Week 4: Midterm
1. Question : (TCO 1) The war on terrorism will:

Student Answer: improve the confidence level of most consumers.

hurt the profitability of every business operating in the U.S.A.
help some businesses and hurt others.

stabilize the business sector.

2. Question : (TCO 1) As a factor of production, the term capital includes

Student Answer: stocks and bonds issued by corporations

natural resources such as land and water

tools, machinery, and buildings

services provided by the government that enable businesses to be more productive.

3. Question : (TCO1)____________ is the amount a business earns over and above what it spends for salaries and other expenses.

Student Answer: Profit




4. Question : (TCO 1) An increase in __________ means that a given number of workers can produce more output than before.

Student Answer: the CPI

structural unemployment



5. Question : (TCO 4) A difference between partnerships and sole proprietorships is that partnerships

Student Answer: are easier to form

are managed by an elected board of directors

have a greater chance of long term survival

have the advantage of limited liability

6. Question : (TCO 4) One of the major disadvantages of a sole proprietorship is the:

Student Answer: possibility of disagreements between owners.

unlimited liability the owner has for the debts of the firm.

fact that any income earned by this type of business is taxed twice.
high cost of starting or ending the company.

7. Question : (TCO 2) All of the following are reasons why a business should be managed ethically except

Student Answer: because it is the right thing to do

because strict global regulations require it

to attract new customers and retain existing customers.

to please customers, employees, and society

8. Question : (TCO 2) Three questions often help individuals and organizations in deciding whether their decisions are ethical. All of the following are ethics check questions except

Student Answer: Is it legal?

Is it balanced?

Has it been done before?

How will it make me feel about myself?

9. Question : (TCO 4) One result of taking a firm private is:

Student Answer: the firm’s stock is no longer available for purchase on the open market.
managers lose some control as the number of stockholders increases.
the public image of the firm will suffer.

the firm will have access to more capital.

10. Question : (TCO 4) Homer and Marge have decided to open a floral design shop, which they intend to run as co-owners. Both intend to take an active role in the management of their new business, and each will accept unlimited liability. Homer and Marge are planning to operate a:

Student Answer: joint venture.

general partnership.

limited partnership.


1. Question : (TCO 2) One problem of conducting a social audit is:

Student Answer: that most businesses are really not very concerned with these issues.
determining what should be measured and how to calculate the effect on society.
the primary focus of management is on the interests of stakeholders.
governmental “red-tape.”

2. Question : (TCO 3) Under the floating exchange rate system, the value of a country’s currency is determined by:

Student Answer: the monetary authorities of that country.

the United Nations Committee on Floating Currencies.

the currency’s supply and demand in the global market.


3. Question : (TCO 3) Which of the following represents the value of one nation’s currency relative to the currencies of another country?

Student Answer: Euro rate

Currency rate

Exchange rate

Standard of living

4. Question : (TCO 3) A key feature of a(n) _________ is that it has manufacturing capacity or some other physical presence in different nations.

Student Answer: trade cartel

import trading company

export forwarding company

multinational corporation

5. Question : (TCO 4) As a high net worth individual, Allison searches for growth firms in need of additional funding to achieve their goals. In return for this ____________, Allison expects to assume ownership in the business.

Student Answer: analysis

venture capital

corporate loan

securities investment

6. Question : (TCO 2) International issues of social responsibility and ethical behavior are:

Student Answer: the result of greed found in capitalist countries.

found primarily in countries with a low standard of living.

a concern only of business professors.

difficult and not as clear-cut as U.S. firms would like them to be.

7. Question : (TCO 2) A few years ago, several U.S. retailers were sued in Los Angeles courts for human rights abuses associated with contract manufacturers located in the Marianas Islands, a territory of the U.S. government. The accusers wanted the retailers to stop outsourcing the manufacturing of soft goods to manufacturers on the islands that practiced inhumane labor standards. The activists who brought suit against the U.S. firms:

Student Answer: claimed that the retailers were breaking the law.

were taking a corporate social initiative stance.

were quoting the Foreign Corrupt Practices Act.

wanted the courts to recognize the global ethical standards put in place by the International Convention Against Corruption.

8. Question : (TCO 3) A small Italian grocery store sells five varieties of feta cheese. It offers Bulgarian, French, Danish, Greek, and one that is processed and sold from Tillamook, Oregon. The domestic variety (from Oregon) sells for $1.99/pound, while all the others sell for more than $2.99/pound, and the Greek variety is priced at $6.99/pound. The domestic variety is much cheaper because:

Student Answer: Customers always perceive the domestic varieties to be of lower quality than the imported varieties.
The value of the dollar never favors imported goods.

Imported cheese producers often pay protective tariffs on these goods, which ultimately raises the price at the grocery store.
The distributors of these imports refuse to buy the cheese in large enough quantities to enjoy economies of scale.

9. Question : (TCO 3) France, Italy, Denmark, and Luxembourg are all members of the EU. Which of the following statements is an accurate description of trade between these nations?

Student Answer: France and Italy are permitted to engage in free trade due to their proximity to each other; however, Luxembourg only has free trade with Belgium, and Denmark only has free trade with Switzerland, Sweden, and Germany.
The EU has abolished customs duties at internal borders for these and other member nations and put in place a uniform system for taxing imports. Internal border controls subsequently disappeared.
Customs officers that collect tariffs are now found at the internal borders of all EU member nations.
France, Italy, Denmark, and Luxembourg are four nations strongly considering abandoning the EU common market. The global trading bloc has proved inefficient in these nations attracting global business.

10. Question : (TCO 1) Greening refers to:

Student Answer: the need for more carbon dioxide in our air.

firms acquiring more greenbacks (U.S. dollars) from world trade.
finding ways to lessen the harm on our environment.

the agricultural industry’s push to develop and produce new green vegetables to feed the world.

11. Question : (TCO 1) Identify and describe the four basic rights that form the foundation of capitalism.

12. Question : (TCO 2) Explain the difference between a compliance-based ethics code and an integrity-based ethics code.