Business and Society Quiz 1

what is capitalism?

an economic system that allows for private ownership of the means of production (land, labour, capital)

what does capitalism assume?

economic decision making is in the hand of individuals or enterprises who make decisions expecting it to earn a profit

what are the 3 central features of capitalism

1) private ownership of the means of production

2) wage labour

3) production for exchange and profit

what are the 3 principles of capitalism

1) private ownership

2) free markets

3) profit driven

what are the 2 components of capitalisms definition involving labor and production?

wage labour and production for exchange and profit

what is the first of the 9 free assumptions of capitalism

right of private property

the legal right to own and use economic goods such as land buildings is known ___________

private property

what are the 3 ethical implications of private property?

• uneven distribution of wealth (todays society is less equal than ever)

• use of taxation to redistribute wealth (uneven wealth distribution = big motivator)

• intellectual property (IP) → umbrella term for patents/copyrights/trademarks (motivator to do better)

privately owned business

owned by a small group. decisions are optimized for their own profit and goals

publicly owned business

owned by shareholders. decisions focus on maximizing shareholder profit and stock performance

the assumption that the individual, not society, is the paramount decision maker is known as _____________

individualism

the individual who decides what is rational/beneficial is inherently _______________________

decent and rational

in Hofstede’s Cultural Dimensions, what is the opposite of individualism?

collectivism

Which country has the highest individualism score? (IDV)

United States (91)

the assumption of capitalism that involves few restrictions on business activity is known as _____________

economic freedom

what are some parts of economic freedom?

• freedom to voluntarily enter/exit businesses

• enter/terminate contracts

• locate anywhere

(free to start business whenever/wherever you want

how is economic freedom measured?

• how well property rights are protected

• how low taxes/government intervention are

• how minimal and efficient regulations are

• how free wages, price, trade, money flow, and foreign investment are

• by low inflation

• little to no corruption

who elaborated the concept if the “Invisible Hand”

Adam Smith

what is the core idea behind the “Invisible Hand”?

individual self-interest drives social benefit, coordinating the market without central planning

How is uber an example of the “invisible hand”?

drivers and passengers act in their own self-interest, and the apps price system allocates cars based on demand signals and surge pricing

the assumption that all individuals or groups have an even chance at responding to some condition in society is called ________________

equality of opportunity (doesn’t guarantee an equal outcome)

what is the difference between equality of opportunity and equality of outcomes?

opportunity: equal chance to succeed

outcomes: aims for similar results for all

what are some barriers to equality?

• gender wage

• income inequality

• digital divide

• student loan debt

the assumption that many rival sellers seek to provide goods and services to many buyers is known as ______________

competition

what are some ethical implications in competition?

• oligopolies or monopolies

• more difficult for some firms to enter certain industries

• corporations might engage in anti-competitive activity

what is the term for the excess of revenues over expenses in business?

profit

what is “profit motive”/ profit maximization?

business owners are motivated to maximize profit efficiently/effectively

the idea that work is desirable, natural activity and is in itself worthy and admirable is known as the _______________

work ethic

which religious movement is cited as having reinforces the work ethic through values like hard work, diligence, and thrift?

The Protestant ethic

what is the assumption that consumers exercise power over producers through their purchasing decisions?

consumer sovereignty (they purchase the product best for them)

what are the ethical implications of consumer sovereignty?

• not always aware of alternative products

• preferences shaped by advertising

• producers have power to ignore consumer wishes

the minimal involvement of government in the economy, a key aspect of pure capitalism is know as the ___________ approach

Laissez-faire (leave us alone)

is capitalism a monolithic, uniform system?

NO, it varies from country to country

What three types of traditions cause capitalism to vary across countries?

• social

• economic

• political

what economic system represents the 'Less government intervention' end?

Laissex-fair (“pure” capitalism)

• gov intervention limited to police and fire protection

In which type of capitalism does the state undertake commercial, for-profit activities through state-owned enterprises?

state

What is the core principle of Stakeholder capitalism?

balance the needs of shareholders with stakeholders like employers, suppliers, customers, local communities

Clean capitalism incorporates which three types of costs and benefits into market prices?

• social

• economic

• ecological costs (and benefits)

(focuses on minimizing negative externalities)

consumer capitalism

A system where government involvement is limited, open borders exist, and a profit mentality prevails (e.g., Canada, Britain).

producer capitalism

A system that emphasizes production, employment, and statist policies (e.g., France, Japan).

family capitalism

extended clans dominate business and control capital flows (e.g. Thailand, Indonesia)

frontier capitalism

A system where the fundamentals of business are being introduced and capitalism is in its beginning stages (e.g., Russia, China).

conscious capitalism

a business philosophy and movement that emphasizes creating values for all stakeholders, not just shareholders

Which country's model is described as being closer to pure capitalism than other models?

US-style capitalism

US-style capitalism

• limited government involvement

• less worker representation in corporate policies

• lower union density

• stock market financing

• “shareholder capitalism”

In Chinese capitalism, who primarily organizes economic activities?

• the state

• “state capitalism’

• Political>economic

German capitalism

• strong state involvement in corporate policy

• worker representation through co-determination

• bank financing

• strong vocational training and focus on quality

• “stakeholder capitalism”

Which capitalism has strong state involvement in business?

Japanese

Japanese capitalism

• interlocking businesses called Keiretsu

• legacy of zaibatsu

• lifetime employment norm

• “collective capitalism”

What is the key difference between pre-WWII zaibatsu and post-war keiretsu in Japan?

