CD

Comprehensive Business & Economics Study Notes

Systems of Government & Economies

  • Dictatorship:

    • Definition: One leader or a small group possesses total control over the government and its people.

    • Characteristics: Citizens have few to no rights.

    • Scenario Clues: Often indicated by phrases such as "one ruler," "no elections," or "no freedoms."

  • Communism:

    • Definition: The government owns all resources and businesses, making all economic decisions.

    • Goal: Aims for a classless society.

    • Scenario Clues: Phrases like "no private property," "state owns everything," or "central planning."

  • Socialism:

    • Definition: The government owns or controls major industries (e.g., healthcare, energy, utilities), while private small businesses are still permitted to exist.

    • Scenario Clues: Suggestive phrases include "high taxes," provision of "free education/healthcare," or "government runs utilities."

  • Capitalism (Free Market System):

    • Definition: Individuals and companies own businesses.

    • Mechanism: Prices are determined by the forces of supply and demand and competition.

    • Scenario Clues: Identified by concepts such as "private ownership," the "profit motive," or a "market decides prices" approach.

  • Mixed Economy:

    • Definition: A combination, or blend, of capitalism with elements of government regulation and the provision of public services.

    • Scenario Clues: Described as "mostly private but some regulation/welfare."

  • Planned Economy:

    • Definition: The government centrally decides what goods and services to produce, how they will be produced, and for whom.

    • Scenario Clues: Indicated by practices like "production quotas" or the term "centrally planned."

  • Free Market Economy:

    • Definition: Consumers and businesses are the primary decision-makers regarding economic activity.

    • Government Role: The government plays a minimal role.

    • Scenario Clues: Characterized by "consumer choice" and where "competition sets price."

  • Rights in Capitalism (Free Market System):

    • Right to private property

    • Right to own a business

    • Freedom of choice

    • Freedom of competition

    • Right to profits

Business Environment (PESTEL Framework)

  • PESTEL Factors and Definitions:

    • Political: Government actions and policies that can significantly influence business operations.

      • Scenario Clues: Examples include the implementation of new tariffs, shifts resulting from elections, or changes in governmental regulations.

    • Economic: Refers to the overall health and performance of the economy.

      • Scenario Clues: Identified by conditions such as a recession, inflation, or unemployment rates.

    • Social: Relates to demographic trends, cultural norms, and societal values.

      • Scenario Clues: Examples include an aging population or shifts in consumer lifestyles.

    • Technological: Encompasses the impact of new technological advancements.

      • Scenario Clues: Manifests as the adoption of Artificial Intelligence (AI), automation technologies, or the growth of e-commerce.

    • Environmental: Pertains to natural resources, ecological concerns, and climate-related issues.

      • Scenario Clues: This includes carbon emission regulations or a push towards green energy solutions.

    • Legal: Involves the laws and regulations that businesses are required to follow.

      • Scenario Clues: Encompasses consumer protection laws and labor laws.

Functional Areas of Business

  • Management:

    • Responsibilities: Involves planning, organizing, leading, and controlling resources and activities.

    • Scenario Clues: Actions such as a "manager sets goals" or a "supervisor monitors the team."

  • Operations:

    • Responsibilities: Focused on the production and delivery of goods and services.

    • Scenario Clues: Evident in "factory output" or addressing a "supply chain problem."

  • Marketing:

    • Responsibilities: Identifying customer needs, designing appropriate products, setting prices, promoting offerings, and arranging distribution.

    • Scenario Clues: Demonstrated through an "ad campaign" or efforts to "survey customers."

  • Accounting:

    • Responsibilities: Recording and reporting the flow of money within the business.

    • Scenario Clues: Includes activities like "prepares financial statements" or "tracks expenses."

  • Finance:

    • Responsibilities: Managing the company's funds, including obtaining loans and making investments.

    • Scenario Clues: Encompasses actions such as "raises capital" or "manages debt."

  • Human Resources (HR):

    • Responsibilities: Tasks related to hiring, training, and supporting employees.

    • Scenario Clues: Activities like "recruitment" or managing "benefits package" for staff.

Economics & Market Basics

  • Economics:

    • Definition: The study of how limited resources are allocated and utilized to satisfy unlimited wants and needs.

  • Microeconomics:

    • Definition: Focuses on the economic behavior of individuals, households, and specific businesses.

    • Scenario Clues: Examples include a "single company’s pricing" strategy or a "family budget."

  • Macroeconomics:

    • Definition: Examines the economy as a whole, looking at aggregate phenomena.

    • Scenario Clues: Deals with issues like "national unemployment" statistics or when "inflation rises."

  • Factors of Production: The fundamental resources required to produce goods and services.

