Description
Midterm Exam (open book)
Spring – 1, 2022
, can open lecture notes and the textbook. Create your answer sheet (Use the answer sheet
provided), put your name, and turn in the answer sheet in the Blackboard (=where you
found the exam) by 2/6. Please do not email me your answers.
[Multiple Choice] Choose the best answer for each question.
1. How does monopolistic competition differ from perfect competition?
A) There are more sellers in a market characterized by monopolistic competition.
B) It is easier for sellers to enter a market or industry characterized by monopolistic competition.
C) In a perfectly competitive market, products are more dissimilar.
D) In a market characterized by monopolistic competition, individual firms have some control
over price.
E) In a perfectly competitive market, the size of the firms must be large.
2. ABC is a socially responsible American company engaged in the manufacture of sports
shoes. The CEO cautions that there is a disadvantage associated with the company planning
increased globalization of production.
Which of the following is the most likely disadvantage he is referring to?
A) Heavy job losses can ensue in the domestic market.
B) Greater disparities in living standards will emerge.
C) Trade barriers will be reduced between countries.
D) Substantial job losses will occur in developing markets.
E) Increased competition will emerge between companies.
3. Which course of action should the Federal Reserve take if it wishes to reduce inflation and
curb consumer spending?
A) The Federal Reserve should buy securities.
B) The Federal Reserve should sell securities.
C) The Federal Reserve should decrease the reserve requirement.
D) The Federal Reserve should lower the discount rate.
E) The Federal Reserve should sell securities and lower the discount rate.
4. Which of the following is a likely cause of increased prices for products, decreased
purchasing power, and decreased profit margins?
A) low unemployment
B) stagnant wages
C) declining living standards
D) cyclical inflation
E) limited credit
5. In the United States, milk is produced on thousands of farms, with no producer dominating
the market. Producers sell milk at the going price and are unable to influence this price. Millions
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of gallons of milk are purchased every day. What type of competition is the market for milk?
A) a monopoly
B) an oligopoly
C) perfect competition
D) monopolistic competition
E) a cooperative
6. What does the Sarbanes-Oxley Act of 2002 require a chief financial officer to do?
A) prevent insider trading
B) engage in strategic management
C) guarantee the accuracy of financial reporting
D) hire a forensic accountant
E) oversee the implementation of ethical standards
7. Which of the following is the best description of organizational stakeholders?
A) competitors
B) government regulators
C) the officers and key employees of an organization
D) individuals and businesses that own stock in a company
E) individuals and groups that are directly affected by the practices of a company
8. Dara’s Dress Shop was honored last year for its strong commitment to corporate social
responsibility. Which of the following would MOST likely decrease the shop’s chances of being
recognized again this year?
A) The shop has laid off two employees during the past six months.
B) Fewer clearance sales have been offered to the public this year.
C) An experienced ethics professional has been added to the Board of Directors.
D) Many of the dresses are made from fabrics spun by unprotected child laborers.
E) The shop has reduced its line of designer merchandise.
9. What is the term used to describe a situation when increased demand leads to overly steep
and often unwarranted price increases?
A) price fixing
B) price matching
C) price stabilization
D) price gouging
E) price comparison
10. What is the most effective step that a company can take to promote ethical behavior?
A) conduct frequent comprehensive audits of all financial information
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B) have employees sign a code of conduct upon hiring
C) demonstrate top management support of ethical standards
D) publicize efforts to become more ethical
E) survey employees on their personal ethical codes
11. IBP, a leading meat-processing firm, has a long record of breaking environmental protection,
labor, and food processing laws and then trying to cover up its offenses. What type of stance
has IBP adopted to social responsibility?
A) accommodative
B) obstructionist
C) pragmatic
D) defensive
E) proactive
12. Which of the following factors most contributes to small business failure?
A) managerial incompetence or inexperience
B) bad product design
C) legal problems
D) time spent raising capital
E) personnel issues
13. What is a major drawback of sole proprietorships?
A) limited funding
B) work flexibility
C) low start-up costs
D) unlimited liability
E) structured hours
14. What do both sole proprietorships and partnerships lack?
A) trust
B) legal standing
C) continuity
D) shared vision
E) adaptable processes
15. Why do attitudes about entrepreneurship vary internationally?
A) Decision making in big business can overlook local customs.
B) Attitudes towards risk-taking in business are culturally determined.
C) Consumer attitudes are influenced by economic cycles.
D) Foreign-owned companies can be unresponsive to local markets.
E) International business is creating a global village.
16. Lucy has organized her craft shop as a sole proprietorship. Her sister has warned Lucy
about the legal principle holding her responsible for paying off all of the debts of the business.
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What is the name of this principle?
A) unlimited liability
B) limited liability
C) privity
D) unrestricted debt
E) accountability
17. Which of the following exists when a country can produce something more cheaply and/or of
higher quality than any other country can?
A) monopolistic advantage
B) national competitive advantage
C) resource advantage
D) absolute advantage
E) comparative advantage
18. Which statement is true regarding independent agents?
A) They represent one firm at a time.
B) They usually specialize in a particular product.
C) They act as sales representatives.
D) They are usually based at domestic offices.
E) They do not monitor or address customer satisfaction.
19. To avoid transportation costs and tariffs, Apics Enterprises gave exclusive rights to Svenson
AB in Finland to produce its product. What is this an example of?
A) licensing arrangement
B) strategic alliance
C) foreign direct investment
D) independent agent
E) branch office
20. U.S. imports of Canadian softwood timber are limited to 14.7 billion board feet per year.
What is this practice called?
A) tariff
B) embargo
C) subsidy
D) dumping
E) quota
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[End of the Exam]
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