Zaibatsu: family-controlled monopolies

keiretsu: decentralized networks of independently-owned companies.

what is a sole proprietorship?

• owner and the firm are legally the same

• owner has unlimited liability

How does state involvement in the Canadian economy compare to that in the US, Germany, and Japan?

Canada has more involvement than the US

Canada has less that Germany and Japan

What foundational principle from the Constitution Act, 1867, is cited as influencing Canadian capitalism?

The "Peace, Order, and Good Government" (POGG) clause

How is the historical relationship between business and government in Canada characterized?

stable and cooperative

How does union density in Canada compare to that in the United States?

higher density

How is Canada's form of capitalism often described?

described as a mixed system or a market economy with a significant role for the state.

what is a partnership?

• 2 or more owners

• shares profits and liabilities

what is a corporation?

• separate legal entity

• limited liability

• seen as a “new person” that is infinite

the legal separation that protects owners personal assets from corporate failings is known as the _______________

corporate veil

in what circumstances is the corporate veil pierced?

• fraud (money laundering, murder)

• environmental disasters (carelessness)

• fails to pay tax bill to CRA

what is the fundamental principle of the Doctrine of Incorporation regarding association?

freedom of association: association of individuals coming together for some purpose is fundamental to forming a corporation

privately owned corporations

• have no shareholders to answer to

• but have to raise capitol privately

publicly traded corporations

• can raise capitol on the stock market

• but must answer to shareholders (accountability)

crown corporations

• wholly-owned federal or provincial organizations that function like independent countries

• more freedom

• but still under government constraints

what is corporate governance?

system if rules, practices, and processes that direct and control a company

who runs corporations (corporate governance)?

• owners

• boards of directors

• managers

owners

• direct ownership ( shareholders) or

• indirect ownership (mutual fund holders)

boards of directors

• elected by shareholders

• must fulfill legal and fiduciary obligations

managers

• top are hired by boards of directors

• oversee operations of corporation

• set plans/policy

• fire/hire

the concept that shareholders are legal owners but day-to-day control lies with the board and management is called _____________

separation of ownership and control

what kind of problems can arise from the separation of ownership and control in a corporation?

agency

what is the defining characteristic of a non-profit organization regarding its surplus revenues?

uses surplus revenues to further its mission rather than distributing them as profit to shareholders

ex. humane society, ted talks, folk fest

what is a cooperative (co-op)?

businesses owned and operated by a group of individuals like workers or consumers

ex. mountain equipment co-op, home hardware, Assiniboine credit union

what were the 3 technological breakthroughs in the early 1900s that advanced capitalism?

• electric power

• automobiles

• gasoline engine

what are the effects if the automobile technology?

• urbanization

• interdependance (increase)

• sociological effects (shift in nature of work)

The manufacturing approach popularized in the early 1900s that led to economies of scale is known as _____

mass production

what was the focus of management?

how to work the most efficiently

micro focus of schools of thought

looking at how to design specific jobs

macro focus of schools of thought

looking at how all the different jobs fit together in an organization

What management theory, developed by Frederick W. Taylor, focused on finding the "one best way" to perform jobs?

scientific management (Taylorism) (micro)

According to Max Weber, what are the five features of an ideal bureaucracy?

• divisions of labour

• rules and regulations

• hierarchy of authority

• techical qualifications

• impersonality

what were some of the precipitating factors for the Winnipeg General Strike of 1919?

• low wages

• high unemployment

• inflation

• large amount of returning soldiers/immigrants

how many workers walked off the job on May 15th, 1919

30,000

The violent climax of the Winnipeg General Strike, where RCMP killed two strikers, is known as _____

Bloody Saturday

What were the problems solved that led to the roaring twenties?

• increasing population

• growth of cities

• low unemployment

• increasing wages

What were the four main causes of the Great Depression?

• speculation

• weakness on the farm

• weakness in the factory (technology and employment)

• income inequality

What was the name of President Franklin D. Roosevelt's program of government intervention to combat the Great Depression?

The New Deal (implemented 5 acts)

what are the 5 acts Franklin implemented?

• Glass Stegall Banking Act

• Wagner Act

• Social Security Act

• Federal Housing Authority

• National Recovery Act

The management era from 1930-1950, which focused on interpersonal aspects, is known as the _____

human era

relating with others so that their work efforts lead to achievement of organizational goods is known as _______________

leading

The phenomenon where subjects in an experiment modify their behavior because they are being observed is called the _____

Hawthorne effect

What caused the laissez faire effect to vanish and for government to play a central role in the economy?

The Great Depression

Which economist's ideas led to the emergence of fiscal policy, using taxation and expenditure to boost the economy in WW2?

John Maynard Keynes

What is the period between 1950 and 1970, characterized by prosperous growth and a capital-labour accord, often called?

The Golden Age of Capitalism

why was it called the golden age of capitalism?

• business was booming

• workers/managers got along

• active role of government in the economy

During the Golden Age of Capitalism, what did workers' wages track closely?

productivity

What were the three main causes listed for the demise of the Golden Age of Capitalism in the 1970s?

• OPEC oil shocks

• inflation

• stagflation and unemployment

What is the definition of neoliberalism?

A theory favouring free trade, privatization, minimal government intervention, and reduced public expenditure on social services

What happened due to neoliberalism and globalization?

• wages went down

• gap between rich and poor increased

What was the short-term cause of the 2008 Great Recession?

The collapse of the housing bubble and the subsequent collapse in value of mortgage-backed securities.