    • Land: Refers to all natural resources used in production.

    • Labor: Represents the physical and mental work contributed by people.

    • Capital: Includes tools, machinery, buildings, and infrastructure used in production.

    • Entrepreneurship: Involves the risk-taking and innovation required to combine other factors of production.

    • Knowledge: Encompasses the skills, information, and expertise applied in production.

    • Scenario Clues: Illustrated by a "startup founder," "factory machines," or "farmland."

  • Supply & Demand:

    • Demand: Represents what buyers are willing and able to purchase at various prices.

    • Supply: Represents what sellers are willing and able to offer for sale at various prices.

    • Equilibrium: The point where the quantity demanded equals the quantity supplied, resulting in a stable market price.

    • Scenario Clues: Observable when "price rises with higher demand" or a "surplus lowers price."

Market Structures

  • Perfect Competition:

    • Definition: Characterized by many sellers offering identical products, where no single seller has control over the market price.

    • Scenario Clues: An example is "farmers selling wheat."

  • Monopolistic Competition:

    • Definition: Features many sellers offering slightly differentiated products.

    • Scenario Clues: Common in industries like "restaurants" or "clothing brands."

  • Oligopoly:

    • Definition: A market dominated by a few large firms, which may sometimes engage in collusion (cooperative behavior to reduce competition).

    • Scenario Clues: Typical examples include "airlines" and "cell service" providers.

  • Monopoly:

    • Definition: A market structure where there is only one seller controlling the entire market, with no competition.

    • Scenario Clues: Often seen with a "utility company" or in situations where there is "no competition."

Economic Indicators & Policies

  • Gross Domestic Product (GDP):

    • Definition: The total monetary value of all final goods and services produced within a country's borders in a specific period.

    • Scenario Clues: Phrases like "The nation's economy grows 3\%" directly refer to GDP measurement.

  • Unemployment Rate:

    • Definition: The percentage of the labor force that is jobless but actively seeking employment.

    • Scenario Clues: Indicated by an increase in "jobless claims rise."

  • Inflation Rate:

    • Definition: The rate at which the average price level of goods and services in an economy increases over a period, leading to a fall in the purchasing power of currency.

    • Scenario Clues: Evidenced by observations like "Groceries are more expensive."

  • Consumer Price Index (CPI):

    • Definition: A measure that tracks the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

    • Scenario Clues: Referred to as a "measure of consumer prices."

  • Business Cycle:

    • Stages: Describes the natural fluctuation of the economy through four main stages: Expansion
      ightarrow Peak
      ightarrow Recession
      ightarrow Trough
      ightarrow Recovery.

  • Economic Policies:

    • Monetary Policy (Federal Reserve / Fed):

      • Definition: Actions undertaken by a central bank (like the Federal Reserve) to influence the availability and cost of money and credit to help promote national economic goals.

      • Controls: Primarily controls interest rates and the money supply.

      • Scenario Clues: For example, the "Fed raises rates to slow inflation."

    • Fiscal Policy (Government):

      • Definition: The use of government spending and taxation to influence the economy.

      • Key Tools: Involves government decisions on taxes and spending.

      • Scenario Clues: Manifests as "stimulus checks" or "infrastructure spending."

Ethics & Corporate Social Responsibility (CSR)

  • Ethics:

    • Definition: A set of moral principles that govern a person's or group's behavior; the rules of right and wrong.

  • Business Ethics:

    • Definition: Applying ethical principles and standards to business conduct, emphasizing honesty, fairness, and integrity.

    • Examples: Includes practices like "fair hiring" and "transparent accounting."

  • Ethical Issues:

    • Definition: Situations or dilemmas within a business context that involve a conflict of moral principles, potentially leading to questions of right versus wrong.

    • Examples: Common issues are conflicts of interest, insider trading, and whistle-blowing.

    • Scenario Clues: An "employee exposes fraud" or an "exec uses private info."

  • Corporate Social Responsibility (CSR):

    • Definition: A company's commitment to operate in an economic, social, and environmentally sustainable manner while balancing the needs of stakeholders.

    • Purpose: A company's duty to positively impact society and the environment, extending beyond merely making profits.

  • CSR Areas:

    • Environmental protection

    • Consumer rights

    • Employee well-being

    • Community engagement

    • Scenario Clues: Examples include providing "fair wages" and ensuring "safe products."

  • CSR Tools:

    • Code of ethics

    • Training programs for employees

    • Monitoring ethical performance

    • Ethical leadership from management

  • Triple Bottom Line (TBL):

    • Definition: An accounting framework that incorporates three dimensions of performance: social, environmental, and financial.

    • Measures: Focuses on Profit, People, and Planet.

