(Test Bank) Contemporary Business

Boone,Kurtz,Berston, 18

Business

Test Bank

18th Edition

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Author(s): Boone, Kurtz, Berston

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Package Title: Chapter 1 , Course Title: Boone, 18e Chapter Number: 1 Question type: Multiple Choice 1) _____ involves blending individuals of different genders, ethnic backgrounds, cultures, rel i- gions, ages, and physical and mental abilities in order to enhance a firm’s chances of success. a) Outsourcing b) Diversity c) Entrepreneur d) Competitive differentiation e) Strategic alliance f) Capital g) Vision h) Factors of production i) Brand j) Relationship management k) Not -for-profit organizations l) Business ethics Answer: b Difficulty : Medium Learning Objective 1: 1.5 Section Reference 1: Explain current workforce trends in business. Standard 1: AACSB || Analytic Bloomcode : Knowledge 2) _____ refers to technology, tools, information, and physical facilities. a) Outsourcing b) Diversity c) Entrepreneur d) Competitive differentiation e) Strategic alliance f) Capital g) Vision h) Factors of production i) Brand j) Relationship management k) Not -for-profit organizations l) Business ethics Answer: f Difficulty: Medium Learning Objective 1: 1.2 Section Reference 1: Identify and describe the factors of production. Standard 1: AACSB || Analytic Bloomcode: Knowledge 3) _____ is the unique combination of organizational abilities, products, and approaches that sets a company apart from competitors in the minds of consumers. a) Outsourcing b) Diversity c) Entrepreneur d) Competitive differentiation e) Strategic alliance f) Capital g) Vision h) Factors of production i) Brand j) Relationship management k) Not -for-profit organizations l) Business ethics Answer: d Difficulty: Medium Learning Objective 1: 1.3 Section Reference 1: Describe the private enterprise system. Standard 1: AACSB || Analytic Bloomcode: Knowledge 4) A partnership formed to create a competitive advantage for the businesses involved is known as a(n) _____. a) Outsourcing b) Diversity c) Entrepreneur d) Competitive differentiation e) Strategic alliance f) Capital g) Vision h) Factors of production i) Brand j) Relationship management k) Not-for-profit organizations l) Business ethics Answer: e Difficulty: Medium Learning Objective 1: 1.4 Section Reference 1: Identify the seven eras in the history of business. Standard 1: AACSB || Analytic Bloomcode: Knowledge 5) A(n) _____ is a name, term, sign, symbol, design, or combination that identifies the products of one firm. a) Outsourcing b) Diversity c) Entrepreneur d) Competitive differentiation e) Strategic alliance f) Capital g) Vision h) Factors of production i) Brand j) Relationship management k) Not -for-profit organizations l) Business ethics Answer: i Difficulty: Medium Learning Objective 1: 1.4 Section Reference 1: Identify the seven eras in the history of business. Standard 1: AACSB || Analytic Bloomcode: Knowledge 6) The ability to perceive future marketplace needs and what an organization can do to satisfy them is referred to as _____. a) Outsourcing b) Diversity c) Entrepreneur d) Competitive differentiation e) Strategic alliance f) Capital g) Vision h) Factors of production i) Brand j) Relationship management k) Not -for-profit organizations l) Business ethics Answer: g Difficulty: Medium Learning Objective 1: 1.6 Section Reference 1: Identify the skills and attributes needed for today’s manager. Standard 1: AACSB || Analytic Bloomcode: Knowledge 7) A person who sees a profitable opportunity and then devises a plan to achieve that profit is called a(n) _____. a) Outsourcing b) Diversity c) Entrepreneur d) Competitive differentiation e) Strategic alliance f) Capital g) Vision h) Factors of production i) Brand j) Relationship management k) Not -for-profit organizations l) Business ethics Answer: c Difficulty: Medium Learning Objective 1: 1.2 Section Reference 1: Identify and describe the factors of production. Standard 1: AACSB || Analytic Bloomcode: Knowledge 8) _____ is the collection of activities that build and maintain ongoing, mutually beneficial ties between a business and its customers and other parties . a) Outsourcing b) Diversity c) Entrepreneur d) Competitive differentiation e) Strategic alliance f) Capital g) Vision h) Factors of production i) Brand j) Relationship management k) Not -for-profit organizations l) Business ethics Answer: j Difficulty: Medium Learning Objective 1: 1.4 Section Referen ce 1: Identify the seven eras in the history of business. Standard 