Boone Contemporary Business 15e

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Chapter 1The Changing Face of Business
MATCHING
Complete the following using these terms.
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
outsourcing
diversity
entrepreneur
competitive differentiation
strategic alliance
capital
vision
factors of production
brand
relationship management
not-for-profit organizations
business ethics
1. _____ involves blending different genders, ethnic backgrounds, cultures, religions, ages, and
physical and mental abilities in order to enhance a firms chances of success.
2. _____ refers to technology, tools, information, and physical facilities.
3. _____ is the unique combination of organizational abilities, products, and approaches that sets a
company apart from competitors in the minds of consumers.
4. A partnership formed to create a competitive advantage for the businesses involved is known as
a(n) _____.
5. A(n) _____ is a name, terms, sign, symbol, design, or combination that identifies the products of
one firm.
6. The ability to perceive future marketplace needs and what an organization can do to satisfy them
is referred to as _____.
7. A person who seeks a profitable opportunity and then devises a plan to achieve that profit is
called a(n) _____.
8. _____ is a collection of activities that build and maintain ongoing, mutually beneficial ties
between a business and its customers and other parties.
9. To operate effectively, certain inputs called _____ systems are required for all economic systems.
10. _____ are businesslike establishments that have primary objectives other than returning profits to
their owners.
11. _____ refers to the standards of conduct and moral values involving decisions made in the work
environment.
12. A company that contracts with another business to perform functions previously handled by
internal staff is participating in _____.
1. ANS:
Pg. 6
2. ANS:
Pg. 6
b
AACSB:
f
AACSB:
DIF: MEDIUM
Analytic
DIF: MEDIUM
Analytic
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1.2 Factors of Production

K
K
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3. ANS:
Pg. 17
4. ANS:
Pg. 11
5. ANS:
Pg. 8
6. ANS:
Pg. 20
7. ANS:
Pg. 12
8. ANS:
Pg. 12
9. ANS:
Pg. 17
10. ANS:
Pg. 4
11. ANS:
Pg. 22
12. ANS:
Pg. 8
d
AACSB:
e
AACSB:
i
AACSB:
g
AACSB:
c
AACSB:
j
AACSB:
h
AACSB:
k
AACSB:
l
AACSB:
a
AACSB:
DIF: MEDIUM
Analytic
DIF: MEDIUM
Analytic
DIF: MEDIUM
Analytic
DIF: MEDIUM
Analytic
DIF: MEDIUM
Analytic
DIF: MEDIUM
Analytic
DIF: MEDIUM
Analytic
DIF: MEDIUM
Analytic
DIF: MEDIUM
Analytic
DIF: MEDIUM
Analytic
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LO:
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LO:
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1.5 Todays Business Workforce

K
1.4 Six Eras in the History of Business
K
1.3 The Private Enterprise System
K
1.6 The 21st-Century Manager
K
K
K
K
1.1 What Is Business?
K
1.7 What Makes a Company Admired?
K
K
ESSAY
13. Define profit. Explain why you agree or disagree with the following statement: The success of a
business is measured only by the profit it earns.
ANS:
Profit is the financial reward received by successful businesspeople who take the risks involved
in blending people, technology, and information to create and market want-satisfying goods and
services. In order to be successful in a private enterprise system, a business must earn a
satisfactory profit; otherwise, the owners and investors will turn to more attractive opportunities.
However, businesses today are expected to do more than earn a satisfactory profitthey also
have social and ethical responsibilities. In other words, businesses must behave responsibly in
their dealings with employees, customers, suppliers, the general public, and even with their
competitors.
DIF: HARD
Pg. 4 AACSB:
LO: 1.1 What Is Business?

Analytic
BT: C
14. Describe technology as a capital source.

ANS:
Technology is a broad term that refers to such machinery and equipment as computers and
software, telecommunications, and inventions designed to improve production. Information,
frequently improved by technological innovations, is another critical factor because both
managers and operating employees require accurate, timely information for effective performance
of their assigned tasks. Technology plays an important role in the success of many businesses.
Sometimes technology results in a new product, such as hybrid autos that run on a combination of
gasoline and electricity. Most of the major car companies have introduced hybrid models in
recent years.
DIF: MEDIUM
Pg. 6 AACSB:
LO: 1.2 What Is Business?

Analytic
BT: K
15. Explain how consumers benefit from business competition.