    • Scenario Clues: Describes a "firm balances money + society + environment."

Global Business Market Entry Methods

  • Import/Export:

    • Import: Buying goods or services from abroad for sale in the domestic market.

    • Export: Selling goods or services produced domestically to foreign markets.

    • Scenario Clues: An example is a "U.S. company sells to Europe."

  • Licensing:

    • Definition: Granting a foreign firm the rights to manufacture or sell your product, use your patent, trademark, or technology for a fee (royalty).

    • Scenario Clues: Evidenced when a "Foreign company uses U.S. tech."

  • Franchising:

    • Definition: A form of licensing where a foreign operator is allowed to run a business using your brand name, products, and operating system in exchange for a fee and royalties.

    • Scenario Clues: Illustrated by "McDonald’s in India."

  • Outsourcing / Contract Manufacturing:

    • Definition: Hiring a foreign firm to produce products or provide services offshore, often to leverage lower labor costs or specialized expertise.

    • Scenario Clues: An example is "Apple assembles iPhones in China."

  • Joint Venture / Strategic Alliance:

    • Definition: A collaborative partnership between two or more companies to share resources and risks in pursuing a specific project or business opportunity, without fully merging.

    • Scenario Clues: For instance, "Two airlines share routes."

  • Foreign Direct Investment (FDI):

    • Definition: A direct investment in business operations in a foreign country, involving active management and significant ownership.

    • Scenario Clues: Occurs when "Toyota builds U.S. plant."

Challenges in Global Business

  • Cultural Challenges:

    • Definition: Difficulties arising from differences in language, values, customs, and etiquette between countries.

    • Scenario Clues: Can lead to a "translation problem" or require a "different negotiation style."

  • Economic Challenges:

    • Definition: Obstacles stemming from varying income levels, economic systems, and infrastructure development across nations.

    • Scenario Clues: Includes issues like a "weak banking system" or "low purchasing power."

  • Legal Challenges:

    • Definition: Problems arising from differing laws, regulations, and legal frameworks across countries.

    • Scenario Clues: Manifests as "labor laws vary" or concerns about "IP protection weak."

  • Political Challenges:

    • Definition: Risks associated with the political stability of a country and its government policies.

    • Scenario Clues: Such as "civil unrest" or when a "new tariff announced."

Regulation & Trade

  • World Trade Organization (WTO):

    • Definition: An international body that establishes global rules for trade between nations and serves as a forum for settling trade disputes.

    • Scenario Clues: Evident when a "Country files complaint to WTO."

  • Trade Agreements:

    • Definition: Treaties or accords negotiated between two or more countries to reduce or eliminate barriers to trade.

    • Examples:

      • North American Free Trade Agreement (NAFTA) / United States-Mexico-Canada Agreement (USMCA): Involves the U.S., Canada, and Mexico.

      • European Union (EU): Creates a unified market among its member states.

  • Tariff:

    • Definition: A tax or duty imposed on imported goods or services.

    • Scenario Clues: An example is a "25\% tax on steel."

  • Quota:

    • Definition: A government-imposed limit on the quantity of a specific good that can be imported or exported during a given period.

    • Scenario Clues: Such as a "Cap of 10,000 cars."

  • Subsidy:

    • Definition: Financial assistance or support extended by a government to a domestic producer, typically to make their products more competitive or to support a particular industry.

    • Scenario Clues: Illustrated by "Farmers receive gov’t support."

Answers to questions that follow:

📘 Multiple Choice (100)

(I’ll number them straight through so answers are easy to match later)

  1. B

  2. A

  3. A

  4. A

  5. B

  6. B

  7. C

  8. B

  9. B

  10. C

  11. B

  12. B

  13. A

  14. B

  15. D

  16. C

  17. C

  18. B

  19. C

  20. B

  21. B

  22. B

  23. B

  24. A

  25. A

  26. A

  27. C

  28. B

  29. B

  30. A

  31. C

  32. D

  33. B

  34. C

  35. D

  36. C

  37. D

  38. B

  39. C

  40. B

  41. B

  42. B

  43. B

  44. B

  45. A

  46. C

  47. A

  48. A

  49. B

  50. B

  51. B

  52. A

  53. B

  54. B

  55. C

  56. B

  57. B

  58. C

  59. B

  60. A

  61. C

  62. B

  63. A

  64. C

  65. B

  66. B

  67. B

  68. B

  69. C

  70. A

  71. B

  72. B

  73. C

  74. A

  75. B

  76. B

  77. A

  78. B

  79. A

  80. B

  81. B

  82. B

  83. C

  84. B

  85. D

  86. C

  87. C

  88. B

  89. B

  90. B

  91. B

  92. B

  93. B

  94. B

  95. C

  96. B

  97. C

  98. A

  99. B

  100. B

✍ Free Response (10) – Key Points

  1. Fiscal policy (spending/tax cuts) raises demand, reduces unemployment; Monetary policy (lower rates) makes borrowing cheaper → both stimulate growth but risk inflation.

