Intro to Business - Test 1

(The difference depends on who controls the resources.)

Market - Private sector. (Business owners.)

Command - Government.

Kantian Ethics is duty based. "DO unto others as you would want others to do unto you."

Rawl's Social Justice Theory is based on fairness and justice.

• Economical/Financial (what's more cost efficient?)
• Physical/environmental
• Legalities

• Monetary - Federal Reserve Bank controls the money supply.
• Fiscal - Rising/Lowering taxes/spending is what controls money supply.

• The study of people and how they spend money.
• Economics is a social study.

• Maximizing Profits - make the most $ for investors. (the only focus IS investors)
• Moral Minimum - Being aware of society.
• Stakeholder Interest - Balance the interest of stakeholders.
• Corporate Citizenship - What is good for society.

Anybody who has an interest in the company.

ex: Stockholders, customers, employees, etc.

• Technology - (scientific method) Achieving a goal.
• Competition drives technology (companies want to be the best.)
• Encourages entrepeneurship.
• Be used to make better products.
• Technology improves products.

Given market where there are a given # of sellers and buyers.

Large # of sellers produce very similar products that buyers nevertheless perceive as different.

ex: hot dogs, sodas, computers

A lot of buyers, but not a lot of sellers.

One seller, market of one, controls total supply of product or service and sets the price.

ex: National Government

• Capitalism - market economy
• Socialism - mixed economy (take from rich, give to poor)
• Communism - command economy

• Gross Domestic Output.
• Market value of every good/service produced in a year.

2 or more executive quarters of decline in GDP.

Severe recession.

When the economy stabilizes.

Buy the % of people who are unemployed, but actively seeking work.

• Inflation - rise in goods and prices over time.
• Disinflation - prices increases are slowing.
• Deflation - Prices are declining.
• Stagflation - economy is slowing, but prices rise anyhow

• Increase spending; cut taxes.
• Fiscal Policy: taxes and spending.
• Monetary Policy: Mgmt of $ supply & interest rates by the Federal Reserve Bank.

• Frictional (between jobs)
• Structural (restructuring of firms/lay offs)
• Cyclical (recession)
• Seasonal (demand varies)

• Relaxation of trade restrictions; more trade agreements.
• Increase in communication technology.
• Increase in transportation technology.

Taxes on imported goods.

A limit on the # of products that can be imported.

Selling products abroad at below cost (anticompetitive.)

A ban on trade with a particular nation.

The regulation/restriction of foreign currency exchange.

Where one company allows another to use its trade, patent, technology - for a royalty based on sales.

Sending domestically made products abroad for sale.

Selling the rights to make under your name while using your systems and processes.

Cooperative arrangement between 2 or more companies for mutual benefit.

ex: an oil and natural gas company might form a strategic alliance with a research laboratory to develop more commercially viable recovery processes.

Type of strategic alliance where a new company is formed owned by the partners.


ex: Sony-Ericsson is a joint venture by the Japanese consumer electronics company Sony Corporation and the Swedish telecommunications company Ericsson to make mobile phones. The stated reason for this venture is to combine Sony's consumer electronics expertise with Ericsson's technological leadership in the communications sector.

When a firm builds or purchases facilities in a foreign country.

ex: The purpose of a direct investment is to gain enough control of a company to exercise control over future decisions. This can be accomplished by gaining a majority interest or a significant minority interest. Direct investments can involve management participation, joint-venture or the sharing of technology and skills.

• Compare opportunity cost for creating certain products.
• (Product vs. Product)
• Countries can benefit by obtaining what they need by trading with a country that has a surplus.

• Specific product is produced by monopoly & more efficient than other countries.
• To produce more of a good or service than competitors, using the same amount of resources.

Persons look to an outside source or central figure for ethical guidelines.

Persons choose the alternative that would provide the greatest good to society.

• A set of universal rules that establishes ethical duties.
• The rules are based on reasoning and require (1) Consistency in application and (2) Reversibility.

• Moral duties are based on an implied social contract.
• Fairness is justice.
• Rules are established from an original position.

Individuals decide what is ethical based on their own feelings as to what is right or wrong.

• Compliance-Based Ethics codes (mechanistic)
• Integrity-Based Ethics codes (values, sound behavior, shared accountability)

Anything that might bias us in a way that keeps us from fulfilling our duty.

Business must always operate in public view.

ex: Government