Ch 6 + 8

Question 1

The monetary value of a product

Answer 1

Price

Question 2

System of allocating goods and services without prices

Answer 2

Rationing

Question 3

A simplified version of a complex behavior expressed in the form of an equation, graph, or illustration.

Answer 3

Economic model

Question 4

Price where quantity supplied equals quantity demanded

Answer 4

Equilibrium Price

Question 5

Situation where quantity supplied is greater than quantity demanded at a given price

Answer 5

Surplus

Question 6

Situation where quantity supplied is less than quantity demanded at a given price

Answer 6

Shortage

Question 7

The highest legal price that can be charged for a product.

Answer 7

Price ceiling

Question 8

The lowest legal price that can be paid for a product.

Answer 8

Price Floor

Question 9

A requirement that an owner is personally and fully responsible for all losses and debts of a business; applies to proprietorships and general partnerships.

Answer 9

Unlimited Liability

Question 10

An unincorporated business owned and operated by two or more people who share the profits and have unlimited liability for the debts and obligations of the firm.

Answer 10

Partnership

Question 11

A form of business organization recognized by law as a separate legal entity with all the rights ad responsibilities of an individual, including the right to buy and sell property, enter into legal contracts, and sue and be sued.

Answer 11

Corporation

Question 12

Certificate of ownership in a corporation; can be either common or preffered stock.

Answer 12

Stock

Question 13

Check paid to stockholders, usually quarterly, representing a portion of corporate profits

Answer 13

Dividend

Question 14

Formal contract to repay borrowed money and interest on the borrowed money at regular future intervals.

Answer 14

Bond

Question 15

Payment made for the use of borrowed money, usually paid at periodic intervals for long-term bonds or loans.

Answer 15

Interest

Question 16

Requirement in which a corporation, but not its owner, is responsible for all losses and debts of the bussinesses.

Answer 16

Limited Liability

Question 17

Business investment that involves renting or leasing another successful business model

Answer 17

Franchise

Question 18

Measure of business profits determined by subtracting all expenses, including taxes from revenues

Answer 18

Net Income

Question 19

Total amount of new funds the business generates from operations; broadest measure of profits for a firm because it includes both net income and non cash charges

Answer 19

Cash Flow

Question 20

Combination of firms producing the same kind of products

Answer 20

Horizontal merger

Question 21

Combination of firms involved in different steps of manufacturing, marketing, or sales.

Answer 21

Vertical merger

Question 22

Firm with four or more business making unrelated products, with no single business responsible for the majority of its sales.

Answer 22

Conglomerate

Question 23

Provider of investment funds to a start-up business in exchange for partial ownership of the business.

Answer 23

Venture Captalist

Question 24

Using social networking to appeal to potential investors

Answer 24

Crowdfunding

Question 25

Economic institute that operates like a business but does not seek financial gain; school, churches, and community-service organizations.

Answer 25

Nonprofit Organization

Question 26

Nonprofit service cooperative that accepts deposits, make loans, and provides other financial services.

Answer 26

Credit Union

Question 27

Process of negotiation between union and management representatives over pay, benefits, and job-related matters.

Answer 27

Collective Bargaining

Question 28

Nonprofit organization of local businesses whose purpose is to promote their interests.

Answer 28

Chamber of Commerce

Question 29

Advantages of prices? (4)

Answer 29

Neutrality Flexibility Familarity Efficiency

Question 30

What are the 2 goals of Price Ceiling?

Answer 30

To protect buyers from paying overly high prices. To save resources for other needs, such as war.

Question 31

What are the 2 goals of Price Floors?

Answer 31

To protect businesses during times of difficulty. To stabilize prices and incomes from certain businesses.

Question 32

How do prices help allocate resources between markets?

Answer 32

By signaling to producers and consumers what goods and services are in high demand and what resources are scarce. Prices adjust accordingly, and resources are allocated to where they are most valued.

Question 33

How do Markets Talk?

Answer 33

Gold Prices Rise Stock Prices fall Oil Prices Rise

Question 34

How do surplus and shortage help establish Equilibrium?

Answer 34

By allowing businesses to observe and determine how much they should adjust the prices of their goods

Question 35

Advantages of Corporations?

Answer 35

Ease of raising financial capital Provides limited liability Unlimited life Ease of transferring ownership

Question 36

Disadvantages of Corporations?

Answer 36

Double taxation of corporate profits Difficulty and expense of getting a charter (getting legally established) Owners have little voice in how the business is run Subject to more government regulation than other forms of business

Question 37

Advantages of partnerships?

Answer 37

Ease of Start up Ease of management Lack of separate taxes on a partnership’s income Can easily attract financial capital more easily than proprietorship More efficient operation due to their slightly larger size

Question 38

Disadvantages of Partnerships?

Answer 38

Each partner is fully responsible for the acts of all other partners. In limited partnership, each partner is responsible for the debts of the business, but only to his or her investment in the firm. Limited life. Potential for conflict between partners.

Question 39

Advantages of Proprietorship?

Answer 39

Easy to start up. Ease of management. Owners keep all profits. Not required to pay separate business income taxes. Psychological satisfaction of being your own boss. Easy to get out of business

Question 40

Disadvantages of Proprietorships?

Answer 40

Unlimited liability. Difficulty of raising financial capital. Small size Limited managerial experience. Difficulty of attracting qualified employees. Limited life.

Question 41

The three types of Cooperatives?

Answer 41

Consumer Service Producer

Question 42

A non-profit service cooperative that accepts deposits, makes loans, and provides other other services.

Answer 42

Credit Union

Question 43

Large and have a global presence and a diversified portfolio of products and services.

Answer 43

Multinational Corporation as Conglomerates

Question 44

What are the reasons for a merge?

Answer 44

Faster Growth Synergy - greater affect from combination Economies of scale - more profitable Diversification Elimination of rivals Change or loss of Corporate identity

Question 45

Relation between dividend and stockholders

Answer 45

Dividend is what a company pays its stockholders

Question 46

One person owns and runs the business

Answer 46

Sole Proprietorship

Question 47

A business owned by two or more people

Answer 47

Partnership

Question 48

A business legally recognized as a separate entity.

Answer 48

Corporation