BUS 115 W07 Midterm Exam (Remotely
Proctored) | Questions and Answers |
2026/2027 Updated | 100% Correct - BYU.
Practice Question Bank & Answer Rationale
THIS PACK CONTAINS
150 exam-style multiple-choice questions. Each question includes the correct answer and a complete
rationale for focused revision.
COVERAGE
This midterm exam assesses foundational business concepts across the functional areas of business,
including the economic and global environments, forms of business ownership, entrepreneurship,
management and organizational structure, marketing, operations, accounting and financial management, and
business ethics and law. Questions emphasize application of core terminology and principles to realistic
business scenarios in the contemporary 2026 business environment.
STUDY GUIDE
Recommended duration: 2 hours (remotely proctored). Passing target: 70% (C- or higher; A+ target 97%).
HIGHP - Page 1 of 47
,1. A regional coffee chain reduces its workforce and shifts more order-taking to
self-service kiosks while keeping output steady. This best illustrates which economic
concept?
[ ] A. Economies of scale
[ ] B. Labor productivity improvement
[ ] C. Diminishing marginal returns
[ ] D. Structural unemployment increase
CORRECT: B. Labor productivity improvement
Producing the same output with less labor raises output per worker, which is the definition of improved labor
productivity. Economies of scale (A) refer to cost advantages from larger scale, not reduced labor input.
Diminishing returns (C) concerns added inputs yielding less extra output, and structural unemployment (D) is
a labor-market outcome, not the productivity concept illustrated.
2. Two entrepreneurs want to raise capital from many investors, limit personal liability,
and avoid double taxation. Which ownership form best matches these goals?
[ ] A. General partnership
[ ] B. S corporation
[ ] C. Sole proprietorship
[ ] D. C corporation
CORRECT: B. S corporation
An S corporation provides limited liability and pass-through taxation while allowing multiple shareholders,
avoiding the double taxation of a C corporation. A general partnership (A) exposes partners to unlimited
liability, a sole proprietorship (C) cannot have many investors, and a C corporation (D) faces double taxation.
3. Which management function is primarily demonstrated when a manager assigns
specific tasks, allocates resources, and establishes reporting relationships among team
members?
[ ] A. Planning
[ ] B. Controlling
[ ] C. Organizing
[ ] D. Leading
CORRECT: C. Organizing
Organizing involves arranging resources, tasks, and authority relationships to implement plans. Planning (A)
sets goals and strategies, controlling (B) monitors and corrects performance, and leading (D) focuses on
motivating and influencing people.
HIGHP - Page 2 of 47
,4. A firm segments its market, targets young urban professionals, and emphasizes
eco-friendly packaging in its messaging. These activities are part of which marketing mix
element?
[ ] A. Product
[ ] B. Price
[ ] C. Place
[ ] D. Promotion
CORRECT: D. Promotion
Segmentation, targeting, and positioning messages are communication activities that fall under promotion in
the marketing mix. Product (A) concerns the offering itself, price (B) concerns the monetary exchange, and
place (C) concerns distribution channels.
5. A company reports current assets of $500,000 and current liabilities of $250,000. What is
its current ratio, and what does it indicate?
[ ] A. 0.5; weak short-term liquidity
[ ] B. 2.0; strong short-term liquidity
[ ] C. 2.5; excessive long-term debt
[ ] D. 1.5; adequate profitability
CORRECT: B. 2.0; strong short-term liquidity
Current ratio = current assets ÷ current liabilities = $500,000 ÷ $250,000 = 2.0, indicating the firm has twice
the short-term assets needed to cover short-term obligations. Option A reverses the ratio, C miscalculates
and misstates the metric, and D uses an incorrect value and refers to profitability rather than liquidity.
6. Which of the following best describes the primary purpose of a company's mission
statement?
[ ] A. To specify quarterly financial targets
[ ] B. To define its fundamental purpose and reason for existence
[ ] C. To list all products currently offered
[ ] D. To detail operational procedures for employees
CORRECT: B. To define its fundamental purpose and reason for existence
A mission statement articulates the organization's core purpose, values, and reason for existing, guiding
strategy and decision-making. Financial targets (A) belong in goals or budgets, product lists (C) are tactical,
and operational procedures (D) belong in manuals or policies.
