FBLA Intro to Business Concepts Set 2 Practice Questions with Explanations
Questions
The basic economic problem caused by unlimited wants and limited resources is:
- Scarcity
- Inflation that rises faster than wages
- A recession in the business cycle
- Government regulation of markets
The value of the next best alternative you give up when making a decision is the:
- Opportunity cost
- Sunk cost of the original decision
- Fixed cost
- Marginal revenue from the choice
Something you must have to survive, such as food or shelter, is a:
- Need
- Want
- Luxury good that most people purchase
- Service
The four factors of production are land, labor, capital, and:
- Entrepreneurship
- Money held in a bank account
- Consumers
- Technology licenses
Natural resources such as water, minerals, and timber are classified as which factor of production?
- Land
- Capital goods used in a factory
- Labor
- Entrepreneurship
Tools, machines, and buildings used to produce goods are which factor of production?
- Capital
- Land and natural resources
- Labor
- Consumer goods
The human effort used in producing goods and services is:
- Labor
- Capital invested by owners
- Land
- Profit
A tangible item that can be bought and sold, such as a backpack, is a:
- Good
- Service performed for a customer
- Utility
- Factor of production
An activity performed for others for a fee, such as a haircut, is a:
- Service
- Good that is consumed quickly
- Raw material
- Capital good
The amount of a product consumers are willing and able to buy at various prices is:
- Demand
- Supply
- Equilibrium price
- Market share
According to the law of demand, as the price of a product rises, the quantity demanded usually:
- Decreases
- Increases at the same rate as price
- Stays exactly the same
- Doubles
According to the law of supply, as the price of a product rises, the quantity supplied usually:
- Increases
- Decreases because costs rise
- Stays exactly the same
- Falls to zero
The price at which quantity supplied equals quantity demanded is the:
- Equilibrium price
- Price ceiling set by government
- Surplus price
- Wholesale price
When the quantity supplied is greater than the quantity demanded, the result is a:
- Surplus
- Shortage of the product
- Monopoly
- Price ceiling
When the quantity demanded is greater than the quantity supplied, the result is a:
- Shortage
- Surplus of the product
- Recession
- Price floor
The usefulness or want-satisfying power of a product is called:
- Utility
- Scarcity
- Equity in the business
- Liquidity
Making a product available when customers want it creates:
- Time utility
- Form utility created by manufacturing
- Possession utility
- Place utility
Turning lumber into furniture creates which type of utility?
- Form utility
- Place utility created by shipping
- Time utility
- Possession utility
Offering credit so a customer can take a product home today creates:
- Possession utility
- Form utility
- Place utility from delivery
- Time utility
An economic system in which individuals and businesses own resources and make decisions based on supply and demand is a:
- Market economy
- Command economy
- Traditional economy
- Planned socialist economy
An economic system in which the government makes the major decisions about production is a:
- Command economy
- Market economy
- Traditional economy based on customs
- Free enterprise system
An economic system in which decisions are based on customs and habits passed down through generations is a:
- Traditional economy
- Command economy
- Market economy
- Mixed economy with private and public ownership
The United States economy is best described as a:
- Mixed economy that is mostly market-based
- Pure command economy
- Traditional economy
- Pure market economy with no government role
Which is a key characteristic of the free enterprise system?
- Private property
- Government ownership of all businesses
- Prices set by a central planning agency
- No competition between businesses
The money a business has left after paying all of its expenses is:
- Profit
- Revenue
- Gross sales
- Capital
Rivalry among businesses selling similar products to the same customers is:
- Competition
- A monopoly
- Cooperation required by law
- Scarcity
A market in which a single company controls the supply of a product with no close substitutes is a:
- Monopoly
- Oligopoly
- Perfect competition
- Monopolistic competition among many sellers
A market controlled by a few large firms, such as the airline industry, is a(n):
- Oligopoly
- Monopoly
- Perfect competition
- Traditional market
Gross Domestic Product (GDP) measures:
- The total value of final goods and services produced in a country in a year
- The amount of money a government borrows each year
- The total number of people employed in the country
- The value of goods exported to other nations
A general rise in the prices of goods and services over time is:
- Inflation
- Deflation
- Recession
- Depression
A significant decline in economic activity lasting several months is a:
- Recession
- Period of expansion and growth
- Inflationary boom
- Trade surplus
The four phases of the business cycle are expansion, peak, contraction, and:
- Trough
- Inflation
- Surplus
- Recovery tax
A business owned and operated by one person is a:
- Sole proprietorship
- Partnership
- Corporation owned by stockholders
- Cooperative
A major advantage of a sole proprietorship is that the owner:
- Keeps all the profits and makes all the decisions
- Has limited liability for business debts
- Can easily raise large amounts of capital from investors
- Shares the workload with several co-owners
A major disadvantage of a sole proprietorship is:
- Unlimited liability
- Double taxation of profits
- Having to share profits with stockholders
- Complex legal paperwork to form
Unlimited liability means the owner:
- Is personally responsible for all debts of the business
- Cannot lose more than they invested
- Pays no income taxes
- Can sell shares of stock
A business owned by two or more people who share profits and responsibility is a:
- Partnership
- Sole proprietorship
- Corporation
- Franchise owned by one person
The written agreement that spells out each partner's duties and share of profits is the:
- Partnership agreement
- Articles of incorporation
- Bylaws
- Franchise agreement
A partner who invests money but does not take part in management and has limited liability is a:
- Limited partner
- General partner
- Silent stockholder of a corporation
- Sole proprietor
A business that is a separate legal entity owned by stockholders is a:
- Corporation
- Partnership
- Sole proprietorship
- Joint venture between two people
A major advantage of a corporation is:
- Limited liability for owners
- No taxes on corporate profits
- Very few government regulations
- Owners make every daily decision
"Double taxation" for a C corporation means that:
- Corporate profits are taxed, and then dividends are taxed again as shareholders' income
- The corporation pays twice the tax rate of a partnership
- Employees pay income tax twice each year
- Products are taxed at both the state and the federal level
The owners of a corporation are its:
- Stockholders
- Board of directors
- Managers
- Customers
The group elected by stockholders to set major policies and oversee a corporation is the:
- Board of directors
- Executive committee of employees
- Labor union
- Partnership council
A payment of profits from a corporation to its stockholders is a:
- Dividend
- Bond payment
- Wage
- Commission
A business form that combines limited liability with pass-through taxation like a partnership is a(n):
- Limited liability company
- Sole proprietorship
- General partnership
- Nonprofit corporation
A business owned and operated by its members, who share in its benefits, is a:
- Cooperative
- Corporation
- Monopoly
- Sole proprietorship run by one person
A license to sell another company's products or use its name and system is a:
- Franchise
- Patent
- Merger
- Cooperative
In a franchise, the company that sells the rights to use its name and business system is the:
- Franchisor
- Franchisee
- Licensee
- Stockholder
An organization that operates to serve a social cause rather than to earn profits for owners is a:
- Nonprofit organization
- Corporation
- Partnership
- Franchise