Test Bank for Business in Action , 8th Edition
Prepare effectively with Test Bank for Business in Action , 8th Edition—a comprehensive set of questions to help you ace your exams.
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1
Business in Action, 8e (Bovee)
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
Answer: 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 the major types of
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E) is an outdated concept that's been replaced by corporate sustainability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, to 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 concept of adding value in a business, and identify the major types of
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 the major types of
businesses.
Business in Action, 8e (Bovee)
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
Answer: 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 the major types of
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, to 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 concept of adding value in a business, and identify the major types of
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 the major types of
businesses.
1
Business in Action, 8e (Bovee)
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
Answer: 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 the major types of
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, to 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 concept of adding value in a business, and identify the major types of
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 the major types of
businesses.
Business in Action, 8e (Bovee)
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
Answer: 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 the major types of
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, to 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 concept of adding value in a business, and identify the major types of
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 the major types of
businesses.
2
4) ________ is the term used to describe the difference between revenue and expenses.
A) Revenue
B) Interest
C) Sales
D) Owner's equity
E) Profit
Answer: E
Explanation: 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 the major types of
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) Barrier 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 the major types of
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 the major types of
businesses.
4) ________ is the term used to describe the difference between revenue and expenses.
A) Revenue
B) Interest
C) Sales
D) Owner's equity
E) Profit
Answer: E
Explanation: 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 the major types of
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) Barrier 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 the major types of
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 the major types of
businesses.
2
4) ________ is the term used to describe the difference between revenue and expenses.
A) Revenue
B) Interest
C) Sales
D) Owner's equity
E) Profit
Answer: E
Explanation: 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 the major types of
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) Barrier 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 the major types of
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 the major types of
businesses.
4) ________ is the term used to describe the difference between revenue and expenses.
A) Revenue
B) Interest
C) Sales
D) Owner's equity
E) Profit
Answer: E
Explanation: 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 the major types of
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) Barrier 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 the major types of
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 the major types of
businesses.
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 entry
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 unethical 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 the major types of
businesses.
8) A ________ creates value by performing activities that provide benefit to the customer.
A) goods-producing business
B) manufacturing business
C) service business
D) merchandising business
E) not-for-profit organization
Answer: C
Explanation: Service businesses create value by performing activities that deliver some benefit
to the customer, such as finance, insurance, transportation, construction, utilities, wholesale and
retail trade, banking, entertainment, health care, maintenance and repair, and information.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
9) Businesses that need very large amounts of money, equipment, or other material resources in
order to get started are ________ businesses.
A) service 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 businesses are often capital-intensive
businesses.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
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 entry
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 unethical 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 the major types of
businesses.
8) A ________ creates value by performing activities that provide benefit to the customer.
A) goods-producing business
B) manufacturing business
C) service business
D) merchandising business
E) not-for-profit organization
Answer: C
Explanation: Service businesses create value by performing activities that deliver some benefit
to the customer, such as finance, insurance, transportation, construction, utilities, wholesale and
retail trade, banking, entertainment, health care, maintenance and repair, and information.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
9) Businesses that need very large amounts of money, equipment, or other material resources in
order to get started are ________ businesses.
A) service 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 businesses are often capital-intensive
businesses.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
4
10) What type of business tends to be labor intensive, relying more on human resources than
material resources?
A) goods producing
B) service
C) not-for-profit
D) competitively disadvantaged
E) manufacturing
Answer: B
Explanation: Service businesses tend to be labor-intensive businesses, in that they rely more on
human resources than buildings, machinery, and equipment to prosper.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
11) ________ refers to a resource or capability a company must have before it can start
competing in a given market.
A) Assets
B) Economies 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: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
12) 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 satisfy customers' needs.
Difficulty: 1: Easy
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
10) What type of business tends to be labor intensive, relying more on human resources than
material resources?
A) goods producing
B) service
C) not-for-profit
D) competitively disadvantaged
E) manufacturing
Answer: B
Explanation: Service businesses tend to be labor-intensive businesses, in that they rely more on
human resources than buildings, machinery, and equipment to prosper.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
11) ________ refers to a resource or capability a company must have before it can start
competing in a given market.
A) Assets
B) Economies 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: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
12) 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 satisfy customers' needs.
Difficulty: 1: Easy
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
5
13) 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: Explain the concept of adding value in a business, and identify the major types of
businesses.
14) Businesses add value by transforming lower-value inputs (like paper and ink) into higher-
value outputs (like textbooks).
Answer: TRUE
Explanation: 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 concept of adding value in a business, and identify the major types of
businesses.
15) 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: FALSE
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 the major types of
businesses.
16) 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 the major types of
businesses.
17) Assets 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 knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
13) 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: Explain the concept of adding value in a business, and identify the major types of
businesses.
14) Businesses add value by transforming lower-value inputs (like paper and ink) into higher-
value outputs (like textbooks).
Answer: TRUE
Explanation: 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 concept of adding value in a business, and identify the major types of
businesses.
15) 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: FALSE
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 the major types of
businesses.
16) 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 the major types of
businesses.
17) Assets 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 knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
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6
18) In the USA, the service sector now accounts for less than half of the nation's economic
output, but most of all jobs in the country.
Answer: FALSE
Explanation: The service sector now accounts for roughly 70 percent of the nation's economic
output and 80 percent of all jobs in the country.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
19) A firm uses competitive advantage to reduce its costs. This is an example of barrier to entry.
Answer: FALSE
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 business, and identify the major types of
businesses.
20) 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 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 business, and identify the major types of
businesses.
21) Intangible products have a physical presence.
Answer: FALSE
Explanation: Intangible products create value by performing activities that deliver some benefit
to the customer. They do not have physical presence.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
22) The service sector now dominates the U.S. economy.