1: AACSB || Analytic Bloomcode: Knowledge 9) To operate effectively, certain inputs called _____ are required for all economic systems. a) Outsourcing b) Diversity c) Entrepreneur d) Competitive differentiation e) Strategic alliance f) Capital g) Vision h) Factors of production i) Brand j) Relationship management k) Not -for-profit organizations l) Business ethics Answer: h Difficulty: Medium Learning Objective 1: 1.2 Section Reference 1: Identify and describe the factors of production. Standard 1: AACSB || Analytic Bloomcode: Knowledge 10) _____ are businesslike establishments that have primary objectives other than returning profits to their owners. a) Outsourcing b) Diversity c) Entrepreneur d) Competitive differentiation e) Strategic alliance f) Capital g) Vision h) Factors of production i) Brand j) Relationship management k) Not -for-profit organizations l) Business ethics Answer: k Difficulty: Medium Learning Objective 1: 1.1 Section Reference 1: Define business. Standard 1: AACSB || Analytic Bloomcode: Knowledge 11) _____ refers to the standards of conduct and moral values involving decisions made in the work environment. a) Outsourcing b) Diversity c) Entrepreneur d) Competitive differentiation e) Strategic alliance f) Capital g) Vision h) Factors of production i) Brand j) Relationship management k) Not -for-profit organizations l) Business ethics Answer: l Difficulty: Medium Learning Objective 1: 1.7 Section Reference 1: Outline the characteristics that make a company admired. Standard 1: AACSB || Ethics Bloomcode: Knowledge 12) A company that contracts with another business to perform functions previously handled by internal staff is participating in _____. a) Outsourcing b) Diversity c) Entrepreneur d) Competitive differentiation e) Strategic alliance f) Capital g) Vision h) Factors of production i) Brand j) Relationship management k) Not -for-profit organizations l) Business ethics Answer: a Difficulty: Medium Learning Objective 1: 1.5 Section Reference 1: Explain current workforce trends in business. Standard 1: AACSB || Analytic Bloomcode: Knowledge Question type: Essay 13) Define profit. Your roommate makes the following statement, “The success of a business is measured only by the profit it earns”? Do you agree? Explain your answer. Answer: Solution: 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 profit —they also have social and ethical responsibilities. In other words, businesses must behave responsibly in their dealings with employees, customers, suppliers, investors, creditors, government, the general public, and even with their competitors. Difficulty: Hard Learning Objective 1: 1.1 Section Reference 1: Define business. Standard 1: AACSB || Analytic Bloomcode: Comprehension 14) Is technology a capital source? Explain. Answer: Solution: 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. Bill Gates is quoted as saying: “Inf ormation technology and business are becoming inextricably interwoven. I don’t think anyone can talk meaningfully about one without talking about the other.” Sometimes technology results in a new product such as the Google self -driving car, which is able t o navigate without human input. Difficulty: Medium Learning Objective 1: 1.2 Section Reference 1: Identify and describe the factors of production. Standard 1: AACSB || Analytic Bloomcode: Comprehension 15) Explain why competition is important according to Adam Smith? Answer: Solution: Adam Smith, the author of the book The Wealth of Nations , identified that competition among firms would lead to consumers’ receiving the best possible products and prices because less efficient producers would gradually be driven from the marketplace. Difficulty: Hard Learning Objective 1: 1.3 Section Reference 1: Describe the private enterprise system. Standard 1: AACSB || Analytic Bloomcode: Comprehension 16) What are the four basic rights in the private enterprise system? Briefly describe each right. Answer: Solution: 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 profit s (after taxes) they earn through their activities. Freedom of choice means that a private en- terprise 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. Difficulty: Hard Learning Objective 1: 1.3 Section Reference 1: Describe the private enterprise system. Standard 1: AACSB || Analytic Bloomcode: Comprehension 17) What did Nordstrom do differently to achieve a considerable increase in its annual sales? Answer: Solution: Initially, with a dozen IT professionals, Nordstrom set up a tech lab aimed at coming up with innovative ideas to deal with the changing ways that customers shop. To continue its fanatic approach to creating a great service experience for customers, the IT professionals developed new products, new business models, and new ways of dealing with its many retail competitors. For example, using TextStyle, a messaging app developed by the company, a Nordstrom salesperson can use technology to further cultivate a relationship by texting, chatting, and sharing product images with customers, who must opt in to the service. As part of its strategy to create new and innovative service experiences for customers, the company recently moved some of its IT tech-nologists directly into its business groups. The integration has been effective because there is a broader range of n ew ideas coming from both the business and technology teams. The result: more immediate customer input to quickly spot gaps in service by involving sales associates in idea generation. Difficulty: Medium Learning Objective 1: 1.3 Section Reference 1: Descr ibe the private enterprise system. Standard 1: AACSB || Analytic Bloomcode: Comprehension 18) What are the seven eras of business history? Name and describe the era used by businesses today. Answer: Solution: The seven eras are the Colonial period, the Industrial Revolution, the age of industrial entrepreneurs, the production era, the marketing era, the relationship era, and the social er a) To- day’s era, the social era, can be described as a new approach to the way businesses and individuals interact, connect, communicate, share, and exchange information with each other in virtual communities and networks around the world. Difficulty: Medium Learning Objective 1: 1.4 Section Reference 1: Identify the seven eras in the history of business. Standard 1: AACSB || Analytic Bloomcode: Comprehension 19) Describe the business approach used in the relationship era. Answer: Solution: In the relationship era, businesses are taking a different, longer -term approach in inte r- acting with and creating authentic customer relationships. Companies 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. Co m- panies 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. Difficulty: Hard Learning Objective 1: 1.4 Section Reference 1: Identify the seven eras in the history of business. Standard 1: AACSB || Analytic Bloomcode: Comprehension 20) Differentiate between transaction management and relationship management. Answer: Solution: Transaction management is an approach that focuses on building, promoting, and selling enough products to cover costs and earn profits. In relationship management, businesses seek ways to actively nurture customer loyalty by carefully managing every interaction. It includes activities that build and maintain ongoing, mutually beneficial ties with customers and other parties. Difficulty: Medium Learning Objective 1: 1.4 Section Reference 1: Identify the seven eras in the history of business. Standard 1: AACSB || Analytic Bloomcode: Comprehension 21) Briefly d escribe the Industrial Revolution. What was its contribution to the evolution of business? Answer: Solution: 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 sem i- skilled workers. The factories profited from the savings created by large -scale production, bol- stered by increasing support f rom 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 efficienc y. Influenced by these events in England, business in the United States began a time of rapid indus-trialization. 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. Difficulty: Medium Learning Objective 1: 1.4 Section Reference 1 : Identify the seven eras in the history of business. Standard 1: AACSB || Analytic Bloomcode: Comprehension 22) Explain strategic alliance with an example. Answer: Solution: Strategic alliance is a partnership formed to create a competitive advantage for the businesses involved. In international business, it refers to a business strategy in which a company finds a partner in the country where it wants to do business. Havaianas is a Brazilian- owned manufacturing company known for its bright and colorful flip -flops. The company recently a n- nounced a strategic alliance with The Walt Disney Company, which will provide Disney fans the opportunity to purchase flip- flops imprinted with Disney characters and themes. They will be available at Disney resorts, theme parks, and vacation clubs. In addition, Havaianas will be the official sponsor of the runDisney marathon events. Difficulty: Medium Learning Objective 1: 1.4 Section Reference 1: Identify the seven eras in the history