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Better Business 5th Edition Test Bank - Page 1

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Better Business 5th Edition Test Bank

Better Business 5th Edition Test Bank offers everything you need for thorough exam preparation, including solved questions and MCQs.

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Better Business 5th Edition Test Bank - Page 1 preview image1Better Business, 5e(Solomon/Poatsy/Martin)Chapter 1 Business Basics1) When a company's revenue is greater than its expenses, it means that ________.A) the company earns a profitB) the company spends more than it earnsC) the company's income is decreasingD) the company needs to increase its spendingE) the company must increase its productivityAnswer: AExplanation: A company earns a profit when it takes in more revenue (earnings) than it spends.If a company spends more than it earns, it does not make a profit. Instead, it suffers a loss. Acompany can make a profit even if its income is decreasing, as long as its earnings continue toexceed its expenses. A profitable company may or may not need to increase its spending,depending on its business goals.Diff: 1AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: ConceptLearning Outcome: Explain how economic performance is monitored2) The physical products that a business offers are called ________.A) goodsB) servicesC) assetsD) devicesE) intangibleAnswer: AExplanation: By definition, physical products that a business offers are calledgoods.Servicesare intangible products, for example, hair styling or bookkeeping. A physical product may be anasset to the business or the purchaser, but it is a more general term that could include anyvaluable product or aspect of the business. A device is a physical product, but not all physicalproducts are devices. For instance, pizza would be considered a physical product, but a pizza isnot a device.Diff: 1AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: Concept
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Better Business 5th Edition Test Bank - Page 2 preview image
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Better Business 5th Edition Test Bank - Page 3 preview image23) Emma bought a tablet and a smartphone. These products are called goods because ________.A) they do a good job of satisfying a customer's needsB) they are physical or tangible productsC) they are produced in an economical offshore factoryD) they can be sold either in a store or onlineE) they are good at increasing a company's profit marginAnswer: BExplanation: Goods are physical or tangible products offered by a business. They may or maynot do a good job of satisfying a customer's needs, although they must do so if a business is to besuccessful. Goods are typically produced in a factory, but not in any particular location. It is truethat goods can be sold either in a store or online, or by other means, such as direct marketing.However, other business offerings, such as services, can also be sold in a store or online.Diff: 1AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: Application4) Jose called an electrician to repair some appliances in his home. Which of the following termsBEST describes the electrician's repairs?A) a serviceB) a goodC) a benefitD) an appointmentE) a liabilityAnswer: AExplanation: An electrical repair is an example of a nontangible business product called aservice. An electrical repair is not a good, which is a tangible physical product. Although therepair might involve the installation of a physical product, or good, the primary offering of theelectrician is the service he or she provides by coming to a location, identifying the problem, andif necessary, making a repair. Such a service may be a benefit to the customer, but any businessoffering, physical or nontangible, could be a benefit. Although electricians typically provideservices by appointment, "appointment" does not define the type of product the electricianprovides.Diff: 1AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: Application
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Better Business 5th Edition Test Bank - Page 4 preview image35) Chris orders a salad at a restaurant. What is the BEST definition of what he is buying?A) Chris is buying a good.B) Chris is buying a service.C) Chris is buying a service, but not a good.D) Chris is buying neither a good nor a service.E) Chris is buying both a good and a service.Answer: EExplanation: Chris is buying a combination of products offered by the restaurant. He is buying agood (the salad) as well as the services of preparing and serving the salad.Diff: 1AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: Application6) Profits allow a company to ________.A) increase productivityB) lower employee wagesC) reduce its span of operationsD) disregard concern about expensesE) lower standards of living for the entire societyAnswer: AExplanation: Profits allow a company to reward employees, increase productivity, and expandinto new areas. To maintain productivity, a company would need to remain concerned aboutcontrolling expenses, and maintain or increase employee wages. Profits would be likely to allowfor growth in its operations, not a reduction.Diff: 2AACSB: Reflective Thinking, Analytical ThinkingLO: 1.1: Define business and list the factors of production.Classification: ConceptLearning Outcome: Explain how economic performance is monitored
