BUSN100 Midterm Practice Exam Set
Exam Practice Questions And Correct
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1. Which of the following best defines a business?
A. An organization that only manufactures goods
B. An organization that provides goods or services to earn a profit or fulfill
a mission
C. A government agency responsible for regulating trade
D. A nonprofit organization only
Rationale: A business is any organization that produces goods or services
for customers. While many businesses aim to earn profits, some
organizations also pursue social or charitable missions while operating in a
business environment.
2. Which economic system relies primarily on private ownership and
competition?
A. Command economy
B. Market economy
,C. Traditional economy
D. Socialist economy
Rationale: A market economy depends on private ownership, consumer
choice, and competition to determine production and pricing, with limited
government intervention.
3. Which of the following is an example of a service rather than a good?
A. Laptop computer
B. Smartphone
C. Office chair
D. Haircut
Rationale: Services are intangible activities performed for customers,
whereas goods are tangible products that can be seen and touched.
4. What is profit?
A. Total sales revenue
B. Total expenses minus revenue
C. Revenue remaining after all expenses are deducted
D. The value of business assets
Rationale: Profit represents the financial gain achieved after subtracting all
operating and non-operating expenses from total revenue.
5. Which business stakeholder purchases products and services?
A. Employees
B. Customers
C. Government regulators
D. Competitors
Rationale: Customers generate revenue for businesses by purchasing goods
and services, making them one of the most important stakeholder groups.
, 6. Which factor of production includes machinery and equipment?
A. Labor
B. Entrepreneurship
C. Capital
D. Land
Rationale: Capital consists of man-made resources such as equipment,
machinery, buildings, and technology used to produce goods and services.
7. Entrepreneurship primarily involves:
A. Supervising employees only
B. Identifying opportunities and taking business risks
C. Setting government regulations
D. Purchasing company stock
Rationale: Entrepreneurs organize resources, innovate, and assume
financial risks to establish and grow businesses.
8. Which function is responsible for attracting and retaining customers?
A. Accounting
B. Marketing
C. Human resources
D. Information technology
Rationale: Marketing identifies customer needs, develops products,
promotes offerings, and builds customer relationships.
9. What is scarcity?
A. Unlimited availability of resources
B. Limited resources relative to unlimited wants
C. Government regulation of production
D. Equal distribution of wealth
, Rationale: Scarcity exists because resources are finite while human wants
are virtually unlimited, requiring choices about resource allocation.
10. Which economic principle explains how consumers respond to
higher prices?
A. Law of diminishing returns
B. Law of demand
C. Law of supply
D. Comparative advantage
Rationale: The law of demand states that, all else being equal, consumers
buy less of a product as its price increases.
11. A decrease in supply with unchanged demand will most likely:
A. Lower prices
B. Increase prices
C. Eliminate competition
D. Increase unemployment
Rationale: When supply falls while demand remains constant, competition
among buyers increases, leading to higher prices.
12. Inflation refers to:
A. Falling interest rates
B. Declining business profits
C. A general increase in the prices of goods and services
D. Increased unemployment
Rationale: Inflation reduces purchasing power because consumers must
pay more for the same goods and services over time.
13. GDP measures:
Exam Practice Questions And Correct
Answers (Verified Answers) Plus
Rationale 2026 Q&A| Instant Download
1. Which of the following best defines a business?
A. An organization that only manufactures goods
B. An organization that provides goods or services to earn a profit or fulfill
a mission
C. A government agency responsible for regulating trade
D. A nonprofit organization only
Rationale: A business is any organization that produces goods or services
for customers. While many businesses aim to earn profits, some
organizations also pursue social or charitable missions while operating in a
business environment.
2. Which economic system relies primarily on private ownership and
competition?
A. Command economy
B. Market economy
,C. Traditional economy
D. Socialist economy
Rationale: A market economy depends on private ownership, consumer
choice, and competition to determine production and pricing, with limited
government intervention.
3. Which of the following is an example of a service rather than a good?
A. Laptop computer
B. Smartphone
C. Office chair
D. Haircut
Rationale: Services are intangible activities performed for customers,
whereas goods are tangible products that can be seen and touched.
4. What is profit?
A. Total sales revenue
B. Total expenses minus revenue
C. Revenue remaining after all expenses are deducted
D. The value of business assets
Rationale: Profit represents the financial gain achieved after subtracting all
operating and non-operating expenses from total revenue.
5. Which business stakeholder purchases products and services?
A. Employees
B. Customers
C. Government regulators
D. Competitors
Rationale: Customers generate revenue for businesses by purchasing goods
and services, making them one of the most important stakeholder groups.
, 6. Which factor of production includes machinery and equipment?
A. Labor
B. Entrepreneurship
C. Capital
D. Land
Rationale: Capital consists of man-made resources such as equipment,
machinery, buildings, and technology used to produce goods and services.
7. Entrepreneurship primarily involves:
A. Supervising employees only
B. Identifying opportunities and taking business risks
C. Setting government regulations
D. Purchasing company stock
Rationale: Entrepreneurs organize resources, innovate, and assume
financial risks to establish and grow businesses.
8. Which function is responsible for attracting and retaining customers?
A. Accounting
B. Marketing
C. Human resources
D. Information technology
Rationale: Marketing identifies customer needs, develops products,
promotes offerings, and builds customer relationships.
9. What is scarcity?
A. Unlimited availability of resources
B. Limited resources relative to unlimited wants
C. Government regulation of production
D. Equal distribution of wealth
, Rationale: Scarcity exists because resources are finite while human wants
are virtually unlimited, requiring choices about resource allocation.
10. Which economic principle explains how consumers respond to
higher prices?
A. Law of diminishing returns
B. Law of demand
C. Law of supply
D. Comparative advantage
Rationale: The law of demand states that, all else being equal, consumers
buy less of a product as its price increases.
11. A decrease in supply with unchanged demand will most likely:
A. Lower prices
B. Increase prices
C. Eliminate competition
D. Increase unemployment
Rationale: When supply falls while demand remains constant, competition
among buyers increases, leading to higher prices.
12. Inflation refers to:
A. Falling interest rates
B. Declining business profits
C. A general increase in the prices of goods and services
D. Increased unemployment
Rationale: Inflation reduces purchasing power because consumers must
pay more for the same goods and services over time.
13. GDP measures:
