Business A changing World - Test Bank

Chapter 01 - The Dynamics of Business and Economics True / False Questions 1. Products have tangible attributes only. FALSE Chapter 01 The Dynamics of Business and Economics Products can also be a service, which has intangible attributes. Blooms: Remember Difficulty: Easy Learning Objective: 01-01 Define basic concepts such as business, product, and profit. Topic: 01-02 The Nature of Business 2. The goal of business activities is to earn a profit. TRUE Without profit, businesses will go out of business. Blooms: Remember Difficulty: Easy Learning Objective: 01-01 Define basic concepts such as business, product, and profit. Topic: 01-03 The Goal of Business 3. Non-profit organizations, such as the Canadian Red Cross, do not have to engage in management, marketing, or finance activities. FALSE Non-profit organizations do not accumulate profits, but they do provide goods and services to consumers. Blooms: Understand Difficulty: Medium Learning Objective: 01-01 Define basic concepts such as business, product, and profit. Topic: 01-03 The Goal of Business 1-1 Chapter 01 - The Dynamics of Business and Economics 4. Organizations such as the Special Olympics have two fundamental purposes: to earn a profit and to accomplish social objectives. FALSE Non-profit organizations, such as the Canadian Red Cross, Special Olympics, and other charities and social causes, do not have the fundamental purpose of earning profits, although they may provide goods or services and engage in fundraising. Blooms: Apply Difficulty: Easy Learning Objective: 01-01 Define basic concepts such as business, product, and profit. Topic: 01-03 The Goal of Business 5. Profit is what it costs to make and sell a product. FALSE Profit is the difference between what it costs to make and sell a product and what a customer pays for it. Blooms: Remember Difficulty: Easy Learning Objective: 01-01 Define basic concepts such as business, product, and profit. Topic: 01-03 The Goal of Business 6. Businesses have the right to keep and use their profits as they choose, without limitations. FALSE Within legal limitations, businesses have the right to keep and use their profits as they choose. Blooms: Remember Difficulty: Easy Learning Objective: 01-01 Define basic concepts such as business, product, and profit. Topic: 01-03 The Goal of Business 7. Earning profits contributes to society by providing employment, which in turn provides money that is reinvested in the economy. TRUE In addition, profits must be earned in a responsible manner. Blooms: Understand Difficulty: Medium Learning Objective: 01-01 Define basic concepts such as business, product, and profit. Topic: 01-03 The Goal of Business 1-2 Chapter 01 - The Dynamics of Business and Economics 8. Finance is concerned with obtaining money and using it effectively. TRUE Financial resources must be managed effectively for the business to succeed. Blooms: Remember Difficulty: Easy Learning Objective: 01-02 Identify the main participants and activities of business and explain why studying business is important. Topic: 01-04 The People and Activities of Business 9. Owners have little responsibility to provide funds for the operation of the business. FALSE The primary responsibility of the owners is to provide financial resources for the operation of the business. Blooms: Remember Difficulty: Medium Learning Objective: 01-02 Identify the main participants and activities of business and explain why studying business is important. Topic: 01-04 The People and Activities of Business 10. Managers coordinate resources to achieve organizational objectives. TRUE Managers coordinate, organize, and motivate employees to achieve the business's goals. Blooms: Remember Difficulty: Easy Learning Objective: 01-02 Identify the main participants and activities of business and explain why studying business is important. Topic: 01-04 The People and Activities of Business 11. The focus of all marketing activities is customer satisfaction. TRUE Marketing includes all the activities designed to provide goods and services that satisfy customer's needs and wants. Blooms: Remember Difficulty: Easy Learning Objective: 01-02 Identify the main participants and activities of business and explain why studying business is important. Topic: 01-04 The People and Activities of Business 1-3 Chapter 01 - The Dynamics of Business and Economics 12. Owners always manage their businesses themselves. FALSE Owners can manage the business themselves or hire employees to accomplish this task. Blooms: Understand Difficulty: Medium Learning Objective: 01-02 Identify the main participants and activities of business and explain why studying business is important. Topic: 01-04 The People and Activities of Business 1-4 Chapter 01 - The Dynamics of Business and Economics 13. Studying business will help you develop skills to employ in a future career, if that career takes place in the country where you studied business topics. FALSE Studying business can help students in careers both domestically and internationally, public and private, profit and non-profit. Blooms: Remember Difficulty: Medium Learning Objective: 01-02 Identify the main participants and activities of business and explain why studying business is important. Topic: 01-04 The People and Activities of Business 14. One of the best-known Canadian marketing initiatives of all time is Tim Hortons' "Roll Up the Rim to Win" campaign. TRUE The simple idea was developed by Tim Hortons executive, Ron Buist, who says the idea was developed as a way to gain even more marketing leverage (strength) from its paper cup and to increase sales. Blooms: Remember Difficulty: Easy Learning Objective: 01-02 Identify the main participants and activities of business and explain why studying business is important. Topic: 01-04 The People and Activities of Business 15. A central issue of economics is how to fulfill consumers' unlimited demand for goods and services in a world with limited resources. TRUE Economics is the study of how resources are distributed for the production of goods and services. Blooms: Remember Difficulty: Medium Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-06 Economic Systems 16. Natural resources include land, minerals, water, and other gifts of nature which are not made by humans. TRUE Canada has an abundance of fresh water, large forest areas, and a variety of minerals including nickel, copper, and uranium. Blooms: Remember Difficulty: Medium Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-05 The Economic Foundations of Business 1-5 Chapter 01 - The Dynamics of Business and Economics 17. As the baby boomers, who make up roughly one-third of Canada's population, retire, Canada may face a labour shortage in some sectors. TRUE Some Canadian companies have had challenges finding enough workers in recent years, as the baby boomers, who make up roughly one-third of Canada's population, retire. Blooms: Apply Difficulty: Hard Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-05 The Economic Foundations of Business 18. Capitalism is an economic system in which the government owns and operates basic industries while individuals own most other businesses. FALSE Socialism is an economic system in which the government owns and operates basic industries while individuals own most of the other businesses. Blooms: Remember Difficulty: Easy Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-06 Economic Systems 19. China is an example of a communist economy that exists today which satisfies Karl Marx's ideal of communism. FALSE No true communist economy exists today that satisfies Marx's ideal. Blooms: Apply Difficulty: Medium Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-06 Economic Systems 20. Russia, Poland, Hungary, and other Eastern European nations have turned