Copyright 2023 Pearson Education, Inc.

1 Copyright © 2023 Pearson Education, Inc.Better Business, 6e (Solomon/Poatsy/Martin) Chapter 1 Business Basics 1) Which of the following occurs when company's revenue is greater than its expenses?

• 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) What are the physical products that a business offers referred to as?

• Goods
• Services
• Assets
• 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, 6e Michael Solomon, Mary Anne Poatsy, Kendall Martin (Test Bank All Chapters, 100% Original Verified, A+ Grade) 1 / 4

2 Copyright © 2023 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 and 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. 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
• Telecommuting
• Intellectual property
• E-commerce

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.

Diff: 1

AACSB: Reflective Thinking

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

Classification: Application

5) Some companies offer products that are both goods and services. Which of the following is an example of a company that offers products that are both goods and services?

• A manufacturing plant
• A green technology company
• A university
• A parts supplier
• A restaurant

Answer: E

Explanation: Some companies offer products that are both goods and services. Take, for example, a restaurant franchises. When you order food, you're paying for the goods (the food) as well as the service of preparing, cooking, and serving the food.

Diff: 2

AACSB: Application of Knowledge

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

Classification: Application

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3 Copyright © 2023 Pearson Education, Inc.6) What do profits allow a company to do?

• Increase productivity
• Lower employee wages
• Control expenses
• Eliminate factors of production
• Eliminate competitors

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.

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

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.

Diff: 3

AACSB: Analytical Thinking

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

Classification: Application

Learning Outcome: Explain how economic performance is monitored

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4 Copyright © 2023 Pearson Education, Inc.8) Which of the following describes how profits are used in a non-profit organization?

• To increase income for owners
• To generate income in the economy
• To expand services
• To reduce labor costs
• To reward stakeholders

Answer: C

Explanation: Non-profit organizations do not go into business to pursue profits for their owners.Instead, a non-profit organization seeks to serve its community through social, educational, or political means. Any profits they generate are used to further the organizations' causes by expanding the services they provide.

Diff: 2

AACSB: Application of Knowledge

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

Classification: Concept

Learning Outcome: Explain how economic performance is monitored

9) Which of the following include all the various resources used to create a company's goods and services?

• Raw materials
• Factors of production
• Supplies
• Inventory
• Intellectual property

Answer: B

Explanation: Factors of production are the resources used to produce goods and services. They include six factors: labor, natural resources, capital, entrepreneurial talent, technology, and intellectual property. Raw materials, supplies, inventory, and intellectual property might be included in the natural resources factor, but do not encompass all the resources needed for production.

Diff: 1

AACSB: Reflective Thinking

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

Classification: Concept

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