Better Business, 6e (Solomon/Poatsy/Martin)
Chapter 1 Business Basics
1) Which of the following occurs when 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
Learning Outcome: Explain how economic performance is monitored
2) What are the physical products that a business offers referred to as?
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A) Goods
B) Services
C) Assets
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D) Devices
E) Intangible
Answer: A
Explanation: By definition, physical products that a business offers are called goods. Services
are intangible products, for example, hair styling or bookkeeping. A physical product may be an
st
asset to the business or the purchaser, but it is a more general term that could include any
valuable product or aspect of the business. A device is a physical product, but not all physical
products are devices. For instance, pizza would be considered a physical product, but a pizza is
ba
not a device.
Diff: 1
AACSB: Reflective Thinking
LO: 1.1: Define business, and list the factors of production.
nk
Classification: Concept
sm
af
1
ia
Copyright © 2023 Pearson Education, Inc.
@Testbanksmafia
,3) Emma bought a tablet and a smartphone. These products are called goods because ________.
A) they do a good job of satisfying a customer's needs
B) they are physical and tangible products
C) they are produced in an economical offshore factory
D) they can be sold either in a store or online
E) they 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 appliances in his home. Which of the following terms
BEST describes the electrician's repairs?
A) A service
B) A good
C) Telecommuting
D) Intellectual property
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E) E-commerce
Answer: A
Explanation: An electrical repair is an example of a nontangible business product called a
Te
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
st
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?
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A) A manufacturing plant
B) A green technology company
C) A university
D) A parts supplier
nk
E) A restaurant
Answer: E
Explanation: Some companies offer products that are both goods and services. Take, for
example, a restaurant franchises. When you order food, you're paying for the goods (the food) as
sm
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.
af
Classification: Application
2
ia
Copyright © 2023 Pearson Education, Inc.
@Testbanksmafia
,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, Analytical Thinking
LO: 1.1: Define business, and list the factors of production.
Classification: Concept
Learning Outcome: Explain how economic performance is monitored
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
Te
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.
st
Classification: Application
Learning Outcome: Explain how economic performance is monitored
ba
nk
sm
af
3
ia
Copyright © 2023 Pearson Education, Inc.
@Testbanksmafia
, 8) Which of the following describes how profits are used in a non-profit organization?
A) To increase income for owners
B) To generate income in the economy
C) To expand services
D) To reduce labor costs
E) To reward stakeholders
Answer: C
Explanation: Non-profit organizations do not go into business to pursue profits for their owners.
Instead, a non-profit 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
Learning Outcome: Explain how economic performance is monitored
9) Which of the following include all the various resources used to create a company's goods and
services?
A) Raw materials
B) Factors of production
C) Supplies
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D) Inventory
E) Intellectual property
Answer: B
Te
Explanation: Factors of production are the resources used to produce goods and services. They
include six factors: labor, natural resources, capital, entrepreneurial talent, technology, and
intellectual property. Raw materials, supplies, inventory, and intellectual property might be
included in the natural resources factor, but do not encompass all the resources needed for
production.
st
Diff: 1
AACSB: Reflective Thinking
LO: 1.1: Define business, and list the factors of production.
ba
Classification: Concept
nk
sm
af
4
ia
Copyright © 2023 Pearson Education, Inc.
@Testbanksmafia
Chapter 1 Business Basics
1) Which of the following occurs when 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
Learning Outcome: Explain how economic performance is monitored
2) What are the physical products that a business offers referred to as?
@
A) Goods
B) Services
C) Assets
Te
D) Devices
E) Intangible
Answer: A
Explanation: By definition, physical products that a business offers are called goods. Services
are intangible products, for example, hair styling or bookkeeping. A physical product may be an
st
asset to the business or the purchaser, but it is a more general term that could include any
valuable product or aspect of the business. A device is a physical product, but not all physical
products are devices. For instance, pizza would be considered a physical product, but a pizza is
ba
not a device.
Diff: 1
AACSB: Reflective Thinking
LO: 1.1: Define business, and list the factors of production.
nk
Classification: Concept
sm
af
1
ia
Copyright © 2023 Pearson Education, Inc.
@Testbanksmafia
,3) Emma bought a tablet and a smartphone. These products are called goods because ________.
A) they do a good job of satisfying a customer's needs
B) they are physical and tangible products
C) they are produced in an economical offshore factory
D) they can be sold either in a store or online
E) they 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 appliances in his home. Which of the following terms
BEST describes the electrician's repairs?
A) A service
B) A good
C) Telecommuting
D) Intellectual property
@
E) E-commerce
Answer: A
Explanation: An electrical repair is an example of a nontangible business product called a
Te
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
st
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?
ba
A) A manufacturing plant
B) A green technology company
C) A university
D) A parts supplier
nk
E) A restaurant
Answer: E
Explanation: Some companies offer products that are both goods and services. Take, for
example, a restaurant franchises. When you order food, you're paying for the goods (the food) as
sm
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.
af
Classification: Application
2
ia
Copyright © 2023 Pearson Education, Inc.
@Testbanksmafia
,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, Analytical Thinking
LO: 1.1: Define business, and list the factors of production.
Classification: Concept
Learning Outcome: Explain how economic performance is monitored
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
Te
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.
st
Classification: Application
Learning Outcome: Explain how economic performance is monitored
ba
nk
sm
af
3
ia
Copyright © 2023 Pearson Education, Inc.
@Testbanksmafia
, 8) Which of the following describes how profits are used in a non-profit organization?
A) To increase income for owners
B) To generate income in the economy
C) To expand services
D) To reduce labor costs
E) To reward stakeholders
Answer: C
Explanation: Non-profit organizations do not go into business to pursue profits for their owners.
Instead, a non-profit 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
Learning Outcome: Explain how economic performance is monitored
9) Which of the following include all the various resources used to create a company's goods and
services?
A) Raw materials
B) Factors of production
C) Supplies
@
D) Inventory
E) Intellectual property
Answer: B
Te
Explanation: Factors of production are the resources used to produce goods and services. They
include six factors: labor, natural resources, capital, entrepreneurial talent, technology, and
intellectual property. Raw materials, supplies, inventory, and intellectual property might be
included in the natural resources factor, but do not encompass all the resources needed for
production.
st
Diff: 1
AACSB: Reflective Thinking
LO: 1.1: Define business, and list the factors of production.
ba
Classification: Concept
nk
sm
af
4
ia
Copyright © 2023 Pearson Education, Inc.
@Testbanksmafia
