boundaries over a given period of time, adjusted
for inflation.
Employment Rate- The percentage of the labor force reflecting those who don’t have jobs and are actively seeking
employment.
Business Cycle- The periodic contraction and expansion that occur overtime in virtually every economy.
Inflation Rate- The rate at which prices are rising across the economy. The govt tracks the consumer price index
and the producer price index.
Productivity- The relationship btwn the goods and services that an economy produces and the inputs needed to
produce them. Calculated by: OUTPUT/INPUT
Since economic systems are so complex, no single measure captures all the dimensions of economic performance. But
each
measure
yields
insight
on
overall
economic
health.
Gross domestic product (GDP): The total value of all goods and services produced within a nation's physical boundaries
over
a
given
period
of
time.
Unemployment rate: The percentage of the labor force reflecting those who don't have jobs and are actively seeking
employment.
Business cycle: The periodic expansion and contraction that occur over time in virtually every economy.
Inflation rate: The rate at which prices are rising across the economy. The government tracks the consumer price index
and
the
producer
price
index.
Productivity: The relationship between the goods and services that an economy produces and the inputs needed to
produce them.
Chapter 3
Balance of Trade- A basic measure of the difference
in value btwn a nation’s exports and imports,
including goods and services.
Countertrade- International trade that involves the
barter of products for products rather than for
currency.
Trade Surplus- Overage that occurs when the total
value of a nation’s exports is higher than the total
value of its imports.
Foreign Outsourcing- Contracting with foreign
suppliers to produce products, usually at a fraction of
the cost of domestic production.
Trade Deficit –Shortfall that occurs when the total
value of a nation’s imports is higher than the total
value of its exports.
Importing- Buying products domestically that have
been produced or grown in foreign nations.
Exchange rates- A measurement of the value of one
nation’s currency relative to the currency of other
nations.
Exporting- Selling products in foreign nations that
have been produced or grown domestically.
Foreign Licensing- Authority granted by a domestic
form to a foreign firm for the rights to produce &
market its product or to use its trademark/patent
rights in a defined geographical area.
Foreign Franchising- A specialized type of foreign
licensing in which a firm expands by offering
businesses in other countries the right to produce &
market its products according to specific operating
requirements.
Direct investment- When firms either acquire
foreign firms or develop new facilities from the
ground up in foreign countries.
Joint Ventures- When 2 or more companies join
forces-sharing resources, risks, and profits, but not
actually merging companies-to pursue
specific
opportunities.
Partnership- A voluntary agreement in which 2 or
more people act as co-owners of a business for profit.
Strategic Alliance- An agreement btwn 2 or more
firms to jointly pursue a specific opportunity without
actually merging their businesses.
-Typically involves less formal, less encompassing
agreements than partnerships.
Sociocultural Differences- Differences
cultures in language, attitudes, and values.
among
Infrastructure- A country’s physical facilities that
support economic activity.
Protectionism- National policies designed to restrict
international trade, usually with the goal of
protecting domestic businesses.
Tariffs- Taxes levied against imports.
Quotas- Limitations on the amount of specific
products that may be imported from certain
countries during a given time period.
Embargo- A complete ban on international trade of a
certain item, or a total halt in trade with a particular
nation.
Free Trade- The unrestricted movement of goods
and services across international borders.
General Agreement on Tariffs and Trade (GATT)An international trade treaty designed to encourage
worldwide trade among its members.
World Trade Organization (WTO)- A permanent
global institution to promote international trade and
to settle international trade disputes.
World Bank- An international cooperative of 189
member countries, working together to reduce
poverty in the developing world.
International Monetary Fund (IMF)- An
international organization of 190 member nations
that promotes international economic cooperation &
stable growth.
North American Free Trade Agreement (NAFTA)Treaty among U.S., Mexico, and Canada that
eliminated trade barriers & investment restrictions
over a 15-year period beginning in 1994.
European Union (EU)World’s largest common market, composed of 27
European
Nations.
Why do nations trade? – Better access to factors of production, reduced risk, and an inflow of new ideas.
