Test Bank for Business in Action , 8th Edition

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1Business in Action, 8e(Bovee)Chapter 1Developing a Business Mindset1) ________ is money that an organization brings in through the sale of its goods and services.A) Competitive advantageB) RevenueC) SalesD) Capital investmentE) FinanceAnswer: BExplanation: Revenue is the money a company brings in through the sale of goods and services.Difficulty: 1: EasyAACSB: Application of knowledgeLO: 1.1: Explain the concept of adding value in a business, and identify the major types ofbusinesses.2) The risk and reward relationship ________.A) is a key aspect of social responsibilityB) applies only to service-intensive businessesC) is essential to the counter-cyclical business modelD) is fundamental to businesses in every modern economyE) is an outdated concept that's been replaced by corporate sustainabilityAnswer: DExplanation: A company needs to see some promise of reward before it will decide to accept therisks involved in creating and selling products. However, to ensure responsible behavior, theserisks need to stay attached to those decisions, meaning that if the decisions turn out bad, thatcompany should suffer the consequences.Difficulty: 1: EasyAACSB: Application of knowledgeLO: 1.1: Explain the concept of adding value in a business, and identify the major types ofbusinesses.3) A(n) ________ is a framework of how a business intends to generate revenue.A) business modelB) strategic management toolC) profitability analysisD) competitive advantageE) entrepreneurial mindsetAnswer: AExplanation: A company's business model is a clear, simple outline of how the business intendsto generate revenue.Difficulty: 1: EasyAACSB: Analytical thinkingLO: 1.1: Explain the concept of adding value in a business, and identify the major types ofbusinesses.

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24) ________ is the term used to describe the difference between revenue and expenses.A) RevenueB) InterestC) SalesD) Owner's equityE) ProfitAnswer: EExplanation: Profit is the amount of money left over after all the costs involved in doingbusiness, have been deducted from revenue.Difficulty: 1: EasyAACSB: Application of knowledgeLO: 1.1: Explain the concept of adding value in a business, and identify the major types ofbusinesses.5) ________ refers to some aspect of a product or company that makes it more appealing totarget customers.A) Competitive advantageB) Economies of scaleC) Horizontal integrationD) Vertical integrationE) Barrier to entry advantageAnswer: AExplanation: Competitive advantage refers to some aspect of a product or company that makes itmore appealing to target customers.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.1: Explain the concept of adding value in a business, and identify the major types ofbusinesses.6) An organization that seeks to operate efficiently and effectively to achieve its goals withoutfocusing on profit as a motive is a ________.A) business intermediaryB) nonprofit organizationC) service businessD) government-owned corporationE) goods-producing businessAnswer: BExplanation: Not-for-profit organizations (also known as nonprofit organizations) such asmuseums, most universities, and charities do not have a profit motive.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.1: Explain the concept of adding value in a business, and identify the major types ofbusinesses.

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37) If individuals and companies believe they can pursue rewards without facing the risks thatshould be attached to those pursuits, they are more likely to engage in irresponsible and evenunethical behavior. This situation is known as a(n) ________.A) ethical dilemmaB) professional dilemmaC) barrier to entryD) competitive advantageE) moral hazardAnswer: EExplanation: If individuals and companies believe they can pursue rewards without facing therisks that should be attached to those pursuits, they are more likely to engage in irresponsible andeven unethical behavior–a situation known as moral hazard.Difficulty: 2: ModerateAACSB: Ethical understanding and reasoningLO: 1.1: Explain the concept of adding value in a business, and identify the major types ofbusinesses.8) A ________ creates value by performing activities that provide benefit to the customer.A) goods-producing businessB) manufacturing businessC) service businessD) merchandising businessE) not-for-profit organizationAnswer: CExplanation: Service businesses create value by performing activities that deliver some benefitto the customer, such as finance, insurance, transportation, construction, utilities, wholesale andretail trade, banking, entertainment, health care, maintenance and repair, and information.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.1: Explain the concept of adding value in a business, and identify the major types ofbusinesses.9) Businesses that need very large amounts of money, equipment, or other material resources inorder to get started are ________ businesses.A) service sectorB) labor-intensiveC) competitively-advantagedD) not-for-profitE) capital-intensiveAnswer: EExplanation: Because they require large amounts of money, equipment, land, and otherresources to get started and to operate, goods-producing businesses are often capital-intensivebusinesses.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.1: Explain the concept of adding value in a business, and identify the major types ofbusinesses.

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410) What type of business tends to be labor intensive, relying more on human resources thanmaterial resources?A) goods producingB) serviceC) not-for-profitD) competitively disadvantagedE) manufacturingAnswer: BExplanation: Service businesses tend to be labor-intensive businesses, in that they rely more onhuman resources than buildings, machinery, and equipment to prosper.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.1: Explain the concept of adding value in a business, and identify the major types ofbusinesses.11) ________ refers to a resource or capability a company must have before it can startcompeting in a given market.A) AssetsB) Economies of scaleC) Barriers to entryD) Technological requirementsE) Fixed costsAnswer: CExplanation: Barrier to entry is a resource or capability a company must have before it can startcompeting in a given market.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.1: Explain the concept of adding value in a business, and identify the major types ofbusinesses.12) Business is any profit-seeking organization that provides goods and services designed tosatisfy customers' needs.Answer: TRUEExplanation: In a general sense business can be defined as any profit-seeking organization thatprovides goods and services designed to satisfy customers' needs.Difficulty: 1: EasyAACSB: Application of knowledgeLO: 1.1: Explain the concept of adding value in a business, and identify the major types ofbusinesses.