of business. Standard 1: AACSB || T echnology Bloomcode: Comprehension 23) Describe how the aging populations in the United States and abroad directly affect changes in the workforce. Answer: Solution: 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. Difficulty: Medium Learning Objective 1: 1.5 Section Reference 1: Expla in current workforce trends in business. Standard 1: AACSB || Analytic Bloomcode: Comprehension 24) Is a diverse workforce advantageous to businesses? Explain. Answer: Solution: 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 management’s understanding of customer needs and relationships with consumer groups. Difficulty: Medium Learnin g Objective 1: 1.5 Section Reference 1: Explain current workforce trends in business. Standard 1: AACSB || Diversity Bloomcode: Comprehension 25) Describe offshoring and its related trends. Answer: Solution: 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 l o- cation for production offshoring for many firms, while India has become the key player in of f- shoring services. Som e U.S. companies are now structured so that entire divisions or functions are developed and staffed overseas —the jobs were never in the United States to start with. Difficulty: Medium Learning Objective 1: 1.5 Section Reference 1: Explain current workforce trends in business. Standard 1: AACSB || Analytic Bloomcode: Comprehension 26) Define outsourcing. Explain the utility of outsourcing in the United States. Answer: Solution: Outsourcing involves the use of outside vendors —contracting work out to anot her pa r-ty—for the production of goods or fulfillment of services and functions previously performed in house. Manufacturing used to account for most of the U.S.’s annual output, but the balance has now shifted to services such as hospitality, retail, healt h care, human services, information tec h- nology, financial services, and education. This means that product firms, for example, with a higher service component, must rely on well -trained workers who have the knowledge, prob- lem-solving and technical skills, and ability to communicate and deal with people as part of their daily work. Oftentimes, market pressures drive a firm to reduce costs by outsourcing in order to focus its resources on other components of its business. Difficulty: Medium Learning Objective 1: 1.5 Section Reference 1: Explain current workforce trends in business. Standard 1: AACSB || Analytic Bloomcode: Comprehension 27) What is vision? Explain with an example why it is an important managerial quality. Answer: Solution: Vision is the ability to perceive marketplace needs and what an organization must do to satisfy them. Shake Shack’s owner, restaurateur Danny Meyers, is an example of a leader with a definite vision who has reaped significant rewards operating within the private enterpr ise system. By successfully identifying and serving the needs and demands of customers who think nothing of standing in long lines to experience all -natural menu items and great customer service, Meyer has created somewhat of a cult following for his Shake Shack dining experience. Also coveted for its frozen custard, Shake Shack’s core philosophy is based on the simple mantra of “enlightened hospitality,” which translates to a warmer, friendlier, and more engaging customer service exp e- rience for its burger -loving clientele. Known affectionately as the “Shack Team,” employees are expected to embody the “5 tenets of enlightened hospitality”: taking care of each other, our guests, our community, our suppliers, and our stockholders. With its recent IPO, the Shac k Team has more than just a few stockholders to consider and has expanded beyond the Big Apple to locations i n- cluding Miami, Chicago, Atlanta, and Austin. Difficulty: Easy Learning Objective 1: 1.6 Section Reference 1: Identify the skills and attributes needed for today’s manager. Standard 1: AACSB || Analytic Bloomcode: Knowledge 28) Describe critical thinking and creativity. Explain why they are important qualities for today’s manager. Answer: Solution: Critical thinking is the ability to analyze a nd assess information to pinpoint problems or opportunities. The critical -thinking process includes activities such as determining the authenti c-ity, accuracy, and worth of data, information, knowledge, and arguments. It involves looking beneath the surface for deeper meaning and connections that can help identify critical issues and solutions. 