Business Essentials, 13e (Ebert/Griffin) Chapter 1 The U.S. Business Environment AACSB: Application of knowledge 1) Which of the following best describes profit? A) Total money taken in by a corporation B) Increases in income from year to year C) Increases in a corporation's stock price D) Revenue generated by goods and services E) Difference between revenues and expenses Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.1: Define the nature of U.S. business, describe the external environments of business, and discuss how these environments affect the success or failure of organizations. 2) Which of the following is defined as the environment where a firm conducts its operations and derives its revenues known as? A) Global business environment B) Economic environment C) Domestic business environment D) Technological environment E) Political-legal environment Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.1: Define the nature of U.S. business, describe the external environments of business, and discuss how these environments affect the success or failure of organizations. 3) Factors such as international trade agreements, economic conditions, and political unrest will have the greatest impact on which type of business environment? A) Global business environment B) Economic environment C) Domestic business environment D) Technological environment E) Political-legal environment Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.1: Define the nature of U.S. business, describe the external environments of business, and discuss how these environments affect the success or failure of organizations. 4) Changes in which type of business environment can reduce or replace the need for traditional working methods, physical equipment, and other platforms needed to conduct business? 1 Copyright © 2022 Pearson Education, Inc.
A) Global business environment B) Economic environment C) Domestic business environment D) Technological environment E) Political-legal environment Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.1: Define the nature of U.S. business, describe the external environments of business, and discuss how these environments affect the success or failure of organizations. 5) As a teenager, Melinda started cutting grass for her neighbor. She did a good job, and more and more neighbors began to hire her. After saving money and investing in additional equipment, Melinda began to earn an even greater profit. Which of the following did Melinda create when she began cutting her neighbor's yard and earning income? A) Risk B) Opportunity C) Market economy D) Monopolistic competition E) Business Answer: E Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 1.1: Define the nature of U.S. business, describe the external environments of business, and discuss how these environments affect the success or failure of organizations. 6) In which way does consumer choice and demand affect the way a business operates? A) Businesses must take into account what consumers want or need. B) Businesses must produce most of the goods and services we consume. C) Businesses must find opportunity and develop a plan to capitalize on it. D) Business must prepare to compete in the global marketplace. E) Business must use technology to track changing demographics in the community. Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.1: Define the nature of U.S. business, describe the external environments of business, and discuss how these environments affect the success or failure of organizations. 7) Which of the following consists of everything outside an organization's boundaries that might affect how the business operates? A) Opportunities and enterprise B) Corporate culture C) External environment D) Domestic business environment 2 Copyright © 2022 Pearson Education, Inc.
E) Political-legal environment Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.1: Define the nature of U.S. business, describe the external environments of business, and discuss how these environments affect the success or failure of organizations. 8) Aimee wants to open her retail shop in her local community so that she can establish strong relationships with suppliers and customers, and distinguish herself and her shop from the competition. In which environment does Aimee wish to do business? A) Global B) Political-legal C) Domestic D) Economic E) Technological Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.1: Define the nature of U.S. business, describe the external environments of business, and discuss how these environments affect the success or failure of organizations. 9) The Basic Broom Company orders much of its raw material from overseas markets, even though the product is made locally. Which of the following business environments might prevent The Basic Broom Company from being able to get its supply of raw material when they need it? A) Changes in the global business environment B) Changes in the technological environment C) Changes in the sociocultural environment D) Changes in the factors of production E) Changes in the labor force Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.1: Define the nature of U.S. business, describe the external environments of business, and discuss how these environments affect the success or failure of organizations. 10) Which of the following includes all the ways a firm creates value for their customers? A) Technological environment B) Profitability C) Economic environment D) Creation of a market economy E) Law of supply and demand Answer: A Difficulty: Moderate AACSB: Application of knowledge 3 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Concept LO: 1.1: Define the nature of U.S. business, describe the external environments of business, and discuss how these environments affect the success or failure of organizations. 11) Sally's Supply shop has recently had to change her process for shipping supplies because of changes in government regulations. She now also has to change how she reports profit and loss, and when those reports are processed. Which of the following is forcing these changes for Sally's Supply shop A) The laws of supply and demand B) Political-legal environment C) The establishment of perfect competition D) Changes in the market economy E) Economic environment Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.1: Define the nature of U.S. business, describe the external environments of business, and discuss how these environments affect the success or failure of organizations. 12) A new restaurant recently opened in the local community. It serves a variety of ethnic foods, and plays background music in keeping with the customers and values of the local demographics make up of the community. Which external environment of business is this restaurant considering when they support the customs, values, and demographics of the local community? A) Monopoly B) Sociocultural C) Freedom of choice D) Perfect competition E) Global Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.1: Define the nature of U.S. business, describe the external environments of business, and discuss how these environments affect the success or failure of organizations. 13) Which of the following include relevant conditions that exist such as wage rates, number of people looking for jobs, and competition? A) Global business environment B) Technological environment C) Political-legal environment D) Sociocultural environment E) Economic environment Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept 4 Copyright © 2022 Pearson Education, Inc.
LO: 1.1: Define the nature of U.S. business, describe the external environments of business, and discuss how these environments affect the success or failure of organizations. 14) Which of the following business environments includes the customers, mores, values, and demographic characteristics of the society where the organization functions? A) Sociocultural B) Technological C) Political-legal D) Fiscal E) Economic Answer: A Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Concept LO: 1.1: Define the nature of U.S. business, describe the external environments of business, and discuss how these environments affect the success or failure of organizations. 15) The pursuit of profits is how a business differs from organizations such as public universities, public hospitals, and government agencies. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 1.1: Define the nature of U.S. business, describe the external environments of business, and discuss how these environments affect the success or failure of organizations. 16) An organization's external environment consists of everything outside of the organization that might affect it. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 1.1: Define the nature of U.S. business, describe the external environments of business, and discuss how these environments affect the success or failure of organizations. 17) Businesses improve society by improving the quality of life in a society. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 1.1: Define the nature of U.S. business, describe the external environments of business, and discuss how these environments affect the success or failure of organizations. 18) The environment, not economic forces, play a major role in the success and failure of businesses everywhere. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge 5 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Concept LO: 1.1: Define the nature of U.S. business, describe the external environments of business, and discuss how these environments affect the success or failure of organizations. 19) Compare a sociocultural environment to an economic environment. Answer: The sociocultural environment includes the customs, mores, values, and demographic characteristics of the society in which an organization functions. Sociocultural processes also determine the goods and services, as well as the standards of business conduct, that a society is likely to value and accept. The economic environment refers to relevant conditions that exist in the economic system in which a company operates. For example, if an economy is doing well enough that most people have jobs and wages are high, a growing company may find it necessary to pay even higher wages and offer more benefits to attract workers from other companies. But if many people in an economy are looking for jobs, a firm may be able to pay less and offer fewer benefits. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 1.1: Define the nature of U.S. business, describe the external environments of business, and discuss how these environments affect the success or failure of organizations. 20) Describe the domestic business environment. Answer: The domestic business environment refers to the environment in which a firm conducts its operations and derives its revenues. In general, businesses seek to be close to their customers, to establish strong relationships with their suppliers, and to distinguish themselves from their competitors. Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 1.1: Define the nature of U.S. business, describe the external environments of business, and discuss how these environments affect the success or failure of organizations. 21) How do consumer choice and demand affect a capitalistic system? Answer: In a capitalistic system, such as that in the United States, businesses exist to earn profits for owners. Within certain broad constraints, an owner is free to set up a new business, grow that business, sell it, or even shut it down. But consumers also have freedom of choice. In choosing how to pursue profits, businesses must take into account what consumers want or need. No matter how efficient a business is, it won't survive if there is no demand for its goods or services. Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 1.1: Define the nature of U.S. business, describe the external environments of business, and discuss how these environments affect the success or failure of organizations. 22) What are the benefits of business for society? Answer: Businesses produce most of the goods and services we consume, and they employ most working people. They create most innovations and provide a vast range of opportunities for new 6 Copyright © 2022 Pearson Education, Inc.
businesses, which serve as their suppliers. A healthy business climate also contributes to the quality of life and standard of living of people in a society. Business profits enhance the personal incomes of millions of owners and stockholders, and business taxes help to support governments at all levels. Many businesses support charities and provide community leadership. Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 1.1: Define the nature of U.S. business, describe the external environments of business, and discuss how these environments affect the success or failure of organizations. 23) What is the general term for resources used by a business to produce a good or service referred to as? A) Labor B) Human Resources C) Human capital D) Factors of production E) Economic systems Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 24) Which of the following denotes a nation's basis for allocating its resources among its citizens? A) Capital structure B) Economic system C) Ownership processes D) Distribution network E) National regulations Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 25) Which of the following is the process for converting government enterprises into individually owned firms? A) Production allocation B) Privatization C) Entrepreneurship D) Demand assessment E) Profit maximization Answer: B Difficulty: Easy 7 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Concept LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 26) Which is the term for the physical and intellectual contributions of people while engaged in the production of goods and services? A) Human resources B) Working capital C) Physical resources D) Planned resources E) Market resources Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 27) Who is described as the person who accepts the risks and opportunities inherent in a new business opportunity? A) Capital managers B) Entrepreneurs C) Human resources D) Home country economic systems managers E) Information technology managers Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 28) What factor of production is used to generate forecasts based on specialized knowledge and economic data? A) Economic resources B) Labor C) Information resources D) Entrepreneurs E) Physical resources Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 29) When making decisions about production and allocation, which type of system depends on 8 Copyright © 2022 Pearson Education, Inc.
individual producers and consumers to create a combination of supply and demand? A) Planned economy B) Communism C) Private economy D) Market economy E) Socialism Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 30) The idea that individuals would contribute according to their abilities and receive benefits according to their needs supports which type of economy? A) Market economy B) Socialist based economy C) Mixed market economy D) Capitalist market economy E) Communist based economy Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. AACSB: Analytical thinking31) Which type of economy is the United States reflective of? A) Planned B) Mixed C) Market D) Private E) Socialist Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 32) What does a planned economy rely on a centralized government to do? A) Support free enterprise in every way possible B) Determine how to allocate all or most factors of production C) Encourage citizens to buy shares of stock in small companies D) Keep its control activities to a minimum E) Direct workers to start their own small businesses Answer: B 9 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 33) Which economic system emphasizes the private ownership of most factors of production? A) Socialism B) Communism C) Capitalism D) Marxism E) Federalism Answer: C Difficulty: Easy AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 34) In which type of economy do the individual producer and consumer control production through supply and demand? A) Planned B) Communist C) Market D) Socialist E) Mixed Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 35) Which of the following marks the key difference between economic systems? A) The way the factors of production are managed B) The way goods are transported within their borders C) The way rules and regulations are legislated D) The way workers are relocated to different regions E) The way basic necessities are determined Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 36) Which of the following represents the financial resources needed to operate a business? 10 Copyright © 2022 Pearson Education, Inc.
A) Factors of production B) Savings C) Economy D) Supply and demand E) Capital Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 37) Kathleen has ordered new computers and office equipment of her tax preparation business. She is also considered renting a larger office for next year? Which of the following refer to the tangible things that Kathleen needs and uses to operate her business. A) Technological environment B) Private property C) Business cycle D) Physical resources E) Capital Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 38) Which of the following refers to a reliance on a centralized government to allocate most factors of production? A) Market economy B) Global business environment C) Information resources D) Planned economy E) Sociocultural environment Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 39) Which of the following do most countries rely on in terms of economic systems? A) Mixed market economy B) Privatization C) Market economies D) Capitalism E) Communism 11 Copyright © 2022 Pearson Education, Inc.
Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 40) Which of the following is a mechanism for exchange between buyers and sellers of specific goods or services? A) Market B) Entrepreneurship C) Communism D) Capitalism E) Free enterprise Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 41) Which of the following does a market economy depend on? A) Profits B) Freedom of choice C) Economic restrictions D) Competition E) Privatization Answer: B Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Concept LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 42) Which of the following is the economic basis of the market process? A) Profit and loss B) Supply and demand C) Planned and market economies D) Labor and capital E) Physical and technological resources Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 12 Copyright © 2022 Pearson Education, Inc.
43) Which of the following is the underlying premise of a market economy? A) A matured society B) Direct ownership of factors of production C) Creation of shared value D) Centralized government E) A political basis of the market process Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 44) Which of the following is the political basis of the market economy process? A) Communism B) Socialism C) Capitalism D) Planned economic support E) Centralized governments Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 45) In which planned economic systems does the government own and operate selected major industries and sources of production? A) Mixed B) Privatization C) Socialism D) Communism E) Capitalism Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 46) The customs, values, and demographic characteristics of the society in which an organization functions are the principal elements of the political-legal environment. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.2: Describe the different types of global economic systems according to the means by 13 Copyright © 2022 Pearson Education, Inc.
which they control the factors of production. 47) Physical resources include the data and other information used by businesses. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 48) One major difference between economic systems is the way in which a system manages its factor of production. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 49) The technological environment includes only electronics and telecommunications used to perform business activities. Answer: FALSE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 50) In a market system, individuals free to choose what they buy and how they can spend their money. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 51) China functions as a communistic economy and political system. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 52) In a market economy, there is a centralized government that controls factors of production and decision making. 14 Copyright © 2022 Pearson Education, Inc.
Answer: FALSE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 53) Discuss the two forms of planned economies and give examples of each. Answer: There are two basic forms of planned economies: communism and socialism. Communism is a system in which the government owns and operates all factors of production. Under such a system, the government would assign people to jobs. It would also own all business and control business decisions—what to make, how much to charge, and so forth. Marx proposed that individuals would contribute according to their abilities and receive benefits according to their needs. He also expected government ownership of production factors to be temporary. Once society had matured, government would wither away, and workers would take direct ownership of the factors of production. Today, North Korea, Vietnam, Laos, Cuba and the People's Republic of China are the only nations remaining that are controlled with openly communist systems parties. In the partially planned system called socialism, the government owns and operates selected major industries. In such mixed market economies, the government may control banking, transportation, or industries producing basic goods such as oil and steel. Smaller businesses, such as clothing stores and restaurants are privately owned. Many Western European countries, including England and France, allow free market operations in most economic areas but keep government control of others, such as health care. Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 54) Describe the role of information resources in business. Answer: The production of tangible goods once dominated most economic systems. Today, information resources, data and other information used by businesses play a major role. Information resources that businesses rely on include market forecasts, the specialized knowledge of people, and economic data. In turn, much of what businesses do with the information results either in the creation of new information or the repackaging of existing information for new users. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 55) Compare a planned economy to a market economy. Answer: Economic systems also differ in the ways decisions are made about production and allocation. A planned economy relies on a centralized government to control all or most factors of production and to make all or most production and allocation decisions. In a market economy, individual producers and consumers control production and allocation by creating combinations 15 Copyright © 2022 Pearson Education, Inc.
of supply and demand. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 56) Identify the five factors of production and their role in economic systems. Answer: An economic system is a nation's system for allocating its resources among its citizens, both individuals and organizations. A basic difference between economic systems is the way in which a system manages its factors of production, the resources that a country's businesses use to produce goods and services. Economists have long focused on four factors of production: labor, capital, entrepreneurs, and physical resources. In addition to these traditional four factors, many economists now include information resources. People who work for businesses provide labor. Labor, sometimes called human resources or human capital, includes the physical and intellectual contributions people make while engaged in economic production. Capital includes the financial resources needed to operate a business. An entrepreneur is a person who accepts the risks and opportunities entailed in creating and operating a new business. Physical resources are the tangible things that organizations use to conduct their business. They include natural resources and raw materials, offices, storage and production facilities, parts and supplies, computers and peripherals, and a variety of other equipment. Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Synthesis LO: 1.2: Describe the different types of global economic systems according to the means by which they control the factors of production. 57) Which of the following is the profit-maximizing price at which the demand for a good and the supply of the good are equal? A) Equilibrium price B) Decision point C) Surplus price D) Perfect price E) Parity point Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 58) When demand and supply curves are plotted on the same graph, at which point will they intersect? A) The going rate B) The margin rate C) The market price 16 Copyright © 2022 Pearson Education, Inc.
D) The optimum price E) The cost price Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 59) Which of the following occurs when the quantity demanded exceeds the quantity supplied? A) Demand deficit B) Surplus C) Equilibrium point D) Shortage E) Price drop Answer: D Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 60) On an economic level, what are the primary force that determines what a firm buys and sells? A) Laws of supply and demand B) The demand and supply schedule C) Economic resources D) Equilibrium price E) The private enterprise system Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system.
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61) Which of the following is the willingness and ability of producers to offer a good for sale referred to as? A) Competition B) Supply C) Planned economy D) Equilibrium E) Demand Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 62) Which of the following is proven when buyers purchase more of a product when the price drops and less when the price increases? A) Equilibrium B) Law of supply C) Law of demand D) Degree of competition E) Free market economy Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 63) What can be used to determine relationships among different levels of demand and supply, based on price? A) Market economies B) Degrees of competition C) Surplus to shortage relationships D) Demand and supply curves E) Private enterprise competition Answer: D Difficulty: Easy AACSB: Analytical thinking, Application of Knowledge Quest. Category: Application LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. AACSB: Application of knowledge64) What is the basis for a market economy? A) The ability to pursue an interest with minimal government restriction 18 Copyright © 2022 Pearson Education, Inc.
B) The ability to limit profits on competitors based on government restriction C) The ability to offer a good or service at a variety of price points D) A limitation on the number of competitors the government will allow within a specific geographic region E) The ability of a large number of smaller firms in an industry will limit influence Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 65) Which of the following represents the ownership of resources used in a private enterprise system? A) Freedom of choice B) Private property rights C) Increased profits D) Limited competition E) Perfect competition Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 66) Which of the following would lead some to become an entrepreneur and influence the choice of goods or services to produce? A) Competition B) Profit C) Degrees of competition D) Government regulation E) Monopolistic competition Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 67) What is needed to gain a competitive advantage over competitors? A) The ability to produce goods and services and sell those at a fixed profit B) The ability to produce goods and services and sell those at a small profit C) The ability to produce goods or services efficiently and sell those at a reasonable profit 19 Copyright © 2022 Pearson Education, Inc.
D) The ability to leverage the internet to sell in a global marketplace E) The ability to have a good or service that can be easily duplicated by competitors Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. AACSB: Application of knowledge68) When there are many small firms in a specific industry, what is likely to occur? A) Competitive advantage B) An oligopoly C) Private enterprise D) Perfect competition E) Market force reliability Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 69) What is created when one company can most efficiently supply all the goods or services needed by the marketplace? A) Communism B) Natural monopolies C) Marketplace shifts D) Monopolistic competition E) Oligopolies Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 70) Which of the following is one of the elements required in private enterprise? A) Adequate representation in the government B) Freedom from foreign competition C) The opportunity for market leadership D) The right to ownership of property E) Numerous regulatory agencies Answer: D 20 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 71) In perfect competition, which of the following conditions must prevail? A) All firms must adhere to cost and pricing standards. B) The number of firms in the industry must be limited. C) A single firm is able to influence the price of its product. D) It is relatively difficult to enter the industry. E) All firms in a given industry must be small. Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. AACSB: Analytical thinking72) In an oligopoly, when one firm reduces its prices, how do other sellers react? A) There is no reaction from other firms to change their prices. B) Other firms reduce their prices also, usually quite quickly. C) Other firms may reduce their prices, but usually gradually. D) Other firms are not usually aware that price has changed. E) There is a combined response from other firms to stabilize prices. Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. AACSB: Application of knowledge73) What is the term used to describe a market condition where buyers are able to satisfy the demand of the consumer, yet have some product remain unsold? A) Surplus B) Stoppage C) Shortage D) Demand deficit E) Equilibrium price Answer: A Difficulty: Moderate AACSB: Application of knowledge 21 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Concept LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 74) When a new product has high demand in the market, how should a company react? A) Increase the supply of the product B) Decrease the supply of the product C) Reduce the price of the product D) Maintain the current supply until demand falls E) Create an artificial shortage of the product Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 75) Mario's Pizza is a very successful pizza shop just off campus. Mario has noticed that as soon as the fall semester starts, he sells twice as many pizzas as he does during summer months. Which aspect of a market economy is Mario experiencing? A) Demand B) Choice C) Supply D) Competition E) Private enterprise Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 76) Tommey started his own t-shirt shop, and sold his shirts for low, very competitive prices. As his products became well-known he began selling them out of the local area, and on-line. Based on the Law of supply, what will likely happen to the prices that Tommey charges for his t-shirts? A) Prices will rise B) Prices will fall C) Prices will stay the same D) Prices will fluctuate depending on where the shirts are sold E) Prices will decrease only on those sold online Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application 22 Copyright © 2022 Pearson Education, Inc.
LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 77) The principle that says producers will offer more of a product for sale as its price rises, and less as its price drops is referred to as _____. A) the law of demand B) equilibrium C) market pricing D) freedom of choice E) the law of supply Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 78) In which was can a producer of a product assess the relationship among different levels of demand and supply, at different price levels? A) Demand curves B) Competition in the market C) Aggregate output D) Demand and supply schedules E) Gross domestic product Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 79) Which of the following will show how many units of a product should be supplied at different prices? A) Demand curve B) Parity C) Supply curve D) Productivity E) Aggregate output Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition 23 Copyright © 2022 Pearson Education, Inc.
in the U.S. economic system. 80) When of the following occurs when two or more business compete for the same resources or customers? A) Shortage B) Competition C) Demand fluctuation D) Perfect competition E) Decreased aggregate output Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 81) In which form of competition are prices set exclusively by supply and demand, and accepted by both sellers and buyers? A) Monopolistic competition B) Balance of trade C) Economic stability D) Purchasing power parity E) Perfect competition Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 82) In an effort to distinguish themselves from competitors, Healthy Gym began offering fitness classes designed for retirees in the morning, and high energy cycling classes during evening hours. Which degree of competition, which includes a large number of buyers and sellers, does Healthy Gym compete in? A) Monopolistic competition B) Perfect C) Oligopoly D) Monopoly E) Natural monopoly Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition 24 Copyright © 2022 Pearson Education, Inc.
in the U.S. economic system. 83) Which type of competition includes relatively few but large sellers who have the power to influence the prices of their products and significantly affect the sales of every other firm in the industry? A) Perfect competition B) Parity C) Balance of trade D) Natural monopoly E) Oligopoly Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 84) The laws of supply and demand determine decisions about what to buy and sell. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 79) Economic systems differ in how factors of production are used. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 85) The point at which the supply curve and the demand curve intersect is the market price. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 86) One of the four elements that are necessary for private enterprise to be carried out is reasonable prices. Answer: FALSE 25 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 87) Product differentiation is common in a market characterized by monopolistic competition. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 88) In a natural monopoly, prices tend to be government regulated. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 89) What is function of the laws of demand and supply? Answer: On all economic levels, decisions about what to buy and what to sell are determined primarily by the forces of de-mand and supply. Demand is the willingness and ability of buyers to purchase a product (a good or a service). The law of Demand says buyers will purchase (demand) more of a product as its price drops and less as its price increases Supply is the willingness and ability of producers to offer a good or service for sale. The law of supply says producers will offer (supply) more of a product for sale as its price rises and less of a product as its price drops. Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Synthesis LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 90) What is required for perfect competition to exist, and what principles must be in place to achieve those conditions? Answer: For perfect competition to exist, two conditions must prevail: (1) all firms in an industry must be small, and (2) the number of firms in the industry must be large. Under these conditions, no single firm is powerful enough to influence the price of its product. Prices are, therefore, determined by such market forces as supply and demand. There are four principles that support the two conditions. The products of each firm are so similar that buyers view them as 26 Copyright © 2022 Pearson Education, Inc.
identical to those of other firms. Both buyers and sellers know the prices that others are paying and receiving in the marketplace. Because each firm is small, it is easy for firms to enter or leave the market. Going prices are set exclusively by supply and demand and accepted by both sellers and buyers. Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Synthesis LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 91) Discuss each of the four principles of private enterprise systems. Answer: Market economies rely on a private enterprise system—one that allows individuals to pursue their own interests with minimal government restriction. In turn, private enterprise requires the presence of four elements: private property rights, freedom of choice, profits, and competition. Ownership of the resources used to create wealth is in the hands of individuals. You can sell your labor to any employer you choose. You can also choose which products to buy, and producers can choose whom to hire and what to produce. The lure of profits (and freedom) leads some people to abandon the security of working for someone else and to assume the risks of entrepreneurship. Anticipated profits also influence individuals' choices of which goods or services to produce. If profits motivate individuals to start a business, competition motivates them to operate those businesses efficiently. Competition occurs when two or more businesses vie for the same resources or customers. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Synthesis LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 92) How can price be best determined? Answer: The demand and supply schedule can be used to construct demand and supply curves. A demand curve shows how many products will be demanded at different prices. A supply curve shows how many of the items will be supplied at different prices. Demand increases as price decreases; supply increases as price increases. When demand and supply curves are plotted on the same graph, the point at which they intersect is the market price (also called the equilibrium price), the price at which the quantity of goods demanded and the quantity of goods supplied are equal. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 93) Explain the concept of mixed market economies and how they support pure planned and pure market economies. Answer: In reality, there are really no "pure" planned or "pure" market economies. Most 27 Copyright © 2022 Pearson Education, Inc.
countries rely on some form of mixed market economy that features characteristics of both planned and market economies. Even a market economy that strives to be as free and open as possible, such as the U.S. economy, restricts certain activities. Some products can't be sold legally, others can be sold only to people of a certain age, advertising must be truthful, and so forth. The People's Republic of China, the world's most important planned economy, is increasingly allowing private ownership and entrepreneurship (although with government oversight). When a government is making a change from a planned economy to a market economy, it usually begins to adopt market mechanisms through privatization, the process of converting government enterprises into privately owned companies. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 1.3: Show how markets, demand, and supply affect resource distribution in the United States, identify the elements of private enterprise, and explain the various degrees of competition in the U.S. economic system. 94) Which of the following offers expert statistical information on the strength and performance of an economy? A) Market price reports B) Supply curves C) Economic indicators D) Demand Curves E) Degrees of competition reports Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 95) The total value of all goods and services produced by a country within a given period is measured through what? A) Standard of living B) Aggregate output C) Gross national product D) Output per capita E) Inflation rates Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 96) What term do economists use for the pattern of short-term expansions and contractions in the economy? A) Business cycle 28 Copyright © 2022 Pearson Education, Inc.
B) Aggregate output C) Standard of living D) Consumer price index E) Purchasing power parity Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 97) Which indicator refers to the total quantity of goods and services produced by an economic system during a given period? A) The business cycle B) Aggregate output C) Gross domestic product D) The consumer price index E) Gross national product Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 98) Which type of government based economic policy includes both fiscal and monetary policy? A) Trade B) Employment C) Stabilization D) Tax E) Foreign Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 99) How would supply affect the aggregate output of an economy? A) Supply would decrease aggregate output B) Increases in both would cause inflation C) Aggregate output would grow as supply grows D) Supply would have no direct effect on aggregate output E) Aggregate output would increase the money supply Answer: C Difficulty: Moderate AACSB: Analytical thinking 29 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Analytical LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 100) Which of the following BEST describes what the consumer price index is used to indicate? A) The average wage rate for a given region B) The economic performance of key consumer product companies C) The changes in the cost of consumer products over time D) The percentage of consumers in the total population looking for work E) The number of price increases within a given period of time Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 101) Which of the following is a likely cause of increased prices for products, decreased purchasing power, and decreased profit margins? A) Low unemployment B) Stagnant wages C) Declining living standards D) Cyclical inflation E) Limited credit Answer: A Difficulty: Difficult AACSB: Reflective thinking Quest. Category: Analytical LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 102) Which term refers to the pattern of short-term ups and downs in an economy? A) Aggregate output B) Business cycle C) Standard of living D) Balance of payments E) Demand and supply schedule Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 103) Which term refers to the total quantity and quality of goods and services that people living in an economic system can purchase? A) Business cycle supply 30 Copyright © 2022 Pearson Education, Inc.
B) Demand and supply schedule C) Standard of living D) Aggregate output E) Consumer price index Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 104) Which term refers to the total value of all goods and services produced within a given period by a national economy through domestic factors of production? A) Output per capita B) Aggregate output C) Gross domestic product D) Gross national product E) Purchasing power parity Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. AACSB: Application of knowledge105) Which of the following is measured by productivity? A) The total value of all goods and services produced by a national economy B) How much a system produces with the resources needed to produce it C) How much output is necessary to produce a certain level of demand D) The standard of living relative to purchasing power parity E) How much gross national product results from inputs of labor Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 106) What is the economic condition characterized by widespread increased prices without increased purchasing power? A) Unemployment B) Inflation C) Expansion D) Deflation E) Recession Answer: B Difficulty: Easy AACSB: Application of knowledge 31 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Critical Thinking LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 107) What is the condition in an economic system in which the amount of money available, and the number of goods and services produced, are growing at about the same rate? A) Unemployment B) Stability C) Deflation D) Inflation E) Oversupply Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. AACSB: Application of knowledge108) Which of the following BEST describes nominal GDP? A) Total quantity of goods and services produced by an economic system. B) Total value of all goods and services produced within a given period by a national economy, measured in current dollars or with all components valued at current prices. C) Total value of all goods and services produced within a given period by a national economy regardless of where the factors of production are located. D) Total value of all goods and services produced within a given period by a national economy, adjusted to account for changes in currency values and price changes. E) Total quantity of goods and services that are imported within a given period of time. Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 109) Which is the BEST explanation for why standard of living only increases through productivity? A) The more goods that are available, the lower prices will be. B) More goods are available without having to come by additional resources. C) Productivity increases the money supply in an economy. D) Purchasing power increases when there is more consumer choice. E) Prices are determined by the standard of living. Answer: A Difficulty: Difficult AACSB: Reflective thinking Quest. Category: Concept LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 32 Copyright © 2022 Pearson Education, Inc.
110) Why would a government MOST likely be concerned about its country carrying a trade deficit? A) A trade deficit means that the country's productivity is low. B) A trade deficit means local companies do not have enough competition. C) A trade deficit ties up money that could be used for economic growth. D) A trade deficit decreases demand for goods overall. E) A trade deficit means that consumers do not have enough purchasing power. Answer: C Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Analytical LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. AACSB: Application of knowledge111) Which of the following is an indication of national economic growth, shown by measuring aggregate output? A) Gross domestic product B) Standard of living C) Economic indicators D) Gross national product E) Real growth rate Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 112) When gross domestic product increases, what is the outcome for economic growth? A) National growth will increase B) The nation will experience a slowdown in growth C) Aggregate output will decrease D) Growth will remain steady when compared to developing nations E) Growth will decline based on the value of the national currency Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 113) When economists measure gross national product, what is being measured within a specific time period, regardless of location? A) The aggregate output B) The economic growth of the nation C) The growth of domestic factors of production D) The growth rate adjusted for inflation 33 Copyright © 2022 Pearson Education, Inc.
E) The total value of all goods and services Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 114) Why is gross national product (GNP) considered to be a less valuable indicator of domestic economic performance than gross domestic product (GDP)? A) GNP does not consider where the economic performance was located. B) GNP only considers economic performance within the United States. C) GNP is not adjusted for inflation. D) GNP does not consider currency fluctuations at the time of product purchase. E) GNP does not compare output to population rates. Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 115) The amount of money that a government owes its creditors is referred to as that country's A) GDP. B) national debt. C) consumer price index. D) inflation rate. E) GNP. Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 116) Which of the following supports the idea that the prices of similar products in different countries should be about the same? A) Standard of living B) Real growth rate C) Purchasing power parity D) Trade deficit E) Balance of trade Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 1.4: Explain the importance of the economic environment to business and identify the 34 Copyright © 2022 Pearson Education, Inc.
factors used to evaluate the performance of an economic system. 117) Why is it important to calculate purchasing power parity in the global market? A) It indicates how much consumers will pay for goods and services. B) It determines interest rates on short-term debt. C) It identifies how much the nominal GDP should be adjusted. D) It helps companies determine standards of living across the globe. E) It indicates the level of disposable income in developed nations. Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 118) Which of the following is calculated by dividing the total gross domestic product by the total population? A) GDP per Capita B) Real growth rate C) Real GDP D) Purchasing power parity E) Standard of living Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 119) Why do companies consider purchasing power parity when pricing goods and services for international markets? A) It measures economic performance for international workers B) It indicates what people can actually buy in their respective economic system C) It shapes the balance of trade between nations D) It prevents inflation E) It enforces compliance with monetary policies in the home country Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 120) Which of the following is the economic value of all products that a country exports minus the economic value of all the products it imports? A) National debt B) Gross domestic product 35 Copyright © 2022 Pearson Education, Inc.
C) Balance of trade D) GDP per capital E) Gross national product Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 121) Which of the following occurs when a country exports more than it imports? A) Recession B) Negative balance of trade C) Economic stability D) Positive balance of trade E) Inflations Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 122) Why is the United States considered to be a debtor nation? A) It has a positive balance of trade B) It imposes tariffs on some trade C) The GDP is higher than that of trade partners D) It exports more than it imports E) It has a negative balance of trade Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 123) Which of the following is an outcome of deflation? A) Instability B) Economic growth C) Decreasing unemployment D) Positive balance of trade E) Shrinking economy Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.4: Explain the importance of the economic environment to business and identify the 36 Copyright © 2022 Pearson Education, Inc.
factors used to evaluate the performance of an economic system. 124) Which of the following indicated the level of joblessness among people who are actively seeking work in an economic system? A) Parity B) Deflations C) Balance of trade D) Unemployment E) Inflation Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 125) Which of the following is a period during which aggregate output, as measured by real GDP, declines? A) Depression B) System-wide economic disorder C) Recession D) Deflation E) Inflation Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 126) Which of the following is used by a government to determine how it collects and spends revenue? A) Deflation B) Fiscal policies C) National debt D) Monetary policy E) Stabilization policy Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 127) Which of the following is used by a government to control the size of its money supply? A) Monetary policy B) Inflation 37 Copyright © 2022 Pearson Education, Inc.
C) Stabilization policy D) Trade deficits E) Gross domestic product Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 128) Aggregate output refers to a company's annual production of goods or services. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 129) The United States government manages the collection and spending of its revenues through monetary policy. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. AACSB: Application of knowledge130) The primary measure of growth in the business cycle is inflation. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 131) Inflation results in increased purchasing power for the consumer. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 132) Tax increases and decreases are a form of fiscal policy. Answer: TRUE Difficulty: Moderate 38 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Concept LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 133) The government can influence the availability of capital through the use of the Federal Reserve System. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 134) Stabilization policy is made up of both monetary and fiscal policy. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 135) The main measure of growth in the business cycle is aggregate output. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 136) Deflation, an indication that the economy is contracting, is characterized by price stabilization of goods. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 137) If productivity increases, prices charged to consumers will tend to increase as well. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. AACSB: Application of knowledge 39 Copyright © 2022 Pearson Education, Inc.
138) In the United States, the Federal Reserve System, which is the nation's central bank, can influence the ability and willingness of banks to lend money. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 139) Discuss the fiscal and monetary goals of a stabilization policy. Answer: Fiscal policy and monetary policy make up stabilization policy—government economic policy in which the goal is to smooth out fluctuations in output and unemployment and to stabilize prices. The various government interventions, such as financial bailouts, represent strategies to restore economic stability. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 140) Explain the types of policies used by the U.S. government to manage the U.S. economy. Answer: The government acts to manage the U.S. economic system through two sets of policies: fiscal and monetary. It manages the collection and spending of its revenues through fiscal policies. Tax rates, for example, can play an important role in fiscal policies helping to manage the economy. Monetary policies focus on controlling the size of the nation's money supply. Working primarily through the Federal Reserve System (the nation's central bank, often referred to simply as "the Fed"), the government can influence the ability and willingness of banks throughout the country to lend money. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 141) What is the difference between an economic recession and an economic depression? Answer: To determine whether an economy is going through a recession, start by measuring aggregate output. This is the function of real GDP which is found by making necessary adjustments to the total value of all goods and services produced within a given period by a national economy through domestic factors of production. A recession is more precisely defined as a period during which aggregate output, as measured by real GDP, declines. Most economists agree that the U.S. economy went into recession in 2008. Most also agree that we were gradually emerging from that recession in 2011. A prolonged and deep recession is a depression. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 40 Copyright © 2022 Pearson Education, Inc.
142) How does unemployment affect economic stability? Answer: Unemployment is the level of joblessness among people actively seeking work in an economic system. When unemployment is low, there is a shortage of labor available for businesses to hire. As businesses compete with one another for the available supply of labor, they raise the wages they are willing to pay. Higher labor costs eat into profit margins; they raise the prices of their products. Although consumers have more money to inject into the economy, this increase is often undone by higher prices, so purchasing power declines. Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Synthesis LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 143) Discuss the balance of trade in the United States and how it affects debt. Answer: A country's balance of trade is the economic value of all the products that it exports minus the economic value of its imported products. A positive balance of trade results when a country exports (sells to other countries) more than it imports (buys from other countries). A negative balance of trade results when a country imports more than it exports. A negative balance of trade is commonly called a trade deficit. The United States is a debtor nation rather than a creditor nation. Trade deficit affects economic growth because the amount of money spent on foreign products has not been paid in full. Therefore, it is borrowed money and borrowed money costs more in the form of interest. The money that flows out of the country to pay off the deficit can't be used to invest in productive enterprises, either at home or overseas. Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Synthesis LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 144) How does the amount of national debt influence the bond market in the United States? Answer: Although taxes are the most obvious way the government raises money, it also sells bonds—securities through which it promises to pay buyers certain amounts of money by specified future dates. These bonds are attractive investments because they are extremely safe. The U.S. government is not going to default on them (that is, fail to make payments when due). Even so, they must also offer a decent return on the buyer's investment, and they do this by paying interest at a competitive rate. By selling bonds, therefore, the U.S. government competes with every other potential borrower for the available supply of loanable money. The more money the government borrows, the less money is available for the private borrowing and investment that increase productivity. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Synthesis LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system. 145) How does aggregate output influence standards of living? Answer: Experts call the pattern of short-term ups and downs (or, better, expansions and 41 Copyright © 2022 Pearson Education, Inc.
contractions) in an economy the business cycle. The primary measure of growth in the business cycle is aggregate output, the total quantity of goods and services produced by an economic system during a given period. When output grows more quickly than the population, output per capita—the quantity of goods and services per person—goes up, and the system provides more of the goods and services that people want. When these two things occur, people living in an economic system benefit from a higher standard of living, which refers to the total quantity and quality of goods and services that they can purchase with the currency used in their economic system. To know how much your standard of living is improving, you need to know how much your nation’s economic system is growing Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Synthesis LO: 1.4: Explain the importance of the economic environment to business and identify the factors used to evaluate the performance of an economic system.
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Business Essentials, 13e (Ebert/Griffin) Chapter 2 Understanding Business Ethics and Social Responsibility 1) What are the individual beliefs about what is right and wrong or good and bad referred to as? A) Motivators B) Rules C) Cultures D) Ethics E) Laws Answer: D Difficulty: Easy AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 2) Which of the following should be the first step in assessing ethical behavior in a certain situation? A) Seek the advice of managers. B) Make a judgment based on the outcome of the activity. C) Consider appropriate moral values. D) Collect facts related to the situation. E) Gather a range of opinions on the effectiveness of the situation. Answer: D Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Application LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 3) Which of the following is likely the single MOST effective step that a company can take to set ethical standards? A) Offer large cash awards for whistle-blowing. B) Suggest that employees take ethics training. C) Post ethical rules on bulletin boards. D) State that the workplace values diversity. E) Demonstrate support from top management. Answer: E Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 4) How do top managers BEST demonstrate a commitment to ethical business practices? A) By adopting and enforcing written codes of ethics B) By reading employees' e-mails 1 Copyright © 2022 Pearson Education, Inc.
C) By decentralized decision-making practices D) By cooperating with other companies E) By monitoring employees' web searches Answer: A Difficulty: Easy AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 5) Which category of ethics relates to matters such as hiring, firing, working conditions, privacy and respect? A) Behavior toward economic agents B) Behavior toward employees C) Behavior toward the organization D) Elimination of conflicts of interest E) Social responsibility Answer: B Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 6) When an activity benefits an individual but not the employer, which ethical dilemma has been created? A) Lack of social responsibility B) Violation of the code of conduct C) Conflict of morals D) Interaction with primary agents of interest E) Conflict of interest Answer: E Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 7) Which of the following ethical norms ensures an action is consistent with what's fair? A) Caring B) Morals C) Justice D) Social responsibility E) Economic agents Answer: C Difficulty: Moderate AACSB: Ethical understanding and reasoning 2 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Concept LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 8) Which ethical norm considers whether a particular act optimizes the benefits to those who are affected by it? A) Utility B) Rights C) Justice D) Caring E) Respect Answer: A Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 9) When evaluating a decision based on the ethical norm based on individual rights, a manager is MOST likely to consider which of the following questions? A) Is the decision consistent with what we regard as fair? B) Does the decision respect the all individuals involved? C) Is the decision consistent with people's responsibilities to each other? D) Does the decision optimize the benefits for those who are affected by it? E) Does the decision comply with current legislation? Answer: B Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Analytical LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. AACSB: Ethical understanding and reasoning10) Standards that help to shape behaviors towards employees, the organization, and other economic agents are A) social responsibilities. B) managerial ethics. C) whistle-blowing techniques. D) values. E) morals. Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 11) When a firm significantly increases the price of a good or service because of an increase in 3 Copyright © 2022 Pearson Education, Inc.
demand, what unethical practice are they potentially engaging in? A) Consumerism B) Collusion C) Unfair pricing D) Collaboration E) Price gouging Answer: E Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 12) In addition to an individual's values and morals, which of the following will determine whether a behavior is regarded as ethical or unethical? A) Laws B) Social context C) Code of Conduct D) Behavior towards the organization E) Opinion of stakeholders Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 13) Sally's boss is out of town and she is considering taking an extended lunch to get some shopping done. Although no one will know she is gone, she knows this is not the right things to do, and that her boss has placed trust in her work ethic. Which of the following confirms Sally's belief about what is right and good, and the social norms expected of her? A) Social responsibility B) Ethical behavior C) Laws D) Managerial ethics E) Social consciousness Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 14) Which of the following is the ethical or unethical behaviors by employees in the context of their jobs? A) Justice B) Managerial ethics 4 Copyright © 2022 Pearson Education, Inc.
C) Business ethics D) Individual values E) Morals Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 15) Why do ethics vary from person to person, from situation to situation, and from culture to culture? A) Ideas of right and wrong must comply with those of the employers in the community. B) Laws that support ethics vary by culture. C) It is difficult to distinguish ethics from social responsibility. D) Ideas of right and wrong are based on beliefs and social context. E) Social standards can be narrowly interpreted. Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 16) Which of the following is the basis for formal laws within society? A) Standards of behavior of managers toward employees B) Codes of conduct C) Business opportunity D) Individuals values and morals E) Prevailing ethics standards Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 17) Ron has an employee who he thinks is acting in a manner that is not in the best interest for the organization. Ron has gathered facts from a variety of vendors, suppliers, and co-workers. Which of the following is Ron's next step in assessing the ethical behavior of his employee? A) Determine the utility of the potentially unethical behavior. B) Ask the employee to rationalize their behavior. C) Write a policy that addresses the potentially unethical behavior. D) Make an ethical judgment based on his standards of right and wrong. E) Analyze the facts and determine the most appropriate moral values. Answer: E Difficulty: Moderate 5 Copyright © 2022 Pearson Education, Inc.
