Test Bank for Business in Action, 9th Edition

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Business in ActionNinth EditionCourtland L. BoveeJohn V. ThillTest Bank (Download only)for Business in ActionRevised bySusan Schanne

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1Business in Action, 9e(Bovee/Thill)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 four useful ways tocategorize businesses.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is essential to the counter-cyclical business modelD) is fundamental to businesses in everymodern economyE) is an outdated concept that's been replaced by corporate sustainabilityAnswer: DExplanation: A company needs to see some promise of reward before it will decide to accept therisks involved in creating and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 four useful ways tocategorize businesses.3) A(n) ________ is a framework of how a business intends to generate revenue.A) business modelB) strategic management toolC) profitability analysisD) competitiveadvantageE) 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 addingvalue in a business, and identify four useful ways tocategorize businesses.

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24) ________ is the term used to describe the difference between revenue and expenses.A) Economies of scaleB) 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 four useful ways tocategorize businesses.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 ofadding value in a business, and identify four useful ways tocategorize businesses.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 nothave a profit motive.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.1: Explain the concept of adding value in a business, and identify four useful ways tocategorize businesses.

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37) If individuals and companies believe they can pursuerewards 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 four useful ways tocategorize businesses.8) Business isany 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 four useful ways tocategorize businesses.9) Profit refers to the money the company brings in throughthe 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 four useful ways tocategorize businesses.10) 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 four useful ways tocategorize businesses.

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411) 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 conceptof adding value in a business, and identify four useful ways tocategorize businesses.12) 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 four useful ways tocategorize businesses.13) 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 four useful ways tocategorize businesses.14) A firm uses competitive advantage to reduce its costs. Using competitive advantage is anexample 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 four useful ways tocategorize businesses.

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515) 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 four useful ways tocategorize 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 andbuilding assets, which are anything of meaningful value, frompatents 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 four useful ways tocategorize businesses.17) 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: 3: ChallengingAACSB: Application of knowledgeLO: 1.1: Explain the concept of adding value in a business, and identify four useful ways tocategorize businesses.

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618) ________ 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.19) 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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720) 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 employmentand 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.21) Who are the people 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 to create change.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.2: List three steps you can take to help make the leap from consumer to businessprofessional.22) 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: 1.2: List three steps you can take to help make the leap from consumer to businessprofessional.

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823) 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.24) 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.25) 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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926) 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 theirfamilies. In addition, many companies help their employees meet the costs of health care, childcare, 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 national growth, stability, and security. Beyond the mere dollars of taxespaid, a strong 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 understandingand reasoningLO: 1.2: List three steps you can take to help make the leap from consumer to businessprofessional.27) ________ refers to the resources or capabilities 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: 1.3: Discuss the five major environments in which every business operates.

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1028) 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: 1.3: Discuss the five major environments in which every business operates.29) Population trends that change the composition of consumer markets and the workforce are apart of a company's ________ environment.A) economicB) regulatoryC) technologicalD) 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.30) 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 affected 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 notaffect 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.

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1131) 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.32) 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.33) 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.

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1234) 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.35) 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.36) Which of the following is acomponent of the specific market environment within whicheach business operates?A) Ethical restrictionsB) CompetitorsC) Technological innovationsD) Environmental restrictionsE) The speed of granting permits and licensesAnswer: BExplanation: Everycompany 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 thosecustomers.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.3: Discuss the five major environments in which every business operates.

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1337) ________ 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 toa 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.38) 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.39) What types of technologies are strong enough to create or destroy companies?A) ConnectiveB) GigC) MobileD) DisruptiveE) CollaborativeAnswer: DExplanation: Disruptive technologies, those that fundamentally change thenature 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.

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1440) 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 ininternational 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: 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.41) 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.42) Which of the following best describes a purpose-driven business?A) A company that strives to create high financial return for stakeholdersB) A company that strives to do more than just make moneyC) A company that strives to limit the demand for goods and servicesD) A company that strives to follow all laws and regulations in the international environmentE) A company that strives to incorporate as much technology as possibleAnswer: BExplanation: A growing number of employees and company leaders believe that acompanyshould strive for something more than just making money, giving rise to the concept of thepurpose-driven business.Difficulty: 2: ModerateAACSB: Application of knowledgeLO: 1.3: Discuss the five major environments in which every business operates.

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