Answers will vary. Potential student responses may include communication, technical, or

Chapter 1

• In your own words, describe what you have to offer to a potential

employee of a company that you desire to work for.

Correct Answer:

Answers will vary. Potential student responses may include communication, technical, or computer skills. They may provide specific skills such as accounting or auditing experience or education, expertise with Microsoft Office including Excel and/or Access, or expertise in social media and social networking. Students may mention internship experience or quality experience while completing their degree.

• How can online networking improve your chances of success in the

business world?

Correct Answer:

Answers will vary. It may be best to make the most of online networking by identifying and joining sites where you can connect with prospective employers, current and former classmates, and others who may help you spread the word of a job search. Online networking can also advance your career by being a part of sites such as Facebook, Twitter, and LinkedIn, among others.

• An entrepreneur combines four kinds of resources into a business.

What would be the effect on the business if any one were left out?

Correct Answer:

The four kinds of resources include material resources (raw materials), human resources (people), financial resources (capital and money), and informational resources (information to make decisions and to evaluate a firm’s activities). Every business must work to organize these four resources. If one resource is not available or is left out, the business will, most likely, fail since it is the combination and balancing of the four resources that creates business success. For example, a manufacturer cannot produce products if there are no raw materials. And the other three resources are just as important.

• What is profit and why is it important to a business?

Correct Answer:

Profit is what remains after all business expenses have been deducted from sales revenue. Sales revenue is the money received from customers in exchange for goods or services. In addition, all businesses have expenses which are deducted from revenue, thus, leaving the profit. A negative profit, called a loss, cannot be sustained long term for a business to survive. If a firm is operating at a loss, management must take action to eliminate the loss, increase sales, and reduce expenses or the firm may be forced to file for bankruptcy protection or go out of business.

• What three activities must a business perform in order to be

successful? Briefly describe each of these and why each is essential to business success.(Foundations of Business, 5e William Pride, Robert Hughes, Jack Kapoor) (Test Bank all Chapters) 1 / 4

Correct Answer:

A business is the organized effort of individuals to produce and sell, for a profit, the goods and services that satisfy society’s needs. For a business to be successful, it must (1) be organized; (2) make a profit on the goods or services it sells to its customers; and (3) meet the needs of its customers. If one or more of the three elements is missing, the business will not be a success.

• Why do we say that the U.S. economy is a mixed ec onomy?

Correct Answer:

The United States economy exhibits elements of both capitalism and socialism, and, therefore, can be deemed a mixed economy. The U.S. government, for example, participates in the economy as more than simply an umpire or rule maker. The U.S. government participates in the four basic economic questions—what, how, for whom, and who. For example, the government is involved in public schools, social services including subsidized childcare or job-search assistance, and public-private partnerships such as with hospitals or research institutes.

• Why is productivity important? How can a nation's productivity rate

be improved?

Correct Answer:

Productivity is the average level of output per worker per hour. An increase in productivity results in economic growth because a larger number of goods and services are produced by the labor force. Increased productivity growth helps an economy’s businesses to compete more effectively in the global environment due to more goods or services being produced at a lower cost.Productivity rates can be improved through technology, advanced employee training, as well as transferring routine functions to other locations, possibly through the Internet.

• A nation's economy fluctuates instead of growing at a steady pace

every year. These fluctuations are generally referred to as the business cycle. Describe the four different phases of the business cycle.

Correct Answer:

The business cycle generally includes four phases: the peak, sometimes called prosperity; recession, two or more consecutive three-month periods of decline in a country’s GDP; the trough, the turning point when a nation’s production and employment bottom out and reach their lowest levels; and recovery, sometimes called expansion.

• In perfect competition, who sets the price of a product?

Correct Answer:

In perfect competition, there are many buyers and sellers of a product or service and no single buyer or seller is powerful enough to affect prices. Therefore, the actions of buyers sets the price of a product since, in theory, all products are the same and buyers will pay the lowest price for the same products.

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• Describe how supply and demand affect the price of a product.

Correct Answer:

The supply of a product is the quantity of the product that producers are willing to sell at each of various prices. Suppliers supply more product when consumers are willing to pay a higher price.The demand for a product is the quantity that buyers are willing to purchase at various prices.Buyers demand more when a price is low. Shifts in demand for a product raise and lower the market price. Also, a change in the supply of a product can cause a change in the price for the product.

• In a monopolistic competition setting, how can a manufactur er

differentiate a product?

Correct Answer:

Sellers attempt to differentiate their product or service so it is attractive to consumers. Product differentiation is the process of developing and promoting differences between one’s products and all competitive products. For example, sellers provide unique product features, attention- getting brand or product names, unique and attractive packaging, and services such as free delivery or a lifetime warranty.

• How does a monopoly have complete control over the price of its

product?

Correct Answer:

A monopoly has some control over the price of its product because it is the only firm in the industry. No firm, however, can set its price at some astronomical figure simply due to lack of competition. The firm would find that no customers would be willing to pay an exorbitant price.Therefore, the firm in a monopoly position must consider the demand for its product and set the price at the most profitable level.

• What effect did the Industrial Revolution and the golden age of

invention have on the development of American business?

Correct Answer:

In the late 1700s, the factory system of manufacturing was born in which all materials, machinery, and workers required to manufacture a product were assembled in one place.Specialization was also introduced during the Industrial Revolution. Specialization is the separation of a manufacturing process into distinct tasks and the assignment of different tasks to different individuals. The years of 1820 to 1900 were considered the golden age of invention and innovation in machinery. Many basic characteristics of the modern business system took form during these time periods.

• All of the following are material resources for Toyota Motor Company except

• paint.
• steel.
• factory. 3 / 4

• tires.

*e. money.

• The monetary contributions that the owners of IBM pay for shares of the company's stock

are ____ resources for IBM.

• material

*b. financial

• informational
• human
• manufacturing

• Mondie Weller decides to start a residential landscaping business. How would this business

most likely be classified?

• Manufacturing business
• Marketing intermediary

*c. Service business

• Corporation
• Nonprofit organization

• Best Buy stores would most likely be classified as

• service businesses.
• sole proprietorships.

*c. a marketing intermediary.

• manufacturing establishments.
• perfect competition.

• The ultimate objective of every firm, such as IBM, Hewlett-Packard, JC Penney

• sell either to other firms or to consumers.

*b. satisfy the needs of its customers.

• pay out money to cover the various expenses of doing business.
• know that people generally buy a product and store it.
• make it impossible to satisfy customers.

• The relationship between sales and profits can be written as

• sales revenues + expenses = profit.
• loss + profit = sales revenue.
• profit − expenses = sales revenue.
• expenses + loss = sales revenue + profit.
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