(Test Bank) The Business Environment: Themes and Issues in a Globalizing World

Wetherly,Otter, 4

Business

Test Bank

4th Edition

• $10.00 $35.00

---

Description

Test Bank for The Business Environment: Themes and Issues in a Globalizing World, The downloadable file consists of 156 pages, and the total size of the file is 3.23 MB. Purchase now only for highly discounted price.

Author(s): Wetherly, Otter

---

---

Study Note Preview

Test Bank for The Business Environment Themes and Issues in a Globalizing World, 4e Paul Wetherly, Dorron Otter (All Chapters) Weth erly and Otter: The Business Environment , 4th edition © Oxford University Press, 201 8. All rights reserved. Type: multiple choice question Title: Chapter 1 - Question 01 01) According to John Kay the profit -seeking paradox is that: *a. The most profitable companies are not the most profit -oriented Feedback: There is a paradox because it might be expected that t he most profit -oriented companies, which pursue profit single -mindedly, would be the most profitable, but Kay says this is not the case. Thus, according to Kay, the goal of making a profit is best approached obliquely or indirectly and might be achieved, f or example, by striving for excellence. Page reference: 17 b. The most profitable companies are the most vulnerable to takeover Feedback: There is a paradox because it might be expected that the most profit -oriented companies, which pursue profit single -mindedly, would be the most profitable, but Kay says this is not the case. Thus, according to Kay, the goal of making a profit is best approached obliquely or indirectly and might be achieved, for example, by striving for excellence. Page reference: 17 c. The most profitable companies give their customers the worst deal Feedback: There is a paradox because it might be expected that the most profit -oriented companies, which pursue profit single -mindedly, would be the most profitable, but Kay says this is not t he case. Thus, according to Kay, the goal of making a profit is best approached obliquely or indirectly and might be achieved, for example, by striving for excellence. Page reference: 17 d. The most profitable companies pay the highest wages to employees Feedback: There is a paradox because it might be expected that the most profit -oriented companies, which pursue profit single -mindedly, would be the most profitable, but Kay says this is not the case. Thus, according to Kay, the goal of making a profit is b est approached obliquely or indirectly and might be achieved, for example, by striving for excellence. Page reference: 17 Type: multiple choice question Title: Chapter 1 - Question 02 02) Christine Lagarde is head (in 2018) of which international organi zation? a. World Bank Feedback: Christine Lagarde is head of the International Monetary Fund (IMF), which describes itself as ‘ an organization of 189 countries, working to foster global monetary co - operation, secure financial stability, facilitate internatio nal trade, promote high employment and sustainable economic growth, and reduce poverty around the world. ’ In 2017 Lagarde called for the benefits of globalization to be distributed more evenly and for national governments to take steps to reduce inequality . Page reference: 8 *b. International Monetary Fund (IMF) Feedback: Christine Lagarde is head of the International Monetary Fund (IMF), which describes itself as ‘ an organization of 189 countries, working to foster global monetary co - operation, secure fina ncial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. ’ In 2017 Lagarde called for the benefits of globalization to be distributed more evenly and for national governme nts to take steps to reduce inequality. Page reference: 8 c. United Nations Feedback: Christine Lagarde is head of the International Monetary Fund (IMF), which describes itself as ‘ an organization of 189 countries, working to foster global monetary co - operation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. ’ In 2017 Lagarde called for the benefits of globalization to be distributed more evenly and for national governments to take steps to reduce inequality. Page reference: 8 d. International Labour Organization (ILO) Weth erly and Otter: The Business Environment , 4th edition © Oxford University Press, 201 8. All rights reserved. Feedback: Christine Lagarde is head of the International Monetary Fund (IMF), which describes itself as ‘ an organization of 189 countries , working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. ’ In 2017 Lagarde called for the benefits of globaliza tion to be distributed more evenly and for national governments to take steps to reduce inequality. Page reference: 8 Type: multiple choice question Title: Chapter 1 - Question 03 03) The basic economic problem facing society is: a. Inflation Feedback: Inflation is a persistent problem in market economies but it varies over time and is not the basic economic problem. Page reference: 10 *b. Scarcity Feedback: The argument is that all societies face scarcity at all times in the sense of having to allocate li mited resources between competing wants and needs. However, this view is controversial as it can be argued that in rich economies such as the UK scarcity has been conquered. Page reference: 10 c. Greed Feedback: Some people argue this is a significant prob lem in the UK and some other societies, but it is not the basic economic problem. Page reference: 10 d. Pollution Feedback: Pollution is a prime example of market failure. There is growing awareness of this problem particularly in connection with climate c hange, but it is not the basic economic problem. Page reference: 10 Type: multiple choice question Title: Chapter 1 - Question 04 04) The definition of a stakeholder in a private sector business is: a. Just the owners and managers of the business Feedback : The answer is ‘Any individual or group that is affected by a decision of the business’. Page reference: 5 b. Just the owners, managers , and employees Feedback: The answer is ‘Any individual or group that is affected by a decision of the business’. Page r eference: 5 c. The owners, managers, employees , and customers Feedback: The answer is ‘Any individual or group that is affected by a decision of the business’. Page reference: 5 *d. Any individual or group that is affected by a decision of the business Feedback: Thus stakeholders can be defined very widely to include, in some cases, the whole of society, e.g. in relation to the banking crisis. Page reference: 5 and 25–6 Type: multiple choice question Title: Chapter 1 - Question 05 05) Which four economies constitute the BRIC group? a. Bulgaria, Romania, Italy, Cyprus Feedback: The BRIC economies are Brazil, Russia, India , and China. The term was introduced by the economist Jim O’Neill in 2001 to draw attention to the importance of these Weth erly and Otter: The Business Environment , 4th edition © Oxford University Press, 201 8. All rights reserved. fast-developing eco nomies. By 2017 a group of five BRICS economies also included South Africa. Page reference: 7 b. Brazil, Russia, India, Cuba Feedback: The BRIC economies are Brazil, Russia, India , and China. The term was introduced by the economist Jim O’Neill in 2001 to draw attention to the importance of these fast-developing economies. By 2017 a group of five BRICS economies also included South Africa. Page reference: 7 *c. Brazil, Russia, India, China Feedback: The BRIC economies are Brazil, Russia, India , and China. T he term was introduced by the economist Jim O’Neill in 2001 to draw attention to the importance of these fast-developing economies. By 2017 a group of five BRICS economies also included South Africa. Page reference: 7 d. Brazil, Russia, Indonesia, China Feedback: The BRIC economies are Brazil, Russia, India , and China. The term was introduced by the economist Jim O’Neill in 2001 to draw attention to the importance of these fast-developing economies. By 2017 a group of five BRICS economies also included Sout h Africa. Page reference: 7 Type: multiple choice question Title: Chapter 1 - Question 06 06) In the UK the hourly rate below which, by law, pay for employees aged over 25 years must not be allowed to fall is known as the: *a. National living wage Feedbac k: The National Minimum Wage (NMW) was introduced in the UK in 1999 to provide decent minimum standards and fairness for all employees and a ‘level playing field’ for employers. The National Living Wage for employees aged over 25 was introduced in 2016 as, in effect, an enhancement of the NMW . Both the NMW and NLW can be defined in terms of guaranteeing a decency threshold though they are not generally referred to using this term. Jobseeker’s allowance is a benefit paid to the unemployed to help them