AACSB: Analytical thinking Quest. Category: Concept LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 18) Which of the following is the ethical norm that measures how consistent an act is in terms of people's responsibility to each other? A) Caring B) Morals C) Utility D) Justice E) Rights Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 19) ABCo works hard to maintain a positive working relationship with employees, suppliers, and vendors. They have developed clear positions on how the firm and the employees will conduct business. Which of the following should ABCo use to encourage and guide ethical behavior in the workplace? A) Statement of rights to privacy B) E-mail monitoring C) Code of conduct D) Monitoring of online searches and other electronic activity E) Social responsibility programs Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 20) In addition to adopting formal written codes to ethical business practices, what else is one of the MOST common approached to formalizing top management's commitment to ethical behavior? A) Outlining core principles and values B) Revising organizational objectives C) Monitoring stakeholder activities D) Instituting ethics programs E) Tracking employee use of technology Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept 6 Copyright © 2022 Pearson Education, Inc.
LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 21) Ultimately, who is responsible for teaching standards of ethics that apply to the workplace, and educating employees about ethics in the workplace? A) Colleges and universities B) Former executives C) Peers from similar cultures D) Each organization E) Family units, including parents and grandparents Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace.
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22) Ethics are beliefs about what is right and wrong. Answer: TRUE Difficulty: Easy AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 23) Business ethics refer to ethical or unethical behaviors by employees in the context of their personal lives. Answer: FALSE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 24) The standards of behavior that guide managers in their work are called written codes. Answer: FALSE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Application LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 25) Some ethical and unethical behaviors fall into gray areas, while others are widely agreed upon. Answer: TRUE Difficulty: Easy AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 26) A conflict of interest occurs when an activity may benefit the individual to the detriment of his or her employer. Answer: TRUE Difficulty: Easy AACSB: Ethical understanding and reasoning Quest. Category: Application LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 27) Ethical values are the same from person to person. Answer: FALSE Difficulty: Moderate AACSB: Ethical understanding and reasoning 8 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Critical Thinking LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 28) What constitutes ethical behavior is determined entirely by the individual. Answer: FALSE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 29) An individual's personal code of ethics is shaped by his or her life experiences. Answer: TRUE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 30) Some actions may be illegal, yet considered ethical. Answer: FALSE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 31) Though an individual feels that his behavior is ethical, that behavior may still be considered unethical if social norms consider it to be so. Answer: TRUE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 32) The ethical norm of utility evaluates whether an act respects the rights of all parties. Answer: FALSE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 33) The most essential element in encouraging ethical behavior in an organization is letting employees dictate ethical norms. 9 Copyright © 2022 Pearson Education, Inc.
Answer: FALSE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 34) When considering ethical behavior toward primary agents of interest such as customers, competitors, and other stakeholders, there is ethical ambiguity in just about every activity. Answer: TRUE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 35) Businesses that sincerely stress the importance of ethical behavior tend to have fewer ethical scandals than those that do not. Answer: TRUE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 36) Discuss the three areas where managerial ethics affect the organization. Answer: Managerial ethics are the standards of behavior that guide individual managers in their work. Although your ethics can affect your work in any number of ways, it’s helpful to classify them in terms of three broad categories. 1.) Behavior toward employees: This category of managerial ethics relates to such matters as hiring and firing, wages and working conditions, and privacy and respect. Ethical guidelines suggest and legal standards require that hiring and firing decisions should be based solely on a person’s ability to perform a job. 2.) Behavior toward the organization: Ethical issues can also arise from employee behavior toward employers, especially in such areas as conflict of interest, confidentiality, and honesty. A conflict of interest occurs when an activity may benefit the individual but to the detriment of his or her employer. 3.) Behavior toward other economic agents: Ethics also come into play in the relationship of a business and its employees with so-called primary agents of interest, mainly customers, competitors, stockholders, suppliers, dealers, and unions. In dealing with such agents, there is room for ethical ambiguity in just about every activity—advertising, financial disclosure, ordering and purchasing, bargaining and negotiation, and other business relationships. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 37) What is the purpose of a written code of ethics? 10 Copyright © 2022 Pearson Education, Inc.
Answer: A written code of ethics formally announces a company's intent to do business in an ethical manner and provides guidelines for enforcing their code of ethics. Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 38) What would constitute a conflict of interest in a business setting? Answer: An activity that benefits the individual to the detriment of his or her employer would be considered a conflict of interest. Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Application LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 39) Describe the three-step model for applying ethical judgments. Answer: The three-step model includes (1) gathering the relevant factual information; (2) determining the most appropriate moral values; and (3) making an ethical judgment based on the rightness or wrongness of the proposed activity or policy. Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Application LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. 40) What role has e-mail played in business ethics and company practices? Answer: E-mail messages can be retrieved and used as evidence. An increasingly controversial area regarding business ethics and company practices involves the privacy of e-mail and other communication that takes place inside an organization. For instance, some companies monitor the Web searches conducted by their employees, and the appearance of certain key words may trigger a closer review of how an employee is using the company's computer network. Although some companies argue they do this for business reasons, some employees claim that it violates their privacy. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 2.1: Explain how individuals develop their personal codes of ethics and why ethics are important in the workplace. AACSB: Application of knowledge 41) Which of the following is the BEST description of organizational stakeholders? A) Competitors B) Government regulators C) The officers and key employees of an organization D) Individuals and businesses who own stock in a company E) Individuals and groups that are directly affected by the practices of a company 11 Copyright © 2022 Pearson Education, Inc.
Answer: E Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.2: Distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today.
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42) Which term refers to the way in which a business tries to balance its commitments to groups and individuals in its social environment? A) Business ethics B) Socialization C) Stakeholder consciousness D) Social responsibility E) Corporatization Answer: D Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.2: Distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today. 43) What is the term given to the groups, individuals, and organizations that are directly affected by the practices of an organization? A) Primary agents of interest B) Social auditors C) Competitors D) Organizational stakeholders E) Local communities Answer: D Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.2: Distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today. 44) When businesses work to honor warranties, charge fair prices and stand behind the quality of their products, what stakeholder group are they supporting? A) Customers B) Employees C) Investors D) Suppliers E) Local communities Answer: A Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Analytical LO: 2.2: Distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today. 45) What stakeholder group is being protected when managers follow proper procedures and strive to be accurate and candid in assessing future growth? A) Customers B) Employees 13 Copyright © 2022 Pearson Education, Inc.
C) Investors D) Suppliers E) Local communities Answer: C Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Analytical LO: 2.2: Distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today. 46) When a multinational organization supports its commitment to stakeholders, which stakeholders are they most concerned with? A) The stakeholders in their home country B) The stakeholders where most sales are made C) The stakeholders in emerging markets D) The stakeholders represented by the government E) The stakeholders in every country where business is done Answer: E Difficulty: Difficult AACSB: Ethical understanding and reasoning Quest. Category: Analytical LO: 2.2: Distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today. 47) What is the name of the concept that expanded the role of business in protecting and enhancing the general welfare of society? A) Ethics B) Morals C) Social responsibility D) Accountability E) Restraint Answer: D Difficulty: Difficult AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.2: Distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today. 48) Which element of the stakeholder model of responsibility considers the need to treat workers fairly and make them a part of the team? A) Customers B) Local communities C) Employees D) Investors E) Suppliers Answer: C Difficulty: Difficult 14 Copyright © 2022 Pearson Education, Inc.
AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.2: Distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today. 49) In order to behave responsibility to stakeholders, Willa's Wholesale often shares delivery schedules, adjusts profit margins, and works to ensure reasonable delivery schedules from those companies who provide Willa's Wholesale with raw material. Which of the following is Willa's Wholesale working with in terms of stakeholder responsibility? A) Customers B) Investors C) Employees D) Suppliers E) The local community Answer: D Difficulty: Difficult AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.2: Distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today. 50) Each quarter, Mabel determines which local event the company will volunteer with and support financially. They typically donate cash, and allow workers to take the day off work to volunteer at the event. Which of the following stakeholders does Mabel's organization seek to establish a strong relationship with? A) Investors B) Communities C) Suppliers D) Customers E) Employees Answer: B Difficulty: Difficult AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.2: Distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today. 51) A business's social responsibility to investors includes following proper accounting procedures. Answer: TRUE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.2: Distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today. 52) In the United States, there are increased expectations for a greater social role for business. 15 Copyright © 2022 Pearson Education, Inc.
Answer: TRUE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Synthesis LO: 2.2: Distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today. 53) An organizational stakeholder includes any group or individual that is directly affected by the practices of an organization. Answer: TRUE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Synthesis LO: 2.2: Distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today. 54) Organizations try to be socially responsible to their local communities, in part, to minimize their negative impact on communities. Answer: TRUE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Synthesis LO: 2.2: Distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today. 55) What is the difference between ethics and social responsibility? Answer: Ethics are beliefs about what is right and wrong or good and bad. Ethics affect individual behavior in the workplace. Social responsibility refers to the way in which a business tries to balance its commitments to groups and individuals in its social environment. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 2.2: Distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today. 56) When defining its sense of social responsibility, a firm typically confronts which areas of concern? Answer: A firm typically addresses and has social responsibility for the following five areas: its customers, its employees, its investors, its suppliers, and local communities. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 2.2: Distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today. 57) How can an organization apply the stakeholder model of social responsibility to its global partners? Answer: The stakeholder model can also provide some helpful insights into the conduct of 16 Copyright © 2022 Pearson Education, Inc.
managers in international business. In particular, to the extent that an organization acknowledges its commitments to its stakeholders, it should also recognize that it has multiple sets of stakeholders in each country where it does business. A global organization's actions might affect many different communities in dozens of different countries. Similarly, international businesses must also address their responsibilities in areas such as wages, working conditions, and environmental protection across different countries that have varying laws and norms regulating such responsibilities. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 2.2: Distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today.
17 Copyright © 2022 Pearson Education, Inc.
58) Describe the stakeholder model of social responsibility. Answer: Companies that strive to be responsible to their stakeholders concentrate on five main groups: customers, employees, investors, suppliers, and the local communities where they do business. To be responsible toward their customers, businesses strive to be fair in their pricing, honor warranties, meet delivery commitments, and stand behind the quality of their products. Businesses that are socially responsible toward their employees treat them fairly, make them a part of the team, and respect their dignity and basic human needs. To be responsible toward investors, businesses follow proper accounting procedures, provide appropriate information to shareholders about financial performance, and manage the organization to protect shareholders rights and investments. Businesses are responsible toward suppliers when they provide realistic delivery schedules and reduced profit margins. Many businesses keep their suppliers informed about future plans and work to partner with them. To be responsible toward communities, businesses often give back through charitable programs and local causes. Difficulty: Difficult AACSB: Reflective thinking Quest. Category: Critical Thinking LO: 2.2: Distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today. 59) Explain the steps that an organization must take to foster a company-wide sense of social responsibility. Answer: Social responsibility must first start at the top. No program can succeed without top management support and top management must issue a statement announcing the commitment. A committee of top managers must then develop a plan detailing the level of management support; some companies set aside percentages of profits for social programs. At this point, managers must set specific priorities. Then, one executive must be put in charge of the firm's agenda, and this individual must monitor the program and ensure that its implementation is consistent with the firm's policy statement. The organization must conduct social audits, which are systematic analyses of the firm's success in using funds earmarked for its social responsibility goals. Failing an audit should prompt a rethinking of the program's implementation and its priorities. Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 2.2: Distinguish social responsibility from ethics, identify organizational stakeholders, and characterize social consciousness today. 60) What must every corporation do in maintaining and reporting its financial status? A) Purchase stocks on margin B) Use creative accounting practices C) Support increased stock prices D) Aim to maximize predicted profit margins E) Conform to generally accepted accounting principles Answer: E Difficulty: Easy AACSB: Ethical understanding and reasoning 18 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Critical Thinking LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 61) Which of the following occurs when someone uses confidential information to gain from the purchase or sale of stocks? A) Identity theft B) A margin purchase C) Insider trading D) Collusion E) GAAP standards violation Answer: C Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Application LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 62) What does the Sarbanes-Oxley Act of 2002 require a chief financial officer to do? A) Prevent insider trading B) Engage in strategic management C) Guarantee the accuracy of financial reporting D) Hire a forensic accountant E) Oversee the implementation of ethical standards Answer: C Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 63) Which type of pollution is created by carbon monoxide and other chemicals produced by manufacturing plants? A) Noise B) Land C) Water D) Air E) Waste Answer: D Difficulty: Easy AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 64) Which of the following includes provisions that control air pollution by members? A) Sarbanes-Oxley 19 Copyright © 2022 Pearson Education, Inc.
B) GAAP C) Code of ethics D) NAFTA E) FTC Answer: D Difficulty: Easy AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 65) Which of the following is created by the chemical or radioactive by-products of the manufacturing process? A) Air pollution B) Toxic waste C) Alternative sources of energy D) Carbon dioxide E) Landfill waste Answer: B Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 66) What is the main cause of water pollution? A) Acid rain B) Landfill runoff C) Chemical and waste dumping D) Vehicle exhaust E) Decomposition Answer: C Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 67) What do new forms of solid-waste disposal, such as repurposing combustible waste, help prevent? A) Future contamination of land B) Toxins C) Use of phosphates D) Runoff E) Zero-landfill claims Answer: A Difficulty: Moderate 20 Copyright © 2022 Pearson Education, Inc.
AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 68) What is the practice of injecting water and chemicals into underground rock in order to break the rock apart called? A) Recycling B) Toxic waste elimination C) Fracking D) Zero-landfill support E) Repurposing Answer: C Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 69) Which of the following regulates advertising and pricing practices to protect consumers? A) Generally Accepted Accounting Principles B) North American Free Trade Agreement C) Food and Drug Administration D) Federal Trade Commission E) Children's Online Privacy Protection Act Answer: D Difficulty: Easy AACSB: Ethical understanding and reasoning Quest. Category: Application LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 70) Social activism dedicated to protecting the rights of consumers is the result of what? A) Decreased consumer rights B) Consumerism C) International agreements D) The Consumer Bill of Rights E) Green marketing efforts Answer: B Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 71) When a firm modifies a production process to limit the consumption of valuable resources, and promotes the product produced as environmentally friendly, which business practice are they 21 Copyright © 2022 Pearson Education, Inc.
engaging in? A) Collusion B) Consumerism C) Green marketing D) Recycling E) Near zero status Answer: C Difficulty: Difficult AACSB: Ethical understanding and reasoning Quest. Category: Analytical LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 72) What is the result of two or more firms collaborating on a wrongful act, such as price fixing? A) Unfair pricing B) Price gouging C) Product collaboration D) Collusion E) Consumerism Answer: D Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 73) What is the term for an employee who discovers an illegal or unethical activity and tries to put an end to it by speaking up? A) Whistle-blower B) Inside trader C) Obstructionist D) Colluder E) Accommodator Answer: A Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 74) When a stakeholder uses confidential information to gain from the sale or purchase of a stock, what ethical violation are they engaging in? A) Whistle-blowing B) Insider training C) Social accommodation D) Collusions E) Gouging 22 Copyright © 2022 Pearson Education, Inc.
Answer: B Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. AACSB: Ethical understanding and reasoning75) Firms typically confront concerns about responsibility towards the environment, customers, employees, and investors, which is referred to as A) social responsibility. B) whistleblowing. C) ethics. D) social consciousness. E) the stakeholder model of responsibility. Answer: A Difficulty: Difficult AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 76) In terms of climate change, which of the following is considered to be the MOST significant challenge for contemporary businesses? A) Carbon offsets B) Consumer rights C) Maintaining high levels of return on investments D) Toxic waste disposal E) Controlling pollution Answer: E Difficulty: Difficult AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 77) In addition to preventing future of contamination, which of the following is a key issue that characterizes land pollution? A) Restoring the quality of land that is already damaged B) Managing acid rain and its effects C) Disposing of recycled products D) Maintaining the fracking process E) Developing agreements with trade partners in other nations Answer: A Difficulty: Difficult AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking 23 Copyright © 2022 Pearson Education, Inc.
LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 78) Which of the following is the reconversion of waste materials into useful products? A) Green marketing B) Proactive stance to social responsibility C) Social consciousness D) Fracking E) Recycling Answer: E Difficulty: Difficult AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 79) Which element of green marketing support the process of using renewable resources and managing limited resources responsibly and efficiently? A) Sustainability B) Packaging reduction C) Carbon offset D) Product modification E) Production processes Answer: A Difficulty: Difficult AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 80) Pour House Coffee uses cups and napkins make from recycled materials. Which element of green marketing does Pour House Coffee support by using these products? A) Carbon offset B) Sustainability C) Product modification D) Packing reduction E) Production process Answer: E Difficulty: Difficult AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 81) Environmental issues are now a significant challenge for socially reasonable organizations. Answer: TRUE Difficulty: Easy 24 Copyright © 2022 Pearson Education, Inc.
AACSB: Ethical understanding and reasoning Quest. Category: Analytical LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 82) A company that does not act responsibly toward its customers may lose their trust and ultimately their business. Answer: TRUE Difficulty: Easy AACSB: Ethical understanding and reasoning Quest. Category: Analytical LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 83) The Consumer Bill of Rights is backed by numerous federal and state laws. Answer: TRUE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 84) What is collusion? Answer: Collusion occurs when two or more parties agree to collaborate on such wrongful acts as price fixing; price fixing occurs when firms illegally control supplies and prices of products. Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Concept LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 85) Define consumerism. Answer: Consumerism is social activism dedicated to protecting the rights of consumers in their dealings with businesses. Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Concept LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 86) Identify who is responsible for regulating advertising and what the key issues are. Answer: To encourage responsibility, the Federal Trade Commission (FTC) regulates advertising and pricing practices. Some critics also point to misleading labelling and advertising in the agricultural sector. Another issue concerns advertising that some consumers consider morally objectionable—for products such as underwear, condoms, alcohol, tobacco products, and firearms. Laws regulate some of this advertising (for instance, tobacco cannot be promoted in television commercials but can be featured in print ads in magazines), and many advertisers 25 Copyright © 2022 Pearson Education, Inc.
use common sense and discretion in their promotions. Difficulty: Difficult AACSB: Reflective thinking Quest. Category: Application LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 87) What is insider trading? Why would an investor engage in it? Answer: Insider trading is using confidential information to gain from the purchase or sale of stocks. Confidential information is information that is not available to the general public but that is available to a few people because of their position within a company. For example, investors with inside information may sell a stock at a high price just before a piece of negative information becomes public and the price plummets, thus preventing a big loss. Similarly, an investor with inside information may buy stock at a low price just before a piece of favorable information becomes public and the price of the stock increases. Difficulty: Difficult AACSB: Reflective thinking Quest. Category: Application LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 88) Discuss the six elements of the Consumer Bill of Rights. Answer: Consumers have a right to safe products. They have a right to be informed about all relevant aspects of a product. Consumers has a right to be heard, and have a right to choose what they buy. Consumers have a right to be educated about purchases, and consumers have a right to courteous service. Difficulty: Difficult AACSB: Reflective thinking Quest. Category: Application LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 89) Why should organizations carefully consider social responsibility and ethics in their international advertising efforts? Answer: Advertising standards in different countries vary in many different ways. Some of the differences are attributable to sociocultural norms. For instance, ads and billboards in some parts of Europe occasionally feature nudity and may be much more provocative than might be accepted in the United States, while ads in the Middle East and parts of Asia are likely to be very conservative. Legal restrictions also vary across different countries. For example, U.S. regulations prohibit tobacco companies from advertising on television and most magazines. But in other countries tobacco companies may still be allowed to advertise in print media and on television. Difficulty: Difficult AACSB: Reflective thinking Quest. Category: Application LO: 2.3: Show how the concept of social responsibility applies both to environmental issues and to a firm's relationships with customers, employees, and investors. 26 Copyright © 2022 Pearson Education, Inc.
90) If a firm hides responsibility for wrongdoing, what type of stance are they taking toward social responsibility? A) Responsible B) Obstructionist C) Accommodative D) Proactive E) Moderate Answer: B Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.4: Identify four general approaches to social responsibility and note the role of social responsibility in small business. 91) What concept is supported by those who believe that corporations should help improve the lives of citizens? A) Social auditing B) Government initiative C) Collusion D) Social responsibility E) Social accommodation Answer: D Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.4: Identify four general approaches to social responsibility and note the role of social responsibility in small business. 92) What stance do firms who do as little as possible to solve social or environmental problems take? A) Social accommodation B) Obstructionist C) Defensive D) Accommodative E) Proactive Answer: B Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.4: Identify four general approaches to social responsibility and note the role of social responsibility in small business. 93) If a manager believes their job is to generate profits and is willing to do everything legally required, but no more, what social responsibility stance is being taken? A) Proactive B) Accommodative C) Defensive 27 Copyright © 2022 Pearson Education, Inc.
D) Obstructionist E) Social accommodation Answer: C Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.4: Identify four general approaches to social responsibility and note the role of social responsibility in small business. 94) Firms that meet, and occasionally exceed legal and ethical requirements take what type of social responsibility stance? A) Proactive B) Social accommodation C) Defensive D) Accommodative E) Obstructionist Answer: D Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.4: Identify four general approaches to social responsibility and note the role of social responsibility in small business. 95) Those firms who look for opportunities to contribute positively to society because of a sincere desire to improve social welfare take what type of social responsibility stance? A) Obstructionist B) Accommodative C) Social accommodations D) Defensive E) Proactive Answer: E Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.4: Identify four general approaches to social responsibility and note the role of social responsibility in small business. 96) What is the most common and direct way to provide direct financial support when taking a proactive stance to social responsibility? A) Set up a foundation B) Reduce prices C) Make a donation with each purchase D) Use the Internet to solicit donations E) Follow all laws set forth by the government Answer: A Difficulty: Moderate AACSB: Reflective thinking 28 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Application LO: 2.4: Identify four general approaches to social responsibility and note the role of social responsibility in small business. 97) In business, ethical decisions are generally based on what? A) Social responsibility B) Individual ethics C) Laws D) Societal norms E) Stakeholder returns Answer: B Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Analytical LO: 2.4: Identify four general approaches to social responsibility and note the role of social responsibility in small business. AACSB: Ethical understanding and reasoningAACSB: Ethical understanding and reasoningAACSB: Ethical understanding and reasoningAACSB: Ethical understanding and reasoningAACSB: Ethical understanding and reasoningAACSB: Ethical understanding and reasoning98) The proactive approach to social responsibility argues that profits should not be spent on social programs. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 2.4: Identify four general approaches to social responsibility and note the role of social responsibility in small business. 99) The strongest stance toward social responsibility a company can take is a proactive one. Answer: TRUE Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Analytical LO: 2.4: Identify four general approaches to social responsibility and note the role of social responsibility in small business. 100) There is general consensus within the United States that social responsibility must take precedence over profits. Answer: FALSE Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Analytical LO: 2.4: Identify four general approaches to social responsibility and note the role of social responsibility in small business. 101) Small businesses must answer many of the same social responsibility questions as big 29 Copyright © 2022 Pearson Education, Inc.
businesses. Answer: TRUE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Analytical LO: 2.4: Identify four general approaches to social responsibility and note the role of social responsibility in small business. 102) Organizations that take a proactive approach to social responsibility actively look for opportunities to contribute to the well-being of the social environment. Answer: TRUE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Analytical LO: 2.4: Identify four general approaches to social responsibility and note the role of social responsibility in small business. 103) An organization that tries to cover up wrong doings is taking a defensive stance toward social responsibility. Answer: FALSE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Analytical LO: 2.4: Identify four general approaches to social responsibility and note the role of social responsibility in small business. 104) How do issues of social responsibility and ethics affect small business? Answer: Small businesses must address, more or less, the same issues as big businesses–the differences are primarily differences of scale. Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Analytical LO: 2.4: Identify four general approaches to social responsibility and note the role of social responsibility in small business. 105) Identify two arguments against social responsibility as a business goal. Answer: Some skeptics of business-sponsored social projects fear that if businesses become too active, they will gain too much control over the ways in which those projects are addressed by society as a whole. Other critics claim that business organizations lack the expertise needed to address social issues. Difficulty: Difficult AACSB: Ethical understanding and reasoning Quest. Category: Analytical LO: 2.4: Identify four general approaches to social responsibility and note the role of social responsibility in small business. 106) Discuss social responsibility actions of a company that takes a defensive stance towards 30 Copyright © 2022 Pearson Education, Inc.
social responsibility. Answer: Organizations that take a defensive stance will do everything that is legally required, including admitting to mistakes and taking corrective actions, but nothing more. Defensive stance managers insist that their job is to generate profits and might, for example, install pollution-control equipment dictated by law but not higher-quality equipment to further limit pollution. Difficulty: Difficult AACSB: Ethical understanding and reasoning Quest. Category: Analytical LO: 2.4: Identify four general approaches to social responsibility and note the role of social responsibility in small business. 107) Describe the obstructionist stance to social responsibility. Answer: The few organizations that take an obstructionist stance to social responsibility usually do as little as possible to solve social or environmental problems, have little regard for ethical conduct, and will go to great lengths to deny or cover up wrongdoing. Difficulty: Difficult AACSB: Ethical understanding and reasoning Quest. Category: Analytical LO: 2.4: Identify four general approaches to social responsibility and note the role of social responsibility in small business. 108) How does the government affect the idea of social responsibility in a planned economy? A) The government requires higher stakeholder returns. B) The government passes laws to make sure business interests do not damage society. C) The government heavily regulates business activities to ensure the business supports social ideals. D) The government attempts to offset small business restrictions. E) The government limits regulations in exchange for planned giving. Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 2.5: Explain the role of government in social responsibility in terms of how governments and businesses influence each other. 109) When the government dictates what organizations can and cannot do, what tactic is the government using? A) Social responsibility B) Taxation C) Stakeholder support D) Regulation E) Socialism Answer: D Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Analytical LO: 2.5: Explain the role of government in social responsibility in terms of how governments 31 Copyright © 2022 Pearson Education, Inc.
and businesses influence each other. 110) Where do direct regulations imposed by the government evolve from? A) Laws B) The National Labor Relations Board C) Indirect channels D) The Foreign Corrupt Practices Act E) Social beliefs Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 2.5: Explain the role of government in social responsibility in terms of how governments and businesses influence each other. 111) What government agency has the responsibility to handle investor-related issues? A) SEC B) Department of Labor C) FTC D) Environmental Protection Agency E) EEOC Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 2.5: Explain the role of government in social responsibility in terms of how governments and businesses influence each other. 112) What government agency has the responsibility to oversee consumer-related concerns? A) Department of Labor B) FTC C) Equal Employment Opportunity Commission D) SEC E) National Labor Relations Board Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 2.5: Explain the role of government in social responsibility in terms of how governments and businesses influence each other. 113) Which of the following allows for financial sanctions against businesses or business officials who engage in bribery? A) Sarbanes-Oxley Act B) SEC Act C) U.S. Foreign Corrupt Practices Act D) NRA 32 Copyright © 2022 Pearson Education, Inc.
E) Political Action Committees Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 2.5: Explain the role of government in social responsibility in terms of how governments and businesses influence each other. 114) In what way can the government use indirect regulation to affect social responsibility? A) Enacting laws B) Supporting shareholders C) Imposing fines to violators D) Providing tax incentives E) Cooperating with foreign governments Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 2.5: Explain the role of government in social responsibility in terms of how governments and businesses influence each other. 115) In what way can a business or industry represent themselves before political bodies in order to influence the government? A) Personal contacts B) Financial gifts C) Lobbying D) Offering favors E) Voting Answer: C Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Concept LO: 2.5: Explain the role of government in social responsibility in terms of how governments and businesses influence each other. 116) If an individual business person wanted to present his or her opinion on a piece of legislations, what method might be used? A) Voting B) Lobbying C) Favors D) Personal contacts E) Political action committee meetings Answer: D Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Analytical LO: 2.5: Explain the role of government in social responsibility in terms of how governments 33 Copyright © 2022 Pearson Education, Inc.
and businesses influence each other. 117) What types of organizations are used to solicit money that then is distributed to political candidates? A) Lobbies B) Government agencies C) Stakeholders D) Ethical compliance leaders E) Political action committees Answer: E Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Concept LO: 2.5: Explain the role of government in social responsibility in terms of how governments and businesses influence each other. 118) When a business hires a staff to formally represent the organization before a political body, in efforts to influence that political body, the business is A) using personal contacts. B) starting a political action committee. C) lobbying. D) asking for favors. E) campaigning. Answer: C Difficulty: Easy AACSB: Analytical thinking Quest. Category: Concept LO: 2.5: Explain the role of government in social responsibility in terms of how governments and businesses influence each other. 119) In addition to government regulation, in which way can the government regulate business practices? A) Legislation B) Political action committees C) Bribes D) Fines E) Taxes Answer: A Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.5: Explain the role of government in social responsibility in terms of how governments and businesses influence each other. 120) It is legal to solicit favors from an organization or politician, or use other influence tactics to gain support. Answer: TRUE 34 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.5: Explain the role of government in social responsibility in terms of how governments and businesses influence each other. 121) Government will most often influence organizations through the establishment of laws and rules that dictate what organizations can and cannot do. Answer: TRUE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.5: Explain the role of government in social responsibility in terms of how governments and businesses influence each other. 122) Critics of indirect regulation maintain that a free market system would accomplish the same goals as government regulations. Answer: TRUE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 2.5: Explain the role of government in social responsibility in terms of how governments and businesses influence each other. 123) Discuss the difference between lobbying and using Political Action Committees as a means to influence government. Answer: Lobbying, or the use of persons or groups to formally represent an organization or group of organizations before political bodies, is an effective way to influence the government. Lobbyists work to represent an organization's position on an issue and to influence members of Congress when voting on legislation. Political action committees (PACs) are special organizations created to solicit money and then distribute it to political candidates and groups working on a particular political issue. Employees of a firm may be encouraged to make donations to a particular PAC because managers know that it will support candidates with political views similar to their own. PACs, in turn, make the contributions themselves, usually to a broad slate of state and national candidates and use monies collected to develop advertising campaigns for or against a candidate or issue. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 2.5: Explain the role of government in social responsibility in terms of how governments and businesses influence each other. 124) Describe the ways that the government attempts to shape social responsibility. Answer: The government (national, state, or local) attempts to shape social responsibility practices through both direct and indirect channels. Direct influence most frequently is manifested through regulation, whereas indirect influence can take a number of forms, most notably taxation policies. 35 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 2.5: Explain the role of government in social responsibility in terms of how governments and businesses influence each other. 125) Explain how the government most often directly influences organizations. Answer: The government most often directly influences organizations through regulation, the establishment of laws and rules that dictate what organizations can and cannot do. This regulation usually evolves from social beliefs about how businesses should conduct themselves. To implement legislation, the government generally creates special agencies to monitor and control certain aspects of business activity. A variety of government agencies have the power to levy fines or bring charges against organizations that violate regulation. AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 2.5: Explain the role of government in social responsibility in terms of how governments and businesses influence each other. 126) Which of the following is a way to tell how an organization is doing in meeting its social responsibility goals? A) Governmental mandate B) Executive summary C) Social audit D) Government initiative E) Financial report Answer: C Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Analytical LO: 2.6: Discuss how businesses manage social responsibility in terms of both formal and informal dimensions and how organizations can evaluate their social responsibility. 127) Because of the influence of a more sophisticated and educated public, what approach should corporations take to develop social responsibility plans? A) The same approach they take when developing any other business strategy B) Create new legal and implied requirements C) Develop an informal plan and use it to see what work before incorporating those ideas to a formal plan D) Increase ethical understanding and training for leadership E) Increase philanthropic giving Answer: A Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Critical Thinking LO: 2.6: Discuss how businesses manage social responsibility in terms of both formal and informal dimensions and how organizations can evaluate their social responsibility. 128) Which of the following is an informal dimension for managing social responsibility? 36 Copyright © 2022 Pearson Education, Inc.
A) Legal compliance B) Whistle-blowing C) PAC committees D) Ethical compliance E) Philanthropic giving Answer: B Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Application LO: 2.6: Discuss how businesses manage social responsibility in terms of both formal and informal dimensions and how organizations can evaluate their social responsibility. 129) What is the extent to which an organization conforms to local, state, federal, and international laws known as? A) Government agency support B) Social responsibility C) Legal compliance D) Political action E) Free-trade Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 2.6: Discuss how businesses manage social responsibility in terms of both formal and informal dimensions and how organizations can evaluate their social responsibility. 130) What is the extent to which members of an organization follow basic ethical and legal standards of behavior? A) Social responsibility B) Norms C) Values D) Ethical compliance E) Legal compliance Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 2.6: Discuss how businesses manage social responsibility in terms of both formal and informal dimensions and how organizations can evaluate their social responsibility. 131) Which of the following is the act of awarding funds or gifts to charities? A) Ethical compliance B) Political action C) Lobbying D) Informal dimensions of giving E) Philanthropic giving Answer: E 37 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 2.6: Discuss how businesses manage social responsibility in terms of both formal and informal dimensions and how organizations can evaluate their social responsibility. 132) Which of the following best supports an organization's stance in terms of social responsibility and ethical leadership? A) Philanthropic giving B) Organizational leadership practices C) Line and staff members D) Stakeholders E) Government intervention Answer: B Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Critical Thinking LO: 2.6: Discuss how businesses manage social responsibility in terms of both formal and informal dimensions and how organizations can evaluate their social responsibility. 133) To ensure efforts are producing the desired benefit, what must a socially responsible business use? A) Government regulation B) The concept of control C) Ethics policies D) Internet campaigns E) Senior leadership task forces Answer: B Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Application LO: 2.6: Discuss how businesses manage social responsibility in terms of both formal and informal dimensions and how organizations can evaluate their social responsibility. 134) When conducting a corporate social audit, what must be evaluated? A) Efforts of competitors B) General goals that are flexible, based on need C) The resources devoted to each goal D) The strength of the leadership team E) International laws and regulation Answer: C Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Application LO: 2.6: Discuss how businesses manage social responsibility in terms of both formal and informal dimensions and how organizations can evaluate their social responsibility. 38 Copyright © 2022 Pearson Education, Inc.
135) Within the organization, the use of formal committees, training, and codes of conduct help to ensure standards of A) ethical compliance. B) philanthropic giving. C) organizational leadership. D) social responsibility. E) legal compliance. Answer: A Difficulty: Easy AACSB: Analytical thinking Quest. Category: Application LO: 2.6: Discuss how businesses manage social responsibility in terms of both formal and informal dimensions and how organizations can evaluate their social responsibility. 136) Ethical compliance is the extent to which an organization conforms to local, state, and federal laws. Answer: FALSE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.6: Discuss how businesses manage social responsibility in terms of both formal and informal dimensions and how organizations can evaluate their social responsibility. 137) A whistle-blower is an outsider who reports publicly on the wrongdoings of companies. Answer: FALSE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.6: Discuss how businesses manage social responsibility in terms of both formal and informal dimensions and how organizations can evaluate their social responsibility. 138) Most firms use outside auditors to conduct their social audit. Answer: FALSE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Concept LO: 2.6: Discuss how businesses manage social responsibility in terms of both formal and informal dimensions and how organizations can evaluate their social responsibility. 139) Most philanthropic giving in the United States is targeted towards the arts. Answer: FALSE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Application LO: 2.6: Discuss how businesses manage social responsibility in terms of both formal and informal dimensions and how organizations can evaluate their social responsibility. 39 Copyright © 2022 Pearson Education, Inc.
140) A corporate social audit acts to analyze the effectiveness of a firm's social performance. Answer: TRUE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Application LO: 2.6: Discuss how businesses manage social responsibility in terms of both formal and informal dimensions and how organizations can evaluate their social responsibility. 141) Discuss ways in which an organization can help to ensure all members of the organization participate in ethical compliance. Answer: Ethical compliance is the extent to which the members of the organization follow basic ethical (and legal) standards of behavior. Organizations have increased their efforts in this area by providing training in ethics and developing guidelines and codes of conduct. These activities serve as vehicles for enhancing ethical compliance. Many organizations also establish formal ethics committees. These committees might review proposals for new projects, help evaluate new hiring strategies, or assess a new environmental protection plan. They might also serve as a peer review panel to evaluate alleged ethical misconduct by an employee. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 2.6: Discuss how businesses manage social responsibility in terms of both formal and informal dimensions and how organizations can evaluate their social responsibility. 142) Discuss ways in which an organization can formally analyze the effectiveness of its social performance. Answer: An organization may sometimes actually evaluate the effectiveness of its social responsibility efforts. In addition, some businesses occasionally conduct a corporate social audit, a formal and thorough analysis of the effectiveness of a firm’s social performance. A task force of high-level managers from within the firm usually conducts the audit. It requires that the organization clearly define all of its social goals, analyze the resources it devotes to each goal, determine how well it is achieving the various goals, and make recommendations about which areas need additional attention. Recent estimates suggest that around 80 percent of the world’s 250 largest firms now issue annual reports summarizing their efforts in the areas of environmental and social responsibility. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 2.6: Discuss how businesses manage social responsibility in terms of both formal and informal dimensions and how organizations can evaluate their social responsibility.
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Business Essentials, 13e (Ebert/Griffin) Chapter 3 Entrepreneurship, New Ventures, and Business Ownership 1) Which entity is defined as independent and has little influence on its market? A) Corporation B) Joint venture C) Small business D) Partnership E) Government agency Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 3.1: Define small business, discuss its importance to the U.S. economy, and explain popular areas of small business. 2) The U.S. Department of Commerce considers a business "small" if it has fewer than how many employees? A) 10 B) 50 C) 100 D) 500 E) 1,500 Answer: D Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 3.1: Define small business, discuss its importance to the U.S. economy, and explain popular areas of small business. 3) Which of the following industry groups is the largest segment of small business enterprise? A) Manufacturing B) Wholesaling C) Retailing D) Transportation E) Services Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 3.1: Define small business, discuss its importance to the U.S. economy, and explain popular areas of small business. 4) Which of the following types of venue is favored by small-business retailers because they can focus limited resources on narrow or small market segments? A) Superstores B) Catalog showrooms 1 Copyright © 2022 Pearson Education, Inc.
C) Specialty shops D) Department stores E) Studio workrooms Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 3.1: Define small business, discuss its importance to the U.S. economy, and explain popular areas of small business. 5) Why is it difficult to compare relative job growth for different-sized businesses? A) Sourcing up-to-date employment figures is difficult. B) Many small businesses experience rapid unreported growth. C) Spheres of influence overlap between the small and big business sectors. D) Staff size of small businesses tends to change faster than staff size of big businesses. E) It is hard to determine the cutoff point at which a small business becomes a large business. Answer: E Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 3.1: Define small business, discuss its importance to the U.S. economy, and explain popular areas of small business. 6) Which of the following can assist a small business and helps to determine standards based on industry? A) The U.S. Department of Commerce B) The Small Business Administration C) A franchise D) Venture capitalist E) The Small Business Development Center Answer: B Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Concept LO: 3.1: Define small business, discuss its importance to the U.S. economy, and explain popular areas of small business. 7) When though investor is not interested in owning their own business, why do they need to understand entrepreneurship? A) To understand why someone would want to work so hard for a small return B) To determine the key characteristics of success C) To understand how to convert a great idea to a profitable idea D) To assess the market potential for up-and-coming businesses E) To learn how to set up a business plan Answer: D Difficulty: Difficult AACSB: Analytical thinking 2 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Application LO: 3.1: Define small business, discuss its importance to the U.S. economy, and explain popular areas of small business. 8) In a small business, who determines prices for wholesalers and customers? A) Customers B) Franchise owners C) Market forces D) Small business administration E) Small business owners Answer: C Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 3.1: Define small business, discuss its importance to the U.S. economy, and explain popular areas of small business. 9) The contribution a small business on the U.S. economy is measured based on its impact to which economic systems? A) Bank loans, and contributions to big business B) International trade, interest rates, and the service industry C) Bank loans and innovation D) The service industry, the stock market, and job creation E) Job creation, contributions to big business, and innovation Answer: E Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Analytical LO: 3.1: Define small business, discuss its importance to the U.S. economy, and explain popular areas of small business. 10) When do new businesses often emerge? A) When there is an economic recession B) When big businesses sell most of their products to consumers C) When big businesses sell most of their product to small firms D) When goods are only available in bulk E) In response to emerging opportunities Answer: E Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Analytical LO: 3.1: Define small business, discuss its importance to the U.S. economy, and explain popular areas of small business. 11) The Small Business Administration is the government agency charged with owning small businesses. Answer: FALSE 3 Copyright © 2022 Pearson Education, Inc.
Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 3.1: Define small business, discuss its importance to the U.S. economy, and explain popular areas of small business. 12) The more resources required to start a business, the less likely it is that small firms will dominate the industry. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 3.1: Define small business, discuss its importance to the U.S. economy, and explain popular areas of small business. 13) Small businesses produce more patents per employee than large patenting firms. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 3.1: Define small business, discuss its importance to the U.S. economy, and explain popular areas of small business. 14) Most businesses in the United States are large businesses with more than 500 employees. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.1: Define small business, discuss its importance to the U.S. economy, and explain popular areas of small business. 15) Major innovations are most likely to come from large corporations. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.1: Define small business, discuss its importance to the U.S. economy, and explain popular areas of small business. 16) Small businesses tend to hire at a slower rate, but they also rarely lay employees off. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.1: Define small business, discuss its importance to the U.S. economy, and explain popular areas of small business. 4 Copyright © 2022 Pearson Education, Inc.
17) The Small Business Administration (SBA) may consider a business with as many as 1500 employees to be small as long as it has relatively little influence in its market. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.1: Define small business, discuss its importance to the U.S. economy, and explain popular areas of small business.
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18) How is the U.S. economy affected by small businesses? Answer: Small businesses affect the U.S. economy through job creation and innovation and by making products for and selling products made by big businesses. Small businesses are an important source of new jobs in the United States. Innovations are as likely to come from small businesses as big businesses. Finally, most of the products made by big businesses are sold to consumers by small businesses. Big businesses often depend on small businesses as suppliers as well. By creating jobs, fostering innovation, and providing goods and services, small businesses have a positive effect on the U.S. economy. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 3.1: Define small business, discuss its importance to the U.S. economy, and explain popular areas of small business. 19) Discuss the contribution to big business that is made by small businesses. Answer: Most of the products made by big businesses are sold to consumers by small ones. For example, most dealerships that sell Chevrolets, Toyotas, and Hondas are independently operated. Even as more shoppers turn to online shopping, smaller businesses still play critical roles. For instance, larger traditional retailers with an online presence actually outsource the management of this part of their business and the distribution of their products to other firms, many of them small or regional companies. Smaller businesses also provide data storage services for larger businesses. Moreover, small businesses provide big ones with many of their services and raw materials. Microsoft, for instance, relies on hundreds of small firms for most of its routine codewriting functions. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 3.1: Define small business, discuss its importance to the U.S. economy, and explain popular areas of small business. 20) Identify three popular areas of small business and the impact small businesses make in that sector. Answer: 1.) Services: About 56.2 percent of businesses with fewer than 20 employees are involved in the service industry, which ranges from marriage counseling to computer software, from management consulting to professional dog walking. Partly because they require few resources (and hence don’t cost as much to start), service providers constitute a large segment of small business. 2.) Retailing: Retailers, which sell products made by other firms directly to consumers, account for about 13.69 percent of small businesses. Usually, people who start small retail businesses favor specialty shops, such as big men’s clothing or gourmet coffees that let the owners focus limited resources on narrow or small market segments. 3.) Construction: About 9.57 percent of all U.S. businesses are involved in construction. Because many construction jobs are small local projects, such as a homeowner adding a garage or remodeling a room, local contractors are often best suited to handle them. 4.) Wholesaling: Small business owners often do well in wholesaling, which accounts for about 5.28 percent of businesses with fewer than 20 employees. Wholesalers buy products in bulk from manufacturers or other producers and store them in quantities and locations convenient for selling them to retailers. 5.) Finance and Insurance: Financial and insurance firms account for about 6.6 percent of small businesses. Most of these businesses, such as local State Farm Insurance offices, are affiliates of or agents for 6 Copyright © 2022 Pearson Education, Inc.
larger national firms. Small locally owned banks are also common in smaller communities and rural areas. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 3.1: Define small business, discuss its importance to the U.S. economy, and explain popular areas of small business. 21) Which of the following BEST defines those who assume the risk of business ownership? A) Entrepreneurs B) Customers C) Corporate partners D) The Small Business Administration E) Banks Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 3.2: Explain entrepreneurship and describe some key characteristics of entrepreneurial personalities and activities. 22) Which of the following is the process of seeking business opportunities under conditions of risk? A) Investment B) Entrepreneurship C) Leadership D) Diversification E) Growth Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.2: Explain entrepreneurship and describe some key characteristics of entrepreneurial personalities and activities. 23) Which term is most closely associated with enterprises that pursue entrepreneurship with the goal of independence from working for someone else, with a reasonable degree of financial security? A) Vision B) New ventures C) Small business D) LLC E) Dominance Answer: C Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Critical Thinking 7 Copyright © 2022 Pearson Education, Inc.