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513) Profit refers to the money the company brings in through the sale of goods and services.Answer: FALSEExplanation: Profit is the amount of money left over after expenses–all the costs involved indoing business–have been deducted from revenue.Difficulty: 1: EasyAACSB: Application of knowledgeLO: 1.1: Explain the concept of adding value in a business, and identify the major types ofbusinesses.14) Businesses add value by transforming lower-value inputs (like paper and ink) into higher-value outputs (like textbooks).Answer: TRUEExplanation: Businesses add value by transforming lower-value inputs to higher-value outputs.In other words, they make goods and services more attractive from the buyer's perspective.Difficulty: 1: EasyAACSB: Application of knowledgeLO: 1.1: Explain the concept of adding value in a business, and identify the major types ofbusinesses.15) In a free-market economy, companies generally have limited autonomy in deciding whichcustomers they want to focus on and how they want to compete.Answer: FALSEExplanation: In a free-market economy, companies generally have considerable freedom indeciding which customers they want to focus on and how they want to compete.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.1: Explain the concept of adding value in a business, and identify the major types ofbusinesses.16) A company has competitive advantage when its products are more appealing to its chosencustomers.Answer: TRUEExplanation: Competitive advantage makes a company's products or the company as a wholemore appealing to its chosen customers.Difficulty: 1: EasyAACSB: Application of knowledgeLO: 1.1: Explain the concept of adding value in a business, and identify the major types ofbusinesses.17) Assets refer to the tangible economic resources owned by a firm.Answer: FALSEExplanation: Assets refer to anything of meaningful value, from patents and brand names to realestate and company stock.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.1: Explain the concept of adding value in a business, and identify the major types ofbusinesses.

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618) In the USA, the service sector now accounts for less than half of the nation's economicoutput, but most of all jobs in the country.Answer: FALSEExplanation: The service sector now accounts for roughly 70 percent of the nation's economicoutput and 80 percent of all jobs in the country.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.1: Explain the concept of adding value in a business, and identify the major types ofbusinesses.19) A firm uses competitive advantage to reduce its costs. This is an example of barrier to entry.Answer: FALSEExplanation: Barrier to entry refers to any resource or capability a company must have before itcan start competing in a given market.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.1: Explain the concept of adding value in a business, and identify the major types ofbusinesses.20) Difficulty in obtaining business permits or licenses to perform a particular type of businesswould be an example of a barrier to entry for a firm.Answer: TRUEExplanation: Barrier to entry refers to any resource or capability a company must have before itcan start competing in a given market.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.1: Explain the concept of adding value in a business, and identify the major types ofbusinesses.21) Intangible products have a physical presence.Answer: FALSEExplanation: Intangible products create value by performing activities that deliver some benefitto the customer. They do not have physical presence.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.1: Explain the concept of adding value in a business, and identify the major types ofbusinesses.22) The service sector now dominates the U.S. economy.Answer: TRUEExplanation: Over the past few decades, the U.S. economy has undergone a profoundtransformation from being dominated by manufacturing to being dominated by services.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.1: Explain the concept of adding value in a business, and identify the major types ofbusinesses.

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723) Why are not-for-profit organizations different from most businesses? Are there anysimilarities between a goods-producing business and a not-for-profit organization?Answer: The driving forces behind most businesses are the prospects of earning profits andbuilding assets, which are anything of meaningful value, from patents and brand names to realestate and company stock. In contrast, not-for-profit organizations (also known as nonprofitorganizations) such as museums, most universities, and charities do not have a profit motive.However, similar to goods-producing businesses, they must operate efficiently and effectively toachieve their goals. A nonprofit organization might use many of the business-managementprinciples used by other businesses such as a goods-producing business.Difficulty: 3: ChallengingAACSB: Analytical thinkingLO: 1.1: Explain the concept of adding value in a business, and identify the major types ofbusinesses.24) Compare and contrast between goods-producing businesses and service businesses.Answer: Goods-producing businesses create value by making "things," from Pop-Tarts to schoolfurniture to spacecraft. Most goods are tangible, meaning they have a physical presence,although software, music downloads, and other digital products are intangible. On the otherhand, service businesses create value by performing activities that deliver some benefit to thecustomer, such as finance, insurance, transportation, construction, utilities, wholesale and retailtrade, banking, entertainment, health care, maintenance and repair, and information. Twitter,Jiffy Lube, HBO, and Verizon Wireless are examples of service businesses.Difficulty: 3: ChallengingAACSB: Analytical thinkingLO: 1.1: Explain the concept of adding value in a business, and identify the major types ofbusinesses.25) Explain barrier to entry with an example.Answer: Barrier to entry refers to a resource or capability a company must have before it canstart competing in a given market. Barriers to entry include government testing and approval,tightly controlled markets, strict licensing procedures, limited supplies of raw materials, and theneed for highly skilled employees.Difficulty: 1: EasyAACSB: Application of knowledgeLO: 1.1: Explain the concept of adding value in a business, and identify the major types ofbusinesses.