while they are looking for work. Page reference: 14 b. National minimum wage Feedback: The National Minimum Wage (NMW) was introduced in the UK in 1999 to provide decent minimum standards and fairness for all employees and a ‘level playing field’ for employers. The National Living Wage for employees aged over 25 was introduced in 2016 as, in effect, an enhancement of the NMW . Both the NMW and NLW can be defined in terms of guaranteeing a decency threshold though they are not generally referred to using this term. Jobseeker’s allowance is a benefit paid to the unemployed to help them while they are looking for work. Page reference: 14 c. Jobseeker’s allowance Feedback: The National Minimum Wage (NMW) was introduced in the UK in 1999 to provide decent minimum standa rds and fairness for all employees and a ‘level playing field’ for employers. The National Living Wage for employees aged over 25 was introduced in 2016 as, in effect, an enhancement of the NMW . Both the NMW and NLW can be defined in terms of guaranteeing a decency threshold though they are not generally referred to using this term. Jobseeker’s allowance is a benefit paid to the unemployed to help them while they are looking for work. Page reference: 14 d. Decency threshold Feedback: The National Minimum Wa ge (NMW) was introduced in the UK in 1999 to provide decent minimum standards and fairness for all employees and a ‘level playing field’ for employers. The National Living Wage for employees aged over 25 was introduced in 2016 as, Weth erly and Otter: The Business Environment , 4th edition © Oxford University Press, 201 8. All rights reserved. in effect, an enhancement of the NMW . Both the NMW and NLW can be defined in terms of guaranteeing a decency threshold though they are not generally referred to using this term. Jobseeker’s allowance is a benefit paid to the unemployed to help them while they are looking for work. Page reference: 14 Type: multiple response question Title: Chapter 1 - Question 07 07) The private sector of the economy is characterized by the following features: (Please select all that apply. ) Feedback: In market systems governments do not attempt t o plan economic activity, as a whole, other than in exceptional circumstances. Page reference: 13 *a. Profit motive b. Central planning of production by government *c. Competition between businesses *d. Production of goods and services for sale Type: mult iple response question Title: Chapter 1 - Question 08 08) Tax avoidance may be defined or characteri zed as: (Please select all that apply. ) Feedback: Legal tax avoidance is distinguished from illegal tax evasion. Although legal, such activity by multinatio nal companies operating in the UK has been critici zed as immoral by a committee of MPs. Page reference: 27 a. An illegal activity of non -payment of tax *b. A legal activity of tax planning by large companies to minimi ze corporation tax on the economic acti vity they conduct in a specific jurisdiction *c. A way of minimi zing tax liabilities that is not illegal but might be judged to be immoral *d. Using tax law to gain a tax advantage not intended by Parliament Type: multiple response question Title: Chapter 1 - Question 09 09) Adam Smith characterized the operation of the market system in the following terms: (Please select all that apply. ) Feedback: Adam Smith tried to show that, on the whole, markets are able to reconcile self- interest with the common good . The basic point is that businesses serve their own interests (i.e. profit) by serving the interests of others (consumers). Page reference: 14 a. Private businesses are motivated by the goal of serving the common good *b. Though motivated by self-interest private businesses are inadvertently led to serve the common good *c. To make a profit businesses are led to serve the needs of customers d. The common good is never realized through the pursuit of self-interest in the market Type: multiple response ques tion Title: Chapter 1 - Question 10 10) In addition to a specific business organi zation or firm, the term ‘business’ may be used to refer to: (Please select all that apply .) Feedback: In addition to these meanings it is common to use the term to refer to a particular type of economic activity or ‘line of business’. These uses are all interrelated. Page reference: 9 *a. A specific legal form such as a public limited company *b. The business system, e.g. the capitalist system c. The activities of a voluntary organi zation seeking to influence decisions taken by a business *d. The business community Weth erly and Otter: The Business Environment , 4th edition © Oxford University Press, 201 8. All rights reserved. Type: multiple response question Title: Chapter 1 - Question 11 11) Firms may seek ‘locational advantage’ from which of the following? Please select all that apply . Feedback: Locational advantage refers to the competitive advantage firms may derive from a particular location. Other factors include the cost of labour and the proximity of suppliers or consumers. The ethnic composition of the workforce is not really re levant here. Page reference: 23 *a. The availability of skilled labour *b. The quality of infrastructure such as transport networks c. The ethnic composition of the workforce *d. A favourable tax or regulatory environment Type: multiple response question Title: Chapter 1 - Question 12 12) When we refer to businesses as complex, internally differentiated systems , which of the following aspects of the business environment do we focus on? Please select all that apply. Feedback: The internal environment also h as to be managed for businesses to operate successfully. The categories ‘internal’ and ‘immediate’ overlap insofar as the internal environment involves day -to-day decision -making. Page reference: 4 and 21 a. General *b. Internal c. Immediate d. External Type: multiple response question Title: Chapter 1 - Question 13 13) Examples of the spatial scale of the business environment may include the following: (Please select all that apply. ) Feedback: Spatial scale refers to the geographical unit or level of anal ysis that is relevant. Oligopoly and monopoly are examples of market structure. Page reference: 4 *a. National b. Oligopolistic c. Monopolistic *d. Global Type: multiple response question Title: Chapter 1 - Question 14 14) When we conduct a stakeholder an alysis of business , which of the following statements are generally true? Please select all that apply. Feedback: All stakeholders are affected otherwise they wouldn’t be stakeholders. But they may experience different effects. It is an important aspect of stakeholder analysis to examine the different interests and levels of influence of different stakeholders. Page reference: 25 a. All stakeholders have the same interests *b. All stakeholders are affected in some way by the business c. All stakeholders are affected in the same way by the business *d. Stakeholders have varying degrees of influence over business decisions Type: true /false Title: Chapter 1 - Question 15 15) The term business is only ever used to refer to private sector, profit -making companie s. a. True Weth erly and Otter: The Business Environment , 4th edition © Oxford University Press, 201 8. All rights reserved. Feedback: A broad conception of business includes organizations in the public sector and ‘third sector’. Page reference: 11 *b. False Feedback: Yes, this would be a narrow definition of business. It is a common definition but not the only one. A broad conception of business includes organizations in the public sector and ‘third sector’. Page reference: 8 Type: true /false Title: Chapter 1 - Question 16 16) In the 1980s Conservative governments used the policy of privatization to bring about a major shift in the boundary between the public and private sectors in the UK. *a. True Feedback: Yes, this policy reversed measures of nationalization in the post Second World War period. This shows that the scope of the private sector is a subject of politic al decisions. Page reference: 12 and 19 b. False Feedback: This was a major policy of the Conservatives under Margaret Thatcher. Page reference: 12 and 19 Type: true /false Title: Chapter 1 - Question 17 17) Only poor societies and poor people in rich soci eties have to face the problem of scarcity. a. True Feedback: It is, of course, true that scarcity is more pressing for the poor, but the concept of scarcity in economics suggests that even rich societies face scarcity because people’s growing wants tend t o outstrip limited resources. Page reference: 10 *b. False Feedback: It is, of course, true that scarcity is more pressing for the poor, but the concept of scarcity in economics suggests that even rich societies face scarcity because people’s growing wants tend to outstrip limited resources. Page reference: 10 Type: true /false Title: Chapter 1 - Question 18 18) There is general agreement within society about how the success of private sector business is defined and measured. *a. False Feedback: The statem ent is false because there are competing values and interests in society meaning that we have different ideas about what we want from business and how we judge its success. For example, growth in the number of international tourists carried on Ryanair plan es may be judged as a success by the company but regarded negatively by environmental campaigners. Page reference: 12 and 17 b. True Feedback: The statement is false because there are competing values and interests in society meaning that we have differen t ideas about what we want from business and how we judge its success. For example, growth in the number of international tourists carried on Ryanair planes may be judged as a success by the company but regarded negatively by environmental campaigners. Page reference: 12 and 17 Type: true /false Title: Chapter 1 - Question 19 Weth erly and Otter: The Business Environment , 4th edition © Oxford University Press, 201 8. All rights reserved. 