ANS:
Competition forces a business that wants to continue to be profitable to constantly find acceptable
ways to satisfy customers needs. Customers benefit from new products, more services, and more
economical strategies and operations that are continuously offered by firms as they strive for
customer acceptance. These tactics often bring lower prices, better quality, and more convenience
to the customers. The ability to buy more raises the standard of living, increases demand, and
subsequently creates more jobs.
DIF: HARD
Pg. 8 AACSB:
LO: 1.3 The Private Enterprise System

Analytic
BT: C
16. List and describe the four basic rights in the private enterprise system.
ANS:
The right to private property guarantees every participant the right to own, use, buy, sell, and
bequeath most forms of property. The right to profits ensures business owners the right to all
profits (after taxes) they earn through their activities. Freedom of choice means that a private
enterprise system relies on the potential for citizens to choose their own employment, purchases,
and investments. Finally, the private enterprise system permits fair competition by allowing the
public to set rules for competitive activity, including laws that prohibit cutthroat competition.
DIF: HARD
Pg. 8 AACSB:
LO: 1.3 The Private Enterprise System

Analytic
BT: K
17. List the six eras of business history. Name and describe the era used by businesses today.
ANS:
The six eras are the Colonial period, the Industrial Revolution, the age of industrial entrepreneurs,
the production era, the marketing era, and the relationship era. Todays era, the relationship era,
focuses on taking a long-term approach to relationships with customers. Firms seek ways to gain
customer loyalty by managing each transaction.
DIF: MEDIUM
Pg. 12 AACSB:
LO: 1.4 Six Eras in the History of Business

Analytic
BT: C
18. Explain how business owners enhance productivity by building connections with their customers
in the relationship era.
ANS:
In the relationship era, businesses are taking a different, longer-term approach to their interactions
with customers. Firms now seek ways to actively nurture customer loyalty by carefully managing
every interaction. They earn enormous paybacks for their efforts. A company that retains
customers over the long haul reduces its advertising and sales costs. Because customer spending
tends to accelerate over time, revenues also grow. Companies with long-term customers often can
avoid costly reliance on price discounts to attract new business, and they find that many new
buyers come from loyal customer referrals. Because it is much less expensive to serve existing
customers than to find new ones, businesses that develop long-term customer relationships can
reduce their overall costs. Long-term relationships with customers enable businesses to improve
their understanding of what customers want and prefer from the company. As a result, businesses
enhance their chances of sustaining real advantages through competitive differentiation.
DIF: HARD
Pg. 12 AACSB:

Analytic
BT: C
19. Explain the difference between transaction management and relationship management.
ANS:
Building and promoting products with the hope that the sales will cover costs and earn an
acceptable profit is known as transaction management. Actively promoting long-term
relationships with customers by carefully managing each interaction is known as relationship
management. Potential benefits of relationship management include higher revenues and lower
marketing expenses.
DIF: MEDIUM
Pg. 12 AACSB:

Analytic
BT: C
20. Briefly describe the Industrial Revolution and its contribution to the evolution of business.
ANS:
The Industrial Revolution began in England around 1750. It moved business operations from an
emphasis on independent, skilled workers who specialized in building products one by one to a
factory system that mass-produced items by bringing together large numbers of semiskilled
workers. The factories profited from the savings created by large-scale production, bolstered by
increasing support from machines over time. As businesses grew, they could often purchase raw
materials more cheaply in larger lots than before. Specialization of labor, limiting each worker to
a few specific tasks in the production process, also improved production efficiency.
Influenced by these events in England, business in the United States began a time of rapid
industrialization. Agriculture became mechanized, and factories sprang up in cities. During the
mid-1800s, the pace of the revolution was increased as newly built railroad systems provided fast,
economical transportation. In California, for example, the combination of railroad construction
and the gold rush fueled a tremendous demand for construction.
DIF: MEDIUM
Pg. 12 AACSB:

Technology
BT: K
21. Explain how e-business has created a new type of strategic alliance among companies.
ANS:
An e-business strategic alliance enables online companies, such as Amazon.com or
Overstock.com, to work with traditional retail stores for the benefit of both companies.
Traditional companies bring their merchandise and knowledge of distribution, whereas online
companies provide increased opportunities for sales and additional return on their dollars.
DIF:
MEDIUM
LO:
Pg. 12 AACSB:
Technology
BT:
22. Describe how the aging population in the United States and abroad directly affects changes in the
workforce.
ANS:
Employers must deal with issues such as retirement, disability programs, retraining, and
insurance benefits. Additionally, teenagers are entering the workforce sooner, and some seniors
are staying longer or seeking new careers after retiring from their primary careers.
DIF: MEDIUM
Pg. 17 AACSB:
LO: 1.5 Todays Business Workforce

Analytic
BT: C
23. What are the advantages of a diverse workforce?

ANS:
Studies show that diverse employee teams and workforces tend to perform tasks more effectively
and develop better solutions to business problems than homogeneous employee groups. Also, a
diverse workforce may improve managements understanding of customer needs and
relationships with consumer groups.
DIF: MEDIUM
Pg. 17 AACSB:

Diversity
BT: K
24. Describe offshoring and related trends.