LO: 3.2: Explain entrepreneurship and describe some key characteristics of entrepreneurial personalities and activities. 24) When an entrepreneur has the goals of growth and expansion, with the vision of turning the business into a large business, what term is used when referring to the business? A) Visionary B) Small Business C) Diversification D) Start-up E) Expansionist Answer: D Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Analytical LO: 3.2: Explain entrepreneurship and describe some key characteristics of entrepreneurial personalities and activities. 25) Which of the following is almost always a key element in entrepreneurship? A) Growth B) Aspiration C) Self-reliance D) Risk E) Planning Answer: D Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Analytical LO: 3.2: Explain entrepreneurship and describe some key characteristics of entrepreneurial personalities and activities. 26) People who assume the risk of business ownership with a primary goal of growth and expansion are called entrepreneurs. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 3.2: Explain entrepreneurship and describe some key characteristics of entrepreneurial personalities and activities. 27) Most successful entrepreneurs have a strong desire to be their own bosses. Answer: TRUE Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Application LO: 3.2: Explain entrepreneurship and describe some key characteristics of entrepreneurial personalities and activities. 8 Copyright © 2022 Pearson Education, Inc.
28) Not all entrepreneurs want to grow their business, some prefer to keep their business small. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 3.2: Explain entrepreneurship and describe some key characteristics of entrepreneurial personalities and activities. 29) The first step in becoming an entrepreneur is to have clear goals in the early stages of development. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 3.2: Explain entrepreneurship and describe some key characteristics of entrepreneurial personalities and activities. 30) Explain entrepreneurship and describe key entrepreneurial characteristics. Answer: Entrepreneurs are people who assume the risk of business ownership. Entrepreneurship is the process of seeking business opportunities under conditions of risk. Some entrepreneurs have a goal of independence and financial security, whereas others want to launch a new venture that can be grown into a large business. Most successful entrepreneurs are resourceful and concerned for customer relations. They have a strong desire to be their own bosses and can handle ambiguity and surprises. Today's entrepreneur is often an open-minded leader who relies on networks, business plans, and consensus and is just as likely to be female as male. Finally, although successful entrepreneurs understand the role of risk, they do not necessarily regard what they do as being risky. Difficulty: Easy AACSB: Reflective thinking Quest. Category: Concept LO: 3.2: Explain entrepreneurship and describe some key characteristics of entrepreneurial personalities and activities. 31) Discuss the various goals of those who pursue entrepreneurship. Answer: People may decide to pursue entrepreneurship for a variety of reasons. Many entrepreneurs seek to launch a new business with the goal of independence—independence from working for someone else, coupled with some reason-able degree of financial security. Such entrepreneurs want to achieve a safe and secure financial future for themselves and their families but do not necessarily aspire to grow their business beyond their capacity to run it. Other entrepreneurs launch new businesses with the goal of growth and expansion—that is, to transform their venture into a large business. Terms such as new ventures and start-ups are often used to refer to these kinds of businesses. In still other cases, the goals of an entrepreneur may not always be clear in the early stages of business development. For instance, one entrepreneur might launch a business with little or no expectation that it will have huge growth potential but then find that it can grow dramatically. Difficulty: Moderate AACSB: Reflective thinking 9 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Concept LO: 3.2: Explain entrepreneurship and describe some key characteristics of entrepreneurial personalities and activities. 32) What does an entrepreneur use to summarize his or her business strategy for a proposed new venture? A) Success chart B) Director's guideline C) Financial blueprint D) Business plan E) Balance sheet Answer: D Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 33) What is considered to be a significant disadvantage of owning a franchise? A) Start-up costs B) Operational guidelines C) Difficulty obtaining loans D) Double taxation E) Competition Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 34) What is the MOST important source of money for new business start-ups? A) Banks B) The SBA C) Personal resources D) Government grants E) Venture capital Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 35) Who constitutes the membership of SCORE? A) Retired executives B) Venture capitalists 10 Copyright © 2022 Pearson Education, Inc.
C) Company officers D) Commercial lenders E) Successful entrepreneurs Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 36) Which of the following does a start-up company need in order to estimate the required size of a plant, store, or office, inventory levels, and size of staff? A) Sales forecast B) Tax estimate C) Business objective D) Stock options E) Funding source Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 37) Which of the following is the major drawback of accepting venture capital? A) Sharing company control B) Having to pay high interest rates C) Limiting expansion D) Facing a short repayment period E) Having to write proposals Answer: A Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Analytical LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 38) Which of the following are groups of small investors seeking to make profits on companies with rapid growth potential? A) Community banks B) Venture capital companies C) Equity managers D) Government securities dealers E) Stock brokers Answer: B Difficulty: Moderate AACSB: Application of knowledge 11 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Concept LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 39) Which of the following is federally licensed to borrow money from the Small Business Administration to invest in or lend to small businesses? A) SCORE B) SBICs C) SBDC D) FDIC E) SEC Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 40) Which of the following helps entrepreneurs gain skills that are essential for running a business? A) ESOP B) SBIC C) SEC D) LLC E) SBA Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 41) Which distinctive competency must an entrepreneur identify when attempting to enter a market segment that is not currently being exploited? A) The ability to identify new markets B) The ability to identify niche markets C) The ability to differentiate themselves from others in the market D) The ability to get the highest return without driving away customers E) The ability to move quickly to take advantage of new opportunities Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 42) Which of the following is considered to be an established market? A) A segment of a market that is currently not be exploited 12 Copyright © 2022 Pearson Education, Inc.
B) One where many firms compete according to well-defined criteria C) One where an entrepreneur can move quickly to take advantage of opportunity D) A segment of a market where first-mover advantage is not established E) An existing business where the entrepreneur operates under a license issued by a parent company Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 43) Which of the following explains first mover advantage? A) The concept that the first in the market will make the most money B) The concept that a firm who exploits an opportunity before others has an advantage C) The concept that there is an advantage in leaving a market when it becomes flooded D) The concept that large organizations cannot take advantage of an opportunity as quickly as an entrepreneur E) The concept that there is more risk being first, but also more reward, if successful Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 44) What is the first step in becoming an entrepreneur? A) Deciding to proceed B) Formulating a business plan C) Identifying distinctive competencies D) Searching for capital to invest E) Implementing plans and opening Answer: C Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Critical Thinking LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 45) Which key element of a business plan will determine inventory, size of space required, and number of employees needed? A) Financial planning B) Comparing existing businesses C) Sales forecasting D) Setting goals and objectives E) Identifying strategies and how to implement them Answer: C 13 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Critical Thinking LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 46) Which of the following is the advantage to starting a business from scratch instead of buying an existing business? A) There is a proven ability to attract customers. B) Profit is generated sooner. C) There is a stronger relationship with lenders and other stakeholders. D) There are no ill-effects from the previous owner. E) There is a clearer picture of what to expect in terms of start-up. Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 47) Where can a new business owner go to seek help and learn from other institutions and disciplines? A) The Service Corps of Retired Executives (SCORE) B) The Small Business Development Center (SBDC) C) Small business investment companies (SBICs) D) Venture capitalist E) Minority Enterprise Small Business Investment Companies (MESBICs) Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 48) A business plan demonstrates how an entrepreneur's business strategy will be implemented. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 49) Loans are the most important sources of money for new businesses. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept 14 Copyright © 2022 Pearson Education, Inc.
LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 50) Lending institutions are more likely to help finance the purchase of an existing business rather than the start-up of a business from scratch. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 51) A group of small investors who invest money in companies in return for partial ownership is known as a small-business development company. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 52) Small-business investment companies (SBICs) may be sponsored by the federal government. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 53) The Small Business Development Center provides micro loan programs for members. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 54) Franchisees may be obligated to contribute a percentage of sales to parent corporations. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 55) Identifying niches in an established market is a form of distinctive competency. Answer: TRUE 15 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 56) Discuss four sources of financing for starting up a small business. Answer: Financing for starting up a new business may come from personal resources, bank loans, venture capital firms, or small-business investment companies (SBICs). The most important source of financing for a small business is the owner's personal resources. Bank loans are a second source of financing. Venture capital firms invest money in a business in return for stock. These firms are groups of small investors seeking to make profits on companies with rapid growth potential. SBICs take a more balanced approach in their choices than do venture capital firms. SBICs are federally licensed to borrow money from the SBA to invest in or lend to small businesses. Financing for starting up a new business may come from personal resources, bank loans, venture capital firms, or SBICs. Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Synthesis, Concept LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 57) Why might an entrepreneur wish to purchase an existing business rather than start one from scratch? Answer: An entrepreneur may wish to purchase an existing business because of an increased chance for success. An existing business will have established working relationships with lenders, suppliers, and the community. The track record of an existing business gives potential buyers a much clearer picture of what to expect than any estimate of new business prospects. The advantage of buying an existing business is better chances of success, as business relationships have already been established and past records give an indication of future business possibilities. Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Analytical LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 58) Discuss the advantages and disadvantages of owning a franchisee? Answer: The advantages of franchising include access to managerial and financial help, the benefits of the selling corporation's expertise and experience, and reduced chances of failure. The disadvantages of franchising include significant start-up costs and continued obligations to contribute a percentage of sales to parent corporations. Advantages include access to managerial and financial help and the benefits of the selling corporation's expertise and experience, which can support increased chances of success. The disadvantages include significant start-up costs and ongoing commitments to contribute a percentage of sales to parent corporations. Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Synthesis 16 Copyright © 2022 Pearson Education, Inc.
LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 59) Describe three ways to establish distinctive competencies. Answer: An organization’s distinctive competencies are the aspects of business that the firm performs better than its competitors. The distinctive competencies of small business usually fall into three areas: (1) the ability to identify new niches in established markets, (2) the ability to identify new markets, and (3) the ability to move quickly to take advantage of new opportunities. Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Synthesis LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 60) How do successful entrepreneurs identify new markets? Answer: Successful entrepreneurs also excel at discovering whole new markets. Discovery can happen in at least two ways. First, an entrepreneur can transfer a product or service that is well established in one geographic market to a second market. Second, entrepreneurs can sometimes create entire industries. Because entrepreneurs are not encumbered with a history of doing business in a particular way, they are usually better at discovering new markets than are larger, more mature organizations. Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Synthesis LO: 3.3: Describe distinctive competence, the business plan, and the start-up decisions made by small businesses and identify sources of financial aid available to such enterprises. 61) Which of the following is an effective way for an entrepreneur to become a competent manager? A) Working alone B) Relying on luck C) Getting a college degree D) Being open to opportunities E) Working for a successful company first Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 3.4: Discuss the trends in small business start-ups and identify the main reasons for success and failure among small businesses. 62) Which of the following represents the fastest-growing segment of minority business ownership? A) African Americans B) Asians C) Hispanics D) Pacific Islanders 17 Copyright © 2022 Pearson Education, Inc.
E) Europeans Answer: A Difficulty: Easy AACSB: Diverse and multicultural work environments Quest. Category: Concept LO: 3.4: Discuss the trends in small business start-ups and identify the main reasons for success and failure among small businesses. 63) Which of the following is the MOST significant recent trend in small-business start-ups? A) Entrepreneurs who cross over from big business B) Increased opportunities for minorities C) Increased opportunities for women D) Emergence of e-commerce E) Global economic downturn Answer: D Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 3.4: Discuss the trends in small business start-ups and identify the main reasons for success and failure among small businesses. 64) Which of the following factors MOST contributes to small business failure? A) Managerial incompetence or inexperience B) Bad product design C) Legal problems D) Time spent raising capital E) Personnel issues Answer: A Difficulty: Moderate AACSB: Diverse and multicultural work environments Quest. Category: Application LO: 3.4: Discuss the trends in small business start-ups and identify the main reasons for success and failure among small businesses. 65) A new business should have enough capital to operate at least how many months without earning a profit? A) 1 B) 2 C) 4 D) 6 E) 9 Answer: D Difficulty: Moderate AACSB: Diverse and multicultural work environments Quest. Category: Application LO: 3.4: Discuss the trends in small business start-ups and identify the main reasons for success and failure among small businesses. 18 Copyright © 2022 Pearson Education, Inc.
66) Which of the following are used to keep a business on track and alert to potential trouble withing the company? A) Capital B) Small Business Association financial programs C) Venture capitalists D) Control systems E) Sales forecasting Answer: D Difficulty: Moderate AACSB: Diverse and multicultural work environments Quest. Category: Application LO: 3.4: Discuss the trends in small business start-ups and identify the main reasons for success and failure among small businesses. 67) Which of the following is a factor typically cited to explain the success of a small business? A) Niche marketing B) Small Business Association C) Control systems D) Capital E) Market demand Answer: E Difficulty: Moderate AACSB: Diverse and multicultural work environments Quest. Category: Application LO: 3.4: Discuss the trends in small business start-ups and identify the main reasons for success and failure among small businesses. AACSB: Application of knowledge68) The number of minority-owned businesses has decreased in recent years. Answer: FALSE Difficulty: Easy AACSB: Diverse and multicultural work environments Quest. Category: Application LO: 3.4: Discuss the trends in small business start-ups and identify the main reasons for success and failure among small businesses. 69) Many new businesses are started by people who have left big corporations. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 3.4: Discuss the trends in small business start-ups and identify the main reasons for success and failure among small businesses. 70) The survival rate among small businesses has been declining in recent years. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge 19 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Analytical LO: 3.4: Discuss the trends in small business start-ups and identify the main reasons for success and failure among small businesses. 71) Neglect is a major factor that contributes to small business failure. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.4: Discuss the trends in small business start-ups and identify the main reasons for success and failure among small businesses. 72) The most significant trend in new entrepreneurial ventures is the crossover from big business. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.4: Discuss the trends in small business start-ups and identify the main reasons for success and failure among small businesses. 73) Entrepreneurs rarely find opportunity in the global market. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.4: Discuss the trends in small business start-ups and identify the main reasons for success and failure among small businesses. 74) How has the emergence of e-commerce affected entrepreneurship? Answer: The most significant trend is the rapid emergence of e-commerce and other online points of entry. Because the Internet provides fundamentally new ways of doing business, savvy entrepreneurs have created and expanded new businesses faster and easier than ever before. Such leading-edge firms as Google, Amazon, and eBay owe their existence to the Internet. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.4: Discuss the trends in small business start-ups and identify the main reasons for success and failure among small businesses. 75) Identify four reasons why half of all new business fail to survive. Answer: Although no set pattern has been established, four general factors contribute to failure: 1.) Managerial incompetence or inexperience. Some entrepreneurs put too much faith in common sense, overestimate their own managerial skills, or believe that hard work alone ensures success. If managers don’t have a sound business plan, don’t know how to make basic business decisions, or don’t understand basic management principles, they aren’t likely to succeed in the long run. 2.) Neglect. Some entrepreneurs try to launch ventures in their spare time, and others devote only 20 Copyright © 2022 Pearson Education, Inc.
limited time to new businesses. But starting a small business demands an overwhelming time commitment. If you aren’t willing to put in the time and effort that a business requires, you aren’t likely to survive. 3.)Weak control systems. Effective control systems keep a business on track and alert managers to potential trouble. If your control systems don’t signal impending problems, you may be in serious trouble before you spot more obvious difficulties. 4.) Insufficient capital. Some entrepreneurs are overly optimistic about how soon they’ll start earning profits. In most cases, it takes months or even years. Experts say you need enough capital to operate at least 6 months without earning a profit; some recommend enough to last a year. Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.4: Discuss the trends in small business start-ups and identify the main reasons for success and failure among small businesses. 76) Which of the following types of businesses is MOST common in the United States? A) Sole proprietorships B) General partnerships C) Cooperatives D) Corporations E) Limited partnerships Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. 77) In which business sector are cooperatives still important? A) Manufacturing B) Automotive C) Public utilities D) Agriculture E) Health care Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. 78) Which of the following legal forms of business is owned and usually operated by a single person who is responsible for its debts? A) Cartel B) Corporation C) General partnership D) Sole proprietorship 21 Copyright © 2022 Pearson Education, Inc.
E) Limited partnership Answer: D Difficulty: Easy AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. 79) What is a major drawback of sole proprietorships? A) Short-term focus of shareholders B) Work flexibility C) Low start-up costs D) Unlimited liability E) Structured hours Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. 80) Which of the following will force a sole proprietorship to be legally dissolved? A) Financial limitations B) The partners reorganize the firm's structure C) Tax benefit issues D) The owner donates profits E) The owner dies Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. 81) What resources does a sole proprietorship primarily depend on? A) The corporation B) Foreign investors C) Capital markets D) Those of the owner E) A committed clientele Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. 22 Copyright © 2022 Pearson Education, Inc.
82) What type of business has two or more owners who share in the operation of the firm and are financially responsible for its debts? A) Corporation B) Partnership C) Cooperative D) Conglomerate E) Nonprofit Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. 83) What is the most common type of partnership? A) Limited partnership B) Corporate partnership C) General partnership D) Sole partnership E) Cooperative partnership Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. 84) Who invests all or most of the of the funds needed for a business but plays no role in its management? A) Silent partner B) Sole proprietor C) General partner D) Principal E) Director Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. 85) What is the a key advantage of general partnerships? A) The unlimited liability of the partnership B) The ability to grow with the addition of new talent and money C) The ease of implementing an effective control system D) The increased role of luck E) The need for minority partners 23 Copyright © 2022 Pearson Education, Inc.
Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. 86) What do both sole proprietorships and partnerships potentially lack? A) Trust B) Legal standing C) Continuity D) Shared vision E) Adaptable processes Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Synthesis LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. 87) Which of the following is a partner who actively manages a firm and has unlimited liability for its debts? A) Limited partner B) General partner C) Stockholding partner D) Public partner E) Silent partner Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. AACSB: Application of knowledge88) Which of the following is an advantage of sole proprietorships? A) Ease in attracting a silent partner B) Sales and expenses are treated as part of personal finances C) It is easier to borrow money. D) There is increased continuity E) Bills are paid out of pocket Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. 24 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge89) Which of the following describes an investor in a business who is liable for some of its debt, but has no active role in its operation? A) General partners B) Unlimited partners C) Master partners D) Limited partners E) Minority partners Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. 90) If a business owner needs money for expansion, but does not want to give up sole control over the business, what type of partnership would be best? A) General partnership B) Limited partnership C) Active partnership D) Master limited partnership E) Cooperatives Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. 91) In which type of ownership is an owner liable for debt, but only based on how much they invested? A) Master limited partnership B) Cooperative C) Limited partnership D) Corporation E) General partnership Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. 92) What type of partnership allows an organization to sell shares of the partnership to investors on a public market? A) General partnership B) Limited partnership 25 Copyright © 2022 Pearson Education, Inc.
C) Cooperative D) Master limited partnership E) Unlimited partnership Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. 93) When a business owner forms a master limited partnership, what responsibilities does the master partner have toward the minority partner(s)? A) The master partner must provide detailed operating and financial reports. B) The master partner must allow the partners to decide all major business changes and transactions. C) The master partner must make all liabilities clear before the partnership is formed. D) The master partner must give up majority ownership. E) The master partner must allow the partners to take an active role in the business. Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. 94) Which of the following is an advantage to joining a cooperative with potential competitors? A) Increased marketing power B) Limited production power of competitors C) Ease of establishing ownership D) Increased ability to control personal finances E) Increased ability to franchise Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. 95) The least common type of partnership is the general partnership. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. 96) Low start-up costs and tax benefits are advantages of sole proprietorships. 26 Copyright © 2022 Pearson Education, Inc.
Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. 97) By law, each general partner is liable for all debts incurred in the name of the partnership. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. 98) A sole proprietorship is personally liable for all debt incurred by the business. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. 99) Describe three disadvantages of operating a business as a sole proprietorship. Answer: The disadvantages of sole proprietorships include unlimited liability, lack of continuity, and limited financing options. A sole proprietor is totally responsible for all of the debts of the business and may have to give up personal assets to repay those debts. A sole proprietorship lacks continuity because the business dissolves with the death of the owner. Finally, sole proprietors have a limited ability to secure financing, relying mostly on their personal resources. Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Application LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. 100) Discuss the advantages and disadvantages of partnerships. Answer: Advantages of partnerships include their ability to grow with the addition of new talent and money, ease of organization, and independent legal status. Disadvantages are unlimited liability, potential lack of continuity, difficulty of transferring ownership, and little or no guidance for resolving internal conflicts. Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Analytical LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. 101) Discuss the role of a general partnership in a small business. 27 Copyright © 2022 Pearson Education, Inc.
Answer: The most common type of partnership, the general partnership, is similar to a sole proprietorship but is owned by more than one person. Partners may invest equal or unequal sums of money. In most cases, partners share the profits equally or in proportion to their investment. In certain cases, though, the distribution of profits may be based on other things. And sometimes one partner invests all or most of the funds needed for the business but plays no role in its management. This person is usually called a silent partner. Another partner might invest little or nothing but provide all the labor. In this case, the financial investor likely owns all or most the entire business, and the labor partner owns less. But over time, and as specified in a contract, the labor partner gradually gains a growing ownership stake in the business (usually called sweat equity). Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Analytical LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. 102) Discuss why a business owner would form a limited partnership instead of a general partnership. Answer: General partnerships are among the least popular forms of business. For general partnerships, as for sole proprietorships, unlimited liability is the greatest drawback. Partnerships also share with sole proprietorships the potential lack of continuity. A related disadvantage is difficulty in transferring ownership. No partner may sell out without the consent of the others. The limited partnership allows for limited partners who invest money but are liable for debts only to the extent of their investments. They cannot, however, take active roles in business operations. A limited partnership must have at least one (or active) partner, mostly for liability purposes. This is usually the person who runs the business and is responsible for its survival and growth. Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Analytical LO: 3.5: Explain sole proprietorships, partnerships, and cooperatives and discuss the advantages and disadvantages of each. 103) Why are lenders most willing to loan to corporations? A) Continuity and legal status are assured B) Links with owners and founders are established C) Professional management teams can be changed D) Commitment to expansion is readily available E) Brand and marketing strategies can be diversified Answer: A Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 28 Copyright © 2022 Pearson Education, Inc.
104) What type of corporation issues stock that is held by only a few people and not available to the public? A) Limited liability B) Subchapter S C) Public D) Closely held E) Professional Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 105) Which form of business ownership generates the most sales revenue in the United States? A) Sole proprietorship B) General partnership C) Cooperative D) Corporation E) Limited partnership Answer: D Difficulty: Easy AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 106) Which type of business is legally considered a separate entity from its owners and is liable for its own debts? A) Sole proprietorship B) Corporation C) Limited partnership D) Cooperative E) General partnership Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 107) Who are the owners of a corporation? A) Board of directors B) Financial officers 29 Copyright © 2022 Pearson Education, Inc.
C) Stockholders D) Top managers E) Entrepreneurs Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 108) To raise revenue, what can a business issue and sell to those wishing to own some of the organization? A) Bonds B) Profits C) Stocks D) Dividends E) Loans Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 109) What type of company has stock that is widely held and available for sale to the general public? A) Private corporation B) Public corporation C) General partnership D) Limited liability corporation E) Professional corporation Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 110) Which types of corporations are those comprised of doctors, lawyers, or accountants MOST likely to be? A) Private B) Public C) Subchapter S D) Professional 30 Copyright © 2022 Pearson Education, Inc.
E) Multinational Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 111) Which of the following occurs when two firms combine to create a new company? A) Acquisition B) Takeover C) Venture D) Divestiture E) Merger Answer: E Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 112) When income is taxed at the corporate level and on shareholder returns as dividends, what is this situation known as? A) Dual costs B) Double taxation C) Regulatory costs D) Double ownership E) Financial balancing Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 113) What is the biggest advantage of incorporating? A) Limited liability B) Increased profits C) Tax advantage D) Increased talent pool E) Limited tender offers Answer: A Difficulty: Moderate AACSB: Application of knowledge 31 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Analytical LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 114) What is the term for the profits that are distributed to all owners of a corporation? A) Tender B) Interests C) ESOP D) Dividends E) Yield Answer: D Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Concept LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 115) What type of ownership is created when a firm buys another outright? A) Merger B) Acquisition C) Spin-off D) Divestiture E) Institutional Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 116) Who is responsible for the day-to-day management and overall performance of an organization? A) Officers B) President C) Chief Executive Officer D) Board of Directors E) Vice President Answer: C Difficulty: Easy AACSB: Analytical thinking Quest. Category: Analytical LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 32 Copyright © 2022 Pearson Education, Inc.
117) Which of the following occurs when an organization sells part of a business or operation to another corporation so that is can focus more specifically on its core business? A) Merger B) Acquisition C) Divestiture D) Buy out E) Spin off Answer: C Difficulty: Easy AACSB: Analytical thinking Quest. Category: Analytical LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 118) Why would an organization divest some of its existing business operations? A) To focus more on its core business B) To create new partnerships C) Because the divested business is more valuable as a separate company D) To buy another firm outright E) To create a new company from several smaller ones Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 119) What is formed when a corporation establishes a trust on behalf of employees for the purpose of buying shares of ownership? A) Institutional ownership B) Divestiture C) Strategic alliance D) Corporate governance E) Employee stock ownership plan (ESOP) Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 120) In order to exert influence on corporate managers, groups can pool resources to buy huge blocks of stock. These groups are known as A) spin offs. 33 Copyright © 2022 Pearson Education, Inc.
B) ESOPS. C) joint ventures. D) institutional investors. E) strategic alliances. Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. AACSB: Application of knowledge121) How can competing firms collaborate on a new enterprise without losing control of their existing firm? A) Establish a joint venture B) Buy large blocks of the competitor's stock C) Hire a new chief executive office D) Sell off similar operations E) Change the corporate governance of both firms Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 122) Which type of corporation spans national boundaries and is subject to regulation in multiple countries? A) Publicly held B) Limited liability C) Subchapter S D) Professional E) Multinational Answer: E Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 123) Which of the following is a unique feature of a multinational corporation? A) Owners have unlimited financial liability. B) Owners are taxed like partners. C) It is considered to be a partnership for tax purposes. D) Stock is held by only a few people. 34 Copyright © 2022 Pearson Education, Inc.
E) Stock is traded on the exchanges of several countries. Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 124) Which of the following is created when a corporation creates a new operation with another firm? A) Divestiture B) Spin-off C) Joint venture D) Merger E) Acquisition Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 125) Which of the following do competitors establish when collaborating on a project that might have mutual gain? A) Stock options B) A new Board of Directors C) A strategic alliance D) Institutional investors E) A spin-off Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 126) What is the advantage of forming a strategic alliance with a competitor or supplier? A) Mutual gain B) Increased shares of stock C) The ability to influence the price of stock D) To legally join the two organizations E) The ability to sell a section of the business but still retain control Answer: A Difficulty: Moderate 35 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Concept LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 127) Which of the following is the legal principle that says investors in a corporation are liable for the firm's debts only to the limits of their personal investment in it? A) Tender offer B) Legal liability C) Double taxation D) Governance E) Merger Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 128) Which of the following is the offer to buy shares directly to a target corporation's shareholders, often with the intent to take the corporation over against the will of its managers? A) Limited liability B) Corporate governance C) Strategic alliance D) Tender offer E) Employee stock ownership plan Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. AACSB: Application of knowledge129) Which of the following is organized and operated like a corporation but treated as a partnership for tax purposes? A) Multinational corporation B) Professional corporation C) Limited liability corporation D) Publicly held corporation E) S corporation Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept 36 Copyright © 2022 Pearson Education, Inc.
LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 130) Which of the following determines the role of shareholders, directors, and other managers in making decisions and accountability? A) Board of directors B) Stockholders C) Corporate governance D) Venture capitalists E) Corporate officers Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 131) Who is responsible for the day-to-day management of an organization? A) Shareholders B) Corporate governance C) Chief executive officer D) Board of directors E) Officers Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 132) A limited liability corporation is a hybrid of a publicly held corporation and a partnership. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 133) Corporations enjoy significant tax benefits when compared to sole proprietorships or partnerships. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge 37 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Analytical LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 134) An S corporation has stock that is widely held and available for sale to the general public. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 135) The board of directors of a corporation reports to the officers of the corporation. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 136) An organization's president is usually responsible for the overall performance of the firm. Answer: FALSE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 137) An employee stock ownership plan allows employees to join together and influence corporate managers and how they run the company. Answer: FALSE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 138) A joint venture occurs when partners share ownership of a new enterprise. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept 38 Copyright © 2022 Pearson Education, Inc.
LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 139) A strategic alliance is formed when two or more organizations collaborate on a project for mutual gain. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 140) Explain limited liability in a corporation. Answer: Limited liability is the legal principle holding investors liable for a firm's debts only to the limits of their personal investment in it. The biggest advantage of corporations is limited liability. Investor liability is limited to personal investment (through stock ownership) in the corporation. In the event of failure, the courts may seize and sell a corporation's assets but cannot touch the investors' personal possessions. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 141) Explain a tender offer. Answer: A tender offer is an offer to buy shares made by a prospective buyer directly to a corporation's shareholders. A corporation can be taken over against the will of its managers through a tender offer. A tender offer is an offer to buy shares made by a prospective buyer directly to a corporation's shareholders, who then make individual decisions about whether to sell. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 142) A corporation must be managed on the principles of corporate governance. Explain what this is. Answer: Corporate governance is the role of shareholders, directors, and other managers in corporate decision making and accountability. This governance is established by a firm's bylaws and usually involves stockholders, the board of directors, and officers. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept 39 Copyright © 2022 Pearson Education, Inc.
LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 143) Explain the role of a corporation's board of directors. Answer: The board of directors is responsible for communicating with shareholders and other stakeholders and for setting financial policy on issues such as dividends, major spending, and executive compensation. The board is legally responsible and accountable for corporate actions. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 144) Discuss the advantages and disadvantages of corporations. Answer: The advantages include limited liability, continuity, and the ability to raise money. Among the disadvantages are transferring ownership such as through a tender offer, higher startup costs, and double taxation. The biggest advantage of incorporation is limited liability. Investor liability is limited to personal investment (through stock ownership) in the corporation. The biggest disadvantage of incorporation is double taxation. Difficulty: Difficult AACSB: Reflective thinking Quest. Category: Analytical LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 145) Describe the three distinct bodies of corporate governance that are specified in a corporation's bylaws. Answer: Stockholders are the owners of a corporation who buy shares of ownership. The board of directors is a group of people elected by stockholders to oversee the management of the corporation. Corporate officers are top managers hired by the board to run the corporation on a day-to-day basis. Corporate governance covers the roles of shareholders, directors, and other managers in corporate decision making and accountability. Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Synthesis LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 146) Explain the difference between mergers and acquisitions and why they are important forms of corporate strategy. Answer: In an acquisition, one firm buys another outright. Many deals that are loosely called mergers are really acquisitions. This is because one of the two firms will usually control the newly combined ownership. In general, when the two firms are roughly the same size, the 40 Copyright © 2022 Pearson Education, Inc.
combination is usually called a merger even if one firm is taking control of the other. When the acquiring firm is substantially larger than the acquired firm, the deal is really an acquisition. Socalled mergers and acquisitions are an important form of corporate strategy. They let firms increase product lines, expand operations, go international, and create new enterprises.. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 147) Discuss the difference among a divestiture, a merger and acquisition, and a spin-off. Answer: One important set of issues includes mergers, acquisitions, divestitures, and spin-offs. Mergers and acquisitions involve the legal joining of two or more corporations. A divestiture occurs when a corporation sells a business operation to another corporation; with a spin-off, it creates a new operation. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Synthesis LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership. 148) Describe the difference between a joint venture and a strategic alliance. Answer: In a strategic alliance, two or more organizations collaborate on a project for mutual gain. When partners share ownership of what is essentially a new enterprise, it is called a joint venture. The number of strategic alliances has increased rapidly in recent years on both domestic and international fronts. For example, Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Synthesis LO: 3.6: Describe corporations, discuss their advantages and disadvantages, and identify different kinds of corporations; explain the basic issues involved in managing a corporation and discuss special issues related to corporate ownership.
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Business Essentials, 13e (Ebert/Griffin) Chapter 4 Understanding the Global Context of Business 1) What are products that are created abroad and then transported and sold domestically? A) Dumped goods B) Exports C) Imports D) Buy backs E) Domestic goods Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 2) What are products that are created domestically and transported for sale abroad? A) Dumped goods B) Exports C) Imports D) Buy backs E) Domestic goods Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 3) Which country is the world's largest marketplace and most stable economy? A) The United States B) Canada C) Germany D) Japan E) China Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 4) Which country in the Pacific Asia region has one of the world's largest economies? A) South Korea B) China C) Indonesia D) Japan 1 Copyright © 2022 Pearson Education, Inc.
E) Taiwan Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 5) Which organization was developed to promote economic and cultural cooperation among Asian countries? A) ASEAN B) UAS C) EU D) NAFTA E) ECOWAS Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 6) Which organization classifies countries based on per capita income to make distinctions among countries? A) The World Bank B) The World Trade Organization C) The International Monetary Fund D) The European Union E) The General Agreement on Tariffs and Trade Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 7) Under which of the following treaties are Canada, the United States, and Mexico gradually eliminating tariffs and all other trade barriers? A) The EURO Agreement B) The Pan-American Agreement C) The North American Free Trade Agreement D) The General Agreement on Tariffs and Trade E) The G-3 Free Trade Agreement Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept 2 Copyright © 2022 Pearson Education, Inc.
LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 8) Which organization was founded in 1967 for economic, political, social, and cultural cooperation in the Asia Pacific region? A) SEATO B) ASEAN C) CENTO D) OAS E) WTO Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 9) Which of the following resulted from NAFTA? A) Companies from other countries, such as Japan, have made fewer business investments in North America. B) U.S. exports to Mexico have decreased. C) Mexican imports to the United States have increased. D) More jobs have been created than what was originally predicted. E) More U.S. jobs were eliminated than what was originally predicted. Answer: C Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Analytical LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 10) Which of the following treaties sought to eliminate trade barriers such as tariffs and quotas for most of the world's countries? A) United Nations Development Assistance Plan B) North American Free Trade Agreement C) General Agreement on Tariffs and Trade D) General Agreement on Trade in Services E) European Union Stability and Growth Pact Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 11) How does globalization of business benefit shareholders of an organization? A) Through easier and faster international travel B) Through the elimination of diseases in developing nations 3 Copyright © 2022 Pearson Education, Inc.
C) Through improved profitability D) Through lower taxes between trade partners E) Through more distinct cultural heritage Answer: C Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Synthesis LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 12) Which of the following was believed to play a key role in the shift of production from Mexico to China? A) Increases in Mexico's cost of living and wages B) Modernization of facilities in China C) Improved international travel abilities D) Increases in China's cost of living and wages E) Higher levels of education and professional jobs in Mexico Answer: A Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Synthesis LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 13) Which of the following is the process through which the world economy is becoming a single, interdependent system? A) Globalization B) Foreign investment C) Expansionism D) Imports E) Tariffs Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 14) A local, independent coffee shop sells all their products in the store, and does not sell any items over the internet. In which way can globalization effect their business? A) The creation of advertising to attract new customers B) Fluctuation in exchange rates affecting the price of coffee beans C) Changes in the product offering to meet the demand of consumers D) The hiring of part-time labor E) The rate of pay provided to all employees Answer: B Difficulty: Moderate 4 Copyright © 2022 Pearson Education, Inc.
AACSB: Analytical thinking Quest. Category: Concept LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 15) In addition to improved business profitability, which of the following is a benefit of globalizations for businesses and shareholders? A) Less government control B) Each of transferring one successful product to overseas markets C) Improved standards of living D) Ability to keep up with competitors E) Improved opportunity to eliminate small competitors and suppliers Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 16) Which of the following is an argument against globalization? A) Increased international travel B) Poor communication skills in developing nations C) Cheaper products D) Exploitation of workers E) Products are produced faster than ever before Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 17) The World Bank uses per capita income to make distinctions based on wealth. Which of the following economic distinction level would be those which are considered to be developing countries? A) High-income B) Upper-middle-income C) Middle-income D) Low-middle-income E) Low-income Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 5 Copyright © 2022 Pearson Education, Inc.
18) Which of the following established an integrated economic system between countries in order to increase its importance in the world market? A) The Middle East B) Ireland, Scotland, England, and Wales C) The United States, Mexico, and Canada D) The European Union E) Eastern Europe Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 19) Which of the following describes the basic purpose of NAFTA? A) To create more jobs in Mexico B) To increase exports from the United States to Mexico C) To create a more active and unified North American market D) To increase exports from the United States to Canada E) To eliminate tariffs on imports between all member nations Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 20) Which of the following was created to help member nations negotiate trade agreements and resolve disputes about trade policies and practices? A) General Agreement on Tariffs and Trade B) World Trade Organization C) Association of Southeast Asian Nations D) The European Union E) The World Bank Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 21) In additional to establishing fair procedures for resolving disputes, and promoting multilateral negotiations, which of the following is one of the primary objectives of the World Trade Organization? A) Reducing the number of low-income countries B) Eliminating labor abuses C) Creating uniform trade barriers affecting member groups 6 Copyright © 2022 Pearson Education, Inc.
D) Reducing trade barriers such as quotas E) Encouraging fair-trade practices Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances.
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AACSB: Application of knowledge22) An import is a product made or grown abroad but sold domestically. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 23) The World Trade Organization (WTO) was created to encourage international trade. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 24) Globalization refers to the process by which countries around the world are becoming more self-sufficient. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 25) NAFTA regulates trade between the United States, Europe, and Japan. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances.
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26) The purpose of the General Agreement on Tariffs and Trade is to reduce trade barriers. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 27) The primary purpose of the World Trade Organization is to impose tariffs on imported products. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 28) One outcome of globalization is the exploitation of workers in less developed countries. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 29) The world's economy generally revolves around three major marketplaces which are all relatively more of the high-middle income nations. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 30) Discuss the importance and benefits of globalization and international trade on organizations. Answer: Small firms with no international operations (for example, an independent coffee shop) may still buy from international suppliers, and even individual contractors or self-employed people can be affected by fluctuations in exchange rates. International trade is becoming increasingly important to most nations and their businesses. Many countries that once followed strict policies to protect domestic business now encourage trade just as aggressively. They are opening borders to foreign businesses, offering incentives for domestic businesses to expand internationally, and making it easier for foreign firms to partner with local firms. Likewise, as more industries and markets be-come global, so, too, are the firms that compete in them. Several forces have combined to spark and sustain globalization. For one thing, governments and businesses are more aware of the benefits of globalization to businesses and shareholders. These benefits include the potential for higher standards of living and improved business profitability. New technologies have made international travel, communication, and commerce faster and 9 Copyright © 2022 Pearson Education, Inc.
cheaper than ever before. Finally, there are competitive pressures: Sometimes a firm must expand into foreign markets simply to keep up with competitors. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 31) Discuss arguments against globalization. Answer: Globalization is not without its detractors. Some critics charge that globalization allows businesses to exploit workers in less developed countries and bypass domestic environmental and tax regulations. For example, businesses pay workers in Vietnam and Indonesia lower wages than their counterparts in the United States. Factories in China are not subject to the same environmental protection laws as are firms in Europe. And businesses that headquarter their corporate offices in the Cayman Islands pay lower taxes. Critics also charge that globalization leads to the loss of cultural heritages and often benefits the rich more than the poor. For instance, as the English language becomes increasingly widespread throughout the world, some local languages are simply disappearing. Similarly, local residents in Africa receive relatively few economic benefits when oil or precious minerals are discovered on their land; prosperous investors buy the rights from landowners, who often don’t realize the value of these re-sources. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.1: Discuss the rise of international business and describe the major world marketplaces, trade agreements, and alliances. 32) Which of the following is the name for the economic value of all of the products that a country exports minus the economic value of its imports? A) Balance of foreign competition B) Balance of domestic competition C) Balance of trade D) Balance of payments E) Balance of supply and demand Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 33) Which of the following refers to the situation when a country's imports exceed its exports? A) Balance of payments B) Balance of trade C) Trade deficit D) Trade surplus E) Trade advantage 10 Copyright © 2022 Pearson Education, Inc.
Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 34) Which of the following is the name for the overall flow of money into or out of a country? A) Exchange rate B) Trade rate C) Balance of exchange D) Balance of payments E) Balance of trade Answer: D Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 35) With which type of exchange rate does the value of a country's currency remain constant relative to that of another country? A) Floating B) Indexed C) Fixed D) Adjusted E) Deflated Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 36) When the value of one country's currency relative to that of another varies with market conditions, which of the following exists? A) Floating exchange rate B) Fixed exchange rate C) Indexed exchange rate D) Flat exchange rate E) Balanced exchange rate Answer: A Difficulty: Moderate AACSB: Application of knowledge 11 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Concept LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 37) Which of the following BEST describes a positive trade balance? A) The economic condition in which a country's exports exceed its imports B) The economic condition in which a country's imports exceed its exports C) The economic condition in which a country's inflow of money exceeds its outflow D) The economic condition in which a country's outflow of money exceeds its inflow E) The economic condition in which a country's natural resources exceed its human resources Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 38) The value of the U.S. dollar relative to the value of the British pound fluctuates with market conditions. What is this type of exchange rate? A) Floating B) Fixed C) Indexed D) Adjusted E) Monitored Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 39) Which of the following exists when a country can produce something that is cheaper or of higher quality than any other country can? A) Monopolistic advantage B) National competitive advantage C) Resource advantage D) Absolute advantage E) Comparative advantage Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international 12 Copyright © 2022 Pearson Education, Inc.
environment. 40) National competitive advantage derives from four conditions, one of which is factor conditions. What do factor conditions include? A) Customers, suppliers, and labor B) Government quotas and subsidies C) Product quality, productivity, and profits D) Labor, capital, entrepreneurs, and physical resources E) Strategies, structures, and rivalries Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 41) What typically happens to a country's balance of trade as the value of its currency falls? A) It improves B) It declines C) It remains the same D) It fluctuates drastically E) It fluctuates moderately Answer: A Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 42) What is the result when a country can produce goods more efficiently or better than other nations? A) Balance of trade deficit B) Absolute advantage C) Increased globalization D) Comparative advantage E) National competitive advantage Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 43) Changes in which condition is needed to gain a national competitive advantage that includes a large domestic consumer base that promotes use of innovative products? 13 Copyright © 2022 Pearson Education, Inc.
