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Business Essentials 12th Edition Test Bank

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    1 CHAPTER 1 THE CANADIAN BUSINESS SYSTEM MULTIPLE CHOICE QUESTIONS. Choose the one alternative that best completes the statement or answers the question. 1)Which of the following statements is correct with regard to the opening case entitled “ Opportunities and Challenges in the Mobile Phone Market"? A)RIM has been very successful so far, but there are big potential problems on the horizon. B)There is now a general consensus among industry experts that RIM is going to be the leading company in the mobile phone market. C)To date competition is not tough in the mobile phone market. D)The "bring your own device" trend has just about run its course. E)Unlike other phone makers, RIM has not been plagued with patent infringement lawsuits. Answer: A Diff: 2 Skill: Recall Objective: 1.1 A-Heading: The Idea of Business and Profit 2)Profit is A)what remains after business expenses are subtracted from business revenues. B)equal to the market value of shares in a company. C)equal to total revenue minus cash expenses. D)the amount of sales minus 50 percent. E)double the amount the company pays in taxes. Answer: A Diff: 1 Skill: Recall Objective: 1.1 A-Heading: The Idea of Business and Profit 3)This week, Jessica's Variety Store had sales of $4,000, employees were paid $1,000, the cost of goods was $1,500, and rent was $500. Profit for the week was A)$3,000. B)$1,000. C)$4,000. D)$2,000. E)$1,500. Answer: B Diff: 2 Skill: Application Objective: 1.1 A-Heading: The Idea of Business and Profit 4)How are provincial universities in Canada different from business firms? A)They do not seek to make a profit B)They are not affected by the global environment C)Their organizational boundaries are narrower than normal D)They do not produce goods or services E)They are more important to society than business firms Answer: A Diff: 2 Skill: Recall Objective: 1.1 A-Heading: The Idea of Business and Profit

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    2 5)__________ is the difference between a business firm's revenues and its expenses. A)Cost of goods sold B)Productivity C)Sales D)Debt E)Profit Answer: E Diff: 1 Skill: Recall Objective: 1.1 A-Heading: The Idea of Business and Profit 6)Profit is A)the market value of shares of stock in a company. B)the level of expenses divided by the firm’s assets . C)what remains after business expenses are subtracted from business revenues. D)gross revenue minus taxes a company pays. E)gross sales minus taxes a company pays. Answer: C Diff: 1 Skill: Recall Objective: 1.1 A-Heading: The Idea of Business and Profit 7)Examples of businesses include all of the following except A)local supermarkets. B)one-person businesses, like barbershops. C)non-profit organizations. D)large corporations like Canadian Pacific or Alcan Aluminum. E)farms. Answer: C Diff: 2 Skill: Application Objective: 1.1 A-Heading: The Idea of Business and Profit 8)Most of the goods and services consumed in Canada are produced by A)countries in the European Union. B)businesses in the U.S. C)countries of the Pacific Rim. D)the Canadian government. E)business firms. Answer: E Diff: 1 Skill: Application Objective: 1.1 A-Heading: The Idea of Business and Profit 9)Not-for-profit organizations A)are content with small profits, whereas business firms want large profits B)are more important than business firms. C)use the funds they generate from government grants or the sale of goods or services to provide service to the public. D)do not sell goods or services. E)are not allowed to operate in the manufacturing sector. Answer: C Diff: 2

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    3 Skill: Recall Objective: 1.1 A-Heading: The Idea of Business and Profit 10)Generally speaking, which one of the factors of production is most important? A)Land B)Labour C)Capital D)Entrepreneurship E)None of these Answer: E Diff: 2 Skill: Recall Objective: 1.2 A-Heading: Economic Systems Around the World 11)The key difference between economic systems is the different ways in which they manage A)the factors of production. B)the transportation of goods within their borders. C)government rules and regulations. D)the payment of workers. E)none of these answers is accurate. Answer: A Diff: 2 Skill: Recall Objective: 1.2 A-Heading: Economic Systems Around the World 12)An economic system is A)an agreement between countries that deal with free trade. B)the way in which a nation allocates its resources among its citizens. C)a government decree that requires certain goods and services to be provided. D)a long standing agreement between citizens and governments on how an economy is run. E)a large government department that oversees how the economy is running. Answer: B Diff: 2 Skill: Recall Objective: 1.2 A-Heading: Economic Systems Around the World 13)The key difference between economic systems is A)the structure of government. B)the management of capital and labour. C)the management of the factors of production. D)who controls the banks. E)who controls large industries like steel and auto manufacturing. Answer: C Diff: 2 Skill: Recall Objective: 1.2 A-Heading: Economic Systems Around the World 14)In a command economy, the central government A)supports free enterprise in every way possible B)allocates all or most factors of production C)encourages citizens to buy shares of stock in small companies