19) A market system can be characteri zed as a decentrali zed mechanism for deciding the allocation of resources. *a. True Feedback: In broad terms we can distinguish a market in this way from government as a centrali zed mechanism for allocating resources. In a market decisions are made by individual buyers and sellers, whereas government makes collective decisions. Page reference: 11 b. False Feedback: In broad terms we can distinguis h a market in this way from government as a centrali zed mechanism for allocating resources. In a market decisions are made by individual buyers and sellers, whereas government makes collective decisions. Page reference: 11 Type: true /false Title: Chapter 1 - Question 20 20) In reality there is no such thing as a free market in the sense of firms being left entirely free to make decisions for themselves. *a. True Feedback: In all market systems the law is used more or less extensively to regulate various aspects of business decisions and behaviour. Page reference: 13–14 b. False Feedback: In all market systems the law is used more or less extensively to regulate various aspects of business decisions and behaviour. Page reference: 13–14 Wetherly and Otter: The Business Environment , 4th edition © Oxford University Press, 2018 . All rights reserved. Type: essay/short answer question Title: Chapter 2 - Question 01 01) Explain what is meant by the economic problem and show how economic efficiency relates to its three parts. Feedback: Describe the problem of scarcity —limited resources but unlimited need s and wants. Describe and explain the three parts of the economic problem in terms of allocation, production , and distribution. Show how efficiency then needs to relate to allocation, production , and distribution , and how we might measure the degree to w hich it has been achieved. Page reference: 36–9 Type: essay/short answer question Title: Chapter 2 - Question 02 02) Define what is meant by ‘market failure ’ and show the circumstances in which this might occur. Feedback: Describe the operation of market forces in terms of allocation, production , and distribution decisions. Show how, in relation to allocation, market failure might occur in not providing merit goods, public goods , or in failing to take into account externalities. Show how there may be pr oblems in production as a result of monopolies, destructive competition, market instability, long-term projects , and risk and uncertainty. Show how distribution issues are important, and that if there is inequity then this is a problem. Page reference: 58–61 Type: essay/short answer question Title: Chapter 2 - Question 03 03) Explain what is meant by the term ‘price elasticity of demand’, and show with examples how differences in the price elasticity of demand faced by firms will influence their behaviou r. Feedback: Define and explain the nature of the price elasticity of demand. Explain the degrees of price elasticity and the determinants of these. Show how the behaviour of firms will depend on the nature of the degree of elasticity. In general, if mar kets are competitive then there will be incentives for firms to cut prices, but the reverse is true if markets are not competitive. Page reference: 55–7 Type: essay/short answer question Title: Chapter 2 - Question 04 04) Explain why there was a widespre ad adoption of neoclassical and neoliberal polic ies across the global economy from the mid 1970s onwards. What are seen as the main weaknesses of this approach to economic policy? Feedback: Explain the context in which neoclassical policy came to prominenc e in the mid 1970s (i.e. the perceived failure of the Keynesian welfare consensus in the ‘ first world’ and the collapse of communism in the ‘second world’ , as opposed to the success of the Asian economies). Wetherly and Otter: The Business Environment , 4th edition © Oxford University Press, 2018 . All rights reserved. Explain the main features of the neoclassical vi ew (i.e. the belief in markets ; this can be related back to the discussion of how —in theory —markets work). The main arguments against this perspective (i.e. inequality and lack of financial regulation ; again , this can be related back to the discussion abo ut the potential problems of the free market). Page reference: 43–5 and 5 8–64 Type: essay/short answer question Title: Chapter 2 - Question 05 05) To what extent is there agreement that the 2008 global financial crisis was the result of insufficient atte ntion being paid to government regulation? What actions are needed to reform the global financial system? Feedback: Explain the origins of the 2008 financial crisis. What are the broad areas of agreement as to the causes of this crisis? What types of sup port then should governments provide at both the national and global level? Page reference: 65–6 Type: multiple choice question Title: Chapter 2 - Question 06 06) The opportunity cost of an individual’s decision to allocate a fixed amount of resources to an activity is best described as: a. The value to the individual of that activity Feedback: Opportunity cost can only be measured in terms of what was given up in order to undertake a particular economic activity. Value to both individuals and society is subjective and monetary cost is irrelevant when assessing opportunity cost. Our focus is on resource use and so we measure opportunity cost in terms of what the next best activity could have been. Page reference: 37 b. The costs to society of that activit y Feedback: Opportunity cost can only be measured in terms of what was given up in order to undertake a particular economic activity. Value to both individuals and society is subjective and monetary cost is irrelevant when assessing opportunity cost. Our f ocus is on resource use and so we measure opportunity cost in terms of what the next best activity could have been. Page reference: 37 *c. The value of the next best activity forgone Feedback: Opportunity cost can only be measured in terms of what was give n up in order to undertake a particular economic activity. Value to both individuals and society is subjective and monetary cost is irrelevant when assessing opportunity cost. Our focus is on resource use and so we measure opportunity cost in terms of what the next best activity could have been. Page reference: 37 d. The monetary costs of that activity Feedback: Opportunity cost can only be measured in terms of what was given up in order to undertake a particular economic activity. Value to both individuals and society is subjective and monetary cost is irrelevant when assessing opportunity cost. Our focus is on resource use and so we measure opportunity cost in terms of what the next best activity could have been. Page reference: 37 Type: multiple choice q uestion Title: Chapter 2 - Question 07 07) Which of the following is not universally accepted as being a reason for legitimate government policy? Wetherly and Otter: The Business Environment , 4th edition © Oxford University Press, 2018 . All rights reserved. a. The provision of merit goods Feedback: Incorrect. Merit goods are widely seen as an area in which governme nts should intervene to ensure adequate provision. Page reference: 58 b. The provision of public goods Feedback: Incorrect. It is widely accepted that markets cannot provide public goods so the state needs to take action to make sure that they are provide d. Page reference: 59 c. The need to take account of externalities Feedback: Incorrect. If there are social costs or benefits then it is acknowledged that governments need to intervene