Chapter 8 Vocab Quiz

Large companies have an advantage over small companies due to economies of scale. This means that as the scale of production increases, the cost per unit decreases. Large companies can take advantage of bulk purchasing, efficient production processes, and distribution networks to lower their costs and offer competitive prices. This allows them to have higher profit margins and invest in research and development, marketing, and expansion. Small companies, on the other hand, often struggle to achieve the same level of efficiency and cost-effectiveness, making it more challenging for them to compete in the market.

A rebate is a discount given to the cost of a product or service. It is a partial refund or reduction in price that is offered by the seller to the buyer after the purchase has been made. This can be in the form of cash back, a gift card, or a coupon that can be used towards future purchases. Rebates are often used as a marketing strategy to incentivize customers to buy a particular product or service by offering them a financial incentive.

Philanthropy refers to actions that benefit society, such as donating money, resources, or time to charitable causes. It involves individuals or organizations voluntarily giving back to the community and supporting initiatives that address social issues and improve the well-being of others. Unlike Social Darwinism, which promotes the idea of survival of the fittest and justifies inequality, philanthropy focuses on promoting equality and making a positive impact on society. Trust, vertical integration, and horizontal integration do not necessarily involve actions that directly benefit society as philanthropy does.

Vertical integration refers to the combining of companies that operate in different, but related businesses. This strategy allows a company to control multiple stages of the production or distribution process, from raw materials to the final product or service. By vertically integrating, a company can potentially reduce costs, improve efficiency, and gain more control over its supply chain. This can also lead to increased market power and the ability to capture a larger share of the value chain.

The correct answer is "Entrepreneur." An entrepreneur is someone who organizes and manages a business venture, taking on financial risks in order to do so. They are known for their ability to identify opportunities, innovate, and create value in the market. This term accurately describes an individual who starts and runs their own business, making it the most suitable choice among the given options.

Horizontal integration refers to the combining of companies that are in the same kind of business. This means that companies within the same industry merge or acquire each other to expand their market share, increase their economies of scale, and gain a competitive advantage. Horizontal integration allows companies to consolidate their operations, reduce competition, and potentially increase their profitability by eliminating duplicate functions and sharing resources.

A holding company is a type of company that does not produce any goods or services itself, but instead owns stocks or shares in other companies. It exists solely to manage and control these investments. By holding stocks in multiple companies, a holding company can diversify its portfolio and potentially earn profits through dividends and capital appreciation. This allows the holding company to have control and influence over its subsidiary companies without directly engaging in their operations.

A corporation is a type of company that is formed by a group of investors. It is a legal entity that is separate from its owners and is recognized as such by the law. This means that the corporation has its own rights and responsibilities, and can enter into contracts, own property, and sue or be sued. The investors who form the corporation are known as shareholders, and they own shares of the company's stock. The shareholders elect a board of directors to oversee the company's operations and make important decisions on their behalf. Corporations are often used for large businesses because they provide limited liability protection for the shareholders and allow for easy transfer of ownership through buying and selling shares.

Social Darwinism is the correct answer because it refers to the philosophy used by businesses based on the concept of "Survival of the Fittest." This philosophy suggests that businesses should operate in a competitive manner, where only the strongest and most successful businesses survive while weaker ones fail. Social Darwinism is often associated with the belief that this competitive nature is beneficial for society as a whole, as it leads to progress and improvement. It is important to note that Social Darwinism has been criticized for its potential to justify unethical practices and disregard social responsibility.

When a company is controlled by a board, it is typically referred to as a corporation. A corporation is a legal entity that is separate from its owners, and its operations are overseen by a board of directors. The board is responsible for making important decisions and setting the overall direction of the company. Trust, holding company, vertical integration, and horizontal integration do not necessarily involve a board of directors and are different concepts in the business world.