Copyright 2017 Pearson Education, Inc.

1 Copyright © 2017 Pearson Education, Inc.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.

• Competitive advantage
• Revenue
• Sales
• Capital investment
• 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 responsibilityB) applies only to service-intensive businessesC) is essential to the counter-cyclical business modelD) is fundamental to businesses in every modern economyE) is an outdated concept that's been replaced by corporate sustainabilityAnswer: DExplanation: A company needs to see some promise of reward before it will decide to accept therisks involved in creating and selling products. However, to ensure responsible behavior, theserisks need to stay attached to those decisions, meaning that if the decisions turn out bad, 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 modelB) strategic management toolC) profitability analysisD) competitive advantageE) 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 Courtland Bovee (Test Bank, 100% Original Verified, A+ Grade) 1 / 4

2 Copyright © 2017 Pearson Education, Inc.4) ________ is the term used to describe the difference between revenue and expenses.

• Revenue
• Interest
• Sales
• Owner's equity
• 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.

• Competitive advantage
• Economies of scale
• Horizontal integration
• Vertical integration
• 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 ________.

• business intermediary
• nonprofit organization
• service business
• government-owned corporation
• 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

3 Copyright © 2017 Pearson Education, Inc.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) ________.

• ethical dilemma
• professional dilemma
• barrier to entry
• competitive advantage
• 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.

• goods-producing business
• manufacturing business
• service business
• merchandising business
• 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.

• service sector
• labor-intensive
• competitively-advantaged
• not-for-profit
• 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. 3 / 4

4 Copyright © 2017 Pearson Education, Inc.10) What type of business tends to be labor intensive, relying more on human resources than material resources?

• goods producing
• service
• not-for-profit
• competitively disadvantaged
• 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.

• Assets
• Economies of scale
• Barriers to entry
• Technological requirements
• 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.

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