to either cut back on provision of commodities which incur social costs or increase the provision of those which provide social benefits . Page reference: 59 *d. Very high taxation rates on the richer member s of society Feedback: While many critics do argue that the rich should pay higher taxes to provide for the benefits that the government might provide for the poor, neoclassical critics feel that tax rates that are too high can deter the incentives that are needed for entrepreneurs to operate and provide the business opportunities that benefit all of society. Page reference: 62 Type: multiple choice question Title: Chapter 2 - Question 08 08) If the demand for a good is relatively price elastic and its price falls the revenue will: a. Fall Feedback: If the price elasticity of demand is elastic and the price falls then the ri se in demand will be greater than the fall in price and so the revenue will rise. Page reference: 56–7 b. Remain constant Feedback: If the price elasticity of demand is elastic and the price falls then the rise in demand will be greater than the fall in pr ice and so the revenue will rise. Page reference: 56–7 *c. Rise Feedback: If the price elasticity of demand is elastic and the price falls then the rise in demand will be greater than the fall in price and so the revenue will rise. Page reference: 56–7 d. None of the above Feedback: If the price elasticity of demand is elastic and the price falls then the rise in demand will be greater than the fall in price and so the revenue will rise. Page reference: 56–7 Type: multiple choice question Title: Chapter 2 - Question 09 09) Which of the following would indicate that markets are operating efficiently? *a. Consumer sovereignty is being achieved Feedback: If there is consumer sovereignty then consumers are getting value for money. If firms are making high profi ts this may be because they are exploiting consumers as a result of monopoly power. A rise in money values does not mean that there are more resources available and if incomes are distributed equally this will mean that people may lack the incentives to wo rk harder or take risks. It is argued that it is not equality that economic systems should seek to achieve but equity. Page reference: 44–5 b. Firms are making a high level of profits Feedback: If there is consumer sovereignty then consumers are getting va lue for money. If firms are making high profits this may be because they are exploiting consumers as a result of monopoly power. A rise in money values does not mean that there are more resources available and if incomes are distributed equally this will m ean that people may lack the incentives to work harder or take risks. It is argued that it is not equality that economic systems should seek to achieve but equity. Wetherly and Otter: The Business Environment , 4th edition © Oxford University Press, 2018 . All rights reserved. Page reference: 44–5 c. There is a constant rise in the money value of goods and services Feedback: If there is consumer sovereignty then consumers are getting value for money. If firms are making high profits this may be because they are exploiting consumers as a result of monopoly power. A rise in money values does not mean that there are more resources available and if incomes are distributed equally this will mean that people may lack the incentives to work harder or take risks. It is argued that it is not equality that economic systems should seek to achieve but equity. Page reference: 44–5 d. Incomes are distributed equally across all people Feedback: If there is consumer sovereignty then consumers are getting value for money. If firms are making high profits this may be because they are exploiting consumers as a result of monopoly power. A r ise in money values does not mean that there are more resources available and if incomes are distributed equally this will mean that people may lack the incentives to work harder or take risks. It is argued that it is not equality that economic systems sho uld seek to achieve but equity. Page reference: 44–5 Type: multiple choice question Title: Chapter 2 - Question 10 10) Which of the following activities in the supply chain for automobiles is an example of a service activity? a. Production of the rubber f or the tyres Feedback: Production of rubber is a primary activity and the manufacture of the tyres and the assembly takes place at the secondary stage. The retailing of the car is a service activity. Page reference: 58 b. The production of the tyres themse lves Feedback: Production of rubber is a primary activity and the manufacture of the tyres and the assembly takes place at the secondary stage. The retailing of the car is a service activity. Page reference: 58 c. The assembly of all the car components int o a finished motor car Feedback: Production of rubber is a primary activity and the manufacture of the tyres and the assembly takes place at the secondary stage. The retailing of the car is a service activity. Page reference: 58 *d. The selling of the car through a motor sales dealership Feedback: Production of rubber is a primary activity and the manufacture of the tyres and the assembly takes place at the secondary stage. The retailing of the car is a service activity. Page reference: 58 Type: multiple r esponse question Title: Chapter 2 - Question 11 11) Which of the following are examples of an externality? Please select all that apply. Feedback: Externalities can be either negative or positive. They are costs/benefits that are incurred but are not refle cted in the market price of a commodity. In the case of the cost to a cigarette smoker of a packet of cigarettes and the cost of petrol to a motorist, the costs are the individual costs and reflect the private benefit gained by the cigarette smoker or car user. When considering the noise levels for households who live near airports there is a negative externality as a result of the actions of the producers and consumers of air travel. This will probably lower house price values in these areas. In terms of t he effect on the value of homes for existing homeowners of an increase in the reputation of schools in the neighbourhood, there is a positive benefit to householders, as house prices will probably rise as families try to move into the area. Page reference: 59 a. The cost to a cigarette smoker of a packet of cigarettes *b. Noise levels for households who live near airports *c. The effect on the value of homes for existing homeowners of an increase in the reputation of schools in the neighbourhood d. The cost of petrol to a motorist Wetherly and Otter: The Business Environment , 4th edition © Oxford University Press, 2018 . All rights reserved. Type: multiple response question Title: Chapter 2 - Question 12 12) Which of the following businesses can be best described as being in the primary sector? Please select all that apply. Feedback: This question is about the categor ization of different sectors in terms of business activity. Both a farm and an oil rig provide raw materials —i.e. foodstuff and oil —and so can be considered to be part of the primary sector. Page reference: 58 *a. A farm *b. An oil rig c. A supermarket d. A bank Type: multiple response question Title: Chapter 2 - Question 13 13) If as a result of a 5 per cent rise in price demand falls by 10 per cent , which of the following statements is correct? Please select all that apply. Feedback: The elasticity of de mand is elastic, and using the formula percentage change in the quantity demanded/percentage change in price, we can see that its value is −2. This means that since price has risen by 5 per cent but demand has fallen by 10 per cent , the overall revenue wil l fall. If the firm was trading in an uncompetitive market then it is likely that the price elasticity will be inelastic. Page reference: 56−7 *a. The price elasticity of demand is elastic *b. The price elasticity of demand is −2 *c. The revenue for the fi rm will fall d. It is likely that the firm is operating in an uncompetitive market Type: multiple response question Title: Chapter 2 - Question 14 14) If there was a shortage in a particular market, which of the following is least likely to happen if the market is allowed to operate freely? Please select all that apply. Feedback: In a free market, if demand is greater than supply, prices will rise. This will act to both reduce demand and increase supply until supply matches demand. Thus it is most likely that prices would rise to choke off the excess demand, and , in the long run, supply would increase to eradicate the shortage. In this way, there is no need for permanent black markets, and if there is a shortage, prices are n ot likely to fall. Page referen ce: 52−3 *a. A permanent black market would form b. Prices