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    4 D)keeps its control activities to a minimum E)buys surpluses from private sector companies to keep prices from falling Answer: B Diff: 2 Skill: Recall Objective: 1.2 A-Heading: Economic Systems Around the World 15)A nation's economic system is its way of A)allocating resources among its citizens. B)collecting taxes. C)managing the money supply. D)regulating business firms by government laws. E)supplementing low-income families. Answer: A Diff: 2 Skill: Recall Objective: 1.2 A-Heading: Economic Systems Around the World 16 )In terms of factors of production, Imperial Oil’s crude oil reserves are an example of _______, while market forecasts are an example of ________. A)labour; entrepreneurs B)information; labour C)capital; information D)natural resources; information E)information; natural resources Answer: C Diff: 2 Skill: Application Objective: 1.2 A-Heading: Economic Systems Around the World 17)All of the following are factors of production except A)natural resources. B)labour. C)capital. D)entrepreneurs. E)technology. Answer: E Diff: 2 Skill: Application Objective: 1.2 A-Heading: Economic Systems Around the World 18)Entrepreneurs are important because they A)make lots of money. B)are good at making decisions. C)take risks to start new businesses. D)are good managers. E)are rich. Answer: C Diff: 2 Skill: Application Objective: 1.2 A-Heading: Economic Systems Around the World 19)Which of the following is an example of a natural resource? A)Computer software B)The mental and physical capabilities of people

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    5 C)Land, water, and mineral deposits D)Money E)Trained engineers Answer: C Diff: 1 Skill: Application Objective: 1.2 A-Heading: Economic Systems Around the World 20)Elizabeth wants to set up a consulting business that specializes in mathematical problem solving. Which of the following factors of production would she require? A)Capital B)Labour C)Information resources D)Natural resources E)All of these Answer: E Diff: 2 Skill: Application Objective: 1.2 A-Heading: Economic Systems Around the World 21)Which factor of production is Imperial Oil trying to increase when it spends large sums of money in an attempt to find new oil fields? A)Information B)Entrepreneurship C)Labour D)Capital E)Natural resources Answer: E Diff: 2 Skill: Application Objective: 1.2 A-Heading: Economic Systems Around the World 22)"Embrace the opportunities and accept the risks" is a phrase that best characterizes the __________ attitude. A)entrepreneurial B)capitalist C)communist D)socialist E)mixed market Answer: A Diff: 2 Skill: Application Objective: 1.2 A-Heading: Economic Systems Around the World 23)Something that would contribute directly to improving labour as a factor of production would be A)finding new oil reserves. B)better education for more of the population. C)increasing the purchasing power of employees. D)programs designed to decrease unemployment. E)finding more efficient ways to produce products. Answer: B Diff: 2 Skill: Application Objective: 1.2

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    6 A-Heading: Economic Systems Around the World 24)Labour includes A)everyone in a business. B)only non-unionized employees. C)only unionized employees. D)only managers. E)only workers who do physical work. Answer: A Diff: 2 Skill: Application Objective: 1.2 A-Heading: Economic Systems Around the World 25)A factor that contributes directly to improving labour as a factor of production is A)free tuition at post-secondary educational institutions. B)increased purchasing power by employees. C)better education for more of the population. D)programs that decrease unemployment. E)creation of more manual-labour jobs. Answer: C Diff: 2 Skill: Application Objective: 1.2 A-Heading: Economic Systems Around the World 26)Natural resources, as a factor of production for mining, are a practical consideration when a mining company considers A)the ease with which ore could be mined. B)the number of miners available to mine the ore. C)the amount of capital required to build the mine. D)the profit that could be made from mining the ore. E)the number of customers who want to buy ore. Answer: A Diff: 3 Skill: Application Objective: 1.2 A-Heading: Economic Systems Around the World 27)Which of the following is correct with regard to the Entrepreneurship and New Ventures box entitled “A Shrine to Wine”? A)Genuwine Cellars has very little competition for its products B)Genuwine has resisted moving some of its operations to lower-cost countries C)Genuwine found that government agencies were not very helpful with advice on how to succeed D)Genuwine started by focusing on building wine cellars, but now most of its business is the actual production of wine E)All these are correct Answer: A Diff: 2 Skill: Recall Objective: 1.2 A-Heading Economic Systems Around the World 28)What is the difference between a command economy and a market economy? A)A command economy is found only in communist countries, while a market economy is found only in capitalist countries B)A command economy is more efficient than a market economy