ANS:
Offshoring is the relocation of business processes to lower-cost locations overseas. This can
include both production and services. In recent years, China has emerged as a dominant location
for production offshoring for many firms, while India has become the key player in offshoring
services. Some U.S. companies are now structured so that entire divisions or functions are
developed and staffed overseasthe jobs were never in the United States to start with.
DIF: MEDIUM
Pg. 17 AACSB:
Analytic
BT: K
25. Explain the new employer-employee relationship in business.
ANS:
Many firms now recognize the value of a partnership with employees that encourages creative
thinking, problem solving, and innovation. Managers are being trained to listen to and respect
employees, and companies routinely share financial data and reward employees with benefits,
such as stock options. Additionally, employees often receive training geared toward career
advancement. Employeesarenolongerlikelytoremainwithasinglecompanythroughouttheir
entirecareersanddonotnecessarilyexpectlifetimeloyaltyfromthecompaniestheyworkfor.
Theydonotexpecttogivethatloyaltyeither.Instead,theybuildtheirowncareershoweverand
wherevertheycan.
DIF: MEDIUM
Pg. 17 AACSB:

Analytic
BT: C
26. Define the term vision. Why is vision an important skill today?
ANS:
Vision is the ability to perceive marketplace needs and what an organization must do to satisfy
them. Vision and the ability to turn ideas into action enhance a firms chances of success.
DIF: EASY
Pg. 20 AACSB:
LO: 1.6 The 21st-Century Manager

Analytic
BT: C
27. What are some examples of external and internal forces that would require a manager to lead
organizational change?
ANS:
External forces might include feedback from customers, developments in the international
marketplace, economic trends, and new technologies. Internal factors might arise from new
company goals, emerging employee needs, labor union demands, or production problems.
DIF: MEDIUM
Pg. 20 AACSB:
LO: 1.6 The 21st-Century Manager

Analytic
BT: C
28. Describe critical thinking and creativity and why they are important qualities for the 21 st century
manager.
ANS:
Critical thinking is the ability to analyze and assess information to pinpoint problems or
opportunities. The critical-thinking process includes activities such as determining the
authenticity, accuracy, and worth of information, knowledge, and arguments. It involves looking
beneath the surface for deeper meaning and connections that can help identify critical issues and
solutions. Without critical thinking, a firm may encounter serious problems. Creativity is the
capacity to develop novel solutions to perceived organizational problems. Although most people
think of it in relation to writers, artists, musicians, and inventors, that is a very limited definition.
In business, creativity refers to the ability to see better and different ways of doing business. A
computer engineer who solves a glitch in a software program is executing a creative act.
DIF: MEDIUM
Pg. 22 AACSB:
LO: 1.7 What Makes a Company Admired?

Ethics
BT: K
29. Explain how business ethics differs from social responsibility.

ANS:
Business ethics refers to standards of conduct and moral values involving right and wrong actions
in the work environment. Social responsibility is the actions taken by an organization that lead to
social and economic benefits to society as a whole, such as supporting charitable organizations
and protecting the environment.
DIF: MEDIUM
Pg. 22 AACSB:
LO: 1.7 What Makes a Company Admired?

Ethics
BT: C
MULTIPLE CHOICE
30. Which of the following are organized for profit and provide goods and services?
a.
businesses
b.
public schools
c.
government
d.
churches
ANS: a
Pg. 4 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
31. All of the following statements are correct EXCEPT:

a.
Successful businesses seek to meet their social
and ethical responsibilities.
b.
Business provides goods and services necessary
to an economic system.
c.
d.
ANS: d
Pg. 4 AACSB:
Business is the economic pulse of a nation.

Business includes nonprofit organizations that
provide services to the public.
DIF: MED
Analytic
LO:
BT:
32. In accounting terms, profits are ________.

a.
b.
the difference between revenues and expenses

the difference between commissions earned and
receipts
the difference between sales and expenses
the sum of sales and expenses
c.
d.
ANS: a
Pg. 4 AACSB:
DIF: EASY
Analytic

K
LO:
BT:

K
33. In the U.S. economy, ________ are considered the reward for the risk of entering business.
a.
revenues
b.
generated income
c.
profits
d.
sales
ANS: c
Pg. 4 AACSB:
DIF: MED
Ethics
LO:
BT:

K
34. ________ is essential because it serves as a primary incentive for people to start companies,
expand them, and provide consistently high-quality competitive goods and services.
a.
Vision
b.
Profit
c.
Market research
d.
Philanthropy
ANS: b
Pg. 4 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
35. All of the following are businesses EXCEPT ________.
a.
U.S. Postal Service
b.
UPS
c.
FedEx
d.
AOL Time Warner
ANS: a
Pg. 4 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
36. All of the following are typically part of the not-for-profit sector EXCEPT ________.
a.
labor unions
b.
religious organizations
c.
hotels
d.
museums
ANS: c
Pg. 4 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
37. A public-sector not-for-profit organization would include which of the following?

a.
library
b.
museum
c.
charitable group
d.
labor union
ANS: d
Pg. 4 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
38. The factors of production in an economic system are ________.