would rise to choke off the excess demand c. In the long run supply would increase to eradicate the shortage *d. Prices will fall Type: multiple response question Title: Chapter 2 - Question 15 15) Which of the following are the most likely characteristics of a market which has a high degree of monopoly power? Please select all that apply. Feedback: Monopoly power is a threat to allocative, productive , and distributive efficiency and so most governm ents seek to control and curb monopoly power. Page reference: 55 and 5 9 *a. Prices will be high and allocative efficiency will not be evident *b. Productive efficiency will not be attained *c. The elasticity of demand for the product will be relatively inelast ic *d. There will be very large profits Type: true /false Title: Chapter 2 - Question 16 16) Assume that a person has sufficient resources to consume either A , B, or C, and chooses C. The opportunity cost of C is A and B. Wetherly and Otter: The Business Environment , 4th edition © Oxford University Press, 2018 . All rights reserved. a. True Feedback: The opportunity cost is the cost of the next most desirable alternative and not the cost of all possible alternatives. Page reference: 37 *b. False Feedback: If C is chosen then the opportunity cost is either the cost of not having A or the cost of not having B. If the next most desirable alternative was B then the opportunity cost of C is B. Page reference: 37 Type: true /false Title: Chapter 2 - Question 17 17) The basic economic problem is simply that we haven’t got enough money to do all the things that we want. a. True Feedback: It isn’t money itself that is scarce but resources. If resources are limited and money increases this does not lead to an increase in resources, but simply a rise in their money value. In Chapter 6, we see that this is simply inflation. Page reference: 37–8 *b. False Feedback: The economic problem arises from the scarcity of resources and these are labour, land, capital , and enterprise. Money in and of itself has no value unless it can be used to get hold of resources. Page referenc e: 37–8 Type: true /false Title: Chapter 2 - Question 18 18) Economic efficiency has to encompass the three parts to the economic problem. *a. True Feedback: Economic efficiency is defined in terms of allocation, production , and distribution , and for a n economy to b e truly efficient it must achieve efficiency in all three areas. Page reference: 38 b. False Feedback: Economic efficiency is defined in terms of allocation, production , and distribution , and for an economy to be truly efficient it must achie ve efficiency in all three areas. Page reference: 38 Type: true /false Title: Chapter 2 - Question 19 19) If revenue from sales of a product increases as a result of an increase in price, then the price elasticity of demand for the product must be relatively inelastic. *a. True Feedback: If price elasticity of demand is relatively inelastic, then if its price rises the demand will fall —but by a smaller percentage —and so revenue will rise. Page reference: 56–7 b. False Feedback: Price elasticity of demand will affect the revenue of a firm if it changes price. If it is inelastic and price rises then revenue will rise. In this case, although demand falls the percentage fall i s lower than the percentage rise in price. Since revenue is price X sales, revenue rises. If it is inelastic and price falls then revenue will fall since here the percentage rise in demand will be less than the percentage fall in price and so overall reven ue falls. Page reference: 56–7 Type: true /false Title: Chapter 2 - Question 20 20) As incomes rise we would expect there be a greater percentage of this spent on services than on primary goods. *a. True Wetherly and Otter: The Business Environment , 4th edition © Oxford University Press, 2018 . All rights reserved. Feedback: The income elasticity of demand for servic es is relatively elastic and that for primary good s relatively inelastic. Page reference: 58 b. False Feedback: As incomes increase we spend a greater percentage of our incomes on services and a smaller percentage on primary goods. Page reference: 58 Wetherly and Otter: The Business Environment , 4th edition © Oxford University Press, 201 8. All rights reserved. Type: essay/short answer question Title: Chapter 3 - Question 01 01) What role does technology play in business in general and in terms of shaping business strategy in particular? Feedback: • Explain what technology is and how it impacts on business in terms of productivity and potential for product differentiation. • Explain the role of technology in terms of competitive advantage. • Discuss the possible strategic responses in terms of being a ‘first mover ’ or an adopter of technology. Page reference: 69–78 Type: essay/short answer question Title: Chapter 3 - Question 02 02) What role has technological change played in shaping the nature of the grocery markets in developed countries? Assess the cost s and benefits of these changes . Feedback: • Describe the main ch anges across the value chain from small -scale farms and local markets to large -scale agribusiness and supermarkets. • Discuss the reasons for these changes. • Discuss the relative advantages and disadvantages of these developments. Page reference: 72 Type: e ssay/short answer question Title: Chapter 3 - Question 03 03) How does Porter use the concept of the ‘value chain ’ to show the importance and impact of technology in developing the competitive advantage of a firm? Explain, with examples, how information te chnology has played such a large role in the most recent rapid rise in economic growth rates across the world . Feedback: • Define and explain the nature of the value chain. • Give examples of technological change across the value chain. • Explain with examples I T applications and the rapid growth in IT capacity. • Reference the recent debate about the ‘productivity paradox ’. Page reference: 71–2 and 85–8 Type: essay/short answer question Title: Chapter 3 - Question 04 04) What is the ‘IT productivity paradox’? Evaluate the relative arguments between the technology pessimists and optimists. Feedback: • Define and exp lain the IT productivity paradox . • Discuss the differences in views between the technology optimists and pessimists . • Identify t he problems involved both in applying the principle itself and in assessing the relative benefits and costs of technology. • Assess the strength/weaknesses of the relative positions. Page reference: 85–8 Type: essay/short answer question Title: Chapter 3 - Question 05 05) Choose one of the following businesses : Apple , Google, Facebook , or Amazon. Outline the main features of the technological environment which have shaped the business strategy of your chosen business and discuss any potential threats to their future growth. Wetherly and Otter: The Business Environment , 4th edition © Oxford University Press, 201 8. All rights reserved. Feedback: • Describe the evolution of the business. • Show the main ways in which the technological environment has impacted on the company. • Discuss potential threats: competition, regulatory issues, development of rival technologies. Page reference: 78–81 Type: essa y/short answer question Title: Chapter 03 - Question 06 06) To what extent is it inevitable that the development of ICT and AI will lead to technological unemployment? Feedback: • Outline the arguments that have been advanced in the past from the Luddites onwards that technology will cause unemployment . • Has this been the case and if not what has? • Is this time really ‘different ’? If so why? • What can be done to ensure that human beings are not in an antagonistic ‘race against the machine ’ but to ensure that th e benefits of technology and growth are ‘inclusive ’? Page reference 85–91 Type: multiple choice question Title: Chapter 3 - Question 07 07) The IT productivity paradox is: a. That it is always better to invest in low-tech solutions rather than high-tech ones Feedback: This statement can sometimes be correct in the context of developing countries and refers to the relevance of appropriate as opposed to advanced technology . Page reference: 85-86 b. Most commonly accepted by technological optimists Feedback : No. Technological optimists do not support this . Page reference: 79 c. That as all investment is financially risky , businesses must be cautious not to overestimate the possible future returns Feedback: This refers to the need for businesses to be fully a ware of the private costs and benefits of an investment and the risky nature of all future capital spending but does not refer to the IT productivity paradox . Page reference: 65 *d. That while it is assumed that ICT developments have revolutionized busines s