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    7 C)A market economy gives greater “life satisfaction” to people D)A command economy relies on centralized government control of the factors of production, while in a market economy supply and demand determine production and allocation decisions E)There really are no significant differences between a command economy and a market economy Answer: D Diff: 3 Skill: Application Objective: 1.2 A-Heading: Economic Systems Around the World 29)A command economy is A)one where there is a mix of government regulation and free enterprise. B)one in which the market directs what is made and in what quantity. C)the type of economy found in Australia and New Zealand. D)one in which the government controls all or most factors of production. E)one in which customers demand what new products are to be made. Answer: D Diff: 3 Skill: Application Objective: 1.2 A-Heading: Economic Systems Around the World 30)The economic system in which producers and consumers control production and allocation decisions through supply and demand is called A)a centrally planned economy. B)privatization. C)a market economy. D)communism. E)socialism. Answer: C Diff: 2 Skill: Application Objective: 1.2 A-Heading: Economic Systems Around the World 31)Which country has a command economy? A)Australia B)Japan C)Canada D)Germany E)Cuba Answer: E Diff: 2 Skill: Application Objective: 1.2 A-Heading: Economic Systems Around the World 32)Which of the following is correct with regard to the communist economic system? A)The centralized planning emphasis on capital equipment and military hardware has caused declines in the prices of consumer goods B)Government ownership of the means of production is only temporary C)Most government-operated enterprises are very efficient because of central planning D)Overall production expands rapidly because of central planning E)The government owns and operates all sources of production Answer: E Diff: 2

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    8 Skill: Application Objective: 1.2 A-Heading: Economic Systems Around the World 33)Stanislav lives in a country where all the factors of production are owned by the government. The economic system in his country is A)communism. B)capitalism. C)mixed market. D)socialism. E)it is not possible to tell with the information provided. Answer: A Diff: 2 Skill: Application Objective: 1.2 A-Heading: Economic Systems Around the World 34)John lives in a country where producers and consumers control production, and where allocation decisions are made through the mechanism of supply and demand. John lives in a country with a _________ economy. A)privatized B)socialist C)communist D)market E)it is not possible to tell with the information given Answer: D Diff: 2 Skill: Application Objective: 1.2 A-Heading: Economic Systems Around the World 35)A GlobeScan poll showed that the highest support for the free market economy was found in A)Japan. B)China. C)U.S. D)Canada. E)Brazil. Answer: B Diff: 2 Skill: Recall Objective: 1.2 A-Heading: Economic Systems Around the World 36)What is the major source of capital for small businesses? A)Bank loans B)Sale of shares of stock C)Personal investment by owners D)Venture capital firms E)It is not known what the major source of capital is Answer: C Diff: 2 Skill: Recall Objective: 1.2 A-Heading Economic Systems Around the World 37)A major drawback to communism as an economic system is that A)government control of the factors of production is only temporary. B)people don’t like communis m. C)individuals contribute according to their ability.

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    9 D)individuals receive economic benefits according to their needs. E)production of goods and services is inefficient because of the lack of a profit incentive. Answer: E Diff: 3 Skill: Application Objective: 1.2 A-Heading: Economic Systems Around the World 38)Olga lives in a country where the government owns and operates selected major industries. The economic system in her country is most likely to be A)privatization. B)mixed market. C)deregulation. D)communism. E)socialism. Answer: E Diff: 2 Skill: Application Objective: 1.2 A-Heading: Economic Systems Around the World 39)Command economies are most likely to be found in A)the newly emerging economies of southeast Asia. B)communist and socialist nations. C)western European countries. D)Japan. E)Canada and the U.S. Answer: B Diff: 2 Skill: Application Objective: 1.2 A-Heading: Economic Systems Around the World 40)An economy that has a strong central government that controls labour, capital, and natural resources and has few entrepreneurs is a A)market economy. B)command economy. C)free-enterprise economy. D)capitalist economy. E)oligopolistic economy. Answer: B Diff: 1 Skill: Recall Objective: 1.2 A-Heading: Economic Systems Around the World 41)Communism and socialism are A)basic forms of market economies. B)becoming more popular. C)extreme opposites. D)basic forms of command economies. E)identical forms. Answer: D Diff: 2 Skill: Recall Objective: 1.2 A-Heading: Economic Systems Around the World

