See pages 29-32

Exam 1 – Essay Question Study Guide
Sample Questions:
1. What are the factors of production? Explain & give examples.
- See page 11-12
The four basic inputs required for effective operation of any economic
- Natural resources – all products useful in their natural state, including
land, forests, mineral deposits, etc.
- Capital – technology, machinery, equipment, tools, information, money
- Human resources – anyone who works, including both physical labor and
intellectual contributions
- Entrepreneurship – the willingness to take risks to create and operate a
2. What is the private enterprise system and the rights critical to its operation?
- See pages 13 and 14
An economic system that rewards firms based on how well they match and
counter the offerings of competitors to serve the needs and demands of
The basic rights critical to the operation of capitalism are:
- The right to private property
- The right to all profits (after taxes) earned by their activities
- The freedom of choice for employment, purchases & investments
- Fair competition by allowing the public to set rules for competitive
3. How is the US labor pool changing?
- See pages 29-32
- Older
- Labor pool is shrinking
- Population is becoming more diverse
- People are more mobile, will re-locate
- People change jobs more frequently
- Changing nature of the employer/employee relationship
4. What are business ethics, why are they important, and what kinds of on-thejob ethical dilemmas that someone might face?
- See page 49
The standards of conduct and moral values governing actions and
decisions in the work environment. Kinds of ethical dilemmas include:
- Conflicts of interest – an action benefiting one person has the potential to
harm another
- Honesty & Integrity – Telling the truth and adhering to ethical principals
Loyalty vs. Truth – Deciding between loyalty to the company and
truthfulness in business relationships
Whistle-Blowing – An employee’s disclosure to the media or gov’t
authorities of illegal, immoral, or unethical practices.
5. What are a business’s social responsibilities, and to whom is it responsible?
- See pages 60 – 64
Management’s acceptance of the obligations to consider profit, consumer
satisfaction, and societal well-being of equal value in evaluating the firm’s
performance. Business’s social responsibilities include the following:
- To investors and the financial community – fair return, or profit
- To employees – training, a safe workplace
- To customers – safe products that provide value
- To the general public – the environment, public health, quality of
These responsibilities should be evaluated on a periodic basis through a
social audit
6. What are some of the responsibilities that companies have toward their
- See page 67
- See list of consumer rights
7. List and describe the levels of involvement and organization structures that
allow a company to engage in business on a global basis.
- Levels of Involvement:
i. Exporting or importing
ii. Entering into contractual agreements like franchising, licensing,
and subcontracting deals
iii. Direct investment in foreign markets through acquisitions, joint
ventures or establishing overseas divisions.
- International Organization Structures:
i. Independent Agents
ii. Licensing Agreements
iii. Branch Offices
iv. Strategic Alliances
v. Direct Investment
- See pages 145-155