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826) Compare and contrast between capital-intensive businesses and labor-intensive businesses.Answer: Capital-intensive businesses require large amounts of money, equipment, land, andother resources to get started and to operate. Goods-producing businesses are often capital-intensive businesses. Service businesses tend to be labor-intensive businesses in that they relymore on human resources than buildings, machinery, and equipment to prosper. However, theInternet and other technologies have reduced the labor required to operate many types of servicebusinesses.Difficulty: 3: ChallengingAACSB: Analytical thinkingLO: 1.1: Explain the concept of adding value in a business, and identify the major types ofbusinesses.27) ________ refers to a view of business that considers the many decisions that must be madeand the potential problems that must be overcome before the organization can deliver itsproducts or services.A) Business mindsetB) Service orientationC) Free-market philosophyD) Competitive advantageE) Business modelAnswer: AExplanation: A business mindset refers to a view of business that considers the many decisionsthat must be made and the potential problems that must be overcome before the organization candeliver its products or services.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.2: List three steps you can take to help make the leap from consumer to businessprofessional.28) What key aspect of running a business includes the ability to offer valuable goods andservices while contributing to society?A) corporate social responsibilityB) business mindsetC) opportunities in the marketplaceD) vertical integrationE) producing intangiblesAnswer: AExplanation: Business has the potential to contribute to society in many useful ways, includingoffering goods and services, providing employment, paying taxes, and contributing to nationalgrowth, stability, and security.Difficulty: 2: ModerateAACSB: Analytical thinkingLO: 1.2: List three steps you can take to help make the leap from consumer to businessprofessional.

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929) Businesses can impact society in both positive and negative ways. Occupying land anddisplacing existing businesses are examples of ________.A) generating pollutionB) disrupting communitiesC) creating wasteD) creating safety risksE) causing financial instabilityAnswer: BExplanation: From occupying land to displacing existing businesses to overloading schools androads with employees and their children, growing businesses can disrupt communities even asthey provide employment and other benefits. And when businesses fall into decline, they canleave behind everything from abandoned buildings to laid-off workers.Difficulty: 2: ModerateAACSB: Analytical thinkingLO: 1.2: List three steps you can take to help make the leap from consumer to businessprofessional.30) Who are the workers who apply entrepreneurial strategies to cause large-scale social change?A) government regulatorsB) social responsibility leadersC) social entrepreneursD) business mindset entrepreneursE) high-value output leadershipAnswer: CExplanation: Social entrepreneurs, people who apply entrepreneurial strategies to enable large-scale social change, use business concepts as well.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.2: List three steps you can take to help make the leap from consumer to businessprofessional.31) A business mindset is a view of business that considers the various decisions a business hasto make as well as the challenges that it must overcome in order to be successful.Answer: TRUEExplanation: A business mindset is a view of business that considers the various decisions abusiness has to make as well as the challenges that it must overcome in order to be successful.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.2: List three steps you can take to help make the leap from consumer to businessprofessional.

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1032) Businesses can have both positive and negative effects on society.Answer: TRUEExplanation: The relationship between business and society is complex and far-reaching.Businesses can have both positive and negative effects on society.Difficulty: 1: EasyAACSB: Application of knowledgeLO: 1.2: List three steps you can take to help make the leap from consumer to businessprofessional.33) Forces resulting from the practical application of science to a company's products andprocesses would best describe its social environment.Answer: FALSEExplanation: Every business operates within the broad social environment. Social environmentrefers to the trends and forces in society at large.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.2: List three steps you can take to help make the leap from consumer to businessprofessional.34) Compare and contrast the perspective of a business professional with that of a consumer.Answer: Consumer experiences include the impact of poor customer service, a sense for productvalue, and the entire experience of searching for, purchasing, and owning products. While acustomer thinks about the cost of buying a particular product, a business professional thinksabout the cost of making it, promoting it, and distributing it. A business professional focuses onwhat it takes to make a product stand out from the crowd and recognizes the importance offinding opportunities in the marketplace. He/she starts to develop a business mindset whichinvolves an appreciation for the many decisions that must be made and the many challenges thatmust be overcome before companies can deliver the products that satisfy customer needs.Difficulty: 3: ChallengingAACSB: Analytical thinkingLO: 1.2: List three steps you can take to help make the leap from consumer to businessprofessional.

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1135) Discuss the positive and negative role of business in society.Answer: A business professional needs to recognize the positive and negative effects thatbusiness can have on society. Business has the potential to contribute to society in many usefulways, such as:∙ Offering valuable goods and services.∙ Providing employment, which enables employees to provide for themselves and their families.In addition, many companies help their employees meet the costs of health care, child care,insurance, retirement, and other living expenses.∙ Paying taxes. Money collected from taxes that helps build highways, fund education, furtherscientific research, enhance public safety and national defense, and support other vital functionsof government.∙ Contributing to nationalgrowth, stability, and security. Beyond the mere dollars of taxes paid, astrong economy helps ensure a strong country.Unfortunately, businesses don't always operate in ways that benefit society. The potentiallynegative effects that business can have on society include generating pollution and creatingwaste, creating health and safety risks, disrupting communities, and causing financial instability.The potential negative effects of business are serious matters, but employees can conductthemselves in ways that balance the profit motive with society's shared interests.Difficulty: 3: ChallengingAACSB: Ethical understanding and reasoningLO: 1.2: List three steps you can take to help make the leap from consumer to businessprofessional.36) Population trends that change the composition of consumer markets and the workforce are apart of a company's ________ environment.A) economicB) regulatoryC) culturalD) socialE) politicalAnswer: DExplanation: Every business operates within the broad social environment, the trends and forcesin society at large. For instance, all companies are affected by population trends that change thecomposition of consumer markets and the workforce.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.3: Discuss the five major environments in which every business operates.