a.
land, rent, capital, and human resources
b.
capital, perseverance, natural resources, and
human resources
c.
rent, wages, interest, and profit
d.
natural resources, human resources, capital, and
entrepreneurship
ANS: d
Pg. 6 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
39. Timber Trails, a Northwest lumber company, utilizes ________ as its primary production factor.
a.
human resources
b.
entrepreneurship
c.
capital
d.
natural resources
ANS: d
Pg. 6 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
40. Donovan Corporations sources of capital can include all of the following EXCEPT ________.
a.
cash dividends declared by Donovans board of
directors and paid to the stockholders
b.
c.
d.
ANS: a
Pg. 6 AACSB:
investments from stockholders

reinvested profits
investments from venture capitalists
DIF: MED
Analytic
LO:
BT:

K
41. Technology, tools, information, and physical facilities for the operation of a business are
examples of ________.
a.
profits
b.
wages
c.
capital
d.
interest
ANS: c
Pg. 6 AACSB:
DIF: EASY
Technology
LO:
BT:

K
42. A company that values employees as sources of ideas and innovation is utilizing its
_________________.
a.
entrepreneurship
b.
natural resources
c.
capital
d.
human resources
ANS: d
Pg. 6 AACSB:
DIF: MEDIUM
Technology
LO:
BT:

K
43. The human resources of a firm refer to ________.

a.
everyone over 18 years of age
b.
everyone who works for the business
c.
full-time employees
d.
top management
ANS: b
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DIF: EASY
Analytic
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44. Tarek, a former middle manager from Alexander Manufacturing, owns and operates a Subway
franchise. Tarek is demonstrating ________.
a.
social responsibility
b.
socialism
c.
entrepreneurship
d.
pure competition
ANS: c
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DIF: MEDIUM
Analytic
LO:
BT:

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45. Businesses that operate in an environment where success or failure is determined by how well
they match and counter the offerings of competitors are operating under ________.
a.
the private enterprise system
b.
c.
d.
ANS: a
Pg. 8 AACSB:
a social democracy
a monopoly
socialism
DIF: MEDIUM
Analytic
LO:
BT:
46. Capitalism is founded on ________.

a.
the social changes that followed the Industrial

Revolution
the idea that 80 percent of the nations wealth
should be owned by no more than 20 percent of
the people
the belief that competition among business firms
best serves the needs of society
b.
c.
d.
ANS: c
Pg. 8 AACSB:

K
the idea that the government must own all

factors of production
DIF: MEDIUM
Analytic
LO:
BT:

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47. In his book The Wealth of Nations, the Scottish economist Adam Smith was the first person to
describe ________.
a.
socialism
b.
communism
c.
capitalism
d.
entrepreneurship
ANS: c
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DIF: EASY
Analytic
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48. By offering a lifetime warranty on its products, Warner Electronics has set itself apart from its
competition. This difference is known as Warner Electronics ___________.
a.
private enterprise system
b.
competitive differentiation
c.
capitalism
d.
natural resources
ANS: b
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DIF: EASY
Analytic
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49. When Greenlawn Inc. finds itself losing contracts because Lo-Price Lawn Co. charges less
money, Greenlawn responds by lowering its bids. This reaction demonstrates ________.
a.
the invisible hand of competition
b.
c.
d.
collision
the right to private property
ANS: a
Pg. 8 AACSB:
DIF: MED
Analytic
LO:
BT:

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50. Namesh recently sold his Ford Taurus to a personal friend. Nameshs sale of his automobile
illustrates the right to ________.
a.
freedom of choice
b.
private property
c.
profit
d.
set ground rules for competitive activity
ANS: b
Pg. 8 AACSB:
DIF: MED
Analytic
LO:
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51. All of the following are basic rights within a private enterprise system EXCEPT ________.
a.
private property
b.
guaranteed profits
c.
freedom of choice of investment
d.
freedom of choice of employment
ANS: b
Pg. 8 AACSB:
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Analytic
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52. The right to profit means the ________.

a.
risk taker is guaranteed the right to all profits

(after taxes) that are earned by the business
right to go into or out of business at any point
and for any reason
government will guarantee a profit
right to all benefits resulting from the ownership
of property
b.
c.
d.
ANS: a
Pg. 8 AACSB:
DIF: MEDIUM
Analytic

K
LO:
BT:

K
53. Which of the following is considered to be the most fundamental right of the private enterprise
system?
a.
the right to private property
b.
the right to guaranteed profits
c.
freedom of choice
d.
the right to fair competition
ANS: a
Pg. 8 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

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54. Citizens in a private enterprise system have the right to choose their employment, purchases, and
investments, illustrating their right to ________.
a.
private property
b.
credit
c.
profit
d.
freedom of choice
ANS: d
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Analytic
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55. All of the following are rights granted to citizens and to the government in a private enterprise
system EXCEPT the right to ________.
a.
fair competition
b.
permit price discrimination
c.
select from among a variety of goods and
services
d.
own property
ANS: b
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DIF: MEDIUM
Analytic
LO:
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56. Which of the following is a benefit of entrepreneurship?