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Better Business 5th Edition Test Bank - Page 5 preview image47) Nina's furniture store has had a successful year and made a significant profit. Which of thefollowing actions using Nina's store profits would BEST increase productivity?A) Pay for utilities and inventory in advance.B) Develop a website that would enable customers to shop and place orders online.C) Hire more staff.D) Create an emergency fund.E) Service her community through social and educational means.Answer: BExplanation: A website with an online shopping function would increase productivity bygenerating sales without requiring additional staff time. It might also provide more options forcustomers, since the online store could carry more items than could be viewed in the store.Hiring more staff could reduce productivity by increasing the labor costs associated with sellingitems. Paying for expenses in advance or creating an emergency fund would have neither apositive nor negative impact on productivity. While serving her community is a positive, it willnot have a direct impact on productivity.Diff: 3AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: ApplicationLearning Outcome: Explain how economic performance is monitored8) Which of the following statements is TRUE of a not-for-profit organization?A) It pursues profits for its owners.B) It does not pay expenses.C) It can earn excess revenue.D) It cannot operate like a business.E) It rewards the proprietor of the organization with earned profits.Answer: CExplanation: These organizations do not go into business to pursue profits for their owners. Anyexcess revenue they generate is used to further the organizations' causes by expanding theservices they provide.Diff: 2AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: ConceptLearning Outcome: Explain how economic performance is monitored
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Better Business 5th Edition Test Bank - Page 6 preview image59) The various resources used to create a company's goods and services are collectively referredto as ________.A) raw materialsB) factors of productionC) suppliesD) inventoryE) intellectual propertyAnswer: BExplanation: Factors of production are the resources used to produce goods and services. Theyinclude six factors: labor, natural resources, capital, entrepreneurial talent, technology, andintellectual property. Raw materials, supplies, inventory, and intellectual property might beincluded in the natural resources factor, but do not encompass all the resources needed forproduction.Diff: 1AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: Concept10) Labor is a factor of production that refers to any physical or ________ work peoplecontribute to a business's production.A) intellectualB) emotionalC) unionizedD) entrepreneurialE) technologicalAnswer: AExplanation: Labor is a factor of production that refers to any physical or intellectual work thatpeople contribute to a business's production. Entrepreneurial or technological work might beincluded in a company's labor costs, but such work could be either physical or intellectual, andtherefore would not necessarily describe a type of work that was not physical. A company's laborforce could be either unionized or nonunionized, independent of the type of work, whetherphysical or intellectual. Emotional work is not considered part of a business's labor requirements.Diff: 1AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: Concept
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Better Business 5th Edition Test Bank - Page 7 preview image611) Which of the following is an example of real capital?A) a business loanB) computer softwareC) natural gasD) a manufacturing plantE) personal savingsAnswer: DExplanation: Real capital refers to the physical facilities used to produce goods and services.Thus, a manufacturing plant would be an example of a business's real capital. Computer softwareis an example of the technology factor of production. Natural gas is an example of the naturalresources factor of production. Business loans and personal savings are examples of capital, butof financial capital rather than real capital.Diff: 2AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: Application12) Teresa and Luis are getting married next month. Which of the following elements of theirwedding does NOT require a natural resource for its production?A) the wedding ringsB) the wedding vowsC) the wedding cakeD) the bridesmaids' dressesE) the table centerpiecesAnswer: BExplanation: The wedding vows are intangible statements created in the minds of the bride andgroom and do not require a physical raw material for their production. Wedding rings arecomposed of natural resources such as metal or gems. The cake is made from agriculturalingredients that depend on natural resources such as soil. The bridesmaids' dresses may be madefrom natural fabrics, such as cotton, which requires soil for growing, or synthetic fabrics whoseproduction depends on water and natural energy sources. The table centerpieces could includenatural floral elements, which require soil for growing, and manmade objects like vases andcandles.Diff: 2AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: Application
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Better Business 5th Edition Test Bank - Page 8 preview image713) Robert wants to upgrade his real estate company's computer systems. Which of the followingfactors of production would Robert find LEAST useful for his project?A) financial capitalB) technologyC) real capitalD) laborE) human resourcesAnswer: CExplanation: Robert is not producing any products with his upgrade project, so he would notrequire real capital, that is, a facility for producing goods. Financial capital, labor (or humanresources), and technology would all be necessary to develop or purchase and install theupgraded computer systems.Diff: 2AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: Application14) Melinda is a store owner who buys items online to sell in her shop. Which of the followingfactors of production is BEST illustrated in Melinda's use of the Internet?A) capitalB) laborC) technologyD) entrepreneursE) natural resourcesAnswer: CExplanation: Technology refers to items and services such as smartphones, computer software,and digital broadcasting that make businesses more efficient. Melinda's use of the Internet forpurchasing store inventory reflects her use of technology. Since Melinda is making the purchasesherself, labor is not a factor. Capital may be involved in the purchase, but that would be true ofany purchase, not specifically online purchases. Melinda may be an entrepreneur, but her onlinepurchasing behavior is not a defining characteristic of entrepreneurship. Natural resources, rawmaterials provided by nature, are not part of her online purchases.Diff: 1AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: Application
