Question 1. what is a proprietorship?
Proprietorship is the form of business organization in which the
owner is in sole charge of the business and it responsible for all its
success or failure.
Characteristics: the sole proprietorship is the oldest, most
common and simplest form of business organization.
The sole proprietorship is a business entity owner and managed by
one person. In the sole proprietorship, the owner is inseparable from the
business.
He directly controls over the business. A sole proprietorship does
not pay taxes separately from the owner. It is organized very informally.
It is not subject to much state regulation. It is relatively simple to manage
and control.
Advantages:
1, it is easy to set up. This is the simplest way to set up a business.
A sole proprietorship is a company which is not registered with the state
as a corporation.
2, it provides certain freedom for its owner. A sole proprietor has
absolute freedom.
3, tax advantages to owner. Avoidance of double tax, the proprietor
only needs to pay personal income tax, not business tax.
4, all profits belong to the owner.
Disadvantages:
1, limited funds (or capital). This limits depends on the personal
resources of the proprietors, plus whatever money that.
2, limited life: the life span of the business is uncertain. As soon as
the owner decides not to have the business anymore, or the owner does.
So the business ceases to exist.

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1, unlimited liability: each and every partner in a business may be
held liable for its debts. No matter how many partners a business has,
anyone of them can be responsible for paying off what it owes. There is
no limit to the amount of money that a partner may lose.
2. limited life: a partnership is legally ended when one of the
partners dies. While it is possible to continue the business by forming a
new partnership, to do so can present legal problems.
3. limited funds: the mount of money the partnership can raise is
limited. This limit depends upon the personal resources of the partner
plus whatever money they can borrow.
4, partners may disagree. Sometimes partners will have sich serious
disagreements that they can no longer function as a team. When this
happens, it can easily bring the business to an end.
Question 4. market price
Market price is the price at which a goods or service is offered at
the market place. We have described what buyers and seller are willing to
do at a variety of prices. “Demand and supply of chocolate chip cookies”
Demand (students will buy) At a price of Supply (sellers will offer)
100
$ 70 each
2000
200
60
1800
400
50
1600

corporation, shares of stock can be sold merely by signing them over to a
new owner.
Disadvantages: corporations are costly and complicated to set up,
their owners are subject to double taxation.
1, costly and complicated to set up: in order to organize as a
corporation, a firm must first get permission from the state or federal
government. This is a complicated and costly procedure that usually
requires the assistance of a lawyer.
2. double taxation: the profits of most corporations are subject to
corporate income taxes. These profits or dividends as they are called, are
then subject to personal income taxes.

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The stockholders are said to be subject to double taxation: first
when the corporations profits are taxed and second when the
stockholders’ dividends are taxed at income tax time.
Question 6. market economic system
The way that a group community of people or nation organizes
itself for production is known as economic system.
Characteristics:
1. the price that you charge for your goods and services will be
influenced by your competition.
2, the success that you have will depend on the demand by
consumers for your goods.
3, in contrasted with a planed economy in which the central
government determines the price of goods and services using a fixed
price system.
Question 7. the roles of the government

Question 9. traditional economic system
Traditional economic system is one in which people’s economic
roles are determined by behaviors handed down to present from the past.
Characteristics:
a strong social network is based on primitive methods and tools.
Resources in the traditional system are allocated by inheritance. Societies
that produce goods and services in traditional ways are found today in
some parts of South America, Asia, Africa.
Traditional ways decide how work is to be preformed and what
people have to do earn their living.
Advantages: there is little to no uncertainly. Everyone knows what
role to play. Life is generally stable, predictable and continuous.
Disadvantages: tend to discourage ideals and new ways of doing
thing. Lack of progress lower standard of living. Less use technology,
difficult to improve.