7. A manufacturer uses just-in-time inventory, lean production, and continuous
improvement to reduce waste. These practices are most associated with which operations
approach?
HIGHP - Page 3 of 47
, [ ] A. Mass customization
[ ] B. Six Sigma only
[ ] C. Lean manufacturing
[ ] D. Capacity planning
CORRECT: C. Lean manufacturing
Lean manufacturing centers on eliminating waste through JIT, continuous improvement, and efficient flow.
Mass customization (A) focuses on tailored products at scale, Six Sigma (B) emphasizes defect reduction
through statistical methods, and capacity planning (D) concerns matching production capacity to demand.
8. A manager discovers that a supplier uses child labor. The manager ends the contract
despite higher costs from a new supplier. Which ethical approach best explains this
decision?
[ ] A. Utilitarian approach
[ ] B. Rights approach
[ ] C. Justice approach
[ ] D. Virtue approach
CORRECT: B. Rights approach
The rights approach holds that decisions should respect fundamental human rights, such as freedom from
exploitative child labor. The utilitarian approach (A) weighs overall costs and benefits, the justice approach
(C) focuses on fairness and equal treatment, and the virtue approach (D) asks what a person of good
character would do.
9. Which of the following is a key advantage of a sole proprietorship for a new small
business owner?
[ ] A. Limited personal liability
[ ] B. Ease and low cost of formation
[ ] C. Perpetual existence
[ ] D. Ability to raise large amounts of equity
CORRECT: B. Ease and low cost of formation
A sole proprietorship is simple and inexpensive to start, with minimal legal formalities. Limited liability (A),
perpetual existence (C), and large-scale equity raising (D) are characteristics of corporations, not sole
proprietorships.
10. A U.S. company opens a factory in another country to take advantage of lower labor
costs and access to new markets. This is an example of:
[ ] A. Franchising
[ ] B. Outsourcing
HIGHP - Page 4 of 47
Proctored) | Questions and Answers |
2026/2027 Updated | 100% Correct - BYU.
Practice Question Bank & Answer Rationale
THIS PACK CONTAINS
150 exam-style multiple-choice questions. Each question includes the correct answer and a complete
rationale for focused revision.
COVERAGE
This midterm exam assesses foundational business concepts across the functional areas of business,
including the economic and global environments, forms of business ownership, entrepreneurship,
management and organizational structure, marketing, operations, accounting and financial management, and
business ethics and law. Questions emphasize application of core terminology and principles to realistic
business scenarios in the contemporary 2026 business environment.
STUDY GUIDE
Recommended duration: 2 hours (remotely proctored). Passing target: 70% (C- or higher; A+ target 97%).
HIGHP - Page 1 of 47
,1. A regional coffee chain reduces its workforce and shifts more order-taking to
self-service kiosks while keeping output steady. This best illustrates which economic
concept?
[ ] A. Economies of scale
[ ] B. Labor productivity improvement
[ ] C. Diminishing marginal returns
[ ] D. Structural unemployment increase
CORRECT: B. Labor productivity improvement
Producing the same output with less labor raises output per worker, which is the definition of improved labor
productivity. Economies of scale (A) refer to cost advantages from larger scale, not reduced labor input.
Diminishing returns (C) concerns added inputs yielding less extra output, and structural unemployment (D) is
a labor-market outcome, not the productivity concept illustrated.
2. Two entrepreneurs want to raise capital from many investors, limit personal liability,
and avoid double taxation. Which ownership form best matches these goals?
[ ] A. General partnership
[ ] B. S corporation
[ ] C. Sole proprietorship
[ ] D. C corporation
CORRECT: B. S corporation
An S corporation provides limited liability and pass-through taxation while allowing multiple shareholders,
avoiding the double taxation of a C corporation. A general partnership (A) exposes partners to unlimited
liability, a sole proprietorship (C) cannot have many investors, and a C corporation (D) faces double taxation.
