economics unit 2

Question 1

what is scarcity and choice?

Answer 1

Economics=scarcity and choice. if you have scarcity you need to make choices.

Question 2

tradeoff

Answer 2

when you choose one thing over the other. sacrifice.

Question 3

opportunity cost

Answer 3

the cost of what is being given up by a decision one makes

Question 4

Production Possibilities Curve

Answer 4

Show the maximum number of goods or services that can be produced using limited resources

Question 5

capitalism

Answer 5

Resources and means of production are privately owned, and prices, production, and the distribution of goods are determined mainly by competition in a free market

Question 6

Private enterprise

Answer 6

An economy in which the production of goods and services is carried out by businesses owned and operated by people risking their investment in the hope of making a profit

Question 7

competition

Answer 7

The effort of the persons or firms to attract business by offering the most favorable

Question 8

Profit motive

Answer 8

The gain after all the expenses are subtracted from the amount received

Question 9

Private Property

Answer 9

Ownership of property by individuals or corporations.

Question 10

Consumer Sovereignty

Answer 10

Consumers dictate the types, the quality, and quantity of the goods and services provided

Question 11

what is The Circular Flow of Money

Answer 11

The exchange of money, goods, and services between private business, consumers, and government

Question 12

what does the Circular Flow of Money do?

Answer 12

a.Money passes from the households (consumers) to the business.
b.Some of that money then goes to the private business while taxes go to the government.
c.The business uses its profit to produce more products where it hires more workers.
d.The households supply the business with labor.
e.The government uses the money to provide social necessities to the public.
f.The public labor passes that money to the business.

Question 13

Externalities

Answer 13

A side effect

Question 14

Externalities Positive

Answer 14

third party benefits

Question 15

Externalities Negative

Answer 15

cost of production or consumption

Question 16

Advantages of Expansion

Answer 16

a. Division of labor leads to specialization.
b. Can obtain more goods at lower costs
c. This leads to more discounts such as better credit, better opportunities for investors, wider customer base

Question 17

disadvantages of Expansion

Answer 17

a. A shortage of cash bc you may need to borrow money to buy new premises or equipment to expand.
b. Increased capital requirements because a larger business requires a larger workforce, more facilities or equipment, and often more investment.
c. Loss of control because Larger businesses mean more management between different locations. Resulting in higher staff turnover, damaging your customer relationships.
d. Compromised productivity and quality from due to a lack of resources. Management, staff, and even your machines may be unable to keep up with the excess workload.

Question 18

The Law of Diminishing Returns

Answer 18

a. The output per worker or machine begins to decline.
b. The more you make, the less profit per item.

Question 19

The Law of Diminishing Returns- 3 causes

Answer 19

1. Inflation
2. Decreased purchasing power- people enter the workforce because of increased population, competition for jobs increases, and wages go down and people no longer want to work on farms.
3. The power of completion - hire cheap labor, buy cheap ingredients, put up or rent a cheap location.

Question 20

Sole Proprietorship

Answer 20

• A business owned and operated by one person.

Question 21

Sole Proprietorship advantages

Answer 21

1. Easy and inexpensive to create.
2. The owner makes all business decisions.
   3.The owner receives all the profit.
3. Least regulated form of business ownership.
   5.The business itself pays no taxes.

Question 22

Sole Proprietorship disadvantages

Answer 22

1.The owner has unlimited liability for all debts and actions of the business. The debts of the business may be paid from the personal assets (possessions) of the owner.
2. Difficult to raise capital.
3. A sole proprietorship is limited by his/her skills and ability.
4. The death of the owner automatically dissolves the business.

Question 23

Partnership

Answer 23

A form of business ownership in which two or more share the assets, liabilities (debts), and profits

Question 24

Partnership advantages

Answer 24

1. Shared decision-making and management responsibilities.
2. Easier to raise capital than in a sole partnership.
3. Business losses are shared by all partnerships.

Question 25

Partnership disadvantages

Answer 25

1. Partnerships may lead to disagreements. 2. Some entrepreneurs are not willing to share responsibilities and profits. 3. Some entrepreneurs fear being held legally liable for the errors of their partners. 4.Each owner has unlimited liability.

Question 26

Corporation

Answer 26

A business is owned by shareholders, and legally operates apart from its owners.

Question 27

Shares of stock

Answer 27

a unit of ownership in a company

Question 28

Who owns a corporation

Answer 28

the shareholders

Question 29

Advantages of a corporation

Answer 29

1. Can raise money by issuing shares of stocks. 2. Offers owners Limited liability - owners are responsible for up to the amount of their investments. 3.People can easily enter or leave the business by buying or selling their shares of stock. 4. The business can hire experts to professionally manage each aspect of the business.

Question 30

disadvantages of a corporation

Answer 30

1.Legal assistance is needed to start a corporation. 2.Start-ups are costly. 3.Double taxation - corporation's profits are taxed and all shareholders dividends are taxed.

Question 31

Officers v Board of Directors

Answer 31

1. The people who run the day-to-day activities of the corporation are called officers. 2. Shareholders elect the Board of Directors who set long-range goals and keep shareholders informed of significant developments.

Question 32

Types of corporations

Answer 32

1. Limited Liability Company (LLC) -provides limited liability and tax advantages. 2. Nonprofit Corporation- reinvest all profits back into the business. 3.S Corporation- corporation with less than 75 shareholders that is taxed like a sole proprietorship or partnership.

Question 33

Franchise

Answer 33

a legal agreement that gives an individual the right to market a company's products or services in a particular area.

Question 34

Franchisee

Answer 34

a person who purchases a franchise agreement.

Question 35

Franchisor

Answer 35

the person or company who sells a franchise.

Question 36

Initial franchise fee

Answer 36

the fee the franchise owner pays in return for the right to run the business

Question 37

Advantages of purchasing a franchise business

Answer 37

1. An established product or service is being provided. 2. Franchisors often offer management, technical, and other assistance. 3. Equipment and supplies may be less expensive. 4. Guarantee of consistency attracts customers.

Question 38

Disadvantages of purchasing a franchise business

Answer 38

1. The cost of franchises may be high, which can reduce profits. 2. Franchise owners are limited in the decisions they can make regarding the business. 3. The performance of other franchises impact on the franchisee. 4. The franchise agreement may be terminated by the franchisor.

Question 39

command economy

Answer 39

everything by the government

Question 40

market economy

Answer 40

by private companies so everything is made good to make competion

Question 41

mixed economu

Answer 41

public and private

Question 42

everything under thhe graph is?

Answer 42

underutilized

Question 43

everything over or off the graph is?

Answer 43

impossible

Question 44

How is profit determined

Answer 44

revunue-costs

Question 45

Which is NOT an advantage for a franchisor

Answer 45

a limited amount of competition for each store