A) Factor conditions B) Strategies and structures C) Demand conditions D) Rivalries E) Related and supporting industries Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 44) Which is the common currency for nations who are members of the European Union? A) Yen B) Euro C) Dollar D) Pound E) Peso Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 45) Why did the European Union develop the euro as its common currency? A) To better compete with the U.S. dollar B) To improve the integration of the economic system between member countries C) To be able to outsource work to countries where wages are lower D) To integrate a quality standard of production between member countries E) To speed the issue of payment between member and nonmember countries Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 46) In addition to balance of trade, what do economist use to measure whether an overall balance exists between imports and exports? A) Balance of payments B) Trade deficit C) Exchange rates D) Competitive advantage 14 Copyright © 2022 Pearson Education, Inc.
E) Comparative advantage Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 47) Which of the following is one of the biggest concerns about trade balances? A) Exchange rates B) Flow of currency C) Trade surpluses D) Interest rates E) National competitive advantage Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 48) When a country exports more than it imports, which of the following is created? A) Fixed exchange rates B) Trade blocks C) Trade surplus D) Negative balance of trade E) Trade deficit Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 49) While on a trip to Japan, Mary went to an ATM to withdraw cash. However, she did not receive the one hundred U.S. dollars she thought she would. Which of the following determines the amount of currency Mary can exchange for the currency of another country. A) Exchange rate B) Balance of payments C) Interest rates D) Trade surplus E) Globalization Answer: A Difficulty: Moderate 15 Copyright © 2022 Pearson Education, Inc.
AACSB: Analytical thinking Quest. Category: Concept LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 50) The value of the U.S. dollar has declined when compared to the Euro. Which of the following is the likely outcome for U.S. firms who ship products to the European Union? A) Competitors in the European Union will be less likely to open facilities in the U.S. B) There should be a boost in exports from the U.S. C) The balance of trade will stabilize D) There should be a boost in imports to the U.S. E) The European Union will have an absolute advantage over U.S. firms Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 51) When an organization has related and supporting industries, suppliers, and customers within its home country, which of the following is created? A) Trade deficit B) Absolute advantage C) National competitive advantage D) Free trade E) Comparative advantage Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 52) Which of the following refers to firms and industries that stress cost reduction, product quality, higher productivity, and innovative products? A) Factor conditions B) Strategies, structures, and rivalries C) Related and supporting industries D) Demand conditions E) Physical resources Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept 16 Copyright © 2022 Pearson Education, Inc.
LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 53) If the United States exports more to the Netherlands than it imports from the Netherlands, the United States has a trade deficit with the Netherlands. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 54) Today, fixed exchange rates are the norm for most major nations of the world. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 55) A comparative advantage exists when a country can produce something more cost effectively and/or of higher quality than any other country. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 56) The single largest trading partner of the United States is China. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 57) Small trade imbalances are common and unimportant. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept 17 Copyright © 2022 Pearson Education, Inc.
LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 58) The United States has large trade deficits with Japan, China, and Mexico. This means that the United States has imported more from those countries than what they have purchased from the United States. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 59) Describe how balance of trade and balance of payments work and define both terms. Answer: A country's balance of trade is the total economic value of all the products that it exports minus the economic value of all the products that it imports. Balance of payments refers to the flow of money into and out of a country, mostly attributed to the country's balance of trade. The money that a country pays for imports and receives for exports—its balance of trade— accounts for much of its balance of payments. Other financial exchanges are also factors. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 60) In which way does competitive advantage affect balance of trade? Answer: Because no country can produce everything that it needs, countries tend to export what they can produce better or less expensively than other countries and use the proceeds to import what they can’t produce as effectively. This principle doesn’t fully explain why nations export and import what they do. Such decisions hinge partly on the advantages that a particular country enjoys regarding its abilities to create or sell certain products and resources. Economists traditionally focused on absolute and comparative advantage to explain international trade. But because this approach focuses narrowly on such factors as natural resources and labor costs, a more contemporary view of national competitive advantage has emerged. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 61) Explain a floating exchange rate. Answer: A floating exchange rate allows the value of one country's currency relative to the value of another country's currency to fluctuate according to market conditions. On a daily basis, 18 Copyright © 2022 Pearson Education, Inc.
exchange rates fluctuate very little. Significant variations usually occur over longer time spans. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 62) Why should companies conducting international operations be concerned about exchange rate fluctuations? Answer: Changes in exchange rates affect overseas demand for their products and can be a major factor in international competition. Exchange rate fluctuations can also affect the companies' profitability. In general, when the value of a country's currency rises–becomes stronger–companies based there find it harder to export products to foreign markets and easier for foreign companies to enter local markets. It also makes it more cost-efficient for domestic companies to move operations to lower-cost foreign sites. When the value of a currency declines–becomes weaker–the opposite occurs. Difficulty: Difficult AACSB: Reflective thinking Quest. Category: Synthesis LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 63) Explain why fluctuations in exchange rates have significant influence on the balance of trade. Answer: When the value of a country's currency rises, companies based there find it harder to export products to foreign markets and easier for foreign companies to enter local markets. As the value of a country's currency falls, its balance of trade usually improves because domestic companies should experience a boost in exports. There may be less reason for foreign companies to ship products into the domestic market or to establish operations in other countries. Difficulty: Difficult AACSB: Reflective thinking Quest. Category: Analytical LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 64) Discuss the differences between absolute advantage and comparative advantage. Answer: An absolute advantage exists when a country can produce something more cheaply and/or of higher quality than any other country. Absolute advantages are relatively rare. A country has a comparative advantage in goods that it can produce more efficiently than other goods. Economists traditionally focused on absolute and comparative advantage to explain international trade. But because this approach focuses narrowly on such factors as natural resources and labor costs, a more contemporary view of national competitive advantage has emerged. Difficulty: Difficult 19 Copyright © 2022 Pearson Education, Inc.
AACSB: Reflective thinking Quest. Category: Analytical LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 65) What are the four components of national competitive advantage? Answer: The four components of national competitive advantage are factor conditions; demand conditions; related and supporting industries; and strategies, structures, and rivalries. When all attributes of national competitive advantage exist, a nation is likely to be heavily involved in international business. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Concept LO: 4.2: Explain how differences in import-export balances, exchange rates, and foreign competition determine the ways in which countries and businesses respond to the international environment. 66) Which of the following organizations is a firm that makes products in one country and then distributes and sells them in others? A) Importer B) Exporter C) Multinational firm D) International firm E) Direct foreign investor Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 67) Which of the following buys products in foreign markets and then sells them for resale in its home country? A) Importer B) Exporter C) Multinational firm D) International firm E) Direct foreign investor Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 68) Which of the following will allow one firm to use another firm's brand name, operating 20 Copyright © 2022 Pearson Education, Inc.
procedures or technology? A) A foreign direct investment B) A licensing arrangement C) A branch office setup D) A strategic alliance E) An import-export relationship Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 69) Which of the following helps to create a more visible public presence in foreign countries and customers? A) Developing a strategic alliance B) Outsourcing C) Licensing products D) Investing directly in a foreign venture E) Opening a local branch office Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 70) Which of the following denotes the international organization strategy of finding a partner in the country in which a company would like to conduct business? A) Opening a branch office B) Developing a strategic alliance C) Forming an independent agency D) Outsourcing E) Investing directly in a foreign venture Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 71) Ford, an American car company, purchased Volvo, which is based in Sweden. What is this an example of? A) A franchise B) An independent agency C) A licensing arrangement D) A foreign direct investment 21 Copyright © 2022 Pearson Education, Inc.
E) A strategic alliance Answer: D Difficulty: Easy AACSB: Reflective thinking Quest. Category: Analytical LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 72) Which of the following design, produce, and manufacture products in many nations? A) Multinational firms B) Importing firms C) Domestic firms D) International firms E) Exporting firms Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. AACSB: Application of knowledgeAACSB: Analytical thinking73) Which of the following provides exclusive rights to produce a product for another firm? A) Licensing agreements B) Strategic alliance C) Foreign direct investment D) Independent agent E) Branch office Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 74) Which of the following types of payments are usually received by an exporter as an ongoing payment calculated as a percentage of the license holder's sales? A) Flat fees B) Royalties C) Agent fees D) Subsidies E) Direct investments Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting 22 Copyright © 2022 Pearson Education, Inc.
the appropriate levels of international involvement and international organizational structure. 75) In which international organization structure does a firm have greatest control over foreign activities than agents and licensees? A) Exporting arrangements B) Strategic alliances C) Importing arrangements D) Joint ventures E) Branch offices Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 76) What is a difference between an international firm and a multinational firm? A) Multinational firms design, produce, and market products in many nations, whereas international firms are based primarily in one nation. B) International firms design, produce, and market products in many nations, whereas multinational firms are based primarily in one nation. C) International and multinational firms are the same thing. D) Multinational firms are concerned primarily with foreign markets, whereas international firms are concerned primarily with the domestic market. E) International firms are concerned primarily with foreign markets, whereas multinational firms are concerned primarily with the domestic market. Answer: A Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Analytical LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 77) The practice of using suppliers in foreign countries to perform business processes that were previously done in the United States is called A) licensing. B) adapting. C) offshoring. D) exporting. E) importing. Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 23 Copyright © 2022 Pearson Education, Inc.
78) What is the advantage for a business that uses offshoring in their manufacturing process? A) Decreased costs B) Improved quality C) Decreased production time D) Increased employee moral E) Decreased employee turnover Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 79) Which of the following allows firms to focus on core activities and reduce cost by moving aspects of the business to areas where costs are low? A) Outsourcing B) Adapting C) Licensing D) Exporting E) Importing Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 80) Gnomatics has made the decision to sell their product abroad and they know their products are in demand in several international markets. Which of the following does Gnomatics has to decide before they begin selling to foreign customers? A) How to outsource the product to the foreign customers B) Whether Gnomatics should be the importer or exporter of the product C) How to adapt the product to meet the special demands of foreign customers D) Where to open branch offices E) The amount of foreign direct investment needed before selling to foreign customers Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 81) Which of the following describes a firm that conducts a significant portion of its business in foreign countries? A) Domestic B) Licensed C) International 24 Copyright © 2022 Pearson Education, Inc.
D) Independent E) Multinational Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 82) Before selling to the international market, Gnomatics wanted to ensure their company was protected in foreign markets. To do so, they hired people to act as sales representatives, to collect payments, and to ensure the customers are satisfied. Which of the following did Gnomatics hire? A) Independent agents B) Foreign offices C) Strategic partners D) Owners of branch offices E) Franchisee Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 83) Which of the following is the outcome of a company finding a foreign partner to contribute half of the resources needed to establish and operate a new business in the partner's country? A) Foreign direct investment B) Strategic alliance C) Branch office D) Licensing agreements E) Independent agent relationship Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 84) In a licensing arrangement, firms give organizations exclusive rights to manufacture their products in another country in return for a fee plus royalties. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 25 Copyright © 2022 Pearson Education, Inc.
85) Transportation costs have relatively little impact on a domestic firm's decision to go international when compared to other possible factors. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 86) International firms conduct a good deal of their business abroad and may even maintain overseas manufacturing facilities. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 87) Because the world's economy is becoming more globalized, fewer firms need to expand international operations. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 88) Different levels of international involvement entail different kinds of organizational structures. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 85) Strategic alliances give firms greater control over foreign activities than do agents and licensees. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 89) A company with high demand for its product in a particular foreign market that is associated with high transportation costs would tend to arrange a strategic alliance over any other international organization structure. 26 Copyright © 2022 Pearson Education, Inc.
Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 90) When working with international partners, the terms outsourcing and offshoring are often used interchangeably. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 91) What are three basic levels of involvement available for a firm that decides to conduct business internationally? Answer: The firm may act as an exporter or importer, organize as an international firm, or operate as a multinational firm. Most of the world's largest industrial firms operate as multinational firms-firms that design, produce, and market products in many nations. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 92) Explain how a firm may have more direct control with a branch office than it does over agents or license holders. Answer: In a branch office, a firm sends its own managers overseas where there is more visible public presence. Branch offices also furnish a more visible public presence in foreign countries, and foreign customers tend to feel more secure when there's a local branch office. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 93) Define licensing arrangement and strategic alliance and discuss their relative merits. Answer: With a licensing arrangement, a firm gives foreign entities exclusive rights to manufacture or market their products in that market. With such arrangements, the licensing firm is not often present to monitor that production and quality control standards are consistently being met. Such arrangements, which include franchising, might benefit the licensing firm in that the local people likely know the local market best; therefore, a licensing arrangement would allow the licensing firm to tap into a foreign market via the use of employees who share cultural similarities with that particular market. In a strategic alliance, a firm comes together in a form of a partnership with a firm in a country in which it wants to do business. Both sides agree to invest 27 Copyright © 2022 Pearson Education, Inc.
resources and capital into a new business or toward a common purpose. This type of partnership represents a type of "marriage" between two firms and both sides are present while major decisions are being made and both sides work toward their common purpose. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Synthesis LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 94) Discuss the importance of adapting to the needs of the customer when deciding to expand internationally. Answer: If its product is in demand, a firm must decide whether and how to adapt it to meet the special demands of foreign customers. For example, to satisfy local tastes, McDonald’s sells wine in France, beer in Germany, gazpacho in Spain, and some vegetarian sandwiches in India. Likewise, consumer electronics companies have to be aware that different countries use different kinds of electric sockets and different levels of electric power. Therefore, regardless of demand, customer needs must still be considered. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Synthesis LO: 4.3: Discuss the factors involved in deciding to do business internationally and in selecting the appropriate levels of international involvement and international organizational structure. 95) What is the shared system of symbols, beliefs, and values of a country known as? A) Organizational structure B) Culture C) Rules D) Norms E) Leadership Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 4.4: Explain the role and importance of the cultural environment in international business. 96) Which of the following indicates the belief people hold about differences in hierarchies and authority in an organization? A) Individualism B) Social orientation C) Collectivism D) Power orientation E) Uncertainty orientation Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.4: Explain the role and importance of the cultural environment in international business. 28 Copyright © 2022 Pearson Education, Inc.
97) Those cultures that place a higher value on social relationship, quality of life, and concern for others instead of money and assertiveness have which type of orientation behavior? A) Uncertainty avoidance B) Aggressive goal C) Time D) Passive goal E) Power tolerance Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.4: Explain the role and importance of the cultural environment in international business. 98) Which of the following is a person's belief about the importance of an individual compared to the importance of a group? A) Social orientation B) Power orientation C) Uncertainty orientation D) Goal orientation E) Time orientation Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 4.4: Explain the role and importance of the cultural environment in international business. 99) What type of societies tends to prefer reward systems that link pay with performance of individual employees? A) Collectivist B) Power respect C) Power tolerance D) Uncertainty avoidance E) Individualistic Answer: E Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Application LO: 4.4: Explain the role and importance of the cultural environment in international business. 100) Which of the following is an indication that people accept the authority of superiors simply because of their position in the organization? A) Power respect B) Power tolerance C) Power acceptance D) Power uncertainty E) Uncertainty avoidance 29 Copyright © 2022 Pearson Education, Inc.
Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.4: Explain the role and importance of the cultural environment in international business. 101) Which of the following can be greatly influenced by having a deep understanding of the cultural environment and how it affects business? A) The success or failure of international business activity B) The ability to establish strategic alliances C) The total value of foreign direct investments D) The decision as to whether a firm should pursue licensing arrangements or licensing agreements E) The ability to move from an international firm to become a multinational firm Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.4: Explain the role and importance of the cultural environment in international business. 102) Which of the following supports the idea that the person comes first, not the group? A) Individualism B) Collectivism C) Uncertainty acceptance D) Long-term outlook E) Short-term outlook Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.4: Explain the role and importance of the cultural environment in international business. 103) Teresita doesn't mind helping her team members in completing the project, even though she is busy on another project right now. She knows that if the group does well, everyone in the group will look good. Which of the following dimension of culture does Teresita's actions support? A) Passive goal behavior B) Power respect C) Uncertainty avoidance D) Short-term outlook E) Collectivism Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.4: Explain the role and importance of the cultural environment in international business. 30 Copyright © 2022 Pearson Education, Inc.
104) Dezmon works at a company with an open office, and everyone is encouraged to question, challenge, and build on ideas of others in the organization, even their managers. Which of the following does Dezmon's workplace place more significance on? A) Uncertainty orientation B) Goal orientation C) Passive goal behavior D) Power tolerance E) Long-term outlook Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.4: Explain the role and importance of the cultural environment in international business. 105) Scott thrives on change and new opportunities. He works best in organizations with high degrees of A) social orientation B) power orientation C) uncertainty orientation D) goal orientation E) time orientation Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.4: Explain the role and importance of the cultural environment in international business. 106) When Andrew is given an assignment, he wants to fully understand the goals and steps in the process. He does not like, or work well in situations with high levels of ambiguity. Which of the following is the cultural dimension that describes Andrew's working style? A) Aggressive goal behavior B) Uncertainty avoidance C) Short-term outlook D) Power respect E) Collectivism Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.4: Explain the role and importance of the cultural environment in international business. 107) Which of the following is the extent to which members of a culture adopt a long-term versus short-term outlook on work, life, and other elements of society? A) Power orientation B) Time orientation C) Goal orientation D) Social orientation 31 Copyright © 2022 Pearson Education, Inc.
E) Uncertainty orientation Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.4: Explain the role and importance of the cultural environment in international business. 108) Some people place a higher value on material possession, money, and assertiveness. Which of the following is a cultural dimension that reflects these attitudes? A) Short-term outlook B) Aggressive goal behavior C) Power respect D) Collectivism E) Uncertainty avoidance Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.4: Explain the role and importance of the cultural environment in international business. 109) Having a deep understanding of culture can be a manor factor in the success or failure of a business. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.4: Explain the role and importance of the cultural environment in international business. 110) Even though two cultures are similar, cultural factors often cause problems for managers. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.4: Explain the role and importance of the cultural environment in international business. 111) Cultural differences between countries can have a direct impact on business practices. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.4: Explain the role and importance of the cultural environment in international business. 112) Cultural values and beliefs are often unspoken. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking 32 Copyright © 2022 Pearson Education, Inc.
LO: 4.4: Explain the role and importance of the cultural environment in international business. 113) Discuss the five dimensions of social behavior that differ across cultures. Answer: The first dimension is social orientation. Social orientation is a person's beliefs about the relative importance of the individual versus groups to which that person belongs. The two extremes of social orientation are individualism and collectivism. A second important dimension is power orientation, the beliefs that people in a culture hold about the appropriateness of power and authority differences in hierarchies such as business organizations. Some cultures are characterized by power respect. This means people tend to accept the power and authority of their superiors simply on the basis of their position in the hierarchy and to respect their right to hold that power. Third, uncertainty orientation is the feeling individuals have regarding uncertain and ambiguous situations. People in cultures with uncertainty acceptance are stimulated by change and thrive on new opportunities. The fourth dimension of cultural values is goal orientation. In this context, goal orientation is the manner in which people are motivated to work toward different kinds of goals. One extreme on the goal orientation continuum is aggressive goal behavior. A fifth dimension is called time orientation. Time orientation is the extent to which members of a culture adopt a long-term versus a short-term outlook on work, life, and other elements of society. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Concept LO: 4.4: Explain the role and importance of the cultural environment in international business. 114) Discuss the impact of culture on motivation. Answer: Managers in international business also have to understand that there are differences in what motivates people in different cultures. Although it’s impossible to predict exactly how people from different cultures will react in the workplace, some insights have been developed from research on individual behaviors and attitudes across different cultures. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Concept LO: 4.4: Explain the role and importance of the cultural environment in international business. 115) In some South American countries, it is sometimes legal to bribe other businesses and government officials, while this practice is illegal in the United States. Which of the following refers to this type of policy? A) Protectionism B) Business practice laws C) Free trade agreements D) Fair trade agreements E) Local content laws Answer: B Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Critical Thinking LO: 4.5: Describe some of the ways in which economic, legal, and political differences among nations affect international business. 33 Copyright © 2022 Pearson Education, Inc.
116) China and India require that when foreign firms enter into joint ventures with local firms, the local partners must have the controlling ownership stake. What is this an example of? A) Local content laws B) Business practice laws C) Fair trade agreements D) Quotas E) Subsidies Answer: A Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Critical Thinking LO: 4.5: Describe some of the ways in which economic, legal, and political differences among nations affect international business. 117) In Germany, Walmart has been required to buy existing retailers rather than open brandnew stores. What does this illustrate? A) Local content laws B) Fair trade agreements C) Free trade agreements D) Licensing arrangements E) Business practice laws Answer: E Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Concept LO: 4.5: Describe some of the ways in which economic, legal, and political differences among nations affect international business. 118) Which of the following denotes a government order forbidding exportation and/or importation of a particular product from a particular country? A) Tariff B) Embargo C) Subsidy D) Local content law E) Business practice law Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 4.5: Describe some of the ways in which economic, legal, and political differences among nations affect international business. 119) Which of the following is a government payment to help a domestic business compete with foreign firms? A) Revenue tariff B) Protectionist tariff C) Import buy-back 34 Copyright © 2022 Pearson Education, Inc.
D) Export rebate E) Subsidy Answer: E Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 4.5: Describe some of the ways in which economic, legal, and political differences among nations affect international business. 120) Which of the following denotes the practice of protecting domestic business at the expense of free market competition? A) Fair trade B) Balanced trade C) Free trade D) Market liberalism E) Protectionism Answer: E Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 4.5: Describe some of the ways in which economic, legal, and political differences among nations affect international business. 121) Many governments require that products sold in their particular country be at least partly made there. This policy involves what type of laws? A) Quota laws B) Local content laws C) Business practice laws D) Free trade laws E) Subsidy laws Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 4.5: Describe some of the ways in which economic, legal, and political differences among nations affect international business. 122) Which of the following refers to associations of producers that control supply and prices? A) Independent agencies B) Cartels C) Trade alliances D) Multinational firms E) Trade monopolies Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept 35 Copyright © 2022 Pearson Education, Inc.
LO: 4.5: Describe some of the ways in which economic, legal, and political differences among nations affect international business. 123) Which of the following refers to the practice of selling a product abroad for less than the cost of production? A) Exporting B) Importing C) Dumping D) Safeguarding E) Offshoring Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 4.5: Describe some of the ways in which economic, legal, and political differences among nations affect international business. 124) Which of the following refers to tariffs that are imposed strictly to raise money for the government? A) Revenue tariffs B) Protectionist tariffs C) Quota tariffs D) Subsidy tariffs E) Labor tariffs Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.5: Describe some of the ways in which economic, legal, and political differences among nations affect international business. 125) Which of the following types of tariff is meant to discourage the import of particular products? A) Revenue tariff B) Quota tariff C) Labor tariff D) Subsidy tariff E) Protectionist tariff Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.5: Describe some of the ways in which economic, legal, and political differences among nations affect international business. 126) Suppose the United States requires products sold in the United States be at least 51 percent made in the United States. Which of the following denotes this type of policy? 36 Copyright © 2022 Pearson Education, Inc.
A) Business practice law B) Deregulation law C) Antidumping laws D) Strategic alliance E) Local content law Answer: E Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Critical Thinking LO: 4.5: Describe some of the ways in which economic, legal, and political differences among nations affect international business. 127) Which of the following goals is a primary purpose of tariffs on imports? A) Maintain domestic competitiveness B) Decrease exports C) Increase imports D) Subsidize domestic industry E) Promote free trade Answer: A Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Critical Thinking LO: 4.5: Describe some of the ways in which economic, legal, and political differences among nations affect international business. 128) Which of the following statements BEST describes the effects of subsidies? A) A subsidy essentially lowers the prices of foreign goods rather than raising the prices of domestic goods. B) A subsidy essentially raises the prices of domestic goods rather than lowering the prices of foreign goods. C) A subsidy essentially lowers the prices of domestic goods rather than raising the prices of foreign goods. D) A subsidy essentially raises the prices of foreign goods while also raising the prices of domestic goods. E) A subsidy essentially lowers the prices of foreign goods while also lowering the prices of domestic goods. Answer: C Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Application LO: 4.5: Describe some of the ways in which economic, legal, and political differences among nations affect international business. 129) Which of the following directly affects the price and quantity of foreign-made products in a country by restricting the amount of product that can be imported? A) Local content law B) Quotas 37 Copyright © 2022 Pearson Education, Inc.
C) Cartels D) Subsidies E) Protectionism Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 4.5: Describe some of the ways in which economic, legal, and political differences among nations affect international business. 130) Which of the following represents the controversial practice of supporting domestic businesses at the expense of free market competition? A) Embargos B) Quotas and tariffs C) Protectionism D) Local content law E) Cartels Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 4.5: Describe some of the ways in which economic, legal, and political differences among nations affect international business. 131) Even free market economies often establish some system of quotas and/or tariffs. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical LO: 4.5: Describe some of the ways in which economic, legal, and political differences among nations affect international business. 132) A subsidy is a tax designed to help companies who import products. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 4.5: Describe some of the ways in which economic, legal, and political differences among nations affect international business. 133) Local content laws guarantee that products sold in a country are at least partly made there. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 4.5: Describe some of the ways in which economic, legal, and political differences among nations affect international business. 38 Copyright © 2022 Pearson Education, Inc.
134) Revenue tariffs are primarily designed to discourage the importation of foreign products. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 4.5: Describe some of the ways in which economic, legal, and political differences among nations affect international business. 135) Critics of protectionism charge that it drives up prices by reducing competition. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 4.5: Describe some of the ways in which economic, legal, and political differences among nations affect international business. 136) An embargo is a type of quota that forbids the exporting or importing of a particular product. Answer: TRUE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 4.5: Describe some of the ways in which economic, legal, and political differences among nations affect international business. 137) Under U.S. antidumping legislation, what conditions must be met to prove that dumping is being practiced? Answer: Dumping is the practice of selling a product abroad for less than the cost of production. U.S. antidumping legislation sets two conditions for determining that dumping is being practiced: products are being priced at "less than fair value," and the result unfairly harms a domestic industry. The U.S. government has been known to impose significant tariffs on imports as a means to combat dumping. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 4.5: Describe some of the ways in which economic, legal, and political differences among nations affect international business. 138) How can a local content law in a country act as a barrier to a U.S.-based automobile manufacturing company that is interested in setting up a branch office in that country? Answer: Success in international trade will depend largely upon social, economic, legal, and political barriers. Any firm planning to conduct business abroad must understand social and cultural differences between the host country and home country. Economic differences include the extent of government involvement in a given industry and the level of competition. There are many legal and political barriers to international trade, including quotas, tariffs, subsidies, local content laws, and business practice laws. Many countries, including the United States, have local 39 Copyright © 2022 Pearson Education, Inc.
content laws–requirements that products sold in a country be at least partly made there. Firms seeking to do business in a country must either invest there directly or take on a domestic partner. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Synthesis LO: 4.5: Describe some of the ways in which economic, legal, and political differences among nations affect international business. 139) What are the advantages and disadvantages of globalization? Answer: Globalization has increased the standard of living for billions of people and has helped to create enormous wealth in many different parts of the globe. However, many people have not shared in this wealth and some critics believe that globalization has hurt less developed countries and destroyed or damaged the unique cultures that exist in different parts of the world. In recent years governments and businesses have become more aware of the benefits of globalization to businesses and shareholders, while critics have been more willing to protest or demonstrate at international gatherings of global economic leaders. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Synthesis LO: 4.5: Describe some of the ways in which economic, legal, and political differences among nations affect international business. 140) Describe the difference between quotas, tariffs, and subsidies as they relate to importing and exporting. Answer: Even free market economies, such as the that of United States, have some quotas or tariffs, both of which affect prices and quantities of foreign-made products. A quota restricts the number of products of a certain type that can be imported and, by reducing supply, raises the prices of those imports. The ultimate quota is an embargo, a government order forbidding exportation or importation of a particular product—or even all products—from a specific country. Tariffs are taxes on imported products. They raise the prices of imports by making consumers pay not only for the products but also for tariff fees. Tariffs take two forms: revenue and protectionist. Revenue tariffs are imposed to raise money for governments, but most tariffs, called protectionist tariffs, are meant to discourage particular imports. A subsidy is a government payment to help a domestic business compete with foreign firms. They’re actually indirect tariffs that lower the prices of domestic goods rather than raise the prices of foreign goods. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Synthesis LO: 4.5: Describe some of the ways in which economic, legal, and political differences among nations affect international business.
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Business Essentials, 13e (Ebert/Griffin) Chapter 5 Managing the Business 1) Which of the following participates in the business through analyzing their competitive environments, and plan, organize, direct, and control the operations of their organizations? A) Stockholders B) Managers C) Regulators D) Agents E) Customers Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 5.1: Describe the nature of management and identify the four basic functions that constitute the management process. 2) Which aspect of the management process involves determining what the organization needs to do and how best to get it done? A) Organizing B) Planning C) Controlling D) Processing E) Monitoring Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 5.1: Describe the nature of management and identify the four basic functions that constitute the management process. 3) What function of the management process is used to monitor and ensure the organization is meeting its goals? A) Planning B) Organizing C) Leading D) Controlling E) Budgeting Answer: D Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Concept LO: 5.1: Describe the nature of management and identify the four basic functions that constitute the management process. 4) The first main component in the planning process is determining goals. What is the next step? A) Developing a strategic mission 1 Copyright © 2022 Pearson Education, Inc.
B) Developing a comprehensive strategy C) Developing an array of tactics D) Developing an operational plan E) Developing a functioning budget Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 5.1: Describe the nature of management and identify the four basic functions that constitute the management process. 5) Which description defines the planning function of the management process? A) Guiding and motivating employees to meet organizational objectives B) Discussing how best to arrange an organization's resources into a coherent structure C) Scanning the business environment for threats and opportunities D) Determining what an organization needs to do and how best to get it done E) Monitoring a firm's performance to make sure that it is meeting its goals Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 5.1: Describe the nature of management and identify the four basic functions that constitute the management process. 6) Which description identifies the organizing function of the management process? A) Guiding and motivating employees to meet organizational objectives B) Determining how best to arrange an organization's resources into a coherent structure C) Scanning the business environment for threats and opportunities D) Monitoring an organization's performance to ensure that it is meeting its goals E) Determining what an organization needs to do and how best to get it done Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 5.1: Describe the nature of management and identify the four basic functions that constitute the management process. AACSB: Reflective thinking AACSB: Application of knowledge7) Comparing actual performance against standards is an example of which function of the management process? A) Planning B) Organizing C) Leading D) Controlling E) Strategizing Answer: D Difficulty: Moderate AACSB: Application of knowledge 2 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Critical Thinking LO: 5.1: Describe the nature of management and identify the four basic functions that constitute the management process. 8) Which aspect of the leadership process is ultimately responsible for the performance and effectiveness of the teams, divisions, and company? A) Planning B) Controlling C) Educating D) Management E) Organizing Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 5.1: Describe the nature of management and identify the four basic functions that constitute the management process. 9) Grant is a senior manager at PlanCo. He has developed a strategy and is now moving on to the next phase of the planning process. Which of the following should Grant do after developing the strategy for PlanCo? A) Create organizational charts to help everyone understand their reporting relationships. B) Determine how to control the day-to-day operations of the business. C) Review all resources available within the firm. D) Design tactical and operational plans for implementation of the strategy. E) Work to motivate all employees to achieve the goals of the organization. Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 5.1: Describe the nature of management and identify the four basic functions that constitute the management process. 10) Which of the following can help employees understand their roles and reporting relationships within the organization? A) Strategies B) Operational plans C) Organizational charts D) Control standards E) Objectives Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 5.1: Describe the nature of management and identify the four basic functions that constitute the management process. 3 Copyright © 2022 Pearson Education, Inc.
11) Which of the following is part of the leading function within an organization? A) Providing orders to employees and demanding results. B) Monitoring performance to ensure the firm's goals are met. C) Organizing people and resources to build reporting relationships. D) Determining what needs to be done and how to do it. E) Guiding and motivating employees to meet the firm's objectives. Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 5.1: Describe the nature of management and identify the four basic functions that constitute the management process. 12) When does the process of controlling begin? A) When performance can be measured B) When standards are established C) When motivating employees D) When organizing work units E) When establishing strategies Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 5.1: Describe the nature of management and identify the four basic functions that constitute the management process. 13) Which of the following is the primary advantage of education as a source of management skills? A) Students can follow a well-developed program that addresses current research and thinking. B) Students can follow a general program that meets the needs of a wide variety of students. C) Students will not have to focus on specific, hard to obtain knowledge. D) Students will have an increased appreciation for all aspects of the manager's job. E) Students will not have to rely on experience after graduation. Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 5.1: Describe the nature of management and identify the four basic functions that constitute the management process. 14) What type of management process function is being used when a manager motivates the workforce by rewarding them when standards are achieved? A) Leading B) Planning C) Organizing D) Marketing E) Strategizing 4 Copyright © 2022 Pearson Education, Inc.
Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 5.1: Describe the nature of management and identify the four basic functions that constitute the management process. 15) When a sales manager compares actual sales to the quarterly sales quota, he or she is performing the controlling function of management. Answer: TRUE Difficulty: Easy AACSB: Analytical thinking Quest. Category: Application LO: 5.1: Describe the nature of management and identify the four basic functions that constitute the management process. 16) The first step in the control process is to compare actual performance to standards. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 5.1: Describe the nature of management and identify the four basic functions that constitute the management process. 17) Regardless of the size of the organization, all managers perform many of the same functions and have many of the same responsibilities. Answer: TRUE Difficulty: Easy AACSB: Analytical thinking Quest. Category: Application LO: 5.1: Describe the nature of management and identify the four basic functions that constitute the management process. 18) Define the term management. Answer: Management is the process of planning, organizing, leading, and controlling an organization's financial, physical, human, and information resources to achieve its goals. Typically, a manager's day would involve attention to all these aspects of the role. Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 5.1: Describe the nature of management and identify the four basic functions that constitute the management process.
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19) What can managers do to incorporate a scientific approach to management? Answer: Many management problems and issues can be approached in ways that are rational, logical, objective, and systematic. Managers can gather data, facts, and objective information. They can use quantitative models and decision-making techniques to arrive at "correct" decisions. They need to take such a scientific approach to solving problems whenever possible, especially when they are dealing with relatively routine and straightforward issues. Technical, diagnostic, and decision-making skills (which we will discuss later in the chapter) are especially important when approaching a management task or problem from a scientific perspective. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Concept LO: 5.1: Describe the nature of management and identify the four basic functions that constitute the management process. 20) Discuss the art of management and how it is supported by the science of management. Answer: Managers must blend an element of intuition and personal insight with hard data and objective facts. Even though managers may try to be scientific as often as possible, they must frequently make decisions and solve problems on the basis of intuition, experience, instinct, and personal insights. For example, relying heavily on conceptual, communication, interpersonal, and time-management skills, a manager may have to decide among multiple courses of action that look equally attractive, and even objective facts may prove to be wrong. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Application LO: 5.1: Describe the nature of management and identify the four basic functions that constitute the management process. 21) Identify the four basic managerial functions. Answer: There are four basic managerial functions that managers are responsible for. They are (1) Setting goals is part of planning, (2) setting up the organization is part of organizing, (3) managing people is part of leading, and (4) monitoring performance is part of controlling. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Application LO: 5.1: Describe the nature of management and identify the four basic functions that constitute the management process. 22) Which type of manager is responsible for implementing the strategies, policies, and decisions made by top managers? A) First-line manager B) Middle manager C) Supervisory manager D) Office manager E) Financial managers Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application 6 Copyright © 2022 Pearson Education, Inc.
LO: 5.2: Identify different types of managers likely to be found in an organization by level and area.
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23) Which type of manager spends most of their time working with and supervising the employees who report to them? A) First-line managers B) Information managers C) Top managers D) Chief executive officers E) Operations managers Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 5.2: Identify different types of managers likely to be found in an organization by level and area. 24) Which type of business managers have titles such as President and CEO? A) First-line managers B) Top managers C) Middle managers D) Power brokers E) Stockholders Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 5.2: Identify different types of managers likely to be found in an organization by level and area. 25) Which level of management is responsible for the overall performance and effectiveness of the firm? A) Top managers B) First-line managers C) Middle managers D) Supervisory managers E) Human resource managers Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 5.2: Identify different types of managers likely to be found in an organization by level and area. 26) CFO and controller are titles associated with what type of manager? A) Financial B) Information C) Human resource D) Marketing E) Operations 8 Copyright © 2022 Pearson Education, Inc.
Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 5.2: Identify different types of managers likely to be found in an organization by level and area. 27) Which level of management sets general policies, formulates strategies, approves all significant decisions, and represents the company in dealings with other firms and with government bodies? A) Operations managers B) Production managers C) Top managers D) Middle managers E) First-line managers Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 5.2: Identify different types of managers likely to be found in an organization by level and area. 28) Titles such as plant manager, operations manager, and division manager designate which level of management? A) First-line managers B) Middle managers C) Top managers D) Supervisors E) Technology managers Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 5.2: Identify different types of managers likely to be found in an organization by level and area. 29) The titles of supervisor, office manager, and group leader are examples of which level of management? A) Top management B) Middle management C) First-line management D) Operations management E) Human resource management Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application 9 Copyright © 2022 Pearson Education, Inc.
LO: 5.2: Identify different types of managers likely to be found in an organization by level and area. 30) Which of the following are responsible for production and quality control? A) Information managers B) Human resource managers C) First-line managers D) Operations managers E) Marketing managers Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 5.2: Identify different types of managers likely to be found in an organization by level and area. 31) Which of the following managers are directly responsible for getting product information from producers to consumers? A) Human resource managers B) Public relations managers C) Information managers D) Marketing managers E) Financial managers Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 5.2: Identify different types of managers likely to be found in an organization by level and area. 32) Who is responsible for designing and implementing systems to gather, organize, and distribute facts and data essential for the running of the company? A) Marketing managers B) Information managers C) Production managers D) Human resource managers E) Research and development managers Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 5.2: Identify different types of managers likely to be found in an organization by level and area. 33) Which of the following managers are responsible for planning and overseeing the firm's accounting functions? A) Financial managers 10 Copyright © 2022 Pearson Education, Inc.
B) Information managers C) Production managers D) Human resource managers E) Marketing managers Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 5.2: Identify different types of managers likely to be found in an organization by level and area. 34) When top managers set organizational goals, who is primarily responsible for determining how to meet these goals? A) Middle managers B) Top managers C) Controllers D) Chief executive officer E) First-line managers Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 5.2: Identify different types of managers likely to be found in an organization by level and area. 35) Joel is managing a sink hole repair. He spends most of his time working with and supervising the employees who report to him, but also interacts with community officials and upper-level management at the home office. Which of the following describes Joel's position? A) Project manager B) Office manager C) Division manager D) Vice President E) Group leader Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 5.2: Identify different types of managers likely to be found in an organization by level and area. 36) Which of the following is responsible for the hiring and training of employees, performance evaluation, and compensation strategy for a firm? A) Information managers B) Project managers C) Financial managers D) Operations managers E) Human resource managers Answer: E 11 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 5.2: Identify different types of managers likely to be found in an organization by level and area. 37) Charlie is helping to design a new information system to improve the connectivity of all the divisions and plants. Which of the following describes Charlie's position within the firm? A) Top manager B) Chief information officer C) First-line manager D) Middle manager E) Controller Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 5.2: Identify different types of managers likely to be found in an organization by level and area. 38) Ahn is the first-line manager in the accounting department at her firm. Which of the following titles might she expect to have? A) Chief financial offices B) Vice president for finance C) Accounting supervisor D) Division controller E) Accountant Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 5.2: Identify different types of managers likely to be found in an organization by level and area. 39) Operations managers are responsible for production, inventory, and quality control. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 5.2: Identify different types of managers likely to be found in an organization by level and area. 40) Information managers are responsible for getting products from producers to consumers. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 5.2: Identify different types of managers likely to be found in an organization by level and 12 Copyright © 2022 Pearson Education, Inc.
area. 41) Middle managers have considerable autonomy as they work to implement the strategies and goals set by op managers. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 5.2: Identify different types of managers likely to be found in an organization by level and area. 42) Marketing managers work closely with financial managers to oversee accounting functions and financial resources. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 5.2: Identify different types of managers likely to be found in an organization by level and area. 43) Describe and discuss the three levels of management and their roles in the organization. Answer: A key role of top managers is mentoring and developing those who work for them. Top managers are responsible for the overall performance and effectiveness of the firm. This is done by setting general policies, formulating strategies and approving all significant decisions. Top managers also represent the company in dealings with other firms and the government. Middle managers are responsible for implementing the strategies set by top managers, and working towards those goals. First line managers supervise the work of employees who report to them, and ensure employees understand and are trained in company policies and procedures. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Application LO: 5.2: Identify different types of managers likely to be found in an organization by level and area. 44) Describe the role of financial managers in an organization. Answer: Nearly every company has financial managers to plan and oversee its accounting functions and financial resources. Levels of financial management may include CFO or vice president for finance (top), a division controller (middle), and an accounting supervisor (first-line manager). Some financial institutions, such as Wells Fargo and State Farm Insurance, have even made effective financial management the company’s reason for being. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Application LO: 5.2: Identify different types of managers likely to be found in an organization by level and area. 45) Which type of skills are needed to understand and work well with people in the workplace? 13 Copyright © 2022 Pearson Education, Inc.
A) Human relations skills B) Technical skills C) Conceptual skills D) Motor skills E) Decision-making skills Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 5.3: Describe the basic roles and skills required of managers. 46) Which of the following refers to a person's ability to think in the abstract, to diagnose and analyze different situations, and to see beyond the present situation? A) Human relations skills B) Decision-making skills C) Conceptual skills D) Production skills E) Technical skills Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 5.3: Describe the basic roles and skills required of managers. 47) Which type of skills requires defining problems and selecting the best course of action to take? A) Human relations skills B) Production skills C) Conceptual skills D) Decision-making skills E) Technical skills Answer: D Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 5.3: Describe the basic roles and skills required of managers. 48) An accountant's ability to audit a company's records is an example of what type of skills? A) Motor skills B) Technical skills C) Human relations skills D) Conceptual skills E) Decision-making skills Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical 14 Copyright © 2022 Pearson Education, Inc.
LO: 5.3: Describe the basic roles and skills required of managers. 49) What skills can a manager utilize to work well with people and make them feel excited about their work? A) Human relations skills B) Technical skills C) Accounting skills D) Conceptual skills E) Marketing skills Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 5.3: Describe the basic roles and skills required of managers. 50) Which of the following managers depend most on conceptual skills? A) First-line managers B) Top managers C) Middle managers D) Marketing managers E) Financial managers Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 5.3: Describe the basic roles and skills required of managers. 51) A manager is expected to serve in which interpersonal capacity when coordinating people, groups, and organizations? A) Figurehead B) Spokesperson C) Leader D) Negotiator E) Liaison Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 5.3: Describe the basic roles and skills required of managers. AACSB: Analytical thinking52) What type of manager needs to understand foreign markets, cultural differences, and motives of foreign rivals? A) Technology B) Strategic C) Project D) Interpersonal E) Global 15 Copyright © 2022 Pearson Education, Inc.
Answer: E Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 5.3: Describe the basic roles and skills required of managers. 53) Fostering new ideas and innovation and resolving conflicts within a department is a responsibility under which managerial role? A) Interpersonal B) Resource allocator C) Decisional D) Disturbance handler E) Informational Answer: C Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 5.3: Describe the basic roles and skills required of managers. 54) The managerial role characterized by the ability to gather and disseminate communications and areas of interest is referred to as A) interpersonal. B) resource allocator. C) decisional. D) disturbance handler. E) informational. Answer: E Difficulty: Easy AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 5.3: Describe the basic roles and skills required of managers. 55) Mary is leading a large international project. She has invited her international colleagues to visit her plant so they can better understand how the process will run. While her international colleagues are in town, Mary has taken them to dinner and has arranged and attended tours of the area with them. Which of the following describes Mary's role in this situation? A) Informational B) Decisional C) Entrepreneurial D) Human relational E) Interpersonal Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 5.3: Describe the basic roles and skills required of managers. 16 Copyright © 2022 Pearson Education, Inc.
