Chapter 5- The Free Enterprise System
Fill in the blanks as you watch the presentation the free enterprise system.
Term
Free enterprise system
Patent
Trademark
Copyright
Competition
Price competition
Nonprice competition
Monopoly
Business risk
Profit
Supply
Demand
Domestic business
Global business
For-profit business
Nonprofit organization
Public sector
Private sector
Industry
Derived demand
Definition
Wholesalers
Retailers
Production
Management
Finance
Accounting
Assignment #1: Reading Activity 5.1
I.
II.
III.
IV.
V.
VI.
VII.
VIII.
_____________ ____________ rights are protected in a free enterprise system.
There are four categories under these rights:
a. With a(n) ________ on a(n) _______________, you alone own the rights to that
item or idea.
b. A(n) ______________ is a word, name, or symbol that cannot be used by anyone
else.
c. Anything that is authored by an individual such as music, artwork, and writings is
covered under ____________ law.
d. Coca Cola’s formula for Coke is an example of a(n) ________ _____________.
The ____________ ___________ strategy is based on the assumption that
consumers will buy the products that cost the least.
The law of _____________ states that price and quantity move in the same
direction.
The law of _______________ is the economic principle that price and consumer
interest in making a purchase move in opposite directions.
When profits decline, the first thing many businesses do is _________ __________
___________.
Businesses in free enterprise systems try to attract new customers and keep old
ones. Other businesses try to take those customers away. This process is called
___________.
Same day delivery service offered by dot-com companies is an example of
_____________ ______________.
Assignment #2: Enrichment Activity 5.1
1. A(n) _____________ _____________ encourages people to start and operate their own
businesses, without government involvement.
2. When one firm controls the market for a given product, a(n) ______________ exists.
3. If you have a(n) ________________, you alone own the rights to the item or idea.
4. _______________ forces businesses to produce better quality goods and services as
they struggle to gain customers.
5. The potential for loss or failure is known as __________ ___________.
6. ____________ refers to customer willingness and ability to buy products.
7. Factors such as service, financing, and reputation are all part of _______________.
8. After all costs and expenses have been paid, the money earned by a business is called
a(n) _________________.
9. A(n) ______________ is a word, name, symbol, sound, or color that identifies a good or
service and cannot be used by anyone but the owner.
10. A store that usually has prices that are five percent higher than its competitors is not
engaging in _____________ ______________.
Assignment #3: Reading Activity 5.2
1. Highlight the main idea.
a. Major functions of business are production or procurement, marketing,
management, and finances.
b. The purpose of a business will determine its success or failure.
c. SWOT analysis is necessary for all businesses.
2. Which of these details does not support the main idea?
a. Production is a function of business.
b. The success of a business is dependent on how well things are managed.
c. An economic benefit of successful firms is increased income.
3. Which of these details does not support the main idea?
a. Service-related businesses function in both consumer and industrial markets.
b. Supply and demand interact to create price.
c. All related marketing activities support the buying and selling functions.
4. Which statement best summarizes the text?
a. Competition is an essential part of any business
b. Businesses can be best classified on the basis of size and scope, purpose, and
place within an industry.
c. A SWOT analysis will give you the five “rights” of merchandising.
5. The key term production means
a. The process of creating, expanding, manufacturing, or improving.
b. The process of placing.
c. The process of problem solving.
Assignment #4: Enrichment Activity 5.2
Directions: Use the information contained in your text to evaluate the accuracy of the following
statements. Type True or False. If the statement is false, explain why.
1. Domestic businesses limit their scope of operation to one country, thus limiting their
opportunities for growth.
2. A for-profit business does not usually have to pay taxes on its income.
3. Businesses not affiliated with government agencies are part of the private sector.
4. For the most part, wholesalers cater to the consumer market.
5. An industry consists of a group of establishments who handle the same product or
group of products.
Assignment #5: Competition the Old Fashioned Way
An 80-year-old tool company, Snap-On Tools has succeeded because of a unique and extremely
effective way of doing business. Snap-On Tools makes and sells tools and equipment for the
automotive industry. Rather than sell through traditional retail stores, Snap-On’s franchises sell
out of big white trucks emblazoned with the red Snap-On logo. Each truck is fully stocked with
tools and equipment, a fully mobile retail establishment. Each franchise owner drives to service
stations, car dealerships, independent garages, and places where car enthusiasts work. The
franchise owner takes the store to them, building a strong relationship with his customers.
