Midterm Exam Review Notes

This set of flashcards is designed to help review key terms and concepts in preparation for the midterm exam.

Risk

The chance entrepreneurs take of losing time and money; chance of something happening.

Bankruptcy

Unable to pay outstanding debts, seek relief through court-ordered liquidation of assets.

Revenue

Total money received during a period for goods/services sold.

Standard of living

How much people can buy with the money they have.

Quality of life

General well-being of society.

Comparative advantage theory

Countries should export goods/services they produce most efficiently.

Absolute advantage theory

A country can produce something specific more efficiently than all other countries.

Fiscal policy

Federal efforts to keep the economy stable.

Law

Formal rules for societal order enforced by government.

Ethics

Standards of moral behavior accepted by society.

Corporate Social Responsibility

A business's concern for the welfare of the public, giving back to society.

Compliance-based code

Prevents unlawful behavior by increasing control.

Integrity-based code

Promotes ethical behavior, outlines values, and shares accountability.

Social audit

System for evaluating a business's social and ethical performance.

Offshoring

Sourcing part of the purchased inputs outside of the country.

Outsourcing

Contracting with other companies to perform functions of a firm.

Insourcing

Company has functions that could be outsourced.

Disinflation

Price increases are slowing.

Deflation

Prices are actually declining.

Tariffs

A tax imposed on imports.

GDP

Total goods and services produced by the economy.

Unemployment rate

Percentage of the labor force that actively seeks work but is unable to find work.

Inflation

General rise in prices over time.

Frictional unemployment

Due to personal preferences causing people to leave jobs.

Structural unemployment

Caused by restructuring of firms; jobs open/closed.

Cyclical unemployment

Caused by recession or other business cycle downturns.

Seasonal unemployment

Demand varies throughout the year.

Market economy

Private ownership of resources, using markets for economic decisions.

Command economy

Government controls everything.

Mixed economy

Combines use of markets and government presence in decision-making.

Traditional economy

Decisions depend on customs, history, and beliefs.

Perfect competition

Many sellers in the market, no seller large enough to dictate price.

Monopolistic competition

Large number of sellers selling very similar goods.

Oligopoly

Few sellers dominate a market.

Monopoly

One seller dominates a market.

Trade surplus

Favorable; exports exceed imports.

Trade deficit

Unfavorable; imports exceed exports.

Licensing

A firm licenses the right to manufacture its product or use trademarks to a foreign company.

Exporting

Engaging in exporting through export trading.

Franchising

Selling the right to use a business name and product to others.

Joint venture

Partnership of companies to undertake a major project.

Government involvement

Ways government interacts with business, like through laws and regulations.

Sole proprietorship

A business owned and operated by one individual.

Partnership

An organization with two or more owners who share the responsibilities and profits.

Corporations

A group of people authorized to act as a single entity and recognized as such.

Franchises

A right granted to an individual or group to market a company’s goods or services.

SWOT analysis

Framework to assess how a business is doing based on its strengths, weaknesses, opportunities, and threats.

Acid-test ratio

Measures liquidity; indicates if current assets can cover current liabilities without inventory.

Earnings per share (EPS)

A company's profit divided by the outstanding shares of its common stock.