56) After listening to the opinions of her staff, Willa though through a variety of options for the new plant location, and is now ready to share that information with her staff and others in the workplace. Which of the following describes Willa's role in this situation? A) Entrepreneurial B) Human resources C) Figurehead D) Informational E) Negotiator Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 5.3: Describe the basic roles and skills required of managers. 57) Two of Owen's managers are trying to access the same product line at the same time, each claiming their work is more important. Owen set up a meeting with both managers to try to determine potential solutions. In this scenario, Owen needs to act in the role of A) spokesperson. B) liaison. C) disturbance handler. D) monitor. E) entrepreneur. Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 5.3: Describe the basic roles and skills required of managers. 58) Which type of skills are especially important for first-line managers because of the time spent helping solve work-related problems? A) Human resource B) Technical C) Conceptual D) Time management E) Global Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 5.3: Describe the basic roles and skills required of managers. 59) James feels he is constantly interrupted by phone calls, making it difficult to get other work done. He has decided to schedule blocks of time when he will return the most important phone calls, allowing him to better concentrate on other work that needs to be done. Which of the following is James using to manage the constant interruption of phone calls? A) Time management skills B) Decision-making skills 17 Copyright © 2022 Pearson Education, Inc.
C) Global management skills D) Technical skills E) Human relations skills Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 5.3: Describe the basic roles and skills required of managers. 60) Eloise's company has just purchased a company in Spain. Eloise will be relocated from the United States to Madrid for the next three years. Which of the following is an advantage to sending an employee from headquarters to the new international location? A) To help transfer the corporate culture to the foreign operations. B) To better prepare other employees for international assignments. C) To prepare for international competition for key leadership roles. D) To allow employees to advance within the firm. E) To identify directors from other countries to serve on the firm's board. Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 5.3: Describe the basic roles and skills required of managers. 61) Today, information flows to everyone in an organization simultaneously, thanks for improvements in technology and networks. Which of the following is the result of increased use of technology in a firm? A) Less time spent on emails B) Quicker decision making C) Increased reliance on hierarchies D) Increased bureaucracy E) Less group building and teamwork Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 5.3: Describe the basic roles and skills required of managers. 62) One outcome of using conceptual skills is being able to select the best alternative. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 5.3: Describe the basic roles and skills required of managers. 63) Changes in technology will result in a decrease in the amount of information that managers will use to make decisions. Answer: FALSE 18 Copyright © 2022 Pearson Education, Inc.
Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 5.3: Describe the basic roles and skills required of managers. 64) Many managers spend as much as four hours a day in meetings. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 5.3: Describe the basic roles and skills required of managers. 65) The effectiveness of managers in using time can be undermined by frequent phone calls. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 5.3: Describe the basic roles and skills required of managers. 66) The informational roles of a manager are natural continuations of a manager's interpersonal role. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 5.3: Describe the basic roles and skills required of managers. 67) The work of most executives fall into three basic categories: interpersonal, informational, an decisional. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 5.3: Describe the basic roles and skills required of managers. 68) Discuss how new technologies have shaped management communication and decisionmaking skills. Answer: One significant issue facing tomorrow's managers is technology, especially as it relates to communication. Managers have always had to deal with information. Today, the amount of information has reached staggering proportions. New forms of technology have added to a manager's ability to process information while simultaneously making it even more important to organize and interpret an ever-increasing wealth of input and to develop effective technology skills. Technology has also begun to change the way the interaction of managers shapes corporate structures. Elaborate networks control the flow of a firm's lifeblood— information. This information no longer flows strictly up and down through hierarchies. It now flows to everyone simultaneously. As a result, decisions are made quicker, and more people are directly involved. With e-mail, videoconferencing, and other forms of communication, neither time nor distance—nor such corporate boundaries as departments and divisions—can prevent people from 19 Copyright © 2022 Pearson Education, Inc.
working more closely together. More than ever, bureaucracies are breaking down, and planning, decision making, and other activities are beginning to benefit from group building and teamwork. Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 5.3: Describe the basic roles and skills required of managers. 69) Identify the four leading causes of wasted time in the workplace as outlined in the text. Answer: The four leading causes of wasted time in the workplace include paperwork, meetings, phone calls, and e-mail. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 5.3: Describe the basic roles and skills required of managers. 70) Managers have many roles within the organization. Discuss the interpersonal roles of managers and how those roles affect the organization. Answer: Three interpersonal roles are inherent in the manager's job. First, the manager is often expected to serve as a figurehead—taking visitors to dinner, attending ribbon-cutting ceremonies, and the like. These activities are typically more ceremonial and symbolic than substantive. The manager is also expected to serve as a leader—hiring, training, and motivating employees. A manager who formally or informally shows subordinates how to do things and how to perform under pressure is leading. Finally, managers can have a liaison role. This role often involves serving as a coordinator or link among people, groups, or organizations. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 5.3: Describe the basic roles and skills required of managers. 71) Identify and explain the four types of decisional roles and the function of each role. Answer: The information acquired by the manager as a result of performing the informational roles has a major bearing on important decisions that he or she makes. There are four decisional roles. First, the manager has the role of entrepreneur, the voluntary initiator of change. A second decisional role is initiated not by the manager but by some other individual or group. The manager responds to her role as disturbance handler by handling such problems as strikes, copyright infringements, or problems in public relations or corporate image. The third decisional role is that of resource allocator. As resource allocator, the manager decides how resources are distributed and with whom he or she will work most closely. A fourth decisional role is that of negotiator. In this role, the manager enters into negotiations with other groups or organizations as a representative of the company. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Concept LO: 5.3: Describe the basic roles and skills required of managers. 72) Identify and explain the important of human relations skills for managers. 20 Copyright © 2022 Pearson Education, Inc.
Answer: Effective managers also generally have good human relations skills, skills that enable them to understand and get along with other people. A manager with poor human relations skills may have trouble getting along with subordinates, cause valuable employees to quit or transfer, and contribute to poor morale. Although human relations skills are important at all levels, they are probably most important for middle managers, who must often act as bridges between top managers, first-line managers, and managers from other areas of the organization. Managers should possess good communication skills. Many managers have found that being able both to understand others and to get others to understand them can go a long way toward maintaining good relations in an organization. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Concept LO: 5.3: Describe the basic roles and skills required of managers. 73) Which of the following identifies performance targets used by organizations and their managers to measure success or failure at every level? A) Tactics B) Goals C) Strategies D) Mission statements E) Promotions Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 74) If an organization sets out to increase its share of the snack food market by 10 percent during the next eight years, what kind of goal is the organization setting? A) A short-term goal B) An intermediate goal C) A tactical goal D) A long-term goal E) An organizational goal Answer: D Difficulty: Easy AACSB: Reflective thinking Quest. Category: Application LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 75) When the finance department has a goal of a 3 percent increase in return on investment in three years, what type of goal is the organization setting? A) A long-term goal B) A tactical goal C) A short-term goal 21 Copyright © 2022 Pearson Education, Inc.
D) An intermediate goal E) An organizational goal Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. AACSB: Application of knowledge AACSB: Application of knowledge76) What strategic management activity do company managers undertake so they can later measure success or failure at every organizational level? A) Planning tactics B) Setting goals C) Devising strategies D) Auditing skills E) Publicizing promotions Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 77) What of the following indicates an organization's reason for being? A) Strategy B) Tactic C) Purpose D) Diversity E) Profitability Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 78) Which of the following BEST describes a mission statement? A) An objective that a business hopes and plans to achieve B) A broad set of organizational plans for implementing decisions made for achieving organizational goals C) The shared experiences, stories, beliefs, and norms that characterize an organization D) An organization's statement of how it will achieve its purpose in the environment in which it conducts business E) An organization's competitive standing in the marketplace Answer: D Difficulty: Moderate AACSB: Application of knowledge 22 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Concept LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 79) Which of the following BEST describes a business strategy? A) A strategy for determining the firm's overall attitude toward growth and the way it will manage its businesses or product lines B) A strategy at the business unit or product line level that focuses on improving a firm's competitive position C) A strategy by which managers in specific areas decide how best to achieve corporate goals through productivity D) A strategy that assists first line managers in making day-to-day decisions about motivating employees E) A strategy that integrates an organization's marketing goals into a cohesive whole by focusing on the ideal product mix to achieve maximum profit potential Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 80) A three-year goal is considered to be what? A) Long-term B) Intermediate C) Short-term D) Objective E) Problematic Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 81) Which of the following BEST describes functional strategy? A) A strategy for determining the firm's overall attitude toward growth and the way it will manage its businesses or product lines B) A strategy at the business-unit or product-line level that focuses on improving a firm's competitive position C) A strategy by which managers in specific areas decide how best to achieve corporate goals through productivity D) A strategy that assists first line managers in making day-to-day decisions about motivating employees E) A strategy that integrates an organization's marketing goals into a cohesive whole by focusing on the ideal product mix to achieve maximum profit potential Answer: C 23 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 82) Increasing sales by 4 percent in the next eight months is an example of what kind of goal? A) Tactical B) Strategic C) Short-term D) Intermediate E) Long-term Answer: C Difficulty: Easy AACSB: Reflective thinking Quest. Category: Application LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 83) The marketing manager wants to increase regional sales by 2 percent each quarter over the next year. This is an example of what kind of goal? A) Long-term B) Intermediate C) Short-term D) Strategic E) Tactical Answer: C Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Application LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 84) Which of the following is the BEST example of unrelated diversification? A) Ford Motor Company merging with General Motors B) Northwest Airlines merging with Procter & Gamble C) McDonald's merging with Burger King D) Tootsie Roll merging with Hershey E) Bath and Body Works merging with The Body Store Answer: B Difficulty: Difficult AACSB: Reflective thinking Quest. Category: Application LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 85) Which variable of a SWOT analysis identifies changing consumer tastes, hostile takeover 24 Copyright © 2022 Pearson Education, Inc.
offers, and new government regulations? A) Threats B) Opportunities C) Strategies D) Internal factors E) Weaknesses Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 86) When conducting a SWOT analysis of an organization, which question can help management brainstorm for the strengths section of the analysis? A) What external changes present interesting possibilities? B) What aspect of the organization's vision can be altered? C) What necessary skills do the organization's employees currently lack? D) What does the organization offer that makes it stand out from other organizations? E) What external economic forces can affect the organization's bottom line? Answer: D Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Analytical LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 87) When conducting a SWOT analysis of an organization, which question can help management brainstorm for the weaknesses section of the analysis? A) What external changes present interesting possibilities? B) What aspect of the organization's vision can be altered? C) What necessary skills do the organization's employees currently lack? D) What does the organization offer that makes it stand out from other organizations? E) What external economic forces can affect the organization's bottom line? Answer: C Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Application LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 88) When conducting a SWOT analysis of an organization, which question can help management brainstorm for the opportunities section of the analysis? A) What external changes present interesting possibilities? B) What aspect of the organization's vision can be altered? C) What necessary skills do the organization's employees currently lack? D) What does the organization offer that makes it stand out from other organizations? 25 Copyright © 2022 Pearson Education, Inc.
E) What external economic forces can affect the organization's bottom line? Answer: A Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Application LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 89) When conducting a SWOT analysis of an organization, which question can help management brainstorm for the threats section of the analysis? A) What external changes present interesting possibilities? B) What aspect of the organization's vision can be altered? C) What necessary skills do the organization's employees currently lack? D) What does the organization offer that makes it stand out from other organizations? E) What external economic forces can affect the organization's bottom line? Answer: E Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Application LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 90) Which of the following would be classified as opportunities for an organization? A) Government regulation of the organization's services B) Highly unionized workers in the organization's industry C) New competitors D) Stronger demand for the organization's services E) Economy fluctuations Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 91) What type of analysis focuses on external factors? A) Organizational analysis B) Governmental analysis C) Environmental analysis D) Functional analysis E) Financial analysis Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 26 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge92) In which step of the strategy formulation process would a SWOT analysis take place? A) Matching the organization and its environment B) Analyzing the organization and the environment C) Developing tactical and operations plans D) Setting strategic goals E) Contingency planning and crisis management Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 93) Which of the following is the last step in the strategy formulation process and requires comparing threats and opportunities against strengths and weaknesses? A) Organizational analysis B) Matching the organization and its environment C) Analyzing the organization and the environment D) Setting strategic goals and mission statements E) Conducting an analysis using SWOT techniques Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 94) Which of the following is the process of helping an organization maintain an effective alignment with its environment? A) Strategic management B) SWOT analysis C) Goal setting D) Corporate strategy E) Competitive strategy Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 95) Which of the following should be used when making decision on a daily basis so that the business can achieve its organizational goals? A) Goals B) Strategy 27 Copyright © 2022 Pearson Education, Inc.
C) Global management D) Corporate strategy E) Functional strategy Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 96) Which of the following is a key purpose of goal setting? A) To determine when a SWOT analysis might be needed B) To maintain effective alignment with the environment C) To outline how a firm will achieve their purpose in the environment D) To determine the businesses overall attitude toward growth E) To help managers assess performance Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 97) Which businesses a company will own and operate, and the strategy for determining the firm's overall attitude toward growth is guided by A) the firm's goals. B) the firm's mission. C) the firm's corporate strategy. D) the firm's attitude toward unrelated diversification. E) the firm's functional strategy. Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 98) Which of the following is the creation of a broad program for defining and meeting an organization's goals? A) Setting strategic goals B) Environmental analysis C) Strategy formulation D) Tactical plans E) Operational plans Answer: C Difficulty: Moderate AACSB: Analytical thinking 28 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Critical Thinking LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 99) Which of the following should be derived directly from a firm's mission statement? A) Strategic goals B) SWOT analysis C) Environmental analysis D) Functional strategy E) Competitive strategy Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 100) Which of the following is the purpose of an organizational analysis? A) To identify environmental opportunities B) To analyze a firm's strengths and weaknesses C) To formulate strategy D) To match environmental threats and opportunities against corporate strengths and weaknesses E) To implement tactical plans Answer: B Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 101) Which of the following reflect decisions about how a firm will allocate resources and the priorities of the company? A) Operational plans B) Organizational analysis C) Goals D) Mission statement E) Strategic plans Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 102) James has a meeting with his manager to develop short term plans to help guide decisions that are made within the department. James wants to be sure these plans support the company's strategic plans. Which of the following are James and his manager creating? 29 Copyright © 2022 Pearson Education, Inc.
A) Tactical plans B) Goals C) SWOT analysis D) Contingency plans E) Operational plans Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 103) After meeting with his manager, James has created a series of plans for each day, week, and month for his front-line managers. Which of the following is James sharing with his managers? A) Operational plans B) Tactical plans C) Contingency plans D) Strategic plans E) Crisis management plans Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 104) Business strategy focuses on improving the company's competitive position. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 105) The starting point in effective management is setting goals. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 106) Goal setting helps managers assess performance. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical 30 Copyright © 2022 Pearson Education, Inc.
LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 107) Long-term goals are derived directly from a firm's mission statement. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. AACSB: Application of knowledgeAACSB: Application of knowledgeAACSB: Application of knowledge108) A firm first sets its strategies and then focuses attention on goals to accomplish them. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 109) Strategy has a wider scope than planning. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 110) An organization retrenches by increasing its investment in a particular area. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 111) SWOT analysis is usually conducted before strategic goals have been established. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 112) A strategy is an objective that a business hopes and plans to achieve. Answer: FALSE Difficulty: Moderate 31 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Analytical LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 113) What is a mission statement? Answer: A mission statement is a statement of how the organization will achieve its purposes in the environment in which it conducts business. It is an important way that a firm encapsulates and communicates its core business to employees, clients, and a range of other stakeholders. Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 114) What is the difference between a goal and a strategy? Answer: A goal is an objective that a business hopes and plans to achieve. A strategy is a broad set of organizational plans for implementing the decisions made for achieving organizational goals. A strategy entails the goals that a company sets out to achieve. Therefore, the strategy constitutes the way that the goals can be realized. Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Concept LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 115) Describe the components of a SWOT analysis? Answer: After strategic goals have been set, organizations usually go through SWOT analysis as they continue to formulate their strategy. This process involves assessing organizational (internal) strengths (S) and weaknesses (W) and environmental (external) opportunities (O) and threats (T). A SWOT analysis is a widely used process for evaluating the current strengths and weaknesses of a company's business. Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Concept LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 116) Discuss the four main purposes of organizational goal setting. Answer: Goal setting provides direction and guidance for managers at all levels, helps firms allocate resources, helps to define corporate culture, and helps managers assess performance. However, the process of setting goals needs to be conducted in a disciplined fashion in order to support these purposes. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Concept LO: 5.4: Explain the importance of strategic management and effective goal setting in 32 Copyright © 2022 Pearson Education, Inc.
organizational success. 117) Discuss the three broad levels of strategy that organizations may implement. Answer: Organizations may set corporate, business, and functional strategies. The purpose of corporate strategy is to determine the firm's overall attitude toward growth and the way it will manage its businesses or product lines. Business strategy, which takes place at the level of the business or product line, focuses on improving the company's competitive position. At the level of functional strategy, managers in specific areas decide how best to achieve corporate goals through productivity. These three levels form a hierarchy in terms of strategic management and planning. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 118) Differentiate among strategic, tactical, and operational plans. Answer: Strategic plans reflect decisions about resource allocations, company priorities, and the steps needed to meet strategic goals. Tactical plans are shorter-range plans for implementing specific aspects of the company's strategic plans. Operational plans set short-term targets for daily, weekly, or monthly performance. Strategy needs to be translated into actual plans, which means that strategic, tactical, and operational plans are connected. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 119) Describe the three kinds of goals a firm should use to help achieve its mission. Answer: In addition to its mission, every firm also has long-term, intermediate, and short-term goals. Long-term goals relate to extended periods, typically 5 years or more. Intermediate goals are set for a period of 1 to 5 years. Companies usually set intermediate goals in several areas. Short-term goals are set for perhaps 1 yar and are developed for several different areas. After a firm sets its goals, it then focuses attention on strategies to accomplish them. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 5.4: Explain the importance of strategic management and effective goal setting in organizational success. 120) What element of management is being utilized when using computer forecasts to determine possible outcomes of an intended change? A) Strategy formulation B) Goal setting C) Crisis management D) Contingency planning E) Related diversification 33 Copyright © 2022 Pearson Education, Inc.
Answer: D Difficulty: Difficult AACSB: Reflective thinking Quest. Category: Application LO: 5.5: Discuss contingency planning and crisis management in today's business world. 121) How can organizations best deal with emergencies requiring immediate response? A) Strategic management B) Operational plans C) Crisis management plans D) Tactical plans E) Goal setting Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 5.5: Discuss contingency planning and crisis management in today's business world. 122) Contingency planning seeks to identify how a company will respond to change. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 5.5: Discuss contingency planning and crisis management in today's business world. 123) Effective contingency planning eliminated the need for crisis management plans. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 5.5: Discuss contingency planning and crisis management in today's business world. 119) Effective crisis management involves having a contingency plan for emergencies. Answer: FALSE Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Application LO: 5.5: Discuss contingency planning and crisis management in today's business world. 124) Describe the purpose of contingency planning. Answer: Contingency planning seeks to identify in advance important aspects of a business or its market that might change. It also identifies the ways in which a company will respond to changes. Difficulty: Moderate AACSB: Reflective thinking Quest. Category: Application LO: 5.5: Discuss contingency planning and crisis management in today's business world. 34 Copyright © 2022 Pearson Education, Inc.
125) Describe crisis management and one area of focus for much of that planning. Answer: A crisis is an unexpected emergency requiring immediate response. Crisis management involves an organization’s methods for dealing with emergencies. The focus of much of that planning related to the growing threat of terrorism. Specifically, businesses challenged themselves to consider how they might best respond if one of their facilities is bombed by terrorists or if an employee is taken hostage by a terrorist group. Difficulty: Difficult AACSB: Reflective thinking Quest. Category: Application LO: 5.5: Discuss contingency planning and crisis management in today's business world. 126) Which element of an organization is defined by shared experiences, stories, beliefs, and norms? A) Its human resources B) Its product philosophy C) Its corporate culture D) Its mission statement E) Its organizational structure Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 5.6: Describe the development and explain the importance of corporate culture. AACSB: Reflective thinking127) When a company attempts to change its culture, what must take place to give the new culture solid shape within the firm? A) The firm must set up new systems for appraising and compensating employees who enforce the new values. B) A highly responsive strategy must be determined. C) There must be a period devoted to conflict and resistance. D) There must be renewed focus on the activities of the competitors and customers. E) There must be a thorough SWOT analysis to determine if the change is necessary. Answer: A Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Analytical LO: 5.6: Describe the development and explain the importance of corporate culture.
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128) How does a new employee learn acceptable behaviors within the organization? A) Quality standards B) Crisis management strategies C) Contingency plans D) Operational plans E) Cultural norms Answer: E Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 5.6: Describe the development and explain the importance of corporate culture. 129) Which of the following is one of the purposes of a strong corporate culture? A) It shapes management philosophy, style, and behavior. B) It supports top-down communications. C) It aids in assimilating new organizations into the firm. D) It reinforces the financial success of the firm. E) It directs the efforts of employees in working toward the same goals. Answer: E Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 5.6: Describe the development and explain the importance of corporate culture. 130) Which of the following is critical for a firm to use culture to its advantage? A) Tactical plans B) Goal setting C) A strong mission statement D) Comprehensive strategies E) Effective communication Answer: E Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 5.6: Describe the development and explain the importance of corporate culture. 131) Corporate culture is largely a result of state and local laws and regulations. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 5.6: Describe the development and explain the importance of corporate culture. 132) A strong corporate culture directs employees' efforts and helps everyone work toward the same goals. Answer: TRUE Difficulty: Moderate 36 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 5.6: Describe the development and explain the importance of corporate culture. 133) It is not possible to change an organization's corporate culture. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 5.6: Describe the development and explain the importance of corporate culture. 134) Corporate culture influences management's philosophy, style, and behavior. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 5.6: Describe the development and explain the importance of corporate culture. 135) To use a firm's culture to its advantage, effective communication is critical. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 5.6: Describe the development and explain the importance of corporate culture. 136) Define the term corporate culture. Answer: Corporate culture is the shared stories, beliefs, experiences, and norms that characterize an organization. Corporate culture helps define the work and business climate within an organization. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 5.6: Describe the development and explain the importance of corporate culture. 137) What are the purposes of having a strong corporate culture? Answer: A strong corporate culture serves several purposes. First, it directs employees' efforts and helps everyone work toward the same goals. Second, it helps newcomers identify accepted behaviors. Finally, it gives each organization its own identity, much as personalities give identity to people. Corporate culture constitutes a unique identity giving every company a unique feel or signature. A well-known example is the "work hard, play hard" culture that is part of the Google work environment. Difficulty: Difficult AACSB: Reflective thinking Quest. Category: Critical Thinking LO: 5.6: Describe the development and explain the importance of corporate culture. 138) Discuss the importance of effective communication is building a strong organizational culture. 37 Copyright © 2022 Pearson Education, Inc.
Answer: To use a firm’s culture to its advantage, managers must accomplish several tasks, all of which hinge on effective communication. First, managers themselves must have a clear understanding of the culture. Second, they must transmit the culture to others in the organization. Thus, training and orientation for newcomers in an organization often include information about the firm’s culture. A clear and meaningful statement of the organization’s mission is also a valuable communication tool. Finally, managers can maintain the culture by rewarding and promoting those who understand it and work toward maintaining it. Difficulty: Difficult AACSB: Reflective thinking Quest. Category: Critical Thinking LO: 5.6: Describe the development and explain the importance of corporate culture.
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Business Essentials, 13e (Ebert/Griffin) Chapter 6 Organizing the Business 1) Which term refers to the specification of jobs to be done within an organization and the ways in which those jobs relate to one another? A) Delegation B) A mission statement C) Cross training D) Role responsibility E) Organizational structure Answer: E Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 6.1: Discuss the factors that influence a firm's organizational structure. 2) Which of the following clarifies structure and shows employees where they fit into a firm's operations? A) Delegation B) Departmentalization C) Organization charts D) Mission statement E) Job descriptions Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 6.1: Discuss the factors that influence a firm's organizational structure. 3) What do the solid lines on an organization chart show in reporting relationships within a company? A) Mission statement B) Chain of command C) Job specialization D) Grapevine activity E) Market share Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 6.1: Discuss the factors that influence a firm's organizational structure. 4) Which factor plays a key role in determining an organization's structure? A) Competition and technology B) Location and life-cycle stage C) Profitability and leverage D) Research and development 1 Copyright © 2022 Pearson Education, Inc.
E) Mission and strategy Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 6.1: Discuss the factors that influence a firm's organizational structure. 5) What is the advantage of an organization that is unstructured and informal? A) Decisions can be made by consensus. B) There is less effect on the organization in a rapidly changing market. C) Managers do not become overwhelmed with decision making. D) It can become a more complex structure quickly and efficiently. E) The structure is more adaptable to the environment. Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 6.1: Discuss the factors that influence a firm's organizational structure. 6) Reporting relationships within a company are indicated on an organization chart and represent A) organizational structure. B) mission and strategy responsibility. C) areas of specialization. D) chain of command. E) decision-making responsibility. Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 6.1: Discuss the factors that influence a firm's organizational structure. 7) Elizabeth works for a large international pharmaceutical company, which employees thousands of people around the word. She wants to review the organizational chart to see how her job relates to others in her work unit. To do so, she most likely will need to look at an organization chart that shows A) the entire organization. B) her country. C) all managers. D) her department. E) her division. Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 6.1: Discuss the factors that influence a firm's organizational structure. 8) Which of the following describes the specification of the jobs to be done within the 2 Copyright © 2022 Pearson Education, Inc.
organization, and the relationship between those jobs? A) Organizational structure B) Chain of command C) Compartmentalization D) Hierarchy E) Job specialization Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 6.1: Discuss the factors that influence a firm's organizational structure. 9) Which of the following is a key part of the management process and should be conducted with an equal awareness for both the internal and external environment of a firm? A) Planning B) Chain of command C) Organizing D) Organizational structuring E) Product departmentalization Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 6.1: Discuss the factors that influence a firm's organizational structure. 10) Which of the following is likely to occur when an organization has a shift in its strategy? A) Specialization B) Span of control issues C) Delegation D) Structural change E) Departmentalization Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 6.1: Discuss the factors that influence a firm's organizational structure. 11) Organizations rarely change the organizational structure once it has been established. Answer: FALSE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 6.1: Discuss the factors that influence a firm's organizational structure. 12) In an organization chart, each solid box represents a key division within the organization. Answer: FALSE Difficulty: Easy 3 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Concept LO: 6.1: Discuss the factors that influence a firm's organizational structure. 13) Organization charts are graphical representations of employee salary information. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 6.1: Discuss the factors that influence a firm's organizational structure. 14) The chain of command is depicted by solid lines on an organization chart. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 6.1: Discuss the factors that influence a firm's organizational structure. 15) Organizational structure is a function of the organization's mission and strategy. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.1: Discuss the factors that influence a firm's organizational structure. 16) The reporting relationships within an organization follow a chain from the highest level to the lowest level in the organization, and is known as chain of command. Answer: TRUE Difficulty: Easy AACSB: Analytical thinking Quest. Category: Concept LO: 6.1: Discuss the factors that influence a firm's organizational structure. 17) Describe how organizations create and communicate their organizational structure. Answer: Each organization must develop an appropriate organizational structure, which includes the specification of the jobs to be done and the ways in which those jobs relate to one another. Most organizations change structures almost continuously. Firms prepare organization charts to clarify structure and to show employees where they fit into a firm's operations. Each box represents a job, and solid lines define the chain of command, or reporting relationships. The charts of large firms are complex and include individuals at many levels. Because size prevents them from charting every manager, they may create single organization charts for overall corporate structure and separate charts for divisions. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 6.1: Discuss the factors that influence a firm's organizational structure. 4 Copyright © 2022 Pearson Education, Inc.
18) Discuss the factors that must be considered when determining organizational structure. Answer: Many factors play a part in determining an organization’s optimal structure. Chief among them are the organization’s mission and strategy. A dynamic and rapidly growing business, for example, needs an organizational structure that allows it to be flexible, to respond quickly to changes in its environment and strategy, and to grow. A stable organization with only modest growth goals and a more conservative strategy will most likely function best with a different organizational structure, perhaps one less flexible and more focused on current business activities. Size of the company and elements of the organization’s environment also affect organizational structure. Organizing is a key part of the management process. As such, it must be conducted with an equal awareness of both a firm’s external and internal environments. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 6.1: Discuss the factors that influence a firm's organizational structure. 19) What do managers do when the "job" of a firm is broken down into smaller jobs, allowing others to perform them? A) Fragment the task B) Specialize the job C) Respond to the job D) Assign the task E) Control the job Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.2: Explain specialization and departmentalization as two of the building blocks of organizational structure. 20) Which of the following is an advantage of job specialization? A) Workers can develop expertise in their jobs. B) Workers will not need to be trained. C) Jobs become more interesting. D) Workers derive more satisfaction from their jobs. E) Jobs do not need to be redefined. Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.2: Explain specialization and departmentalization as two of the building blocks of organizational structure. 21) When a large organization has departments based on areas of production, what type of departmentalization is being utilized? A) Customer departmentalization B) Process departmentalization C) Geographic departmentalization 5 Copyright © 2022 Pearson Education, Inc.
D) Functional departmentalization E) Product departmentalization Answer: E Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Concept LO: 6.2: Explain specialization and departmentalization as two of the building blocks of organizational structure. 22) What is the advantage of using product departmentalization? A) Managers can focus on specific product lines. B) Products are organized based on the production process. C) Products are better targets to specific customer groups. D) Customer groups are easily identifiable. E) Products are closer to where consumers are served. Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.2: Explain specialization and departmentalization as two of the building blocks of organizational structure. 23) If a manufacturer divides the organization according to the way goods are created, what type of departmentalization is being utilized? A) Functional departmentalization B) Process departmentalization C) Customer departmentalization D) Geographic departmentalization E) Brand departmentalization Answer: B Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Concept LO: 6.2: Explain specialization and departmentalization as two of the building blocks of organizational structure. 24) Which of the following is a natural part of organizational growth? A) Retrenchment B) Entrepreneurship C) Job specialization D) Outsourcing E) Team consolidation Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.2: Explain specialization and departmentalization as two of the building blocks of 6 Copyright © 2022 Pearson Education, Inc.
organizational structure. 25) Determining how people performing certain tasks can best be grouped together is called what? A) Departmentalization B) Specialization C) Controlling D) Leadership E) Directing Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.2: Explain specialization and departmentalization as two of the building blocks of organizational structure. 26) What is dividing a store into a men's department, a women's department, and a luggage department an example of? A) Product departmentalization B) Customer departmentalization C) Process departmentalization D) Geographic departmentalization E) International departmentalization Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.2: Explain specialization and departmentalization as two of the building blocks of organizational structure. 27) A snack food firm is divided by the areas they serve, including one division for the United States, one for Europe, and another for Asia. How is this firm departmentalized? A) By customer B) By process C) By geography D) By function E) By productivity Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.2: Explain specialization and departmentalization as two of the building blocks of organizational structure. 28) What is the process of designing specific jobs that need to be done and identifying the people who will perform them called? A) Departmentalization B) Job specialization 7 Copyright © 2022 Pearson Education, Inc.
C) Group tasks D) Segmentation E) Team cohesion Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 6.2: Explain specialization and departmentalization as two of the building blocks of organizational structure. 29) Which term identifies the grouping of jobs into logical units? A) Specialization B) Accountability C) Authorization D) Departmentalization E) Process management Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.2: Explain specialization and departmentalization as two of the building blocks of organizational structure. 30) What kind of departmentalization happens when an organization is divided into operations categorized by tasks performed by employees? A) Functional departmentalization B) Process departmentalization C) Customer departmentalization D) Geographic departmentalization E) Regional departmentalization Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 6.2: Explain specialization and departmentalization as two of the building blocks of organizational structure. 31) What type of departmentalization would be most effective for a small or new organization? A) Geographic B) Functional C) Customer D) Product E) Process Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application 8 Copyright © 2022 Pearson Education, Inc.
LO: 6.2: Explain specialization and departmentalization as two of the building blocks of organizational structure. 32) If specific jobs are grouped into logical units based on location, what type of departmentalization is being utilized? A) Functional B) Product C) Process D) Customer E) Geographic Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 6.2: Explain specialization and departmentalization as two of the building blocks of organizational structure. 33) A separate company unit responsible for its own cost and revenue is referred to as which of the following? A) Centralized organization B) Decentralized organization C) Department D) Job specialty E) Profit center Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 6.2: Explain specialization and departmentalization as two of the building blocks of organizational structure. 34) Job specialization is the process of eliminating unnecessary or undesirable jobs. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.2: Explain specialization and departmentalization as two of the building blocks of organizational structure. 35) Departmentalization refers to the process of grouping jobs into logical units. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 6.2: Explain specialization and departmentalization as two of the building blocks of organizational structure. 9 Copyright © 2022 Pearson Education, Inc.
36) Geographic departmentalization divides firms according to the areas of the country or the world that they serve. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.2: Explain specialization and departmentalization as two of the building blocks of organizational structure. 37) The building blocks of all organizations are specialization and centralization. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.2: Explain specialization and departmentalization as two of the building blocks of organizational structure. 38) As organizations grow and become larger, jobs tend to become less specialized. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.2: Explain specialization and departmentalization as two of the building blocks of organizational structure. 39) Firms with production, marketing, human resource, and finance departments have a process form of organization. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.2: Explain specialization and departmentalization as two of the building blocks of organizational structure. 40) Firms typically use the same form of departmentalization at upper and lower levels. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 6.2: Explain specialization and departmentalization as two of the building blocks of organizational structure. 41) Profit centers can occur based on function, product, process, customer, or geographical areas. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application 10 Copyright © 2022 Pearson Education, Inc.
LO: 6.2: Explain specialization and departmentalization as two of the building blocks of organizational structure. 42) Deciding who will be empowered to make which decisions is determined when developing the structure of a business. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 6.2: Explain specialization and departmentalization as two of the building blocks of organizational structure. 43) Functional departmentalization is the process of dividing an organization according to the skill sets of workers. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 6.2: Explain specialization and departmentalization as two of the building blocks of organizational structure. 44) Briefly describe the five basic forms of departmentalization. Answer: The five basic forms of departmentalization are customer, product, process, geographic, and functional. Customer departmentalization occurs when the organization is divided according to the types of customers they serve. An organization with product departmentalization groups people and functions according to the specific products being created. Process departmentalization occurs when the organization is divided according to production processes. Organizations with geographic departmentalization create divisions to serve different geographic areas. Finally, functional departmentalization occurs when departments are created around their function or activity. The five basic forms of departmentalization are customer, product, process, geographic, and functional. Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Application LO: 6.2: Explain specialization and departmentalization as two of the building blocks of organizational structure. 45) Explain geographic departmentalization and discuss how and why an organization might use this structure. Answer: Geographic departmentalization divides firms according to the areas of the country or the world they serve. Levi Strauss, for instance, has one division for North and South America; one for Europe, the Middle East, and North Africa; and one for the Asia Pacific region. Utility companies might use geographic departmentalization based on the location of the customer or the location of the firm's resources. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 6.2: Explain specialization and departmentalization as two of the building blocks of 11 Copyright © 2022 Pearson Education, Inc.
organizational structure. 46) Briefly describe the first steps in developing the struct of any new business. Answer: The first steps in developing the structure of any business, large or small, involve three activities: 1.)Specialization which is used in determining who will do what, 2.) departmentalization, which is determining how people performing certain tasks can best be grouped together, and 3.) the establishment of a decision-making hierarchy. This process involved deciding who will be empowered to make which decisions and who will have authority over others. These three activities are the building blocks of all business organizations. Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Application LO: 6.2: Explain specialization and departmentalization as two of the building blocks of organizational structure. 47) Which process is used to assign work to subordinates? A) Authority B) Decentralization C) Delegation D) Staffing E) Decentralization Answer: C Difficulty: Easy AACSB: Analytical thinking Quest. Category: Concept LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy AACSB: Analytical thinking48) Which organizational structure is characteristic of decentralized firms? A) Flat B) Tall C) Diverse D) Multi-layered E) Matrix Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 49) Which organizational structure is characteristic of centralized firms? A) Flat B) Tall C) Very large 12 Copyright © 2022 Pearson Education, Inc.
D) Responsive to change E) Well capitalized Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 50) Which of the following is an employee's duty to perform an assigned task? A) Delegation B) Authority C) Responsibility D) Accountability E) Specialization Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 51) Which of the following provides employees with the power to make the decisions necessary to complete a task called? A) Delegation B) Specification C) Authority D) Responsibility E) Accountability Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 52) What is authority that flows down the chain of command called? A) Staff authority B) Departmental authority C) Delegated authority D) Divisional authority E) Line authority Answer: E Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key 13 Copyright © 2022 Pearson Education, Inc.
ingredients in establishing the decision-making hierarchy 53) Which type of departments are linked to the production and sales of specific products? A) Staff departments B) Matrix departments C) Line departments D) Organizational departments E) Entrepreneurial departments Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 54) What is authority given to a decision-making body with power beyond that possessed by any one person? A) Risk aversion B) Committee and team C) Line D) Matrix E) Product and labor Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 55) In which type of organization are decisions approved by upper management before they are implemented? A) Line B) Staff C) Decentralized D) Centralized E) Learning Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 56) In which type of organization is decision-making authority delegated to levels of management at various points below the top? A) Centralized B) Decentralized 14 Copyright © 2022 Pearson Education, Inc.
C) Flat D) Geographic E) Autocratic Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 57) What kind of organization becomes more responsive to its environment by breaking the company into more manageable units? A) Centralized B) Decentralized C) Geographic D) Process-oriented E) Customer departmentalized Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 58) What type of structure represents one with relatively few layers of managers? A) Tall organizational structure B) Short organizational structure C) Flat organizational structure D) Elliptical organizational structure E) Triangular organizational structure Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 59) Companies with centralized authority systems typically require multiple layers of management. What type of organizational structures are these companies utilizing? A) Tall B) Short C) Flat D) Broad E) Compressed Answer: A Difficulty: Moderate AACSB: Application of knowledge 15 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Application LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 60) In tall organizations, which feature describes the span of control? A) Short B) Tall C) Wide D) Narrow E) Horizontal Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 61) Which is the preferred span of control when jobs are more diversified or prone to change? A) Wide B) Narrow C) Tall D) Deep E) Authoritative Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 62) Which of the following begins when a manager assigns responsibility to a subordinate? A) Centralization B) Delegation C) Liability D) Authority E) Training Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 63) After responsibility for a task is assigned, which of the following comes next to ensure the employee has the power to make the decisions necessary to complete the task? A) The centralization of the task is identified. B) The liability of the task is determined. 16 Copyright © 2022 Pearson Education, Inc.
C) The span of control is decided. D) The work team is created. E) Authority is granted. Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 64) Which type of management is exemplified by the idea that managers should delegate to subordinates and allow those subordinates to be responsible for decisions? A) Departmentalized B) Linear C) Centralized D) Divisional E) Decentralized Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy AACSB: Application of knowledge65) Which of the following BEST describes authority? A) The power to make the decisions necessary to complete a task B) The ability of subordinates to accomplish tasks assigned by managers C) The number of people supervised by one manager D) The ability to take on new responsibility E) The duty to perform an assigned task Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 66) Which of the following BEST describes accountability? A) The power to make the decisions necessary to complete a task B) The obligation employees have to their manager for the successful completion of an assigned task C) The decision to communicate clear expectations related to assigned tasks D) The number of people supervised by one manager E) The duty to perform a task Answer: B Difficulty: Moderate AACSB: Application of knowledge 17 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Concept LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 67) What authority is based on special expertise and usually involves counseling and advising? A) Line authority B) Matrix authority C) Delegated authority D) Staff authority E) Divisional authority Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 68) What are an organization's specialists in law, accounting, and human resource management commonly called? A) Profit centers B) Cost centers C) Staff members D) Line members E) Unit managers Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 69) Which term describes groups of operating employees who are empowered to plan and organize their tasks and to perform those tasks with a minimum of supervision? A) Task forces B) Standing committees C) Work teams D) Division committees E) Board members Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 70) In a centralized structure, most decision-making authority is delegated to levels of management at various points below the top. 18 Copyright © 2022 Pearson Education, Inc.
Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 71) Accountability refers to the obligation of subordinates for accomplishing tasks assigned by managers. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 72) Flat organizational structures are usually associated with centralized decision making. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 73) Employees' abilities and the supervisor's managerial skills help determine whether span of control is wide or narrow. Answer: TRUE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 74) When several employees perform the same simple task, a narrow span of control is most appropriate. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 75) Line departments are linked directly to the production and sales of a specific product. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept 19 Copyright © 2022 Pearson Education, Inc.
LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 76) When the decision-making hierarchy focuses on the overall organization, it becomes a question decentralization versus centralization. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 77) During times of uncertainty, most organizations move to the decentralization of their decision-making process. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 78) Tall organizational structures are more efficient at information flow and decision making. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 79) Describe the difference between delegation and the centralization of the organization when establishing the organizational structure. Answer: The third major building block of organizational structure is the establishment of a decision-making hierarchy. This is usually done by formalizing reporting relationships. When the focus is on the reporting relationships among individual managers and the people who report to them, it is most commonly referred to as delegation. However, when the focus is on the overall organization, it becomes a question of decentralization versus centralization. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 80) Identify and discuss three factors that may affect a manager's span of control. Answer: Factors that may affect a manager's span of control include employees' abilities, the similarity and simplicity of tasks, and the extent to which tasks are interrelated. Other factors may include the supervisor's management skills and the synergy between the assigned tasks. Difficulty: Moderate 20 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 81) Discuss ways in which the manager's decision-making authority is related to span of control. Answer: The distribution of authority in an organization affects the number of people who work for any individual manager. In a flat organizational structure, the number of people directly managed by one supervisor, the manager’s span of control, is usually wide. In tall organizations, span of control tends to be narrower. Employees’ abilities and the supervisor’s managerial skills influence how wide or narrow the span of control should be, as do the similarity and simplicity of tasks and the extent to which they are interrelated. If lower-level managers are given more decision-making authority, their supervisors will have fewer responsibilities and may then be able to take on a widened span of control. Similarly, when several employees perform either the same simple task or a group of interrelated tasks, a wide span of control is possible and often desirable. For in-stance, because of the routine and interdependent nature of jobs on an assembly line, one supervisor may well control the entire line. In contrast, when jobs are more diversified or prone to change, a narrow span of control is preferable. Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 82) Briefly summarize the steps in the delegation process. Answer: The delegation process begins when responsibility is assigned. Then, authority is granted. Finally, accountability is created. The delegation sequence includes assigning responsibility, granting authority, and instigating accountability processes. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 83) What is the difference between responsibility and authority? Answer: Responsibility is the duty to perform an assigned task, whereas authority is the power to make the decisions necessary to complete the task. Responsibility relates to task assignment; authority relates to task completion. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 84) What is delegation? Identify four reasons that managers have trouble delegating. Answer: Delegation is the process by which managers allocate work to employees. Experts 21 Copyright © 2022 Pearson Education, Inc.
pinpoint several reasons why managers may have trouble delegating effectively. Some managers may be concerned that employees are less able to perform a job. Managers may also be concerned that the employee will show them up in front of others by doing a superior job. Managers may be hesitant to delegate because of a desire to keep as much control as possible over operations. Finally, managers may lack the ability to effectively delegate. The four reasons that managers have trouble with delegation include perception of employee ability to complete a task, concern about appearing inadequate, desire to exert control, and lack of effective delegation skills. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 85) List and describe the three forms of authority. Answer: The three forms of authority are line authority, staff authority, and committee and team authority. Line authority flows in a direct chain of command from the top of the company to the bottom. Staff authority is based on expertise and usually involves counseling and advising managers. Committee and team authority is granted to committees or work teams involved in a firm's daily operations. Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Concept LO: 6.3: Describe centralization and decentralization, delegation, and authority as the key ingredients in establishing the decision-making hierarchy 86) Which form of organization is used by most small to medium-sized firms? A) Divisional B) Functional C) Matrix D) International E) Stratified Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.4: Explain the differences among functional, divisional, matrix, and international organizational structures and describe the most popular new forms of organizational design. 87) Firms with which structure are organized around departments for each basic business activity? A) Divisional B) Matrix C) Functional D) International E) Regional Answer: C Difficulty: Moderate 22 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Application LO: 6.4: Explain the differences among functional, divisional, matrix, and international organizational structures and describe the most popular new forms of organizational design. 88) Which of the following structures relies on product departmentalization? A) Matrix B) Functional C) Divisional D) International E) Regional Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 6.4: Explain the differences among functional, divisional, matrix, and international organizational structures and describe the most popular new forms of organizational design. 89) In which organizational structure are groups established that resemble separate businesses in that they produce and market their own products? A) Regions B) Divisions C) Function centers D) Cost centers E) Work hubs Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.4: Explain the differences among functional, divisional, matrix, and international organizational structures and describe the most popular new forms of organizational design. 90) Which style of organization relies almost entirely on employees working on a common project with little or no underlying functional hierarchy? A) Team B) Virtual C) Learning D) Flexible E) Stratified Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.4: Explain the differences among functional, divisional, matrix, and international organizational structures and describe the most popular new forms of organizational design. 91) Which organizational structure is used when an organization has little or no formal structure and with only a handful of permanent employees, and when needed, is supplemented by 23 Copyright © 2022 Pearson Education, Inc.
temporary employees? A) Team B) Virtual C) Learning D) Flexible E) Balanced Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.4: Explain the differences among functional, divisional, matrix, and international organizational structures and describe the most popular new forms of organizational design. 92) What type of organizational structure seeks to integrate continuous improvements with lifelong learning and personal employee development? A) Team B) Virtual C) Learning D) Flexible E) Evolving Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.4: Explain the differences among functional, divisional, matrix, and international organizational structures and describe the most popular new forms of organizational design. 93) In a large firm, what can a functional structure foster, even though it can be counterproductive to the goals of the organization? A) Competitiveness B) Centralization C) Decentralization D) Diversity E) Creativity Answer: B Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Application LO: 6.4: Explain the differences among functional, divisional, matrix, and international organizational structures and describe the most popular new forms of organizational design. 94) Which of the following types of structure entails a second chain of command, and is often used when developing new products? A) Divisional B) Departmental C) Committee D) Matrix 24 Copyright © 2022 Pearson Education, Inc.
E) Team Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 6.4: Explain the differences among functional, divisional, matrix, and international organizational structures and describe the most popular new forms of organizational design. 95) International organizational structures are an approach to organizational structure developed in response to the need to manufacture, purchase, and sell in global markets. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.4: Explain the differences among functional, divisional, matrix, and international organizational structures and describe the most popular new forms of organizational design. 96) Divisional structure is the relationships between group functions and activities that determine authority. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.4: Explain the differences among functional, divisional, matrix, and international organizational structures and describe the most popular new forms of organizational design. 97) The functional organizational structure is the approach to organizational structure used by most small to medium-sized firms. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.4: Explain the differences among functional, divisional, matrix, and international organizational structures and describe the most popular new forms of organizational design. 98) An international organization is one in which traditional boundaries and structures are minimized or eliminated altogether. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.4: Explain the differences among functional, divisional, matrix, and international organizational structures and describe the most popular new forms of organizational design. 99) A virtual organization has little or no formal structure. Answer: TRUE Difficulty: Moderate 25 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.4: Explain the differences among functional, divisional, matrix, and international organizational structures and describe the most popular new forms of organizational design. 100) A divisional structure relies on functional departmentalization. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.4: Explain the differences among functional, divisional, matrix, and international organizational structures and describe the most popular new forms of organizational design. 101) Matrix structures are considered to be highly flexible and readily adaptable. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.4: Explain the differences among functional, divisional, matrix, and international organizational structures and describe the most popular new forms of organizational design. 102) Virtual organizations exists only in response to its own needs and requirements. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.4: Explain the differences among functional, divisional, matrix, and international organizational structures and describe the most popular new forms of organizational design. 103) Learning organizations are often centered around small groups that strive for continuous product improvement. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.4: Explain the differences among functional, divisional, matrix, and international organizational structures and describe the most popular new forms of organizational design. 104) Discuss the purpose and goals of learning organizations. Answer: The so-called learning organization works to integrate continuous improvement with continuous employee learning and development. Specifically, a learning organization works to facilitate the lifelong learning and personal development of all of its employees while continually transforming itself to respond to changing demands and needs. Although managers might approach the concept of a learning organization from a variety of perspectives, the most frequent goals are superior quality, continuous improvement, and ongoing performance measurement. The idea is that the most consistent and logical strategy for achieving continuous improvement is to constantly upgrade employee talent, skill, and knowledge. 26 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.4: Explain the differences among functional, divisional, matrix, and international organizational structures and describe the most popular new forms of organizational design. 105) In which way can a matrix structure support the functional structure of an organization? Answer: Sometimes a matrix structure, a combination of two separate structures, works better than either simpler structure alone. This structure gets its matrix-like appearance by using one underlying “permanent” organizational structure and then super-imposing a different organizing framework on top of it. Suppose a company using a functional structure wants to develop a new product as a one-time special project. A team might be created and given responsibility for that product. The project team may draw members from existing functional departments, such as finance and marketing, so that all viewpoints are represented as the new product is being developed; the marketing member may provide ongoing information about product packaging and pricing issues, for instance, and the finance member may have useful information about when funds will be available. In some companies, the matrix organization is a temporary measure installed to complete a specific project and affecting only one part of the firm. In these firms, the end of the project usually means the end of the matrix—either a breakup of the team or a restructuring to fit it into the company’s existing line-and-staff structure. Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.4: Explain the differences among functional, divisional, matrix, and international organizational structures and describe the most popular new forms of organizational design. 106) What does a divisional structure rely on and why does it rely on this feature? Answer: A divisional structure relies on product departmentalization. Organizations using this approach are typically structured around several product-based divisions that operate like separate businesses. Divisional structures can resemble separate businesses where each is responsible for the production and marketing of their own products. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.4: Explain the differences among functional, divisional, matrix, and international organizational structures and describe the most popular new forms of organizational design. 107) Because international organizational structures have emerged in response to the need to manufacture, purchase, and sell in global markets; how do some companies adopt a truly global structure? Answer: Some companies adopt a truly global structure in which they acquire resources (including capital), produce goods and services, engage in research and development, and sell products in whatever local market is appropriate, without consideration of national boundaries. The advantage of an international organizational structure is that it allows the company to function as one integrated global organization. Difficulty: Moderate AACSB: Application of knowledge 27 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Critical Thinking LO: 6.4: Explain the differences among functional, divisional, matrix, and international organizational structures and describe the most popular new forms of organizational design. 108) Describe the four basic forms of organizational structure. Answer: The basic forms of organizational structure are functional, divisional, matrix, and international. In a functional organization, authority is determined by the relationships between groups and activities. Functional organizations tend to be structured around basic functions. In a divisional organization, corporate divisions operate as autonomous businesses under the larger corporate umbrella. Organizations with matrix structures form teams, and team members report to two or more managers. International organizational structures have developed in response to the need to manufacture, purchase, and sell in global markets. Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Concept LO: 6.4: Explain the differences among functional, divisional, matrix, and international organizational structures and describe the most popular new forms of organizational design. 109) List and describe three advantages of a divisional structure. Answer: In a divisional organization, corporate divisions operate as autonomous businesses under the larger corporate umbrella. A divisional structure allows the corporation to evaluate the performance of each division independently. Because the divisions are relatively autonomous, a firm can sell or eliminate a single division with minimal disruption to the remaining business operations. Finally, a divisional structure can create healthy competition. Divisions can share certain corporate-level resources. Divisions operate as autonomous businesses. The advantages include independent evaluation, ability to sell or disband with minimal disruption to the corporation, and the opportunity to compete and share resources. Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.4: Explain the differences among functional, divisional, matrix, and international organizational structures and describe the most popular new forms of organizational design. 110) What are everyday social interactions among employees that transcend formal jobs and job interrelationships called? A) Traditional structure B) Informal organization C) Matrix opportunities D) Production organization E) Learning organizations Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 6.5: Describe the informal organization and discuss intrapreneuring. 111) Which term describes creating and maintaining the innovation and flexibility of a small business environment within the confines of a large, bureaucratic structure? 28 Copyright © 2022 Pearson Education, Inc.
A) Learning organization B) Process organization C) Intrapreneuring D) Virtual learning E) Product innovation Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 6.5: Describe the informal organization and discuss intrapreneuring. 112) Which of the following organizational systems is the part that can be seen and represented in chart form? A) Networking B) Formal organization C) Informal organization D) Grapevine E) Intrapreneuring Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.5: Describe the informal organization and discuss intrapreneuring. AACSB: Application of knowledge113) Which of the following is an informal communications network within the organization? A) Work groups B) Virtual learning C) The grapevine D) The corporate structure E) Teams Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.5: Describe the informal organization and discuss intrapreneuring.AACSB: Application of knowledge 114) How can an organization minimize the potential damage caused by inaccurate information spread through the grapevine? A) Ban employees from using the internet and e-mail for personal reasons. B) Identify a list of off-limit topics. C) Respond vigorously to inaccurate information. D) Allow new information to be released only through formal communication channels. E) Keep groups small and focused. Answer: C Difficulty: Moderate 29 Copyright © 2022 Pearson Education, Inc.
AACSB: Reflective Thinking Quest. Category: Critical Thinking LO: 6.5: Describe the informal organization and discuss intrapreneuring. 115) What is the name given to the middle manager who learns about a new project and becomes committed to the support of the idea? A) Stakeholder B) Sponsor C) Intrapreneur D) Innovator E) Product champion Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 6.5: Describe the informal organization and discuss intrapreneuring. 116) To move a new idea to a marketable entity, who must approve and support the project, including the funding of the idea? A) Inventors B) Sponsors C) Stakeholders D) Product champions E) Project committees Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 6.5: Describe the informal organization and discuss intrapreneuring. 117) When a firm wants to gather information on the potential reaction to a new policy or idea, how can a manager collect information? A) Through intrapreneuring B) Through social media monitoring C) By utilizing the company grapevine D) By utilizing the informal chain of command E) By organizing new reporting relationships Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.5: Describe the informal organization and discuss intrapreneuring. 118) Which of the following is used to carry personal information within the organization? A) Cluster chain B) Interest groups C) Gossip chain 30 Copyright © 2022 Pearson Education, Inc.
D) Product champions E) Sponsors Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.5: Describe the informal organization and discuss intrapreneuring. 119) Which of the following is the person who conceives and develops the new idea, product or service within the organizations? A) Product champion B) Catalyst C) Inventor D) Informal group manager E) Sponsor Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.5: Describe the informal organization and discuss intrapreneuring. 120) Frequently, the informal organization effectively alters a company's formal structure. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.5: Describe the informal organization and discuss intrapreneuring. 121) The informal organization is not as powerful as the formal structure. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.5: Describe the informal organization and discuss intrapreneuring. 122) Intrapreneuring attempts to create and maintain the innovation and flexibility found in large, bureaucratic structures. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.5: Describe the informal organization and discuss intrapreneuring. 123) The gossip chain is used to carry information to a few select individuals, who then pass it on or keep it to themselves. Answer: FALSE Difficulty: Moderate 31 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.5: Describe the informal organization and discuss intrapreneuring. 124) Informal groups have very little influence on the interests of the organization. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.5: Describe the informal organization and discuss intrapreneuring. 125) The grapevine can provide highly accurate information, and social media plays a growing role in the grapevine. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.5: Describe the informal organization and discuss intrapreneuring. 126) The grapevine, according to some studies, is said to be a fairly accurate source of information. Discuss the contributing factors that influence the accuracy of the grapevine. Answer: There is some disagreement about how accurate the information carried by the grapevine is, but research is increasingly finding it to be fairly accurate, especially when the information is based on fact rather than speculation. One study found that the grapevine may be between 75 percent and 95 percent accurate. That same study also found that informal communication is increasing in many organizations for several basic reasons. One contributing factor is the continued growth in merger, acquisition, and takeover activity. Because such activity can greatly affect the people within an organization, it follows that they may spend more time talking about it. A second contributing factor is that as more and more corporations move facilities regularly and have more but smaller administrative centers, employees tend to talk less and less to others outside the organization and more and more to one another. Yet another contributing factor is simply the widespread availability of information technology that makes it easier than ever before for people to communicate quickly and easily. Much like in informal groups, social media plays a growing role in the grapevine. Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.5: Describe the informal organization and discuss intrapreneuring. 127) Why is it important that organizations pay attention to the information organizations structure within the formal organization? Answer: Frequently, the informal organization, everyday social interactions among employees that transcend formal jobs and job interrelationships, effectively alters a company’s formal structure. They may talk about business, the boss, or non-work-related topics. Their impact on the organization may be positive (if they work together to support the organization), negative (if they work together in ways that run counter to the organization's interests) or irrelevant. On the negative side, the informal organization can reinforce office politics that put the interests of 32 Copyright © 2022 Pearson Education, Inc.
individuals ahead of those of the firm and can disseminate distorted or inaccurate information. For example, if the informal organization is highlighting false information about impending layoffs, valuable employees may act quickly (and unnecessarily) to seek other employment. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.5: Describe the informal organization and discuss intrapreneuring. 128) What is an informal organization and how does it relate to the formal structure? Answer: The informal organization consists of the everyday social interactions among employees that go beyond formal jobs and job interrelationships. It can affect the company's formal structure by changing the way information is sourced and distributed. In certain cases, the informal organization is sometimes just as powerful, if not more powerful, than the formal structure. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.5: Describe the informal organization and discuss intrapreneuring. 129) How can a firm utilize and control an informal company grapevine? Answer: Attempts to eliminate the grapevine are fruitless, but fortunately the manager does have some control over it. By maintaining open channels of communication and responding vigorously to inaccurate information, the manager can minimize the damage the grapevine can do. The grapevine can actually be an asset. For example, by learning who the key people in the grapevine are, for example, the manager can partially control the information they receive and use the grapevine to sound out employee reactions to new ideas, such as a change in human resource policies or benefit packages. The manager can also get valuable information from the grapevine and use it to improve decision making. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.5: Describe the informal organization and discuss intrapreneuring. 130) Discuss the types of grapevines within an organization and how accurate the grapevine can be. Answer: The gossip chain occurs when one person spreads the message to many other people. Each one, in turn, may either keep the information confidential or pass it on to others. The gossip chain is likely to carry personal information. The other common grapevine is the cluster chain, in which one person passes the information to a selected few individuals. Some of the receivers pass the information to a few other individuals; the rest keep it to themselves. There is some disagreement about the accuracy of the information carried by the grapevine, but research is increasingly finding it to be fairly accurate, especially when the information is based on fact rather than speculation. One study found that the grapevine may be between 75 percent and 95 percent accurate. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.5: Describe the informal organization and discuss intrapreneuring. 33 Copyright © 2022 Pearson Education, Inc.
131) Discuss reasons why informal communication plays a growing role in an organization. Answer: Informal communication is increasing in many organizations for several basic reasons. One contributing factor is the recent increase in merger, acquisition, and takeover activity. Because such activity can greatly affect the people within an organization, it follows that they may spend more time talking about it. The second contributing factor is that as more and more corporations move facilities from inner cities to suburbs, employees tend to talk less and less to others outside the organization and more and more to one another. Yet another contributing factor is simply the widespread availability of information technology that makes it easier than ever before for people to communicate quickly and easily. Much like in informal groups, social media plays a growing role in the grapevine. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 6.5: Describe the informal organization and discuss intrapreneuring.
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Business Essentials, 13e (Ebert/Griffin) Chapter 7 Operations Management and Quality 1) Which term refers to all the activities involved in making products for customers? A) Operations B) Processes C) Planning D) Scheduling E) Performance Answer: A Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Concept LO: 7.1: Explain the meaning of operations and discuss the growth in the services and goods sectors of the U.S. economy. 2) Which of the following are the activities that produce intangible and tangible products, such as entertainment, transportation, and education? A) Scheduling B) Service operations C) Tangibility D) Goods operations E) Performance operations Answer: B Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Concept LO: 7.1: Explain the meaning of operations and discuss the growth in the services and goods sectors of the U.S. economy. 3) Which of the following is critical to the success or failure of service operations? A) Provider-customer contact B) Internet exposure C) Supply chain D) Tangible services products E) Supplier-manufacture contact Answer: A Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Application LO: 7.1: Explain the meaning of operations and discuss the growth in the services and goods sectors of the U.S. economy. 4) Services are more tangible, more customized, and more storable than most products. Answer: FALSE Difficulty: Moderate AACSB: Application of Knowledge 1 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Application LO: 7.1: Explain the meaning of operations and discuss the growth in the services and goods sectors of the U.S. economy. 4) The United States is the world's second largest exporter of manufactured good, trailing only China. Answer: TRUE Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Application LO: 7.1: Explain the meaning of operations and discuss the growth in the services and goods sectors of the U.S. economy. 5) Discuss the important of the service industry in terms of employment and gross domestic product. Answer: Both goods and service industries are important, but employment has risen significantly in the service sector and has leveled off at just 11 to 12 percent in goods-producing industries for years 2004 through 2019. Much of this growth comes from e-commerce, business services, health care, amusement and recreation, and education. By 2019, the service sector’s growth generated about 68 percent of private-sector national income. The service sector’s greater percentage of GDP has hovered above 65 percent in recent years. At the same time, the smaller 11 percent of the workforce in goods-producing jobs produced 32 percent of national income. Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Application LO: 7.1: Explain the meaning of operations and discuss the growth in the services and goods sectors of the U.S. economy.
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6) When a company produces products when consumers want them, it creates which type of utility? A) Ownership B) Time C) Form D) Place E) Value Answer: B Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.2: Identify the three kinds of utility created by operations and the characteristics that distinguish service operations from goods production. 7) In a business, whose job is it to draw up plans to transform resources into products and bring together basic resources, such as knowledge, physical materials, equipment, and labor? A) CEO B) Operations manager C) Quality manager D) Floor foreman E) Supply manager Answer: B Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Application LO: 7.2: Identify the three kinds of utility created by operations and the characteristics that distinguish service operations from goods production. 8) Which term describes services that cannot be produced ahead of time? A) Transformed B) Low-contact C) Unstorable D) Intangible E) Consistent Answer: C Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.2: Identify the three kinds of utility created by operations and the characteristics that distinguish service operations from goods production. 9) Which of the following refers to a set of methods and technologies used to produce a good or service? A) Quality ownership B) Production C) Utility D) Value added analysis 3 Copyright © 2022 Pearson Education, Inc.
E) Operations process Answer: E Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Concept LO: 7.2: Identify the three kinds of utility created by operations and the characteristics that distinguish service operations from goods production.
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10) When a company makes products available for consumers where they are convenient for the consumers, which type of utility is created? A) Time B) Form C) Place D) Possession E) Leisure Answer: C Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.2: Identify the three kinds of utility created by operations and the characteristics that distinguish service operations from goods production. 11) Which of the following is the ability of a product to satisfy a human want or need? A) Utility B) Relative advantage C) Content D) Satisfaction E) Quality ownership Answer: A Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Application LO: 7.2: Identify the three kinds of utility created by operations and the characteristics that distinguish service operations from goods production. 12) When a firm produces goods for mass consumption, what type of goods production method is generally used? A) High-contact systems B) Make-to-order C) Layout planning D) Low-contact systems E) Make-to-stock Answer: E Difficulty: Moderate AACSB: Analytical Thinking Quest. Category: Application LO: 7.2: Identify the three kinds of utility created by operations and the characteristics that distinguish service operations from goods production.
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13) In which type of system must the customer be actively involved in order to receive the good or service? A) Make-to-stock B) High-contact C) Intangible D) Low contact E) Operations process Answer: B Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Application LO: 7.2: Identify the three kinds of utility created by operations and the characteristics that distinguish service operations from goods production. 14) What goods-producing operations method is designed around specific customer specifications? A) High-contact systems B) Make-to-order C) Layout planning D) Low-contact systems E) Make-to-stock Answer: B Difficulty: Moderate AACSB: Analytical Thinking Quest. Category: Concept LO: 7.2: Identify the three kinds of utility created by operations and the characteristics that distinguish service operations from goods production. 15) Which of the following must be considered when classifying services? A) The ability to stock pile services B) Extent of customer contact C) The transformation of the customer D) The ability to transform possessions E) Time utility Answer: B Difficulty: Moderate AACSB: Analytical Thinking Quest. Category: Concept LO: 7.2: Identify the three kinds of utility created by operations and the characteristics that distinguish service operations from goods production. 16) In a low-contact system, the customer must be a part of the system to receive the service. Answer: FALSE Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Concept LO: 7.2: Identify the three kinds of utility created by operations and the characteristics that 6 Copyright © 2022 Pearson Education, Inc.
distinguish service operations from goods production. 17) By turning raw materials into finished goods, production creates form utility. Answer: TRUE Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.2: Identify the three kinds of utility created by operations and the characteristics that distinguish service operations from goods production.
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18) Firms that make only tangible products are engaged in goods production. Answer: TRUE Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Concept LO: 7.2: Identify the three kinds of utility created by operations and the characteristics that distinguish service operations from goods production. 19) The purpose of a service operation is to transform customers or their possessions. Answer: TRUE Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Concept LO: 7.2: Identify the three kinds of utility created by operations and the characteristics that distinguish service operations from goods production. 20) Differentiate between high- and low-contact processes. Give an example of each. Answer: Processes may be classified according to the extent of customer contact as either highor low-contact processes. In a high-contact process, the customer must be a part of the system. Examples of high-contact processes include public transportation, medical services, and most legal services. With a low-contact process, customers need not be a part of the system to receive the service. Examples include check-processing operations at the bank and lawn-care services. The manager of a high-contact process must be more concerned with the customer experience. Difficulty: Moderate AACSB: Analytical Thinking Quest. Category: Critical Thinking LO: 7.2: Identify the three kinds of utility created by operations and the characteristics that distinguish service operations from goods production. 21) Explain what is meant by the term utility. What type of utility is created when a pharmacy changes its evening schedule to remain open for an extra hour in response to customer needs? Answer: Utility is a product's ability to satisfy a human want or need. The pharmacy creates time utility by being open at a convenient time for customers. Difficulty: Difficult AACSB: Application of Knowledge Quest. Category: Concept LO: 7.2: Identify the three kinds of utility created by operations and the characteristics that distinguish service operations from goods production. 22) Explain time, place, and form utility and provide an example of each. Answer: Time utility is created when a company makes products available when consumers want them. Examples may include seasonal items such as Christmas ornaments, bathing suits, and mosquito repellent. Place utility is created when a company makes a product's location convenient for consumers. An example is the placement of routinely purchased items in convenience stores or conveniently located discount stores. Form utility is created when a company combines materials to create products. A business adds customer value by providing utility. 8 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Application LO: 7.2: Identify the three kinds of utility created by operations and the characteristics that distinguish service operations from goods production. 23) Differentiate between goods production and service operations. Answer: Goods production involves tangible products, such as radios, newspapers, buses, and textbooks. Through service operations, firms produce tangible and intangible service products such as entertainment, transportation, and education. General Electric is a company that produces goods and provides services. Difficulty: Moderate AACSB: Analytical Thinking Quest. Category: Critical Thinking LO: 7.2: Identify the three kinds of utility created by operations and the characteristics that distinguish service operations from goods production. 24) Describe the difference between the make-to-order and make-to-stock production processes. Answer: We can classify goods production into broad groupings by asking whether its operations process has a make-to-order or a make-to-stock emphasis. We can classify services according to the extent of customer contact required. Clothing, such as evening gowns, is available either off-the-shelf in department stores or custom-made at a designer or tailor shop. The designer or tailor's make-to-order operations respond to one-of-a-kind gown requirements including unique patterns, materials, sizes, and shapes, depending on customers' characteristics. Make-to-stock operations, in contrast, produce standard gowns in large quantities to be stocked on store shelves or in displays for mass consumption. The production processes are quite different for the two settings, including procedures for designing gowns; planning for materials purchases; equipment and work methods for cutting, sewing, and assembling gowns; and employee skills for production. Difficulty: Difficult AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.2: Identify the three kinds of utility created by operations and the characteristics that distinguish service operations from goods production. 25) Describe the role of the customer in the operations process of a service. Answer: Because service operations transform customers or their possessions, the customer is often present in the operations process. To get a haircut, for example, most of us have to go to a hair salon. As participants in the operations process, customers can affect it. As a customer, you expect the salon to be conveniently located (place utility), to be open for business at convenient times (time utility), to provide safe and comfortable facilities, and to offer high-quality grooming (form utility) at reasonable prices (value for money spent). Accordingly, the manager sets hours of operation, available services, and an appropriate number of employees to meet customer requirements. But when a customer, scheduled for only a haircut, also asks for additional services, such as color highlights or a shave, the service provider must quickly adjust the service activities to provide customer satisfaction. High customer contact has the potential to affect the process significantly. 9 Copyright © 2022 Pearson Education, Inc.
Difficulty: Difficult AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.2: Identify the three kinds of utility created by operations and the characteristics that distinguish service operations from goods production. 26) Which term describes a special ability that production does especially well allowing the company to outperform the competition? A) Supply chain management B) Total quality management C) Process engineering D) Operations capability E) Value-added analysis Answer: D Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Concept LO: 7.3: Explain how companies with different business strategies are best served by having different operations capabilities. 27) Which of the following helps to determine operations capabilities and allows the firm to focus all activities in a particular direction? A) Flexibility of activity B) High-context system C) Business strategy D) Extent of customer contact E) Production capability Answer: C Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.3: Explain how companies with different business strategies are best served by having different operations capabilities. 28) Which type of strategy is a firm using when promoting quick, consistent, and on time delivery for every order? A) Quality B) Low cost C) Flexibility D) Dependability E) Accessibility Answer: D Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.3: Explain how companies with different business strategies are best served by having different operations capabilities. 10 Copyright © 2022 Pearson Education, Inc.
29) Which type of strategy is being used to attract customers when a product performs reliably, has an appealing fit, and consistently meets or exceeds customer expectations? A) Quality B) Low cost C) Flexibility D) Dependability E) Service Answer: A Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.3: Explain how companies with different business strategies are best served by having different operations capabilities. 30) Which of the following supports a business strategy that incorporates the key operational capability of flexibility? A) Maintaining excess production capability B) Reducing labor and shelving costs C) Having high quality standards for suppliers D) Utilizing specialized, automated equipment for consistent product buildup E) Using electronic tools to improve customer communications Answer: A Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.3: Explain how companies with different business strategies are best served by having different operations capabilities. 31) Which type of strategy to attract customers should a firm that promotes quick and on time delivery utilize? A) Quality B) Low cost C) Flexibility D) Dependability E) Accessibility Answer: D Difficulty: Moderate AACSB: Analytical Thinking Quest. Category: Analytical LO: 7.3: Explain how companies with different business strategies are best served by having different operations capabilities. 32) Which type of strategy emphasizes low overhead and inventory, and a limited assortment of products to attract customers? A) Flexibility B) Quality 11 Copyright © 2022 Pearson Education, Inc.
C) Low-cost D) Dependability E) Consistency Answer: C Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.3: Explain how companies with different business strategies are best served by having different operations capabilities. 33) Which of the following can help firms become excellent in several capabilities? A) Training managers to be flexible in decision making B) Focusing on quality products on every product line C) Using technology to increase dependability D) Learning to achieve more than one competence E) Producing consistent products over time Answer: C Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.3: Explain how companies with different business strategies are best served by having different operations capabilities. 34) A company will achieve more than one competence over time, and eventually become excellent in several capabilities. Answer: TRUE Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Analytical LO: 7.3: Explain how companies with different business strategies are best served by having different operations capabilities.
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30) A company should select the same kind of production used by most of its competitors. Answer: FALSE Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Analytical LO: 7.3: Explain how companies with different business strategies are best served by having different operations capabilities. 35) Operations capability is a special ability that production does especially well to outperform the competition. Answer: TRUE Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Analytical LO: 7.3: Explain how companies with different business strategies are best served by having different operations capabilities. 36) What is an operations capability? Answer: Operations capability refers to the activity or process that production does especially well. Each company's operations capability matches up with its business strategy so that the firm's activities, from top to bottom, are focused in a particular direction. For example, the operations capability of FedEx is dependability. Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.3: Explain how companies with different business strategies are best served by having different operations capabilities. 37) Why does each company's operations capability match up with its business strategy? Answer: Each company's operations capability matches up with its business strategy so that the firm's activities, from top to bottom, are focused in a particular direction. Aligning operations capability with business strategy helps to improve profitability. For example, FedEx focuses on dependability, which has made it a leader with business customers. Difficulty: Difficult AACSB: Analytical Thinking Quest. Category: Critical Thinking LO: 7.3: Explain how companies with different business strategies are best served by having different operations capabilities. 38) In which way should firms determine the best way to select the kind of production that is best for them? Answer: There is no one standard way for doing production, either for services or for goods. Rather, it is a flexible activity that can be molded into many shapes to give quite different operations capabilities for different purposes. They aim to adopt the kind of production that achieves the firm’s larger business strategy in the most efficient way possible. Difficulty: Difficult AACSB: Analytical Thinking 13 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Critical Thinking LO: 7.3: Explain how companies with different business strategies are best served by having different operations capabilities.
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39) Examining procedures step-by-step, to reduce inefficiency, most centrally involves which approach? A) Operations scheduling B) Performance analysis C) Value-added analysis D) Methods improvement E) Quality ownership Answer: D Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.4: Identify the major factors that are considered in operations planning. 40) Bakery, woodworking, and dress making shops typically use which type of layout? A) Product B) Custom-products C) Same-steps D) Hybrid E) Make-to-stock Answer: B Difficulty: Moderate AACSB: Analytical Thinking Quest. Category: Application LO: 7.4: Identify the major factors that are considered in operations planning. 41) Which type of layout is designed to move resources through a smooth, fixed sequence of steps? A) Same-steps B) Location C) Custom-products D) Quality E) Make-to-order Answer: A Difficulty: Moderate AACSB: Analytical Thinking Quest. Category: Concept LO: 7.4: Identify the major factors that are considered in operations planning.
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42) Which of the following is an advantage of using a product layout plan? A) They do not require specialized equipment. B) They can be easily rearranged for new applications. C) They can only be used for custom products. D) They are inflexible in nature. E) Unskilled labor can be utilized. Answer: E Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Analytical LO: 7.4: Identify the major factors that are considered in operations planning. 43) Which term is defined as the combination of "characteristics of a product or service that bear on its ability to satisfy stated or implied needs"? A) Quality B) Production C) Quantity D) Clarification E) Capacity Answer: A Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.4: Identify the major factors that are considered in operations planning. 44) Performance refers to which of the following? A) The principle that quality belongs to each person who creates it while performing a job B) The consistency of product quality from unit to unit C) How well the product does what it is supposed to do D) The process by which a company analyzes a competitor's products to identify desirable improvement E) Providing value by making products available when customers want them Answer: C Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.4: Identify the major factors that are considered in operations planning.
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45) Consistency refers to which of the following? A) The principle that quality belongs to each person who creates it while performing a job B) The sameness of product quality from unit to unit C) The sum of all activities involved in getting high-quality products into the marketplace D) The process by which a company analyzes a competitor's products to identify desirable improvements E) Providing value by making products available where customers want them Answer: B Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.4: Identify the major factors that are considered in operations planning. 46) When designing operations systems, the identification of each production step, and the specific methods for performing it, leads to _____. A) advance planning B) materials management C) methods improvement D) quality planning E) quality ownership Answer: C Difficulty: Moderate AACSB: Analytical Thinking Quest. Category: Concept LO: 7.4: Identify the major factors that are considered in operations planning. 47) Which of the following is the amount of a product that a company can produce under normal working conditions? A) Capacity B) Output C) Efficiency D) Burden E) Performance Answer: A Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Concept LO: 7.4: Identify the major factors that are considered in operations planning. 48) Equipment and people are grouped according to function in which type of production layout? A) Fixed position B) Same-steps C) Custom-products D) Supply-chain E) Service Answer: C Difficulty: Easy 17 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of Knowledge Quest. Category: Concept LO: 7.4: Identify the major factors that are considered in operations planning. 49) Which term refers to how well a product does what it is supposed to do? A) Capacity B) Consistency C) Reliability D) Performance E) Quality control Answer: D Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Concept LO: 7.4: Identify the major factors that are considered in operations planning. 50) What type of planning has the greatest effect on production costs and flexibility relative to competitors? A) Capacity B) Layout C) Quality D) Location E) Process Answer: D Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Analytical LO: 7.4: Identify the major factors that are considered in operations planning. 51) Which of the following affects how efficiently a company can respond to demand for more or different products, and their ability to match competitors speed and convenience? A) Location planning B) Quality planning C) Technology planning D) Long-range capacity planning E) Layout planning Answer: E Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Analytical LO: 7.4: Identify the major factors that are considered in operations planning. 52) What is the main advantage of effective process layouts? A) Flexibility B) Cost C) Speed D) Quality 18 Copyright © 2022 Pearson Education, Inc.
E) Performance Answer: A Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Analytical LO: 7.4: Identify the major factors that are considered in operations planning. 53) When planning for quality, two key elements are A) speed and dependability. B) consistency and accuracy. C) flexibility and accuracy. D) dependability and flexibility. E) performance and consistency. Answer: E Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Application LO: 7.4: Identify the major factors that are considered in operations planning. 54) What can be used to identify the sequence of activities, movements of materials, and work performed? A) Operations schedules B) Process flowcharts C) Gantt charts D) PERT charts E) Project schedules Answer: B Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.4: Identify the major factors that are considered in operations planning. 55) Which of the following would be best used when producing make-to-stock or mass production products? A) Fixed position layout B) Process layout C) Customer-product layout D) Operations scheduling layout E) Assembly line layout Answer: E Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Analytical LO: 7.4: Identify the major factors that are considered in operations planning. 56) When do organizations use fixed-position layouts for some goods or services? A) When the customer requests it 19 Copyright © 2022 Pearson Education, Inc.
B) When it is more cost effective C) When it increases the quality level D) When it is difficult to move the good or service E) When consistency in production is needed Answer: D Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.4: Identify the major factors that are considered in operations planning. 57) Which of the following is dependent on how many people a firm employs and the number and size of its facilities? A) Quality B) Location planning C) Capacity planning D) Long-term capacity E) Proximity to customers Answer: C Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.4: Identify the major factors that are considered in operations planning. 58) Which of the following considers both current and future requirements in capacity planning? A) Market share of competitors B) Long-range capacity C) Short-term goal setting D) Location planning E) Expansion Answer: B Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.4: Identify the major factors that are considered in operations planning. 59) Which of the following is a key area of focus for consumer service organizations? A) Long-range capacity B) Expansion C) Methods planning D) Being near customers E) Forecasting Answer: D Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.4: Identify the major factors that are considered in operations planning. 20 Copyright © 2022 Pearson Education, Inc.
60) CityCreations manufactures high quality leather goods and timepieces in the local community. All labor, equipment, materials, and other resources are brought to the company's location, where all production work is done. Which of the following describes this process layout? A) Fixed-position B) Assembly line C) Product D) Same-step E) Process Answer: D Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.4: Identify the major factors that are considered in operations planning. 61) A firm's capacity depends on both how many people it employs and the number and size of its facilities. Answer: TRUE Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Analytical LO: 7.4: Identify the major factors that are considered in operations planning. 62) Capacity planning should include both short-term and long-term goals. Answer: TRUE Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Analytical LO: 7.4: Identify the major factors that are considered in operations planning.
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63) In a same-steps layout, equipment and people are set up to produce one type of good in a fixed sequence of steps and are arranged according to its production requirements. Answer: TRUE Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.4: Identify the major factors that are considered in operations planning. 64) A process flowchart identifies the sequence of production activities, movements of materials, and work performed at each stage of the process. Answer: TRUE Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.4: Identify the major factors that are considered in operations planning. 65) A fixed-position layout is most effective when there is a large-volume make-to-stock operation in place. Answer: FALSE Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Analytical LO: 7.4: Identify the major factors that are considered in operations planning. 66) Quality includes factors such as price and dependability in delivering the promised benefits. Answer: TRUE Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Analytical LO: 7.4: Identify the major factors that are considered in operations planning. 67) Why is it important that a firm use long-range capacity planning? Answer: The amount of a product that a company can produce under normal conditions is its capacity. A firm’s capacity depends on how many people the firm employs and the number and size of its facilities. Long-range capacity planning considers both current and future requirements. If capacity is too small for demand, the company must turn away customers, a situation that cuts into profits and alienates both customers and salespeople. If capacity greatly exceeds demand, the firm is wasting money by maintaining facilities that are too large, keeping excess machinery online, or employing too many workers. The stakes are high in capacity decisions: While expanding fast enough to meet future demand and to protect market share from competitors, managers must also consider the costs of expanding. When markets are growing, greater capacity is desirable. In troubled times, however, existing capacity may be too large and too expensive to maintain, requiring a reduction in size. Difficulty: Difficult AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.4: Identify the major factors that are considered in operations planning. 22 Copyright © 2022 Pearson Education, Inc.
68) Describe two alternatives for production facility layouts. Answer: In a custom-products layout, equipment and people are grouped according to function; in a same-steps layout, equipment and people are set up to produce one type of product in a fixed sequence of steps and are arranged according to production requirements. A custom-products layout is well suited for make-to-order shops while a same-steps layout is efficient for make-tostock operations. Difficulty: Difficult AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.4: Identify the major factors that are considered in operations planning. 69) Describe the purpose of an assembly line layout and when a firm would choose to use this format. Answer: A product layout (also called a same-steps layout or assembly line layout) is set up to provide one type of service or make one type of product in a fixed sequence of production steps. All units go through the same set of steps. It is efficient for large-volume make-to-stock operations that mass-produce many units of a product quickly. A partially finished product moves step by step through the plant on conveyor belts or other equipment, often in a straight line, as it passes through each stage until the product is completed. Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Application LO: 7.4: Identify the major factors that are considered in operations planning. 70) Which of the following is a scheduling tool that breaks down large projects into steps to be performed and specifies the time required to perform each one? A) Myers graphic B) Critical path chart C) Gantt chart D) Process analysis graph E) Master schedule Answer: C Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Concept LO: 7.5: Discuss the information contained in four kinds of operations schedules–the master operations schedule, detailed schedule, staff schedule, and project schedule. 71) Which of the following tracks which service or products will be produced and when? A) Master operations schedule B) Detailed schedule C) Gantt chart D) Staff schedule E) PERT chart Answer: A Difficulty: Moderate 23 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of Knowledge Quest. Category: Application LO: 7.5: Discuss the information contained in four kinds of operations schedules–the master operations schedule, detailed schedule, staff schedule, and project schedule. 72) Which scheduling tool shows the necessary sequence of activities in a project and identifies the critical path? A) Gantt chart B) Process flowchart C) Detailed schedule D) Master production schedule E) PERT chart Answer: E Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Application LO: 7.5: Discuss the information contained in four kinds of operations schedules–the master operations schedule, detailed schedule, staff schedule, and project schedule.
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73) Which of the following would be used to provide coordination for completing large-scale projects? A) Master schedule B) Detailed schedules C) Staff schedules D) Project schedules E) Coordination schedules Answer: D Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Application LO: 7.5: Discuss the information contained in four kinds of operations schedules–the master operations schedule, detailed schedule, staff schedule, and project schedule. 74) Which of the following breaks large tasks down to a series of smaller steps, and includes all activities to successfully perform the task? A) Master schedule B) Coordination schedule C) Gantt chart D) Detailed schedule E) PERT chart Answer: C Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Application LO: 7.5: Discuss the information contained in four kinds of operations schedules–the master operations schedule, detailed schedule, staff schedule, and project schedule. 75) Which of the following indicates the critical path needed for the completion of large projects? A) Master schedule B) Coordination schedule C) Gantt chart D) Detailed schedule E) PERT chart Answer: E Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Application LO: 7.5: Discuss the information contained in four kinds of operations schedules–the master operations schedule, detailed schedule, staff schedule, and project schedule.
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76) What is the main advantage of using a PERT chart on a large-scale project? A) It aids in the ordering of supplies and materials. B) It shows the most time-consuming path for project completion. C) It allows managers to plan for delays. D) It allows managers to monitor performance by comparing results with detailed schedules. E) It identifies which tasks can be performed at the same time as others. Answer: B Difficulty: Difficult AACSB: Analytical Thinking Quest. Category: Critical Thinking LO: 7.5: Discuss the information contained in four kinds of operations schedules–the master operations schedule, detailed schedule, staff schedule, and project schedule. 77) Every day before work begins, Jesse, the manager of YumYum Chocolates, creates a schedule of all work assignments with start and stop times for each assigned job. Which of the following does Jesse use to manage the production process at YumYum Chocolates? A) Master schedules B) Staff schedules C) Project schedules D) Detailed schedules E) PERT charts Answer: D Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.5: Discuss the information contained in four kinds of operations schedules–the master operations schedule, detailed schedule, staff schedule, and project schedule. 78) Which of the following is an advantage to using detailed scheduling to manager production? A) Customer orders and information about equipment is considered in the schedule. B) Financing decisions can be included in the research of new equipment. C) Hiring and training needs can be addressed. D) The number of employees needed per shift can be accurately determined. E) Precise timing for the production of the products can be calculated. Answer: D Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.5: Discuss the information contained in four kinds of operations schedules–the master operations schedule, detailed schedule, staff schedule, and project schedule. 79) Which of the following is used to assign working times in upcoming days for each employee on each shift? A) Gantt charts B) Detailed schedules C) Methods improvements D) Fixed positioning 26 Copyright © 2022 Pearson Education, Inc.
E) Staff schedules Answer: E Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.5: Discuss the information contained in four kinds of operations schedules–the master operations schedule, detailed schedule, staff schedule, and project schedule. 80) Aesa is a hardworking and highly organized student. At the start of each semester, she creates a plan for all her classes. This plan indicates upcoming assignments with due dates, and includes every day of the upcoming semester. What type of schedule does Aesa use to outline all her classes as assignments. A) Master B) Detailed C) Project D) Daily E) Staff Answer: A Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.5: Discuss the information contained in four kinds of operations schedules–the master operations schedule, detailed schedule, staff schedule, and project schedule. 81) Edouard has found that he likes to organize his class assignments and projects by week. Every Saturday he reviews what assignments he has due in the upcoming week, and uses a schedule to assign start and stop times for each assignment he wants to complete. Which of the following does Edouard use to schedule his class assignments? A) Daily B) Staff C) PERT D) Master E) Project Answer: A Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.5: Discuss the information contained in four kinds of operations schedules–the master operations schedule, detailed schedule, staff schedule, and project schedule. 82) Staff schedules identify which products will be produced and when. Answer: FALSE Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.5: Discuss the information contained in four kinds of operations schedules–the master operations schedule, detailed schedule, staff schedule, and project schedule. 27 Copyright © 2022 Pearson Education, Inc.