Although Snap-On’s tools are generally more expensive than their competitor’s tools, Snap-On
wins loyal customers by offering high-quality tools and unparalleled customer service. Besides
the freedom of being able to shop at work, Snap-On customers can receive interest-free credit
on many sales and interest-bearing loans for expensive equipment. In addition, the company,
which prides itself on its service and vision, continues to increase its product line to meet the
needs of its customers. The company has moved beyond wrenches to products such as
computerized diagnostic systems.
1. How would you describe Snap-On Tools’ competitive strategy-does it fit a price or
nonprice model? Explain.
2. How are the free enterprise “freedoms” of ownership and profit depicted in this article
on Snap-On Tools?
3. Is there any risk for the franchised dealers who purchase the truck, tools, and
equipment from Snap-On? Explain your answer.
Assignment #6: E-Commerce Security Consultant
Role Play Imagine you are an employee of a specialty retail establishment that sells some
products online. Your employer has noticed a decline in online sales recently. After spending a
lot of money for the design and maintenance of the company’s Web site, your employer is
concerned. Since you have direct contact with online customers, your employer (judge) wants
your input on whether to keep the online business.
Directions Role-play a meeting with your employer (judge) during which you discuss the pros
and cons of keeping the online business. To prepare for the meeting, use your knowledge of ecommerce to outline the risks and solutions to the problems.
Organize your thoughts around the performance indicators noted below. Use these
performance indicators to jot down your ideas during the preparation period.
Assessment You will be evaluated on how well you meet the following performance indicators:
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Explain the nature of risk management
Identify ways that technology impacts business
Explain key factors in building a clientele
Demonstrate problem-solving skills
Explain routine security precautions
Assignment #7 Improving Vocabulary
Directions Use the following tips to help improve your vocabulary. Then complete the following
sentences using the correct word from the list below.
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Improving Vocabulary
Most vocabulary words are learned from context. The more words you are exposed
to, the better vocabulary you will have.
Relate new words to words you already know.
Get in the habit of looking up words you do not know.
business risk
competition
demand
supply
global business
equilibrium
public sector
patent
private sector
profit
domestic business
nonprofit organization
1. A state of ______________ exists when the number of products supplied equals the
amount of product demanded.
2. It would be a big ______________ to spend more money on a new advertising campaign
than the campaign would generate.
3. She worries about ______________ because a clothing store opened up near hers.
4. When Joe took a job with the local government, it was his first experience working in
the ______________.
5. The company was about to become a ______________ when it began exporting
products to Costa Rica.
6. He made a nice ______________ when he sold his car for $1,200 more than what he
paid for it.
7. They realized ______________ was down for their product when they ran out of room
in the warehouse.
8. The board members decided they did not want to sell things to overseas, they were
happy being a ______________.
Assignment #8 Improving Vocabulary
Directions Study the Test-Prep Tips and think about how you can use them to improve your test
scores. Write a sentence or two to answer each of the following questions about the main ideas
in Chapter 5.
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Test-Prep Tips
Review tests you have already taken for end-of-chapter or end-of-term tests.
Read any teacher comments from old tests and homework.
Correct any questions you missed on previous tests and homework.
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2.
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4.
5.
6.
What are some ways to protect intellectual property?
Explain why competition is an essential part of a free enterprise system.
What are some of the factors businesses use in non-price competition?
How are the prices and the quantities of goods produced determined? Explain.
What is the difference between a domestic and global business?
What are the five “rights” of merchandising?
Assignment #9 Practice Test
Directions Take the practice test. Choose the word or phrase that best completes the sentence
or answers the question.
1. Demand for consumer goods and their respective consumer trends
a. Create derived demand in the industrial market.
b. Are not related to demand in the industrial market.
c. Are only useful to businesses in the consumer market.
d. Create problems with suppliers in the industrial markets.
2. Which of the following are economic benefits of profitable businesses?
a. The value of a company’s stock goes down
b. The demand for a company’s product goes down
c. Profitable companies attract competition
d. Profitable businesses can cut back on research and development
3. When evaluating the production function during a SWOT analysis, you would look for
a. Cost
b. Innovation
c. Liabilities
d. Demand of the product
4. What are four main functions of an organization’s operation?
a. Production, marketing, management, and finance
b. Accounting, production, promotion, and sales
c. Management, accounting, finance, and advertising
d. Marketing, management, accounting, and finance
5. Intellectual property rights for inventions are known as
a. Trademarks
b. Copyrights
c. Design plans
d. Patents
6. A business that uses the money it makes to fund a cause is called a
a. Global business
b. Domestic business
c. Nonprofit business
d. For profit business