Business in Action, 10e (Bovee/Thill)
n n n n
Chapter 1 Developing a Business Mindset
n n n n n
1) is money that an organization brings in through the sale of its goods and services.
n n n n n n n n n n n n n n
A) Competitive advantage n
B) Revenue
C) Sales
D) Capital investment n
Answer: B
n n
Explanation: Revenue is the money a company brings in through the sale of goods and services.
n n n n n n n n n n n n n n n
Difficulty: 1: Easy
n n n
AACSB: Application of knowledge n n n n
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
n n n n n n n n n n n n n n n n
categorize businesses.
n n
2) Why is the link between risk and reward critical for a business?
n n n n n n n n n n n
A) It is a key aspect of social responsibility
n n n n n n n
B) It provides opportunities for not-for-profit organizations to stay in business
n n n n n n n n n
C) It is essential to the counter-cyclical business model
n n n n n n n
D) It provides incentive to take on the risk
n n n n n n n
Answer: D
n n
Explanation: Without the promise of rewards, businesses would have no incentive to take on
n n n n n n n n n n n n n
the risks. And without entrepreneurs and companies willing to accept risk, little would get done
n n n n n n n n n n n n n n n
in the economy.
n n n
Difficulty: 2: Moderate n n n
AACSB: Application of knowledge n n n n
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
n n n n n n n n n n n n n n n n
categorize businesses.
n n
3) A(n) is a framework of how a business intends to generate revenue.
n n n n n n n n n n n
A) business model n
B) strategic management tool n n
C) profitability analysis n
D) competitive advantage n
Answer: A
n n
Explanation: A company's business model is a clear, simple outline of how the business intends
n n n n n n n n n n n n n n
to generate revenue.
n n n
Difficulty: 1: Easy n n n
AACSB: Analytical thinking n n n
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
n n n n n n n n n n n n n n n n
categorize businesses.
n n
1
Copyright © 2024 Pearson Education, Inc.
,4) is the term used to describe the difference between revenue and expenses.
n n n n n n n n n n n
A) Profit
B) Interest
C) Sales
D) Owner's equity n
Answer: A
n n
Explanation: Profit is the amount of money left over after all the costs involved in doing
n n n n n n n n n n n n n n n
business, have been deducted from revenue.
n n n n n n
Difficulty: 1: Easy n n n
AACSB: Application of knowledge
n n n n
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
n n n n n n n n n n n n n n n n
categorize businesses.
n n
5) refers to some aspect of a product or company that makes it more appealing to
n n n n n n n n n n n n n n
target customers.
n n
A) Competitive advantage n
B) Economies of scale n n
C) Horizontal integration n
D) Vertical integration n
Answer: A
n n
Explanation: Competitive advantage refers to some aspect of a product or company that makes
n n n n n n n n n n n n n
it more appealing to target customers.
n n n n n n
Difficulty: 2: Moderate n n n
AACSB: Application of knowledge
n n n n
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
n n n n n n n n n n n n n n n n
categorize businesses.
n n
6) Which type of organization seeks to operate efficiently and effectively to achieve its goals
n n n n n n n n n n n n n
without focusing on profit as a motive?
n n n n n n n
A) Business intermediary n
B) Nonprofit organization n
C) Service business n
D) Goods-producing business n
Answer: B
n n
Explanation: Not-for-profit organizations (also known as nonprofit organizations) such as
n n n n n n n n n
museums, most universities, and charities do not have a profit motive.
n n n n n n n n n n n
Difficulty: 2: Moderate n n n
AACSB: Application of knowledge
n n n n
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
n n n n n n n n n n n n n n n n
categorize businesses.
n n
2
Copyright © 2024 Pearson Education, Inc.
