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Test Bank for Business in Action, 9th Edition

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    Business in Action Ninth Edition Courtland L. Bovee John V. Thill Test Bank (Download only) for Business in Action Revised b y Susan Schanne

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    1 Business in Action, 9e (Bovee/Thill) Chapter 1 Developing a Business Mindset 1) ________ is money that an organization brings in through the sale of its goods and services. A) Competitive advantage B) Revenue C) Sales D) Capital investment E) Finance An swer: B Explanation: Revenue is the money a company brings in through the sale of goods and services. Difficulty: 1: Easy AACSB: Application of knowledge LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to cate gorize businesses. 2) The risk and reward relationship ________. A) is a key aspect of social responsibility B) applies only to service - intensive businesses C) is essential to the counter - cyclical business model D) is fundamental to businesses in every modern economy E) is an outdated concept that's been replaced by corporate sustainability Answer: D Explanation: A company needs to see some promise of reward before it will decide to accept the risks involved in creating and selling products. However, t o ensure responsible behavior, these risks need to stay attached to those decisions, meaning that if the decisions turn out bad, that company should suffer the consequences. Difficulty: 1: Easy AACSB: Application of knowledge LO: 1.1: Explain the concep t of adding value in a business, and identify four useful ways to categorize businesses. 3) A(n) ________ is a framework of how a business intends to generate revenue. A) business model B) strategic management tool C) profitability analysis D) competitive advantage E) entrepreneurial mindset Answer: A Explanation: A company's business model is a clear, simple outline of how the business intends to generate revenue. Difficulty: 1: Easy AACSB: Analytical thinking LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses.

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    2 4) ________ is the term used to describe the difference between revenue and expenses. A) Economies of scale B) Interest C) Sales D) Owner's equity E) Profit Answer: E Explanatio n: Profit is the amount of money left over after all the costs involved in doing business, have been deducted from revenue. Difficulty: 1: Easy AACSB: Application of knowledge LO: 1.1: Explain the concept of adding value in a business, and identify fou r useful ways to categorize businesses. 5) ________ refers to some aspect of a product or company that makes it more appealing to target customers. A) Competitive advantage B) Economies of scale C) Horizontal integration D) Vertical integration E) Barr ier to entry advantage Answer: A Explanation: Competitive advantage refers to some aspect of a product or company that makes it more appealing to target customers. Difficulty: 2: Moderate AACSB: Application of knowledge LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses. 6) An organization that seeks to operate efficiently and effectively to achieve its goals without focusing on profit as a motive is a ________. A) business intermediary B) nonprofit organization C) service business D) government - owned corporation E) goods - producing business Answer: B Explanation: Not - for - profit organizations (also known as nonprofit organizations) such as museums, most universities, and charities do not have a profit motive. Difficulty: 2: Moderate AACSB: Application of knowledge LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses.

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    3 7) If individuals and companies believe they can pursue rewards without facing the risks that should be attached to those pursuits, they are more likely to engage in irresponsible and even unethical behavior. This situation is known as a(n) ________. A) ethical dilemma B) professional dilemma C) barrier to entr y D) competitive advantage E) moral hazard Answer: E Explanation: If individuals and companies believe they can pursue rewards without facing the risks that should be attached to those pursuits, they are more likely to engage in irresponsible and even u nethical behavior — a situation known as moral hazard. Difficulty: 2: Moderate AACSB: Ethical understanding and reasoning LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses. 8) Business is any profit - seeking organization that provides goods and services designed to satisfy customers' needs. Answer: TRUE Explanation: In a general sense business can be defined as any profit - seeking organization that provides goods and services designed to s atisfy customers' needs. Difficulty: 1: Easy AACSB: Application of knowledge LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses. 9) Profit refers to the money the company brings in through the sale of goods and services. Answer: FALSE Explanation: Profit is the amount of money left over after expenses — all the costs involved in doing business — have been deducted from revenue. Difficulty: 1: Easy AACSB: Application of knowledge LO: 1.1: E xplain the concept of adding value in a business, and identify four useful ways to categorize businesses. 10) Businesses add value by transforming lower - value inputs (like paper and ink) into higher - value outputs (like textbooks). Answer: TRUE Explanatio n: 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: Easy AACSB: Application of knowledge LO: 1.1: Explain the conc ept of adding value in a business, and identify four useful ways to categorize businesses.