Answer: TRUE
Explanation: Over the past few decades, the U.S. economy has undergone a profound
transformation from being dominated by manufacturing to being dominated by services.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
18) In the USA, the service sector now accounts for less than half of the nation's economic
output, but most of all jobs in the country.
Answer: FALSE
Explanation: The service sector now accounts for roughly 70 percent of the nation's economic
output and 80 percent of all jobs in the country.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
19) A firm uses competitive advantage to reduce its costs. This is an example of barrier to entry.
Answer: FALSE
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 business, and identify the major types of
businesses.
20) 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 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 business, and identify the major types of
businesses.
21) Intangible products have a physical presence.
Answer: FALSE
Explanation: Intangible products create value by performing activities that deliver some benefit
to the customer. They do not have physical presence.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
22) The service sector now dominates the U.S. economy.
Answer: TRUE
Explanation: Over the past few decades, the U.S. economy has undergone a profound
transformation from being dominated by manufacturing to being dominated by services.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
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7
23) Why are not-for-profit organizations different from most businesses? Are there any
similarities between a goods-producing business and a not-for-profit organization?
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 businesses, 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 the major types of
businesses.
24) Compare and contrast between goods-producing businesses and service businesses.
Answer: Goods-producing businesses create value by making "things," from Pop-Tarts to school
furniture to spacecraft. Most goods are tangible, meaning they have a physical presence,
although software, music downloads, and other digital products are intangible. On the other
hand, service businesses create value by performing activities that deliver some benefit to the
customer, such as finance, insurance, transportation, construction, utilities, wholesale and retail
trade, banking, entertainment, health care, maintenance and repair, and information. Twitter,
Jiffy Lube, HBO, and Verizon Wireless are examples of service businesses.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
25) Explain barrier to entry with an example.
Answer: Barrier to entry refers to a resource or capability a company must 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.
Difficulty: 1: Easy
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
23) Why are not-for-profit organizations different from most businesses? Are there any
similarities between a goods-producing business and a not-for-profit organization?
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 businesses, 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 the major types of
businesses.
24) Compare and contrast between goods-producing businesses and service businesses.
Answer: Goods-producing businesses create value by making "things," from Pop-Tarts to school
furniture to spacecraft. Most goods are tangible, meaning they have a physical presence,
although software, music downloads, and other digital products are intangible. On the other
hand, service businesses create value by performing activities that deliver some benefit to the
customer, such as finance, insurance, transportation, construction, utilities, wholesale and retail
trade, banking, entertainment, health care, maintenance and repair, and information. Twitter,
Jiffy Lube, HBO, and Verizon Wireless are examples of service businesses.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
25) Explain barrier to entry with an example.
Answer: Barrier to entry refers to a resource or capability a company must 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.
Difficulty: 1: Easy
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
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26) Compare and contrast between capital-intensive businesses and labor-intensive businesses.
Answer: Capital-intensive businesses require large amounts of money, equipment, land, and
other 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 rely
more on human resources than buildings, machinery, and equipment to prosper. However, the
Internet and other technologies have reduced the labor required to operate many types of service
businesses.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
27) ________ 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.
A) Business mindset
B) Service orientation
C) Free-market philosophy
D) Competitive advantage
E) Business model
Answer: A
Explanation: 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: Application of knowledge
LO: 1.2: List three steps you can take to help make the leap from consumer to business
professional.
28) 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 goods 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 business
professional.
26) Compare and contrast between capital-intensive businesses and labor-intensive businesses.
Answer: Capital-intensive businesses require large amounts of money, equipment, land, and
other 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 rely
more on human resources than buildings, machinery, and equipment to prosper. However, the
Internet and other technologies have reduced the labor required to operate many types of service
businesses.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
27) ________ 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.
A) Business mindset
B) Service orientation
C) Free-market philosophy
D) Competitive advantage
E) Business model
Answer: A
Explanation: 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: Application of knowledge
LO: 1.2: List three steps you can take to help make the leap from consumer to business
professional.
28) 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 goods 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 business
professional.
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29) 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 risks
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 from consumer to business
professional.
30) Who are the workers 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) high-value output leadership
Answer: C
Explanation: Social entrepreneurs, people who apply entrepreneurial strategies to enable large-
scale social change, use business concepts as well.
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.
31) A business mindset is a view of 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
business 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.
29) 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 risks
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 from consumer to business
professional.
30) Who are the workers 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) high-value output leadership
Answer: C
Explanation: Social entrepreneurs, people who apply entrepreneurial strategies to enable large-
scale social change, use business concepts as well.
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.
31) A business mindset is a view of 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
business 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.
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10
32) 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.
33) Forces resulting from the practical application of science to a company's products and
processes would best describe its social environment.
Answer: FALSE
Explanation: Every business operates within the broad social environment. Social environment
refers to the trends and forces in society at large.
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.
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 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 thinks
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 develop 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: Analytical thinking
LO: 1.2: List three steps you can take to help make the leap from consumer to business
professional.
32) 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.
33) Forces resulting from the practical application of science to a company's products and
processes would best describe its social environment.
Answer: FALSE
Explanation: Every business operates within the broad social environment. Social environment
refers to the trends and forces in society at large.
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.
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 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 thinks
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 develop 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: Analytical thinking
LO: 1.2: List three steps you can take to help make the leap from consumer to business
professional.
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35) Discuss the positive and negative role of business in society.
Answer: A business professional needs to recognize the positive and negative 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 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, further
scientific research, 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.
Unfortunately, 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 causing 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.
36) Population trends that change the composition of consumer markets and the workforce are a
part of a company's ________ environment.
A) economic
B) regulatory
C) cultural
D) social
E) political
Answer: D
Explanation: Every business operates within the broad social environment, the trends and forces
in society at large. 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 business operates.
35) Discuss the positive and negative role of business in society.
