BUSINESS PRINCIPLES 1301 EXAM 1
REVIEW
Free Enterprise - Answers - a system of business that allows individuals to decide what
to produce, how to produce it and what price to sell it at.
Business - Answers - the organized effort of individuals to produce and sell, for a profit,
the goods and services that satisfy society's needs
The Four Resources Necessary for a Successful Business - Answers - Materials,
Humans, Financial, Information
What is the objective of every firm? - Answers - to satisfy the needs of customers
Profit - Answers - What remains after all business expenses have been deducted from
sales revenue.
Loss - Answers - A negative profit, which results when a firm's expenses are greater
than its sales revenue.
Economics - Answers - the study of how wealth is created and distributed
Entrepreneur - Answers - a person who risks his or her time, effort, and money to start
and operate a business.
Capitalism - Answers - An economic system in which individuals own and operate the
majority of businesses that provide goods and services.
Example:
Socialism - Answers - the key industries are owned and controlled by the government
Example:
Communism - Answers - almost all economic resources are owned by the government
Example:
What economist wrote about the theory of laissez faire capitalism? - Answers - Adam
Smith
, Four Fundamental Issues in Adam Smith's Theory - Answers - 1. The creation of wealth
is the concern of private individuals, not of government.
2. Private individuals must own the resources used to create wealth (land, buildings,
equipment, etc.) and the owners of resources should be free to determine how these
resources are used.
3. Smith contended that economic freedom ensures the existence of competitive
markets that allow both sellers and buyers to enter and exit as they choose.
4. In Smith's view, the role of government should be limited to providing defense against
foreign enemies, ensuring internal order, and furnishing public works and education.
Market Economy - Answers - an economic system in which businesses and individuals
make the decisions about what to produce and what to buy; the market determines how
much is sold and at what prices.
Did Smith believe Gov should play a large role in the affairs of business? - Answers -
No, he thought that the government should stay out of it completely
What percent of the goods/services produced in the U.S. are sold to customers? -
Answers - 70%
Planned Economy - Answers -
Command Economy - Answers - An economic system in which the government controls
a country's economy.
Who is considered the father of Communism? - Answers - Karl Marx
Productivity - Answers - the average level of output per worker per hour
GDP - Answers - Gross Domestic Product- the total dollar value of all goods and
services produced by all people within the boundaries of a country during a one- year
period.
Business Cycle - Answers - the recurrence of periods of growth and recession in a
nation's economic activity. (Fluctuations)
Recession - Answers - Two or more consecutive three-months periods of decline in a
country's gross domestic product.
Depression - Answers - a severe recession that last longer than a typical recession and
has higher unemployment rates, a lack of consumer confidence in the economy, and a
general decrease in business activity.
Federal Deficit - Answers - when the government spends more than it receives
National Debt - Answers - total of all federal deficit
REVIEW
Free Enterprise - Answers - a system of business that allows individuals to decide what
to produce, how to produce it and what price to sell it at.
Business - Answers - the organized effort of individuals to produce and sell, for a profit,
the goods and services that satisfy society's needs
The Four Resources Necessary for a Successful Business - Answers - Materials,
Humans, Financial, Information
What is the objective of every firm? - Answers - to satisfy the needs of customers
Profit - Answers - What remains after all business expenses have been deducted from
sales revenue.
Loss - Answers - A negative profit, which results when a firm's expenses are greater
than its sales revenue.
Economics - Answers - the study of how wealth is created and distributed
Entrepreneur - Answers - a person who risks his or her time, effort, and money to start
and operate a business.
Capitalism - Answers - An economic system in which individuals own and operate the
majority of businesses that provide goods and services.
Example:
Socialism - Answers - the key industries are owned and controlled by the government
Example:
Communism - Answers - almost all economic resources are owned by the government
Example:
What economist wrote about the theory of laissez faire capitalism? - Answers - Adam
Smith
, Four Fundamental Issues in Adam Smith's Theory - Answers - 1. The creation of wealth
is the concern of private individuals, not of government.
2. Private individuals must own the resources used to create wealth (land, buildings,
equipment, etc.) and the owners of resources should be free to determine how these
resources are used.
3. Smith contended that economic freedom ensures the existence of competitive
markets that allow both sellers and buyers to enter and exit as they choose.
4. In Smith's view, the role of government should be limited to providing defense against
foreign enemies, ensuring internal order, and furnishing public works and education.
Market Economy - Answers - an economic system in which businesses and individuals
make the decisions about what to produce and what to buy; the market determines how
much is sold and at what prices.
Did Smith believe Gov should play a large role in the affairs of business? - Answers -
No, he thought that the government should stay out of it completely
What percent of the goods/services produced in the U.S. are sold to customers? -
Answers - 70%
Planned Economy - Answers -
Command Economy - Answers - An economic system in which the government controls
a country's economy.
Who is considered the father of Communism? - Answers - Karl Marx
Productivity - Answers - the average level of output per worker per hour
GDP - Answers - Gross Domestic Product- the total dollar value of all goods and
services produced by all people within the boundaries of a country during a one- year
period.
Business Cycle - Answers - the recurrence of periods of growth and recession in a
nation's economic activity. (Fluctuations)
Recession - Answers - Two or more consecutive three-months periods of decline in a
country's gross domestic product.
Depression - Answers - a severe recession that last longer than a typical recession and
has higher unemployment rates, a lack of consumer confidence in the economy, and a
general decrease in business activity.
Federal Deficit - Answers - when the government spends more than it receives
National Debt - Answers - total of all federal deficit