  2. Licensing or outsourcing lowers risk/capital in strict regulatory markets; FDI is high control but costly. Best: licensing due to legal/social barriers.

  3. Monopoly. Pros: efficiency, consistent supply. Cons: high prices, no competition. Remedy: regulation or introducing competition.

  4. Environmental + Political/Legal PESTEL factors. Old firms hurt, green firms benefit. Shifts demand/investment.

  5. Breaks ethics, CSR, and legal standards. Fix: transparency, safety compliance, apology campaigns, rebuild trust.

  6. Fiscal expansion = more jobs/demand. Monetary easing = cheaper loans. Risks = debt, inflation, overheated economy.

  7. Marketing (cultural adaptation) + HR (local hiring/training). Must adapt menu, ads, customer experience.

  8. Monopoly: sets high prices, little innovation pressure. Monopolistic competition: must innovate, market, differentiate, respond to rivals.

  9. CSR + Triple Bottom Line: balancing profit, people, planet. Trade-off: lower short-term profit vs stronger long-term brand/trust.

  10. Perfect Competition. Firms = price takers, low profits long-term, risk = no power over price

Multiple Choice Questions (100)

  1. A country bans all elections, controls media, and suppresses opposition. What system of government is this most like?
    A) Mixed Economy
    B) Dictatorship
    C) Free Market Economy
    D) Socialism

  2. A government sets quotas for production, owns all factories, and no private business exists. Which economic/political system is this?
    A) Communism
    B) Capitalism
    C) Oligopoly
    D) Monopolistic Competition

  3. A nation uses high income taxes to fund universal healthcare, energy utility services, and free education, while allowing small private businesses. Which system is this?
    A) Socialism
    B) Dictatorship
    C) Capitalism
    D) Planned Economy

  4. A toy company prices its action figures based on how many kids demand them, and competitors also adjust prices similarly. Which economy type describes this?
    A) Free Market Economy
    B) Communism
    C) Mixed Economy
    D) Socialism

  5. A country where most businesses are privately owned but the government regulates pollution, safety, and provides welfare. What system is this?
    A) Capitalism (Free Market System)
    B) Mixed Economy
    C) Planned Economy
    D) Socialism

  6. Caroline is analyzing a scenario: “Government raises taxes, opens public hospitals, but allows private shops and restaurants to operate.” Which system matches this scenario?
    A) Communism
    B) Socialism
    C) Dictatorship
    D) Free Market Economy

  7. Which PESTEL factor would be most relevant if a country increases its import tariffs on steel?
    A) Social
    B) Environmental
    C) Political
    D) Legal

  8. A business wants to adopt AI technologies and automation. In the PESTEL framework, this is what kind of factor?
    A) Economic
    B) Technological
    C) Political
    D) Environmental

  9. A major drought hits, reducing water supply and affecting agriculture. Which PESTEL factor is this?
    A) Social
    B) Environmental
    C) Economic
    D) Legal

  10. If a job market shows unemployment climbing to 12%, that’s an example of which economic indicator?
    A) Inflation Rate
    B) Business Cycle Trough
    C) Unemployment Rate
    D) GDP

  1. Samantha wants to start a business that uses local craftspeople. She needs to decide price, how to advertise, and where to sell. Which functional area of business is she working in most?
    A) Operations
    B) Marketing
    C) Finance
    D) Human Resources

  2. A factory manager schedules shifts, orders raw materials, and ensures machines are maintained. Which functional area is this?
    A) Accounting
    B) Operations
    C) Marketing
    D) Management

  3. A company is preparing balance sheets, doing audits, and filing taxes. Which functional area is responsible?
    A) Accounting
    B) Finance
    C) HR
    D) Marketing

  4. A startup is planning growth, hiring, and tracking employees’ performance. Which business function is this?
    A) Finance
    B) Human Resources
    C) Marketing
    D) Operations

  5. A business evaluating whether to build a new factory site vs outsourcing production—this is part of which function?
    A) Marketing
    B) Operations
    C) Management
    D) Finance

  1. Suppose smartphone demand suddenly spikes. Producers increase supply. Eventually, there’s too much inventory and prices drop. This describes movement along which curve?
    A) Supply curve only
    B) Demand curve only
    C) Equilibrium shift
    D) Supply & Demand matching