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1237) Which one of the following is true regarding the economic environment of business thatshapes the behavior of buyers and sellers?A) Forces resulting from the practical application of science are effected by the economicenvironment.B) Virtually every decision made is influenced by the economic environment.C) Laws and regulations that restrain, support, and protect businesses protect the economicenvironment.D) Targeted customers and competitors that market similar products will not affect the economicenvironment.E) Population trends, social values, and relationships of society and business are dependent onthe economic environment.Answer: BExplanation: Conditions and forces in the economic environment affect the cost and availabilityof goods, services, and labor; so they shape the behavior of buyers and sellers.Difficulty: 2: ModerateAACSB: Analytical thinkingLO: 1.3: Discuss the five major environments in which every business operates.38) Because they fundamentally change the nature of an industry, ________ can be powerfulenough to create or destroy entire companies.A) adaptive technologiesB) disruptive technologiesC) apocryphal technologiesD) incremental technologiesE) innovative technologiesAnswer: BExplanation: Disruptive technologies fundamentally change the nature of an industry. Therefore,they can have sufficient power to create or destroy entire companies.Difficulty: 2: ModerateAACSB: Information technologyLO: 1.3: Discuss the five major environments in which every business operates.39) All groups affected by a company's activities are referred to as its ________.A) shareholdersB) customersC) stakeholdersD) employeesE) suppliersAnswer: CExplanation: Stakeholders refers to the internal and external groups affected by a company'sdecisions and activities.Difficulty: 1: EasyAACSB: Ethical understanding and reasoningLO: 1.3: Discuss the five major environments in which every business operates.

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1340) The term ________ refers to forces resulting from the practical application of science toinnovations, products, and processes.A) social trendsB) research and developmentC) barriers to entryD) technological environmentE) business mindsetAnswer: DExplanation: The technological environment refers to forces resulting from the practicalapplication of science to innovations, products, and processes.Difficulty: 2: ModerateAACSB: Information technologyLO: 1.3: Discuss the five major environments in which every business operates.41) The conditions that affect the cost and availability of goods, services and labor, and thebehavior of buyers and sellers are BEST described as the ________ environment.A) marketB) regulatoryC) legalD) economicE) socialAnswer: DExplanation: Virtually every decision a company makes is influenced by the economicenvironment, the conditions and forces that (a) affect the cost and availability of goods, services,and labor and (b) thereby shape the behavior of buyers and sellers.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.3: Discuss the five major environments in which every business operates.42) The legal and regulatory environment would include ________.A) demographic factorsB) technological innovationsC) the number of competitors in the marketD) preferences of the consumersE) the speed of obtaining licensesAnswer: EExplanation: Every business is affected by the legal and regulatory environment, the sum oflaws and regulations at the local, state, national, and even international level.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.3: Discuss the five major environments in which every business operates.

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1443) The policies and practices of government bodies would shape the ________ environment fora business.A) legal and regulatoryB) technologicalC) socialD) economicE) marketAnswer: AExplanation: Every business is affected by the legal and regulatory environment, the sum oflaws and regulations at the local, state, national, and even international level. The policies andpractices of government bodies also establish an overall level of support for businesses operatingwithin their jurisdictions.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.3: Discuss the five major environments in which every business operates.44) Which of the following is a component of the specific market environment within whicheach business operates?A) demographic factorsB) competitorsC) technological innovationsD) environmental restrictionsE) the speed of granting permits and licensesAnswer: BExplanation: Every company operates within a specific market environment composed of threeimportant groups: (1) its target customers, (2) buying influences that shape the behavior of thosecustomers, and (3) competitors–other companies that market similar products to those customers.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.3: Discuss the five major environments in which every business operates.45) ________ refers to a company's target customers, the buying influences that shape thebehavior of those customers, and competitors that market similar products to those customers.A) Regulatory environmentB) Social environmentC) Economic environmentD) Market environmentE) Technological environmentAnswer: DExplanation: Market environment refers to a company's target customers, the buying influencesthat shape the behavior of those customers, and competitors that market similar products to thosecustomers.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.3: Discuss the five major environments in which every business operates.