away from communism and toward economic systems governed by supply and demand rather than by central planning. TRUE Their experiments with alternative economic systems have been fraught with difficulty and hardship. Blooms: Apply Difficulty: Hard Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-06 Economic Systems 1-6 Chapter 01 - The Dynamics of Business and Economics 21. The Chinese state is the largest shareholder among China's largest companies and influences thousands of other businesses. TRUE Economic prosperity has advanced in China with the government claiming to ensure market openness, equality, and fairness. Blooms: Apply Difficulty: Medium Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-06 Economic Systems 22. Most socialist nations are democratic. TRUE Most socialist nations recognize basic individual freedoms such as voting for government officials. Blooms: Remember Difficulty: Medium Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-06 Economic Systems 23. Human resources refer only to the mental abilities of people used to produce goods and services, it is synonymous with knowledge. FALSE Human resources include both the physical and mental abilities of people in producing goods and services. It includes not just the knowledge or mental ability, but also the physical efforts of labour as well. Blooms: Remember Difficulty: Medium Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-05 The Economic Foundations of Business 24. If free enterprise is going to be successful, individuals must have the right to choose what career to pursue, where to live, what goods and services to purchase, and more. TRUE This is one of the four basic rights that must exist for free enterprise to work. Blooms: Understand Difficulty: Medium Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-07 The Free-Enterprise System 1-7 Chapter 01 - The Dynamics of Business and Economics 25. Demand is the quantity of goods and services that consumers are willing to buy at different prices at a specific time. TRUE Usually, as prices decrease, consumers are willing to buy more of a good or service. Blooms: Remember Difficulty: Easy Learning Objective: 01-04 Describe the role of supply, demand, and competition in a free-enterprise system. Topic: 01-08 The Forces of Supply and Demand 26. The demand curve is upward sloping. FALSE The demand curve is downward sloping. Blooms: Remember Difficulty: Medium Learning Objective: 01-04 Describe the role of supply, demand, and competition in a free-enterprise system. Topic: 01-08 The Forces of Supply and Demand 27. The equilibrium price is represented by the point where a product's supply and demand curves intersect. TRUE The price at which the number of products that businesses are willing to supply is equal to the amount of products that consumers are willing to buy at a specific point in time is the equilibrium price. Blooms: Remember Difficulty: Medium Learning Objective: 01-04 Describe the role of supply, demand, and competition in a free-enterprise system. Topic: 01-08 The Forces of Supply and Demand 28. Monopolistic competition exists when there is only one producer of a product in a given market. FALSE Monopolistic competition exists when there are fewer businesses than in a pure-competition environment and the differences among the goods are small. Blooms: Remember Difficulty: Medium Learning Objective: 01-04 Describe the role of supply, demand, and competition in a free-enterprise system. Topic: 01-09 The Nature of Competition 1-8 Chapter 01 - The Dynamics of Business and Economics 29. An oligopoly exists when there are many small businesses selling one standardized product. FALSE An oligopoly exists when there are very few businesses selling a product. Blooms: Remember Difficulty: Medium Learning Objective: 01-04 Describe the role of supply, demand, and competition in a free-enterprise system. Topic: 01-09 The Nature of Competition 30. Government-granted monopolies are not subject to government-regulated prices. FALSE Government-granted monopolies are subject to government-regulated prices. Blooms: Remember Difficulty: Hard Learning Objective: 01-04 Describe the role of supply, demand, and competition in a free-enterprise system. Topic: 01-09 The Nature of Competition 31. A product's equilibrium price is constantly changing in response to changes in economic conditions, availability of resources, and degree of competition. TRUE Changing the price alters the supply curve, and a new equilibrium price results. This is an on-going process, with supply and demand constantly changing in response to changes in economic conditions, availability of resources, and degree of competition. Blooms: Understand Difficulty: Hard Learning Objective: 01-04 Describe the role of supply, demand, and competition in a free-enterprise system. Topic: 01-08 The Forces of Supply and Demand 32. Economic expansion occurs when an economy is growing and people are spending more money. TRUE When people spend more money, it stimulates the production of goods and services, which in turn stimulates employment. Blooms: Remember Difficulty: Medium Learning Objective: 01-05 Specify why and how the health of the economy is measured. Topic: 01-10 Economic Cycles and Productivity 1-9 Chapter 01 - The Dynamics of Business and Economics 33. The standard of living rises because people have less money to spend. FALSE The standard of living rises because people have more money to spend. Blooms: Remember Difficulty: Medium Learning Objective: 01-05 Specify why and how the health of the economy is measured. Topic: 01-10 Economic Cycles and Productivity 34. Inflation is a condition characterized by falling prices. FALSE Inflation describes the situation in which there is a sustained and persistent increase in the general level of prices of goods and services. Blooms: Remember Difficulty: Medium Learning Objective: 01-05 Specify why and how the health of the economy is measured. Topic: 01-10 Economic Cycles and Productivity 35. A severe recession may turn into a depression. TRUE A depression has very high unemployment, very low consumer spending, and business output is sharply reduced. Blooms: Remember Difficulty: Easy Learning Objective: 01-05 Specify why and how the health of the economy is measured. Topic: 01-10 Economic Cycles and Productivity 36. During a recession, unemployment is unusually low. FALSE A recession is characterized by a decline in production, rising unemployment, and declining income. Blooms: Understand Difficulty: Hard Learning Objective: 01-05 Specify why and how the health of the economy is measured. Topic: 01-10 Economic Cycles and Productivity 1-10 Chapter 01 - The Dynamics of Business and Economics 37. Gross domestic product is the sum of all goods and services produced in a country during a year. TRUE GDP is a measurement that countries use to measure their state of economies. Blooms: Remember Difficulty: Easy Learning Objective: 01-05 Specify why and how the health of the economy is measured. Topic: 01-10 Economic Cycles and Productivity 38. Since 1997, it has been common policy for the government of Canada to run large budget deficits. FALSE Since 1997, the Canadian government has made great efforts to reverse the trend of budget deficits. The efforts to accumulate large budget surpluses have been quite successful until the recession in . Blooms: Remember Difficulty: Hard Learning Objective: 01-05 Specify why and how the health of the economy is measured. Topic: 01-10 Economic Cycles and Productivity 39. Canada has had a positive trade balance for much of the last decade. TRUE Canada has ran a trade surplus or positive balance of trade for much of the last decade. Blooms: Remember Difficulty: Medium Learning Objective: 01-05 Specify why and how the health of the economy is measured. Topic: 01-10 