a.
low risk
b.
flexibility
c.
guaranteed profit
d.
reduced competition
ANS: b
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Analytic
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57. In colonial society, real economic and political power was centered in ________.
a.
metropolitan areas
b.
areas west of the Mississippi River
c.
rural areas
d.
ANS: c
Pg. 12 AACSB:
cities
DIF: EASY
Analytic
LO:
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58. The Industrial Revolution in England transformed Americas economy by introducing ________.
a.
the concept of each worker producing one
complete product
b.
labor unions
c.
the factory system
d.
the continuously moving assembly line
ANS: c
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Analytic
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59. The American Industrial Revolution did not make real progress until ________.
a.
a railroad system was built providing fast,
economical transportation
b.
a good relationship was formed with England
c.
the introduction of the automobile occurred
d.
a reliable system of telephone communication
was established
ANS: a
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DIF: MEDIUM
Analytic
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60. Inventors such as Robert McCormick and Eli Whitney were part of the ___________.
a.
marketing era
b.
colonial era
c.
relationship era
d.
age of industrial entrepreneurs
ANS: d
Pg. 12 AACSB:
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Analytic
LO:
BT:

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61. Henry Ford is noted in business history for introducing the moving assembly line, which greatly
reduced the cost of producing a car. Assembly lines first became common during the ________.
a.
relationship era
b.
marketing era
c.
Industrial Revolution
d.
production era
ANS: d
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Analytic
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62. Which of the following BEST distinguishes the philosophy of the marketing era from the
philosophy of the production era?
a.
The marketing era was more consumer- oriented.
b.
The production era occurred after World War II.
c.
The marketing era advocated price

discrimination.
The production era was more consumer-oriented.
d.
ANS: a
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Analytic
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63. The business philosophy that advocates determining what consumers want and need, and then
designing products to satisfy those needs, is known as ________.
a.
consumer orientation
b.
self-sufficiency concept
c.
work ethic
d.
production concept
ANS: a
Pg. 12 AACSB:
DIF: MEDIUM
Analytic
LO:
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64. The concept of branding first emerged during the ________.

a.
production era
b.
relationship era
c.
d.
ANS: d
Pg. 12 AACSB:
age of the industrial entrepreneur

marketing era
DIF: MEDIUM
Analytic
LO:
BT:

K
65. Blogs and social networking use __________ to manage relationships.

a.
strategic alliances
b.
marketing research
c.
technology
d.
business etiquette
ANS: c
Pg. 12 AACSB:
DIF: MEDIUM
Technology
LO:
BT:

K
66. Technology has resulted in all of the following EXCEPT ________.

a.
product obsolescence
b.
the creation of new industries
c.
the opening of new business opportunities
d.
less business efficiency
ANS: d
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DIF: EASY
Technology
LO:
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67. Concentrating on building and promoting products in hopes that enough customers will buy them
in order to cover costs and earn acceptable profits is called ________.
a.
b.
marketing management
c.
d.
ANS: d
Pg. 12 AACSB:
a strategic alliance
transaction management
DIF: EASY
Analytic
LO:
BT:

K
68. Nurturing customer loyalty by gathering knowledge of customer needs and preferences is an
approach known as ________.
a.
b.
transaction management
c.
a strategic alliance
d.
marketing management
ANS: a
Pg. 12 AACSB:
DIF: EASY
Analytic
69. A partnership is ________.

a.
b.
c.
d.
LO:
BT:

K
a category of relationship management
an affiliation of two or more companies
not common in the e-business world
the same as transaction management
ANS: b
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70. Apple iPods sold on Amazons Web site signify the formation of a ________ to increase profits.
a.
transaction alliance
b.
brand partnership
c.
strategic alliance
d.
marketing agreement
ANS: c
Pg. 12 AACSB:
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Analytic
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71. Which of the following statements is NOT correct?

a.
Workers change jobs less frequently today.
b.
c.
The size of the labor pool is decreasing.

The U.S. population is getting older.
d.
The U.S. population is becoming more diverse.
ANS: a
Pg. 17AACSB:
DIF: EASY
Analytic
LO:
BT:

K
72. The number of people age 65 and over will ________ by 2030.
a.
decrease by approximately 10 percent
b.
double
c.
d.
ANS: b
Pg. 17 AACSB:
increase by approximately 50 percent

increase by approximately 10 percent
DIF: MEDIUM
Analytic
LO:
BT:

K
73. Diverse employee teams tend to perform ________ and develop ________ than do homogenous
employee groups.
a.
less effectively; better solutions
b.
more effectively; better solutions
c.
less effectively; worse solutions
d.
more effectively; worse solutions
ANS: b
Pg. 17 AACSB:
DIF: MEDIUM
Diversity
LO:
BT:
74. Outsourcing ________.

a.
b.
c.
d.
ANS: b
DIF:

K
reduces the diversity of the workforce
can make a firm more competitive
increases staffing requirements
increases costs
EASY
LO:
Pg. 17 AACSB:
Analytic
BT:
75. When a business employs an outside company to handle all customer correspondence and phone
calls, the business is ________ its customer service department.
a.
outsourcing
b.
branding
c.
multitasking
d.
shrinking
ANS: a
Pg. 17 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
76. When Google opened offices in Tokyo, London, and Sydney, they were utilizing ________ by
relocating business activities to lower-cost locations overseas.
a.
nearshoring
b.
outsourcing
c.
offshoring
d.
employee sourcing
ANS: c
Pg. 17 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
77. The work-comes-first lifestyle can, at times, be exemplified by:

a.
Baby Boomers
b.
Generation X
c.
Generation Y
d.
The EU
ANS: a
Pg. 17 AACSB:
78.
DIF: EASY
Analytic
LO:
BT:

K
The new employer-employee partnership has led to all of the following EXCEPT ________.
a.
increased job security
b.
sharing of financial information with employees
c.
increased emphasis on listening to and
respecting employees
d.
helping employees improve skills and
knowledge
ANS: a
Pg. 17 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
79. When a U.S. company contracts work to Mexico, it is ________.

a.
nearshoring
b.
nearsourcing
c.
exproting
d.
offshoring
ANS: a
Pg. 17 AACSB:
DIF: MEDIUM
Communication
LO:
BT:

K
80. For todays managers, which of the following is LEAST important?
a.
the ability to work by strict rules
b.
vision
c.
critical thinking skills
d.
creativity
ANS: a
Pg. 20 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
81. ________ is the ability to perceive marketplace needs and what an organization must do to satisfy
these needs.
a.
critical thinking
b.
c.
vision
d.
creativity
ANS: c
Pg. 20 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
82. Emily works for a pharmaceutical company and gives a presentation on the need to expand the
companys geriatric division within the next ten years. Emily is helping to establish the
companys ________.
a.
creativity
b.
productivity
c.
vision
d.
critical thinking
ANS: c
Pg. 20 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
83. In business, ________ refers to the ability to see better and different ways of doing business.
a.
critical thinking
b.
c.
creativity
d.
vision
ANS: c
Pg. 20 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
84. Restating issues in reverse, such as naming ways to lose customers, is a method of developing
________.
a.
critical thinking
b.
c.
vision
d.
creativity
ANS: a
Pg. 20 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
85. When 3M managers decided to manufacture Post-it notes, a new product was born. This was an
example of ________ in action.
a.
b.
c.
d.
ANS: d
Pg. 20 AACSB:
critical thinking skills

vision
creativity
DIF: MEDIUM
Analytic
LO:
BT:

K
86. Alejandro is seeking to revitalize his graphic design company with new innovations and has
called a brainstorming meeting with his top designers. Alejandro is practicing ________.
a.
vision
b.
productivity
c.
critical thinking
d.
creativity
ANS: d
Pg. 20 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
87. Feedback from customers is an example of a(n) ________ that requires organizational change.
a.
internal force
b.
external force
c.
change agent
d.
marketing issue
ANS: b
Pg. 20 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
88. Which of the following is NOT an example of an internal force that requires organizational
change?
a.
labor union demands
b.
production problems
c.
new technologies
d.
new company goals
ANS: c
Pg. 20 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
89. ________ refers to standards of conduct and moral values of a firm.

a.
creativity
b.
business ethics
c.
a social audit
d.
ANS: b
Pg. 22 AACSB:
DIF: EASY
Ethics
LO:
BT:

K
90. Newmans Own is a food product line that gives 100 percent of its after-tax profits to charity.
This company is practicing ________.
a.
business ethics
b.
c.
d.
ANS: b
Pg. 22 AACSB:
customer satisfaction
creativity
DIF: MEDIUM
Ethics
LO:
BT:

K
91. When management adheres to a set of standards involving the right and wrong actions arising in
the work environment, management is practicing ________.
a.
b.
business ethics
c.
social welfare
d.
creativity
ANS: b
Pg. 22 AACSB:
DIF: EASY
Ethics
LO:
BT:

K
92. When managements decisions align with social and economic issues, the company is practicing
________.
a.
creativity
b.
business ethics
c.
social welfare
d.
ANS: d
Pg. 22 AACSB:
DIF: EASY
Ethics
LO:
BT:

K
93. Social responsibility would include all of the following EXCEPT ________.
a.
supporting the local United Way
b.
buying goods and services from minority-owned
vendors
c.
making campaign contributions to politicians in
the hope of obtaining a government contract
d.
making contributions to the local public radio
station
ANS: c
Pg: 22 AACSB:
DIF: MEDIUM
Ethics
LO:
BT:

K
TRUE/FALSE
94. Large corporations are defined as businesses, whereas small companies are more of an
investment.
ANS: F
Pg. 4 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
95. Companies are not required to be ethical to succeed in the long run.
ANS: F
DIF:
EASY
LO:
Pg. 4 AACSB:
Ethics
BT:
96. In order to remain viable, not-for-profit organizations need to focus on profits even more than the
public service they provide.
ANS: F
Pg. 4 AACSB:
DIF: MEDIUM
Ethics
LO:
BT:

K
97. Just as with a for-profit business, the first priority for a not-for-profit organization is making a
profit.
ANS: F
Pg. 4 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
98. Not-for-profit organizations are commonly exempt from federal, state, and local taxes.
ANS: T
Pg. 4 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
99. All factors of production are found in equal amounts in all businesses.
ANS: F
Pg. 6 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
100. Capital includes money, machines, tools, buildings, and human resources.
ANS: F
Pg. 6 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
101. Natural resources are linked to the factor payment of rent.