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1546) The practical application of science to products and innovations has the potential to createchange in almost every facet of business, as part of the ________.A) social environmentB) wearable and mobile technology revaluationC) technological environmentD) economic environmentE) stakeholders responsibilityAnswer: CExplanation: Technological environment stems from the practical application of science toinnovations, products, and processes. Technological advances have the potential to change everyfacet of business, from altering internal processes to creating or destroying market opportunities.Difficulty: 2: ModerateAACSB: Information technologyLO: 1.3: Discuss the five major environments in which every business operates.47) What types of technologies are strong enough to create or destroy companies?A) connectiveB) social mediaC) mobileD) disruptiveE) collaborativeAnswer: DExplanation: Disruptive technologies, those that fundamentally change the nature of an industry,can be powerful enough to create or destroy entire companies. Many of the technologies that youuse in your academic, personal, and social activities, from digital audio and video to the Internetto social media, are disruptive technologies that have shaken up multiple industries.Difficulty: 3: ChallengingAACSB: Information technologyLO: 1.3: Discuss the five major environments in which every business operates.48) If mobile technology is a disruptive technology, why do organizations value integration ofthe technology?A) Stakeholders are demanding an increase in the use of the newest technologies.B) Mobile technology is more cost effective than traditional methods of communication.C) Mobile technology is more consistent in international markets.D) Once integrated, the technology has fewer shifts and is easy to maintain.E) Mobile technology can boost productivity and help form closer relationships with customers.Answer: EExplanation: Mobile apps and communication systems can boost employee productivity, helpcompanies form closer relationships with customers and business partners, and spur innovationin products and services. Given the advantages and the rising expectations of employees andcustomers, firms on the leading edge of the mobile revolution are working to integrate mobiletechnology throughout their organizations.Difficulty: 3: ChallengingAACSB: Information technologyLO: 1.3: Discuss the five major environments in which every business operates.

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1649) What is the primary use of smartphone technology in the workplace?A) voice trafficB) data trafficC) word processingD) app generationE) data and file storageAnswer: BExplanation: For many people, the fact that a smartphone can make phone calls is practically asecondary consideration; data traffic from mobile devices far outstrips voice traffic.Difficulty: 2: ModerateAACSB: Information technologyLO: 1.3: Discuss the five major environments in which every business operates.50) What is the ability to send vast amounts of data instantly and globally called?A) social mediaB) economic impactC) radical connectivityD) disruptive technologyE) smart technologyAnswer: CExplanation: Social media pioneer Nicco Mele coined the term radical connectivity to describe"the breathtaking ability to send vast amounts of data instantly, constantly, and globally."Difficulty: 2: ModerateAACSB: Information technologyLO: 1.3: Discuss the five major environments in which every business operates.51) What part of the market environment shapes the behavior of customers?A) target marketB) buying influencesC) competitorsD) regulatory influencesE) connectivityAnswer: BExplanation: A market environment is composed of three important groups: (1) its targetcustomers, (2) the buying influences that shape the behavior of those customers, and (3)competitors.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.3: Discuss the five major environments in which every business operates.

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1752) A firm sets up a paper-manufacturing factory in a country which has very strict regulationsregarding disposal of industrial waste. This increases the cost of production of the firm. This isan example of the social environment of the firm.Answer: FALSEExplanation: Every business operates within the broad social environment. Social environmentrefers to the trends and forces in society at large.Difficulty: 2: ModerateAACSB: Ethical understanding and reasoningLO: 1.3: Discuss the five major environments in which every business operates.53) The term stakeholders refers only to those people who have invested money in the company'sstock.Answer: FALSEExplanation: All internal and external groups affected by a company's decisions and activitiesare referred to as its stakeholders.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.3: Discuss the five major environments in which every business operates.54) Compare and contrast the social environment and the economic environment of a business.Answer: Social environment refers to the trends and forces in society at large. For instance, allcompanies are affected by population trends that change the composition of consumer marketsand the workforce. The economic environment of a business consists of the conditions and forcesthat (a) affect the cost and availability of goods, services, and labor and (b) thereby shape thebehavior of buyers and sellers. For example, a growing economy can help companies byincreasing demand and supporting higher prices for their products, but it can also raise the costsof labor and the materials the companies need to do business.Difficulty: 3: ChallengingAACSB: Analytical thinkingLO: 1.3: Discuss the five major environments in which every business operates.

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1855) Discuss the legal and regulatory environment of a business. How is it related to barriers toentry? What kind of legal and regulatory environment do most businesses prefer?Answer: Every business is affected by the legal and regulatory environment: the sum of lawsand regulations at the local, state, national, and even international level. Some businesses, suchas electricity and other basic utilities, are heavily regulated, even to the point of governmentagencies determining how much such companies can charge for their services. The degree towhich various industries should be regulated remains a point of contention, year in and year out.Government testing and approval, tightly controlled markets, strict licensing procedures can actas barriers to entry.Businesses prefer to locate and do business in jurisdictions that offer lower costs, lowercomplexity, and greater stability and predictability. The policies and practices of governmentbodies establish an overall level of support for businesses operating within their jurisdictions.Taxation, fees, efforts to coordinate multiple regulatory agencies, the speed of granting permitsand licenses, labor rules, environmental restrictions, protection for assets such as patents andbrand names, roads and other infrastructure, and the transparency and consistency of decisionmaking all affect this level of support.Difficulty: 3: ChallengingAACSB: Analytical thinkingLO: 1.3: Discuss the five major environments in which every business operates.56) Compare and contrast the technological environment and the market environment withinwhich a business operates.Answer: The technological environment refers to forces resulting from the practical applicationof science to innovations, products, and processes. Technological changes have the potential tochange every facet of business, from altering internal processes to creating or destroying marketopportunities.Every company operates within a specific market environment composed of three importantgroups: (1) its target customers, (2) buying influences that shape the behavior of those customers,and (3) competitors–other companies that market similar products to those customers. The natureand behavior of these groups and their effect on business strategy vary widely from industry toindustry.Difficulty: 3: ChallengingAACSB: Analytical thinkingLO: 1.3: Discuss the five major environments in which every business operates.

