chapter 7 review economics. 1 the person or group that buys a franchise. franchisee
TRANSCRIPT
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Chapter 7 Review
Economics
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1
•The person or group that buys a franchise.
•Franchisee
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2
•A business owned by two or more co-owners.
•Partnership.
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3
•Putting forth less than the agreed-to effort.
• shirking
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4
•An important decision-making body in a corporation.
•Board of directors.
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5
• A condition in which an owner of a business firm can lose only the amount he or she has invested.
• Limited liability.
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6
•List the formula for calculating profit or loss.
•TR – TC = profit
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7
• Many firms make supervisors _________. This means they receive excess profits as income.
• Residual claimants
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8
• Issuing debt is another name for a _______.
•Bond.
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9
• A person who owns shares of stock in a corporation.
• Shareholder or stockholder
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10
•This type of business can sell stocks and bonds.
•Corporation.
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11
• A law that states that if additional units of one resource are added to another resource in fixed supply, eventually the additional output will decrease.
• Law of diminishing marginal returns.
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12
• With this type of ownership structure, the profit is taxed only 1 time.
• Sole proprietorship & partnership
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13
• Income is taxed twice under this type of ownership structure.
•Corporation.
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14
•List the formula for marginal revenue.
•Change in TR/change in Q = MR
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15
• A cost that changes with the number of units of a good produced.
• Variable cost.
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16
• List a benefit of opening a franchise as opposed to a non-franchise business.
• National advertising, established brand
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17
• A legal entity that can conduct business in its own name in the same way that an individual does.
• Corporation.
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18
• A business that is owned by one individual who makes all business decisions.
• Sole proprietorship
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19
• The entity that offers a franchise.
• Franchiser.
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20
• List the formula for average total cost.
• TC/Q=ATC
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21
• A contract by which a firm lets a person or group use its name and sell its good in exchange for certain payments & requirements.
• Franchise
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22
• List the formula for marginal cost.
• Change in TC/change in Q = MC
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23
• List the three types of ownership structures we discussed in chapter 7.
• Sole proprietorship
• Partnerships
• Corporations
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24
• List an advantage of the partnership compared to the sole proprietorship.
• More people to help raise capital
• Specialization of labor
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25
• List additional costs associated with opening & running a franchise.
• Franchise fee
• Royalties
• Meeting franchise standards
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26
• What is Ralph Nader’s view on social responsibility in business?
• Helping yourself helps others.
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27
• List an example of a stock market.
• AMEX, NASDAQ, & NYSE
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28
• When a corporation first sells stock. The stock is being purchased from the corporation, not another investor.
• Initial Public Offering (IPO)
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29
• A cost or expense that is the same no matter how many units of a good are produced.
• Fixed cost.
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30
• Joe hired a 10th worker at his small business. He has not seen an increase in production. This is an example of the
• Law of diminishing marginal returns
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Chapter 7 Review
True/False Statements
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31
• Business firms exist whenever people working together can produce more than the sum of what an individual working alone can produce.
• True
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32
• The person in the firm who shirks his or her duty is called the monitor.
• False
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33
• Under a sole proprietorship, all decision-making power resides with the board of directors.
• False
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34
• In a partnership, the benefits of specialization of labor can be realized.
• True
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35
• Corporations are subject to triple taxation.
• False
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36
• All businesses have costs, and all costs are the same.
• False
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37
• Expenses that are the same, no matter how many units of a good are produced, are called fixed costs.
• True
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38
• Average total cost is total cost divided by variable costs.
• False
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39
• Marginal cost is the additional cost of producing an additional unit of a good.
• True
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40
• Marginal revenue is the additional revenue from selling an additional unit of a good.
• True
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41
• Marginal revenue equals the change in total cost divided by change in total revenue.
• False
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42
• A firm will produce a good only if a profit will be made.
• True
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43
• The difference between total cost and total revenue is profit or loss.
• True
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44
• When one worker leads to an increase in total revenue, this is an example of the law of diminishing returns.
• False
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