Answer: A business professional needs to recognize the positive and negative 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 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, further
scientific research, 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.
Unfortunately, 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 causing 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.
36) Population trends that change the composition of consumer markets and the workforce are a
part of a company's ________ environment.
A) economic
B) regulatory
C) cultural
D) social
E) political
Answer: D
Explanation: Every business operates within the broad social environment, the trends and forces
in society at large. 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 business operates.
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37) 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 effected 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 availability
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.
38) Because they fundamentally change the nature of an industry, ________ can be powerful
enough to create or destroy entire companies.
A) adaptive technologies
B) disruptive technologies
C) apocryphal technologies
D) incremental technologies
E) innovative technologies
Answer: B
Explanation: Disruptive technologies fundamentally change the nature of an industry. Therefore,
they can have sufficient power to create or destroy entire companies.
Difficulty: 2: Moderate
AACSB: Information technology
LO: 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) 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.
Difficulty: 1: Easy
AACSB: Ethical understanding and reasoning
LO: 1.3: Discuss the five major environments in which every business operates.
37) 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 effected 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 availability
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.
38) Because they fundamentally change the nature of an industry, ________ can be powerful
enough to create or destroy entire companies.
A) adaptive technologies
B) disruptive technologies
C) apocryphal technologies
D) incremental technologies
E) innovative technologies
Answer: B
Explanation: Disruptive technologies fundamentally change the nature of an industry. Therefore,
they can have sufficient power to create or destroy entire companies.
Difficulty: 2: Moderate
AACSB: Information technology
LO: 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) 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.
Difficulty: 1: Easy
AACSB: Ethical understanding and reasoning
LO: 1.3: Discuss the five major environments in which every business operates.
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40) The term ________ refers to forces resulting from the practical application of science to
innovations, products, 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 science to innovations, products, and processes.
Difficulty: 2: Moderate
AACSB: Information technology
LO: 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 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
environment, 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 environments in which every business operates.
42) 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 obtaining 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 knowledge
LO: 1.3: Discuss the five major environments in which every business operates.
40) The term ________ refers to forces resulting from the practical application of science to
innovations, products, 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 science to innovations, products, and processes.
Difficulty: 2: Moderate
AACSB: Information technology
LO: 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 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
environment, 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 environments in which every business operates.
42) 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 obtaining 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 knowledge
LO: 1.3: Discuss the five major environments in which every business operates.
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14
43) 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 establish 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.
44) Which of the following is a component of the specific market environment within which
each business operates?
A) demographic factors
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.
45) ________ 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.
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 environments in which every business operates.
43) 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 establish 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.
44) Which of the following is a component of the specific market environment within which
each business operates?
A) demographic factors
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.
45) ________ 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.
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 environments in which every business operates.
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46) 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 technology 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. Technological 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 which every business operates.
47) What types of technologies are strong enough to create or destroy companies?
A) connective
B) social media
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 technologies 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.
48) If mobile technology is a disruptive technology, why do organizations 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, the technology has fewer shifts 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 can 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 edge 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.
46) 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 technology 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. Technological 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 which every business operates.
47) What types of technologies are strong enough to create or destroy companies?
A) connective
B) social media
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 technologies 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.
48) If mobile technology is a disruptive technology, why do organizations 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, the technology has fewer shifts 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 can 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 edge 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.
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49) What is the primary use of smartphone technology in the workplace?
A) voice traffic
B) data traffic
C) word processing
D) app generation
E) data and file storage
Answer: B
Explanation: For many people, the fact that a smartphone can make phone calls is practically a
secondary consideration; data traffic from mobile devices far outstrips voice traffic.
Difficulty: 2: Moderate
AACSB: Information technology
LO: 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 media
B) economic impact
C) radical connectivity
D) disruptive technology
E) smart technology
Answer: C
Explanation: 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: Moderate
AACSB: Information technology
LO: 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 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.
49) What is the primary use of smartphone technology in the workplace?
A) voice traffic
B) data traffic
C) word processing
D) app generation
E) data and file storage
Answer: B
Explanation: For many people, the fact that a smartphone can make phone calls is practically a
secondary consideration; data traffic from mobile devices far outstrips voice traffic.
Difficulty: 2: Moderate
AACSB: Information technology
LO: 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 media
B) economic impact
C) radical connectivity
D) disruptive technology
E) smart technology
Answer: C
Explanation: 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: Moderate
AACSB: Information technology
LO: 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 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.
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52) A firm sets up a paper-manufacturing factory in a country which has very strict regulations
regarding disposal of industrial waste. This increases the cost of production of the firm. This is
an example of the social environment of the firm.
Answer: FALSE
Explanation: Every business operates within the broad social environment. Social environment
refers to the trends and forces in society at large.
Difficulty: 2: Moderate
AACSB: Ethical understanding and reasoning
LO: 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's
stock.
Answer: FALSE
Explanation: All internal and external groups affected by a company's decisions and activities
are referred to as its stakeholders.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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, all
companies are affected by population trends that change the composition of consumer markets
and the workforce. The economic environment of a business consists of 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. For example, a growing economy can help companies by
increasing demand and supporting higher prices for their products, but it can also raise the costs
of labor and the materials the companies need to do business.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.3: Discuss the five major environments in which every business operates.
52) A firm sets up a paper-manufacturing factory in a country which has very strict regulations
regarding disposal of industrial waste. This increases the cost of production of the firm. This is
an example of the social environment of the firm.
Answer: FALSE
Explanation: Every business operates within the broad social environment. Social environment
refers to the trends and forces in society at large.
Difficulty: 2: Moderate
AACSB: Ethical understanding and reasoning
LO: 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's
stock.
