Better Business, 3e (Solomon)
Chapter 1 Business Basics
1) When a company's revenue is greater than its expenses, it means that ________.
A) the company earns a profit
B) the company spends more than it earns
C) the company's income is decreasing
D) the company needs to increase its spending
E) the company must increase its productivity
Answer: A
Explanation: A) 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. 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
Objective: 1-1 What are profits, and how do for-profit businesses, and not-for-profit
organizations compare?
Classification: Conceptual
Learning Outcome: Explain how economic performance is monitored
2) The physical products that a business offers are called ________.
A) goods
B) services
C) assets
D) devices
,E) intangible
Answer: A
Explanation: A) By definition, physical products that a business offers are called goods.
Services are nontangible 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
Objective: 1-2 What is the difference between a good and a service, and what are the
factors of production?
Classification: Conceptual
,3) Emma bought an MP3 player and a portable DVD player. These products are called
goods because ________.
A) they do a good job of satisfying a customer's needs
B) they are physical or tangible products
C) they are produced in an economical offshore factory
D) they can be sold either in a store or online
E) they are good at increasing a company's profit margin
Answer: B
Explanation: B) 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
Objective: 1-2 What is the difference between a good and a service, and what are the
factors of production?
Classification: Conceptual
4) Jose called an electrician to repair some appliances in his home. Which of the
following terms BEST describes the electrician's repairs?
A) a service
B) a good
C) a benefit
D) an appointment
E) a liability
Answer: A
, Explanation: A) 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 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
Objective: 1-2 What is the difference between a good and a service, and what are the
factors of production?
Classification: Conceptual
Chapter 1 Business Basics
1) When a company's revenue is greater than its expenses, it means that ________.
A) the company earns a profit
B) the company spends more than it earns
C) the company's income is decreasing
D) the company needs to increase its spending
E) the company must increase its productivity
Answer: A
Explanation: A) 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. 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
Objective: 1-1 What are profits, and how do for-profit businesses, and not-for-profit
organizations compare?
Classification: Conceptual
Learning Outcome: Explain how economic performance is monitored
2) The physical products that a business offers are called ________.
A) goods
B) services
C) assets
D) devices
,E) intangible
Answer: A
Explanation: A) By definition, physical products that a business offers are called goods.
Services are nontangible 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
Objective: 1-2 What is the difference between a good and a service, and what are the
factors of production?
Classification: Conceptual
,3) Emma bought an MP3 player and a portable DVD player. These products are called
goods because ________.
A) they do a good job of satisfying a customer's needs
B) they are physical or tangible products
C) they are produced in an economical offshore factory
D) they can be sold either in a store or online
E) they are good at increasing a company's profit margin
Answer: B
Explanation: B) 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
Objective: 1-2 What is the difference between a good and a service, and what are the
factors of production?
Classification: Conceptual
4) Jose called an electrician to repair some appliances in his home. Which of the
following terms BEST describes the electrician's repairs?
A) a service
B) a good
C) a benefit
D) an appointment
E) a liability
Answer: A
, Explanation: A) 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 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
Objective: 1-2 What is the difference between a good and a service, and what are the
factors of production?
Classification: Conceptual
