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What are the differences between a market economy and a command economy?
(The difference depends on who controls the resources.)
Market - Private sector. (Business owners.)
Command - Government.
Compare and contrast Kantian Ethics with Rawl's "Social Justice Theory."
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.
What are 3 challenges businesses face when doing business overseas?
- Economical/Financial (what's more cost efficient?)
Compare Monetary and Fiscal policy.
- Monetary - Federal Reserve Bank controls the money supply.
- Fiscal - Rising/Lowering taxes/spending is what controls money supply.
What is Economics?
- The study of people and how they spend money.
- Economics is a social study.
What are the 4 approaches to social responsibility?
- 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.
Who are Stakeholders?
Anybody who has an interest in the company.
ex: Stockholders, customers, employees, etc.
What is technology?
How does a market economy affect the pace of technological process?
- 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.
What is Perfect Competition?
Given market where there are a given # of sellers and buyers.
What is Monopolistic Competition?
Large # of sellers produce very similar products that buyers nevertheless perceive as different.
ex: hot dogs, sodas, computers
What is Oligopy?
A lot of buyers, but not a lot of sellers.
What is a Monopoly?
One seller, market of one, controls total supply of product or service and sets the price.
ex: National Government
Name the 3 Economic Systems.
- 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.
What is a recession?
2 or more executive quarters of decline in GDP.
What is a depression?
What is recovery, in economics?
When the economy stabilizes.
How is the unemployment rate determined?
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
Explain the Keynesian Economic Theory.
- Increase spending; cut taxes.
- Fiscal Policy: taxes and spending.
- Monetary Policy: Mgmt of $ supply & interest rates by the Federal Reserve Bank.
Name 4 types of unemployment.
- Frictional (between jobs)
- Structural (restructuring of firms/lay offs)
- Cyclical (recession)
- Seasonal (demand varies)
International Trade - Reason for Trade Expansion (Name 3)
- Relaxation of trade restrictions; more trade agreements.
- Increase in communication technology.
- Increase in transportation technology.
What are tarriffs?
Taxes on imported goods.
What are quotas?
A limit on the # of products that can be imported.
What is dumping?
Selling products abroad at below cost (anticompetitive.)
What is an Embargo?
A ban on trade with a particular nation.
What is the purpose of exchange controls?
The regulation/restriction of foreign currency exchange.
What is licensing?
Where one company allows another to use its trade, patent, technology - for a royalty based on sales.
What is exporting?
Sending domestically made products abroad for sale.
What is franchising?
Selling the rights to make under your name while using your systems and processes.
What is Strategic Alliance?
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.
What is a Joint Venture?
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.
What is Direct Investment?
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.
What is Comparative Advantage?
- 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.
What is Absolute Advantage?
- 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.
What is Ethical Fundamentalism?
Persons look to an outside source or central figure for ethical guidelines.
What is Utilarianism?
Persons choose the alternative that would provide the greatest good to society.
Define: Kantian Ethics
- A set of universal rules that establishes ethical duties.
- The rules are based on reasoning and require (1) Consistency in application and (2) Reversibility.
What is Rawl's Social Justice Theory?
- Moral duties are based on an implied social contract.
- Fairness is justice.
- Rules are established from an original position.
What is Ethical Relativism?
Individuals decide what is ethical based on their own feelings as to what is right or wrong.
What are the 2 basic codes for ethics?
- Compliance-Based Ethics codes (mechanistic)
- Integrity-Based Ethics codes (values, sound behavior, shared accountability)
Define: Conflict of Interest
Anything that might bias us in a way that keeps us from fulfilling our duty.
What is transparency in business?
Business must always operate in public view.