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As result of resistance to change, less productive, do not use new
methods, people not in jobs they are best suited for. Low productivity
result in low standard of living.
Question 10. board of directors
Directors are the representatives whom stockholder in large
corporations elects to organize business operation and look after their
interests.
These directors together make up the Board of directors.
How to elect:
1,electing the voting (all stockholders have right to vote),
2, stockholders can give their voting right to others by signing a

production and its factors these economics can change rapidly. Whatever
is needed most will be produced.
There is no uncertainly, people are hold when and how to work.
Free education, health care, other public services. Guarantees equal
standard of living for everyone. Less crime and proverty.

Needs are

provided for through the government.
Disadvantages: economy designed to meet needs not wants. No
incentive to work hard. People do not often lose their jobs, so they do the
bare minimum to get by. No incentive to produce better product or
engage in entrepreneurship.
Large burecucracy means slow decision making raises cost of
production, lack flexibility. No reward for initiative which slows
progress. Minimal choices. Fewer choices of items.
Question 12. Relative prices
A relative price in the money price of a goods divided by the
money price of another goods or by an average of price of the other
goods.
Eg: the relative price of good: A in terms of goods is the number
of units of goods B that exchange for 1 unit of goods A. in discussing

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relative prices, economists often compare them with absolute prices. An
absolute price is simply the price of a goods in money terms.
Question 13. market economic systems
A Market economic system is one in which a nation’s economic

lose their means of income.
There are market failures. This can cause some companies to
become way to powerful and become a monology. If the government
does not step in, the monology can take advantage of the consumers and
charge ridiculously high prices.
Question 14. the consumer tastes affect the demand curve shift
The third thing which makes demand curve shift (either to the left
or to the right) is consumer tastes or preferences. In part, these are shaped
by convenience, custom and social attitudes.
When the Beatles and the Rolling Stones first became popular, the
demand for haircuts suddenly fell. The fashion for the miniskirt reduced
the demand for textile material.
More recently the emphasis on health and fitness has increased the
demand for jogging equipment, health foods, sport facilities while
reducing the demand for cream cakes, butter and cigarettes.
Question 15. mixed market economic system
A mixed market system is the combination of competitive privately
owned enterprises under some control from the government.
It means that the market alone does not decide how all goods and
services will be produces; the governments also have an important role in
the production of goods and services.
Characteristics: resources that might otherwise have been used to
produce goods and services for private use were used for public use.
Government may step in and interfere with the market’s operation. Close
interactions between the public sector and the private sector are
encouraged.

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In everyday language we say that motorbikes and gasoline are
complimentary to each other because you can not use a motorbike
without also using gasoline. A rise in the price of gasoline tends to reduce
the demand for motorbikes.
In economic terms we say that compliments are goods and
services for which an increase (or decrease) in the price of one decreases
(or increases) the quantity demanded of the other, with other things being
equal.
There are goods and services for which the consumption of one can
replace the comsumption of the other. They are substitutes.
Goods that are similar will be substitutes: coke and pepsi, sirloin
steak and t-bone steak, etc. substitutes are goods and services for which
an increase (or decrease) in the price of one increases (or decreases) the
quantity demanded of the other, with other things being equal.
Question 18. supply and the laws of supply
In economics, supply is the quantity of a goods or service offered
for sale at a range of prices. This la states that supply increases as prices
increase, decrease as prices decrease. Supply change in the same direction
of price change.
There are 2 reasons why the quantity of items offered for sale at
higher price will be greater than the quantity offered at lower owns.
The first reason is that those already in business will try to increase
production as a way of increasing tier profits.
The second reason why the quantity offered at a higher price will
be greater is that other people will be attracted into the business. This
price is reaches when market supply and market demand meet.
Question 19. technology affect the supply curve shift
A supply curve is drawn for a given technology. An improvement


to

appeal

extensive

transparency

provisions, requiring Vietnam provide advance notice of all laws,
regulations and other administrative procedures relating to any matter
covered in the agreement, and requiring their publication, and an
indication therein of effective dates and government contact points.

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Requires all laws governing issues covered in the agreement
which have not been published to be made public and readily available.
Requires designation of an official journal where all such measures will
be published.
Requires formation and administrative or judicial tribunal for
review and correction of all matters covered in the agreement, affords the
right to appeal the relevant decisions.