,7) If individuals and companies believe they can pursue rewards without facing the risks that
n n n n n n n n n n n n n
should be attached to those pursuits, they are more likely to engage in irresponsible and even
n n n n n n n n n n n n n n n n
unethical behavior. This situation is known as a(n)
n n . n n n n n n n
A) moral hazard n
B) professional dilemma n
C) barrier to entry n n
D) competitive advantage n
Answer: A
n n
Explanation: If individuals and companies believe they can pursue rewards without facing the
n n n n n n n n n n n n
risks that should be attached to those pursuits, they are more likely to engage in irresponsible and
n n n n n n n n n n n n n n n n n
even unethical behavior–a situation known as moral hazard.
n n n n n n n n
Difficulty: 2: Moderate n n n
AACSB: Ethical understanding and reasoning
n n n n n
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
n n n n n n n n n n n n n n n n
categorize businesses.
n n
8) How do businesses generate revenue and satisfy the needs of the customers?
n n n n n n n n n n n
A) By continuously adding value during product creation
n n n n n n
B) By expanding geographic reach as often as possible
n n n n n n n
C) By limiting the flow of goods in the free-market economy
n n n n n n n n n
D) By offering products at the lowest prices possible
n n n n n n n
Answer: A
n n
Explanation: A good way to understand what any business does is to view it as a system for
n n n n n n n n n n n n n n n n n
satisfying customers by transforming lower-value inputs into higher-value outputs. At every
n n n n n n n n n n n
stage, a company adds value to create the product in a way that makes it appealing to the next
n n n n n n n n n n n n n n n n n n n
customer in the chain.
n n n n
Difficulty: 2: Moderate n n n
AACSB: Application of knowledge
n n n n
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
n n n n n n n n n n n n n n n n
categorize businesses.
n n
9) A business is any profit-seeking organization that provides goods and services designed to
n n n n n n n n n n n n
satisfy customers' needs.
n n n
Answer: TRUE n n
Explanation: In a general sense, business can be defined as any profit-seeking organization that
n n n n n n n n n n n n n
provides goods and services designed to satisfy customers' needs.
n n n n n n n n n
Difficulty: 1: Easy n n n
AACSB: Application of knowledge
n n n n
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
n n n n n n n n n n n n n n n n
categorize businesses.
n n
3
Copyright © 2024 Pearson Education, Inc.
, 10) Profit refers to the money the company brings in through the sale of goods and services.
n n n n n n n n n n n n n n n
Answer: FALSE
n n
Explanation: Profit is the amount of money left over after expenses–all the costs involved in
n n n n n n n n n n n n n n
doing business–have been deducted from revenue.
n n n n n n
Difficulty: 1: Easy n n n
AACSB: Application of knowledge
n n n n
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
n n n n n n n n n n n n n n n n
categorize businesses.
n n
11) Businesses add value by transforming lower-value inputs (like paper and ink) into higher-
n n n n n n n n n n n n
value outputs (like textbooks).
n n n n
Answer: TRUE n n
Explanation: Businesses add value by transforming lower-value inputs to higher-value
n n n n n n n n n
outputs. In other words, they make goods and services more attractive from the buyer's
n n n n n n n n n n n n n n
perspective.
n
Difficulty: 1: Easy n n n
AACSB: Application of knowledge
n n n n
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
n n n n n n n n n n n n n n n n
categorize businesses.
n n
12) In a free-market economy, companies generally have limited autonomy in deciding which
n n n n n n n n n n n
customers they want to focus on and how they want to compete.
n n n n n n n n n n n n
Answer: FALSE n n
Explanation: In a free-market economy, companies generally have considerable freedom in
n n n n n n n n n n
deciding which customers they want to focus on and how they want to compete.
n n n n n n n n n n n n n n
Difficulty: 2: Moderate n n n
AACSB: Application of knowledge
n n n n
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
n n n n n n n n n n n n n n n n
categorize businesses.
n n
13) A company has competitive advantage when its products are more appealing to its chosen
n n n n n n n n n n n n n
customers.
n
Answer: TRUE n n
Explanation: Competitive advantage makes a company's products or the company as a whole
n n n n n n n n n n n n
more appealing to its chosen customers.
n n n n n n
Difficulty: 1: Easy n n n
AACSB: Application of knowledge
n n n n
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
n n n n n n n n n n n n n n n n
categorize businesses.
n n
4
Copyright © 2024 Pearson Education, Inc.