there is little evidence that this is reflected in productivity statistics Feedback: Solow noted in 1987 that there was not as yet convincing evidence that widespread adoption of ICT had boosted productivity in the developed world. Page reference: 85–6 Type: multiple choice question Title: Chapter 3 - Question 08 08) What is meant by the term ‘a rise in productivity’? a. An increase in business profits Feedback: While an increase in productivity could boost profits, profits can increase for other reason s, e.g. exploiting monopoly power, increase in demand. Page reference: 80 *b. An increase in a firm’s output greater proportionally than a corresponding increase in its inputs Wetherly and Otter: The Business Environment , 4th edition © Oxford University Press, 201 8. All rights reserved. Feedback: Productivity is often measured as total output /total input . If this ri ses, this shows that a business is increasing its output by a greater percentage than it is increasing its resources , i.e. productivity has risen. Page reference: 74 c. An increase in the amount that a business produces Feedback: A firm may well increase o utput but this might require a greater percentage increase in resource use which will show a lowering in productivity. Page reference: 74 d. An increase in a firm’s use of resources which leads to an increase in its outputs Feedback: This tells us nothing about how effectively these resources are used. If the input increase is by a greater percentage than the increase in output then productivity has fallen. Page reference: 74 Type: multiple choice question Title: Chapter 3 - Question 09 09) What did Schum peter mean by the term ‘creative destruction ’? *a. That in the competitive process new business ideas would replace older ones , and that this process of innovation would inevitably mean that change would occur with old companies, products , or processes bei ng replaced by new ones Feedback: Schumpeter saw capitalism as being a system which could give rise to the power of monopoly firms , but that there would still be a competitive energy as new ideas constantly developed replacing old ways of doing things. The se pressures were destructive in the sense that the creative new was replacing the old. Page reference: 79 b. That new ideas may sometimes have harmful effects Feedback: Schumpeter’s analysis was not directed at the merits of new technology but simply at s howing up the dynamic change in the competitive environment. Page reference: 79 c. That capitalism as an economic system would destroy itself through competition Feedback: Schumpeter was aware that dynamic change would cause upheaval but that this was what was needed for capitalism to expand. Page reference: 79 d. That because businesses were under pressure to invest in new technology , they would constantly be facing falling profits and would inevitably fail Feedback: This was a view held by Marx , who argue d that one possible cause of crisis in capitalism was this constant pressure on business that might lead to periodic crises. Page reference: 79 Type: multiple choice question Title: Chapter 3 - Question 10 10) What is meant by the term ‘spillover effects ’ in relation to investment in technological research and the role of the state ? a. The ICT function of business can impact across the value chain Feedback : Porter makes the point that in fact ICT crosses into all the functional areas of business but this is not what is meant by the term ‘spillover effects ’. Page reference: 74 *b. It is often the case that if one firm develops a technological advantage that other firms will be able to share in this Feedback: This might paradoxically deter firms from taking a lead in research and development and provides a strong rationale for government support in the form of grants or offering protection through patents and copyright . Page reference: 74 c. That we haven’t yet seen the true potential of ICT and that the ben efits of the digital age will be much greater in the future Feedback: Technology optimists do argue that this is the case but this is not what is meant by the term. Recent work by Brynjolffson and McAfee use the idea of the ‘second half of the chessboard ’ to discuss the future potential of the digital age. Wetherly and Otter: The Business Environment , 4th edition © Oxford University Press, 201 8. All rights reserved. Page reference: 74 d. That we need to be careful about boosting technology if the side effect is unemployment Feedback : While this is a commonly held view , this is not what is meant by term . Page referen ce: 74 Type: multiple response question Title: Chapter 3 - Question 11 11) Technology is important because: (Please select all that apply. ) Feedback: Whilst technology can increase standards of living , it also can have harmful effects. It does have the po tential to increase productivity and so raise economic growth by increasing the production possibilities. There is no automatic link between increased technology and the narrowing of income gaps. Page reference: 85–9 a. It always produces a higher standard of living *b. It has the potential to increase productivity *c. It can enable a country to shift out of the boundaries of its production possibilities d. It enables the gap between rich and poor to narrow Title: Chapter 3 - Question 12 12) In the value chain as outlined by Michael Porter , which of the following functions are within the horizontal functions of a business? Please select all that apply. Feedback: The value chain is seen as comprising the horizontal functions that go across the whole busines s, such as finance and HR , and the vertical chain of production is from inbound logistics through to production, outbound logistics, marketing , and sales/service. Page reference: 71 *a. Finance *b. Human resources c. Marketing d. Inbound/outbound logistic s Type: multiple response question Title: Chapter 3 - Question 13 13) Which of the following people are most sceptical of the idea that the ICT revolution has had the most dramatic effect in terms of boosting productivity compared to previous eras? Feedba ck: Kurzweil is the correct answer. Page reference: 85–8 a. Robert Gordon b. Brynjolffson c. Ha Joon Chang *d. Kurzweil Type: multiple response question Title: Chapter 3 - Question 14 14) Which of the following are seen as being potential problems of tec hnological advances? Please select all that apply. Feedback: All of the options given would need to be considered. Page reference: 85–8 *a. The development of technology in countries where institutions are ‘extractive ’ *b. The damage to social organization if technology gives more wealth and power to certain groups than to others *c. The costs to the ecological environment *d. The danger of technology allowing the creation of monopoly power Type: true /false Title: Chapter 3 - Question 15 15) The term ‘basic research ’ is used to describe investment in improving the basic skills of a population first to raise literacy and numeracy levels . Wetherly and Otter: The Business Environment , 4th edition © Oxford University Press, 201 8. All rights reserved. a. True Feedback: It is true that it is now generally accepted that investment in the education of children at primary sch ool is an essential development priority but this goes under the banner of ‘basic needs ’ development policy . Page reference: 73 *b. False Feedback . Basic research refers to experimental or ‘blue -skies ’ research . Page reference: 73 Type: true /false Title: Chapter 3 - Question 16 16) It is always better for a business to be a ‘first mover ’ in the invention and adoption of a new technology. a. True Feedback: While this might sometimes be the case, it is so often not so. There are plenty of examples of busines ses which initially came up with new ideas but failed to maintain the competitive advantage as other businesses adopted the technology and were able to use it better. Page reference: 73–4 *b. False Feedback: While this might sometimes be the case, it is s o often not so. There are plenty of examples of businesses which initially came up with new ideas but failed to maintain the competitive advantage as other businesses adopted the technology and were able to use it better . Page reference: 73–4 Type: true /false Title: Chapter 3 - Question 17 17) Technological change contributes to economic growth. *a. True Feedback: Research shows t hat technology does have an effect on growth and that , in turn , if economic growth is high then so will be the rate of technolo gical advance. Page reference: 74–6 b. False Feedback: While people question the impact of technology in many cases , technology is one of the causes of economic growth . Page reference: 74–6 Type: true /false Title: Chapter 3 - Question 18 18) Technologica l change is always initially the result of human ability to have the genius to invent new products. a. True Feedback: It is true that great progress is made by great new inventions , but often progress occurs as a result of gradual changes through innovatio n. Some great inventors have seen their products fail —and what is more important is to analyse the way in which the internal and external environments of business interact to provide the right environment in which technological change can occur. Page refer ence: 83 *b. False Feedback: Economists from Smith to Porter have sought to explain the reasons for economic growth. While they place emphasis on different things , they all agree that growth depends on a combination of entrepreneurial activity and a wider social, economic , and political context. Page reference: 83 Type: true /false Title: Chapter 3 - Question 19 Wetherly and Otter: The Business Environment , 4th edition © Oxford University Press, 201 8. All rights reserved. 