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1957) ________ activities are intended to identify new ideas that have the potential to result in newgoods and services.A) Information technologyB) Operations managementC) Research and developmentD) Human resourcesE) AccountingAnswer: CExplanation: Research and development (R&D) refers to the functional area responsible forconceiving and designing new products.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.58) The advent of ________ has put buyers and sellers on much more equal footing.A) cloud computingB) B2B marketingC) adaptive technologyD) social mediaE) pop-up advertisingAnswer: DExplanation: Due tosocial media, consumers are no longer passive recipients of broadcastadvertising messages. Instead, they participate in unstructured conversations with companies andwith each other. The result has been a profound power shift that puts buyers on much more equalfooting with sellers.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.59) Which of the following enables companies to design new and better ways to run theiroperations?A) process R&DB) marketingC) purchasingD) facilitiesE) human resourcesAnswer: AExplanation: Companies can engage in process R&D to design new and better ways to run theiroperations.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.

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2060) ________ systems can be used to promote communication and data usage through thecompany or to customers.A) Research and development (R&D)B) Strategic marketingC) Product engineeringD) Information technology (IT)E) Forensic technology (FT)Answer: DExplanation: Information technology (IT) systems promote communication and informationusage through the company or allow companies to offer new services to their customers.Difficulty: 2: ModerateAACSB: Information technologyLO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.61) Which of the following best describes the department where the company's products aremade, or its service is performed?A) OperationsB) FinanceC) DistributionD) Process R&DE) MarketingAnswer: AExplanation: Variously called manufacturing, production, or operations, this area is where thecompany makes whatever it makes (for goods-producing businesses) or does whatever it does(for service businesses).Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.62) The ________ function of an organization coordinates the incoming flow of materials andthe outgoing flow of finished products.A) financeB) logisticsC) human resourceD) purchasingE) salesAnswer: BExplanation: Logistics involves coordinating the incoming flow of materials and the outgoingflow of finished products.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.

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2163) Which of the following activities would be a part of facilities management?A) designing a new productB) devising a marketing strategyC) ensuring that the office building adheres to safety standardsD) delivering the finished product to the customerE) maintaining demographic and contact details of potential customersAnswer: CExplanation: Facilities management is responsible for everything from planning new buildingsto maintaining them.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.64) An operations manager is most likely to be responsible for ________.A) developing relationships with potential customersB) using social media to interact with customersC) helping to promote products to retailersD) creating branding and advertising strategiesE) arranging to buy the necessary materials for manufacturingAnswer: EExplanation: In addition to supervising the actual production activity, operations managers areresponsible for a wide range of other strategies and decisions, including purchasing (arranging tobuy the necessary materials for manufacturing).Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.65) Creating branding and advertising strategies to communicate with potential customers wouldfall under the ________ function of a business.A) human resourceB) accountingC) logisticsD) marketingE) research and developmentAnswer: DExplanation: Marketing is charged with identifying opportunities in the marketplace, workingwith R&D to develop the products to address those opportunities, creating branding andadvertising strategies to communicate with potential customers, and setting prices.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.

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2266) The ________ function of a business involves the recruiting, hiring and support of itspersonnel.A) operationsB) financeC) human resourcesD) accountingE) information technologyAnswer: CExplanation: The human resources (HR) function is responsible for recruiting, hiring,developing, and supporting employees.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.67) Research and development fuels new ideas and designs for the company's products andservices that allow it to meet customer needs in competitive markets.Answer: TRUEExplanation: R&D fuels new ideas and designs for the company's products and services thatallow it to meet customer needs in competitive markets.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.68) An employee who is responsible for creating a branding and marketing strategy is mostlikely to be a part of the firm's operations management team.Answer: FALSEExplanation: A person responsible for a company's branding and marketing strategy will be partof strategic management rather than operations management.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.69) In general, accounting managers are responsible for planning, while financial managers areresponsible for monitoring and reporting.Answer: FALSEExplanation: In general, financial managers are responsible for planning, while accountingmanagers are responsible for monitoring and reporting.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.