n n n n
Chapter 1 Developing a Business Mindset
n n n n n
1) is money that an organization brings in through the sale of its goods and services.
n n n n n n n n n n n n n n
A) Competitive advantage n
B) Revenue
C) Sales
D) Capital investment n
Answer: B
n n
Explanation: Revenue is the money a company brings in through the sale of goods and services.
n n n n n n n n n n n n n n n
Difficulty: 1: Easy
n n n
AACSB: Application of knowledge n n n n
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
n n n n n n n n n n n n n n n n
categorize businesses.
n n
2) Why is the link between risk and reward critical for a business?
n n n n n n n n n n n
A) It is a key aspect of social responsibility
n n n n n n n
B) It provides opportunities for not-for-profit organizations to stay in business
n n n n n n n n n
C) It is essential to the counter-cyclical business model
n n n n n n n
D) It provides incentive to take on the risk
n n n n n n n
Answer: D
n n
Explanation: Without the promise of rewards, businesses would have no incentive to take on
n n n n n n n n n n n n n
the risks. And without entrepreneurs and companies willing to accept risk, little would get done
n n n n n n n n n n n n n n n
in the economy.
n n n
Difficulty: 2: Moderate n n n
AACSB: Application of knowledge n n n n
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
n n n n n n n n n n n n n n n n
categorize businesses.
n n
3) A(n) is a framework of how a business intends to generate revenue.
n n n n n n n n n n n
A) business model n
B) strategic management tool n n
C) profitability analysis n
D) competitive advantage n
Answer: A
n n
Explanation: A company's business model is a clear, simple outline of how the business intends
n n n n n n n n n n n n n n
to generate revenue.
n n n
Difficulty: 1: Easy n n n
AACSB: Analytical thinking n n n
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
n n n n n n n n n n n n n n n n
categorize businesses.
n n
1
Copyright © 2024 Pearson Education, Inc.
,4) is the term used to describe the difference between revenue and expenses.
n n n n n n n n n n n
A) Profit
B) Interest
C) Sales
D) Owner's equity n
Answer: A
n n
Explanation: Profit is the amount of money left over after all the costs involved in doing
n n n n n n n n n n n n n n n
business, have been deducted from revenue.
n n n n n n
Difficulty: 1: Easy n n n
AACSB: Application of knowledge
n n n n
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
n n n n n n n n n n n n n n n n
categorize businesses.
n n
5) refers to some aspect of a product or company that makes it more appealing to
n n n n n n n n n n n n n n
target customers.
n n
A) Competitive advantage n
B) Economies of scale n n
C) Horizontal integration n
D) Vertical integration n
Answer: A
n n
Explanation: Competitive advantage refers to some aspect of a product or company that makes
n n n n n n n n n n n n n
it more appealing to target customers.
n n n n n n
Difficulty: 2: Moderate n n n
AACSB: Application of knowledge
n n n n
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
n n n n n n n n n n n n n n n n
categorize businesses.
n n
6) Which type of organization seeks to operate efficiently and effectively to achieve its goals
n n n n n n n n n n n n n
without focusing on profit as a motive?
n n n n n n n
A) Business intermediary n
B) Nonprofit organization n
C) Service business n
D) Goods-producing business n
Answer: B
n n
Explanation: Not-for-profit organizations (also known as nonprofit organizations) such as
n n n n n n n n n
museums, most universities, and charities do not have a profit motive.
n n n n n n n n n n n
Difficulty: 2: Moderate n n n
AACSB: Application of knowledge
n n n n
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
n n n n n n n n n n n n n n n n
categorize businesses.
n n
2
Copyright © 2024 Pearson Education, Inc.