Answer: FALSE
Explanation: All internal and external groups affected by a company's decisions and activities
are referred to as its stakeholders.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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, all
companies are affected by population trends that change the composition of consumer markets
and the workforce. The economic environment of a business consists of 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. For example, a growing economy can help companies by
increasing demand and supporting higher prices for their products, but it can also raise the costs
of labor and the materials the companies need to do business.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.3: Discuss the five major environments in which every business operates.
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55) Discuss the legal and regulatory environment of a business. How is it related to barriers to
entry? 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 laws
and regulations at the local, state, national, and even international level. Some businesses, such
as electricity and other basic utilities, are heavily regulated, even to the point of government
agencies determining how much such companies can charge for their services. The degree to
which 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 act
as barriers to entry.
Businesses prefer to locate and do business in jurisdictions that offer lower costs, lower
complexity, and greater stability and predictability. The policies and practices of government
bodies establish an overall level of support for businesses operating within their jurisdictions.
Taxation, fees, efforts to coordinate multiple regulatory agencies, the speed of granting permits
and licenses, labor rules, environmental restrictions, protection for assets such as patents and
brand names, roads and other infrastructure, and the transparency and consistency of decision
making all affect this level of support.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.3: Discuss the five major environments in which every business operates.
56) Compare and contrast the technological environment and the market environment within
which a business operates.
Answer: The technological environment refers to forces resulting from the practical application
of science to innovations, products, and processes. Technological changes have the potential to
change every facet of business, from altering internal processes to creating or destroying market
opportunities.
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. The nature
and behavior of these groups and their effect on business strategy vary widely from industry to
industry.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.3: Discuss the five major environments in which every business operates.
55) Discuss the legal and regulatory environment of a business. How is it related to barriers to
entry? 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 laws
and regulations at the local, state, national, and even international level. Some businesses, such
as electricity and other basic utilities, are heavily regulated, even to the point of government
agencies determining how much such companies can charge for their services. The degree to
which 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 act
as barriers to entry.
Businesses prefer to locate and do business in jurisdictions that offer lower costs, lower
complexity, and greater stability and predictability. The policies and practices of government
bodies establish an overall level of support for businesses operating within their jurisdictions.
Taxation, fees, efforts to coordinate multiple regulatory agencies, the speed of granting permits
and licenses, labor rules, environmental restrictions, protection for assets such as patents and
brand names, roads and other infrastructure, and the transparency and consistency of decision
making all affect this level of support.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.3: Discuss the five major environments in which every business operates.
56) Compare and contrast the technological environment and the market environment within
which a business operates.
Answer: The technological environment refers to forces resulting from the practical application
of science to innovations, products, and processes. Technological changes have the potential to
change every facet of business, from altering internal processes to creating or destroying market
opportunities.
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. The nature
and behavior of these groups and their effect on business strategy vary widely from industry to
industry.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.3: Discuss the five major environments in which every business operates.
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57) ________ activities are intended to identify new ideas that have the potential to result in new
goods and services.
A) Information technology
B) Operations management
C) Research and development
D) Human resources
E) Accounting
Answer: C
Explanation: Research and development (R&D) refers to the functional area responsible for
conceiving and designing new products.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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 computing
B) B2B marketing
C) adaptive technology
D) social media
E) pop-up advertising
Answer: D
Explanation: Due to social media, consumers are no longer passive recipients of broadcast
advertising messages. Instead, they participate in unstructured conversations with companies and
with each other. The result has been a profound power shift that puts buyers on much more equal
footing with sellers.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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 their
operations?
A) process R&D
B) marketing
C) purchasing
D) facilities
E) human resources
Answer: A
Explanation: Companies can engage in process R&D to design new and better ways to run their
operations.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.
57) ________ activities are intended to identify new ideas that have the potential to result in new
goods and services.
A) Information technology
B) Operations management
C) Research and development
D) Human resources
E) Accounting
Answer: C
Explanation: Research and development (R&D) refers to the functional area responsible for
conceiving and designing new products.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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 computing
B) B2B marketing
C) adaptive technology
D) social media
E) pop-up advertising
Answer: D
Explanation: Due to social media, consumers are no longer passive recipients of broadcast
advertising messages. Instead, they participate in unstructured conversations with companies and
with each other. The result has been a profound power shift that puts buyers on much more equal
footing with sellers.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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 their
operations?
A) process R&D
B) marketing
C) purchasing
D) facilities
E) human resources
Answer: A
Explanation: Companies can engage in process R&D to design new and better ways to run their
operations.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.
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60) ________ systems can be used to promote communication and data usage through the
company or to customers.
A) Research and development (R&D)
B) Strategic marketing
C) Product engineering
D) Information technology (IT)
E) Forensic technology (FT)
Answer: D
Explanation: Information technology (IT) systems promote communication and information
usage through the company or allow companies to offer new services to their customers.
Difficulty: 2: Moderate
AACSB: Information technology
LO: 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 are
made, or its service is performed?
A) Operations
B) Finance
C) Distribution
D) Process R&D
E) Marketing
Answer: A
Explanation: Variously called manufacturing, production, or operations, this area is where the
company makes whatever it makes (for goods-producing businesses) or does whatever it does
(for service businesses).
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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 and
the outgoing flow of finished products.
A) finance
B) logistics
C) human resource
D) purchasing
E) sales
Answer: B
Explanation: Logistics involves coordinating the incoming flow of materials and the outgoing
flow of finished products.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.
60) ________ systems can be used to promote communication and data usage through the
company or to customers.
A) Research and development (R&D)
B) Strategic marketing
C) Product engineering
D) Information technology (IT)
E) Forensic technology (FT)
Answer: D
Explanation: Information technology (IT) systems promote communication and information
usage through the company or allow companies to offer new services to their customers.
Difficulty: 2: Moderate
AACSB: Information technology
LO: 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 are
made, or its service is performed?
A) Operations
B) Finance
C) Distribution
D) Process R&D
E) Marketing
Answer: A
Explanation: Variously called manufacturing, production, or operations, this area is where the
company makes whatever it makes (for goods-producing businesses) or does whatever it does
(for service businesses).
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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 and
the outgoing flow of finished products.
A) finance
B) logistics
C) human resource
D) purchasing
E) sales
Answer: B
Explanation: Logistics involves coordinating the incoming flow of materials and the outgoing
flow of finished products.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.
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63) Which of the following activities would be a part of facilities management?
A) designing a new product
B) devising a marketing strategy
C) ensuring that the office building adheres to safety standards
D) delivering the finished product to the customer
E) maintaining demographic and contact details of potential customers
Answer: C
Explanation: Facilities management is responsible for everything from planning new buildings
to maintaining them.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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 customers
B) using social media to interact with customers
C) helping to promote products to retailers
D) creating branding and advertising strategies
E) arranging to buy the necessary materials for manufacturing
Answer: E
Explanation: In addition to supervising the actual production activity, operations managers are
responsible for a wide range of other strategies and decisions, including purchasing (arranging to
buy the necessary materials for manufacturing).
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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 would
fall under the ________ function of a business.
A) human resource
B) accounting
C) logistics
D) marketing
E) research and development
Answer: D
Explanation: Marketing is charged with identifying opportunities in the marketplace, working
with R&D to develop the products to address those opportunities, creating branding and
advertising strategies to communicate with potential customers, and setting prices.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.
63) Which of the following activities would be a part of facilities management?
A) designing a new product
B) devising a marketing strategy
C) ensuring that the office building adheres to safety standards
D) delivering the finished product to the customer
E) maintaining demographic and contact details of potential customers
Answer: C
Explanation: Facilities management is responsible for everything from planning new buildings
to maintaining them.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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 customers
B) using social media to interact with customers
C) helping to promote products to retailers
D) creating branding and advertising strategies
E) arranging to buy the necessary materials for manufacturing
Answer: E
Explanation: In addition to supervising the actual production activity, operations managers are
responsible for a wide range of other strategies and decisions, including purchasing (arranging to
buy the necessary materials for manufacturing).
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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 would
fall under the ________ function of a business.
A) human resource
B) accounting
C) logistics
D) marketing
E) research and development
Answer: D
Explanation: Marketing is charged with identifying opportunities in the marketplace, working
with R&D to develop the products to address those opportunities, creating branding and
advertising strategies to communicate with potential customers, and setting prices.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.
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66) The ________ function of a business involves the recruiting, hiring and support of its
personnel.
A) operations
B) finance
C) human resources
D) accounting
E) information technology
Answer: C
Explanation: The human resources (HR) function is responsible for recruiting, hiring,
developing, and supporting employees.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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 and
services that allow it to meet customer needs in competitive markets.
Answer: TRUE
Explanation: R&D fuels new ideas and designs for the company's products and services that
allow it to meet customer needs in competitive markets.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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 most
likely to be a part of the firm's operations management team.
Answer: FALSE
Explanation: A person responsible for a company's branding and marketing strategy will be part
of strategic management rather than operations management.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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 are
responsible for monitoring and reporting.
Answer: FALSE
Explanation: In general, financial managers are responsible for planning, while accounting
managers are responsible for monitoring and reporting.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.
66) The ________ function of a business involves the recruiting, hiring and support of its
personnel.
A) operations
B) finance
C) human resources
D) accounting
E) information technology
Answer: C
Explanation: The human resources (HR) function is responsible for recruiting, hiring,
developing, and supporting employees.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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 and
services that allow it to meet customer needs in competitive markets.
Answer: TRUE
Explanation: R&D fuels new ideas and designs for the company's products and services that
allow it to meet customer needs in competitive markets.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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 most
likely to be a part of the firm's operations management team.
Answer: FALSE
Explanation: A person responsible for a company's branding and marketing strategy will be part
of strategic management rather than operations management.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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 are
responsible for monitoring and reporting.
Answer: FALSE
Explanation: In general, financial managers are responsible for planning, while accounting
managers are responsible for monitoring and reporting.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.
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70) Companies that sell shares of stock to the public are required to have their financial records
audited by an outside accounting firm.
Answer: TRUE
Explanation: Companies that sell shares of stock to the public are required to have their financial
records audited by an outside accounting firm.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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 can
manufacture or perform for its customers. (2) Manufacturing, production, or operations is that
part of the company where the firm makes whatever it makes or performs whatever services it
performs. (3) The related group of functions in marketing, sales, distribution, and customer
support are responsible for identifying market opportunities, crafting the promotional strategies,
and making sure customers are supplied and satisfied with their purchases. (4) Finance and
accounting plan for the company's financial needs, control spending, and report on financial
matters. 5) The human resources (HR) function recruits, hires, develops, and supports
employees. (6) A variety of business services provides expertise in law, real estate, and other
areas.
Difficulty: 1: Easy
AACSB: Analytical thinking
LO: 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 a
business.
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 a
company can manufacture or perform for its customers. Companies can also engage in process
R&D to design new and better ways to run their operations.
Manufacturing, production, or operations is that part of the company where the firm makes
whatever it makes or performs whatever services it performs. In addition to supervising the
actual production activity, operations managers are responsible for a wide range of other
strategies and decisions, including purchasing (arranging to buy the necessary materials for
manufacturing), logistics (coordinating the incoming flow of materials and the outgoing flow of
finished products), and facilities management (everything from planning new buildings to
maintaining them).
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.
70) Companies that sell shares of stock to the public are required to have their financial records
audited by an outside accounting firm.
