Business In Action, 10e (Bovee/Thill)
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
InvestmentAnswer: 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 Four Useful Ways
ToCategorize Businesses.
2) Why Is The Link Between Risk And Reward Critical For A Business?
A) It Is A Key Aspect Of Social Responsibility
B) It Provides Opportunities For Not-For-Profit Organizations To Stay In Business
C) It Is Essential To The Counter-Cyclical Business Model
D) It Provides Incentive To Take On The
RiskAnswer: D
Explanation: Without The Promise Of Rewards, Businesses Would Have No Incentive To Take
On The Risks. And Without Entrepreneurs And Companies Willing To Accept Risk, Little Would
Get Done In TheEconomy.
Difficulty: 2: Moderate
AACSB: Application Of Knowledge
LO: 1.1: Explain The Concept Of Adding Value In A Business, And Identify Four Useful
Ways ToCategorize 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
AdvantageAnswer: A
Explanation: A Company's Business Model Is A Clear, Simple Outline Of How The Business
IntendsTo Generate Revenue.
Difficulty: 1: Easy
AACSB: Analytical Thinking
LO: 1.1: Explain The Concept Of Adding Value In A Business, And Identify Four Useful Ways
ToCategorize Businesses.
1
,4) Is The Term Used To Describe The Difference Between Revenue And Expenses.
A) Profit
B) Interest
C) Sales
D) Owner's
EquityAnswer: A
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 Four Useful Ways
ToCategorize Businesses.
5) Refers To Some Aspect Of A Product Or Company That Makes It More Appealing
To TargetCustomers.
A) Competitive Advantage
B) Economies Of Scale
C) Horizontal Integration
D) Vertical Integration
Answer: A
Explanation: Competitive Advantage Refers To Some Aspect Of A Product Or Company That
Makes ItMore 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 Four Useful Ways
ToCategorize Businesses.
6) Which Type Of Organization Seeks To Operate Efficiently And Effectively To Achieve
Its GoalsWithout Focusing On Profit As A Motive?
A) Business Intermediary
B) Nonprofit Organization
C) Service Business
D) Goods-Producing
BusinessAnswer: 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 Four Useful Ways
ToCategorize Businesses.
2
,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 EvenUnethical Behavior. This Situation Is Known As A(N) .
A) Moral Hazard
B) Professional Dilemma
C) Barrier To Entry
D) Competitive
AdvantageAnswer: A
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 AndEven 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 Four Useful Ways
ToCategorize Businesses.
8) How Do Businesses Generate Revenue And Satisfy The Needs Of The Customers?
A) By Continuously Adding Value During Product Creation
B) By Expanding Geographic Reach As Often As Possible
C) By Limiting The Flow Of Goods In The Free-Market Economy
D) By Offering Products At The Lowest Prices
PossibleAnswer: A
Explanation: A Good Way To Understand What Any Business Does Is To View It As A System
For Satisfying Customers By Transforming Lower-Value Inputs Into Higher-Value Outputs. At
Every Stage,A Company Adds Value To Create The Product In A Way That Makes It Appealing
To The Next Customer InThe Chain.
Difficulty: 2: Moderate
AACSB: Application Of Knowledge
LO: 1.1: Explain The Concept Of Adding Value In A Business, And Identify Four Useful Ways
ToCategorize Businesses.
9) A Business Is Any Profit-Seeking Organization That Provides Goods And Services
Designed ToSatisfy Customers' Needs.
Answer: TRUE
Explanation: In A General Sense, Business Can Be Defined As Any Profit-Seeking
Organization ThatProvides 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 Four Useful Ways
ToCategorize Businesses.
3
, 10) Profit Refers To The Money The Company Brings In Through The Sale Of Goods And
Services.Answer: FALSE
Explanation: Profit Is The Amount Of Money Left Over After Expenses–All The Costs Involved
InDoing 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 Four Useful Ways
ToCategorize Businesses.
11) Businesses Add Value By Transforming Lower-Value Inputs (Like Paper And
Ink) IntoHigher-Value Outputs (Like Textbooks).
Answer: TRUE
Explanation: Businesses Add Value By Transforming Lower-Value Inputs To Higher-Value
Outputs.In Other Words, They Make Goods And Services More Attractive From The Buyer's
Perspective.
Difficulty: 1: Easy
AACSB: Application Of Knowledge
LO: 1.1: Explain The Concept Of Adding Value In A Business, And Identify Four Useful Ways
ToCategorize Businesses.
12) In A Free-Market Economy, Companies Generally Have Limited Autonomy In Deciding
WhichCustomers They Want To Focus On And How They Want To Compete.
Answer: FALSE
Explanation: In A Free-Market Economy, Companies Generally Have Considerable Freedom In
Deciding Which Customers They Want To Focus On And How They Want To Compete.
Difficulty: 2: Moderate
AACSB: Application Of Knowledge
LO: 1.1: Explain The Concept Of Adding Value In A Business, And Identify Four Useful Ways
ToCategorize Businesses.
13) A Company Has Competitive Advantage When Its Products Are More Appealing To Its
ChosenCustomers.
Answer: TRUE
Explanation: Competitive Advantage Makes A Company's Products Or The Company As A
WholeMore Appealing To Its Chosen Customers.
Difficulty: 1: Easy
AACSB: Application Of Knowledge
LO: 1.1: Explain The Concept Of Adding Value In A Business, And Identify Four Useful Ways
ToCategorize Businesses.