83) A detailed schedule will consider employees' needs and the company's efficiency and cost, including demand for production. Answer: FALSE Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.5: Discuss the information contained in four kinds of operations schedules–the master operations schedule, detailed schedule, staff schedule, and project schedule. 84) If parts A, B, and C must be produced this week, a detailed schedule will indicate the sequence of work. Answer: TRUE Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Application LO: 7.5: Discuss the information contained in four kinds of operations schedules–the master operations schedule, detailed schedule, staff schedule, and project schedule. 85) Operation plans cannot be developed until a master schedule has been provided. Answer: FALSE Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Application LO: 7.5: Discuss the information contained in four kinds of operations schedules–the master operations schedule, detailed schedule, staff schedule, and project schedule. 86) A critical path will indicate the most time-consuming path for project completion. Answer: TRUE Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Application LO: 7.5: Discuss the information contained in four kinds of operations schedules–the master operations schedule, detailed schedule, staff schedule, and project schedule.
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87) Describe how a Gantt chart and a PERT chart are similar, and how they are different. Answer: Both are scheduling tools used in project management, and both break down a project into the steps to be performed and show the time needed for each step. The PERT chart shows the necessary sequence of activities and identifies the critical path, which is the most timeconsuming set of activities and the Gantt chart doesn't. Thus, the PERT chart provides even more information than the Gantt chart. Project managers may use these tools to reassign workers and equipment to speed up late activities and stay on schedule. Difficulty: Difficult AACSB: Analytical Thinking Quest. Category: Analytical LO: 7.5: Discuss the information contained in four kinds of operations schedules–the master operations schedule, detailed schedule, staff schedule, and project schedule. 88) Describe the purpose of a mater operations schedule and its relationship to other scheduling tools. Answer: Once managers and their teams have determined the operations plans, they then develop timetables for implementing the plans. This aspect of operations, called operations scheduling, identifies times when specific activities will occur. There are four types of schedules: (1) The master schedule is “the game plan” for deciding the volume of upcoming activities for months ahead. (2) Detailed schedules show day-to-day activities that will occur in production. (3) Staff schedules identify who and how many employees will be working, and when. (4) Finally, project schedules provide coordination for completing large-scale projects. Scheduling of operations occurs at different levels. First, a top-level master operations schedule shows which services or products will be produced and when, in upcoming time periods. Difficulty: Difficult AACSB: Analytical Thinking Quest. Category: Analytical LO: 7.5: Discuss the information contained in four kinds of operations schedules–the master operations schedule, detailed schedule, staff schedule, and project schedule. 89) In operations control, production managers monitor production performance by which method? A) Comparing results with detailed plans and schedules B) Checking on each worker on the production floor C) Observing activities from a platform above the workers D) Constantly talking with employees involved E) Performing spot checks of worker performance Answer: A Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Analytical LO: 7.6: Discuss the two key activities required for operations control. 90) What is the name for a production system in which all the needed materials and parts arrive at the precise moment they are required for each production stage? A) Quality control system B) Process control system 29 Copyright © 2022 Pearson Education, Inc.
C) Just-in-time production D) Standardized production E) Custom-products production Answer: C Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.6: Discuss the two key activities required for operations control.
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91) Which type of system is designed for smooth production flow to avoid inefficiencies, eliminate unnecessary inventories, and continuously improve production processes? A) Quality system B) Lean system C) Managed system D) Production system E) Flexible system Answer: B Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Concept LO: 7.6: Discuss the two key activities required for operations control. 92) Which term refers to the acquisition of the raw materials a company needs to produce its products? A) Development B) Purchasing C) Goods control D) Quality control E) Wholesaling Answer: B Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Concept LO: 7.6: Discuss the two key activities required for operations control. 93) Which of the following refers to the receiving, storing, handling, and counting of all raw materials, partly finished goods, and finished goods? A) Materials handling B) Inventory control C) Quality control D) Wholesaling E) Distribution control Answer: B Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Concept LO: 7.6: Discuss the two key activities required for operations control. 94) Which department is responsible for ensuring that operations departments produce products that meet specific, predetermined standards? A) Purchasing B) Production systems C) Quality control D) Productivity E) Marketing Answer: C 31 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Analytical Thinking Quest. Category: Concept LO: 7.6: Discuss the two key activities required for operations control. 95) How can managers and employees support quality control efforts within the organization? A) Identify and correct mistakes and failures B) Pursue cost savings measures C) Develop project schedules such as Gantt or PERT charts D) Identify the critical path for activities of the project E) Outline the proper sequence of events before the process begins Answer: A Difficulty: Moderate AACSB: Analytical Thinking Quest. Category: Analytical LO: 7.6: Discuss the two key activities required for operations control. 96) Which of the following identifies the process of determining which outside firm will provide service and materials for the production process? A) Materials management B) Purchasing C) Inventory control D) Inventories of information E) Supplier selection Answer: E Difficulty: Easy AACSB: Analytical Thinking Quest. Category: Concept LO: 7.6: Discuss the two key activities required for operations control. 97) Material management requires the negotiation of terms of service and maintaining the relationship between the buyer and those who sell the firm goods. Which process supports this activity? A) Supplier selection B) Purchasing C) Inventory control D) Production E) Materials management Answer: A Difficulty: Moderate AACSB: Analytical Thinking Quest. Category: Application LO: 7.6: Discuss the two key activities required for operations control. 98) Which material management process describes the movement of finished goods from a business to the customer? A) Procurement 32 Copyright © 2022 Pearson Education, Inc.
B) Purchasing C) Inventory control D) Transportation E) Warehousing Answer: D Difficulty: Easy AACSB: Analytical Thinking Quest. Category: Concept LO: 7.6: Discuss the two key activities required for operations control. 99) Which material management process stores incoming materials for production and finished goods for distribution? A) Warehousing B) Lean production C) Transportation D) Purchasing E) Supply chain Answer: A Difficulty: Easy AACSB: Analytical Thinking Quest. Category: Concept LO: 7.6: Discuss the two key activities required for operations control. 100) Which operations control activity ensures that production decision are being implemented? A) Follow up B) Materials management C) Quality control D) Inventory control E) Just-in-time production Answer: A Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.6: Discuss the two key activities required for operations control. 101) The process of planning, organizing, and controlling the flow of materials from sources of supply through the distribution of a finished good is called _____. A) follow up B) materials management C) just-in-time D) purchasing E) operations control Answer: B Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.6: Discuss the two key activities required for operations control. 33 Copyright © 2022 Pearson Education, Inc.
102) Which of the following is an advantage of JIT production? A) Ability to use stop-and-go production B) Increased number of goods I process C) Minimized inventory cost D) Elimination of disruptions on the production line E) Specialization of employee skill sets Answer: C Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.6: Discuss the two key activities required for operations control. 103) Which of the following is the first step in the quality control process? A) Accessing inventories of information programs B) Supplier selection C) Inventory control D) Establishing JIT inventory levels E) Establishing specific standards and measurements Answer: E Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.6: Discuss the two key activities required for operations control. 104) Just-in-time (JIT) production systems normally require large amounts of safety stock to be maintained in a firm's warehouse. Answer: FALSE Difficulty: Moderate AACSB: Analytical Thinking Quest. Category: Application LO: 7.6: Discuss the two key activities required for operations control. 105) Operations control includes materials management and quality control. Answer: TRUE Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.6: Discuss the two key activities required for operations control. 106) Materials management involves the flow of materials inside of the production facility, while distribution management involves the flow of finished goods. Answer: FALSE Difficulty: Difficult AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.6: Discuss the two key activities required for operations control. 107) Inventory control is the means of moving resources to the producer and finished goods to 34 Copyright © 2022 Pearson Education, Inc.
the customer. Answer: FALSE Difficulty: Moderate AACSB: Analytical Thinking Quest. Category: Application LO: 7.6: Discuss the two key activities required for operations control. 108) Managers use follow-up to ensure production decisions are being implemented. Answer: TRUE Difficulty: Easy AACSB: Analytical Thinking Quest. Category: Application LO: 7.6: Discuss the two key activities required for operations control. 109) Just-in-time production eliminates the need for transportation and warehousing. Answer: FALSE Difficulty: Easy AACSB: Analytical Thinking Quest. Category: Application LO: 7.6: Discuss the two key activities required for operations control. 110) Explain how JIT production and lean manufacturing are related. Answer: Lean manufacturing is designed for smooth production flows that avoid inefficiencies, eliminate unnecessary inventories, and continuously improve production processes. Just-in-time (JIT) production, a type of lean system, brings together all needed materials at the precise moment they are required for each production stage. With JIT production, disruptions are more visible and are resolved more quickly. Difficulty: Difficult AACSB: Analytical Thinking Quest. Category: Analytical LO: 7.6: Discuss the two key activities required for operations control. 111) Describe the activities associated with transportation, warehousing, and inventory control in the materials management process. Answer: Transportation is the means of moving resources to the producer and finished goods to customers. Warehousing is the storage of both incoming materials for production and finished goods for distribution to customers. Inventory control includes the receiving, storing, handling, and counting of all raw materials, partly finished goods, and finished goods. It ensures that enough materials inventories are available to meet production schedules, while at the same time avoiding expensive excess inventories. Difficulty: Difficult AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.6: Discuss the two key activities required for operations control. 112) Describe the purpose of quality control for goods and services. Answer: Quality control is taking action to ensure that operations produce goods or services that 35 Copyright © 2022 Pearson Education, Inc.
meet specific quality standards. The high quality of customer-employee interactions is no accident in firms that monitor customer encounters and provide training for employee skills development. Many managers realize that without employees trained in customer-relationship skills, quality suffers, and businesses, such as airlines and hotels, can lose customers to betterprepared competitors. Difficulty: Difficult AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.6: Discuss the two key activities required for operations control. 113) Which of the following terms includes all activities involved in getting quality products into the marketplace? A) Quality control B) Quality reliability C) Total quality management D) Performance quality E) Quality overview Answer: C Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Concept LO: 7.7: Identify the activities and underlying objectives involved in total quality management. 114) What should a firm use to evaluate the work activities, materials flow, and paperwork in an effort to determine how those activities provide benefit for the customers? A) Value-added analysis B) Benchmarking C) Getting closer to the customer D) Supply chain management E) Follow-up Answer: A Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.7: Identify the activities and underlying objectives involved in total quality management. 115) Which term describes the idea that quality belongs to each person who creates it while performing a job? A) Quality control B) Quality ownership C) Quality circles D) Total quality management E) Quality improvement teams Answer: B Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Concept 36 Copyright © 2022 Pearson Education, Inc.
LO: 7.7: Identify the activities and underlying objectives involved in total quality management.
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116) What name is given to the process by which a company analyzes another company's product to identify desirable improvements in its own product? A) Quality reliability analysis B) Benchmarking C) Performance quality analysis D) Competitive product analysis E) Quality outsourcing Answer: D Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Concept LO: 7.7: Identify the activities and underlying objectives involved in total quality management. 117) Which of the following is patterned after the successful Japanese concept of quality circles? A) Supply chain management B) Quality improvement teams C) Total quality management D) Quality ownership E) Value-added analysis Answer: B Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Analytical LO: 7.7: Identify the activities and underlying objectives involved in total quality management. 118) Which of the following BEST describes total quality management? A) The principle that quality belongs to each person who creates it while performing a job B) The consistency of a product's quality from unit to unit C) The sum of all activities involved in getting high-quality products into the marketplace D) The process by which a company analyzes a competitor's products to identify desirable improvements E) A certification program attesting that an operations process has met rigorous requirements Answer: C Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.7: Identify the activities and underlying objectives involved in total quality management. 119) Which term refers to collaborative groups of employees from various work areas who meet regularly to define, analyze, and solve common production problems? A) Quality improvement teams B) Quality assurance teams C) Quality control teams D) Quality evaluation teams E) Quality review teams Answer: A Difficulty: Moderate 38 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of Knowledge Quest. Category: Concept LO: 7.7: Identify the activities and underlying objectives involved in total quality management. 120) Which of the following BEST describes ISO 9000? A) The concept that all employees are valuable contributors to a firm's business, and should be entrusted with decisions regarding their work B) The redesigning of business processes to improve performance, quality, and productivity C) A program certifying that a factory, laboratory, or office has met the quality management standards of the International Organization for Standardization D) A certification program attesting to the fact that a factory, laboratory, or office has improved environmental performance E) The process of evaluating all work activities to determine the value they add for customers Answer: C Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.7: Identify the activities and underlying objectives involved in total quality management.
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121) Which of the following BEST describes ISO 14000? A) The concept that all employees are valuable contributors to a firm's business and should be entrusted with decisions regarding their work B) A certification program attesting to the fact that a factory, laboratory, or office has improved environmental performance C) A certification program attesting to the fact that a factory, laboratory, or office has met the quality management standards of the International Organization for Standardization D) A standardized method of evaluating a company's greenhouse gas emissions E) A certification program attesting to the fact that a factory, laboratory, or office is operating under free-trade principles Answer: B Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.7: Identify the activities and underlying objectives involved in total quality management. 122) Which term refers to the fundamental rethinking and radical redesign of a business activity to achieve dramatic improvements in performance? A) Supply chain management B) Business process reengineering C) Total quality management D) Quality ownership E) Quality control Answer: B Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.7: Identify the activities and underlying objectives involved in total quality management. 123) Successful companies often focus total quality management efforts on both the quantity and quality of goods produced or delivered, known as A) cost of quality. B) supply chain management. C) material management. D) productivity. E) quality ownership. Answer: D Difficulty: Moderate AACSB: Analytical Thinking Quest. Category: Analytical LO: 7.7: Identify the activities and underlying objectives involved in total quality management. 124) Which of the following is a measure of economic performance, based on the resource we use to produce a good or service? A) Quality B) Productivity C) Control 40 Copyright © 2022 Pearson Education, Inc.
D) Building E) Differentiation Answer: B Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.7: Identify the activities and underlying objectives involved in total quality management. 125) Which of the following is considered to be the first step in total quality management? A) Identifying sources of poor quality B) Marshalling the interests of all stakeholders C) Evaluating the cost of poor quality D) Assigning responsibility for corrections E) Setting quality standards Answer: C Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.7: Identify the activities and underlying objectives involved in total quality management. 126) Which of the following is considered to be one of the biggest challenges in total quality management? A) Training employees on how to achieve quality goals B) Motivating employees and suppliers to achieve quality goals C) Encouraging teamwork and quality circles D) Compensating for quality E) Providing resources that foster a quality focus Answer: B Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.7: Identify the activities and underlying objectives involved in total quality management. 127) What is the goal of quality improvement teams? A) To select leaders in the workplace based on quality initiatives. B) To identify areas of improvement for safety and health of employees. C) To conduct competitive product analysis on a regular basis. D) To improve their own work methods and the products they make. E) To monitor participation in ISO 14000 efforts. Answer: D Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.7: Identify the activities and underlying objectives involved in total quality management.
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128) Quality improvement teams are groups of employees from various work areas who define, analyze, and solve common production problems. Answer: TRUE Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Concept LO: 7.7: Identify the activities and underlying objectives involved in total quality management. 129) Productivity is a measure of economic performance. Answer: TRUE Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Concept LO: 7.7: Identify the activities and underlying objectives involved in total quality management. 130) The biggest challenge of total quality management is motivating employees throughout the company to achieve quality goals. Answer: TRUE Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Analytical LO: 7.7: Identify the activities and underlying objectives involved in total quality management. 131) Value-added analysis might focus on both the elimination of waste and cost minimization. Answer: TRUE Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.7: Identify the activities and underlying objectives involved in total quality management. 132) ISO 9000 is a certification program attesting to the fact that a factory, laboratory, or office has improved its environmental performance. Answer: FALSE Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.7: Identify the activities and underlying objectives involved in total quality management. 133) Japanese companies adapted the concept of quality circles from quality improvement teams used by U.S. companies. Answer: FALSE Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.7: Identify the activities and underlying objectives involved in total quality management. 134) The sales department relies on the engineering department to send samples and quotes to 42 Copyright © 2022 Pearson Education, Inc.
prospective customers on a timely basis. The sales department may be considered the engineering department's internal customer. Answer: TRUE Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Analytical LO: 7.7: Identify the activities and underlying objectives involved in total quality management. 135) Explain competitive product analysis. Answer: Competitive product analysis is a process by which a company analyzes a competitor's products to identify desirable improvements in its own products. For example, a small business owner might study a competitor's Web site to find ways to improve her own site. Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.7: Identify the activities and underlying objectives involved in total quality management. 136) In a total quality management environment, what are some steps that companies use to emphasize the importance of quality? Answer: To ensure high-quality goods and services, many firms assign responsibility for some aspects of TQM to specific departments or positions. More broadly, leaders of the quality movement use various methods and resources to foster a quality focus-training, verbal encouragement, teamwork, and tying compensation to work quality. Total quality management (TQM) includes all the activities necessary for getting high-quality goods and services into the marketplace. Difficulty: Difficult AACSB: Analytical Thinking Quest. Category: Application LO: 7.7: Identify the activities and underlying objectives involved in total quality management. 137) Describe the five most commonly used tools for TQM. Answer: The most commonly used tools for TQM are valued-added analysis, quality improvement teams, getting closer to the customer, the ISO series, and business process reengineering. Value-added analysis refers to the evaluation of all work activities, material flows, and paperwork to determine the value that they add for customers. Quality improvement teams are groups of employees from various work areas who meet regularly to define, analyze, and solve common production problems. Getting closer to the customer involves taking steps to know what customers want in the products they consume. The ISO series pertains to a series of certifications attesting that a factory, laboratory, or office adheres to rigorous quality management requirements set by the International Organization for Standardization. Business process reengineering focuses on improving a business process-rethinking each of the process's steps by starting from scratch. The process yields improvements as measured by cost, quality, speed, and service. TQM begins with leadership and a desire for continuously improving both processes and products. It must consider all aspects of a business, including customers, suppliers, and employees. Difficulty: Difficult AACSB: Analytical Thinking 43 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Critical Thinking LO: 7.7: Identify the activities and underlying objectives involved in total quality management.
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138) Describe the relationship between a firm's productivity level and a country's GDP. Answer: Productivity is a measure of economic performance: It compares how much we produce with the resources we use to produce it. The formula is fairly simple. The more services and goods we can produce while using fewer resources, the more productivity grows and the more everyone—the economy, businesses, and workers—benefits. At the national level, the most common measure is called labor productivity, because it uses the amount of labor worked as the resource to compare against the benefits, the country's GDP, resulting from using that resource. When consumers buy, or don't buy what is produced, GDP increases, or suffers and productivity falls. Producing quality, then, means creating fitness for use—offering features that customers want. Difficulty: Difficult AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.7: Identify the activities and underlying objectives involved in total quality management. 139) Discuss ways in which quality ownerships supports total quality management. Answer: The backbone of TQM, and its biggest challenge, is motivating all employees and the company’s suppliers to achieve quality goals. Leaders of the quality movement use various methods and resources to foster a quality focus, such as training, verbal encouragement, teamwork, and tying compensation to work quality. When those efforts succeed, employees and suppliers will ultimately accept quality ownership, the idea that quality belongs to each person who creates it while performing a job. Difficulty: Difficult AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.7: Identify the activities and underlying objectives involved in total quality management. 140) Which term refers to the flow of information, materials, and services from raw-materials suppliers through stages in the operations process until the product reaches the end customer? A) Total quality management B) Supply chain C) Service channel D) Distribution channel E) Performance channel Answer: B Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Concept LO: 7.8: Explain how a supply chain strategy differs from traditional strategies for coordinating operations among firms. 141) Which term refers to the strategy of paying suppliers and distributors to perform certain business processes or to provide needed materials or services? A) Outsourcing B) Reengineering C) Controlling D) Scheduling 45 Copyright © 2022 Pearson Education, Inc.
E) Warehousing Answer: A Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Concept LO: 7.8: Explain how a supply chain strategy differs from traditional strategies for coordinating operations among firms. 142) Which of the following BEST describes supply chain management? A) The principle of improving the production by focusing on the slowest step in the chain B) A limitation on the number of suppliers allowed to supply a particular company C) Complete movement of raw materials throughout a manufacturing or service facility D) A cost-reduction program in which wholesalers and retailers are eliminated in an effort to entice consumers to purchase directly from manufacturers E) The principle of looking at the supply chain as a whole in order to improve the overall flow through the system Answer: E Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.8: Explain how a supply chain strategy differs from traditional strategies for coordinating operations among firms. 143) When a company shares information to improve the overall flow through a system composed of companies working together, it is engaging in which of the following? A) Distribution chain management B) Total quality management C) Supply chain management D) Service channel analysis E) Supplier selection analysis Answer: C Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.8: Explain how a supply chain strategy differs from traditional strategies for coordinating operations among firms. 144) Which of the following is an advantage for each of the supply chain members? A) Less emphasis on customer satisfaction B) Increased competitive advantage C) ISO certification D) Less need for outsourcing E) Higher inventory levels Answer: B Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept 46 Copyright © 2022 Pearson Education, Inc.
LO: 7.8: Explain how a supply chain strategy differs from traditional strategies for coordinating operations among firms. 145) A value chain includes an entire network of firms, beginning with suppliers and ending when production is complete. Answer: FALSE Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Concept LO: 7.8: Explain how a supply chain strategy differs from traditional strategies for coordinating operations among firms. 146) Because supply chain strategy is based on the collective effort of a number of firms, no one firm in the chain gains a competitive advantage. Answer: FALSE Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.8: Explain how a supply chain strategy differs from traditional strategies for coordinating operations among firms. 147) Each stage in the supply chain adds value for the final customer. Answer: TRUE Difficulty: Easy AACSB: Application of Knowledge Quest. Category: Analytical LO: 7.8: Explain how a supply chain strategy differs from traditional strategies for coordinating operations among firms. 148) The goal of supply chain management is better overall flow in the system. Answer: TRUE Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.8: Explain how a supply chain strategy differs from traditional strategies for coordinating operations among firms. 149) A supply chain can be expanded through outsourcing. Answer: TRUE Difficulty: Moderate AACSB: Application of Knowledge Quest. Category: Critical Thinking LO: 7.8: Explain how a supply chain strategy differs from traditional strategies for coordinating operations among firms. 133) What is a supply chain? How can supply chain management create competitive advantage? Answer: A supply chain is the flow of information, materials, and services that starts with raw materials suppliers and continues through other steps in the operations process until the product 47 Copyright © 2022 Pearson Education, Inc.
reaches the end consumer. Supply chain management creates better value for the customer to produce a competitive advantage for the members of the chain. Dell, Inc. has used an innovative supply chain strategy to help lower prices and speed delivery of its PCs. Difficulty: Difficult AACSB: Analytical Thinking Quest. Category: Critical Thinking LO: 7.8: Explain how a supply chain strategy differs from traditional strategies for coordinating operations among firms. 150) How does outsourcing affect global supply chain management? Answer: Outsourcing is the strategy of paying suppliers and distributors to perform certain business processes or to provide needed materials or services. Arrangements for cross-border materials flows require compliance with each country's commerce regulations. Production and global transportation scheduling are coordinated with U.S. market demand so that outsourced products arrive in the correct amount and on time without harming the manufacturer's image. Outsourcing has been a growing trend in American business. Outsourcers have a greater need of operations skills for integration among dispersed facilities. Difficulty: Difficult AACSB: Analytical Thinking Quest. Category: Analytical LO: 7.8: Explain how a supply chain strategy differs from traditional strategies for coordinating operations among firms.
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151) Outsourcing has led to increasingly global supply chains. Describe three ways that a more global supply chain might be risky for a company that outsources. Answer: While outsourcing has usually been profitable, it has some risks. Global supply chains are more vulnerable to natural disasters, such as the earthquake and tsunami in Japan and flooding in Thailand. Political unrest in other countries is also a risk. Some countries have nationalized businesses without warning to the companies. It is possible that U.S. lawmakers could impose laws discouraging outsourcing. Criminal activities and even war could also disrupt supply chains. Outsourcing expands supply chains and increases their complexity. Difficulty: Difficult AACSB: Analytical Thinking Quest. Category: Synthesis LO: 7.8: Explain how a supply chain strategy differs from traditional strategies for coordinating operations among firms. 152) In which way will process improvement affect the supply chain? Answer: Process improvements and reengineering often are applied in supply chains to lower costs, speed up service, and coordinate flows of information and material. Because the smoother flow of accurate information along the chain reduces unwanted inventories and transportation, avoids delays, and cuts supply times, materials move faster to business customers and individual consumers. SCM offers faster deliveries and lower costs than customers could get if each member acted only according to its own operations requirements. Difficulty: Difficult AACSB: Analytical Thinking Quest. Category: Synthesis LO: 7.8: Explain how a supply chain strategy differs from traditional strategies for coordinating operations among firms.
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Business Essentials, 13e (Ebert/Griffin) Chapter 8 Employee Behavior and Motivation 1) Which of the following is the term for behavior that is related to doing a certain job? A) Performance behavior B) Interpersonal behavior C) Disruptive behavior D) Potential behavior E) Assertive behavior Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 8.1: Identify and discuss the basic forms of behaviors that employees exhibit in organizations. 2) Which would an employee who is productive but refuses to help others or the organization be lacking in? A) Organizational citizenship B) Workplace aggression C) Performance behavior D) Personal productivity E) Self-esteem Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 8.1: Identify and discuss the basic forms of behaviors that employees exhibit in organizations. 3) Behaviors that detract from, instead of contribute to, organizational performance are known as what? A) Inclusive B) Negative reinforcement C) Counterproductive D) Turnover E) Associative Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 8.1: Identify and discuss the basic forms of behaviors that employees exhibit in organizations. AACSB: Application of knowledge 4) Which of these behaviors BEST indicates good organizational citizenship? A) Being willing to help new employees B) Asking for a pay raise 1 Copyright © 2022 Pearson Education, Inc.
C) Meeting job performance standards D) Keeping regular hours E) Using office supplies for business use Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 8.1: Identify and discuss the basic forms of behaviors that employees exhibit in organizations. 5) In what way does absenteeism result in a direct cost to a business? A) Additional training must be provided to coworkers. B) Turnover among high quality employees increases. C) Burnout and psychological distress increases for those who are on the job. D) There is confusion about authority roles within the organization. E) A substitute must do the work of the missing employee. Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 8.1: Identify and discuss the basic forms of behaviors that employees exhibit in organizations. 6) Which of the following is the overall pattern of action by members of an organization that directly or indirectly influence the organization's effectiveness? A) Personality traits B) Agreeableness C) Employee behavior D) Counterproductive behaviors E) Individual differences Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 8.1: Identify and discuss the basic forms of behaviors that employees exhibit in organizations. 7) Which of the following is the total set of work-related behaviors that the employer expects employees to display? A) Counterproductive behaviors B) Performance behaviors C) Organizational citizenship D) Agreeableness E) Self-motivation Answer: B Difficulty: Moderate AACSB: Analytical thinking 2 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Analytical LO: 8.1: Identify and discuss the basic forms of behaviors that employees exhibit in organizations. 8) Which organizational behavior is counterproductive to an organization? A) High levels of corporate citizenship B) Working beyond the normal scope of the job C) High levels of quantity and quality D) Leaving the organization for a new job E) Helping newcomers learn about corporate culture Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 8.1: Identify and discuss the basic forms of behaviors that employees exhibit in organizations. 9) Amira was very unhappy at her job. After several interviews she found a new job and quit. Which of the following is the result of Amira's leaving the organization? A) Turnover B) Absenteeism C) Organizational citizenship D) Performance behavior E) Emotionality Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 8.1: Identify and discuss the basic forms of behaviors that employees exhibit in organizations. 10) Which of the following occurs when there is turnover within the organization? A) Changes in corporate culture B) Increased organizational citizenship behavior C) Increased absenteeism D) Poor person-job fit E) Lost productivity Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 8.1: Identify and discuss the basic forms of behaviors that employees exhibit in organizations. 11) Performance behaviors contribute directly to company productivity. Answer: TRUE Difficulty: Easy 3 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 8.1: Identify and discuss the basic forms of behaviors that employees exhibit in organizations. 12) Organizational commitment reflects an individual's identification with the organization and its mission. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.1: Identify and discuss the basic forms of behaviors that employees exhibit in organizations. 13) Organizational citizenship reflects the ability of a behavior to detract from, rather than contribute to, organizational performance. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.1: Identify and discuss the basic forms of behaviors that employees exhibit in organizations. 14) Counterproductive behaviors such as absenteeism result in direct costs to a business. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.1: Identify and discuss the basic forms of behaviors that employees exhibit in organizations. 15) What are some potential consequences of employees being dissatisfied on the job? Answer: Dissatisfied employees may be absent more often, may experience stress that disrupts coworkers, and may be continually looking for another job. Unlike dissatisfied employees, satisfied employees tend to be absent less often, to be good organizational citizens, and to stay with the organization. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.1: Identify and discuss the basic forms of behaviors that employees exhibit in organizations. 16) Discuss the three types of employee behaviors and how they affect the organization. Answer: Employee behavior is the pattern of actions by the members of an organization that directly or indirectly influences the organization's effectiveness. Organizational citizenship, provide positive benefits to the organization but in more indirect ways. Some employee behaviors, called performance behaviors, directly contribute to productivity and performance. Counterproductive behaviors detract from performance and actually cost the organization. 4 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.1: Identify and discuss the basic forms of behaviors that employees exhibit in organizations. 17) Discuss organizational citizenship and the outcomes of positive organizational citizenship for the organization. Answer: Organizational citizenship refers to the behavior of individuals who make a positive overall contribution to the organization. A number of factors, including individual, social, and organizational variables, play roles in promoting or minimizing organizational citizenship behaviors. For example, the personality, attitudes, and needs of the individual may cause some people to be more helpful than others. Similarly, the individual’s work group may encourage or discourage such behaviors. And the organization itself, especially its corporate culture, may or may not promote, recognize, and reward these types of behaviors. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.1: Identify and discuss the basic forms of behaviors that employees exhibit in organizations. 18) Identify ways in which counterproductive behaviors on the job affect the success of the organization. Answer: Counterproductive behaviors are those that detract from, rather than contribute to, organizational performance. Absenteeism occurs when an employee does not show up for work. When an employee is absent, legitimately or not, his or her work does not get done at all, a substitute must be hired to do it, or others in the organization must pick up the slack. In any event, absenteeism results in direct costs to a business. Turnover occurs when people quit their jobs. An organization usually incurs costs in replacing workers who have quit, lost productivity while seeking a replacement, training someone new, and so on. Other forms of counterproductive behavior may be even more costly for an organization. Theft and sabotage result in direct financial costs for an organization. Sexual and racial harassment also cost an organization, both indirectly (by lowering morale, producing fear, and driving off valuable employees) and directly (through financial liability if the organization responds inappropriately). Workplace aggression and violence are also a concern in some organizations, as is bullying. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 8.1: Identify and discuss the basic forms of behaviors that employees exhibit in organizations. 19) Discuss ways in which absenteeism affects coworkers and the organization. Answer: Absenteeism is a counterproductive behavior that occurs when an employee does not show up for work. Some absenteeism has a legitimate cause, such as illness, jury duty, or death or illness in the family. Other times, the employee may report a feigned legitimate cause that's actually just an excuse to stay home. When an employee is absent, legitimately or not, his or her work does not get done at all or his or her work may be completed by a temp or another 5 Copyright © 2022 Pearson Education, Inc.
employee. In any event, though, absenteeism results in direct costs to a business. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 8.1: Identify and discuss the basic forms of behaviors that employees exhibit in organizations. 20) Which of these "big five" personality traits is an indication of how open or rigid a person is in terms of his or her beliefs? A) Openness B) Extraversion C) Emotionality D) Conscientiousness E) Agreeableness Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.2: Describe the nature and importance of individual differences among employees.
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21) Which of the following describes emotionality? A) The ability of a person to get along with others B) The degree to which someone tends to be positive or negative in their outlook C) The number of things a person tries to accomplish at once D) The relative rigidity of an individual's beliefs E) The likelihood that a person will react aggressively Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.2: Describe the nature and importance of individual differences among employees. 22) Which of the following might you, as a manager, expect to see in an employee who has a low degree of conscientiousness? A) A tendency to be unprepared at meetings B) A tendency to have a high degree of performance C) A tendency to focus on relatively few tasks at one time D) A high level of organization and self-discipline E) An ability to meet deadlines without fail Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 23) If a task involves a high level of detail, which type of personality would be best suited to perform the task? A) One who exhibits high agreeableness B) One who exhibits more negative emotionality C) One who exhibits high openness D) One who exhibits high conscientiousness E) One who exhibits high creativity Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 8.2: Describe the nature and importance of individual differences among employees. 24) The extent to which people are self-aware, able to manage their emotions, and motivate others is an aspect of which of the following? A) Attitude B) Emotional intelligence C) Negative emotionality D) Social skills E) Empathy Answer: B Difficulty: Moderate 7 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 25) Which of the following is represented by a relatively stable set of psychological attributes that distinguish people from others? A) Differences B) Attitude C) Personality D) Extroversion E) Emotional intelligence Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.2: Describe the nature and importance of individual differences among employees. 26) If an employee has a tendency to focus on relatively few tasks at one time, what type of personality trait is considered to be high? A) Agreeableness B) Conscientiousness C) Emotionality D) Extraversion E) Openness Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 27) Which of the following best represent the personality attributes of someone who is considered to be an extrovert? A) Forgiving, understanding, and good natured B) Organized, systematics, and self-disciplined C) Calm, resilient, and secure D) Sociable, assertive, and open to new relationships E) Curious, willing to listen to new ideas, and willing to change their own beliefs Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 28) According to the Myers-Briggs framework, how do introverts recharge their energy levels? A) By being around others B) When considering abstract ideas C) When completing or finishing an assignment or project 8 Copyright © 2022 Pearson Education, Inc.
D) By having time to process open-ended situations E) By being alone and having solitude Answer: E Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 29) What is the term that reflects the extent of one's self awareness and ability to manage emotions? A) Emotional intelligence B) Personality C) Introversion D) Openness E) Emotionality Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.2: Describe the nature and importance of individual differences among employees. 30) Which of the following best describes empathy? A) The ability to balance fear, anxiety, and anger B) The ability to remain optimistic and continue to strive when facing setbacks C) The ability to understand how others feel D) The ability to get along with others E) The ability to establish positive relationships Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.2: Describe the nature and importance of individual differences among employees. 31) Which is the correct term for one's belief that their behavior has an effect on what happens to them? A) Self-efficacy B) Authoritarianism C) Self-esteem D) Locus of control E) Risk propensity Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.2: Describe the nature and importance of individual differences among employees. 32) Which of the following is based on the knowledge a person presumes to have about 9 Copyright © 2022 Pearson Education, Inc.
perceptions of truth and reality? A) Affect B) Intention C) Attitude D) Personality E) Cognition Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.2: Describe the nature and importance of individual differences among employees. 33) Which of the following is used to guide a person's behavior? A) Affect B) Intention C) Attitude D) Personality E) Cognition Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.2: Describe the nature and importance of individual differences among employees. 34) What is the result of a person behaving in a way that is inconsistent with their attitudes? A) Affect B) Lapsed morale C) Increased satisfaction D) Cognitive dissonance E) Impairment Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.2: Describe the nature and importance of individual differences among employees. 35) What is the outcome when employees have positive attitudes towards their jobs? A) Increased cognitive dissonance B) Decreased morale C) Stronger intention D) Limited commitment E) Increased job satisfaction Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 8.2: Describe the nature and importance of individual differences among employees. 10 Copyright © 2022 Pearson Education, Inc.
36) When an employee sees themselves as a member of the team and can easily identify with the organization's mission, what is the result? A) Organizational commitment B) Psychological contracts C) Cognitive dissonance D) Intention E) Cognition Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 37) Which term, similar to emotions, identifies a person's feelings about something? A) Affect B) Intention C) Cognitive dissonance D) Cognition E) Morale Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 8.2: Describe the nature and importance of individual differences among employees. 38) How willing a person is to take chances in their decision process indicates a person's A) self-esteem. B) locus of control. C) risk propensity. D) self-efficacy. E) cognitive dissonance. Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 8.2: Describe the nature and importance of individual differences among employees. 39) Those employees who like to experiment with new ideas or gamble on the development of new products are considered to have a higher degree of A) self-esteem. B) intrinsic reward need. C) authoritarianism. D) propensity for risk. E) cognition. Answer: D Difficulty: Moderate 11 Copyright © 2022 Pearson Education, Inc.
AACSB: Analytical thinking Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 40) If an employee feels they have the skills and ability needed to perform a task well, they are better able to focus their attention on performance because of their high degree of A) self-esteem. B) locus of control. C) risk propensity. D) self-efficacy. E) cognitive dissonance. Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 41) Research suggests that the major personality dimension that exists in a variety of countries, and is therefore reasonably important across cultures is A) attitude. B) cognition. C) intention. D) commitment. E) self-esteem. Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 42) Janelle generally is late for work, and most meetings, and does an excellent job when meeting with customers. Marc loves to design new product descriptions, and is highly focused when at work. Moira takes great pride in her work and is often very emotionally attached to her efforts. Which of the following describes these personal attributes that vary from one person to another? A) Self-esteems B) Self-efficacy C) Empathy D) Personality E) Individual differences Answer: E Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 43) In addition to the "big five" personality traits identified by researchers as being especially 12 Copyright © 2022 Pearson Education, Inc.
relevant to organizations, which of the following also plays a large role in employee personality? A) Emotional intelligence B) Agreeableness C) Personality D) Conscientiousness E) Extraversion Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 44) Nancy is often short with people, is antagonistic towards others, and is generally considered to be rude. Which of the describes Nancy's personality trait? A) High levels of consciousness B) Negative emotionality C) More extroverted D) Low agreeableness E) Less openness Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 45) Apoorva is generally good natured and understanding when it comes to working with others. In which "big five" personality trait would Apoorva score high in? A) Conscientiousness' B) Emotionality C) Agreeableness D) Introversion E) Openness Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 46) Which of the following tend to be relatively higher performers in a variety of different jobs? A) Those who are most agreeable B) Those who are highly conscientious C) Those who tend to be most positive D) Those who are most comfortable in relationships E) Those who are less rigid in terms of their beliefs Answer: B Difficulty: Moderate AACSB: Analytical thinking 13 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 47) Mohammad is a highly reliable employee, and handles job stress, pressure, and tension well. In general, Mohammad is posed, calm and resilient. Which of the following does Mohammad display a positive degree of? A) Conscientiousness B) Emotionality C) Extroversion D) Openness E) Agreeableness Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 48) The manager of the sales and marketing department is interviewing candidates for sales position. Which of the following should the manager look for in the candidates they are interviewing? A) Extraversion B) Low degree of openness C) Negative emotionality D) High degree of sensing E) The ability to judge instead of perceive Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 49) Which of the following describes someone with a low level of openness? A) Curious B) Willing to listen to new ideas C) Lower performance levels D) Willing to change their mind E) Higher degree of acceptance by others Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 50) Julian prefers abstract concepts to concrete things. Which section of the Myers' Briggs framework would measure this? A) Extraversion B) Perceiving 14 Copyright © 2022 Pearson Education, Inc.
C) Thinking D) Intuition E) Feeling Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 51) Researchers agree that the Myers-Briggs Type Indicator can be a useful method for determining some aspects of what? A) Extroversion B) Conscientiousness C) Emotional intelligence D) Personality attributes E) Communication styles Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 52) Which aspect of the Myers-Briggs Type Indicator indicates whether a person bases their decision on logic and reason, or emotions? A) Extraversion versus introversion B) Sensing versus intuition C) Empathy versus motivating D) Thinking versus feeling E) Judging versus perceiving Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 53) Which of the following is an indication of a person's capacity for understanding how she or he is feeling and using that to effectively guide their own lives and behaviors? A) Empathy B) Social skills C) Motiving oneself D) Self-awareness E) Managing emotions Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 15 Copyright © 2022 Pearson Education, Inc.
54) Raj just left a meeting with his customer, who once again changed their requirements. This change requires Raj to scrap the work he has done so far, and start all over again. Still, Raj remains optimistic and wants to works hard to ensure the customer is happy with the final results. Which area of emotional intelligence is Raj using to get the job accomplished? A) Self-awareness B) Empathy C) Managing emotions D) Motivating oneself E) Social skills Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 55) Myron is being trained to take over a large project with a new customer, and it is important that he have a high degree of interpersonal interaction with the customer, and be able to direct the work of others successfully. What type of skills should Myron be working on developing? A) High degree of self-motivation B) Sensing and intuition skills C) Low judgment and high perceiving skills D) High emotional quotient E) Introversion Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 56) Drew works hard and is a very motivated employee. He wants to move into a leadership position in his company and feels that if he works hard, he will succeed. Which of the following does Drew have a high level of? A) Locus of control B) Self-efficacy C) Authoritarianism D) Machiavellianism E) Self-esteem Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 57) Byron accepts instructions and directives from his managers without question, even if he sometimes doesn't agree the outcome will be as good as it could be. Which of the following personality characteristics would Bryon be rated highly in? 16 Copyright © 2022 Pearson Education, Inc.
A) Authoritarianism B) Self-efficacy C) Locus of control D) Machiavellianism E) Judgement Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 58) Leslie is constantly manipulating others for her own personal gain. She will lie to attain a personal goal, and puts little value on loyalty. In which personality characteristic would Leslie be rated highly in? A) Locus of control B) Self-efficacy C) Authoritarianism D) Machiavellianism E) Risk propensity Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 59) Which of the following is the personal belief that one is a worthwhile and deserving individual? A) Self-awareness B) Empathy C) Social skills D) Self-esteem E) Locus of control Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 60) Which of the following is a person's beliefs and feelings about specific ideas, situations, or people? A) Intention B) Cognitive dissonance C) Attitudes D) Self-esteem E) Emotion Answer: C Difficulty: Moderate 17 Copyright © 2022 Pearson Education, Inc.