The benefits of international trade for individual firms include access to factors of production, reduced risk, and an
inflow of new ideas from foreign markets. Overall, industries tend to succeed on a global basis in countries that enjoy a
competitive advantage. A country has an absolute advantage in a given industry when it can produce more of a good
than other nations, using the same amount of resources, and a country has a comparative advantage when it can make
products at a lower opportunity cost than other nations. Unless they face major trade barriers, the industries in any
country tend to produce products for which they have a comparative advantage
How do we measure trade? – Balance of trade
Balance of payments
Exchange Rates
Measuring the impact of international trade on individual nations requires a clear understanding of balance of trade,
balance
of
payments,
and
exchange
rates.
Balance
of
trade:
A
basic
measure
of
the
difference
between
a
nation's
exports
and
imports.
Balance of payments: A measure of the total flow of money into or out of a country, including the balance of trade, plus
other
financial
flows,
such
as
foreign
loans,
foreign
aid,
and
foreign
investments.
Exchange rates: A measure of the value of one nation's currency relative to the currency of other nations. The exchange
rate has a powerful influence on the way global trade affects both individual nations and their trading partners
How do companies reach global markets? – Seek foreign suppliers through outsourcing and importing, seek
foreign customers through exporting, licensing, franchising, and direct investment.
Firms can enter global markets by developing foreign suppliers, foreign customers, or both. Two strategies for acquiring
foreign suppliers are outsourcing and importing. Key strategies for developing foreign markets include exporting,
licensing, franchising, and direct investment. Exporting is relatively low cost and low risk, but it offers little control over
the way the business unfolds. Direct investment, at the other end of the spectrum, tends to be high cost and high risk,
but it offers more control and higher potential profits.
What are the barriers to international trade? – Sociocultural differences- Diff. among countries in language,
attitude, & value.
Economic differences- population, per capita income, economic growth rate, currency exchange rates, stage of
economic development.
Legal/political differences- International businesses must comply with international legal standards, the laws of
their own countries, and the laws of their host countries.
Most barriers to trade fall into the following categories: sociocultural differences, economic differences, and
legal/political differences. Each country has a different mix of barriers. Often countries with the highest barriers have
the least competition, which can be a real opportunity for the first international firms to break through. The best way to
surmount trade barriers is to cultivate a deep understanding of a country before beginning business. And since
conditions change rapidly in many nations, learning and responding are continual processes.
What are the benefits and criticisms of the free trade movement?- The free trade movement has raised the
global standard of living, lowered prices, and expanded choices for millions of people, but critics are troubled by the
growing economic gap between the haves and the have-nots, worker abuse, large-scale pollution, and cultural
homogenization.
Over the past two decades, the emergence of regional trading blocs, common markets, and international trade
agreements has moved the world economy much closer to complete free trade. Key players include:
GATT
and
The
The
WTO
World
The
The
the
International
North
American
European
Bank
Monetary
Free
Fund
Trade
Agreement
Union
(IMF)
(NAFTA)
(EU)
The free trade movement has raised the global standard of living, lowered prices, and expanded choices for millions of
people, but critics are troubled by the growing economic gap between the haves and the have-nots, worker abuse,
large-scale pollution, and cultural homogenization.
Chapter 4
Ethics- Refers to sets of beliefs about right & wrong,
and good & bad.
Business Ethics- The application of right and wrong,
good & bad in a business setting.
Universal Ethical Standards- Ethical norms that
apply to all people across a broad spectrum of
situations.
Ethical Dilemma- A decision that involves a conflict
of values; every potential course of action has some
negative consequences.
Code of Ethics- A formal, written document that
defines the ethical standards of an organization and
gives employees the information they need to make
ethical decisions across a range of situations.
Whistle Blowers- People who report illegal or
unethical behavior.
Social Responsibility- The obligation of a business
to contribute to society.
Stakeholders- Any groups that have a stake-or a
personal interest- in the performance and actions of
an organization.
Consumerism- A widely accepted social movementsuggests that consumer rights should be the starting
point.
Corporate Philanthropy- Includes all business
donations to nonprofit groups, including both money
& products.