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    4 11) In a free - market economy, companies generally have limited autonomy in deciding which customers they want to focus on and how they want to compete. Answer: FAL SE Explanation: In a free - market economy, companies generally have considerable freedom in deciding which customers they want to focus on and how they want to compete. Difficulty: 2: Moderate AACSB: Application of knowledge LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses. 12) A company has competitive advantage when its products are more appealing to its chosen customers. Answer: TRUE Explanation: Competitive advantage makes a company 's products or the company as a whole more appealing to its chosen customers. Difficulty: 1: Easy AACSB: Application of knowledge LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses. 13) As sets refer to the tangible economic resources owned by a firm. Answer: FALSE Explanation: Assets refer to anything of meaningful value, from patents and brand names to real estate and company stock. Difficulty: 2: Moderate AACSB: Application of knowle dge LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses. 14) A firm uses competitive advantage to reduce its costs. Using competitive advantage is an example of barrier to entry. Answer: FA LSE Explanation: Barrier to entry refers to any resource or capability a company must have before it can start competing in a given market. Difficulty: 2: Moderate AACSB: Application of knowledge LO: 1.1: Explain the concept of adding value in a busine ss, and identify four useful ways to categorize businesses.

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    5 15) Difficulty in obtaining business permits or licenses to perform a particular type of business would be an example of a barrier to entry for a firm. Answer: TRUE Explanation: Barrier to ent ry refers to any resource or capability a company must have before it can start competing in a given market. Difficulty: 2: Moderate AACSB: Application of knowledge LO: 1.1: Explain the concept of adding value in a business, and identify four useful way s to categorize businesses. 16) How are not - for - profit organizations different from most businesses? Answer: The driving forces behind most businesses are the prospects of earning profits and building assets, which are anything of meaningful value, from patents and brand names to real estate and company stock. In contrast, not - for - profit organizations (also known as nonprofit organizations) such as museums, most universities, and charities do not have a profit motive. However, similar to goods - producing b usinesses, they must operate efficiently and effectively to achieve their goals. A nonprofit organization might use many of the business - management principles used by other businesses such as a goods - producing business. Difficulty: 3: Challenging AACSB: Analytical thinking LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses. 17) Explain barrier to entry with an example. Answer: Barrier to entry refers to a resource or capability a company m ust have before it can start 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 the need for highly skilled employees. Dif ficulty: 3: Challenging AACSB: Application of knowledge LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses.

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    6 18) ________ refers to a view of business that considers the many decisions tha t must be made and the potential problems that must be overcome before the organization can deliver its products or services. A) Business mindset B) Service orientation C) Free - market philosophy D) Competitive advantage E) Business model Answer: A Explan ation: A business mindset refers to a view of business that considers the many decisions that must be made and the potential problems that must be overcome before the organization can deliver its products or services. Difficulty: 2: Moderate AACSB: App lication of knowledge LO: 1.2: List three steps you can take to help make the leap from consumer to business professional. 19) What key aspect of running a business includes the ability to offer valuable goods and services while contributing to society? A ) Corporate social responsibility B) Business mindset C) Opportunities in the marketplace D) Vertical integration E) Producing intangibles Answer: A Explanation: Business has the potential to contribute to society in many useful ways including offering g oods and services, providing employment, paying taxes, and contributing to national growth, stability, and security. Difficulty: 2: Moderate AACSB: Analytical thinking LO: 1.2: List three steps you can take to help make the leap from consumer to busines s professional.

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    7 20) Businesses can impact society in both positive and negative ways. Occupying land and displacing existing businesses are examples of ________. A) generating pollution B) disrupting communities C) creating waste D) creating safety risk s E) causing financial instability Answer: B Explanation: From occupying land to displacing existing businesses to overloading schools and roads with employees and their children, growing businesses can disrupt communities even as they provide employment and other benefits. And when businesses fall into decline, they can leave behind everything from abandoned buildings to laid - off workers. Difficulty: 2: Moderate AACSB: Analytical thinking LO: 1.2: List three steps you can take to help make the leap fr om consumer to business professional. 21) Who are the people who apply entrepreneurial strategies to cause large - scale social change? A) Government regulators B) Social responsibility leaders C) Social entrepreneurs D) Business mindset entrepreneurs E) H igh - value output leadership Answer: C Explanation: Social entrepreneurs, people who apply entrepreneurial strategies to enable large - scale social change, use business concepts to create change. Difficulty: 2: Moderate AACSB: Application of knowledge LO : 1.2: List three steps you can take to help make the leap from consumer to business professional. 22) Intangible products have a physical presence. Answer: FALSE Explanation: Intangible products create value by performing activities that deliver some b enefit to the customer. They do not have physical presence. Difficulty: 2: Moderate AACSB: Application of knowledge LO: 1.2: List three steps you can take to help make the leap from consumer to business professional.

