Business in Action, 8e (Bovee)
Chapter 1 Developing a Business Mindset
1) is money that an organization brings in through the sale of its goods and services.
A) Competitive advantage
B) Revenue
C) Sales
D) Capital investment
E) Finance
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 the major types of
businesses.
2) The risk and reward relationship .
A) is a key aspect of social responsibility
B) applies only to service-intensive businesses
C) is essential to the counter-cyclical business model
D) is fundamental to businesses in every modern economy
E) is an outdated concept that's been replaced by corporate sustainability
Answer: D
Explanation: A company needs to see some promise of reward before it will decide to accept the
risks involved in creating and selling products. However, to ensure responsible behavior, these
risks need to stay attached to those decisions, meaning that if the decisions turn out bad, that
company should suffer the consequences.
Difficulty: 1: Easy
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
3) A(n) is a framework of how a business intends to generate revenue.
A) business model
B) strategic management tool
C) profitability analysis
D) competitive advantage
E) entrepreneurial mindset
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 the major types of
businesses.
1
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,4) is the term used to describe the difference between revenue and expenses.
A) Revenue
B) Interest
C) Sales
D) Owner's equity
E) Profit
Answer: E
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 the major types of
businesses.
5) refers to some aspect of a product or company that makes it more appealing to
target customers.
A) Competitive advantage
B) Economies of scale
C) Horizontal integration
D) Vertical integration
E) Barrier to entry advantage
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 the major types of
businesses.
6) An organization that seeks to operate efficiently and effectively to achieve its goals without
focusing on profit as a motive is a .
A) business intermediary
B) nonprofit organization
C) service business
D) government-owned corporation
E) 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 the major types of
businesses.
2
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,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) .
A) ethical dilemma
B) professional dilemma
C) barrier to entry
D) competitive advantage
E) moral hazard
Answer: E
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 the major types of
businesses.
8) A creates value by performing activities that provide benefit to the customer.
A) goods-producing business
B) manufacturing business
C) service business
D) merchandising business
E) not-for-profit organization
Answer: C
Explanation: Service businesses create value by performing activities that deliver some benefit
to the customer, such as finance, insurance, transportation, construction, utilities, wholesale and
retail trade, banking, entertainment, health care, maintenance and repair, and information.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
9) Businesses that need very large amounts of money, equipment, or other material resources in
order to get started are businesses.
A) service sector
B) labor-intensive
C) competitively-advantaged
D) not-for-profit
E) capital-intensive
Answer: E
Explanation: Because they require large amounts of money, equipment, land, and other
resources to get started and to operate, goods-producing businesses are often capital-intensive
businesses.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
3
Copyright © 2017 Pearson Education, Inc.
, 10) What type of business tends to be labor intensive, relying more on human resources than
material resources?
A) goods producing
B) service
C) not-for-profit
D) competitively disadvantaged
E) manufacturing
Answer: B
Explanation: Service businesses tend to be labor-intensive businesses, in that they rely more on
human resources than buildings, machinery, and equipment to prosper.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
11) refers to a resource or capability a company must have before it can start
competing in a given market.
A) Assets
B) Economies of scale
C) Barriers to entry
D) Technological requirements
E) Fixed costs
Answer: C
Explanation: Barrier to entry is a resource or capability a company must have before it can start
competing in a given market.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
12) 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 the major types of
businesses.
4
Copyright © 2017 Pearson Education, Inc.
Chapter 1 Developing a Business Mindset
1) is money that an organization brings in through the sale of its goods and services.
A) Competitive advantage
B) Revenue
C) Sales
D) Capital investment
E) Finance
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 the major types of
businesses.
2) The risk and reward relationship .
A) is a key aspect of social responsibility
B) applies only to service-intensive businesses
C) is essential to the counter-cyclical business model
D) is fundamental to businesses in every modern economy
E) is an outdated concept that's been replaced by corporate sustainability
Answer: D
Explanation: A company needs to see some promise of reward before it will decide to accept the
risks involved in creating and selling products. However, to ensure responsible behavior, these
risks need to stay attached to those decisions, meaning that if the decisions turn out bad, that
company should suffer the consequences.
Difficulty: 1: Easy
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
3) A(n) is a framework of how a business intends to generate revenue.
A) business model
B) strategic management tool
C) profitability analysis
D) competitive advantage
E) entrepreneurial mindset
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 the major types of
businesses.
1
Copyright © 2017 Pearson Education, Inc.
,4) is the term used to describe the difference between revenue and expenses.
A) Revenue
B) Interest
C) Sales
D) Owner's equity
E) Profit
Answer: E
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 the major types of
businesses.
5) refers to some aspect of a product or company that makes it more appealing to
target customers.
A) Competitive advantage
B) Economies of scale
C) Horizontal integration
D) Vertical integration
E) Barrier to entry advantage
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 the major types of
businesses.
6) An organization that seeks to operate efficiently and effectively to achieve its goals without
focusing on profit as a motive is a .
A) business intermediary
B) nonprofit organization
C) service business
D) government-owned corporation
E) 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 the major types of
businesses.
2
Copyright © 2017 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) .
A) ethical dilemma
B) professional dilemma
C) barrier to entry
D) competitive advantage
E) moral hazard
Answer: E
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 the major types of
businesses.
8) A creates value by performing activities that provide benefit to the customer.
A) goods-producing business
B) manufacturing business
C) service business
D) merchandising business
E) not-for-profit organization
Answer: C
Explanation: Service businesses create value by performing activities that deliver some benefit
to the customer, such as finance, insurance, transportation, construction, utilities, wholesale and
retail trade, banking, entertainment, health care, maintenance and repair, and information.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
9) Businesses that need very large amounts of money, equipment, or other material resources in
order to get started are businesses.
A) service sector
B) labor-intensive
C) competitively-advantaged
D) not-for-profit
E) capital-intensive
Answer: E
Explanation: Because they require large amounts of money, equipment, land, and other
resources to get started and to operate, goods-producing businesses are often capital-intensive
businesses.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
3
Copyright © 2017 Pearson Education, Inc.
, 10) What type of business tends to be labor intensive, relying more on human resources than
material resources?
A) goods producing
B) service
C) not-for-profit
D) competitively disadvantaged
E) manufacturing
Answer: B
Explanation: Service businesses tend to be labor-intensive businesses, in that they rely more on
human resources than buildings, machinery, and equipment to prosper.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
11) refers to a resource or capability a company must have before it can start
competing in a given market.
A) Assets
B) Economies of scale
C) Barriers to entry
D) Technological requirements
E) Fixed costs
Answer: C
Explanation: Barrier to entry is a resource or capability a company must have before it can start
competing in a given market.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify the major types of
businesses.
12) 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 the major types of
businesses.
4
Copyright © 2017 Pearson Education, Inc.
