Review Questions Chapter 8 – Schweikart

(1) Major new issues faced large-scale manufacturing around 1900. Which observation is correct?

(a) The new environment allowed business to easily shut down during business downturns, and gear up as business conditions improved.

(b) The new environment involved falling fixed costs, which enabled business to gradually reduce production and increase production as circumstances indicated.

(c) There was little interest by industry to intervene with government to encourage them to increase economic stability.

(d) High fixed costs involved with large scale manufacturing made sudden shifts in the market translate into huge, often insurmountable losses.

(2) The Progressive Era involved a major shift in government to business relationships. Which observation is false about this Era?

(a) The Progressives believed that business could be best regulated through competition and the marketplace.

(b) Some elements of the business community wanted government intervention to enhance the stability of the economy, but they did not want government involved with the regulation of industry.

(c) The regulation of the pharmaceutical and food industries was started during the Progressive Era.

(d) The overzealous regulatory activities of government often ended up with ineffective or inappropriate results, similar to the cocaine issue and Coca-Cola.

(3) The Federal Trade Commission was established in 1914 during the Progressive Era. Which observation about Commission, and the environment it worked in, is true?

(a) The Federal Trade Commission grew out of lobbying by industry to develop rules to ensure the quality and safety of products.

(a) The Federal Trade Commission established a permanent regulatory body to examine business trusts. In the process, it developed a body of technically trained government bureaucrats to undertake these investigations.

(b) The Supreme Court allowed the Commission wide powers, beyond the "rule of reason", to investigate and command industry to cease restraint of trade activities.

(c) None of the above are true.

(3) The institution of income taxes and the Federal Reserve System occurred during the Progressive Era. Which observations about these events are true?

(a) Tariffs and land sales provided tax revenues that were adequate for a larger federal government.

(b) Income taxes were supported by the Progressives to increase the power of the federal government and a means to re-distribute income from the wealthy to the middle and lower income groups.

(c) Income taxes proved to be a stable source of revenue for the federal government.

(d) All the above are true.

(4) Bank panics and the orderly growth of the money supply were major issues that led to the institution of the Federal Reserve System in 1913. Which statement is true?

(a) A major purpose of the Federal Reserve System was to de-regulate the banking system , to allow state chartered banks to issue their own currency.

(b) The Federal Reserve System created 12 Federal Reserve Banks throughout the country which were owned by the federal government.

(c) The Federal Reserve System provided a central pool of reserves to lend to member banks in case of emergency.

(d) The Federal Reserve System did not change the existing practice of allowing National Banks to issue their own notes.

(5) Federal policies to support military production during World War I had a number of important implications for business. Which observation is true?

(a) The federal government used direct intervention to control merchant shipping and shipment by railroad.

(b) The federal government organized civilian advisory boards to plan for mobilization.

(c) Boards and bureaus of government often got in the way of efficiency in meeting the needs of military production.

(d) All of the above are true.

(6) The emergence of the retail giants such as Montgomery Ward and Sears Roebuck occurred during the late 1800s and early 1900s. Which observation is correct?

(a) They emphasized sales in urban areas.

(b) They depended upon a sales strategy that involved salesmen travelling door-to-door.

(c) The focussed upon a catalog business serving rural customers at first, then evolved to retail stores in the cities during the 1920s.

(d) None of the above are true.

(7) The department store concept started in the mid 1800s and continued to evolve into the 1900s. Which observation is false?

(a) Alexander Stewart introduced the concept of the large-scale retail store, developed specialized departments, and extended credit to stimulate sales.

(b) The department store depended upon the urbanization of the population, to create a sufficient clientele to make a large-scale operation profitable.

(c) The department store concept started in rural areas, where people from miles around would congregate and purchase goods and enjoy a social experience.

(d) The early department stores in major cities on the east coast drew large crowds as interesting places to visit.

(8) The rise of supermarkets involved a number of innovations. Which observation about this phenomenon is true?

(a) Some supermarkets such as A&P, integrated operations backward into baked goods, sugar, coffee manufacturing, and salmon canning.

(b) The move from clerks to self-help by customers required the innovation of individual packaging.

(c) There was a reduced role for middlemen and grocery wholesalers.

(d) All of the above are true.

(9) During the late 1800s and into early 1900s, the advertising began to evolve as an industry. Which observation is correct?

(a) Mass circulation of newspapers and magazines provided the springboard for the development of the industry.

(b) Specialists were needed who could place ads in national magazines and newspapers, write effective ads, and track the appearance of ads.

(c) Agencies incorporated psychologists to analyze consumers' desires and the impacts of advertising strategies.

(d) All of the above are true.

(10) The rise of the automobile industry occurred in a unique time in American history. Which observation is false about conditions at that time?

(a) There was a high and rising per capita income, which provided sufficient income for a potential market for automotive products.

(b) The steel and petroleum industries were mature industries that could support the needs of the auto industry.

(c) The existence of small-scale machinery manufacturers provided a pool of technically adept people to act as entrepreneurs, inventors, and workers.

(d) The federal government provided large-scale incentives and subsidies to the industry, as it recognized the impact the industry would have on the national economy.

(11) There are many factors which led to the success that Henry Ford enjoyed as an entrepreneur in the auto industry. Which observation is false?

(a) He instituted the idea of interchangeable, standardized parts, and the moving assembly line to mass-produce cars at a low unit cost so that the average person could afford a car.

(b) He increased wages and introduced the eight hour work day, to reduce staff turnover and improve recruitment of workers.

(c) He increased the price of the Model T in 1915 in an attempt to increase total revenues and profits for the Ford Motor Company.

(d) His attention was placed on improved efficiency such that price could be reduced and profits increased.

(12) William Durant is thought of the father of General Motors (GM). Which observation about him is incorrect?

(a) His vision was to bring together the varieties of cars offered by different companies under one corporate entity that could sell different models to cover different consumer tastes and price ranges.

(b) In the early 1900s, he directed GM to combine Buick, Cadillac, and eight other companies under one corporate entity.

(c) By 1915, the concept was immediately financially successful.

(d) He approached Louis Chevrolet in 1916 to develop a new, inexpensive car line for GM.

(13) In 1920, Alfred Sloan was named as head of General Motors. Which statement is incorrect about the contribution of Sloan to GM?

(a) Sloan continued the existing high growth strategy started by William Durant.

(b) Sloan developed a divisional management system, in which each division had its own market niche and price.

(c) Sloan's divisions were autonomous yet were supervised by corporate vice presidents for corporate-wide functions such as accessories and export products.

(d) Sloan instituted financial and production control systems so that GM corporate management could track the performance of divisions.