,7) If individuals and companies believe they can pursue rewards without facing the risks that
n n n n n n n n n n n n n
should be attached to those pursuits, they are more likely to engage in irresponsible and even
n n n n n n n n n n n n n n n n
unethical behavior. This situation is known as a(n)
n n . n n n n n n n
A) moral hazard n
B) professional dilemma n
C) barrier to entry n n
D) competitive advantage n
Answer: A
n n
Explanation: If individuals and companies believe they can pursue rewards without facing the
n n n n n n n n n n n n
risks that should be attached to those pursuits, they are more likely to engage in irresponsible and
n n n n n n n n n n n n n n n n n
even unethical behavior–a situation known as moral hazard.
n n n n n n n n
Difficulty: 2: Moderate n n n
AACSB: Ethical understanding and reasoning
n n n n n
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
n n n n n n n n n n n n n n n n
categorize businesses.
n n
8) How do businesses generate revenue and satisfy the needs of the customers?
n n n n n n n n n n n
A) By continuously adding value during product creation
n n n n n n
B) By expanding geographic reach as often as possible
n n n n n n n
C) By limiting the flow of goods in the free-market economy
n n n n n n n n n
D) By offering products at the lowest prices possible
n n n n n n n
Answer: A
n n
Explanation: A good way to understand what any business does is to view it as a system for
n n n n n n n n n n n n n n n n n
satisfying customers by transforming lower-value inputs into higher-value outputs. At every
n n n n n n n n n n n
stage, a company adds value to create the product in a way that makes it appealing to the next
n n n n n n n n n n n n n n n n n n n
customer in the chain.
n n n n
Difficulty: 2: Moderate n n n
AACSB: Application of knowledge
n n n n
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
n n n n n n n n n n n n n n n n
categorize businesses.
n n
9) A business is any profit-seeking organization that provides goods and services designed to
n n n n n n n n n n n n
satisfy customers' needs.
n n n
Answer: TRUE n n
Explanation: In a general sense, business can be defined as any profit-seeking organization that
n n n n n n n n n n n n n
provides goods and services designed to satisfy customers' needs.
n n n n n n n n n
Difficulty: 1: Easy n n n
AACSB: Application of knowledge
n n n n
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
n n n n n n n n n n n n n n n n
categorize businesses.
n n
3
Copyright © 2024 Pearson Education, Inc.
, 10) Profit refers to the money the company brings in through the sale of goods and services.
n n n n n n n n n n n n n n n
Answer: FALSE
n n
Explanation: Profit is the amount of money left over after expenses–all the costs involved in
n n n n n n n n n n n n n n
doing business–have been deducted from revenue.
n n n n n n
Difficulty: 1: Easy n n n
AACSB: Application of knowledge
n n n n
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
n n n n n n n n n n n n n n n n
categorize businesses.
n n
11) Businesses add value by transforming lower-value inputs (like paper and ink) into higher-
n n n n n n n n n n n n
value outputs (like textbooks).
n n n n
Answer: TRUE n n
Explanation: Businesses add value by transforming lower-value inputs to higher-value
n n n n n n n n n
outputs. In other words, they make goods and services more attractive from the buyer's
n n n n n n n n n n n n n n
perspective.
n
Difficulty: 1: Easy n n n
AACSB: Application of knowledge
n n n n
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
n n n n n n n n n n n n n n n n
categorize businesses.
n n
12) In a free-market economy, companies generally have limited autonomy in deciding which
n n n n n n n n n n n
customers they want to focus on and how they want to compete.
n n n n n n n n n n n n
Answer: FALSE n n
Explanation: In a free-market economy, companies generally have considerable freedom in
n n n n n n n n n n
deciding which customers they want to focus on and how they want to compete.
n n n n n n n n n n n n n n
Difficulty: 2: Moderate n n n
AACSB: Application of knowledge
n n n n
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
n n n n n n n n n n n n n n n n
categorize businesses.
n n
13) A company has competitive advantage when its products are more appealing to its chosen
n n n n n n n n n n n n n
customers.
n
Answer: TRUE n n
Explanation: Competitive advantage makes a company's products or the company as a whole
n n n n n n n n n n n n
more appealing to its chosen customers.
n n n n n n
Difficulty: 1: Easy n n n
AACSB: Application of knowledge
n n n n
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
n n n n n n n n n n n n n n n n
categorize businesses.
n n
4
Copyright © 2024 Pearson Education, Inc.