3. Which management function is primarily demonstrated when a manager assigns
specific tasks, allocates resources, and establishes reporting relationships among team
members?
[ ] A. Planning
[ ] B. Controlling
[ ] C. Organizing
[ ] D. Leading
CORRECT: C. Organizing
Organizing involves arranging resources, tasks, and authority relationships to implement plans. Planning (A)
sets goals and strategies, controlling (B) monitors and corrects performance, and leading (D) focuses on
motivating and influencing people.
HIGHP - Page 2 of 47
,4. A firm segments its market, targets young urban professionals, and emphasizes
eco-friendly packaging in its messaging. These activities are part of which marketing mix
element?
[ ] A. Product
[ ] B. Price
[ ] C. Place
[ ] D. Promotion
CORRECT: D. Promotion
Segmentation, targeting, and positioning messages are communication activities that fall under promotion in
the marketing mix. Product (A) concerns the offering itself, price (B) concerns the monetary exchange, and
place (C) concerns distribution channels.
5. A company reports current assets of $500,000 and current liabilities of $250,000. What is
its current ratio, and what does it indicate?
[ ] A. 0.5; weak short-term liquidity
[ ] B. 2.0; strong short-term liquidity
[ ] C. 2.5; excessive long-term debt
[ ] D. 1.5; adequate profitability
CORRECT: B. 2.0; strong short-term liquidity
Current ratio = current assets ÷ current liabilities = $500,000 ÷ $250,000 = 2.0, indicating the firm has twice
the short-term assets needed to cover short-term obligations. Option A reverses the ratio, C miscalculates
and misstates the metric, and D uses an incorrect value and refers to profitability rather than liquidity.
6. Which of the following best describes the primary purpose of a company's mission
statement?
[ ] A. To specify quarterly financial targets
[ ] B. To define its fundamental purpose and reason for existence
[ ] C. To list all products currently offered
[ ] D. To detail operational procedures for employees
CORRECT: B. To define its fundamental purpose and reason for existence
A mission statement articulates the organization's core purpose, values, and reason for existing, guiding
strategy and decision-making. Financial targets (A) belong in goals or budgets, product lists (C) are tactical,
and operational procedures (D) belong in manuals or policies.
7. A manufacturer uses just-in-time inventory, lean production, and continuous
improvement to reduce waste. These practices are most associated with which operations
approach?
HIGHP - Page 3 of 47
, [ ] A. Mass customization
[ ] B. Six Sigma only
[ ] C. Lean manufacturing
[ ] D. Capacity planning
CORRECT: C. Lean manufacturing
Lean manufacturing centers on eliminating waste through JIT, continuous improvement, and efficient flow.
Mass customization (A) focuses on tailored products at scale, Six Sigma (B) emphasizes defect reduction
through statistical methods, and capacity planning (D) concerns matching production capacity to demand.
8. A manager discovers that a supplier uses child labor. The manager ends the contract
despite higher costs from a new supplier. Which ethical approach best explains this
decision?
[ ] A. Utilitarian approach
[ ] B. Rights approach
[ ] C. Justice approach
[ ] D. Virtue approach
CORRECT: B. Rights approach
The rights approach holds that decisions should respect fundamental human rights, such as freedom from
exploitative child labor. The utilitarian approach (A) weighs overall costs and benefits, the justice approach
(C) focuses on fairness and equal treatment, and the virtue approach (D) asks what a person of good
character would do.
9. Which of the following is a key advantage of a sole proprietorship for a new small
business owner?
[ ] A. Limited personal liability
[ ] B. Ease and low cost of formation
[ ] C. Perpetual existence
[ ] D. Ability to raise large amounts of equity
CORRECT: B. Ease and low cost of formation
A sole proprietorship is simple and inexpensive to start, with minimal legal formalities. Limited liability (A),
perpetual existence (C), and large-scale equity raising (D) are characteristics of corporations, not sole
proprietorships.
10. A U.S. company opens a factory in another country to take advantage of lower labor
costs and access to new markets. This is an example of:
[ ] A. Franchising
[ ] B. Outsourcing
HIGHP - Page 4 of 47