  2. A country’s inflation rate is 2% this year and expected to rise to 6% next year; the central bank decides to raise interest rates. Which policy is this?
    A) Fiscal policy
    B) Environmental policy
    C) Monetary policy
    D) Trade policy

  3. The government increases spending on roads and cutting taxes to boost economic growth after a recession. What type of policy is this?
    A) Monetary Policy
    B) Fiscal Policy
    C) Regulatory Policy
    D) Technology Policy

  4. The Federal Reserve buys government bonds to inject liquidity into the financial system. Which tool is this?
    A) Fiscal Policy
    B) Subsidy
    C) Monetary Policy
    D) Quota

  5. If the government raises taxes to slow down excessive economic growth, which policy is this?
    A) Monetary
    B) Fiscal
    C) Social
    D) Environmental

  1. A company exposes that one of its leaders has been using insider information to enrich themselves. What business concept does this violate?
    A) CSR (Corporate Social Responsibility)
    B) Ethical leadership
    C) Monopoly
    D) Free Market

  2. A firm offers higher wages, supports community projects, and reduces its carbon footprint. This is an example of:
    A) Ethics only
    B) CSR (Corporate Social Responsibility)
    C) Free Market activity
    D) Legal compliance

  3. If a business uses a code of ethics and conducts employee training to prevent discrimination, that is part of what?
    A) Financial Policy
    B) Business Ethics
    C) Marketing Strategy
    D) Outsourcing

  4. When a company balances profit, people, and planet in reporting, it’s using which framework?
    A) Triple Bottom Line
    B) Perfect Competition
    C) Mixed Economy
    D) Supply & Demand

  5. A firm is required by law to publish safety standards and employee compensation information. Which factor is involved?
    A) Legal (in PESTEL)
    B) Economic
    C) Social
    D) Technological

  1. An American fast food chain allows local operators in a foreign country to use its brand name and business model in exchange for royalty payments. This mode of global business entry is called:
    A) Licensing
    B) Joint Venture
    C) Import/Export
    D) Outsourcing

  2. A U.S. smartphone company contracts a firm in India to manufacture parts because labor costs are lower. What entry method is this?
    A) Franchising
    B) Joint Venture
    C) Outsourcing / Contract Manufacturing
    D) Foreign Direct Investment

  3. Two airlines from different countries agree to share routes and profits but remain independent companies. This is a(n):
    A) Licensing
    B) Strategic Alliance / Joint Venture
    C) Franchise
    D) Merger

  4. A clothing brand allows a foreign retailer to use its trademark and sell its products abroad. What is this?
    A) Import/Export
    B) Licensing
    C) Joint Venture
    D) Outsourcing

  5. A company builds its own facility overseas rather than licensing another firm to make its goods. This is:
    A) Foreign Direct Investment
    B) Licensing
    C) Outsourcing
    D) Import/Export

  1. In a market dominated by a few large firms (like airlines), which market structure is likely?
    A) Monopoly
    B) Perfect Competition
    C) Oligopoly
    D) Monopolistic Competition

  2. A neighborhood bakery competes with many bakeries each setting their own flavor, but they are similar. What market structure is this?
    A) Perfect Competition
    B) Monopoly
    C) Oligopoly
    D) Monopolistic Competition

  3. A local water utility is the only provider in the town. Which market structure is this?
    A) Oligopoly
    B) Monopoly
    C) Perfect Competition
    D) Mixed Economy

  4. Farmers growing identical wheat and selling at market price: which market structure?
    A) Monopoly
    B) Oligopoly
    C) Perfect Competition
    D) Monopolistic Competition

  5. Fast food restaurants, each trying to differentiate their burger or style of service, compete with many others. What’s the structure?
    A) Perfect Competition
    B) Oligopoly
    C) Monetarism
    D) Monopolistic Competition

  1. An economy experiencing low GDP growth, high unemployment, and falling business investments is likely in which phase of the business cycle?
    A) Expansion
    B) Peak
    C) Recession
    D) Recovery

  2. After a long recession, the economy begins to grow again, businesses hire more, and consumer confidence returns. Which phase?
    A) Trough
    B) Peak
    C) Recession
    D) Expansion

  3. Price levels are rising rapidly for basic goods, reducing purchasing power. What economic issue is this?
    A) Unemployment
    B) Inflation
    C) Economic Growth
    D) Surplus

  4. A country’s GDP declines for two quarters in a row. What does this indicate?
    A) Economic Recovery
    B) Inflation
    C) Recession
    D) Peak

  5. A measurement that tracks how much prices for a basket of goods consumers buy have changed over time is:
    A) GDP
    B) CPI (Consumer Price Index)
    C) Unemployment Rate
    D) Inflation Rate