Answer: TRUE
Explanation: Companies that sell shares of stock to the public are required to have their financial
records audited by an outside accounting firm.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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 can
manufacture or perform for its customers. (2) Manufacturing, production, or operations is that
part of the company where the firm makes whatever it makes or performs whatever services it
performs. (3) The related group of functions in marketing, sales, distribution, and customer
support are responsible for identifying market opportunities, crafting the promotional strategies,
and making sure customers are supplied and satisfied with their purchases. (4) Finance and
accounting plan for the company's financial needs, control spending, and report on financial
matters. 5) The human resources (HR) function recruits, hires, develops, and supports
employees. (6) A variety of business services provides expertise in law, real estate, and other
areas.
Difficulty: 1: Easy
AACSB: Analytical thinking
LO: 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 a
business.
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 a
company can manufacture or perform for its customers. Companies can also engage in process
R&D to design new and better ways to run their operations.
Manufacturing, production, or operations is that part of the company where the firm makes
whatever it makes or performs whatever services it performs. In addition to supervising the
actual production activity, operations managers are responsible for a wide range of other
strategies and decisions, including purchasing (arranging to buy the necessary materials for
manufacturing), logistics (coordinating the incoming flow of materials and the outgoing flow of
finished products), and facilities management (everything from planning new buildings to
maintaining them).
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.4: Explain the purpose of the six major functional areas in a business enterprise.
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73) ________ audit the financial reports of public companies as required by law.
A) Internal accountants
B) External auditors
C) Credit managers
D) Management accountants
E) Forensic accountants
Answer: B
Explanation: Companies that sell shares of stock to the public are required to have their financial
records audited by an outside accounting firm.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
74) ________ encompasses all the people and processes used to create the goods and perform the
services that a company sells.
A) Sales and marketing
B) Information technology management
C) Human resources management
D) Operations management
E) Financial management
Answer: D
Explanation: Operations management encompasses all the people and processes used to create
the goods and perform the services that a company sells.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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 workforces
B) production monitoring
C) design, implement, and maintain information systems
D) file the annual tax returns for the company
E) verify the financial reports of public companies
Answer: A
Explanation: HR specialists and managers plan and direct human resource activities that include
recruiting, training and development, compensation and benefits, employee and labor relations,
and health and safety.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
73) ________ audit the financial reports of public companies as required by law.
A) Internal accountants
B) External auditors
C) Credit managers
D) Management accountants
E) Forensic accountants
Answer: B
Explanation: Companies that sell shares of stock to the public are required to have their financial
records audited by an outside accounting firm.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
74) ________ encompasses all the people and processes used to create the goods and perform the
services that a company sells.
A) Sales and marketing
B) Information technology management
C) Human resources management
D) Operations management
E) Financial management
Answer: D
Explanation: Operations management encompasses all the people and processes used to create
the goods and perform the services that a company sells.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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 workforces
B) production monitoring
C) design, implement, and maintain information systems
D) file the annual tax returns for the company
E) verify the financial reports of public companies
Answer: A
Explanation: HR specialists and managers plan and direct human resource activities that include
recruiting, training and development, compensation and benefits, employee and labor relations,
and health and safety.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
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25
76) A management accountant is likely to be responsible for which of the following activities?
A) purchasing raw material for production
B) assessing the manufacturing costs of new products
C) determining the prices of products
D) removing a distributor from the supply chain
E) determining the money allocated for marketing
Answer: B
Explanation: Management accountants are responsible for collecting, analyzing, and reporting
on financial matters–such as analyzing budgets, assessing the manufacturing costs of new
products, and preparing state and federal tax returns.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
77) Which of the following positions would be responsible for establishing the long-term
financial goals of the company, investing funds and raising capital?
A) credit manager
B) internal auditor
C) chief information officer
D) forensic accountant
E) finance officer
Answer: E
Explanation: Treasurers and finance officers have a more strategic role, establishing long-term
financial goals and budgets, investing the firm's funds, and raising capital as needed.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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 being
strategic and focused on global competition.
A) human resources
B) operations management
C) sales
D) marketing
E) accounting
Answer: A
Explanation: In the past, top executives and professionals in other functional areas sometimes
viewed HR as a tactical function concerned mostly with processing employee records and other
nonstrategic duties. However, in many companies, the HR function is becoming more strategic
and focused on the global competition to find, attract, and keep the best talent on the market.
Difficulty: 2: Moderate
AACSB: Analytical thinking
LO: 1.5: Summarize seven of the most important business professions.
76) A management accountant is likely to be responsible for which of the following activities?
A) purchasing raw material for production
B) assessing the manufacturing costs of new products
C) determining the prices of products
D) removing a distributor from the supply chain
E) determining the money allocated for marketing
Answer: B
Explanation: Management accountants are responsible for collecting, analyzing, and reporting
on financial matters–such as analyzing budgets, assessing the manufacturing costs of new
products, and preparing state and federal tax returns.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
77) Which of the following positions would be responsible for establishing the long-term
financial goals of the company, investing funds and raising capital?
A) credit manager
B) internal auditor
C) chief information officer
D) forensic accountant
E) finance officer
Answer: E
Explanation: Treasurers and finance officers have a more strategic role, establishing long-term
financial goals and budgets, investing the firm's funds, and raising capital as needed.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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 being
strategic and focused on global competition.
A) human resources
B) operations management
C) sales
D) marketing
E) accounting
Answer: A
Explanation: In the past, top executives and professionals in other functional areas sometimes
viewed HR as a tactical function concerned mostly with processing employee records and other
nonstrategic duties. However, in many companies, the HR function is becoming more strategic
and focused on the global competition to find, attract, and keep the best talent on the market.
Difficulty: 2: Moderate
AACSB: Analytical thinking
LO: 1.5: Summarize seven of the most important business professions.
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26
79) Because of the increasing importance of the field, most companies now employ ________ to
oversee the development of IT strategies for the organization.