Economic Cycles and Productivity 40. When a nation collects more from taxes than it spends, it has a budget deficit. FALSE The relationship between its spending and income (from taxes) determines if a country has a budget deficit, surplus, or balanced budget. Blooms: Remember Difficulty: Easy Learning Objective: 01-05 Specify why and how the health of the economy is measured. Topic: 01-10 Economic Cycles and Productivity 1-11 Chapter 01 - The Dynamics of Business and Economics 41. Industrialization mostly occurred in Central Canada. TRUE Industrialization was not as widespread in Canada as the United States and mostly occurred in Central Canada. Blooms: Remember Difficulty: Easy Learning Objective: 01-06 Trace the evolution of the Canadian economy and discuss the role of the entrepreneur in the economy. Topic: 01-12 A Brief History of the Canadian Economy 42. The Canadian Pacific Railway linked Canada from north to south. FALSE The Canadian Pacific Railway linked Canada from coast to coast. Blooms: Remember Difficulty: Easy Learning Objective: 01-06 Trace the evolution of the Canadian economy and discuss the role of the entrepreneur in the economy. Topic: 01-12 A Brief History of the Canadian Economy 43. Advertising first made consumers aware of differences in products and prices in the marketing economy. TRUE Following the manufacturing economy, businesses became more concerned with the needs of the consumer and entered the marketing economy. Blooms: Remember Difficulty: Medium Learning Objective: 01-06 Trace the evolution of the Canadian economy and discuss the role of the entrepreneur in the economy. Topic: 01-12 A Brief History of the Canadian Economy 44. Entrepreneurs risk their wealth, time, and effort to develop for profit an innovative product or way of doing something. TRUE The Irving Group and Loblaws are great examples of entrepreneurs starting Canadian companies. Blooms: Remember Difficulty: Easy Learning Objective: 01-06 Trace the evolution of the Canadian economy and discuss the role of the entrepreneur in the economy. Topic: 01-13 The Role of the Entrepreneur 1-12 Chapter 01 - The Dynamics of Business and Economics 45. Entrepreneurship is essential to a free-enterprise system. TRUE It is a growing interest as people are attracted to being their own boss. Blooms: Remember Difficulty: Easy Learning Objective: 01-06 Trace the evolution of the Canadian economy and discuss the role of the entrepreneur in the economy. Topic: 01-13 The Role of the Entrepreneur 46. In a free-market system, the government regulates business. FALSE In a free-market system, competition, supply, and demand determine which goods and services are produced. Blooms: Remember Difficulty: Easy Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-06 Economic Systems 47. Free-market capitalism and laissez-faire capitalism are essentially the same thing. TRUE Government does not interfere in a free-market or laissez-faire society. Blooms: Understand Difficulty: Medium Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-06 Economic Systems 48. Research has shown that ethical behaviour cannot only enhance a company's reputation but can also drive profits. TRUE The ethical and socially responsible conduct of companies such as Whole Foods, Starbucks, and the hotel chain Marriott provides evidence that good ethics is good business. Blooms: Apply Difficulty: Medium Learning Objective: 01-06 Trace the evolution of the Canadian economy and discuss the role of the entrepreneur in the economy. Topic: 01-15 The Role of Ethics and Social Responsibility in Business 1-13 Chapter 01 - The Dynamics of Business and Economics 49. Society demands ethical and socially responsible business behaviour towards customers and investors only. There seems to be less of a concern for other stakeholder groups including government regulators and the environment. FALSE Society is increasingly demanding that businesspeople behave ethically towards all stakeholder groups, including the environment, communities, suppliers, and government regulators. Blooms: Understand Difficulty: Medium Learning Objective: 01-06 Trace the evolution of the Canadian economy and discuss the role of the entrepreneur in the economy. Topic: 01-15 The Role of Ethics and Social Responsibility in Business Multiple Choice Questions 50. Businesses differ from non-profit organizations in that a business' focus is on: A. price. B. goods. C. profits. D. organization. E. plans. Businesses accumulate profits, non-profit organizations do not. Blooms: Remember Difficulty: Medium Learning Objective: 01-01 Define basic concepts such as business, product, and profit. Topic: 01-03 The Goal of Business 51. When purchasing a product, the consumer is actually buying its anticipated benefits and the _________ it brings. A. satisfaction B. price C. costs D. productivity E. form Products are bought to satisfy a perceived need such as buying a Big Mac to satisfy hunger. Blooms: Remember Difficulty: Easy Learning Objective: 01-01 Define basic concepts such as business, product, and profit. Topic: 01-02 The Nature of Business 1-14 Chapter 01 - The Dynamics of Business and Economics 52. If a business is to be successful in the long run, it must treat its customers, employees, and community with social: A. integrity B. responsibility C. agendas D. insight E. interests Stakeholders have a stake in the success and outcomes of businesses, therefore a business must act responsibly with its stakeholders. Blooms: Understand Difficulty: Easy Learning Objective: 01-01 Define basic concepts such as business, product, and profit. Topic: 01-03 The Goal of Business 53. Which of the following is not a product? A. A Mac personal computer B. A veterinarian's treatment of a pet's injuries C. A lawyer's advice in a divorce case D. Profits earned by businesses E. A checkup by a doctor Business needs a product or service to make a profit but it is not a product rather it is a financial result. A checkup by a doctor is considered a service. Blooms: Remember Difficulty: Easy Learning Objective: 01-01 Define basic concepts such as business, product, and profit. Topic: 01-02 The Nature of Business 54. The goal of business is to earn: A. respect. B. resources. C. a profit. D. responsibility. E. independence. If a business does not earn a profit, it will go out of business. Blooms: Remember Difficulty: Medium Learning Objective: 01-01 Define basic concepts such as business, product, and profit. Topic: 01-03 The Goal of Business 1-15 Chapter 01 - The Dynamics of Business and Economics 55. The functions of organizing, staffing, planning, and controlling are most closely associated with: A. employees B. customers C. managers D. stockholders E. accountants Managers plan, organize, staff, and control the tasks required to carry out the work of the company or non-profit organization. Blooms: Understand Difficulty: Easy Learning Objective: 01-02 Identify the main participants and activities of business and explain why studying business is important. Topic: 01-04 The People and Activities of Business 56. Which of the following functions involve activities designed to provide goods and services that fulfill the needs and wants of consumers? A. Accounting B. Engineering C. Finance D. Production E. Marketing Marketing includes all the activities designed to provide goods and services that satisfy consumers' needs and wants. Blooms: Remember Difficulty: Medium Learning Objective: 01-02 Identify the main participants and activities of business and explain why studying business is important. Topic: 01-04 The People and Activities of Business 57. Advertising, personal selling, coupons, and sweepstakes are forms of: A. publicity B. promotion C. marketing research D. management activities E. the marketing mix Marketers use promotion to communicate the benefits