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Better Business 5th Edition Test Bank - Page 9 preview image815) As more profit is generated, a company is able to increase its productivity.Answer: TRUEExplanation: As a company's profits increase, profits can be invested in actions that are likely toincrease productivity, such as rewarding employees and upgrading facilities and equipment.Diff: 1AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: ConceptLearning Outcome: Explain how economic performance is monitored16) When a business is profitable, the whole society benefits.Answer: TRUEExplanation: When a business earns profits, many people benefit. Owners benefit, as doemployees who may benefit from bonuses or pay increases. Society as a whole benefits from theemployment opportunities the business provides, as well as the spending and income it generatesin the economy.Diff: 1AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: ConceptLearning Outcome: Explain how economic performance is monitored17) Barbara owns a bakery in Boston. When her business reached a certain level of profit, shedecided to open three more bakeries in the area. Many businesses, like Barbara's, are able toexpand as they earn more profits.Answer: TRUEExplanation: Profit is the money left over after expenses are paid out of revenues. This moneycan be reinvested in the business in a variety of ways, including opening new retail locations,upgrading equipment, and hiring additional employees.Diff: 1AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: ApplicationLearning Outcome: Explain how economic performance is monitored18) Not all businesses provide a product.Answer: FALSEExplanation: All businesses provide a product. Some businesses offer physical products, whichare referred to asgoods. Other businesses offer nontangible products, calledservices.Diff: 2AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: Concept
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Better Business 5th Edition Test Bank - Page 10 preview image919) Car insurance is an example of a good.Answer: FALSEExplanation: Car insurance is a nontangible product; therefore, it is a service, not a good, whichis a physical product.Diff: 1AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: Application20) Any profits generated by a not-for-profit organization must be turned over to thegovernment.Answer: FALSEExplanation: Not-for-profit organizations seek to service their communities through social,educational, or political means. Any profits they generate are used to further their causes byexpanding the services they provide.Diff: 1AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: ConceptLearning Outcome: Explain how economic performance is monitored21) To be successful, a company should keep pace with the latest technology.Answer: TRUEExplanation: Successful companies keep pace with technological processes, thereby harnessingnew knowledge, information, and business strategies. Unsuccessful companies often fail becausethey have not kept pace with the latest technology and techniques.Diff: 1AACSB: Information Technology, Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: ConceptLearning Outcome: Identify the different types of technologies used in business and describetheir uses22) Real capital refers to the money used to facilitate a business enterprise.Answer: FALSEExplanation: Real capital refers to the physical facilities, such as a manufacturing plant, used toproduce goods and services. The money used to facilitate a business' operations is referred to asfinancial capital.Diff: 2AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: Concept
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Better Business 5th Edition Test Bank - Page 11 preview image1023) In what ways is a multinational corporation, like Google, similar to a local business, such asa Chinese restaurant? In what ways are these two businesses different?Answer: Both Google and a local Chinese restaurant are businesses–entities that offer goods andservices to their customers in order to earn a profit. Google and the Chinese restaurant aredifferent in that one is an innovative online business that attracts millions of visitors, while theother is a small town establishment with a smaller local customer base.Diff: 2AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: ApplicationLearning Outcome: Explain the benefits and challenges of engaging in international business24) What do businesses generally do with profits?Answer: As more profit is generated, a company generally opts to use some portion of its profitsto reward its employees, increase its productivity, or expand its business into new areas.Diff: 2AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: ConceptLearning Outcome: Explain how economic performance is monitored25) How do the profits of a single business benefit society in general?Answer: A successful business benefits society by providing the goods and services we needand want. Businesses also provide employment opportunities for members of the community.Because they offer desired goods and services, provide employment, and generate income andspending in the economy, successful businesses contribute to the quality of life by creatinghigher standards of living for the entire society.Diff: 2AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: Concept