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    10 42)Sara lives in an economy where the government restricts the number of children she can give birth to. Sara lives in a ________ economy. A)communist B)backward C)mixed market D)market E)capitalist Answer: A Diff: 3 Skill: Application Objective: 1.2 A-Heading: Economic Systems Around the World 43)Mexico allows producers and consumers to make production and allocation decisions through the mechanism of supply and demand. Such a system is called A)socialism. B)communism. C)privatization. D)nationalization. E)a market economy. Answer: E Diff: 1 Skill: Application Objective: 1.2 A-Heading: Economic Systems Around the World 44)Cuba, North Korea, and Vietnam are all ___________ economies. A)market B)socialist C)mercantile D)mixed E)communist Answer: E Diff: 2 Skill: Application Objective: 1.2 A-Heading: Economic Systems Around the World 45)Socialist economies may stifle economic growth because A)management positions in state-controlled industries are often filled on the basis of political considerations. B)they have too few regulations concerning product safety. C)they are found in countries where people don’t have many skills . D)they are usually found in countries with cold climates. E)they encourage excessive unionization of employees. Answer: A Diff: 3 Skill: Application Objective: 1.2 A-Heading: Economic Systems Around the World 46)An economic system that permits private ownership and control of small businesses but where the government controls large critical industries is known as A)a mixed economy. B)socialism. C)communism. D)capitalism. E)mercantilism.

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    11 Answer: B Diff: 1 Skill: Recall Objective: 1.2 A-Heading: Economic Systems Around the World 47)Which of the following statements is correct? A)Sweden is the best example of a country with a pure socialist economy B)A GlobeScan poll found that the greatest support for the free market economy was found among the citizens of India C)The United States is a pure capitalist economy D)Many countries in the world have a purely communist economy E)Under socialism, smaller businesses are often privately owned Answer: E Diff: 3 Skill: Recall Objective: 1.2 A-Heading: Economic Systems Around the World 48)Socialism is best described as A)a kind of command economy in which the government owns and operates all industries. B)a kind of command economy in which the government owns and operates large critical industries. C)an economy that is free from any regulation or planning. D)a market economy in which markets decide what, when, and how much to produce. E)an economic system with elements of market economy, but not a planned economy. Answer: B Diff: 2 Skill: Recall Objective: 1.2 A-Heading: Economic Systems Around the World 49)Socialism is best described as: A)an economic system with elements of both a planned economy and a market economy B)a kind of command economy in which the government owns and operates large critical industries C)a market economy in which markets decide what, when, and how much to produce D)a kind of command economy in which the government owns and operates all industries E)none of these Answer: B Diff: 2 Type: MC Skill: Recall Objective: 1.2 A-Heading: Economic Systems Around the World 50)Market economies have all of the following characteristics, except that they A)allow businesses to charge whatever they want for their products and services. B)encourage entrepreneurship by offering profits as an incentive. C)require government intervention in order to prosper. D)rely on markets, not governments, to decide what, when, and for whom to produce.

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    12 E)allow customers free choice. Answer: C Diff: 2 Skill: Recall Objective: 1.2 A-Heading: Economic Systems Around the World 51)Canada is home to a(n) ________ economy. A)mixed market B)oligopolistic C)socialist D)market E)command Answer: A Diff: 2 Skill: Recall Objective: 1.2 A-Heading: Economic Systems Around the World 52)Market economies are considered beneficial for small businesses because they A)provide small businesses with lots of government assistance and protection. B)provide a central economic plan within which small businesses can easily prosper. C)protect small businesses from the power of large corporations. D)allow small businesses to fail. E)allow the business to do whatever it wants as long as it doesn’t break the law. Answer: E Diff: 2 Skill: Application Objective: 1.2 A-Heading: Economic Systems Around the World 53)In which economic system will profit motivate entrepreneurs to use resources efficiently and to produce goods that consumers want? A)A centrally planned economy B)Communism C)A market economy D)Socialism E)A barter economy Answer: C Diff: 1 Skill: Recall Objective: 1.2 A-Heading: Economic Systems Around the World 54)Jose is from Guatemala. He is unsure about the nature of business in Canada. You point out that a typical business in Canada operates the same as a typical business in A)The People's Republic of China. B)Poland. C)Peru. D)England. E)Japan. Answer: D Diff: 3 Skill: Application Objective: 1.2