of their products to consumers. Blooms: Remember Difficulty: Medium Learning Objective: 01-02 Identify the main participants and activities of business and explain why studying business is important. Topic: 01-04 The People and Activities of Business 1-16 Chapter 01 - The Dynamics of Business and Economics 58. One of the best-known Canadian marketing initiatives of all time is: A. The Air Miles Program B. Tim Hortons' "Roll Up the Rim to Win" C. Petro-Points D. HBC's reward program E. The President's Choice points Tim Hortons executive Ron Buist, in partnership with the previous owner Ron Joyce, came up with the simple idea of using the company's name and logo as a marketing tool. Blooms: Remember Difficulty: Medium Learning Objective: 01-02 Identify the main participants and activities of business and explain why studying business is important. Topic: 01-04 The People and Activities of Business 59. When a business fails or does not make a profit, the _______ have the most to lose. A. customers B. workers C. managers D. owners E. consumers Owners are responsible for providing financial resources for business operations and may have to borrow or invest their own money during start-up. Blooms: Remember Difficulty: Medium Learning Objective: 01-02 Identify the main participants and activities of business and explain why studying business is important. Topic: 01-04 The People and Activities of Business 60. The function concerned with obtaining and managing money and using it effectively is called: A. management. B. marketing. C. finance. D. production and operations. E. personnel. Finance refers to all activities concerned with obtaining money and using it effectively. Blooms: Remember Difficulty: Easy Learning Objective: 01-02 Identify the main participants and activities of business and explain why studying business is important. Topic: 01-04 The People and Activities of Business 1-17 Chapter 01 - The Dynamics of Business and Economics 61. The group of people to whom management activities most apply is: A. consumers. B. owners. C. bankers. D. government regulators. E. employees. Managers coordinate, organize, and motivate employees to achieve the business goals. Blooms: Understand Difficulty: Medium Learning Objective: 01-02 Identify the main participants and activities of business and explain why studying business is important. Topic: 01-04 The People and Activities of Business 62. All of the following are factors of production used to make goods and services, except: A. natural resources. B. human resources. C. customers. D. capital. E. financial resources. Customers consume goods and services. Blooms: Understand Difficulty: Medium Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-05 The Economic Foundations of Business 63. All of the following are examples of natural resources, except: A. forests. B. human mental talent. C. minerals. D. nickel. E. fisheries. Human mental and physical talent are considered a human resource. Blooms: Understand Difficulty: Medium Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-05 The Economic Foundations of Business 1-18 Chapter 01 - The Dynamics of Business and Economics 64. Factors of production are: A. resources used to produce goods and services. B. fixed resources. C. taxes. D. seldom in demand. E. free. Factors of production are natural, human, and financial resources. Blooms: Remember Difficulty: Easy Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-05 The Economic Foundations of Business 65. Resources may be: A. services. B. ideas. C. machines. D. human. E. concepts. Resources are natural, human, and financial. Blooms: Understand Difficulty: Hard Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-05 The Economic Foundations of Business 66. Which of the following questions are addressed by all economic systems? A. Who will produce the goods? B. What goods and services should be produced? C. How much of each good and service should be produced? D. How should the goods and services be distributed? E. All of these questions must be addressed by all economic systems. The way in which an economic system addresses the questions A through D, determines the type of economic system. Blooms: Understand Difficulty: Medium Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-06 Economic Systems 1-19 Chapter 01 - The Dynamics of Business and Economics 67. All of the following are true in a communist economy, except: A. the means of production are owned by the government. B. the government chooses what will be produced. C. the government decides how the goods will be produced. D. that supply is determined by central government planning. E. that consumers have a wide choice of goods and services. Consumers have a limited choice of goods and services and prices are usually high. Blooms: Understand Difficulty: Medium Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-06 Economic Systems 68. Communist societies: A. appear to be efficient and equitable, at least in theory. B. have a high standard of living. C. seldom have consumer shortages. D. have only one class of people. E. do not spend much on defense. Communist societies close the gap between rich and poor, but on the contrary, have a low standard of living, experience consumer shortages, high prices, and little freedom. Blooms: Understand Difficulty: Hard Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-06 Economic Systems 69. Socialism: A. allows only private ownership of business. B. allows only government ownership of the factors of production. C. has government ownership of basic industries. D. is becoming more popular. E. all of the answers accurately describe socialism. In a socialist system, the government owns and operates basic industries and individuals own most businesses. Blooms: Remember Difficulty: Medium Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-06 Economic Systems 1-20 Chapter 01 - The Dynamics of Business and Economics 70. Socialist economies praise their egalitarianism, which means income and social services are distributed: A. to the elite only. B. to the poor only. C. equally. D. unequally. E. to the homeless. Socialist economies equally distribute income and social services. Blooms: Remember Difficulty: Medium Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-06 Economic Systems 71. Under a capitalist system, goods and services provided are determined by all of the following, except: A. competition. B. supply. C. consumer demand. D. market forces. E. businesses owned by the government. Competition, supply, and demand determine which goods and services are produced, how they are produced, and how they are distributed in a capitalistic society. Blooms: Understand Difficulty: Medium Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-06 Economic Systems 72. The difference between pure capitalism and modified capitalism is that: A. under pure capitalism, there is less government regulation. B. under modified capitalism, there is less government regulation. C. under pure capitalism, there is more government regulation. D. for either form of capitalism, government regulation is equal. E. none of the answers accurately describe the difference between pure capitalism and modified capitalism. In pure capitalism, all decisions are made without government intervention and in modified capitalism, government intervenes on some level. Blooms: Understand Difficulty: Hard Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-06 Economic Systems 1-21 Chapter 01 - The Dynamics of Business and Economics 73. Most economic systems: A. exist in a pure form. B. exist in a mixed form. C. are ineffective. D. create revolutions. E. give individuals freedom. No country practises a pure economic form, but have elements from more than one economic system. Blooms: Remember Difficulty: Medium Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-06 Economic Systems 74. Private property, profits, independent business decisions, and freedom of choice are rights associated with: A. socialism. B. free enterprise. C. communism. D. egalitarianism. E. humanitarianism. Free enterprise necessitates these four rights in order for the system to work. Blooms: Remember Difficulty: Easy Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-07 The Free-Enterprise System 75. Which of the following systems has the highest degree of competition? A. Communism B. Socialism C. Pure capitalism D. Modified capitalism E. Mixed economy In theory, pure capitalism has no government intervention but no pure form of an economic system exists in practice. Blooms: Understand Difficulty: Hard Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-06 Economic Systems 1-22 Chapter 01 - The Dynamics of Business and Economics 76. In which economic system(s) are basic services provided by the central government? A. Communism and socialism B. Capitalism and socialism C. Communism and capitalism D. Socialism only E. Capitalism only Both communist and socialist societies provide basic services through a centralized government but socialist societies also recognize basic individual freedoms. Blooms: Analyze Difficulty: Medium Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-06 Economic Systems 77. Which of the following countries best depict a communist economic system? A. Cuba B. Canada C. Russia D. Poland E. Hungary Both China and Cuba are good examples of communist systems, however, the Chinese economy has grown more than any other country in the past 30 years. The Chinese government maintains a high degree of control but significant capitalist reforms are taking place. Blooms: Apply Difficulty: Medium Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-06 Economic Systems 78. If an economist is analyzing the quantity of goods or services that businesses are willing to sell at different prices at specific times, then the focus is on: A. competition. B. pure competition. C. demand. D. supply. E. equilibrium. Supply is the number of goods or services that a business is willing to sell at different prices at specific times. Blooms: Remember Difficulty: Medium Learning Objective: 01-04 Describe the role of supply, demand, and competition in a free-enterprise system. Topic: 01-08 The Forces of Supply and Demand 1-23 Chapter 01 - The Dynamics of Business and Economics 79. Suppliers are generally willing to: A. lower prices below costs. B. supply more at a higher price. C. demand more at a higher price. D. determine equilibrium prices. E. supply more at a lower price. The potential for profits is higher when businesses sell goods at a higher price. Blooms: Understand Difficulty: Hard Learning Objective: 01-04 Describe the role of supply, demand, and competition in a free-enterprise system. Topic: 01-08 The Forces of Supply and Demand 80. When Walmart has a sale on digital cameras: A. consumers won't demand more digital cameras than normal. B. the store won't supply more digital cameras than it normally does. C. consumers will demand more digital cameras. D. the manufacturer will halt production of digital cameras. E. consumers will demand fewer digital cameras. Generally, when prices decrease, there is an increase in the quantity demanded of that item. Blooms: Apply Difficulty: Medium Learning Objective: 01-04 Describe the role of supply, demand, and competition in a free-enterprise system. Topic: 01-08 The Forces of Supply and Demand 81. When Apple introduced the iPod portable digital music player, the price of and demand for digital music players was high. As a result: A. other suppliers introduced digital music players to meet the demand. B. consumers stopped buying digital music players. C. manufacturers stopped producing digital music players. D. competition was not allowed to enter the market. E. the equilibrium price met the supply. Although prices were high, demand was also high, and therefore businesses have the potential for high profits. Blooms: Apply Difficulty: Medium Learning Objective: 01-04 Describe the role of supply, demand, and competition in a free-enterprise system. Topic: 01-08 The Forces of Supply and Demand 1-24 Chapter 01 - The Dynamics of Business and Economics 82. Supply and demand may be an efficient way to distribute resources: A. but it may not distribute resources equally among those who need them. B. but it doesn't allow the poor to get rich. C. although equilibrium price is determined by the government. D. but it helps inefficient producers to succeed. E. and it is always fair. The forces of supply and demand prevent sellers who have to sell at higher prices and buyers who cannot afford to buy goods at the equilibrium price from participating in the market. Blooms: Understand Difficulty: Hard Learning Objective: 01-04 Describe the role of supply, demand, and competition in a free-enterprise system. Topic: 01-08 The Forces of Supply and Demand 83. Competition fosters efficiency because: A. the government regulates prices. B. producers have to offer the best products at reasonable prices. C. supply depresses prices. D. all buyers have perfect knowledge. E. businesses can set whatever prices they want. If producers do not offer the best products at the most reasonable price, the business will fail. Blooms: Remember Difficulty: Medium Learning Objective: 01-04 Describe the role of supply, demand, and competition in a free-enterprise system. Topic: 01-09 The Nature of Competition 84. If Chrysler raises the prices of its new models of pickup trucks by 4 percent and General Motors and Ford follow by raising prices by a similar amount, then this is evidence of: A. a monopoly. B. an oligopoly. C. pure competition. D. monopolistic competition. E. supply and demand. The prices charged by different firms in an oligopoly stay fairly close because a price cut or increase by one company will trigger a similar response from another company. Blooms: Apply Difficulty: Medium Learning Objective: 01-04 Describe the role of supply, demand, and competition in a free-enterprise system. Topic: 01-09 The Nature of Competition 1-25 Chapter 01 - The Dynamics of Business and Economics 85. Monopolies that function in a capitalistic economy are likely to have prices determined by: A. the law of supply. B. the law of demand. C. the interaction of supply and demand. D. equilibrium interaction. E. government regulation. Government-granted monopolies, such as utility companies, are subject to government-regulated prices. Blooms: Remember Difficulty: Medium Learning Objective: 01-04 Describe the role of supply, demand, and competition in a free-enterprise system. Topic: 01-09 The Nature of Competition 1-26 Chapter 01 - The Dynamics of Business and Economics 86. Using the supply and demand curves shown in the graph that follows, what is the equilibrium price for soft drinks? A. 35 cents B. 45 cents C. 50 cents D. 55 cents E. 75 cents The equilibrium price is where the supply and demand curves intersect. Blooms: Apply Difficulty: Medium Learning Objective: 01-04 Describe the role of supply, demand, and competition in a free-enterprise system. Topic: 01-08 The Forces of Supply and Demand 1-27 Chapter 01 - The Dynamics of Business and Economics 87. When businesses can promote different features of their products and consumers are willing to pay more for products containing the features they desire, the competitive environment is probably: A. pure competition. B. monopolistic competition. C. an oligopoly. D. a monopoly. E. pure capitalism. Consumers value some features more than others and are often willing to pay higher prices for the features they want. Blooms: Remember Difficulty: Easy Learning Objective: 01-04 Describe the role of supply, demand, and competition in a