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Better Business 5th Edition Test Bank - Page 12 preview image1126) Grace loves working with children and plans to start a school for children with disabilities.She would like to invest at least some of the money she makes after expenses back into theschool. Discuss the advantages and disadvantages of forming the school as either a for-profit or anot-for-profit organization.Answer: A not-for-profit organization would be the most common structure for an enterprisewhose primary mission is to provide educational services to the community. If Grace plans to useall excess revenues from the school on activities that support the school's mission, her bestoption is to form a not-for-profit organization. However, there are some schools that seek toprovide high-quality educational services while still making a profit for their ownership. Gracemight consider whether she can accomplish her mission of serving children with disabilitieswithin a for-profit business. A for-profit business structure would allow Grace's school to earn aprofit that Grace could use for any purpose she chose. However, given Grace's emphasis onserving children with disabilities, it is likely that the best choice for her would be to form a not-for-profit organization.Diff: 3AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: ApplicationLearning Outcome: Explain how economic performance is monitored27) Ron plans to open his own café. He wants to offer a variety of coffees, sandwiches, andsalads. He also plans to hire employees who will prepare food and serve customers. What type ofproduct would Ron's customers be offered?Answer: Ron's customers would be paying for both physicalgoods,that is, the food items Ronwould offer, and nonphysicalservices, that is, the preparation and serving of the food items.Diff: 2AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: Application
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Better Business 5th Edition Test Bank - Page 13 preview image1228) Identify and describe the factors of production.Answer:1) Labor. Obviously businesses need people to gets things produced. Labor is the humanresource that refers to any physical or intellectual work people contribute to a business'sproduction.2) Natural resources. Most workers who provide the labor to produce a good need somethingtangible to work with. Natural resources are the raw materials provided by nature that are used toproduce goods and services. Soil used in agricultural production, trees used for lumber to buildhouses, and coal, oil, and natural gas used to create energy are all examples of natural resources.3) Capital. There are two types of capital: real capital and financial capital. Real capitalessentially refers to the physical facilities used to produce goods and services. Financial capital,on the other hand, is money used to facilitate a business enterprise. Financial capital can beacquired via business loans, from investors, or through other forms of fundraising, or even bytapping into personal savings.4) Entrepreneurial talent. An entrepreneur is someone who assumes the risk of creating,organizing, and operating a business and directs all the business resources. Entrepreneurs are ahuman resource, just like labor, but what sets entrepreneurs apart from labor is not only theirwillingness to bear risks but also their ability to manage an enterprise effectively. Successfulentrepreneurs are rewarded with profits for bearing risks and for their managerial expertise.5) Intellectual property. This consists of privately owned, intangible assets developed as a resultof people's intellect and creativity. Drug patents, copyrights to songs, and trademarks forproducts are examples.6) Technology. Technology refers to items and services such as smartphones, computer software,and digital broadcasting that make businesses more efficient and productive.Diff: 2AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: Concept29) Why is technology such an important factor of production?Answer: Effective use of technology can make the difference between a successful and anunsuccessful business. Successful companies are able to keep pace with technological progressesand harness new knowledge, information, and strategies. Unsuccessful organizations often failbecause they have not kept pace with the latest technology and techniques.Diff: 2AACSB: Information Technology, Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: ConceptLearning Outcome: Identify the different types of technologies used in business and describetheir uses
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Better Business 5th Edition Test Bank - Page 14 preview image1330) Explain the similarities and differences between the different types of capital.Answer: There are two types of capital: real capital and financial capital. Real capital refers tothe physical facilities used to produce goods and services. Financial capital, on the other hand, ismoney used to facilitate a business enterprise. Financial capital can be acquired via businessloans, from investors, or through other forms of fundraising, or even by tapping into personalsavings. Though real capital and financial capital are different types of resources, the two typesof capital are similar in that they both support a company's ability to conduct its businessoperations.Diff: 2AACSB: Reflective ThinkingLO: 1.1: Define business and list the factors of production.Classification: Concept31) The economy of the United States is BEST described as ________.A) market-basedB) government-ownedC) socialisticD) not-for-profitE) noncompetitiveAnswer: AExplanation: The United States' economy is market-based, that is, there is an emphasis oneconomic freedom and a limit on government intervention. Therefore, the U.S. economy wouldnot be considered either government-owned or socialistic. The private enterprise system in theUnited States is predicated on the fact that competition benefits consumers because it motivatesbusinesses to produce a wider variety of better and cheaper goods and services. The U.S.economy is intended to support profitable business, and a country's economy, unlike anindividual organization, would not be labeled "not-for-profit."Diff: 1AACSB: Reflective ThinkingLO: 1.2: Explain how competition, the social environment, globalization, and technologicalchanges challenge and provide business opportunities to business owners.Classification: ConceptLearning Outcome: Compare and contrast different economic systems
