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QUIZ 1 1. Define the nature of U.S. business and identify its main goals and functions? 2. Trace the history of business and the changing view of business accountability in the United States. 3. Describe the different types of global economic systems according to the means by which they control the factors of production through input and output markets. 4. Show how demand and supply affect resource distribution in the United States. 5. Identify the elements of private enterprise and explain the various degrees of competition in the U.S economic system. SUMMARY OF LEARNING OBJECTIVESi 1. Define the nature of U.S. business and identify its main goals and functions? A business is an organization that provides goods or services to earn profits. The prospect of earning profits – the difference between a business’s revenues and expenses – encourages people to open and expand businesses. Profits reward owners for taking the risks involves in investing their money and time. Businesses produce most of the goods and services that Americans consume and employ most working people. 2. Trace the history of business and the changing view of business accountability in the United States. The landscape of the U.S. business has evolved over the course of centuries. With the coming of the Industrial Revolution in the middle of the eighteenth century, the factory system brought together in one place the materials and workers required to produce items in large quantities and the new machines needed for mass production. The nineteenth century witnessed the rise of the entrepreneur on a grand scale, and U.S. business embraced the philosophy of laissez-faire- the principle that the government should not interfere in the economy but should let business function without regulation. Unfortunately, both the growth of corporations and improved assembly-line output came at the expense of worker freedom. Thus, the production era saw the rise of labor unions and the beginnings of government regulation. According to the marketing concept, which emerged in the 1950s and 1960s, producers of goods and services begin by determining what customers want and then provide it. The 1980s saw the emergence of a global economy. Improved communication and transportation, in addition to more efficient international methods for financing, producing, distributing, and marketing products and services, have combined to open distant marketplaces to businesses. The information era, fueled by the Internet, should give a boost to trade in all sectors of the economy, especially services. 3. Describe the different types of global economic systems according to the means by which they control the factors of production through input and output markets. An economic system is a nation’s system for allocating its resources among its citizens, both individuals and organizations. Economic systems differ in the ways in which they manage the five factors of production: (1) labor, (2) capital, (3) entrepreneurs, (4) physical resources, and (5) information resources. Different types of economic systems also differ in the ways decisions are made about production and allocation. In a market economy, businesses and households interact in two different relationships. In the input market, firms buy resources from households, which are thus suppliers. In the output market, firms supply goods and services in response to demand on the part of households. The political basis of market processes is capitalism, which fosters private ownership of the factors of production and encourages entrepreneurship by offering profits as an incentive. 4. Show how demand and supply affect resource distribution in the United States. Demand is the willingness and ability of buyers to purchase a product or service. Supply is the willingness and ability of producers to offer a product or service for sale. The law of demand holds the buyers will purchase (demand) more of a product as its prices drops and less as its price increases. The law of supply holds that producers will offer (supply) more of a product for sale as its price rises and less as its price drops. A demand and supply schedule, which is obtained from marketing research and other studies of the market, reveals the relationships among different level of demand and supply at different price levels. A demand curve shows how many products will be demanded (bought) at different prices. A supply curve show how many products will be supplied (offered for sale) at different prices. When both curves are plotted on the same graph, the point at which they intersect is the market price or equilibrium price – the price at which the quantity of goods demanded ant the quantity of goods supplied are equal. 5. Identify the elements of private enterprise and explain the various degrees of competition in the U.S economic system. Market economies reflect the operation of a private enterprise system – a system that allows individuals to pursue their own interests without government restriction. Private enter price works according to four principles: (1) private property rights; (2) freedom of choice; (3) profits; and (4) competition. Economists have also identified for degrees of competition in a private enterprise system: (1) perfect competition; (2) monopolistic competition, (3) oligopoly; and (4) monopoly. i Griffin, Ricky W. and Ronald J. Ebert 2006. Business. 8th edition. Upper Saddle River New Jersey: Pearson Education, Inc.: pp 22-23