Cause Related Marketing- This involves a
partnership btwn a business and a nonprofit,
designed to spike sales for the company and raise
money for the nonprofit.
Corporate Responsibility- Relates closely to
philanthropy but focuses on the actions of the
business itself rather than the donations of money
and time.
Sustainable Development- Doing business to meet
the needs of this generation without harming the
ability of future generations to meet their needs.
Social Audit- A systematic evaluation of how well a
firm is meeting its ethics and social responsibility
goals.
What is ethics? What are the universal ethics standards? – Ethics refers to the beliefs about right & wrong,
good & bad. Universal Ethical Standards are ethical norms that apply to all people across a broad spectrum of
situations.
Ethics is a set of beliefs about right and wrong, good and bad. Who you are as a human being, your family, and your
culture all play a role in shaping your ethical standards. The laws of each country usually set minimum ethical standards,
but truly ethical standards typically reach beyond minimum legal requirements. Despite some significant cultural and
legal differences, people around the globe tend to agree on core values, which can serve as a starting point for universal
ethical standards across a wide range of situations: trustworthiness, respect, responsibility, fairness, caring, and
citizenship.
How does ethics relate to the individual and the organization? – Individual- your personal needs, family,
culture, & religion influence your value system. Your personality traits- self-esteem, self-confidence, independence,
sense of humor, and empathy.
Organization- Influence starts at the top, & actions matter more than words. CEOs must communicate their
personal commitment to high ethical standards & drive that message to employees. Organizational culture has
most ethical influence. Displays of ethics-related actions & accountability for actions.
-Ethical choices begin with ethical individuals. To help people make good choices, experts have developed frameworks
for reaching ethical decisions. While the specifics vary, the core principles of most decision guides are similar:
Do you fully understand each dimension of the problem?
Who would benefit? Who would suffer?
Are the alternative solutions legal? Are they fair?
Does your decision make you comfortable at a "gut feel" level?
Could you defend your decision on the nightly TV news?
Have you considered and reconsidered your responses to each question?
While each person is responsible for his or her own actions, the organization can also have a dramatic influence on the
conduct of individual employees. An ethical culture—which includes ethical leadership from top executives, and
accountability at every level of the organization—has an outsized impact on individual conduct. But formal ethics
programs also play a crucial role. A written code of ethics—a document that lays out the values and priorities of the
organization—is the cornerstone of a formal ethics program. Other key elements include ethics training and a clear
enforcement policy for ethical violations.
What is social responsibility and how does it impact stakeholder groups? Social responsibility is the
obligation of a business to contribute to society.
-Balance their needs & priorities as effectively as possible, with an eye towards building their business over the
long term. Social responsibility is the obligation of a business to contribute to society. Enlightened companies carefully
consider the priorities of all stakeholders—groups who have an interest in their actions and performance—as they make
key decisions. Core stakeholder groups for most businesses are listed below, along with key obligations.
Employees: Treat employees with dignity, respect, and fairness. Ensure that hard work and talent pay off. Help workers
balance emerging work-life priorities.
Customers: Provide quality products at a fair price. Ensure that customers are safe and informed. Support consumer
choice and consumer dialogue.
Investors: Create an ongoing stream of profits. Manage investor dollars according to the highest legal and ethical
standards. Support full disclosure.
Community: Support nonprofit groups that improve the community and fit with your company. Minimize the negative
environmental impact of your business.
What is the role of social responsibility in the global arena? – Meet legal standards- Employers must comply
with laws that include equal opportunity, workplace safety, minimum-wage and overtime requirements, protection
from sexual harassment, and family and medical unpaid leaves. Create a workplace environment that respects the
dignity and value of each employee. Ensure hard work, commitment, and talent pay off. Move beyond minimal
safety requirements to establish proactive protections, respond to the search for a balance btwn work and
personal life.
Establish codes of conduct for their vendors, setting clear policies for human rights, wages, safety, & environmental
impact.
Social responsibility becomes more complex in the global arena, largely due to differences in the legal and cultural
environments. Bribery and corruption are key issues, along with concern for human rights and environmental standards.
