1.What reasons would you give if you were advising someone to study business?
There are four compelling reasons for studying business described in this chapter.
a.To start your own business
b.For help in choosing a career
c.To be a successful employee
d.To become a better informed consumer and investor
2.What factors affect a person’s choice of career?
Deciding what kind of career you want to devote your life to can be both daunting and puzzling, especially when you don’t know what all the possibilities are. Choices range from small, local businesses owned by one individual to large corporations with offices and facilities in countries around the globe. There are also employment opportunities with federal, state, county, and local governments and with not-for-profit organizations. One thing to remember when choosing a career is that a person’s choice of a career is ultimately a reflection of what he or she values and holds most important. What you choose to do with your life will be based on what you feel is most important.
3.Describe the four resources that must be combined to organize and operate a business. How do they differ from the economist’s factors of production?
The four resources are (1) material resources, which include raw materials used in the manufacturing process as well as buildings and machinery; (2) human resources,who are the people that furnish their labor to the business in return for wages; (3) financial resources, which is money used to pay employees, purchase materials, and keep the business operating; and (4) information, which tells the managers of the business how effectively the other resources are being combined and used. Economists refer to the factors of production as the resources used to produce goods and services. They are land and natural resources, labor, capital, and entrepreneurship.
4.Describe the relationship among profit, business risk, and the satisfaction of customers’ needs.
The business that is able to successfully satisfy customers’ needs is said to be the business that will realize the greatest profit potential. Profit is also the payment that business owners receive for assuming the risks of ownership. These risks include not being paid and losing whatever they have invested into the business.
5.What are the four basic economic questions? How are they answered in a capitalist economy?
The four basic economic questions are (1) what goods and services and how much of each to produce, (2) how to produce, (3) for whom to produce, and (4) who owns and controls the factors of production. In a capitalist economy, the first question is answered by consumers as they spend their money. The second question is answered by producers as they compete for sales and profits. The third question is answered by those who have the money to buy the product. The fourth question is answered by who provides the land and natural resources, labor, capital, and/or entrepreneurship. The distribution of goods and services, therefore, depends on the current prices of economic resources, goods, and services and who can afford to buy them.
6.Explain the invisible hand of capitalism.
The “invisible hand” was a term created by Adam Smith to describe how an individual’s personal gain benefits other citizens and a nation’s economy. For example, a small business owner who sells shoes not only prospers from selling his shoes but also provides a benefit to the workers he pays to produce his shoes. Ultimately, the small business owner contributes to the nation’s economy by providing employment, paying taxes, and providing exports, etc.
7.Describe the four basic assumptions required for a laissez-faire capitalist economy.
1.The creation of wealth is the concern of private individuals, not of government.
2.Private individuals must own the...