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Better Business 5th Edition Test Bank - Page 15 preview image1432) Which of the following is NOT a benefit of business competition?A) It may lead to a wider variety of goods and services.B) It may lead to higher quality goods and services.C) It may lead to a limited variety of goods and services.D) It may lead to lower priced goods and services.E) It may lead to increased customer satisfaction.Answer: CExplanation: The United States' private enterprise system is based on the belief that competitionbenefits consumers because it motivates businesses to produce a wider variety of better andlower priced goods and services. Therefore, competition would not benefit consumers if itresulted in a limited variety of goods and services.Diff: 1AACSB: Reflective ThinkingLO: 1.2: Explain how competition, the social environment, globalization, and technologicalchanges challenge and provide business opportunities to business owners.Classification: ConceptLearning Outcome: Compare and contrast different economic systems33) Which of the following BEST describes competition?A) Two or more companies compete with one another for greater federal, state, and localsubsidies.B) Two or more companies compete with one another to attract customers and gain anadvantage.C) Two or more companies compete with one another to maintain a monopoly.D) Two or more companies compete with one another to influence trade policy.E) Two or more companies compete with one another to limit the variety of goods and services.Answer: BExplanation: Competition arises when two or more businesses contend with one another toattract customers and gain an advantage. Even in a free-market economy, it is possible that twoor more businesses might be competing for preferential government treatment such as tax breaks,though that is not a defining characteristic of competition, which is primarily focused onattracting customers. Two or more businesses mightcooperatewith one another, rather thancompete, to maintain a shared monopoly position or attempt to influence trade policies.Diff: 1AACSB: Reflective ThinkingLO: 1.2: Explain how competition, the social environment, globalization, and technologicalchanges challenge and provide business opportunities to business owners.Classification: ConceptLearning Outcome: Compare and contrast different economic systems
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Better Business 5th Edition Test Bank - Page 16 preview image1534) Leroy owns a small hardware store that is known for its high level of customer service. Alarge chain home improvement store has just opened up in his community. Which of thefollowing would BEST help Leroy deal with his new competitor?A) paying his employees "under the table" to avoid costly payroll taxes and keep prices lowerB) closing the business, since small stores cannot compete effectively with chain storesC) advertising aggressively to increase consumer awareness of his reputation for serviceD) moving his store in order to be farther away from the large storeE) raising his prices, to show that their customer service is worth paying a premium forAnswer: CExplanation: Leroy's first step should be to advertise aggressively to remind customers of thebenefits of patronizing his store. Violating tax laws (paying employees "under the table") canhave severe consequences, including losing the business. Moving his store would be costly andmight not improve Leroy's competitive position. Closing the business should be undertaken onlyif Leroy is unable to convince customers that the high quality and convenience his store offers ismore valuable than the lower prices offered by the larger store.Diff: 2AACSB: Analytical ThinkingLO: 1.2: Explain how competition, the social environment, globalization, and technologicalchanges challenge and provide business opportunities to business owners.Classification: Application35) Competition affects companies in all of the following ways EXCEPT ________.A) forcing them to deliver customer satisfactionB) forcing them to improve their productsC) forcing them to aggressively promote their brandsD) forcing them to lower their pricesE) forcing them to increase their production levelsAnswer: EExplanation: Competition does not force companies to increase their output. Producing moreproducts would be of no competitive advantage unless the products were of high quality andthere was sufficient demand to justify increased production levels. In order to compete moreeffectively, companies must either improve their products or lower their prices, or both, relativeto their competition. They must also promote their products aggressively to convince consumersthat their product is better or cheaper than that of their competitors.Diff: 2AACSB: Reflective ThinkingLO: 1.2: Explain how competition, the social environment, globalization, and technologicalchanges challenge and provide business opportunities to business owners.Classification: Concept
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