19) A major feature of the technological debate in the twenty -first century will be the extent to which technological change can occur without leading to increased inequality and unemployment . *a. True Feedback: It is the case that the re is increased attention now being paid to the rise of ICT and AI in inequality and unemployment Page reference: 85–91 b. False Feedback: This is part of the wider deb ate that involves the need to develop an ethical framework in which to view technologica l change . Page reference: 85–91 Type: true /false Title: Chapter 3 - Question 20 20) It is inevitable that the rise of ICT and AI in the future will lead to large level s of unemployment . *a. False Feedback: It is clear that there will potentially be effects on some forms of employment but as well as substituting for labour , technology can create new markets that might complement the demand for labour and in many cases wh at will be needed is people to work in tandem with the new technology . What is needed though will be a range of supportive institutions provided by both the public and private sector to ensure minimum dislocation in terms of employment patterns . Page refer ence: 89–91 b. True Feedback: It is clear that there will potentially be effects on some forms of employment but as well as substituting for labour , technology can create new markets that might complement the demand for labour and in many cases what will b e needed is people to work in tandem with the new technology . What is needed though will be a range of supportive institutions provided by both the public and private sector to ensure minimum dislocation in terms of employment patterns . Page reference: 89–91 Wetherly and Otter: The Business Environment , 4th edition © Oxford University Press, 201 8. All rights reserved. Type: multiple choice question Title: Chapter 4 - Question 01 01) What do the initials TUC stand for? a. Trade Union Committee Feedback: The Trades Union Congress is a national organization representing the interests of trade unions and their members. Page reference: 99 *b. Trades Union Congress Feedback: The Trades Union Congress is a national organization representing the interests of trade unions and their members. Page reference: 99 c. Transport Union Council Feedback: The Trades Union Congress is a nat ional organization representing the interests of trade unions and their members. Page reference: 99 d. Trade Union Council Feedback: The Trades Union Congress is a national organization representing the interests of trade unions and their members. Page ref erence: 99 Type: multiple choice question Title: Chapter 4 - Question 02 02) The ability of business to respond effectively to market conditions, such as fluctuations in demand or sales, through flexible employment arrangements can be referred to as : a. Social responsibility Feedback: This is referred to as labour market flexibility. Alth ough such flexibility can suit employees (e .g. who want to work part -time), this is an issue that can bring conflicting interests between employers and employees to the fo re. Greater flexibility may translate into weakening employee protection in areas such as redundancy and unfair dismissal. Certain forms of flexibility may be criticized as social irresponsibility, such as the use of zero -hours contracts. The capacity of f irms to determine working arrangements to suit business needs may be seen as an aspect of the right to manage. Page reference: 98 *b. Labour market flexibility Feedback: This is referred to as labour market flexibility. Alth ough such flexibility can suit employees (e .g. who want to work part -time), this is an issue that can bring conflicting interests between employers and employees to the fore. Greater flexibility may translate into weakening employee protection in areas such as redundancy and unfair dismi ssal. Certain forms of flexibility may be criticized as social irresponsibility, such as the use of zero -hours contracts. The capacity of firms to determine working arrangements to suit business needs may be seen as an aspect of the right to manage. Page r eference: 98 c. Employee protection Feedback: This is referred to as labour market flexibility. Alth ough such flexibility can suit employees (e .g. who want to work part -time), this is an issue that can bring conflicting interests between employers and empl oyees to the fore. Greater flexibility may translate into weakening employee protection in areas such as redundancy and unfair dismissal. Certain forms of flexibility may be criticized as social irresponsibility, such as the use of zero -hours contracts. Th e capacity of firms to determine working arrangements to suit business needs may be seen as an aspect of the right to manage. Page reference: 98 d. Right to manage Feedback: This is referred to as labour market flexibility. Alth ough such flexibility can su it employees (e .g. who want to work part -time), this is an issue that can bring conflicting interests between employers and employees to the fore. Greater flexibility may translate into weakening employee protection in areas such as redundancy and unfair d ismissal. Certain forms of flexibility may be criticized as social irresponsibility, such as the use of zero -hours Wetherly and Otter: The Business Environment , 4th edition © Oxford University Press, 201 8. All rights reserved. contracts. The capacity of firms to determine working arrangements to suit business needs may be seen as an aspect of the right to manage. Page reference: 98 Type: multiple choice question Title: Chapter 4 - Question 03 03) Where the market system has popular support and there is a general belief that the market is a key element of a good society, this can be referred to as: a. Social responsi bility Feedback: The market system depends on ongoing support within society to organi ze our economic life in this way. Thus legitimacy is important for the continued operation of the market. Economic problems such as the financial crisis have the potentia l to undermine this legitimacy. Legitimacy might depend in part on confidence that business displays social responsibility and is responsive to consumers (consumer sovereignty). Good governance can be seen in part in terms of effective management of the ec onomy. Page reference: 97 and 104 b. Good governance Feedback: The market system depends on ongoing support within society to organi ze our economic life in this way. Thus legitimacy is important for the continued operation of the market. Economic problems such as the financial crisis have the potential to undermine this legitimacy. Legitimacy might depend in part on confidence that business displays social responsibility and is responsive to consumers (consumer sovereignty). Good governance can be seen in p art in terms of effective management of the economy. Page reference: 97 and 104 *c. Legitimacy Feedback: The market system depends on ongoing support within society to organi ze our economic life in this way. Thus legitimacy is important for the continued o peration of the market. Economic problems such as the financial crisis have the potential to undermine this legitimacy. Legitimacy might depend in part on confidence that business displays social responsibility and is responsive to consumers (consumer sove reignty). Good governance can be seen in part in terms of effective management of the economy. Page reference: 97 and 104 d. Consumer sovereignty Feedback: The market system depends on ongoing support within society to organi ze our economic life in this wa y. Thus legitimacy is important for the continued operation of the market. Economic problems such as the financial crisis have the potential to undermine this legitimacy. Legitimacy might depend in part on confidence that