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 a bility to see better and di f- ferent ways of doing business. A computer engineer who solves a glitch in a software program is executing a creative act. Difficulty: Medium Learning Objective 1: 1.6 Section Reference 1: Identify the skills and attributes needed for today’s manager. Standard 1: AACSB || Analytic Bloomcode: Comprehension 29) What are some examples of external and internal forces that would require a manager to lead organizational change? Answer: Solution: External forces might include f eedback from customers, developments in the interna- tional marketplace, economic trends, and new technologies. Internal factors might arise from new company goals, emerging employee needs, labor union demands, or production problems. Difficulty: Medium Learning Objective 1: 1.6 Section Reference 1: Identify the skills and attributes needed for today’s manager. Standard 1: AACSB || Analytic Bloomcode: Comprehension 30) Differentiate between business ethics and social responsibility. Answer: Solution: Business ethics refers to the standards of conduct and moral values involving right and wrong actions in the work environment. Social responsibility is the set of actions taken by an or-ganization that leads to social and economic benefits to soci ety as a whole, such as supporting charitable organizations and protecting the environment. Difficulty: Medium Learning Objective 1: 1.7 Section Reference 1: Outline the characteristics that make a company admired. Standard 1: AACSB || Ethics Bloomcode: Comprehension Question type: Multiple Choice 31) For successful companies, which of the following statements is true? a) They often adapt to changes in customer tastes. b) They spend less time on technology -related projects. c) They refrain from all kinds of competition. d) They strive to reduce the standards of living of their respective countries. Answer: a Difficulty: Easy Learning Objective 1: 1.1 Section Reference 1: Define business . Standard 1: AACSB || Analytic Bloomcode: Knowledge 32) Accountants think of profits as: a) the overall sales of a company in comparison with its top competitor. b) the difference between a firm’s revenues and the expenses incurred in generating them. c) the value of the products or services sold during a fina ncial year. d) the difference between the capital and revenue obtained through selling stocks. Answer: b Difficulty: Easy Learning Objective 1: 1.1 Section Reference 1: Define business . Standard 1: AACSB || Analytic Bloomcode: Knowledge 33) All of these statements are true regarding businesses EXCEPT: a) Successful businesses seek to meet their social and ethical responsibilities. b) Businesses provide goods and services necessary to an economic system. c) Businesses are the economic pulse of a nation. d) Businesses are nonprofit organizations that provide services to the public. Answer: d Difficulty: Medium Learning Objective 1: 1.1 Section Reference 1: Define business. Standard 1: AACSB || Analytic Bloomcode: Comprehension 34) Jason is an accountant . When he is looking at clients’ books, for him, profits are _____. a) the difference between revenues and expenses b) the sum of commissions earned and receipts c) the difference between sales and expenses d) the sum of sales and expenses Answer: a Difficulty: Medium Learning Objective 1: 1.1 Section Reference 1: Define business. Standard 1: AACSB || Analytic Bloomcode: Application 35) In the U.S. economy, _____ are considered the reward for the risk of entering a business. a) revenues b) concessions c) profits d) sales Answer: c Difficulty: Medium Learning Objective 1: 1.1 Section Reference 1: Define business. Standard 1: AACSB || Ethics Bloomcode : Knowledge 36) Which of these are essential because it serves as a primary incentive for people to start co m- panies, expand them, and provide consistently high- quality competitive goods and services? a) Coupons b) Profits c) Discounts d) Rebates Answer: b Difficulty: Medium Learning Objective 1: 1.1 Section Reference 1: Define business. Standard 1: AACSB || Analytic Bloomcode: Knowledge 37) Which of the following is NOT typically a part of the not -for-profit sector? a) Labor unions b) Religious organizations c) Hotels d) Museums Answer: c Difficulty: Medium Learning Objective 1: 1.1 Section Reference 1: Define business. Standard 1: AACSB || Analytic Bloomcode: Knowledge 38) Which of the following is a public sector, not -for-profit organization? a) Library b) Museum c) Charitable group d) Labor union Answer: d Difficulty: Medium Learning Objective 1: 1.1 Section Reference 1: Define business. Standard 1: AACSB || Analytic Bloomcode: Knowledge 39) The Allegany County Library provides a wide variety of library services to its neighborhood. It also provides free online support to it s members, and any fee collected from its members goes directly to charity. The library is an example of a(n) _____. a) not -for-profit organization b) corporate organization c) offshore unit d) business conglomerate Answer: a Difficulty: Medium Learning Objective 1: 1.1 Section Reference 1: Define business. Standard 1: AACSB || Analytic BLOOMCODE: APPLICATION 40) Which of the following represent the factors of production in an economic system? 