  1. A central bank lowers interest rates to encourage borrowing and investment. Which kind of policy is it using?
    A) Fiscal Policy
    B) Monetary Policy
    C) Trade Policy
    D) Regulatory Policy

  2. During war, the government increases spending drastically. What tool is this an example of?
    A) Monetary Policy
    B) Fiscal Policy
    C) CSR
    D) Legal Framework

  3. If a government wants to slow inflation, it might raise interest rates. Which policy is that?
    A) Fiscal
    B) Monetary
    C) Environmental
    D) Social

  4. A financial crisis leads to many banks failing. The government steps in to guarantee deposits. This is part of what policy type?
    A) Fiscal Policy
    B) Monetary Policy
    C) Legal Policy
    D) Social Policy

  5. Government spending for stimulus checks is an example of:
    A) Fiscal Policy
    B) Monetary Policy
    C) CSR
    D) Mixed Economy

  1. A tech company promises to reduce waste and only source materials from sustainable suppliers, going beyond legal requirements. Which concept is this?
    A) Ethics only
    B) Business Ethics
    C) Corporate Social Responsibility (CSR)
    D) Free Market Imperative

  2. A firm is sued because customers were misled by ads. Which PESTEL factor does this touch upon?
    A) Legal
    B) Political
    C) Social
    D) Environmental

  3. A chemical plant gets fined for contamination of a river. This is mainly which PESTEL factor in play?
    A) Environmental
    B) Legal
    C) Political
    D) Economic

  4. A company sets up a community center, hires local people, and ensures fair wages even though it could pay less. Which idea does that most align with?
    A) Monopoly behavior
    B) CSR / Ethics
    C) Free Market Competition
    D) Outsourcing

  5. If a company publishes its carbon emissions and employee diversity stats, that reflects concern with:
    A) Supply & Demand
    B) CSR / Environmental & Social parts of CSR
    C) Market Structure
    D) Accounting

  1. A U.S. corporation wants to enter a foreign country but doesn’t want to commit capital. It instead licenses local producers to use its patents. That choice is which entry method?
    A) Joint Venture
    B) Licensing
    C) Foreign Direct Investment
    D) Outsourcing

  2. A fast food brand pays foreign business owners to use its brand and business model in a country overseas. That is:
    A) Franchising
    B) Import/Export
    C) Licensing
    D) Joint Venture

  3. A company moves part of its production to another country where labor is cheaper, while keeping core operations at home. That is:
    A) Foreign Direct Investment
    B) Outsourcing / Contract Manufacturing
    C) Licensing
    D) Trade Agreement

  4. Two firms form a strategic alliance to share technology and research without merging ownership. Which is this?
    A) Merger
    B) Joint Venture / Strategic Alliance
    C) Licensing
    D) Franchising

  5. A smartphone maker constructs its own factory in a foreign country. That is:
    A) Licensing
    B) Outsourcing
    C) Foreign Direct Investment (FDI)
    D) Import/Export

  1. In a monopoly, what is true?
    A) Many sellers, identical products
    B) One seller, many buyers, no competition
    C) Differentiated products, many sellers
    D) Few sellers, some competition

  2. If a local utility is the only provider of water in a region, that’s an example of which market structure?
    A) Oligopoly
    B) Monopoly
    C) Perfect Competition
    D) Monopolistic Competition

  3. A market with many sellers, but each produces slightly different goods (for example, different types of coffee shops) is which structure?
    A) Monopoly
    B) Perfect Competition
    C) Monopolistic Competition
    D) Oligopoly

  4. Airlines where each airline’s pricing affects the others is an example of:
    A) Perfect Competition
    B) Oligopoly
    C) Monopoly
    D) Mixed Economy

  5. Identical firms selling identical products, price takers, no seller can influence price: which structure is this?
    A) Perfect Competition
    B) Monopoly
    C) Oligopoly
    D) Monopolistic Competition

  1. A country’s gross domestic product grows by 5% one year after a recession. What phase of business cycle is the economy probably in?
    A) Recession
    B) Peak
    C) Recovery / Expansion
    D) Trough

  2. After spending cuts and tax increases, demand drops, unemployment rises. Which phase is coming or occurring?
    A) Peak
    B) Recession
    C) Expansion
    D) Recovery

  3. When price levels keep rising rapidly, and costs for consumers jump, the economy is experiencing:
    A) Inflation
    B) Deflation
    C) Stagnation
    D) Surplus

  4. If households cut spending, investments fall, and GDP decreases, the economy is likely:
    A) In Expansion
    B) In Peak
    C) In Recession
    D) Recovering

  5. If price of groceries doubles year over year, what is that measure likely reflecting?
    A) Growth in GDP
    B) High Inflation
    C) Low Unemployment
    D) Perfect Competition