T/F QUESTIONS
Question 1.
1. every nation has an unlimited supply of natural resources F,
2, a nation’s wealth is not often measured in terms of the capital it
possesses F,

2, goods have values as they satisfy people’s needs and wants T,
3, an example of services is teacher giving lecture T,
4.a scare resource is non for which the supply at a zero price would
exceed the demand F,
5, the business owners, managers and workers are called producers
T
Question 5.
1, the government does not determine property rights F.
2, economics study prices of goods in markets T.
3, in the traditional economic system, people’s ways of production
remain unchanged T.
4, production of goods and services in traditional ways can be
found in some parts of Europe F.
5.in a command economic system, the main decision maker is the
businesses F.
Question 6.
1. in a market system economic systems, people are free to go into
business on their own T.

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2. the economic system being applied in VN now is also a market
oriented one T.
3. most of the economic systems in the world are mixed market
economies T.
4, in mixed market economy, government cn not step in and
interfere with market’s operation F.
5, the mixed market economy does not encourage close
interactions between the public sector and the private sector F.

5, socialism means that means of production are owned and
operated by businesses and firms F.
Question 10.
1, government expenditure represents the expenditure side of
government finance F.
2, ownership is very important in determining distribution T.
3.the efforts of buyers and sellers integrate the separate physical
market T.
4, changes in demand do not affect the price at which goods will be
bought and sold F.
5, if the numbers of items available for the sale at a particular price
increases, the price will rise F
Question 11.
1, in giant corporation, sometimes few stockholders attend annual
meetings T,
2, the wealth of nations is the famous treatise of Thomas malthus
F,
3, the government can use their power to tax to protect certain
industries T
4, in mixed market economic system, government can not step in
and interfere with the market’s operation F,
5, a peak, like a depression may last for a short or long period of
time T
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Question 12.
1, all modern economic systems combine private ownership with
government control T,
2, a particular supply curve is drawn for a general policy regime of

6. an example of an economic indicator is unemployment rates.
Ch 2. 1, the question that ch 2 help answer is: what do all economic
systems have in common.
2. the statement is an opinion than a fact: societies answer that what, how
and who questions in different ways.
3. the price of goods and services will be set by the government in a
command economic system.
4, shopkeepers will try to give customers what they want in a market
economic system.
5. every society must find ways to answer what, how who questions
because people in business need that information.
6, an entrepreneur is a person or a firm that creates new products for the
market.
7, labour is human resource used in business operations to produce goods
and services for the society.
8. according to Keynes, aggregate demand is the key factor in economic
analysis.
9, classical economics focuses on diminishing returns, individual persuit
of private gain, birth control.
10, aggregate demand includes such factors as total spendings of
consumers, governments and investors.
Ch 3. 1, in a free enterprise system, both buyers and sellers decide what
goods and services should be produced.
2, a well functioning economy requires that the government should pay a
role in the production of goods and services.
3. the role of the government is mentioned as a provider of transfer
payments.
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Ch 7. 1, a relative price, related goods is none of these above.
2, an absolute price is the exact price of a single good in terms of money.
3, compliments are goods for which the increase in the price of one
decreases the price of the other.
4, substitudes are goods for which an increase in the price of the one
increases the price of the other
Ch 1: 1, business cycle – periodic changes in the level of business
activity.
2, recession – the period of decline
3, expansion – the period of recovery in the business cycle
4, great depression – the worst period of business decline and
unemployment in the history of Western economies,
5, bottom – the lowest point
6, economic indicator – a statistic that describes the state of the nation’s
economy
7, peak – the period of prosperity
8, economics – the study of the choices people make as producers and
consumers
9, goods – things of value that can be seen or touched
10, services – things of value that can not be seen or touched
11, producers – business owners, managers and workers
12, consumers- those who buy or use goods and services
13, resources – things that go into making goods and services
14, scarcity – limited supply of goods and services
15, opportunity cost – one good and service given up in order to get
another

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