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    8 23) A business mindset is a view o f business that considers the various decisions a business has to make as well as the challenges that it must overcome in order to be successful. Answer: TRUE Explanation: A business mindset is a view of business that considers the various decisions a bu siness has to make as well as the challenges that it must overcome in order to be successful. Difficulty: 2: Moderate AACSB: Application of knowledge LO: 1.2: List three steps you can take to help make the leap from consumer to business professional. 2 4) Businesses can have both positive and negative effects on society. Answer: TRUE Explanation: The relationship between business and society is complex and far - reaching. Businesses can have both positive and negative effects on society. Difficulty: 1: Easy AACSB: Application of knowledge LO: 1.2: List three steps you can take to help make the leap from consumer to business professional. 25) Compare and contrast the perspective of a business professional with that of a consumer. Answer: Consumer exp eriences include the impact of poor customer service, a sense for product value, and the entire experience of searching for, purchasing, and owning products. While a customer thinks about the cost of buying a particular product, a business professional thi nks about the cost of making it, promoting it, and distributing it. A business professional focuses on what it takes to make a product stand out from the crowd and recognizes the importance of finding opportunities in the marketplace. He/she starts to deve lop a business mindset which involves an appreciation for the many decisions that must be made and the many challenges that must be overcome before companies can deliver the products that satisfy customer needs. Difficulty: 3: Challenging AACSB: Analytic al thinking LO: 1.2: List three steps you can take to help make the leap from consumer to business professional.

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    9 26) Discuss the positive and negative role of business in society. Answer: A business professional needs to recognize the positive and negat ive effects that business can have on society. Business has the potential to contribute to society in many useful ways, such as: • Offering valuable goods and services. • Providing employment, which enables employees to provide for themselves and their fa milies. 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, further scientific r esearch, enhance public safety and national defense, and support other vital functions of government. • Contributing to national growth, stability, and security. Beyond the mere dollars of taxes paid, a strong economy helps ensure a strong country. Unfor tunately, businesses don't always operate in ways that benefit society. The potentially negative effects that business can have on society include generating pollution and creating waste, creating health and safety risks, disrupting communities, and causin g financial instability. The potential negative effects of business are serious matters, but employees can conduct themselves in ways that balance the profit motive with society's shared interests. Difficulty: 3: Challenging AACSB: Ethical understanding and reasoning LO: 1.2: List three steps you can take to help make the leap from consumer to business professional. 27) ________ refers to the resources or capabilities a company must have before it can start competing in a given market. A) Assets B) Ec onomies of scale C) Barriers to entry D) Technological requirements E) Fixed costs Answer: C Explanation: Barrier to entry is a resource or capability a company must have before it can start competing in a given market. Difficulty: 2: Moderate AACSB: A pplication of knowledge LO: 1.3: Discuss the five major environments in which every business operates.

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    10 28) Businesses that need very large amounts of money, equipment, or other material resources in order to get started are ________ businesses. A) servic e sector B) labor - intensive C) competitively - advantaged D) not - for - profit E) capital - intensive Answer: E Explanation: Because they require large amounts of money, equipment, land, and other resources to get started and to operate, goods - producing busine sses are often capital - intensive businesses. Difficulty: 2: Moderate AACSB: Application of knowledge LO: 1.3: Discuss the five major environments in which every business operates. 29) Population trends that change the composition of consumer markets a nd the workforce are a part of a company's ________ environment. A) economic B) regulatory C) technological D) social E) political Answer: D Explanation: Every business operates within the broad social environment, the trends and forces in society at la rge. For instance, all companies are affected by population trends that change the composition of consumer markets and the workforce. Difficulty: 2: Moderate AACSB: Application of knowledge LO: 1.3: Discuss the five major environments in which every bus iness operates. 30) Which one of the following is true regarding the economic environment of business that shapes the behavior of buyers and sellers? A) Forces resulting from the practical application of science are affected by the economic environment. B ) Virtually every decision made is influenced by the economic environment. C) Laws and regulations that restrain, support, and protect businesses protect the economic environment. D) Targeted customers and competitors that market similar products will not affect the economic environment. E) Population trends, social values, and relationships of society and business are dependent on the economic environment. Answer: B Explanation: Conditions and forces in the economic environment affect the cost and avai lability of goods, services, and labor; so they shape the behavior of buyers and sellers. Difficulty: 2: Moderate AACSB: Analytical thinking LO: 1.3: Discuss the five major environments in which every business operates.

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    11 31) All groups affected by a co mpany's activities are referred to as its ________. A) shareholders B) customers C) stakeholders D) employees E) suppliers Answer: C Explanation: Stakeholders refers to the internal and external groups affected by a company's decisions and activities. Di fficulty: 1: Easy AACSB: Ethical understanding and reasoning LO: 1.3: Discuss the five major environments in which every business operates. 32) The term ________ refers to forces resulting from the practical application of science to innovations, produ cts, and processes. A) social trends B) research and development C) barriers to entry D) technological environment E) business mindset Answer: D Explanation: The technological environment refers to forces resulting from the practical application of scie nce to innovations, products, and processes. Difficulty: 2: Moderate AACSB: Information technology LO: 1.3: Discuss the five major environments in which every business operates. 33) The conditions that affect the cost and availability of goods, service s and labor, and the behavior of buyers and sellers are BEST described as the ________ environment. A) market B) regulatory C) legal D) economic E) social Answer: D Explanation: Virtually every decision a company makes is influenced by the economic envir onment, 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: Moderate AACSB: Application of knowledge LO: 1.3: Discuss the five major e nvironments in which every business operates.