  1. A central bank reduces the money supply and raises rates to battle inflation. This is an example of which policy?
    A) Fiscal Policy
    B) Monetary Policy
    C) Supply side policy
    D) Trade policy

  2. Government increases public sector jobs and spending to boost employment during a downturn. What policy tools are being used?
    A) Monetary Policy
    B) Fiscal Policy
    C) Environmental Policy
    D) CSR

  3. If a government cuts tax rates across the board to stimulate business investment, this is which policy?
    A) Monetary Policy
    B) Fiscal Policy
    C) Social Policy
    D) Free Market policy

  4. Suppose a national law is passed to force companies to reduce emissions. Which PESTEL factor is this (legal, political, economic, etc.)?
    A) Economic
    B) Technological
    C) Legal
    D) Social

  5. If new legislation requires stronger consumer protection (e.g. product safety), this is under which factor in PESTEL?
    A) Legal
    B) Environmental
    C) Social
    D) Political

  1. A tech firm publicizes profits and invests heavily in community education, though it could focus solely on stockholder profit. This aligns with:
    A) Monopoly behavior
    B) Corporate Social Responsibility (CSR)
    C) Mixed Economy practice
    D) License agreement

  2. If a company faces a scandal and its executives are found falsifying financial reports, what aspect of business ethics has been breached?
    A) Duty to customers
    B) Transparency & honesty
    C) Employee welfare
    D) CSR

  3. Which action by a business would be considered purely ethical rather than legally required?
    A) Following labor laws
    B) Reporting taxes accurately
    C) Offering free training programs for disadvantaged groups
    D) Paying minimum wage

  4. A multinational corporation negotiates trade barriers with a foreign government to lower tariffs for its goods. Which PESTEL factor is involved?
    A) Political
    B) Environmental
    C) Social
    D) Technological

  5. When a country signs an international treaty to preserve rainforests, which PESTEL factor is chiefly engaged?
    A) Social
    B) Environmental
    C) Economic
    D) Legal

  1. AU.S. business sends its electronics overseas for assembly, then sells them in domestic and foreign markets. That is:
    A) Import/Export
    B) Outsourcing / Contract Manufacturing
    C) Joint Venture
    D) Franchise

  2. A clothing company gives a foreign business the right to use its designs, patent, and branding in return for royalties. That is:
    A) Licensing
    B) Franchising
    C) Joint Venture
    D) Foreign Direct Investment

  3. Starbucks opening a company-owned store in another country rather than licensing or franchising it is an example of:
    A) Outsourcing
    B) FDI (Foreign Direct Investment)
    C) Licensing
    D) Import/Export

  4. Two tech firms collaborate to share research and reduce costs in entering a new market without merging ownership. This is:
    A) Strategic Alliance / Joint Venture
    B) Import/Export
    C) Subsidy
    D) Monopoly

  5. A chocolate maker allows retailers in several countries to sell its product under certain legal agreements using its brand, without owning the stores. That most resembles:
    A) Franchising
    B) Licensing
    C) FDI
    D) Outsourcing

  1. In which scenario is there perfect competition?
    A) One large media company controls all news channels.
    B) Many farmers selling identical wheat at market prices, no one controls price.
    C) Few automobile makers set prices together.
    D) A sports team has exclusive rights to a stadium.

  2. Monopolistic competition would best describe:
    A) The water company in a city running alone.
    B) Many coffee shops, each with unique branding and menu.
    C) Just one airline on a route.
    D) A cartel setting prices.

  3. An oligopoly exists if:
    A) There are thousands of sellers offering identical products.
    B) Only one seller controls everything.
    C) A few large firms dominate a market and can influence price.
    D) Products are completely identical with no differentiation.

  4. If a single company has no rivals and sets prices unchallenged, that market is a:
    A) Perfect Competition
    B) Monopoly
    C) Oligopoly
    D) Monopolistic Competition

  5. A local business news vendor faces no competitors, controls pricing; what is this?
    A) Oligopoly
    B) Monopolistic Competition
    C) Perfect Competition
    D) Monopoly

  1. A report shows GDP is rising, unemployment is falling, consumer spending increasing. The economy is in which stage?
    A) Recession
    B) Peak
    C) Expansion / Recovery
    D) Trough

  2. If the economy had a peak and then real GDP begins to decline, falling for two straight quarters. What phase is coming?
    A) Peak
    B) Expansion
    C) Recession
    D) Recovery

  3. Sudden job loss, factory closures, falling prices: what phase?
    A) Recession
    B) Trough
    C) Expansion
    D) Peak

  4. If prices rise 10% in a year and consumers spend more on basics, what are they experiencing?
    A) Deflation
    B) Inflation
    C) Stagflation
    D) Surplus