A) web designers
B) chief information officers
C) systems specialists
D) technical specialist
E) IT managers
Answer: B
Explanation: Reflecting IT's strategic importance, many midsize and large companies now have
a chief information officer (CIO) position at the executive level to plot IT strategy.
Difficulty: 1: Easy
AACSB: Information technology
LO: 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 accountants
B) management accountants
C) internal auditors
D) external auditors
E) forensic accountants
Answer: C
Explanation: Internal auditors verify the work of the company's accounting effort and look for
opportunities to improve efficiency and cost-effectiveness.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
81) Who are those responsible for investigating financial crimes?
A) financial managers
B) controllers
C) external auditors
D) forensic accountants
E) treasurers
Answer: D
Explanation: Forensic accountants investigate financial crimes.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
79) Because of the increasing importance of the field, most companies now employ ________ to
oversee the development of IT strategies for the organization.
A) web designers
B) chief information officers
C) systems specialists
D) technical specialist
E) IT managers
Answer: B
Explanation: Reflecting IT's strategic importance, many midsize and large companies now have
a chief information officer (CIO) position at the executive level to plot IT strategy.
Difficulty: 1: Easy
AACSB: Information technology
LO: 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 accountants
B) management accountants
C) internal auditors
D) external auditors
E) forensic accountants
Answer: C
Explanation: Internal auditors verify the work of the company's accounting effort and look for
opportunities to improve efficiency and cost-effectiveness.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
81) Who are those responsible for investigating financial crimes?
A) financial managers
B) controllers
C) external auditors
D) forensic accountants
E) treasurers
Answer: D
Explanation: Forensic accountants investigate financial crimes.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
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27
82) Who has the strategic, long-term responsibility for raising funds for an organization when
needed?
A) financial managers
B) cash managers
C) credit managers
D) controllers
E) finance officers
Answer: E
Explanation: Treasurers and finance officers have a more strategic role, establishing long-term
financial goals and budgets, investing the firm's funds, and raising capital as needed.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
83) The chief information officer (CIO) is responsible for the preparation of income statements
and balance sheets.
Answer: FALSE
Explanation: Accountants and controllers are responsible for the preparation of income
statements, balance sheets, and other financial reports.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
84) Internal auditors verify the work of the company's accounting effort and look for
opportunities to improve efficiency and cost effectiveness.
Answer: TRUE
Explanation: Internal auditors verify the work of the company's accounting effort and look for
opportunities to improve efficiency and cost effectiveness.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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: TRUE
Explanation: Unlike accounting tasks, for which there is a long tradition of outsourcing, the
work of financial managers is generally kept in-house, particularly in midsize and large
companies. The work of a financial manager touches every part of the company, so a broad
understanding of the various functional areas in business is a key attribute for this position.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
82) Who has the strategic, long-term responsibility for raising funds for an organization when
needed?
A) financial managers
B) cash managers
C) credit managers
D) controllers
E) finance officers
Answer: E
Explanation: Treasurers and finance officers have a more strategic role, establishing long-term
financial goals and budgets, investing the firm's funds, and raising capital as needed.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
83) The chief information officer (CIO) is responsible for the preparation of income statements
and balance sheets.
Answer: FALSE
Explanation: Accountants and controllers are responsible for the preparation of income
statements, balance sheets, and other financial reports.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
84) Internal auditors verify the work of the company's accounting effort and look for
opportunities to improve efficiency and cost effectiveness.
Answer: TRUE
Explanation: Internal auditors verify the work of the company's accounting effort and look for
opportunities to improve efficiency and cost effectiveness.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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: TRUE
Explanation: Unlike accounting tasks, for which there is a long tradition of outsourcing, the
work of financial managers is generally kept in-house, particularly in midsize and large
companies. The work of a financial manager touches every part of the company, so a broad
understanding of the various functional areas in business is a key attribute for this position.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.5: Summarize seven of the most important business professions.
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28
86) What are the functions of HR specialists and managers? How has the role of the HR function
changed over time? Compare it with the functions of a chief information officer.
Answer: HR specialists and managers plan and direct human resource activities that include
recruiting, training and development, compensation and benefits, employee and labor relations,
and health and safety. Additionally, HR managers develop and implement human resources
systems and practices to accommodate a firm's strategy and to motivate and manage diverse
workforces. In the past, HR was seen by many as a lower-level function concerned mostly with
processing employee records and other tactical duties. However, in many companies, the HR
function is becoming more strategic and focused on the global competition to find, attract, and
keep the best talent on the market.
Like HR, information technology (IT) is evolving from a tactical support function to a critical
strategic component. Reflecting IT's strategic importance, many midsize and large companies
now have a chief information officer (CIO) position at the executive level to plot IT strategy.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.5: Summarize seven of the most important business professions.
87) ________ is the quality of performing at a high level and conducting oneself with purpose
and pride.
A) Business mindset
B) Professionalism
C) Job enrichment
D) Positive reinforcement
E) Etiquette
Answer: B
Explanation: Professionalism is the quality of performing at a high level and conducting oneself
with purpose and pride.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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: D
Explanation: Professionals don't talk negatively to their employers in front of customers or in
their personal blogs. When they have a problem, they solve it; they don't share it.
Difficulty: 2: Moderate
AACSB: Ethical understanding and reasoning
LO: 1.6: Identify seven components of professionalism.
86) What are the functions of HR specialists and managers? How has the role of the HR function
changed over time? Compare it with the functions of a chief information officer.
Answer: HR specialists and managers plan and direct human resource activities that include
recruiting, training and development, compensation and benefits, employee and labor relations,
and health and safety. Additionally, HR managers develop and implement human resources
systems and practices to accommodate a firm's strategy and to motivate and manage diverse
workforces. In the past, HR was seen by many as a lower-level function concerned mostly with
processing employee records and other tactical duties. However, in many companies, the HR
function is becoming more strategic and focused on the global competition to find, attract, and
keep the best talent on the market.