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 Answer: d Difficulty: Medium Learning Objective 1: 1.2 Section Reference 1: Identify a nd describe the factors of production. Standard 1: AACSB || Analytic Bloomcode: Comprehension 41) Timbers Are Us, a Canadian lumber company, utilizes _____ as its primary production factor. a) human resources b) entrepreneurship c) capital d) natural resources Answer: d Difficulty: Medium Learning Objective 1: 1.2 Section Reference 1: Identify and describe the factors of production. Standard 1: AACSB || Analytic Bloomcode: Knowledge 42) Technology, tools, information, and physical facilities for the operation of a business are examples of _____. a) profits b) wages c) capital d) liability Answer: c Difficulty: Easy Learning Objective 1: 1.2 Section Reference 1: Identify and describe the factors of production. Standard 1: AACSB || Technology Bloomcode: Knowledge 43) A company that values employees as sources of ideas and innovation is utilizing its _____. a) entrepreneurship b) natural resources c) capital d) human resources Answer: d Difficulty: Medium Learning Objective 1: 1.2 Section Reference 1: Identify and describe the factors of production. Standard 1: AACSB || Technology Bloomcode: Comprehension 44) The labor of a firm refers to _____. a) household consumers b) everyone who works for the business c) full -time employees d) top management executives Answer: b Difficulty: Easy Learning Objective 1: 1.2 Section Reference 1: Identify and describe the factors of production. Standard 1: AACSB || Technology Bloomcode: Knowledge 45) ABC Minimg In c. is a small -scale mining com pany that started its business in 20011. By the year 2018, the firm had to close its operations. The company had been continuously laying off its employees since 2016, which led to the further downsizing of the firm. The decline in the avail a- bility of mine rals in its operating region since 2014 has contributed vastly to its downfall and also reduced the need to inject new capital since then. Which of the following factors of production has primarily caused the firm to end its operations? a) Natural resources b) Capital c) Human resources d) Entrepreneurship Answer: a Difficulty: Medium Learning Objective 1: 1.2 Section Reference 1: Identify and describe the factors of production. Standard 1: AACSB || Analytic Bloomcode: Application 46) Samantha, a former middle manager from Gaylord Manufacturing, owns and operates a 7-Eleven franchise. Samantha is demonstrating _____. a) social responsibility b) socialism c) entrepreneurship d) pure competition Answer: c Difficulty: Medium Learning Objective 1: 1.2 Section Reference 1: Identify and describe the factors of production. Standard 1: AACSB || Analytic Bloomcode: Comprehension 47) Which of the following describes a for -profit system established, owned, and operated by individuals? a) The private enterprise system b) A social democracy c) A monopoly d) State ownership Answer: a Difficulty: Medium Learning Objective 1: 1.3 Section Reference 1: Describe the private enterprise system. Standard 1: AACSB || Analytic Bloomcode: Knowledge 48) Capitalism is founded on _____. a) the social changes that followed the Industrial Revolution b) the idea that 80 percent of a nation’s wealth should be owned by no more than 20 percent of its people c) the principles of a private enterprise system d) the idea that government must own all factors of production Answer: c Difficulty: Medium Learning Objective 1: 1.3 Section Reference 1: Describe the private enterprise system. Standard 1: AACSB || Analytic Bloomcode: Comprehension 49) The economist Adam Smith was the first person to describe _____ in his book The Wealth of Nations. a) socialism b) communism c) capitalism d) entrepreneurship Answer: c Difficulty: Easy Learning Objective 1: 1.3 Section Reference 1: Describe the private enterprise system. Standard 1: AACSB || Analytic Bloomcode: Knowledge 50) Competition, according to Adam Smith, would lead to