4
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
InvestmentAnswer: 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 Four Useful Ways
ToCategorize Businesses.
2) Why Is The Link Between Risk And Reward Critical For A Business?
A) It Is A Key Aspect Of Social Responsibility
B) It Provides Opportunities For Not-For-Profit Organizations To Stay In Business
C) It Is Essential To The Counter-Cyclical Business Model
D) It Provides Incentive To Take On The
RiskAnswer: D
Explanation: Without The Promise Of Rewards, Businesses Would Have No Incentive To Take
On The Risks. And Without Entrepreneurs And Companies Willing To Accept Risk, Little Would
Get Done In TheEconomy.
Difficulty: 2: Moderate
AACSB: Application Of Knowledge
LO: 1.1: Explain The Concept Of Adding Value In A Business, And Identify Four Useful
Ways ToCategorize 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
AdvantageAnswer: A
Explanation: A Company's Business Model Is A Clear, Simple Outline Of How The Business
IntendsTo Generate Revenue.
Difficulty: 1: Easy
AACSB: Analytical Thinking
LO: 1.1: Explain The Concept Of Adding Value In A Business, And Identify Four Useful Ways
ToCategorize Businesses.
1
,4) Is The Term Used To Describe The Difference Between Revenue And Expenses.
A) Profit
B) Interest
C) Sales
D) Owner's
EquityAnswer: A
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 Four Useful Ways
ToCategorize Businesses.
5) Refers To Some Aspect Of A Product Or Company That Makes It More Appealing
To TargetCustomers.
A) Competitive Advantage
B) Economies Of Scale
C) Horizontal Integration
D) Vertical Integration
Answer: A
Explanation: Competitive Advantage Refers To Some Aspect Of A Product Or Company That
Makes ItMore 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 Four Useful Ways
ToCategorize Businesses.
6) Which Type Of Organization Seeks To Operate Efficiently And Effectively To Achieve
Its GoalsWithout Focusing On Profit As A Motive?
A) Business Intermediary
B) Nonprofit Organization
C) Service Business
D) Goods-Producing
BusinessAnswer: 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 Four Useful Ways
ToCategorize Businesses.
2
,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 EvenUnethical Behavior. This Situation Is Known As A(N) .
A) Moral Hazard
B) Professional Dilemma
C) Barrier To Entry
D) Competitive
AdvantageAnswer: A
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 AndEven 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 Four Useful Ways
ToCategorize Businesses.
8) How Do Businesses Generate Revenue And Satisfy The Needs Of The Customers?
A) By Continuously Adding Value During Product Creation
B) By Expanding Geographic Reach As Often As Possible
C) By Limiting The Flow Of Goods In The Free-Market Economy
D) By Offering Products At The Lowest Prices
PossibleAnswer: A
Explanation: A Good Way To Understand What Any Business Does Is To View It As A System
For Satisfying Customers By Transforming Lower-Value Inputs Into Higher-Value Outputs. At
Every Stage,A Company Adds Value To Create The Product In A Way That Makes It Appealing
To The Next Customer InThe Chain.
Difficulty: 2: Moderate
AACSB: Application Of Knowledge
LO: 1.1: Explain The Concept Of Adding Value In A Business, And Identify Four Useful Ways
ToCategorize Businesses.
9) A Business Is Any Profit-Seeking Organization That Provides Goods And Services
Designed ToSatisfy Customers' Needs.
Answer: TRUE
Explanation: In A General Sense, Business Can Be Defined As Any Profit-Seeking
Organization ThatProvides 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 Four Useful Ways
ToCategorize Businesses.
3
, 10) Profit Refers To The Money The Company Brings In Through The Sale Of Goods And
Services.Answer: FALSE
Explanation: Profit Is The Amount Of Money Left Over After Expenses–All The Costs Involved
InDoing 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 Four Useful Ways
ToCategorize Businesses.
11) Businesses Add Value By Transforming Lower-Value Inputs (Like Paper And
Ink) IntoHigher-Value Outputs (Like Textbooks).
Answer: TRUE
Explanation: Businesses Add Value By Transforming Lower-Value Inputs To Higher-Value
Outputs.In Other Words, They Make Goods And Services More Attractive From The Buyer's
Perspective.
Difficulty: 1: Easy
AACSB: Application Of Knowledge
LO: 1.1: Explain The Concept Of Adding Value In A Business, And Identify Four Useful Ways
ToCategorize Businesses.
12) In A Free-Market Economy, Companies Generally Have Limited Autonomy In Deciding
WhichCustomers They Want To Focus On And How They Want To Compete.
Answer: FALSE
Explanation: In A Free-Market Economy, Companies Generally Have Considerable Freedom In
Deciding Which Customers They Want To Focus On And How They Want To Compete.
Difficulty: 2: Moderate
AACSB: Application Of Knowledge
LO: 1.1: Explain The Concept Of Adding Value In A Business, And Identify Four Useful Ways
ToCategorize Businesses.
13) A Company Has Competitive Advantage When Its Products Are More Appealing To Its
ChosenCustomers.
Answer: TRUE
Explanation: Competitive Advantage Makes A Company's Products Or The Company As A
WholeMore Appealing To Its Chosen Customers.
Difficulty: 1: Easy
AACSB: Application Of Knowledge
LO: 1.1: Explain The Concept Of Adding Value In A Business, And Identify Four Useful Ways
ToCategorize Businesses.
4
