Copyright 2024 Pearson Education, Inc.

1 Copyright © 2024 Pearson Education, Inc.Business in Action, 10e (Bovee/Thill) 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

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 four useful ways to categorize businesses.2) Why is the link between risk and reward critical for a business?

• It is a key aspect of social responsibility
• It provides opportunities for not-for-profit organizations to stay in business
• It is essential to the counter-cyclical business model
• It provides incentive to take on the risk

Answer: D

Explanation: Without the promise of rewards, businesses would have no incentive to take on the risks. And without entrepreneurs and companies willing to accept risk, little would get done in the economy.Difficulty: 2: Moderate

AACSB: Application of knowledge

LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses.3) A(n) ________ is a framework of how a business intends to generate revenue.

• business model
• strategic management tool
• profitability analysis
• competitive advantage

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 four useful ways to categorize businesses.Business in Action, 10e Courtland L. Bovee (Test Bank, 100% Original Verified, A+ Grade) 1 / 4

2 Copyright © 2024 Pearson Education, Inc.4) ________ is the term used to describe the difference between revenue and expenses.

• Profit
• Interest
• Sales
• Owner's equity

Answer: A

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 four useful ways to categorize 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

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 four useful ways to categorize businesses.

6) Which type of organization seeks to operate efficiently and effectively to achieve its goals without focusing on profit as a motive?

• Business intermediary
• Nonprofit organization
• Service business
• 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 four useful ways to categorize businesses.

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3 Copyright © 2024 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) ________.

• moral hazard
• professional dilemma
• barrier to entry
• competitive advantage

Answer: A

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 four useful ways to categorize businesses.

8) How do businesses generate revenue and satisfy the needs of the customers?

• By continuously adding value during product creation
• By expanding geographic reach as often as possible
• By limiting the flow of goods in the free-market economy
• By offering products at the lowest prices possible

Answer: A

Explanation: A good way to understand what any business does is to view it as a system for satisfying customers by transforming lower-value inputs into higher-value outputs. At every stage, a company adds value to create the product in a way that makes it appealing to the next customer in the chain.Difficulty: 2: Moderate

AACSB: Application of knowledge

LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to categorize businesses.

9) A 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 four useful ways to categorize businesses.

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4 Copyright © 2024 Pearson Education, Inc.10) 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 four useful ways to categorize businesses.

11) 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 four useful ways to categorize businesses.

12) 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 four useful ways to categorize businesses.

13) 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 four useful ways to categorize businesses.

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