Copyright 2018 Pearson Education, Inc.

1 Copyright © 2018 Pearson Education, Inc.Better Business, 5e (Solomon/Poatsy/Martin) Chapter 1 Business Basics 1) When a company's revenue is greater than its expenses, it means that ________.

• the company earns a profit
• the company spends more than it earns
• the company's income is decreasing
• the company needs to increase its spending
• the company must increase its productivity

Answer: A

Explanation: A company earns a profit when it takes in more revenue (earnings) than it spends.If a company spends more than it earns, it does not make a profit. Instead, it suffers a loss. A company can make a profit even if its income is decreasing, as long as its earnings continue to exceed its expenses. A profitable company may or may not need to increase its spending, depending on its business goals.

Diff: 1

AACSB: Reflective Thinking

LO: 1.1: Define business and list the factors of production.

Classification: Concept

Learning Outcome: Explain how economic performance is monitored

2) The physical products that a business offers are called ________.A) goodsB) servicesC) assetsD) devices

• intangible

Answer: A

Explanation: By definition, physical products that a business offers are called goods.Services are intangible products, for example, hair styling or bookkeeping. A physical product may be an asset to the business or the purchaser, but it is a more general term that could include any valuable product or aspect of the business. A device is a physical product, but not all physical products are devices. For instance, pizza would be considered a physical product, but a pizza is not a device.

Diff: 1

AACSB: Reflective Thinking

LO: 1.1: Define business and list the factors of production.

Classification: Concept

Better Business, 5e Michael Solomon, Mary Anne Poatsy, Kendall Martin (Test Bank All Chapters, 100% Original Verified, A+ Grade) 1 / 4

2 Copyright © 2018 Pearson Education, Inc.3) Emma bought a tablet and a smartphone. These products are called goods because ________.

• they do a good job of satisfying a customer's needs
• they are physical or tangible products
• they are produced in an economical offshore factory
• they can be sold either in a store or online
• they are good at increasing a company's profit margin

Answer: B

Explanation: Goods are physical or tangible products offered by a business. They may or may not do a good job of satisfying a customer's needs, although they must do so if a business is to be successful. Goods are typically produced in a factory, but not in any particular location. It is true that goods can be sold either in a store or online, or by other means, such as direct marketing.However, other business offerings, such as services, can also be sold in a store or online.

Diff: 1

AACSB: Reflective Thinking

LO: 1.1: Define business and list the factors of production.

Classification: Application

4) Jose called an electrician to repair some appliances in his home. Which of the following terms BEST describes the electrician's repairs?

• a service
• a good
• a benefit
• an appointment
• a liability

Answer: A

Explanation: An electrical repair is an example of a nontangible business product called a service. An electrical repair is not a good, which is a tangible physical product. Although the repair might involve the installation of a physical product, or good, the primary offering of the electrician is the service he or she provides by coming to a location, identifying the problem, and if necessary, making a repair. Such a service may be a benefit to the customer, but any business offering, physical or nontangible, could be a benefit. Although electricians typically provide services by appointment, "appointment" does not define the type of product the electrician provides.

Diff: 1

AACSB: Reflective Thinking

LO: 1.1: Define business and list the factors of production.

Classification: Application

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3 Copyright © 2018 Pearson Education, Inc.5) Chris orders a salad at a restaurant. What is the BEST definition of what he is buying?

• Chris is buying a good.
• Chris is buying a service.
• Chris is buying a service, but not a good.
• Chris is buying neither a good nor a service.
• Chris is buying both a good and a service.

Answer: E

Explanation: Chris is buying a combination of products offered by the restaurant. He is buying a good (the salad) as well as the services of preparing and serving the salad.

Diff: 1

AACSB: Reflective Thinking

LO: 1.1: Define business and list the factors of production.

Classification: Application

6) Profits allow a company to ________.

• increase productivity
• lower employee wages
• reduce its span of operations
• disregard concern about expenses
• lower standards of living for the entire society

Answer: A

Explanation: Profits allow a company to reward employees, increase productivity, and expand into new areas. To maintain productivity, a company would need to remain concerned about controlling expenses, and maintain or increase employee wages. Profits would be likely to allow for growth in its operations, not a reduction.

Diff: 2

AACSB: Reflective Thinking, Analytical Thinking

LO: 1.1: Define business and list the factors of production.

Classification: Concept

Learning Outcome: Explain how economic performance is monitored

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4 Copyright © 2018 Pearson Education, Inc.7) Nina's furniture store has had a successful year and made a significant profit. Which of the following actions using Nina's store profits would BEST increase productivity?

• Pay for utilities and inventory in advance.
• Develop a website that would enable customers to shop and place orders online.
• Hire more staff.
• Create an emergency fund.
• Service her community through social and educational means.

Answer: B

Explanation: A website with an online shopping function would increase productivity by generating sales without requiring additional staff time. It might also provide more options for customers, since the online store could carry more items than could be viewed in the store.Hiring more staff could reduce productivity by increasing the labor costs associated with selling items. Paying for expenses in advance or creating an emergency fund would have neither a positive nor negative impact on productivity. While serving her community is a positive, it will not have a direct impact on productivity.

Diff: 3

AACSB: Reflective Thinking

LO: 1.1: Define business and list the factors of production.

Classification: Application

Learning Outcome: Explain how economic performance is monitored

8) Which of the following statements is TRUE of a not-for-profit organization?

• It pursues profits for its owners.
• It does not pay expenses.
• It can earn excess revenue.
• It cannot operate like a business.
• It rewards the proprietor of the organization with earned profits.

Answer: C

Explanation: These organizations do not go into business to pursue profits for their owners. Any excess revenue they generate is used to further the organizations' causes by expanding the services they provide.

Diff: 2

AACSB: Reflective Thinking

LO: 1.1: Define business and list the factors of production.

Classification: Concept

Learning Outcome: Explain how economic performance is monitored

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