Question 1

Matt Newell, a former Air Force pilot, decides to operate a helicopter tour company to provide customers with breathtaking views of the Rocky Mountains.He obtains a loan to ensure that the necessary land, facilities, advertising, and five helicopters are available for his business.What important factor of production has he overlooked in creating his business?

Accepted Answer

Matt has overlooked the need for labor, which includes hiring pilots and support staff to operate and maintain the helicopters, run the office, and provide customer service.

Question 2

Approximately what portion of our nation's total production is made up of consumer goods?

Accepted Answer

Consumer goods make up about 70 percent of total production in many economies, reflecting the significant portion of economic activity dedicated to producing goods and services for personal consumption.

Question 3

Steve Wilson, a chef at a major restaurant in San Francisco, wants to start his own restaurant.He surveys the market, finds a suitable location, and calculates how much money he will need to lease the building and purchase the necessary equipment and supplies.Steve visits his banker and requests a loan.The money Steve will receive as a loan and the resources he will purchase with it are known as _____.

Accepted Answer

The money Steve will receive as a loan is known as capital, which is the financial resources necessary to start and maintain a business. Purchasing equipment and supplies with this loan can also be considered as part of the capital investment for the restaurant. Option B, profit, is the money earned after the restaurant begins to operate and generate revenue. Option C, revenue, is the income earned by the business from its goods or services, but it is not applicable in this scenario as Steve has not yet started his restaurant. Option D, collateral, is the property or asset that is pledged as security for a loan, but it is not necessary in this case as Steve is borrowing money without collateral. Option E, stock, is the ownership interest in a corporation and is not relevant to this situation.

Question 4

Which of the following represents the biggest customer of American business?

Accepted Answer

Consumers represent the biggest customer of American business as they have a significant impact on overall demand and consumption patterns. The purchasing power of consumers ultimately drives the success of businesses and industries.

Question 5

An economic system in which individuals and businesses make decisions about what to produce and what to buy, and the market determines how much is sold and at what prices, is called a ____ economy.

Accepted Answer

In a market economy, individuals and businesses are free to make their own decisions about production and consumption based on supply and demand, without any intervention from a central authority or government. The price signals sent by the market help to allocate resources efficiently and incentivize producers to supply products that are in high demand. This is in contrast to a planned or command economy, where the government or central authority determines what is produced and consumed based on a predetermined plan or set of rules. Therefore, the best choice is C) market.

Question 6

All of the following would typically be considered consumer products except a _____.

Accepted Answer

A high-powered drill press is typically considered an industrial product, not a consumer product. The other options are all items that are usually purchased by consumers for personal use.

Question 7

The work performed to produce goods and services is referred to as _____.

Accepted Answer

Labor refers to the work performed by individuals to produce goods and services.

Question 8

According to economists, natural resources, labor, capital, and entrepreneurship are called _____.

Accepted Answer

Natural resources, labor, capital, and entrepreneurship are referred to as factors of production, which are the resources used by firms to produce goods and services. This term is commonly used in economics to explain the inputs needed to produce goods and services in an economy.

Question 9

Which of the following is not a feature of laissez-faire capitalism?

Accepted Answer

Laissez-faire capitalism promotes economic freedom, competition, private ownership of wealth, and a limited role of government. However, it does not guarantee income for individuals as it believes in the natural distribution of resources based on individual abilities and efforts.

Question 10

Capital or capital goods as recognized by economists would include all of the following except _____.

Accepted Answer

Crude oil is not considered capital or capital goods as recognized by economists. Capital goods are physical assets used in the production process, such as facilities, machinery, and computer equipment. Money is also considered capital as it can be used to purchase these physical capital goods.

Question 11

Households provide all of the following resources to businesses except _____.

Accepted Answer

Dividends are typically paid to shareholders by businesses, not provided by households. The other resources listed (labor, land, buildings, and capital) can all be provided by households to businesses.

Question 12

Which of the following purchases goods and services for personal or household use?

Accepted Answer

A consumer is an individual who purchases goods and services for personal or household use. The other choices listed are not directly associated with personal or household consumption.

Question 13

The United States, whose economy exhibits elements of both capitalism and socialism, is known as a(n) ____ economy.

Accepted Answer

The United States economy is known as a mixed economy because it combines elements of both capitalism and socialism. This means that while the market plays a significant role in determining prices and production, there are also various social programs and regulations in place to provide support and protection for citizens.

Question 14

Diane enjoys scrapbooking and decides to open her own scrapbooking store.She invests her money, time, and effort into making the store a success.Diane can be best described as a(n) _____.

Accepted Answer

Diane is described as investing her own money, time, and effort into opening and running her own store, indicating that she is an entrepreneur.

Question 15

A person who risks his or her time, effort, and money to start and operate a business is called a(n) _____.

Accepted Answer

An entrepreneur is a person who takes on financial and personal risks to start and run a new business venture. They are willing to invest their own time, effort, and money to make the business successful. This distinguishes them from intrapreneurs, who work within existing companies to innovate and create new products and services, or from competitors who may also start businesses but may not necessarily take on the same level of risk and responsibility.

Question 16

Ways in which consumers affect American business include all the following except

Accepted Answer

Consumers affect American business through purchasing goods and services, providing necessary business capital, and labor for production, but they do not tax goods and services. Taxation is a function typically reserved for government entities.

Question 17

In Adam Smith's view, which of the following is not the role of government in business?

Accepted Answer

Adam Smith believed in the concept of laissez-faire, which calls for minimal government intervention in the economy. Therefore, regulating business activity would not be considered a role of government in his view. The other options, such as providing defense, ensuring internal order, furnishing public works, and providing education, are all functions that could fall under the government's responsibilities according to Smith.

Question 18

Which of the following scenarios would best exemplify Adam Smith's view of best serving the interests of society?

Accepted Answer

Adam Smith believed that individuals pursuing their own self-interest and economic gain would ultimately lead to the best overall outcome for society. This is based on the idea that market competition and the pursuit of profit would lead to innovation, efficiency, and the production of goods and services that are most valued by consumers. This approach is contrasted with choices A, B, and C, which all involve some form of government intervention or regulation, while choice D involves a traditionally non-market based transaction system.

Question 19

For Starbucks Coffee, managers and employees would be _____.

Accepted Answer

Managers and employees are considered labor resources in the context of a business like Starbucks where human input is essential for the operations of the business.

Question 20

When consumers spend their money to purchase Dell computers or Sony portable CD players, or when they discontinue buying such items as compact discs, they are telling resource owners

Accepted Answer

Consumers' purchasing decisions signal to producers what products are in demand, thus indicating what to produce.

Quiz 1: Exploring the World of Business and Economics