ANS: T
Pg. 6 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
LO:
BT:

K
102. Technology is considered to be capital.

ANS: T
Pg. 6 AACSB:
DIF: EASY
Technology
103. Technology and capital are considered two separate factors of production.
ANS: F
Pg. 6 AACSB:
DIF: MEDIUM
Technology
LO:
BT:

K
104. When farmers rent land in order to increase crop production, they are acquiring capital.
ANS: F
Pg. 6 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
105. Entrepreneurship is synonymous with risk-taking.
ANS: T
Pg. 6 AACSB:
DIF: MEDIUM
Technology
LO:
BT:

K
106. The private enterprise system encourages government intervention.

ANS: F
Pg. 8 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
107. The private enterprise system is enhanced by maximized government participation.

ANS: F
Pg. 8 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
108. Adam Smiths invisible hand refers to the battle among businesses for consumer acceptance.
ANS: T
Pg. 8 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
109. The private enterprise system is also referred to as capitalism.

ANS: T
Pg. 8 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
110. Private property is considered the most important right in the private enterprise system.
ANS: T
Pg. 8 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
111. When customers enter a supermarket and select their favorite brand of laundry detergent, they are
exercising their right to freedom of choice.
ANS: T
Pg. 8 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
112. When the government sets ground rules for competitive activity, the intent is to increase freedom
of choice for consumers.
ANS: T
Pg. 8 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
113. In the private enterprise system, government has no role to play in ensuring fair competition.
ANS: F
Pg. 8 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
114. Competitive differentiation is discouraged in order for a business success.

ANS: F
Pg. 8 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
115. Finding unique ways to use the factors of production is a common characteristic of most
entrepreneurs.
ANS: T
Pg. 8 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
116. Entrepreneurs are very conservative and usually invest only in sure winners.
ANS: F
Pg. 8 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
117. During the Industrial era, the focus was on agriculture and other rural activities.
ANS: F
Pg. 12 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
118. The Industrial Revolution began in Germany and quickly spread to the rest of Europe.
ANS: F
Pg. 12 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
119. The Industrial Revolution introduced a strong emphasis on the factory system.
ANS: T
Pg. 12 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
120. One factor that led to the Industrial Revolution was the mechanization of agriculture.
ANS: T
Pg. 12 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
121. A key element of the production era was the use of consumer research.
ANS: F
Pg. 12 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
122. Assembly lines were introduced during the production era.

ANS: T
Pg. 12 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
123. In consumer orientation, a company creates a product first, and then determines if the consumer
will likely purchase the product.
ANS: F
Pg. 12 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
LO:
BT:

K
124. The Nike swoosh is an example of a brand.

ANS: T
Pg. 12 AACSB:
DIF: MEDIUM
Analytic
125. The current philosophy among managers today is best described as transaction management.
ANS: F
Pg. 12 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
126. Transaction management was introduced during the industrial era.

ANS: F
Pg. 12 AACSB:
DIF: EASY
Technology
LO:
BT:

K
127. Technology has revolutionized business communications.

ANS: T
Pg. 12 AACSB:
DIF: EASY
Technology
LO:
BT:

K
128. Relationship management refers to ongoing, mutually beneficial ties between a company and its
vendors.
ANS: F
Pg. 12 AACSB:
DIF: MEDIUM
Technology
LO:
BT:

K
129. It is predicted that technology will completely eliminate all cubicle jobs.
ANS: F
Pg. 12 AACSB:
DIF: EASY
Technology
LO:
BT:

K
130. Relationship management concentrates on short-term interactions with customers.

ANS: F
Pg. 12 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
131. The number of companies forming partnerships and strategic alliances has grown in recent years.
ANS: T
Pg. 12 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
132. Amazon is an example of a successful e-business.