  5. Over two years, inflation stays minimal, businesses stay flat, spending low. This suggests:
    A) Expansion
    B) Recession or stagnation
    C) Peak
    D) Growth

  1. Central bank sells government securities to reduce money supply, driving up interest rates. Which tool?
    A) Fiscal Policy
    B) Monetary Policy
    C) Legal Policy
    D) Social Policy

  2. Government spending on infrastructure as stimulus is part of:
    A) Monetary Policy
    B) Fiscal Policy
    C) Business Function
    D) Environmental Factor

  3. If a central bank sets high reserve requirements for banks to slow lending, that is:
    A) Fiscal Policy
    B) Monetary Policy
    C) CSR
    D) Legal Regulation

  4. If a state launches a public awareness campaign to reduce plastic use, that involves which PESTEL factor?
    A) Technological
    B) Social
    C) Environmental
    D) Legal

  5. A new law mandating that advertising must be truthful and not misleading: which factor?
    A) Social
    B) Ethical
    C) Legal
    D) Political

  1. A fast fashion company enters a country by opening franchised stores, giving local owners rights to use the brand. This is:
    A) Licensing
    B) Franchising
    C) Outsourcing
    D) FDI

  2. A car manufacturer builds a factory abroad, invests capital, manages operations itself rather than licensing others. Which entry method?
    A) Franchising
    B) Licensing
    C) FDI
    D) Outsourcing

  3. A local mom-and-pop craft business exports handmade goods abroad but keeps production domestic. This is:
    A) Import/Export
    B) Licensing
    C) Outsourcing
    D) Joint Venture

  4. When several large firms agree informally not to compete too aggressively, possibly fixing prices—this is characteristic of:
    A) Perfect Competition
    B) Oligopoly
    C) Monopoly
    D) Monopolistic Competition

  5. A business has high profits but ignores worker safety and environmental harm; public backlash leads them to change practices. This relates most closely to:
    A) Supply & Demand
    B) CSR / Ethics
    C) Market Structure
    D) Government Policy

Free-Response Questions (10)

  1. Scenario: You are advising a tech startup in a country with rising unemployment, strong inflation, and slow growth. The government is considering both fiscal stimulus (increase spending) and monetary easing (lower interest rates).
    Question: Discuss how both policies might help or harm the economy. Use real indicators from the notes (like inflation, unemployment, GDP).

  2. Scenario: A clothing brand wants to enter Country X. The country has strict regulations on environmental protection and consumer safety, but large demand for fashion. The brand can either license a local firm, open its own stores (FDI), or outsource the manufacturing.
    Question: Which global market entry method would you advise, considering PESTEL factors, and why?

  3. Scenario: A city has one major water utility company – it is the only provider, sets rates, and there is no competition. Citizens are complaining about high prices.
    Question: What market structure is this? What are the usual pros and cons of this structure, and what remedies might a government consider?

  4. Scenario: A country is shifting toward more renewable energy, passes strict environmental laws, increasing taxes on fossil fuels and subsidies on clean energy. Businesses in mining and oil are complaining.
    Question: Analyze this policy change in terms of PESTEL factors and its impact on both existing firms and new green firms.

  5. Scenario: A company is found to be misleading customers, hiding negative product features in its advertising and failing to comply with safety standards. It has legal fines and public outrage.
    Question: How does this situation relate to ethics, CSR, and legal factors? What steps should the company take to restore trust and comply with responsible business behavior?

  6. Scenario: During a recession, the government lowers taxes, increases infrastructure spending, while the central bank cuts interest rates.
    Question: Explain using both fiscal and monetary policy how these tools work together and their potential drawbacks.

  7. Scenario: A fast-food chain wants to expand into a culturally different region where local customs, languages, and customer preferences differ significantly.
    Question: Which functional area(s) of business are most important in ensuring success (e.g. marketing, HR), and how should the company adapt?

  8. Scenario: Two smartphone makers, A and B, are competing. A is a monopoly in its country; B competes in a monopolistic competition structure abroad.
    Question: Compare the competitive pressures both firms face and how each might set prices, manage innovation, and handle customer expectations.

  9. Scenario: A firm seeks to balance making profit with being environmentally sustainable and socially responsible, but doing so reduces short-term profits.
    Question: Discuss how CSR (Corporate Social Responsibility) and the Triple Bottom Line framework come into play. What trade-offs does the firm face and how might they resolve them?

  10. Scenario: Country Y has many companies producing identical staple foods (like rice), price is driven purely by supply and demand. There are no barriers to entry.
    Question: Identify the market structure. Explain how firms earn profit in this structure and what risks exist in the long run