Better Business, 7th Edition Test Bank – Solomon, Poatsy & Martin

Better Business, 7th Edition
Michael R. Solomon | Mary Anne Poatsy | Kendall Martin


TEST BANK

Includes All Chapters (1 to 16 + Mini Chap 1-5)


What’s Included?


• Complete Chapter-by-Chapter Test Bank - All Chapters

• Multiple Choice Questions (MCQs)

• True / False - T/F

• Short Essay Questions

,Better Business, 7e (Solomon)
Chapter 1 Business Basics (Part 1: Looking at the Business Environment)

1) Which of the following occurs when a company's revenue is greater than its expenses?
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 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

2) What category does car insurance fall under?
A) Good
B) Service
C) Capital
D) Entrepreneurial talent
E) Technology
Answer: B
Explanation: Insurance is an intangible product so it is considered a service.
Diff: 1
AACSB: Reflective Thinking
LO: 1.1: Define business and list the factors of production.
Classification: Concept




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,3) Emma bought a tablet and a smartphone. These products are called goods because they
________.
A) do a good job of satisfying a customer's needs
B) are physical and tangible products
C) are produced in an economical offshore factory
D) can be sold either in a store or online
E) 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 home appliances. Which of the following terms BEST
describes the electrician's repairs?
A) A service
B) A good
C) Capital
D) Intellectual property
E) Technology
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) A manufacturing plant
B) A green technology company
C) A university
D) A parts supplier
E) A restaurant
Answer: E
Explanation: Some companies offer products that are both goods and services. Take, for
example, a restaurant franchise. 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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, 6) What do profits allow a company to do?
A) Increase productivity
B) Lower employee wages
C) Control expenses
D) Eliminate factors of production
E) 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
LO: 1.1: Define business and list the factors of production.
Classification: Concept

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?
A) Pay for utilities and inventory in advance.
B) Develop a website that would enable customers to shop and place orders online.
C) Hire more staff.
D) Create an emergency fund.
E) 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

8) Which of the following describes how profits are used in a nonprofit organization?
A) To increase income for owners
B) To generate income in the economy
C) To expand social and community services
D) To reduce labor costs by investing in automation
E) To reward stakeholders
Answer: C
Explanation: Nonprofit organizations do not go into business to pursue profits for their owners.
Instead, a nonprofit 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


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