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    12 34) The legal and regulatory environment would include ________. A) demographic factors B) technological innovations C) the number of competitors in the market D) preferences of the consumers E) the speed of o btaining licenses Answer: E Explanation: Every business is affected by the legal and regulatory environment, the sum of laws and regulations at the local, state, national, and even international level. Difficulty: 2: Moderate AACSB: Application of kno wledge LO: 1.3: Discuss the five major environments in which every business operates. 35) The policies and practices of government bodies would shape the ________ environment for a business. A) legal and regulatory B) technological C) social D) economic E) market Answer: A Explanation: Every business is affected by the legal and regulatory environment, the sum of laws and regulations at the local, state, national, and even international level. The policies and practices of government bodies also establi sh an overall level of support for businesses operating within their jurisdictions. Difficulty: 2: Moderate AACSB: Application of knowledge LO: 1.3: Discuss the five major environments in which every business operates. 36) Which of the following is a component of the specific market environment within which each business operates? A) Ethical restrictions B) Competitors C) Technological innovations D) Environmental restrictions E) The speed of granting permits and licenses Answer: B Explanation: Every company operates within a specific market environment composed of three important groups: (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. Difficulty: 2: Moderate AACSB: Application of knowledge LO: 1.3: Discuss the five major environments in which every business operates.

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    13 37) ________ refers to a company's target customers, the buying influences that shape the behavior of tho se customers, and competitors that market similar products to those customers. A) Regulatory environment B) Social environment C) Economic environment D) Market environment E) Technological environment Answer: D Explanation: Market environment refers to a company's target customers, the buying influences that shape the behavior of those customers, and competitors that market similar products to those customers. Difficulty: 2: Moderate AACSB: Application of knowledge LO: 1.3: Discuss the five major envi ronments in which every business operates. 38) The practical application of science to products and innovations has the potential to create change in almost every facet of business, as part of the ________. A) social environment B) wearable and mobile tec hnology revaluation C) technological environment D) economic environment E) stakeholders' responsibility Answer: C Explanation: Technological environment stems from the practical application of science to innovations, products, and processes. Technologic al advances have the potential to change every facet of business, from altering internal processes to creating or destroying market opportunities. Difficulty: 2: Moderate AACSB: Information technology LO: 1.3: Discuss the five major environments in whic h every business operates. 39) What types of technologies are strong enough to create or destroy companies? A) Connective B) Gig C) Mobile D) Disruptive E) Collaborative Answer: D Explanation: 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 you use in your academic, personal, and social activities, from digital audio and video to the Internet to social media, are disruptive tech nologies that have shaken up multiple industries. Difficulty: 3: Challenging AACSB: Information technology LO: 1.3: Discuss the five major environments in which every business operates.

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    14 40) If mobile technology is a disruptive technology, why do organi zations value integration of the 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, technology has fewer changes and is easy to maintain. E) Mobile technology can boost productivity and help form closer relationships with customers. Answer: E Explanation: Mobile apps and communication systems c an boost employee productivity, help companies form closer relationships with customers and business partners, and spur innovation in products and services. Given the advantages and the rising expectations of employees and customers, firms on the leading e dge of the mobile revolution are working to integrate mobile technology throughout their organizations. Difficulty: 3: Challenging AACSB: Information technology LO: 1.3: Discuss the five major environments in which every business operates. 41) What par t of the market environment shapes the behavior of customers? A) Target market B) Buying influences C) Competitors D) Regulatory influences E) Connectivity Answer: B Explanation: A market environment is composed of three important groups: (1) its target customers, (2) the buying influences that shape the behavior of those customers, and (3) competitors. Difficulty: 2: Moderate AACSB: Application of knowledge LO: 1.3: Discuss the five major environments in which every business operates. 42) Which of th e following best describes a purpose - driven business? A) A company that strives to create high financial return for stakeholders B) A company that strives to do more than just make money C) A company that strives to limit the demand for goods and services D) A company that strives to follow all laws and regulations in the international environment E) A company that strives to incorporate as much technology as possible Answer: B Explanation: A growing number of employees and company leaders believe that a company should strive for something more than just making money, giving rise to the concept of the purpose - driven business. Difficulty: 2: Moderate AACSB: Application of knowledge LO: 1.3: Discuss the five major environments in which every business oper ates.

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