Like HR, information technology (IT) is evolving from a tactical support function to a critical
strategic component. Reflecting IT's strategic importance, many midsize and large companies
now have a chief information officer (CIO) position at the executive level to plot IT strategy.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.5: Summarize seven of the most important business professions.
87) ________ is the quality of performing at a high level and conducting oneself with purpose
and pride.
A) Business mindset
B) Professionalism
C) Job enrichment
D) Positive reinforcement
E) Etiquette
Answer: B
Explanation: Professionalism is the quality of performing at a high level and conducting oneself
with purpose and pride.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 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: D
Explanation: Professionals don't talk negatively to their employers in front of customers or in
their personal blogs. When they have a problem, they solve it; they don't share it.
Difficulty: 2: Moderate
AACSB: Ethical understanding and reasoning
LO: 1.6: Identify seven components of professionalism.
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29
89) The expected norms of behavior in a particular situation are referred to as ________.
A) etiquette
B) dependability
C) expectancy
D) energy
E) accountability
Answer: A
Explanation: Etiquette refers to the expected norms of behavior in any particular situation.
Difficulty: 2: Moderate
AACSB: Ethical understanding and reasoning
LO: 1.6: Identify seven components of professionalism.
90) Performing at a high level, and continuing to improve is an indication of ________ in one's
pursuit of professionalism.
A) being a team player
B) making ethical decisions
C) being dependable and accountable
D) maintaining a confident, positive outlook
E) striving to excel
Answer: E
Explanation: Not only do you have an ethical obligation to give your employer and your
customers your best effort, but excelling at each level in your career is the best way to keep
climbing up to new positions of responsibility.
Difficulty: 2: Moderate
AACSB: Ethical understanding and reasoning
LO: 1.6: Identify seven components of professionalism.
91) What should be done to improve communications and ensure the most effective
communications 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: A
Explanation: Give people useful information that is adapted to their specific needs.
Difficulty: 2: Moderate
AACSB: Analytical thinking
LO: 1.6: Identify seven components of professionalism.
89) The expected norms of behavior in a particular situation are referred to as ________.
A) etiquette
B) dependability
C) expectancy
D) energy
E) accountability
Answer: A
Explanation: Etiquette refers to the expected norms of behavior in any particular situation.
Difficulty: 2: Moderate
AACSB: Ethical understanding and reasoning
LO: 1.6: Identify seven components of professionalism.
90) Performing at a high level, and continuing to improve is an indication of ________ in one's
pursuit of professionalism.
A) being a team player
B) making ethical decisions
C) being dependable and accountable
D) maintaining a confident, positive outlook
E) striving to excel
Answer: E
Explanation: Not only do you have an ethical obligation to give your employer and your
customers your best effort, but excelling at each level in your career is the best way to keep
climbing up to new positions of responsibility.
Difficulty: 2: Moderate
AACSB: Ethical understanding and reasoning
LO: 1.6: Identify seven components of professionalism.
91) What should be done to improve communications and ensure the most effective
communications 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: A
Explanation: Give people useful information that is adapted to their specific needs.
Difficulty: 2: Moderate
AACSB: Analytical thinking
LO: 1.6: Identify seven components of professionalism.
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30
92) What should be done to limit your own filters and biases and to truly seek to improve the
communication process?
A) give facts rather than opinions
B) listen actively
C) clarify expectations
D) be concise and efficient
E) offer compelling arguments
Answer: B
Explanation: Active listening means making a conscious effort to turn off your own filters and
biases to truly hear and understand what someone else is saying.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.6: Identify seven components of professionalism.
93) Your professionalism, and how others view your efforts, is affected by your ________, and
is a vital element in promoting workplace harmony.
A) ethics
B) listening skills
C) personal demeanor
D) communication skills
E) level of teamwork
Answer: C
Explanation: Your energy, positive or negative, is contagious. Personal demeanor is therefore a
vital element of workplace harmony.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.6: Identify seven components of professionalism.
94) One of the best ways to establish yourself as professional, and to stand out from your
competition, is to ________.
A) improve your communication skills
B) have a strong commitment to ethics
C) have a professional demeanor
D) be accountable at all times
E) be a team player
Answer: A
Explanation: If you're looking for a surefire way to stand out from your competition and
establish yourself as a competent professional, improving your communication skills may be the
most important step you can take.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.6: Identify seven components of professionalism.
92) What should be done to limit your own filters and biases and to truly seek to improve the
communication process?
A) give facts rather than opinions
B) listen actively
C) clarify expectations
D) be concise and efficient
E) offer compelling arguments
Answer: B
Explanation: Active listening means making a conscious effort to turn off your own filters and
biases to truly hear and understand what someone else is saying.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.6: Identify seven components of professionalism.
93) Your professionalism, and how others view your efforts, is affected by your ________, and
is a vital element in promoting workplace harmony.
A) ethics
B) listening skills
C) personal demeanor
D) communication skills
E) level of teamwork
Answer: C
Explanation: Your energy, positive or negative, is contagious. Personal demeanor is therefore a
vital element of workplace harmony.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.6: Identify seven components of professionalism.
94) One of the best ways to establish yourself as professional, and to stand out from your
competition, is to ________.
A) improve your communication skills
B) have a strong commitment to ethics
C) have a professional demeanor
D) be accountable at all times
E) be a team player
Answer: A
Explanation: If you're looking for a surefire way to stand out from your competition and
establish yourself as a competent professional, improving your communication skills may be the
most important step you can take.
Difficulty: 3: Challenging
AACSB: Analytical thinking
LO: 1.6: Identify seven components of professionalism.
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Subject
Business Management