consumers receiving the best possible products and prices because _____. a) government interference in economic activity would be maximized b) less efficient producers would be driven out of the market c) increased supply of raw materials would lead to increased production d) natural resources would be utilized more efficiently Answer: b Difficulty: Medium Learning Objective 1: 1.3 Section Reference 1: Describe the private enterprise system. Standard 1: AACSB || Analytic Bloomcode: Comprehension 51) By offering a lifetime warranty on its products, Savvy Security Systems has set itself apart from its competitors. This difference is known as Warner Electronics’ _____. a) private enterprise system b) competitive differentiation c) capitalism d) checkoff Answer: b Difficulty: Easy Learning Objective 1: 1.3 Section Reference 1: Describe the private ente rprise system. Standard 1: AACSB || Analytic Bloomcode: Comprehension 52) When Private Jets, In c. finds itself losing contracts because Global Aviation, In c. charges less money, Private Jets responds by lowering its bids. According to Adam Smith, this reaction demonstrates _____. a) the invisible hand of competition b) collision c) the right to private property d) social responsibility Answer: a Difficulty: Medium Learning Objective 1: 1.3 Section Reference 1: Describe the private enterprise system. Standard 1: AACSB || Analytic Bloomcode: Application 53) Conchita recently sold her Ford Taurus to a personal friend. Conchita’s sale of her automobile illustrates the right to _____. a) freedom of choice b) private property c) profit making d) set ground rules for competitive activity Answer: b Difficulty: Medium Learning Objective 1: 1.3 Section Reference 1: Describe the private enterprise system. Standard 1: AACSB || Analytic Bloomcode: Knowledge 54) All of the following are basic rights within a private enterprise system EXCEPT _____. a) right to private property b) right to profits before tax deduction c) freedom of choice of investment d) freedom of choice of employment Answer: b Difficulty: Medium Learning Objective 1: 1.3 Section Reference 1: Describe the private enterprise system. Standard 1: AACSB || Analytic Bloomcode: Knowledge 55) Which of the following describes the right to profit? a) Owner is legally guaranteed the right to all profits (after taxes) that are earned by a business b) Right to such profits without any form of deduction c) Government will guarantee a profit d) Firm has to earn only profits Answer: a Difficulty: Medium Learning Objective 1: 1.3 Section Reference 1: Describe the private enterprise system. Standard 1: AACSB || Analytic Bloomcode: Comprehension 56) 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) The right to exercise price discrimination d) The right to fair competition Answer: a Difficulty: Medium Learning Objective 1: 1.3 Section Reference 1: Describe the private enterprise system. Standard 1: AACSB || Analytic Bloomcode: Knowledge 57) Which of the following allows for a private enterprise system to rely on the potential for cit-izens to choose their own employment, purchases, and investments? a) Right to private property b) Right to profits c) Freedom of competition d) Freedom of choice Answer: d Difficulty: Easy Learning Objective 1: 1.3 Section Reference 1: Describe the private enterprise system. Standard 1: AACSB || Analytic Bloomcode: Comprehension 58) 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 Answer: b Difficulty: Medium Learning Objective 1: 1.3 Section Reference 1: Describe the private enterprise system. Standard 1: AACSB || Analytic Bloomcode: Knowledge 59) ______ is a benefit of entrepreneurship. a) Low risk b) Flexibility c) Guaranteed profit d) Reduced competition Answer: b Difficulty: Easy Learning Objective 1: 1.3 Section Reference 1: Describe the private enterprise system. Standard 1: AACSB || Analytic Bloomcode: Knowledge 60) Dakarai is a new recruit at an IT firm. He feels that his compensation is below industry standards, and his colleagues at other firms urge him to switch his employment with a company that pays a better salary. Instead of changing his job, he forms a trade union to ensure fair wages in the firm. Which of the following rights has Dakarai exercised? a) Right to private property b) Right to competition c) Right to profits d) Right to freedom of choice Answer: d Difficulty: Medium Learning Objective 1: 1.3 Section Reference 1: Describe the private enterprise system. Standard 1: AACSB || Analytic Bloomcode: Application 61) The economic focus, in colonial society, was centered on _____.