free-enterprise system. Topic: 01-09 The Nature of Competition 88. Agricultural commodities are usually sold in which competitive environment? A. Monopoly B. Monopolistic competition C. Pure competition D. Oligopoly E. Pure capitalism No one business sells enough agricultural commodities to influence the price and there is no difference between the commodities offered, therefore, prices are determined only by supply and demand. Blooms: Remember Difficulty: Easy Learning Objective: 01-04 Describe the role of supply, demand, and competition in a free-enterprise system. Topic: 01-09 The Nature of Competition 89. Which competitive environment best describes the market for wheat, corn, and cotton? A. Monopoly B. Monopolistic competition C. Pure competition D. Oligopoly E. Pure capitalism Agricultural commodities trade in a market characterized by pure competition as no single business can influence the price and there is no difference between the commodities offered. Prices are, therefore, determined only by supply and demand. Blooms: Apply Difficulty: Easy Learning Objective: 01-04 Describe the role of supply, demand, and competition in a free-enterprise system. Topic: 01-09 The Nature of Competition 1-28 Chapter 01 - The Dynamics of Business and Economics 90. Which competitive environment best describes the market for Canadian air travel? A. Monopoly B. Monopolistic competition C. Oligopoly D. Pure competition E. Pure capitalism Canadian air travel is characterized by an oligopoly as it is dominated by Air Canada and WestJet. Blooms: Apply Difficulty: Easy Learning Objective: 01-04 Describe the role of supply, demand, and competition in a free-enterprise system. Topic: 01-09 The Nature of Competition 91. Economic expansion occurs when: A. fewer goods and services are produced than consumers demand. B. an economy is growing and people are spending more money. C. a nation's standard of living drops quickly. D. employment levels decline over time. E. prices begin to rise and incomes begin to fall. When people spend more money, it stimulates the production of goods and services, which in turn stimulates employment. Blooms: Remember Difficulty: Easy Learning Objective: 01-05 Specify why and how the health of the economy is measured. Topic: 01-10 Economic Cycles and Productivity 92. Economic contraction occurs when: A. more goods and services are demanded by consumers. B. spending declines and businesses cut back on production. C. a nation's standard of living remains stable over time. D. employment levels increase over time. E. prices begin to rise and incomes rise accordingly. In an economic contraction, there is a decline in production, employment, and income. Blooms: Remember Difficulty: Medium Learning Objective: 01-05 Specify why and how the health of the economy is measured. Topic: 01-10 Economic Cycles and Productivity 1-29 Chapter 01 - The Dynamics of Business and Economics 93. A continuing rise in prices over a period of time refers to: A. inflation. B. an economic expansion. C. a recession. D. an economic contraction. E. stagflation. When economies expand rapidly, prices generally do as well. Blooms: Remember Difficulty: Medium Learning Objective: 01-05 Specify why and how the health of the economy is measured. Topic: 01-10 Economic Cycles and Productivity 94. Economic contraction generally leads to: A. increased spending. B. recession. C. higher employment. D. inflation. E. deflation. In an economic contraction, businesses cut back on production and lay off workers. This leads to a recession, which is characterized by rising levels of unemployment. Blooms: Remember Difficulty: Medium Learning Objective: 01-05 Specify why and how the health of the economy is measured. Topic: 01-10 Economic Cycles and Productivity 95. Countries measure the state of their economies in order to: A. determine whether they are expanding or contracting. B. regulate wages and employment. C. let other nations know the state of their economic health. D. avoid taking corrective action. E. control government spending. In order for a country to take corrective action or minimize fluctuations, they must first measure the state of their economies. Blooms: Remember Difficulty: Medium Learning Objective: 01-05 Specify why and how the health of the economy is measured. Topic: 01-10 Economic Cycles and Productivity 1-30 Chapter 01 - The Dynamics of Business and Economics 96. Increased unemployment can reduce consumer demand for goods and services leading to A. economic expansion. B. inflation. C. deflation. D. a budget deficit. E. higher employment levels. In an economic contraction, people spend less money which can lead to deflation or decrease in market prices. Blooms: Understand Difficulty: Medium Learning Objective: 01-05 Specify why and how the health of the economy is measured. Topic: 01-10 Economic Cycles and Productivity 97. A budget surplus, when a nation spends less than it takes in from taxes, is the opposite of a(n): A. stagnant income. B. budget deficit. C. economic expansion. D. balance of trade. E. economic contraction. A budget deficit spends more than it takes in from taxes. Blooms: Remember Difficulty: Medium Learning Objective: 01-05 Specify why and how the health of the economy is measured. Topic: 01-10 Economic Cycles and Productivity 98. The most recent recession in Canada occurred during: A. B. C. D. E. The most recent global recession is often called the Great Recession because it was the longest and most severe economic decline since the Great Depression. Blooms: Apply Difficulty: Medium Learning Objective: 01-05 Specify why and how the health of the economy is measured. Topic: 01-10 Economic Cycles and Productivity 1-31 Chapter 01 - The Dynamics of Business and Economics 99. Inflation in Canada is typically measured by: A. The gross domestic product. B. The consumer price index. C. Per capita income. D. Worker productivity. E. The trade balance. The consumer price index (CPI) measures changes in prices of goods and services purchased for consumption by typical urban households. Blooms: Remember Difficulty: Medium Learning Objective: 01-05 Specify why and how the health of the economy is measured. Topic: 01-10 Economic Cycles and Productivity 100. The concept of GDP in relation to population is called: A. Gross national product B. GDP per capita C. Average income D. Income per head E. Per capita income GDP per capita is said to be a better measure of output since it takes into consideration the size of the population (i.e. labour resources) used in the production of total output. Blooms: Remember Difficulty: Medium Learning Objective: 01-05 Specify why and how the health of the economy is measured. Topic: 01-10 Economic Cycles and Productivity 101. GDP per capita is highest in which of the following countries? A. Germany B. Australia C. Canada D. the United States E. Argentina Table 1.2 compares a number of economic statistics for a sampling of countries. Blooms: Apply Difficulty: Hard Learning Objective: 01-05 Specify why and how the health of the economy is measured. Topic: 01-10 Economic Cycles and Productivity 1-32 Chapter 01 - The Dynamics of Business and Economics 102. The early economy of Canada was marked by settlers who operated a society primarily based on: A. manufacturing. B. technology. C. sweatshops. D. information. E. agriculture. Abundant natural resources nourished industries such as farming, fishing, shipping, and the fur trade. Blooms: Remember Difficulty: Easy Learning Objective: 01-06 Trace the evolution of the Canadian economy and discuss the role of the entrepreneur in the economy. Topic: 01-12 A Brief History of the Canadian Economy 103. All of the following are associated with the Industrial Revolution, except: A. factories. B. railroads. C. farm equipment. D. computers. E. machines. Computers came after