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2370) Companies that sell shares of stock to the public are required to have their financial recordsaudited by an outside accounting firm.Answer: TRUEExplanation: Companies that sell shares of stock to the public are required to have their financialrecords audited by an outside accounting firm.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.71) Describe the six major functional areas in a business enterprise.Answer: The six major functional areas in a business are:(1) Research and development (R&D) creates the goods and services that a company canmanufacture or perform for its customers. (2) Manufacturing, production, or operations is thatpart of the company where the firm makes whatever it makes or performs whatever services itperforms. (3) The related group of functions in marketing, sales, distribution, and customersupport are responsible for identifying market opportunities, crafting the promotional strategies,and making sure customers are supplied and satisfied with their purchases. (4) Finance andaccounting plan for the company's financial needs, control spending, and report on financialmatters. 5) The human resources (HR) function recruits, hires, develops, and supportsemployees. (6) A variety of business services provides expertise in law, real estate, and otherareas.Difficulty: 1: EasyAACSB: Analytical thinkingLO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.72) Compare and contrast the research and development and the operations functions of abusiness.Answer: Products are conceived and designed through research and development (R&D),sometimes known as product design or engineering. It creates the goods and services that acompany can manufacture or perform for its customers. Companies can also engage in processR&D to design new and better ways to run their operations.Manufacturing, production, or operations is that part of the company where the firm makeswhatever it makes or performs whatever services it performs. In addition to supervising theactual production activity, operations managers are responsible for a wide range of otherstrategies and decisions, including purchasing (arranging to buy the necessary materials formanufacturing), logistics (coordinating the incoming flow of materials and the outgoing flow offinished products), and facilities management (everything from planning new buildings tomaintaining them).Difficulty: 3: ChallengingAACSB: Analytical thinkingLO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.

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2473) ________ audit the financial reports of public companies as required by law.A) Internal accountantsB) External auditorsC) Credit managersD) Management accountantsE) Forensic accountantsAnswer: BExplanation: Companies that sell shares of stock to the public are required to have their financialrecords audited by an outside accounting firm.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.5: Summarize seven of the most important business professions.74) ________ encompasses all the people and processes used to create the goods and perform theservices that a company sells.A) Sales and marketingB) Information technology managementC) Human resources managementD) Operations managementE) Financial managementAnswer: DExplanation: Operations management encompasses all the people and processes used to createthe goods and perform the services that a company sells.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.5: Summarize seven of the most important business professions.75) An HR specialist is most likely to be responsible for which of the following activities?A) motivate and train diverse workforcesB) production monitoringC) design, implement, and maintain information systemsD) file the annual tax returns for the companyE) verify the financial reports of public companiesAnswer: AExplanation: HR specialists and managers plan and direct human resource activities that includerecruiting, training and development, compensation and benefits, employee and labor relations,and health and safety.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.5: Summarize seven of the most important business professions.

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2576) A management accountant is likely to be responsible for which of the following activities?A) purchasing raw material for productionB) assessing the manufacturing costs of new productsC) determining the prices of productsD) removing a distributor from the supply chainE) determining the money allocated for marketingAnswer: BExplanation: Management accountants are responsible for collecting, analyzing, and reportingon financial matters–such as analyzing budgets, assessing the manufacturing costs of newproducts, and preparing state and federal tax returns.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.5: Summarize seven of the most important business professions.77) Which of the following positions would be responsible for establishing the long-termfinancial goals of the company, investing funds and raising capital?A) credit managerB) internal auditorC) chief information officerD) forensic accountantE) finance officerAnswer: EExplanation: Treasurers and finance officers have a more strategic role, establishing long-termfinancial goals and budgets, investing the firm's funds, and raising capital as needed.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.5: Summarize seven of the most important business professions.78) While in the past, ________ was viewed as a tactical function, today it is viewed as beingstrategic and focused on global competition.A) human resourcesB) operations managementC) salesD) marketingE) accountingAnswer: AExplanation: In the past, top executives and professionals in other functional areas sometimesviewed HR as a tactical function concerned mostly with processing employee records and othernonstrategic duties. However, in many companies, the HR function is becoming more strategicand focused on the global competition to find, attract, and keep the best talent on the market.Difficulty: 2: ModerateAACSB: Analytical thinkingLO: 1.5: Summarize seven of the most important business professions.

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2679) Because of the increasing importance of the field, most companies now employ ________ tooversee the development of IT strategies for the organization.A) web designersB) chief information officersC) systems specialistsD) technical specialistE) IT managersAnswer: BExplanation: Reflecting IT's strategic importance, many midsize and large companies now havea chief information officer (CIO) position at the executive level to plot IT strategy.Difficulty: 1: EasyAACSB: Information technologyLO: 1.5: Summarize seven of the most important business professions.80) Which of the following verify the efforts of an organization's accounting department?A) public accountantsB) management accountantsC) internal auditorsD) external auditorsE) forensic accountantsAnswer: CExplanation: Internal auditors verify the work of the company's accounting effort and look foropportunities to improve efficiency and cost-effectiveness.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.5: Summarize seven of the most important business professions.81) Who are those responsible for investigating financial crimes?A) financial managersB) controllersC) external auditorsD) forensic accountantsE) treasurersAnswer: DExplanation: Forensic accountants investigate financial crimes.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.5: Summarize seven of the most important business professions.

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2782) Who has the strategic, long-term responsibility for raising funds for an organization whenneeded?A) financial managersB) cash managersC) credit managersD) controllersE) finance officersAnswer: EExplanation: Treasurers and finance officers have a more strategic role, establishing long-termfinancial goals and budgets, investing the firm's funds, and raising capital as needed.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.5: Summarize seven of the most important business professions.83) The chief information officer (CIO) is responsible for the preparation of income statementsand balance sheets.Answer: FALSEExplanation: Accountants and controllers are responsible for the preparation of incomestatements, balance sheets, and other financial reports.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.5: Summarize seven of the most important business professions.84) Internal auditors verify the work of the company's accounting effort and look foropportunities to improve efficiency and cost effectiveness.Answer: TRUEExplanation: Internal auditors verify the work of the company's accounting effort and look foropportunities to improve efficiency and cost effectiveness.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.5: Summarize seven of the most important business professions.85) Unlike accounting tasks, the work of financial managers is generally kept "in house,"particularly in midsize and large companies.Answer: TRUEExplanation: Unlike accounting tasks, for which there is a long tradition of outsourcing, thework of financial managers is generally kept in-house, particularly in midsize and largecompanies. The work of a financial manager touches every part of the company, so a broadunderstanding of the various functional areas in business is a key attribute for this position.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.5: Summarize seven of the most important business professions.