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    13 A-Heading: Economic Systems Around the World 55)Which of the following is correct with respect to input and output markets? A)In the input market, firms supply goods and services in response to demand on the part of households B)In the output market, firms buy resources from households, which then supply those resources C)Consumer buying patterns provide information that helps companies decide which products to produce D)Consumers are restricted in the companies they can work for E)Input and output markets exist only in communist countries Answer: C Diff: 3 Skill: Recall Objective: 1.2 A-Heading: Economic Systems Around the World 56)Which of the following is correct with respect to mixed market economies? A)They have features that are not found in either command or market economies B)As a result of the financial crisis of 2008, there is a trend toward increased government regulation of business in mixed market economies C)Very few countries have this type of system D)There is a trend toward increased government ownership of business in mixed market economies E)The mixed market economy is the best type of economic system Answer: B Diff: 2 Skill: Recall Objective: 1.2 A-Heading: Economic Systems Around the World 57)The process of converting government-owned enterprises into enterprises owned by individuals or profit seeking firms is known as A)entrepreneurship. B)deregulation. C)privatization. D)socialism. E)marketing. Answer: C Diff: 1 Skill: Recall Objective: 1.2 A-Heading: Economic Systems Around the World 58)The federal government sold the Lester B. Pearson International Airport in Toronto to a group of entrepreneurs, which then set up the Greater Toronto Airports Authority. This sale is an example of A)socialism. B)freedom of choice. C)entrepreneurship. D)deregulation. E)privatization. Answer: E Diff: 2 Skill: Application Objective: 1.2 A-Heading: Economic Systems Around the World

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    14 59)Which of the following is correct with respect to privatization? A)The TNT Post Group in the Netherlands has been converted from private to government ownership B)Privatization is most likely to occur in communist countries C)Privatization has been a general trend during the last decade, but some countries are going in the opposite direction and pursuing nationalization instead D)Several companies have been nationalized in Canada in recent years E)The recession of 2008 accelerated the trend toward privatization Answer: C Diff: 3 Skill: Recall Objective: 1.2 A-Heading: Economic Systems Around the World 60)The process by which control of a company is shifted from government to business is called A)government bailouts. B)nationalization. C)socialism. D)mercantilism. E)privatization. Answer: E Diff: 1 Skill: Recall Objective: 1.2 A-Heading: Economic Systems Around the World 61)The role of government in our economic system includes all of the following except A)customers. B)innovators. C)competitors. D)regulators. E)taxation agents. Answer: B Diff: 2 Skill: Recall Objective: 1.2 A-Heading: Interactions Between Business and Government 62)Sandy is responsible for monitoring compliance with regulations in her company. She needs to know that the important areas of government regulation are A)protecting competition and upholding environmental regulations. B)protecting social goals, upholding environmental regulations, and protecting shareholder rights. C)protecting competition, protecting consumers, and upholding environmental regulations. D)protecting competition, protecting consumers, protecting social goals, and protecting the environment. E)protecting shareholder rights, and following business law. Answer: D Diff: 2 Skill: Recall Objective: 1.2 A-Heading: Interactions Between Business and Government 63)Madeline is responsible for answering questions about what her company

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    15 can do under the Competition Act. Which one of the following is allowed under the Act? A)The return of surpluses by credit unions to their members B)Pricing products unreasonably low to eliminate competition C)Forming a merger or a monopoly that lessens competition D)Refusal to sell to a retailer who, in turn, sells the product significantly below the suggested retail price E)Giving selective allowances and rebates to cover advertising expenses to specific retailers Answer: A Diff: 2 Skill: Recall Objective: 1.2 A-Heading: Interactions Between Business and Government 64)Which of the following is correct regarding the Competition Act? A)The Act prohibits agreements between companies that reduce competition B)The government has to prove that agreements between companies actually reduce competition C)Recent changes to the Act have reduced fines for misleading marketing practices because it has been shown that these fines don't have any effect D)Surveys of business executives show that they think the Competition Bureau is actually quite quick in approving or denying merger requests E)All of these Answer: A Diff: 1 Skill: Recall Objective: 1.2 A-Heading: Interactions Between Business and Government 65)Why are income taxes called progressive taxes? A)Because poorer people spend proportionally more on necessities B)Because the more one makes, a greater proportion of additional amounts is paid in income taxes C)Because the more one makes, the higher the income tax rate that is applied to one's entire income D)Because they increase total consumption E)Because the more one progresses in a company, the more one pays in income taxes Answer: B Diff: 2 Skill: Recall Objective: 1.2 A-Heading: Interactions Between Business and Government 66)Why are sales taxes called regressive taxes? A)Because food and drugs are often exempt B)Because the more one makes, the lower the rate of sales tax that is applied to one's purchases C)Because poorer people pay a higher percentage of their income than richer people D)Because it applies to sales taxes E)Because they discourage the purchase of some products Answer: C Diff: 3 Skill: Recall Objective: 1.2 A-Heading: Interactions Between Business and Government 67)Incentive programs are designed to

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