World War II during the service economy. Blooms: Understand Difficulty: Easy Learning Objective: 01-06 Trace the evolution of the Canadian economy and discuss the role of the entrepreneur in the economy. Topic: 01-12 A Brief History of the Canadian Economy 104. In the history of the Canadian economy, the period or stage following the Industrial Revolution was known for its emphasis on: A. service. B. technology. C. manufacturing. D. agriculture. E. both manufacturing and agriculture. The Industrial Revolution brought factories to central Canada but most of the east and west coast remained agriculture- focused. Blooms: Remember Difficulty: Medium Learning Objective: 01-06 Trace the evolution of the Canadian economy and discuss the role of the entrepreneur in the economy. Topic: 01-12 A Brief History of the Canadian Economy 1-33 Chapter 01 - The Dynamics of Business and Economics 105. The entrepreneur has been primarily associated with a willingness to A. stay conventional. B. follow others. C. take risks. D. be repetitive. E. be conservative. An entrepreneur risks his or her wealth, time, and effort. Blooms: Remember Difficulty: Medium Learning Objective: 01-06 Trace the evolution of the Canadian economy and discuss the role of the entrepreneur in the economy. Topic: 01-13 The Role of the Entrepreneur 106. Time-pressed Canadians are increasingly: A. paying others to do their own home tasks B. relaxing C. sleeping D. reading E. reducing the time they spend at work Cooking, laundry, landscaping, and child care have made Canada a service-based economy. Blooms: Understand Difficulty: Medium Learning Objective: 01-06 Trace the evolution of the Canadian economy and discuss the role of the entrepreneur in the economy. Topic: 01-12 A Brief History of the Canadian Economy 107. As women entered the workforce in increasing numbers, Canadians began to pay others to do jobs for them which made their lives easier. This began the transformation of the Canadian economy into a: A. service economy B. sluggish economy C. financial economy D. agricultural economy E. industrial economy Cooking, laundry, landscaping, and child care have made Canada a service-based economy. Blooms: Understand Difficulty: Easy Learning Objective: 01-06 Trace the evolution of the Canadian economy and discuss the role of the entrepreneur in the economy. Topic: 01-12 A Brief History of the Canadian Economy 1-34 Chapter 01 - The Dynamics of Business and Economics 108. Technological trends have gradually changed Canada to a(n) _____ economy focused on making life easier for busy consumers. A. manufacturing B. service C. agriculture D. technology E. marketing As consumers get busier, they need others to do tasks such as house cleaning, laundry, and landscaping. Blooms: Remember Difficulty: Easy Learning Objective: 01-06 Trace the evolution of the Canadian economy and discuss the role of the entrepreneur in the economy. Topic: 01-12 A Brief History of the Canadian Economy 109. All of the following are associated with the manufacturing economy, except: A. buying on a time-payment plan. B. marketing. C. advertising. D. cable television. E. marketing research. Cable television came about during the service and Internet-based economy. Blooms: Understand Difficulty: Easy Learning Objective: 01-06 Trace the evolution of the Canadian economy and discuss the role of the entrepreneur in the economy. Topic: 01-12 A Brief History of the Canadian Economy 110. What do Enron, Maple Leaf, and SNC-Lavalin have in common? A. They are the top three Canadian manufacturing organizations. B. They are all service producing multi-national corporations. C. They all experienced a number of ethical issues widely publicized in the media. D. They were scrutinized by the media because of their use of sweatshops in less developed nations. E. They are all corporations that experienced a sudden, unexplained increase in their stock price. In many cases, misconduct by individuals within these firms had an adverse effect on current and retired employees, investors, and others associated with these firms. In some cases, individuals went to jail for their actions. Blooms: Apply Difficulty: Hard Learning Objective: 01-06 Trace the evolution of the Canadian economy and discuss the role of the entrepreneur in the economy. Topic: 01-15 The Role of Ethics and Social Responsibility in Business Short Answer Questions 1-35 Chapter 01 - The Dynamics of Business and Economics 111. Briefly describe the goals of a business, especially the primary goal. Answers will vary. Feedback: The primary goal of businesses is to earn a profit, the difference between what it costs to make and sell a product and what a customer pays for it. Other business goals may include acting ethically and socially responsible. Blooms: Understand Difficulty: Medium Learning Objective: 01-01 Define basic concepts such as business, product, and profit. Topic: 01-03 The Goal of Business 112. Provide an example of a product which is also a service and how that provides value to customers. Answers will vary. Feedback: Dry cleaning, a check-up by a doctor, a performance by a hockey player—these are examples of services. Blooms: Apply Difficulty: Easy Learning Objective: 01-01 Define basic concepts such as business, product, and profit. Topic: 01-02 The Nature of Business 113. Provide an example of an organization that does not have the fundamental purpose of earning profits. Answers will vary. Feedback: Non-profits such as the Canadian Red Cross, Special Olympics, and other charities and social causes. Blooms: Remember Difficulty: Medium Learning Objective: 01-01 Define basic concepts such as business, product, and profit. Topic: 01-02 The Nature of Business 1-36 Chapter 01 - The Dynamics of Business and Economics 114. Describe one business' efforts to reduce the impact that business' waste has on the environment. Answers will vary. Feedback: Best Buy offers recycling of electronics at all of its stores. The stores take cellphones, wide-screen TVs, and most other electronic products in their green program, regardless of where they were purchased. Blooms: Apply Difficulty: Medium Learning Objective: 01-01 Define basic concepts such as business, product, and profit. Topic: 01-03 The Goal of Business 115. Describe the relationship between management, marketing, finance, owners, employees, and customers. Answers will vary. Feedback: Management involves coordinating the efforts of employees to achieve organizational objectives. Marketing involves activities designed to provide goods and services that satisfy customers. Finance involves activities concerned with obtaining money—from owners and investors and other sources—and using it effectively. Blooms: Understand Difficulty: Easy Learning Objective: 01-02 Identify the main participants and activities of business and explain why studying business is important. Topic: 01-04 The People and Activities of Business 116. Describe some of the activities of marketing professionals. Answers will vary. Feedback: Marketers gather information and conduct research to determine what customers want. Using information gathered from marketing research, marketers plan and develop products and make decisions about how much to charge for their products and when and where to make them available. Blooms: Remember Difficulty: Easy Learning Objective: 01-02 Identify the main participants and activities of business and explain why studying business is important. Topic: 01-04 The People and Activities of Business 1-37 Chapter 01 - The Dynamics of Business and Economics 117. What are the three questions that all economic systems must answer? Who answers them under a communist system? A socialist system? A capitalist system? Answers will vary. Feedback: The three economic questions are (1) What goods and services, and how much