ANS: T
Pg. 12 AACSB:
DIF: EASY
Technology
LO:
BT:

K
133. Assume Motorola and Microsoft work on developing a new cell phone that also is a PDA. This is
an example of a strategic alliance.
ANS: T
Pg. 12 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
134. Theneedtodevelopenvironmentallyfriendlyproductsandprocessesisbecomingamajornew
forceinbusinesstoday.
ANS: T
Pg. 12 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
135. A strategic alliance is a partnership formed to create competitive advantage for the businesses
involved.
ANS: T
Pg. 12 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
136. Managers are beginning to recognize the different needs of workers of different ages.
ANS: T
Pg. 17 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
137. During the next few years, the average age of the workforce is expected to increase.
ANS: T
Pg. 17 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
138. The supply for jobs is slowly becoming greater than the demand for workers.
ANS: F
Pg. 17 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
139. Hispanics and Asians represent the fastest growing segments of the U.S. population.
ANS: T
Pg. 17 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
140. Research indicates that work teams consisting of a diverse group of individuals often are more
productive than less diverse work teams.
ANS: T
Pg. 17 AACSB:
DIF: MEDIUM
Diversity
LO:
BT:

K
141. Even with advances in management and communications, manufacturing still accounts for most
of the annual output in the United States.
ANS: F
Pg. 17 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
142. Outsourcing is the use of outside vendors to produce goods or fulfill services and functions that
were previously handled in-house or in-country.
ANS: T
Pg. 17 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
143. Today, workers are much less likely to remain with the same employer throughout their entire
careers.
ANS: T
DIF:
EASY
LO:
Pg. 17 AACSB:
Analytic
BT:
144. The new employer-employee relationship requires firms to establish rigid rules to govern
employee activities.
ANS: F
Pg. 17 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
145. The managerial quality of vision is the ability to perceive marketplace needs and what an
organization must do to satisfy them.
ANS: T
Pg. 20 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
146. Critical thinking skills and creativity are essential qualities for todays managers.
ANS: T
Pg. 20 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
LO:
BT:

K
147. Not all people have creative skills.

ANS: F
Pg. 20 AACSB:
DIF: MEDIUM
Analytic
148. Creativity is the capacity to develop well-tested solutions to common organizational problems.
ANS: F
Pg. 20 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
149. Physical exercise releases endorphins, which can help a manager come up with creative ideas.
ANS: T
Pg. 20 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
150. Mental exercises like brainstorming often foster creativity.

ANS: T
Pg. 20 AACSB:
DIF: EASY
Analytic
LO:
BT:

K
151. Feedback from customers is an example of an internal force that would require change.
ANS: F
Pg. 20 AACSB:
DIF: MEDIUM
Analytic
LO:
BT:

K
152. Business ethics deal with the right versus wrong actions that arise in a work environment.
ANS: T
Pg. 22 AACSB:
DIF: EASY
Ethics
LO:
BT:

K
153. Participating in not-for-profit programs is an example of exhibiting social responsibility.
ANS: T
Pg. 22 AACSB:
DIF: EASY
Ethics
LO:
BT:

K
154. By supporting local charities, a firm is demonstrating social responsibility.

ANS: T
Pg. 22 AACSB:
DIF: EASY
Ethics
LO:
BT:

K

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1.2 Factors of Production

1.5 Todays Business Workforce

LO: 1.1 What Is Business?

14. Describe technology as a capital source.

LO: 1.2 What Is Business?

15. Explain how consumers benefit from business competition.

LO: 1.3 The Private Enterprise System

LO: 1.3 The Private Enterprise System

LO: 1.4 Six Eras in the History of Business

LO: 1.4 Six Eras in the History of Business

LO: 1.4 Six Eras in the History of Business

LO: 1.4 Six Eras in the History of Business

1.4 Six Eras in the History of Business

LO: 1.5 Todays Business Workforce

23. What are the advantages of a diverse workforce?

LO: 1.5 Todays Business Workforce

24. Describe offshoring and related trends.

LO: 1.5 Todays Business Workforce

LO: 1.6 The 21st-Century Manager

LO: 1.6 The 21st-Century Manager

LO: 1.7 What Makes a Company Admired?

29. Explain how business ethics differs from social responsibility.

LO: 1.7 What Makes a Company Admired?

1.1 What Is Business?

31. All of the following statements are correct EXCEPT:

Business is the economic pulse of a nation.

32. In accounting terms, profits are ________.

the difference between revenues and expenses

1.1 What Is Business?

1.1 What Is Business?

1.1 What Is Business?

1.1 What Is Business?

1.1 What Is Business?

1.1 What Is Business?

37. A public-sector not-for-profit organization would include which of the following?

1.1 What Is Business?

38. The factors of production in an economic system are ________.

1.2 Factors of Production

1.2 Factors of Production

investments from stockholders

1.2 Factors of Production

1.2 Factors of Production

1.2 Factors of Production

43. The human resources of a firm refer to ________.

1.2 Factors of Production

1.3 The Private Enterprise System

46. Capitalism is founded on ________.

the social changes that followed the Industrial

1.3 The Private Enterprise System

the idea that the government must own all

1.3 The Private Enterprise System

1.3 The Private Enterprise System

1.3 The Private Enterprise System

1.3 The Private Enterprise System

1.3 The Private Enterprise System

52. The right to profit means the ________.

risk taker is guaranteed the right to all profits

1.3 The Private Enterprise System