Better Business 5th Edition by Michael R. Solomon - Test Bank - Updated

Better Business, 5e (Solomon/Poatsy/Martin)

Chapter 1  Business Basics

1) When a company's revenue is greater than its expenses, it means that ________.

A) the company earns a profit

B) the company spends more than it earns

C) the company's income is decreasing

D) the company needs to increase its spending

E) the company must increase its productivity

Answer:  A

Explanation:  A company earns a profit when it takes in more revenue (earnings) than it spends. If a company spends more than it earns, it does not make a profit. Instead, it suffers a loss. A company can make a profit even if its income is decreasing, as long as its earnings continue to exceed its expenses. A profitable company may or may not need to increase its spending, depending on its business goals.

Diff: 1

AACSB:  Reflective Thinking

LO:  1.1: Define business and list the factors of production.

Classification:  Concept

Learning Outcome:  Explain how economic performance is monitored

2) The physical products that a business offers are called ________.

A) goods

B) services

C) assets

D) devices

E) intangible

Answer:  A

Explanation:  By definition, physical products that a business offers are called goods. Services are intangible products, for example, hair styling or bookkeeping. A physical product may be an asset to the business or the purchaser, but it is a more general term that could include any valuable product or aspect of the business. A device is a physical product, but not all physical products are devices. For instance, pizza would be considered a physical product, but a pizza is not a device.

Diff: 1

AACSB:  Reflective Thinking

LO:  1.1: Define business and list the factors of production.

Classification:  Concept

3) Emma bought a tablet and a smartphone. These products are called goods because ________.

A) they do a good job of satisfying a customer's needs

B) they are physical or tangible products

C) they are produced in an economical offshore factory

D) they can be sold either in a store or online

E) they are good at increasing a company's profit margin

Answer:  B

Explanation:  Goods are physical or tangible products offered by a business. They may or may not do a good job of satisfying a customer's needs, although they must do so if a business is to be successful. Goods are typically produced in a factory, but not in any particular location. It is true that goods can be sold either in a store or online, or by other means, such as direct marketing. However, other business offerings, such as services, can also be sold in a store or online.

Diff: 1

AACSB:  Reflective Thinking

LO:  1.1: Define business and list the factors of production.

Classification:  Application

4) Jose called an electrician to repair some appliances in his home. Which of the following terms BEST describes the electrician's repairs?

A) a service

B) a good

C) a benefit

D) an appointment

E) a liability

Answer:  A

Explanation:  An electrical repair is an example of a nontangible business product called a service. An electrical repair is not a good, which is a tangible physical product. Although the repair might involve the installation of a physical product, or good, the primary offering of the electrician is the service he or she provides by coming to a location, identifying the problem, and if necessary, making a repair. Such a service may be a benefit to the customer, but any business offering, physical or nontangible, could be a benefit. Although electricians typically provide services by appointment, "appointment" does not define the type of product the electrician provides.

Diff: 1

AACSB:  Reflective Thinking

LO:  1.1: Define business and list the factors of production.

Classification:  Application