of each, will satisfy the needs of the consumer? (2) How will goods and services be produced, who will produce them, and with what resources will they be produced? (3) How are the goods and services to be distributed to the consumer? Under a true communist system, these questions are answered by a central government planning committee. Under a true socialist system, central planning answers the questions for basic goods and industries, while the forces of supply and demand answer them for most of the other products. Within a capitalist system, competition, supply, and demand determine the answers. Blooms: Analyze Difficulty: Hard Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-06 Economic Systems 118. List the three major categories of economic resources and give one example of each. Answers will vary. Feedback: Natural resources include vast supplies of fresh water, large areas of forest, nickel, copper, uranium, and large deposits of oil and natural gas. Human resources include labour, referring to the physical and mental abilities that people use to produce goods and services. Financial resources include the funds used to acquire the natural and human resources needed to provide products. Blooms: Remember Difficulty: Easy Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-05 The Economic Foundations of Business 119. Contrast communism and socialism, in terms of business ownership, competition, profits, product availability and price, and employment options. Answers will vary. Feedback: See Table 1.1 - Comparisons of Communism, Socialism, and Capitalism. Blooms: Understand Difficulty: Medium Learning Objective: 01-03 Define economics and compare the four types of economic systems. Topic: 01-06 Economic Systems 1-38 Chapter 01 - The Dynamics of Business and Economics 1-39 Chapter 01 - The Dynamics of Business and Economics 120. Define supply, demand, and equilibrium price, and explain their relationship with each other. Answers will vary. Feedback: Supply is the quantity of goods or services that businesses are willing to sell at different prices at a specific time. Demand is the quantity of goods or services that consumers are willing to buy at different prices at a specific time. Both can be shown graphically with supply and demand curves. Where the supply and demand curves intersect is the equilibrium price, the price at which the quantity of products businesses are willing to supply equals the quantity of products consumers are willing to buy at a specific point in time. If economic conditions, resource availability, degree of competition, or some other factor changes either supply or demand, a new equilibrium price will be established. Blooms: Remember Difficulty: Hard Learning Objective: 01-04 Describe the role of supply, demand, and competition in a free-enterprise system. Topic: 01-08 The Forces of Supply and Demand 121. Summarize the four types of competitive environments: pure competition, monopolistic competition, oligopoly, and monopoly. Answers will vary. Feedback: Pure competition exists when there are many small businesses selling one standardized product, such as agricultural commodities like wheat, corn, and cotton. Monopolistic competition exists when there are fewer businesses than in a pure-competition environment and the differences among the goods they sell are small. An oligopoly exists when there are very few businesses selling a product. In an oligopoly, individual businesses have control over their products' price because each business supplies a large portion of the products sold in the marketplace. A monopoly exists when there is one business providing a product in a given market. Utility companies that supply electricity, natural gas, and water are monopolies. The government permits such monopolies because the cost of creating the good or supplying the service is so great that new producers cannot compete for sales. Blooms: Remember Difficulty: Medium Learning Objective: 01-04 Describe the role of supply, demand, and competition in a free-enterprise system. Topic: 01-09 The Nature of Competition 1-40 Chapter 01 - The Dynamics of Business and Economics 122. Discuss the issues involved in measuring a country's economy. Answers will vary. Feedback: Countries measure the state of their economies to determine whether they are expanding or contracting and whether corrective action is necessary to minimize the fluctuations. One commonly used measure is gross domestic product (GDP), the sum of all goods and services produced in a country during a year. Another important indicator of a nation's economic health is the relationship between its spending and income (from taxes). Blooms: Understand Difficulty: Medium Learning Objective: 01-05 Specify why and how the health of the economy is measured. Topic: 01-10 Economic Cycles and Productivity 123. Contrast an economic contraction with an economic expansion, in terms of spending, production levels, employment levels, and price levels. Answers will vary. Feedback: Economic contraction occurs when spending declines. Businesses cut back on production and lay off workers, and the economy as a whole slows down. Contractions of the economy lead to recession characterized by rising levels of unemployment. Rising unemployment levels tend to stifle demand for goods and services, which can have the effect of forcing prices downward. Economic expansion occurs when an economy is growing and people are spending more money. Their purchases stimulate the production of goods and services, which in turn stimulates employment. The standard of living rises because more people are employed and have money to spend. Rapid expansions of the economy, however, may result in inflation, a continuing rise in prices. Blooms: Remember Difficulty: Easy Learning Objective: 01-05 Specify why and how the health of the economy is measured. Topic: 01-10 Economic Cycles and Productivity 1-41 Chapter 01 - The Dynamics of Business and Economics 124. Why are entrepreneurs important to the economy? Answers will vary. Feedback: Entrepreneurs are important to the economy because they are willing to take the risks necessary to bring ideas for new goods, services, and business practices into the marketplace. They bring together all the factors of production to produce new products. Blooms: Understand Difficulty: Easy Learning Objective: 01-06 Trace the evolution of the Canadian economy and discuss the role of the entrepreneur in the economy. Topic: 01-13 The Role of the Entrepreneur 1-42 Chapter 01 - The Dynamics of Business and Economics 125. Trace the evolution of the Canadian economy. Answers will vary. Feedback: The Early Economy - Before the colonization of North America, Native Americans lived as hunter/gatherers and farmers, with some trade among tribes. The first major business competitors in Canada were the North West Trading Company and the Hudson Bay Company. The Industrial Revolution - The nineteenth century and the Industrial Revolution brought the development of new technology and factories. The factory brought together all the resources needed to make a product— materials, machines, and workers. The Manufacturing and Marketing Economies - Industrialization brought increased prosperity, and many Canadians found jobs in the manufacturing economy—one devoted to manufacturing goods and providing services rather than producing agricultural products. The Service and New Digital Economy - After World War II, with the increased standard of living, Canadians had more money and more time. They began to pay others to perform services that made their lives easier. Beginning in the 1960s, more and more women entered the workforce. Blooms: Remember Difficulty: Medium Learning Objective: 01-06 Trace the evolution of the Canadian economy and discuss the role of the entrepreneur in the e