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1、14) List and describe the five factors of production. Answer: The factors of production are labor, capital, entrepreneurs, physical resources, and information resources. Labor refers to the physical and mental capabilities of people as they contribute to the economic system. Capital refers to the fu
2、nds needed to create and operate a business enterprise. Entrepreneurs are individuals who embrace the opportunities and accept the risks of setting up and operating businesses. Physical resources are tangible things organizations use in the conduct of their business. Information resources include da
3、ta and other information used by businesses. 15) How does a planned economy differ from a market economy? Answer: A planned economy relies on a centralized government to control all or most factors of production and to make all or most production and allocation decisions. In a market economy, indivi
4、duals control production and allocation decisions through supply and demand. 21) Differentiate between gross national product (GNP) and gross domestic product (GDP).Answer: Both gross national product (GNP) and gross domestic product (GDP) measure the economic performance of a national economy. Gros
5、s domestic product refers to the total value of all goods and services produced within a given period by a national economy through domestic factors of production. On the other hand, gross national product measures the total value of goods and services produced by a national economy within a given p
6、eriod regardless of where the factors of production are located. 22) Explain the relationship between productivity and the standard of living. Answer: Standard of living refers to the total quantity and quality of goods and services that people can purchase with the currency used by their economic s
7、ystem. Productivity is a measure of economic growth that compares how much a system produces with the resources needed to produce it. Standard of living improves only through increases in productivity. 24) Explain the role of both profit-seeking businesses and non-profit organizations in the overall
8、 meaning of business. Answer: Businesses are organizations that provide goods and services that are then sold to earn profits. Indeed, the prospect of earning profits, the difference between a businesss revenue and its expenses, is what encourages people to open and expand businesses. After all, pro
9、fits are the reward owners get for risking their money and time. The right to pursue profits distinguishes a business from non-profit organizations, such as universities, hospitals, and government agencies, that run in much the same way but that generally do not seek profits. Whereas profits may be
10、considered the final reward in profit-seeking businesses, the final reward for non-profit organizations might be operational efficiency, for example. 25) How does the external environment affect business?Answer: All businesses operate within the context of a larger external environment. The external
11、 environment consists of everything outside a business boundaries that might affect it. The domestic business environment refers to the environment in which a firm operates, conducting operations and generating revenues. The global business environment includes the international forces affecting a b
12、usiness. The technological environment refers to human knowledge, work methods, physical equipment, electronics and telecommunications, and various processing systems used to conduct a business. The relationship between business and government describes the political-legal environment. The sociocult
13、ural environment includes the customs, mores, values, and demographic characteristics of the society in which a business conducts operations. Finally, the economic environment refers to the economic conditions which exist in the economic system in which a company operates.26) A nations economic syst
14、em is its system for allocating its resources among its citizens, both individuals and organizations. Comment. Answer: A nations resources, often referred to as the factors of production, include labor, capital, entrepreneurs, physical resources, and information resources. An economic system is defi
15、ned by how it manages and allocates these factors of production. In a planned economy, for example, the factors of production are government-owned and controlled. In a market economy, such as that of the United States, individual producers and consumers control production and allocation by creating
16、combinations of supply and demand. In a mixed-market economy, which features characteristics of both a planned and a market economy, there is some government control of some factors of production, often through the nations major industries, such as transportation, communication, and information, alo
17、ngside some private ownership. 27) Explain the roles of demand and supply in a market economy. Answer: On all economic levels of a market economy, decisions about what to buy and what to sell are determined primarily by the forces of demand and supply. Demand is the willingness and ability of buyers
18、 to purchase a product; supply is the willingness and ability of producers to offer a good or service for sale. The law of demand states that buyers will purchase more of a product as its price drops and less as its price increases. The law of supply states that producers will offer more of a produc
19、t for sale as its price rises and less as its price drops. 28) Explain the role of private enterprise in a market economy. Include an explanation of the elements that comprise free enterprise. Answer: Market economies rely on a private enterprise system, one that allows individuals to pursue their o
20、wn interests with minimal government restriction. Private enterprise requires four elements: private property rights, freedom of choice, profits, and competition. Private property rights allow the ownership of resources used to create wealth to be in the hands of individuals. Freedom of choice allow
21、s a number of freedoms in the market, including the freedom for a worker to sell his or her labor to any employer he or she chooses, the freedom to choose which products and brands to buy, and the freedom for producers to choose whom they hire and what they will produce. Profits are the incentives f
22、or entrepreneurs to assume the risks of business ownership. Competition occurs when businesses vie for the same resources and customers; competition is a driver of goods and services quality and price levels. All four of these elements are welcomed in a market economy. 29) Compare and contrast the f
23、our degrees of competition in a private enterprise system. Answer: The four degrees of competition include perfect competition, monopolistic competition, oligopoly, and monopoly. In perfect competition, all firms in an industry are small but the number of firms in the industry is large. No single fi
24、rm is powerful enough to influence price; therefore, price is determined by such market forces as supply and demand. The products in a perfectly competitive market are so similar that buyers view them as identical to those of other firms. In monopolistic competition, there are many buyers and seller
25、s. Often, sellers attempt to differentiate their products and services from others through design, styling, advertising, or the use of brand names; this often gives sellers some control over prices. Monopolistically competitive businesses face few market entry/exit barriers. In an oligopoly, an indu
26、stry has only a handful of sellers, who are generally quite large. Market entry is difficult because large capital outlays are needed for new start-ups. In an oligopoly, the actions of one firm tend to affect the actions of all firms; for example, when one firm changes price, all firms tend to chang
27、e price rather quickly. A monopoly exists when an industry or market has only one producer that dominates the entire market. Though monopolies are illegal in the U.S., natural monopoliessuch as utilities companiesare government-regulated; they are allowed to exist since one such company can often efficiently supply all needed goods or services.