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Eco 10

True/False
Indicate whether the sentence or statement is true or false.
 

1. 

Financial institutions use savings deposits to finance growth and expansion.
 

2. 

Selling shares of stock is one means of financing an expansion.
 

3. 

A business expansion is worthwhile if the cost of financing is greater than the expected profits.
 

4. 

In a market economy, businesses do not have to compete for resources.
 

5. 

The same individual can be a lender and a borrower.
 

6. 

Most short-term bank credit for businesses is in the form of trade credit.
 

7. 

A line of credit is the maximum amount of money a company can borrow from a bank during a period of time.
 

8. 

Issuing stock is a method of short-term financing.
 

9. 

If a corporation fails, bondholders are paid before stockholders.
 

10. 

High interest rates encourage debt financing.
 

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

11. 

Renting new stores and training new workers are some of the
a.
costs of expansion.
c.
expected profits.
b.
expected revenues.
d.
sources of financing.
 

12. 

A potential benefit of financing an expansion is
a.
cost of borrowing.
c.
new taxes.
b.
higher profits.
d.
additional bookkeeping.
 

13. 

What is the reward for people who unintentionally finance business growth by depositing funds in a savings account or CD?
a.
shares in the business
c.
higher profits
b.
interest earned on savings
d.
corporate bonds
 

14. 

In a market economy, resources go where
a.
they generate the highest expected value.
b.
they are needed most.
c.
the benefits of expansion are uncertain.
d.
costs are greatest.
 

15. 

To determine whether or not to expand, a business owner would
a.
make a cost-benefit analysis.
c.
offer stock at an attractive price.
b.
sell corporate bonds.
d.
ask friends for money.
 

16. 

The kind of long-term financing in which stock is sold is called
a.
trade credit.
c.
leasing.
b.
equity financing.
d.
line of credit.
 

17. 

Which of the following describes preferred stock?
a.
issued by all corporations
b.
pays a fixed dividend
c.
holders of this stock have voting rights
d.
stock most often bought and sold
 

18. 

A business would seek short-term financing to
a.
buy more equipment.
c.
build a new plant.
b.
finance debts of more than 10 years.
d.
pay bills until it gets paid.
 

19. 

When a corporation sells bonds, it is engaging in
a.
short-term financing.
c.
long-term financing.
b.
intermediate-term financing.
d.
trade credit.
 

20. 

Which of the following would favor a company's plans to finance expansion?
a.
low interest rates
b.
high interest rates
c.
high debt load
d.
slow economic growth in the overall market
 

21. 

Which of the following are consumer goods?
a.
machines used to assemble automobiles
b.
robotics
c.
paper used for printing magazines
d.
stereo systems
 

22. 

What step in production operations involves choosing a location for a business?
a.
product design
c.
planning
b.
purchasing
d.
inventory control
 

23. 

A slip of paper stating that a product you have purchased was "Inspected by Number 15" is an example of
a.
quality control.
c.
technology.
b.
product design.
d.
planning.
 

24. 

The trade-off for quality control is
a.
larger inventory.
c.
lower prices.
b.
higher production costs.
d.
higher shipping costs.
 

25. 

Methods of production have changed as a result of
a.
lack of financing.
c.
decrease in workers.
b.
technology.
d.
increase in raw materials.
 

Completion
Complete each sentence or statement.
 

26. 

Selecting a location is the most important decision in the ____________________ step in production operations.
 

 

27. 

The ____________________ step in production operations includes obtaining raw materials, machines, and supplies.
 

 

28. 

The Industrial Revolution came about through ____________________, or the combined labor of people and machines.
 

 

29. 

The ____________________ production system is only possible with interchangeable parts and the division of labor.
 

 

30. 

In some industries, the manufacturing process is regulated by ____________________.
 

 

Matching
 
 
Match each item with the correct statement below.
a.
financing
b.
cost-benefit analysis
c.
revenues
d.
profits
e.
stock
 

31. 

shares of a business
 

32. 

the money earned after you subtract costs from revenues
 

33. 

comparing the estimated cost of an action with the benefits of that action
 

34. 

obtaining funds or money capital for business expansion
 

35. 

total income from sales of output
 
 
Match each item with the correct statement below.
a.
trade credit
b.
promissory note
c.
debt financing
d.
line of credit
e.
leasing
 

36. 

renting rather than buying
 

37. 

written agreement to repay a loan at a specified time with a specified rate of interest
 

38. 

maximum amount of money a company can borrow from a bank during a period of time
 

39. 

short-term financing extended by one firm to another business buying the firm's goods
 

40. 

raising money for a business through borrowing
 
 
Match each item with the correct statement below.
a.
production
b.
mechanization
c.
assembly line
d.
division of labor
e.
automation
 

41. 

production system in which a good moves on a conveyor belt past workers who perform individual tasks to assemble it
 

42. 

breakdown of a job into small tasks performed by different workers
 

43. 

production process in which machines do the work and people oversee them
 

44. 

process of changing resources into goods that satisfy the needs and wants of individuals and businesses
 

45. 

combined labor of people and machines
 



 
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