business displays social responsib ility and is responsive to consumers (consumer sovereignty). Good governance can be seen in part in terms of effective management of the economy. Page reference: 97 and 104 Type: multiple choice question Title: Chapter 4 – Question 04 04) During the 1980s in the UK the political goal of ‘rolling back’ the state (i .e. reducing its size) has been referred to by the term: a. Keynesian welfare consensus Feedback: Incorrect. This is the approach that was dominant in the 1950s and 60s favouring ‘big government’ . Page reference: 105–6 *b. Neoliberalism Feedback: Yes, also referred to as Thatcherism , this involved a critique of the post -war big government consensus in favour of a liberal belief in minimal government. Page reference: 105–6 c. Socialism Feedback: Incorrect. Socialism is the principal ideological opponent of capitalism. No Conservative politician would sympathi ze with socialist ideas. Page reference: 105–6 Wetherly and Otter: The Business Environment , 4th edition © Oxford University Press, 201 8. All rights reserved. d. Mixed economy Feedback: Incorrect. The creation of the mixed economy was an aspect of the pos t-war consensus, rejected by the Conservatives in the 1980s in favour of privatization. Page reference: 105–6 Type: multiple choice question Title: Chapter 4 - Question 05 05) Which of the following models of capitalism is based on an ‘optimistic’ view of markets? *a. The minimal state Feedback: The minimal state model seeks to disengage the state from the economy on the optimistic basis that markets drive efficiency and customer responsiveness. The developmental and social -democratic models advocate inter ventionist or activist roles for the state in relation to industrial policy and social policy, based on more pessimistic assessments of the market. The Keynesian welfare state is associated with the social -democratic view. Page reference: 105 b. The develo pmental state Feedback: The minimal state model seeks to disengage the state from the economy on the optimistic basis that markets drive efficiency and customer responsiveness. The developmental and social -democratic models advocate interventionist or acti vist roles for the state in relation to industrial policy and social policy, based on more pessimistic assessments of the market. The Keynesian welfare state is associated with the social -democratic view. Page reference: 105 c. The Keynesian welfare state Feedback: The minimal state model seeks to disengage the state from the economy on the optimistic basis that markets drive efficiency and customer responsiveness. The developmental and social -democratic models advocate interventionist or activist roles for the state in relation to industrial policy and social policy, based on more pessimistic assessments of the market. The Keynesian welfare state is associated with the social -democratic view. Page reference: 105 d. The social -democratic state Feedback: The minimal state model seeks to disengage the state from the economy on the optimistic basis that markets drive efficiency and customer responsiveness. The developmental and social -democratic models advocate interventionist or activist roles for the state in relation to industrial policy and social policy, based on more pessimistic assessments of the market. The Keynesian welfare state is associated with the social -democratic view. Page reference: 105 Type: multiple choice question Title: Chapter 4 - Question 06 06) The term ‘market failure’ refers to: a. Closure of a business due to bankruptcy Feedback: Market failure refers to the inability of the market on its own to produce socially desirable outcomes. The definition of market failure can be quite elastic depending on how desirable outcomes are defined. Generally recogni zed forms of market failure include pollution. Business bankruptcy may be seen as failure of the firm and has obvious undesirable consequences but is not seen as market failure because it is a normal aspect of ‘healthy’ competition. Tax avoidance is legal but arguably immoral and therefore undesirable, but is not market failure. Corruption is illegal and, again, is not market failure. Arguably neither tax avoidance nor corruption are intrinsi c failures of the market. Page reference: 106 b. Tax avoidance by companies Feedback: Market failure refers to the inability of the market on its own to produce socially desirable outcomes. The definition of market failure can be quite elastic depending on how desirable outcomes are defined. Generally recogni zed forms of market failure include pollution. Business bankruptcy may be seen as failure of the firm and has obvious undesirable consequences but is not seen as market failure because it is a normal as pect of ‘healthy’ competition. Tax avoidance is legal but arguably immoral and therefore undesirable, Wetherly and Otter: The Business Environment , 4th edition © Oxford University Press, 201 8. All rights reserved. but is not market failure. Corruption is illegal and, again, is not market failure. Arguably neither tax avoidance nor corruption are intrinsic failures o f the market. Page reference: 106 *c. The inability of the market , if left to itself, to produce socially desirable outcomes such as limiting pollution and global warming Feedback: Market failure refers to the inability of the market on its own to produce socially desirable outcomes. The definition of market failure can be quite elastic depending on how desirable outcomes are defined. Generally recogni zed forms of market failure include pollution. Business bankruptcy may be seen as failure of the firm and h as obvious undesirable consequences but is not seen as market failure because it is a normal aspect of ‘healthy’ competition. Tax avoidance is legal but arguably immoral and therefore undesirable, but is not market failure. Corruption is illegal and, again , is not market failure. Arguably neither tax avoidance nor corruption are intrinsic failures of the market. Page reference: 106 d. Corrupt dealings between business and government Feedback: Market failure refers to the inability of the market on its own t o produce socially desirable outcomes. The definition of market failure can be quite elastic depending on how desirable outcomes are defined. Generally recogni zed forms of market failure include pollution. Business bankruptcy may be seen as failure of the firm and has obvious undesirable consequences but is not seen as market failure because it is a normal aspect of ‘healthy’ competition. Tax avoidance is legal but arguably immoral and therefore undesirable, but is not market failure. Corruption is illegal and, again, is not market failure. Arguably neither tax avoidance nor corruption are intrinsic failures of the market. Page reference: 106 Type: multiple choice question Title: Chapter 4 - Question 07 07) What is meant by the term ‘tax competitiveness’? a. A company avoiding tax to gain a competitive advantage Feedback: In a globalizing world, in which multinational corporations can choose where to locate production facilities, it can be argued that governments need to reduce business taxes in order to att ract investment. This is known as tax competitiveness and is a policy that was actively pursued by the UK government elected in 2010. Page reference: 117–18 b. Having a more effective system of tax collection than other countries Feedback: In a globalizing world, in which multinational corporations can choose where to locate production facilities, it can be argued that governments need to reduce business taxes in order to attract investment. This is known as tax competitiveness and is a policy that was actively pursued by the UK government elected in 2010. Page reference: 117–18 *c. Having a lower rate of corporation tax than other countries in order to attract business investment Feedback: In a globalizing world in which multinational corporations can choos e where to locate production facilities it can be argued that governments need to reduce business taxes in order to attract investment. This is known as tax competitiveness and is a policy that was actively pursued by the UK government elected in 2010. Page reference: 117–18 d. A retailer paying the VAT (value added tax) on goods in order to compete on price Feedback: In a globalizing world, in which multinational corporations can choose where to locate production facilities, it can be argued that governmen ts need to reduce business taxes in order to attract investment. This is known as tax competitiveness and is a policy that was actively pursued by the UK government elected in 2010. Page reference: 117–18 Type: multiple response question Title: Chapter 4 - Question 0 8 08) What are the basic features of democracy ? Please select all that apply.