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2886) What are the functions of HR specialists and managers? How has the role of the HR functionchanged over time? Compare it with the functions of a chief information officer.Answer: HR specialists and managers plan and direct human resource activities that includerecruiting, training and development, compensation and benefits, employee and labor relations,and health and safety. Additionally, HR managers develop and implement human resourcessystems and practices to accommodate a firm's strategy and to motivate and manage diverseworkforces. In the past, HR was seen by many as a lower-level function concerned mostly withprocessing employee records and other tactical duties. However, in many companies, the HRfunction is becoming more strategic and focused on the global competition to find, attract, andkeep the best talent on the market.Like HR, information technology (IT) is evolving from a tactical support function to a criticalstrategic component. Reflecting IT's strategic importance, many midsize and large companiesnow have a chief information officer (CIO) position at the executive level to plot IT strategy.Difficulty: 3: ChallengingAACSB: Analytical thinkingLO: 1.5: Summarize seven of the most important business professions.87) ________ is the quality of performing at a high level and conducting oneself with purposeand pride.A) Business mindsetB) ProfessionalismC) Job enrichmentD) Positive reinforcementE) EtiquetteAnswer: BExplanation: Professionalism is the quality of performing at a high level and conducting oneselfwith purpose and pride.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.6: Identify seven components of professionalism.88) Which of the following activities is most likely to be considered unprofessional?A) Viewing constant change as a positive thing, as a way to avoid stagnation and boredom.B) Being conservative with commitments.C) Helping others in the team to improve their performance.D) Posting critical comments regarding the employer in a personal blog.E) Providing practical information, when required.Answer: DExplanation: Professionals don't talk negatively to their employers in front of customers or intheir personal blogs. When they have a problem, they solve it; they don't share it.Difficulty: 2: ModerateAACSB: Ethical understanding and reasoningLO: 1.6: Identify seven components of professionalism.

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2989) The expected norms of behavior in a particular situation are referred to as ________.A) etiquetteB) dependabilityC) expectancyD) energyE) accountabilityAnswer: AExplanation: Etiquette refers to the expected norms of behavior in any particular situation.Difficulty: 2: ModerateAACSB: Ethical understanding and reasoningLO: 1.6: Identify seven components of professionalism.90) Performing at a high level, and continuing to improve is an indication of ________ in one'spursuit of professionalism.A) being a team playerB) making ethical decisionsC) being dependable and accountableD) maintaining a confident, positive outlookE) striving to excelAnswer: EExplanation: Not only do you have an ethical obligation to give your employer and yourcustomers your best effort, but excelling at each level in your career is the best way to keepclimbing up to new positions of responsibility.Difficulty: 2: ModerateAACSB: Ethical understanding and reasoningLO: 1.6: Identify seven components of professionalism.91) What should be done to improve communications and ensure the most effectivecommunications possible?A) Provide practical information.B) Limit access to all data and release only what is necessary.C) Present opinions in a forceful manner so they appear to be fact based.D) Provide all detail possible in each message.E) Make it clear how you will benefit from the audiences response to your message.Answer: AExplanation: Give people useful information that is adapted to their specific needs.Difficulty: 2: ModerateAACSB: Analytical thinkingLO: 1.6: Identify seven components of professionalism.

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3092) What should be done to limit your own filters and biases and to truly seek to improve thecommunication process?A) give facts rather than opinionsB) listen activelyC) clarify expectationsD) be concise and efficientE) offer compelling argumentsAnswer: BExplanation: Active listening means making a conscious effort to turn off your own filters andbiases to truly hear and understand what someone else is saying.Difficulty: 3: ChallengingAACSB: Analytical thinkingLO: 1.6: Identify seven components of professionalism.93) Your professionalism, and how others view your efforts, is affected by your ________, andis a vital element in promoting workplace harmony.A) ethicsB) listening skillsC) personal demeanorD) communication skillsE) level of teamworkAnswer: CExplanation: Your energy, positive or negative, is contagious. Personal demeanor is therefore avital element of workplace harmony.Difficulty: 3: ChallengingAACSB: Analytical thinkingLO: 1.6: Identify seven components of professionalism.94) One of the best ways to establish yourself as professional, and to stand out from yourcompetition, is to ________.A) improve your communication skillsB) have a strong commitment to ethicsC) have a professional demeanorD) be accountable at all timesE) be a team playerAnswer: AExplanation: If you're looking for a surefire way to stand out from your competition andestablish yourself as a competent professional, improving your communication skills may be themost important step you can take.Difficulty: 3: ChallengingAACSB: Analytical thinkingLO: 1.6: Identify seven components of professionalism.

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