How do companies evaluate their efforts to be socially responsible?- By evaluating a “ double bottom line”,
one that accounts for traditional financial indicators, such as earnings, & one that accounts for social-responsibility
indicators, such as community involvement.
Many companies—even some entire industries—monitor themselves. The process typically involves establishing
objectives for ethics and social responsibility and then measuring achievement of those objectives on a systematic,
periodic basis. Other groups play watchdog roles as well. Key players include activist customers, investors, unions,
environmentalists, and community groups.
Chapter 5
Communication- The transmission of information
btwn a sender and a recipient.
physical, language, body language, cultural,
perceptual, & organizational barriers.
Noise- Any interference that causes the message you
send to be different from the message your audience
understands.
Intercultural Communication- Communication
among people with different cultural backgrounds.
Communication Barriers- Obstacles to effective
communication, typically defined in terms of
Nonverbal Communication- Communication that
does not use words. Common forms of nonverbal
communication include gestures, posture, facial
expressions, tone of voice, and eye contact.
Active Listening- Attentive listening that occurs
when the listener focuses their complete attention on
the speaker.
Communication Channels- The various ways in
which a message can be sent, ranging from one-onone in-person meetings to internet message boards.
Bias- A preconception about members of a particular
group. Common forms of bias include gender bias,
age bias, race, ethnicity, or nationality bias.
Active Voice- Sentence construction in which the
subject performs the action expressed by the verb.
(e.g.The accountant did the taxes). The active voice
works better for the vast majority of business
communication.
Passive Voice- Sentence construction in which the
subject does not do the action expressed by the verb;
rather the subject is acted upon (e.g. The taxes were
done by our accountant). The passive voice tends to
be less effective for business communication.
Dynamic Delivery- Vibrant, compelling presentation
delivery style that grabs & holds the attention of the
audience.
Why is excellent business communication important? – Can dramatically boost your chance for success, while
poor communication skills can bury even the most talented people.
Effective communication happens when relevant meaning is transmitted from the sender to the receiver. Skillful
communicators save time and money, and develop deeper, more trusting relationships with their colleagues. Anything
that interferes with the correct transmission of your message is a barrier to communication. Barriers can be physical,
verbal, nonverbal, cultural, perceptual, or organizational. To communicate effectively, you should be able to identify and
surmount any barriers that stand between you and your audience. The result? Greater chance of long-term success in
every aspect of business.
What are the key elements of nonverbal communication?- Eye contact
Tone of voice
Facial Expressions
Gestures & Posture
The key elements of nonverbal communication include eye contact, tone of voice, facial expressions, gestures, and
posture. Studies suggest that, on average, only 7% of meaning during face-to-face communication comes from the
verbal content of the message, which magnifies the importance of every element of nonverbal communication. Active
listening also plays an influential role. The starting point is empathy: a genuine attempt to understand and appreciate
the speaker. You should signal your focus to the speaker through verbal cues, such as "I understand your point," and
nonverbal cues, such as nods, eye contact, and leaning forward. The result will be better relationships and better
information for you.
What are the different communication channels and what makes them effective?- Texting, memos/reports,
Email, Voicemail, Telephone Conversation, Videoconferencing, In person presentation, face-to-face meeting
-Meeting the needs of your audience will give you a crucial edge in developing a message that works.
ommunication channels differ significantly in terms of richness: the amount of information that they offer the audience.
The spectrum ranges from written communication at the low end to face-to-face meetings at the high end. The best
choice depends on your objective, your message, and your audience. To ensure that your communication achieves your
goals, always consider the needs and expectations of your audience. If you tailor each message with the audience in
mind, you'll give yourself a competitive edge in terms of the time, attention, and response of your audience.
How do you choose the right words for effective communication?- Consider: Expectations, Education,
Profession
How do you compose effective business memos, letters and emails?- Strike the right tone
Don’t make grammar goofs, Use block paragraphs, Use headings and bulleted lists whenever possible.
How do you deliver successful verbal presentations?- Opening- grab the attention of the audience
Body- 3 key points
Close- summarize key points
Questions, Visual aids, Handling nerves and hostility, Incorporating humor, Delivery.