Business Management II 3.02 Review

Which of the following was one of government’s original roles in business:

• Regulating technolody

• Acting as a referee

• Ensuring a business’s profitability

• Protecting the environment

Answer explanation

Acting as a referee. When the United States was born, government was not intended to have a hand in business. Businesses would be free to act in their own best interests without government involvement. The basic role of government in business would be as a referee only. Government does not ensure a business’s profitability. Regulating technology and protecting the environment are areas of responsibility that government took on as the country grew and business expanded.

One way in which government protects private property is to provide

• Federal Reserve Banks

• Local governmental programs

• Patents or copyrights

• Patents or copyrights

Answer explanation

Patents or copyrights. Government issues patents or copyrights to inventors and artists to protect their work. Although government provides local governmental programs, this response is not specific enough to be correct for protecting private property. Federal Reserve Banks are used by local banks for their banking functions. They do not provide protection for local property. Local governments provide fire protection through fire departments, not through fire insurance.

Government is involved in settling business disagreements through the use of

• Fines

• Negotiation

• Force

• Court

Answer explanation

Courts. Government’s first involvement in disputes between businesses is in the court system. Force and fines may be used to enforce a court ruling. Government is not involved in negotiation unless directed to do so by the courts.

Why does government set and collect taxes?

• To increase the use of technology

• To provide economic security

• To help pay the expenses of government

• To help businesses grow and prosper

Answer explanation

To help pay the expenses of government. Some of these taxes are set and collected on products sold by businesses. Increasing technology, providing economic security, and helping businesses grow and prosper can be goals of a political party or government administration but are not reasons that government sets and collects taxes.

One of the reasons that has caused government’s role in business to expand is that

• people’s attitudes have changed.

• products have become very technical.

• costs of production have continued to increase.

• competition in the marketplace has increased.

Answer explanation

People’s attitudes have changed. As the marketplace became more complicated, consumers turned to government for more protection from dishonest or deceptive business practices. The technical nature of products, cost of production, and increased competition between businesses are not reasons to cause government’s role to expand. Increases in cost of production become a contributing factor only when cuts are made in safety that may cause consumer-protection problems. Competition in the marketplace would be a contributing factor when a business engages in deceptive advertising or tries to limit competition.

What is the purpose of government regulation of business activities that might cause air or water pollution?

• To protect competition

• To provide public goods

• To stabilize the economy

• To conserve the environment

Answer explanation

To conserve the environment. Government has passed laws that prohibit business activities that harm the environment. These laws may prohibit the use of dangerous substances, require the use of safe substances, or provide economic incentives for voluntary conservation efforts. Government fiscal policy is intended to stabilize the economy. Laws regulating monopolies protect competition. Government provides public goods—goods and services we all need and use that business could not afford to provide.

Determine whether the following statement is true or false: Government has become an active participant in the world of business.

• True; government helps to start monopolies.

• True; government produces goods and services.

• False; government works with businesses only.

• False; government doesn’t produce any products.

Answer explanation

True; government produces goods and services. It sells these goods and services to consumers. Government also employs thousands of workers and buys supplies from businesses for those workers. Government helps individuals as well as businesses. It tries to prohibit or control monopolies rather than encouraging their development.

The goals of government are to protect the rights of individuals and businesses and to provide a stable environment, but the main goal of business is to

• make a profit.

• save the enviornment.

• provide the best products.

• provide a safe working environment.

Answer explanation

Make a profit. Making a profit is the main goal of business. Profit is the monetary reward a business owner receives for taking the risk involved in investing in business. By providing the best products possible, business owners increase the likelihood of making a profit. Businesses also need to be socially responsible by helping to save the environment and by providing a safe working environment.

Which of the following is a public good that is provided by government:

• Private schools

• Marketing Research

• New Automobiles

• Interstate highways

Answer explanation

Interstate highways. Public goods are goods and services that are used by all people and cannot be withheld from those who don’t help to pay for them. Marketing research, automobiles, and private schools are goods and services provided by private businesses.

Government uses some of the tax money it collects from individuals and businesses to support public welfare programs. What is the benefit of these welfare programs to businesses in a private enterprise economy?

• Recipients don’t have to work.

• Businesses must budget more money for taxes.

• Funds received by recipients are spent in businesses.

• Government has control of how the recipients spend their money.

Answer explanation

Funds received by recipients are spent in businesses. When government provides funds for those in need, businesses benefit as well. People who receive the funds use them to purchase goods and services they otherwise could not afford to buy. It is not a benefit to any business when people are unable or unwilling to work. In a private enterprise economy, there is very little government control of how the money is spent. It is not a benefit to budget more money for taxes.