AACSB: Analytical thinking Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 61) Which of the following occurs when two sets of perceptions are contradictory or incongruent? A) Risk B) Intention C) Cognitive dissonance D) Self-awareness E) Emotionality Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 62) Which of the following reflects an individual's identification with the organization and its mission? A) Intention B) Psychological contracts C) Cognitive dissonance D) Job satisfaction E) Organizational commitment Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 63) Balancing anxiety, fear, and anger so they do not overly interfere with getting things accomplished is a part of emotional intelligence. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 64) According to research, emotional intelligence cannot be developed or learned. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 65) Personality includes personal attributes that vary from one person to another. Answer: TRUE 18 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 66) Affect is one of the three components of attitude. Answer: TRUE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 8.2: Describe the nature and importance of individual differences among employees. 67) Emotional intelligence and personality are generally considered to be the same thing. Answer: FALSE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 8.2: Describe the nature and importance of individual differences among employees. 68) A person's self-efficacy is a belief about their extent of power and status within the organization. Answer: FALSE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 8.2: Describe the nature and importance of individual differences among employees. 69) Identify and explain each of the "Big Five" personality traits. Answer: The "Big Five" personality traits are agreeableness, conscientiousness, emotionality, extraversion, and openness. Agreeableness is a person's ability to get along with others. Conscientiousness refers to the individual's persistence, dependableness, and orderliness. Emotionality refers to the degree to which people tend to be positive or negative in their outlook and behaviors toward others. Extraversion refers to a person's comfort level with relationships. Extraverts are sociable, talkative, assertive, and open to new relationships and tend to be higher performers. Finally, openness is how open or rigid a person is in terms of his or her beliefs. People with a high level of openness are curious and willing to listen to new ideas and, therefore, are often higher performers. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Concept LO: 8.2: Describe the nature and importance of individual differences among employees. 70) Discuss how an employee's level of self-esteem affects their actions and needs at the workplace. Answer: Self-esteem is the extent to which a person believes that he or she is a worthwhile and deserving individual. A person with high self-esteem is more likely to seek higher-status jobs, be more confident in his or her ability to achieve higher levels of performance, and derive greater 19 Copyright © 2022 Pearson Education, Inc.
intrinsic satisfaction from his or her accomplishments. In contrast, a person with less self-esteem may be more content to remain in a lower-level job, be less confident of his or her ability, and focus more on extrinsic rewards (extrinsic rewards are tangible and observable rewards such as a paycheck, job promotion, and so forth). Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 71) Describe emotional intelligence and the various dimension that are associated with it. Answer: Emotional intelligence, or emotional quotient (EQ), refers to the extent to which people are self-aware, can manage their emotions, can motivate themselves, express empathy for others, and possess social skills. Self-awareness refers to a person’s capacity for being aware of how she or he is feeling. In general, more self-awareness allows people to more effectively guide their own lives and behaviors. Managing emotions refers to a person’s capacities to balance anxiety, fear, and anger so that these feelings do not overly interfere with getting things accomplished. Motivating oneself is a person’s ability to remain optimistic and to continue striving in the face of setbacks, barriers, and failure. Empathy is a person’s ability to understand how others are feeling even without being explicitly told. Social skills help people get along with others and establish positive relationships. Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Application LO: 8.2: Describe the nature and importance of individual differences among employees. 72) Which of the following identifies what the organization will provide the employee and what the employee will contribute to the organization in turn? A) Person-job fit B) Psychological contract C) Inducements D) Contributions E) Motivation contract Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 8.3: Explain the meaning and importance of psychological contracts and the person-job fit in the workplace. 73) How can an organization fulfill their organization's contract obligations to employees? A) Contributions B) Psychological contracts C) Inducements D) Intention E) Cognition Answer: C Difficulty: Moderate AACSB: Application of knowledge 20 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Analytical LO: 8.3: Explain the meaning and importance of psychological contracts and the person-job fit in the workplace. 74) Which of the following aspects of the psychological contract is provided by the organization? A) Competency B) Effort C) Time D) Career opportunities E) Talent Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 8.3: Explain the meaning and importance of psychological contracts and the person-job fit in the workplace. 75) Which of the following aspects of the psychological contract is provided by the employee? A) Benefits B) Pay C) Skills D) Security E) Status Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 8.3: Explain the meaning and importance of psychological contracts and the person-job fit in the workplace.AACSB: Application of knowledge 76) What is the term for the extent to which a person's contributions and the organization's inducements match? A) Employee equity B) Person-job fit C) Psychological contract D) Organizational commitment E) Job satisfaction Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.3: Explain the meaning and importance of psychological contracts and the person-job fit in the workplace. 77) Which of the following is likely to occur when the employee and the employer perceive the psychological contract to be fair and equitable? 21 Copyright © 2022 Pearson Education, Inc.
A) The employee will work towards promotion B) The relationship will continue C) The employer will provide pay raises D) Change will be initiated E) The employee will be transferred to a more challenging position Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.3: Explain the meaning and importance of psychological contracts and the person-job fit in the workplace. 78) Marian's company is in the process of downsizing and many employees are unsure of what to expect. Which of the following can the company use to manage the psychological contracts it has with employees? A) Loyalty B) Increased competency requirements C) Guarantee of job permanence D) Higher standards of performance E) Additional training Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.3: Explain the meaning and importance of psychological contracts and the person-job fit in the workplace. 79) Which of the following is the outcome when there is good person-job fit? A) Additional wants and needs B) Additional inducements C) Higher performance D) Negative attitudes E) Increased turnover Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.3: Explain the meaning and importance of psychological contracts and the person-job fit in the workplace. AACSB: Analytical thinking80) In terms of a psychological contract, inducements represent what employees will contribute to an organization. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 8.3: Explain the meaning and importance of psychological contracts and the person-job fit 22 Copyright © 2022 Pearson Education, Inc.
in the workplace. 76) The good person-job fit can result in higher performance and more positive attitudes. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 8.3: Explain the meaning and importance of psychological contracts and the person-job fit in the workplace. 81) Describe the role of the psychosocial contract between an organization and its employees. Answer: A psychological contract is the overall set of expectations held by employees and the organization regarding what employees will contribute to the organization and what the organization will provide in return. Unlike a formal business contract, a psychological contract is not written on paper, nor are all of its terms explicitly negotiated. Employees provide effort, ability, loyalty, skills, time, and competency. In return, employers provide pay, benefits, job security, status, promotion opportunities, and career opportunities. Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 8.3: Explain the meaning and importance of psychological contracts and the person-job fit in the workplace. 82) Describe the importance of person-job fit. Answer: The person-job fit refers to the extent to which a person’s contributions and the organization’s inducements match one another. A good person-job fit is one in which the employee’s contributions match the inducements the organization offers. In theory, each employee has a specific set of needs that he or she wants fulfilled and a set of job-related behaviors and abilities to contribute. If the organization can take perfect advantage of those behaviors and abilities and exactly fulfill those needs, it will have achieved a perfect person-job fit. Good person-job fit, in turn, can result in higher performance and more positive attitudes. A poor person-job fit, though, can have just the opposite effects. Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 8.3: Explain the meaning and importance of psychological contracts and the person-job fit in the workplace. 83) Which of the following describes the set of forces that cause people to behave in a certain way on the job? A) Person-job fit B) Inducements C) Pay D) Psychological contracts E) Motivation Answer: E Difficulty: Moderate 23 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Concept LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 84) Which of the following describes the Hawthorne effect? A) The belief that employees are motivated by money alone B) The conclusion that workers are more productive if management pays attention to them C) The determination that the level of lighting in a workplace has no effect on productivity D) The theory that workers are more productive if their jobs are analyzed closely E) The unspoken agreement between the employee and the employer Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 85) What is the value in understanding the differences in Theory X and Theory Y? A) They shed light on managers' attitudes toward employees. B) They provide a useful blueprint for taking action. C) They help managers better understand employees. D) They accurately depict the attitude of employees at work. E) They support management decisions and plans. Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 86) According to Maslow's model, a set of needs will be a motivator until which of the following occurs? A) The needs are satisfied. B) New needs are identified. C) The person becomes self-motivated. D) A supervisor changes the work. E) The needs are replaced by hygiene factors. Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 87) Which of the following lists Maslow's Hierarchy of Human Needs in order, starting with the most basic? 24 Copyright © 2022 Pearson Education, Inc.
A) Physiological, security, social, esteem, self-actualization B) Social, security, physiological, esteem, self-actualization C) Physiological, self-actualization, security, esteem, social D) Physiological, esteem, security, social, self-actualization E) Esteem, self-actualization, social, physiological, security Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 88) If a manager believes that his employees are self-motivated and growth-oriented, which theory of motivation does he subscribe to? A) Theory Y B) Theory X C) Classical D) Hierarchical E) Expectant Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 89) Which of the following theories focuses on people evaluating their treatment by the organization relative to the treatment of others? A) Equity theory B) Hierarchy of needs C) Expectancy theory D) Goal-setting theory E) X and Y theory Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 90) The classical theory of motivation is best described as a theory of motivation which states A) job satisfaction depends on two factors, hygiene and motivation. B) people are motivated to work toward rewards that they want and that they have a reasonable chance of obtaining. C) people evaluate their treatment by the organization relative to the treatment of others. D) workers are motivated solely by money. E) people will work more productively as long as they receive some kind of attention from 25 Copyright © 2022 Pearson Education, Inc.
management. Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 91) Which of the following helps explain why some people do not work as hard as they can when their salaries are based purely on seniority? A) Two-factor theory B) Maslow's hierarchy of human needs C) Scientific management D) Expectancy theory E) Theory X and Theory Y Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 92) The most productive employee in the department doesn't apply for a job opening they are well suited for, in spite of an excellent record and the pay and prestige associated with the new job. The employee believes that the job will go to someone who has more seniority. Based on expectancy theory, which would explain why the employee doesn't apply for the job? A) The effort-performance issue B) The equity theory issue C) The performance-reward issue D) Personal goals E) Family demands Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 93) An employee is encouraged to apply for a promotion, but does not because he has children and wants to be home in the evening. Based on expectancy theory, which of the following explains why the employee doesn't apply for the job? A) The equity theory issue B) The rewards-personal goals issue C) The performance-rewards issue D) The rewards-ethics issue E) The ethics-performance issue Answer: B 26 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 94) A manager wants to motivate the maintenance staff to be more productive. She starts by providing training and assures employees that high productivity will be rewarded. Employees are asked to identify the rewards that would mean the most to them. The manager likely subscribes to which theory of motivation? A) Equity B) Expectancy C) Two-factor D) Hierarchy of needs E) Productivity Answer: B Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Application LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 95) An employee's level of effort began to decline when they learned a new employee with far less experience was hired at the same salary. The employee's lack of motivation can best be described by which theory of motivation? A) Equity B) Expectancy C) Two-factor D) Scientific management E) Planning Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 96) Which of the following would BEST show that a manager's strategy for motivating his team is consistent with "Theory Y" about employee motivation? A) The employees would need to see incentives as worth having for their own sake. B) The employees would need to see their work as contributing to a success that they share in. C) The manager wants his team to feel rewards will increase as the quality of work is increased. D) The manager thinks that his team will not do their work well without added incentives. E) The manager thinks that incentives are needed in order to boost morale. Answer: B Difficulty: Difficult AACSB: Analytical thinking 27 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Critical Thinking LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 97) If, instead of offering incentives for sales goals, a manager were to get ideas on increasing sales revenue from his sales team to implement, which of the following would MOST likely result? A) The sales team would be more motivated by feeling more invested in the process. B) The sales team would prefer to be given clearly defined goals to meet. C) The sales team would not have enough information to go on in order to get ideas. D) The sales team would come up with too many different ideas. E) The sales team would be more motivated because of the chance to earn more money. Answer: A Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 98) Which of the following supports the belief that people are naturally lazy and must be punished or rewarded to be made productive? A) Hierarchy of human needs B) Theory X C) Theory Y D) Two-factor theory E) Expectancy theory Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 99) According to McGregor, which motivational theory will result in managers most likely having satisfied and motivated employees? A) Hierarchy of human needs B) Theory X C) Theory Y D) Two-factor theory E) Expectancy theory Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 28 Copyright © 2022 Pearson Education, Inc.
100) According to Frederick Herzberg, which of the following is considered a hygiene factor? A) Recognition B) Hours C) Working conditions D) Additional time off E) Added responsibility Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 101) According to McClelland, what is the need for achievement based on? A) The desire to control one's environment B) The desire to increase job satisfaction C) Recognition for a job well done D) The desire to accomplish a goal or task as effectively as possible E) The need for promotions Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 102) According to McClelland, what do employees experience when they tend to want reassurance and approval from others and are genuinely concerned about others' feelings? A) The need for power B) The need for satisfaction C) The need for achievement D) The need for motivation E) The need for affiliation Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 103) According to McClelland, which of the following represents the desire to control one's environment? A) The need for power B) The need for satisfaction C) The need for achievement D) The need for motivation E) The need for affiliation 29 Copyright © 2022 Pearson Education, Inc.
Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 104) Which of the following indicates that an employee will work towards their goals if they believe they have a reasonable opportunity to achieve those goals? A) Equity theory B) Expectancy theory C) Maslow's hierarchy of needs D) Hygiene factors E) Herzberg's two-factor theory Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 105) Which motivational theory focuses on social comparisons as a motivator? A) Equity theory B) Expectancy theory C) Power theory D) Hygiene factors E) Herzberg's two-factor theory Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 106) Which motivation model suggests that there are five levels of needs and that basic needs must be met before people work to satisfy higher-level needs? A) Theories X and Y B) Hierarchy of Human Needs model C) Classical theory of motivation D) Scientific management E) Hawthorne effect Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 30 Copyright © 2022 Pearson Education, Inc.
107) According to Maslow's Hierarchy of Human needs, which of the following is fulfilled by a meaningful and fulling job? A) Esteem needs B) Social needs C) Physiological needs D) Self-actualization needs E) Security needs Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 108) Which theory of motivation claims that hygiene factors affect motivation and satisfaction only when they are absent or do not meet expectations? A) Maslow's hierarchy of Needs model B) McGregor's Theory X and Theory Y model C) Herzberg's Two-factor theory D) Taylor's classical theory of motivation E) Scientific management Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 109) Kendra just finished taking an exam that she had been studying hard for all week. She stayed after class and asked her professor to grade her exam while she waited. Which type of need does Kendra have in regards to her exam score? A) Expectancy B) Power C) Motivation D) Affiliation E) Achievement Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 110) Which of the following is an indication of an individual's desire for human companionship? A) Need for affiliation B) Need for power 31 Copyright © 2022 Pearson Education, Inc.
C) Need for achievement D) Esteem needs E) Physiological needs Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 111) According to the classical theory of motivation, attention from the supervisor is more of a motivator than money. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 112) The two-factor theory examines the relationship between effort and performance. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 8.4: Identify and summarize the most important models and concepts of employee motivation.
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113) According to expectancy theory, people are motivated to work toward rewards they want and that they believe they have a reasonable chance of obtaining. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 114) When people with a high need for achievement set moderately difficult goals and make moderately risky decision. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 115) Hygiene factors affect motivation only if they are absent or fail to meet expectations. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 116) Motivation factors are directly related to the work that employees perform; hygiene factors refer to the environment in which they work. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 117) According to Maslow's hierarchy of needs, a person can work on multiple levels of needs at the same time. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 8.4: Identify and summarize the most important models and concepts of employee motivation.
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118) Individuals may satisfy social needs by making and maintaining friendships at work. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 119) Equity theory is based on the premise that workers prefer a workplace where all employees are paid equally. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 120) How are equity theory and the psychological contract connected? Answer: In both situations, employees compare a ratio of contribution to return. With equity theory, one employee compares his or her ratio with another employee's ratio. According to both theories, employees need to know that they are being treated fairly. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 121) How does Maslow's hierarchy of needs model explain employee motivation? Answer: Maslow identified five levels of human needs, arranged in a hierarchy of importance. Lower-level needs must be met before a person will try to satisfy higher-level needs. Maslow's theory recognizes that because people have different needs, they are motivated by different factors. Maslow's hierarchy of needs explains the human needs that must be met for people to be motivated. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 122) According to the two-factor theory, how should managers enhance motivation? Answer: According to this theory, managers should follow a two-step approach to enhance motivation. First, managers must ensure that hygiene factors are acceptable, reducing dissatisfaction. Then they must offer motivational factors as a means of improving satisfaction and motivation. The two-factor theory includes hygiene factors and motivation factors. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking 34 Copyright © 2022 Pearson Education, Inc.
LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 123) Compare Theory X and Theory Y. Answer: Theory X carries the assumption that people are lazy, lack ambition, are self-centered, resist change, and are gullible. Theory Y carries the assumption that people are energetic, ambitious, selfless, intelligent, and want to contribute to company growth. Theory X and Theory Y are two competing informal theories of motivation. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 124) How does expectancy theory explain employee motivation? Answer: Expectancy theory suggests that people are motivated to work toward rewards that they want and they believe they have a reasonable chance, or expectancy, of obtaining. Expectancy theory states that a number of issues must be considered for individuals to exert high effort. The individual must expect that high effort will result in high individual performance and thereby organizational rewards. Finally, the individual must expect that the organizational reward will meet their personal goals. Expectancy theory explains the circumstances in which employees will work toward goals. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 8.4: Identify and summarize the most important models and concepts of employee motivation. 125) Describe typical characteristics of a person with a high need for achievement. Answer: Individuals who have a high need for achievement tend to set moderately difficult goals and to make moderately risky decisions. High-need achievers also want immediate, specific feedback on their performance. They want to know how well they did something as quickly after finishing it as possible.. Preoccupation with work is another characteristic of highneed achievers. They think about it on their way to the workplace, during lunch, and at home. They find it difficult to put their work aside, and they become frustrated when they must stop working on a partly completed project. Finally, high-need achievers tend to assume personal responsibility for getting things done. They often volunteer for extra duties and find it difficult to delegate part of a job to someone else. Accordingly, they derive a feeling of accomplishment when they have done more work than their peers without the assistance of others Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 8.4: Identify and summarize the most important models and concepts of employee motivation.
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126) According to which theory are employees given a voice in how they do their jobs and how the company is managed? A) Participative management and empowerment B) Theory X C) Classical theory of motivation D) Modified work schedules E) Scientific management Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 127) What is flextime an example of? A) Alternative workplace B) Job rotation C) Modified work scheduling D) Work sharing E) Modified workplace planning Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 128) Which of the following can motivate workers by achieving a more satisfactory fit between workers and their jobs? A) Job redesign B) Team management C) MBO D) Training E) Job enrichment programs Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 129) Which is an example of a modified work schedule? A) Job sharing B) Job redesign C) Job rotation D) Job enrichment E) Job elimination 36 Copyright © 2022 Pearson Education, Inc.
Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 130) Which of the following allows people to choose their working hours by adjusting a standard work schedule on a daily or weekly basis? A) Job enrichment B) Flextime programs C) Job enlargement D) Job redesign E) Work sharing Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 131) Which of the following is the most frequently used method of setting performance goals to motivate behavior? A) Social learning B) Participative management C) Management by objectives D) Job enrichment E) Positive reinforcement Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 132) Which of the following is being practiced when employees can determine how to accomplish their jobs, and results in increased commitment to organizational goals? A) Social learning B) Participative management C) Management by objectives D) Job enrichment E) Positive reinforcement Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 8.5: Describe some of the strategies and techniques used by organizations to improve 37 Copyright © 2022 Pearson Education, Inc.
employee motivation. AACSB: Application of knowledge133) Which behavior modification choice links a negative action with a negative consequence? A) Performance measurement B) Punishment C) Regression D) Social learning E) Management by objectives Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 134) According to social learning theory, what determines the behavior of an individual at the work place? A) Cognitions and social environment B) Management by objectives C) Analysis D) Comparisons E) Reinforcement Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 135) Which of the following requires manager to define behaviors the want employees to exhibit, and specific behaviors they want to eliminate, before linking the behaviors to specific outcomes? A) Behavior modification and reinforcement B) Management by objectives C) Expectancy theory D) Punishment E) Social learning Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 136) Which of the following occurs when a company or manager provides a reward to an employee after the employee exhibits desired behaviors? 38 Copyright © 2022 Pearson Education, Inc.
A) Participative management B) Management by objectives C) Social learning D) Punishment E) Positive reinforcement Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 137) Ricco notices that some coworkers exhibited certain behaviors that got them in trouble, while others exhibited certain behaviors that generated bonuses and promotions. Ricco decided he was going to change his behavior in order to get the bonuses and promotions. Which of the following is Ricco using to gain his desired outcomes? A) Equity theory B) Expectancy theory C) Social learning D) Positive reinforcement E) Management by objectives Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 138) Matt met with his supervisor and together they determined the areas that Matt should focus on for the next six months. This included specific goals and specific steps to evaluate Matts' process toward those goals. Which of the following did Matt and his supervisor use to direct Matt's behavior? A) Punishment B) Two-factor theory C) Participative management D) Management by objectives E) Empowerment Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 139) Which of the following is required for participative management to impact the organization and prevent worker dissatisfaction? A) All suggestions must be acted on 39 Copyright © 2022 Pearson Education, Inc.
B) Participation must have real value C) The invitation to participate is symbolic D) Teams are formed to implement ideas E) Jobs can be redesigned to support suggestions Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 140) Which of the following is an advantage to using work teams in an organization? A) Increased job satisfaction B) Increased effectiveness in traditionally structured organizations C) Less need for company-wide communication D) Less need for job redesign E) Ability to work on teams from remote locations Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 141) In which way can an organization increase job satisfaction? A) Provide all employees with the same motivating factors B) Add one or more motivating factor to job activities C) Increase the use of teams at the workplace D) Use pay as the only source of motivation E) Allow employees to establish client relationships Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 142) Which of the following is the benefit of job enrichment programs? A) Improved client relationships B) Less need for team work and work groups C) Increase job satisfaction D) Lower wages and benefit costs E) The redesign of jobs that leads to the elimination of jobs Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking 40 Copyright © 2022 Pearson Education, Inc.
LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 143) Which of the following allows for workers to do a significant portion of their work away from the traditional office setting? A) Natural work groups B) Job rotation C) Job sharing D) Telecommuting E) Flextime Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. AACSB: Analytical thinking144) The essence behind management by objectives (MBO) is that performance goals are used to direct and motivate behavior. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 145) Rewards can be used as a type of positive reinforcement. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 146) With job rotation, conventional office space is redesigned to accommodate jobs that are less dependent on assigned spaces. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 147) Participation and empowerment work more effectively in large firms than in small firms. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge 41 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Analytical LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 148) Job rotation is a form of job enrichment. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 149) With job sharing, companies often experience increased turnover. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 150) MBO involves managers and subordinates in setting goals and evaluating progress. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. AACSB: Application of knowledge 151) According to many experts, motivational impact is the biggest advantage of MBO. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 152) The use of teams can increase motivation and job satisfaction. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 153) According to social learning theory, people learn, in part, because others expect them to. Answer: TRUE Difficulty: Moderate AACSB: Analytical thinking 42 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Analytical LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 154) In what three ways is job redesign typically implemented? Answer: Job redesign is usually implemented through combining tasks, forming natural work groups, or through establishing client relationships. Job redesign is usually implemented through combining tasks, forming natural work groups, or through establishing client relationships. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 155) How can teams lead to higher levels of employee motivation and satisfaction in smaller firms? Answer: They help employees make decisions more quickly and effectively. In addition, participation on teams enhances companywide communications and encourages organizational members to feel more like a part of the organization. Teams give employees opportunities to feel as if their level of contribution is meaningful. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Application LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 156) Under what conditions might the use of work teams be inappropriate? Answer: Work teams may not be appropriate when workers perform repetitive, highly specialized tasks. Basing pay on team productivity can result in resentment, as faster workers feel that slower workers reduce the group's total output, and slower workers feel their coworkers are putting pressure on them to produce more. Teamwork is not always appropriate for every kind of work. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 157) Discuss management by objectives (MBO). Answer: MBO is a system of collaborative goal setting that extends from the top of an organization to the bottom. MBO involves both managers and subordinates in setting goals and evaluating progress. MBO can serve as a program for improving satisfaction and motivation. Management by objectives is the most frequently used method for setting performance goals, which are commonly used to direct and motivate behavior. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Concept 43 Copyright © 2022 Pearson Education, Inc.
LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 158) Discuss modified work schedules and how they increase job satisfaction. Answer: Modified work schedules are different approaches to working hours. Modified work schedules can give employees more flexibility in balancing work with life. Work sharing programs and flextime programs, such as telecommuting, give employees more freedom in their professional and personal lives. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 159) Discuss the potential benefits to the employer from a flextime program. Answer: Employers implementing flextime programs can expect a number of benefits. Studies have shown that the increased sense of freedom associated with flextime reduces stress and improves individual productivity. In urban areas, flextime programs can reduce traffic congestion and similar problems that contribute to stress and lost work time. Employers also benefit from higher levels of commitment and job satisfaction. Flextime programs can increase employee satisfaction and motivation by helping them to balance work and life. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 160) Discuss ways in which managers can link the concept of punishment and rewards as a form of behavior modification. Answer: Some managers try to influence workers' behavior through systematic rewards and punishments for specific behaviors. Such managers first try to define the specific behaviors that they want their employees to exhibit (working hard, being courteous to customers, stressing quality) and the specific behaviors they want to eliminate (wasting time, being rude to customers, ignoring quality). Then they try to shape employee behavior by linking positive reinforcement with desired behaviors and punishment with undesired behaviors. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation. 161) Describe how job enrichment programs increase job satisfaction. Answer: Job enrichment is intended to add one or more motivating factors to job activities. For example, job rotation programs expand growth opportunities by rotating employees through various positions in the same firm. Workers gain not only new skills but also a broader overview of their work and their organization. Other programs focus on increasing responsibility or recognition. Difficulty: Moderate 44 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Application LO: 8.5: Describe some of the strategies and techniques used by organizations to improve employee motivation.
45 Copyright © 2022 Pearson Education, Inc.
Business Essentials, 13e (Ebert/Griffin) Chapter 9 Leadership and Decision Making 1) Which of the following do organizations need in order to be effective? A) More leadership than management B) More management than leadership C) Both leadership and management D) Either leadership or management E) Neither leadership nor management Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.1: Define leadership and distinguish it from management. 2) Which of the following describes the concept of leadership? A) The processes and behaviors used by someone to determine the optimal decision among several options. B) The processes and behaviors used by someone to motivate, inspire, and influence the behaviors of others. C) The processes and behaviors used by someone to establish the organizational structure of a firm. D) The processes and behaviors used by someone to manage the functioning of an organization. E) The processes and behaviors used by someone to achieve tangible outcomes within an organization. Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 9.1: Define leadership and distinguish it from management. 3) Whereas managers focus on plans, results, and goals, what do leaders focus on? A) Productivity B) Profitability C) Inspiration D) Sales E) Organization Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical LO: 9.1: Define leadership and distinguish it from management. 4) What type of power is granted through the established hierarchy within the organization? A) Legitimate power B) Reward power C) Referent power 1 Copyright © 2022 Pearson Education, Inc.
D) Expert power E) Coercive power Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical LO: 9.1: Define leadership and distinguish it from management. 5) Salary increases, bonuses, promotions, praise and job assignments are all examples of what type of power? A) Legitimate power B) Reward power C) Referent power D) Expert power E) Coercive power Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical LO: 9.1: Define leadership and distinguish it from management. 6) What type of power is more abstract, often based on loyalty or charisma? A) Legitimate power B) Reward power C) Referent power D) Expert power E) Coercive power Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical LO: 9.1: Define leadership and distinguish it from management. 7) When someone is able to act as both a leader and a manager, what type of power do they possess that others often do not? A) Legitimate power B) Reward power C) Referent power D) Expert power E) Coercive power Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.1: Define leadership and distinguish it from management. 8) Which of the following are considered to be those who are in the best position to affect the 2 Copyright © 2022 Pearson Education, Inc.
behaviors of others and motivate them to be more productive? A) Managers B) Executives C) Customers D) Leaders E) Entrepreneurs Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.1: Define leadership and distinguish it from management. 9) Which of the following is part of the role of a leader? A) Organizing B) Planning C) Hiring D) Monitoring E) Controlling Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.1: Define leadership and distinguish it from management. 10) Which of the following is part of the role of a manager? A) Aligning B) Inspiring C) Monitoring D) Agenda setting E) Planning Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.1: Define leadership and distinguish it from management. 11) Which of the following is defined as the ability to affect the behavior of others? A) Power B) Coerciveness C) Expertise D) Reference E) Rewards Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.1: Define leadership and distinguish it from management. 3 Copyright © 2022 Pearson Education, Inc.
12) Which of the following is another name for the legitimate power granted though the organizational hierarchy? A) Reward B) Authority C) Identification D) Charisma E) Expertise Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.1: Define leadership and distinguish it from management. 13) Larry is an employee who likes to get his way at work, and will verbally abuse and threaten those who challenge him. Which type of power structure does Larry use to get his way with coworkers? A) Legitimate B) Reward C) Coercive D) Referent E) Expert Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.1: Define leadership and distinguish it from management. 14) Kim is considered to be a strong leader, and many of her employees mimic her behavior because they admire her. For example, they might work the same hours, and display enthusiasm and support for her ideas. Which type of power is Kim especially well developed in? A) Expert B) Coercive C) Emotional D) Reward E) Referent Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.1: Define leadership and distinguish it from management. 15) Estelle has a client that is often difficult and demanding. Yet, the client will not work with anyone but her because they feel Estelle listens and understands them, and is responsive to their needs. Which type of power does Estelle use when dealing with this client? A) Referent B) Reward C) Expert D) Managerial 4 Copyright © 2022 Pearson Education, Inc.
E) Coercive Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.1: Define leadership and distinguish it from management. 16) Management is defined as the processes and behaviors used to motivate, inspire, and influence the behaviors of others. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 9.1: Define leadership and distinguish it from management. 17) All managers are leaders, but not all leaders are managers. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 9.1: Define leadership and distinguish it from management. 18) A person can be both a leader and a manager. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 9.1: Define leadership and distinguish it from management. 19) Leading and managing are discrete and separate activities. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 9.1: Define leadership and distinguish it from management. 20) Managers have very little legitimate power over their subordinates. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 9.1: Define leadership and distinguish it from management. 21) What is the difference between leadership and management within an organization? Answer: Leadership is necessary to create and direct change at an organization by influencing and motivating its members. Management, on the other hand, is more concerned with everyday administrative activities in order to bring stability to and obtain reliable results from the 5 Copyright © 2022 Pearson Education, Inc.
organization. A person can be a manager, a leader, both, or neither. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 9.1: Define leadership and distinguish it from management. 22) Identify the five types of leadership power and explain each. Answer: Power is the ability to affect the behavior of others. Legitimate power is power granted through the organizational hierarchy; it is the power defined by the organization to be accorded to people occupying a particular position. Reward power is the power to give or withhold rewards. Rewards that a manager may control include salary increases, bonuses, promotion recommendations, praise, recognition, and interesting job assignments. Coercive power is the power to force compliance by means of psychological, emotional, or physical threat. Compared with legitimate, reward, and coercive power, which are relatively concrete and grounded in objective facets of organizational life, referent power is abstract. It is based on identification, imitation, loyalty, or charisma. Expert power is derived from information or expertise. The more important the information and the fewer the people who have access to it, the greater is the degree of expert power possessed by any one individual. Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Application LO: 9.1: Define leadership and distinguish it from management. 23) What area was the earliest research on leadership MOST concerned with? A) Leadership behaviors B) Leadership traits C) Leadership situations D) Leadership integrity E) Leadership roles Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 9.2: Summarize early approaches to the study of leadership. 24) Leadership researchers in the late 1940s believed that leaders should engage in which of the following behaviors? A) Mostly employee-focused leader behavior B) Mostly task-focused leader behavior C) Both employee-focused leader behavior and task-focused leader behavior in equal amounts D) A mixture of employee-focused leader behavior and task-focused behavior depending on the task E) A mixture of employee-focused leader behavior and task-focused behavior depending on the employees Answer: C Difficulty: Difficult AACSB: Application of knowledge 6 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Critical Thinking LO: 9.2: Summarize early approaches to the study of leadership. 25) What was a major problem with the trait approach to leadership? A) The studies were too innovative and thus were not taken seriously at the time. B) The studies were too inconsistent and thus not very practical. C) The results were not very inspiring and thus ignored. D) The results were found to be too pessimistic and thus were dismissed as useless. E) The studies were too focused on certain leaders and thus were dismissed as irrelevant. Answer: B Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Analytical LO: 9.2: Summarize early approaches to the study of leadership. 26) Which of the following BEST describes task-focused leader behavior? A) Concentration on how tasks should be performed B) Concentration on which tasks should be performed C) Concentration on why tasks should be performed D) Concentration on who should perform which tasks E) Concentration on when tasks should be performed Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 9.2: Summarize early approaches to the study of leadership. 27) Which of the following BEST describes employee-focused leader behavior? A) Concentration on both the work quality and work quantity of employees B) Concentration on both the well-being and work quality of employees C) Concentration on both the satisfaction and work quantity of employees D) Concentration on both the satisfaction and the well-being of employees E) Concentration on both the work quantity and the well-being of employees Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.2: Summarize early approaches to the study of leadership. 28) In interviews with two leadership applicants, a manager tried to determine each person's knowledge of the industry, level of energy, and level of self-esteem. With which of the following concepts of leadership is the manager MOST concerned here? A) Charismatic leadership B) Behavioral leadership C) Situational leadership D) Trait-based leadership E) Transformational leadership 7 Copyright © 2022 Pearson Education, Inc.
Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 9.2: Summarize early approaches to the study of leadership. 29) Which of the following statements BEST describes the assumptions made by researchers of the behavioral approach to leadership? A) Behaviors of effective leaders differ in various situations. B) Behaviors of effective leaders are the same in all situations. C) Behaviors of effective leaders reflect the proper traits for effective leadership. D) Behaviors of effective leaders differ as reflected by different traits for effective leadership. E) Behaviors of effective leaders reflect the proper disposition for effective leadership. Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 9.2: Summarize early approaches to the study of leadership. 30) What type of leader behavior is focused on the motivation and well-being of those who work in the organization? A) Behavior B) Task C) Employee D) Situational E) Path-glory Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 9.2: Summarize early approaches to the study of leadership. 31) Which of the following are characteristics identified in current approaches to employeefocused leader behavior? A) Emotional and mental intelligence, drive, and integrity B) Long-term vision, profitability, and competitiveness C) Task, goals, and performance standards D) Performance standards, profitability, and competitiveness E) Drive, height, and mental capacity Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.2: Summarize early approaches to the study of leadership. 32) Which of the following approaches to leadership focused on a list of potential leadership skills as a way to explain who would become a distinguished leader? 8 Copyright © 2022 Pearson Education, Inc.
A) Situational B) Path-glory C) Trait D) Decision tree E) Behavioral Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 9.2: Summarize early approaches to the study of leadership. 33) Which behavioral approach to leadership considers each step that needs to be done to meet certain goals and achieve certain performance standards? A) Trait-focused B) Universally-focused C) Task-focused D) Situation-focused E) Employee-focused Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 9.2: Summarize early approaches to the study of leadership. 34) Miguel is a new manager, hired to replace a manager whose group had very low productivity and lacked motivation. Which of the following should Miguel emphasize with his workgroup to improve these issues? A) Coercive power B) Task-focused behaviors C) Situational behaviors D) Expert power E) Loyalty Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 9.2: Summarize early approaches to the study of leadership. 35) The behavioral approach to the study of leadership identified two main areas of effective leadership behavior: trait-focused behavior and goal-focused behavior. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.2: Summarize early approaches to the study of leadership. 36) The behavioral approach to leadership assumes that appropriate leader behavior varies from 9 Copyright © 2022 Pearson Education, Inc.
one situation to another. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical LO: 9.2: Summarize early approaches to the study of leadership. 37) The behavioral approach to the study of leadership emphasized the actions taken by an effective leader rather than any specific traits. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical LO: 9.2: Summarize early approaches to the study of leadership. 38) Leaders should try to use both task-focused and employee-focused leader behaviors to increase job satisfaction and performance. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.2: Summarize early approaches to the study of leadership. 39) Effective leaders use the same leadership traits in all situations. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.2: Summarize early approaches to the study of leadership. 40) The behavioral approach to leadership focused on determining what behaviors are employed by leaders. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.2: Summarize early approaches to the study of leadership. 41) Explain why the trait approach to leadership has experienced a resurgence in recent years. Answer: Although the trait approach was all but abandoned several decades ago, in recent years, it has resurfaced. For example, some researchers have again started to focus on a limited set of traits. These traits include emotional intelligence, mental intelligence, drive, motivation, honesty and integrity, self-confidence, knowledge of the business, and charisma. The initial research findings from this work show promise but are far from being definitive. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical 10 Copyright © 2022 Pearson Education, Inc.
LO: 9.2: Summarize early approaches to the study of leadership. 42) What is the difference between employee-focused leadership and task-focused leadership? Answer: Employee-focused leadership is when a leader focuses on the satisfaction, motivation, and well-being of his or her employees, and task-focused leadership is when a leader focuses on how tasks should be performed in order to meet certain goals and to achieve certain performance standards. These two basic forms of leader behavior were identified by researchers who assumed that the behaviors of effective leaders differed somehow from the behaviors of less effective leaders, and the behaviors of effective leaders would be the same across all situations. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 9.2: Summarize early approaches to the study of leadership. 43) Which approach to leadership is based on the assumption that appropriate behavior varies from one experience to another? A) Situational leadership B) Trait-based leadership C) Transformational leadership D) Transactional leadership E) Charismatic leadership Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical LO: 9.3: Discuss the concept of situational approaches to leadership. 44) Which of the following models of leadership is based on the expectancy theory of motivation and suggests that the function of a leader is to make rewards available to the workplace? A) Supportive B) Path-goal C) Decision tree D) Employee-focused E) Leader-member exchange Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 9.3: Discuss the concept of situational approaches to leadership. 45) Under the path-goal theory of leadership, what type of leader behavior includes setting challenging goals for the employee with the expectation that those goals will be achieved? A) Directive B) Supportive C) Participative D) Achievement-oriented E) Decision tree 11 Copyright © 2022 Pearson Education, Inc.
Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.3: Discuss the concept of situational approaches to leadership. 46) Which approach to leadership focuses only on subordinate participation in decision making, yet does not address other aspects of leadership? A) Decision tree B) Leader-member exchange C) Transformational D) Path-glory E) Directive leader Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.3: Discuss the concept of situational approaches to leadership. 47) Which method of leadership encourages supervisors to establish a small number of trusted subordinates and give them special duties and privileges? A) Transformational B) Charismatic C) Leader-member exchange D) Decision tree E) Path-glory Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.3: Discuss the concept of situational approaches to leadership. 48) When a leader asks for employees' suggestions and input in the decision-making process, what type of leadership style is being utilized? A) Directive B) Supportive C) Participative D) Achievement E) Transformational Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.3: Discuss the concept of situational approaches to leadership. 49) A leader who sets levels of expectation, then gives direction and guidance and determines work schedules uses what type of leadership theory? 12 Copyright © 2022 Pearson Education, Inc.
A) Transformational B) Directive C) Supportive D) Participative E) Achievement-oriented Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.3: Discuss the concept of situational approaches to leadership. 50) Which approach to leadership attempted to identify various forms of leader behavior that result in contingent outcomes and consequences? A) Universal B)Situational C) Behavioral D) Task-focused E) Trait Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.3: Discuss the concept of situational approaches to leadership. 51) When considering the situational approach to leadership, which of the following is a characteristic of subordinates? A) Value system B) Readiness to assume responsibility C) Personal inclinations D) Feelings of security E) Personal inclinations Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.3: Discuss the concept of situational approaches to leadership. 52) Which of the following can be assumed under the decision tree approach to leadership? A) Leaders represent a vertical dyad of behaviors B) The same leader may display different leadership styles C) Most leaders prefer special duties requiring responsibility and autonomy D) Leaders will only pursue outcomes that are likely to be achieved E) Personal paths to success should be clearly identified Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.3: Discuss the concept of situational approaches to leadership. 13 Copyright © 2022 Pearson Education, Inc.
53) The situational approach to leadership is concerned with the contingent outcomes and consequences of leader behavior rather than universal outcomes and consequences. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 9.3: Discuss the concept of situational approaches to leadership. 54) The situational approach to leadership gives equal weight to the elements of the situation and the characteristics of the leader and followers in order to ascertain the outcomes of a leader's actions. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 9.3: Discuss the concept of situational approaches to leadership. 55) Leadership characteristics include the manager's value system, confidence in subordinates, personal inclinations, feelings of security, and actual behaviors. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 9.3: Discuss the concept of situational approaches to leadership. 56) The leader-member exchange model stresses the importance of using different leadership styles for each situation. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 9.3: Discuss the concept of situational approaches to leadership. 57) Describe the leader-member exchange model of leadership and how it differs from precious approaches to leadership. Answer: The leader–member exchange (LMX) model stresses the importance of variable relationships between super-visors and each of their subordinates. Each superior–subordinate pair represents a “vertical dyad.” The model differs from previous approaches in that it focuses on the differential relationship leaders often establish with different subordinates. This model suggests that supervisors establish a special relationship with a small number of trusted subordinates, referred to as “the in-group.” The in-group usually receives special duties requiring responsibility and autonomy; they may also receive special privileges. Subordinates who are not a part of this group are called “the out-group,” and they receive less of the supervisor’s time and attention. However, the key element of this theory is the concept of individual vertical dyads and how leaders have different relationships with each of their subordinates Difficulty: Moderate AACSB: Application of knowledge 14 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Application LO: 9.3: Discuss the concept of situational approaches to leadership. 58) Compare leadership characteristics to subordinate characteristics in the situational approach to leadership. Answer: Leadership characteristics include the manager’s value system, confidence in subordinates, personal inclinations, feelings of security, and actual behaviors. Subordinate characteristics include the subordinates’ need for independence, readiness to assume responsibility, tolerance for ambiguity, interest in the problem, understanding of goals, knowledge, experience, and expectations. Situational characteristics that affect decision making include the type of organization, group effectiveness, the problem itself, and time pressures. Three important situational approaches to leadership are (1) the path–goal theory, (2) the decision tree approach, and (3) the leader–member exchange model. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 9.3: Discuss the concept of situational approaches to leadership. 59) The situational approach to leadership was first proposed as a continuum of leadership behavior. Explain the two extreme ranges of the continuum. Answer: At one extreme, the leader makes decisions alone; at the other end, employees make decisions with only minimal guidance from the leader. The situational approach to leadership assumes that appropriate leader behavior varies from one situation to another. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 9.3: Discuss the concept of situational approaches to leadership. 60) Describe how the behavioral approach to leadership could apply to the situational approach to leadership. Answer: The behavioral approach to leadership suggests that two forms of leadership prevail: task-focused leader behavior, in which a leader focuses on how tasks should be performed in order to meet certain goals, and employee-focused leader behavior, in which a leader focuses on the satisfaction, motivation, and well-being of his or her employees. The situational approach posits that the actions of a leader depend completely on the given circumstances of the organization to be led. Certain circumstances will necessitate certain behaviors from the leader, task-focused or employee-focused, depending upon where the need is greatest. Situational characteristics that affect decision making include the type of organization, group effectiveness, the problem itself, and time pressures. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 9.3: Discuss the concept of situational approaches to leadership. 61) Which of the following may describe charismatic leadership? A) A form of interpersonal attraction based on the perspectives of the leader B) A form of interpersonal attraction that inspires support and acceptance 15 Copyright © 2022 Pearson Education, Inc.
C) A form of interpersonal guidance based on the perspectives of the managers D) A form of interpersonal guidance that uses highly controlled alternatives E) A form of interpersonal attraction which utilizes group performance norms Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 9.4: Describe transformational and charismatic perspectives on leadership. 62) Which of following describes the activities MOST involved with transactional leadership? A) The implementation of a corporate vision B) The implementation of organizational transformations C) The implementation of regimented activities D) The implementation of employee incentives E) The implementation of situational problem solving Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.4: Describe transformational and charismatic perspectives on leadership. 63) Which of the following is a fundamental element of charismatic leadership? A) Planning B) Controlling C) Analyzing D) Influencing E) Organizing Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.4: Describe transformational and charismatic perspectives on leadership. 64) Which statement is true regarding charismatic leadership? A) Charismatic leadership ideas are unpopular among contemporary managers. B) Many studies have successfully assessed the impact of charismatic leadership. C) Charismatic leadership is recognized as the most important approach to leadership. D) Dependence on charismatic leadership can raise serious ethical concerns. E) Taking over a leadership role from a charismatic leader is often easier than following a leader lacking in charisma. Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 9.4: Describe transformational and charismatic perspectives on leadership. 65) Which of the following describes one of the primary concerns associated with charismatic 16 Copyright © 2022 Pearson Education, Inc.
leadership due to severe devotion to a particular leader? A) The potential lapse of ethical practices B) The potential inability to replace leadership efficiently C) The potential encouragement of micromanaging D) The potential stagnation of corporate vision E) The potential creation of bureaucracy Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 9.4: Describe transformational and charismatic perspectives on leadership. 66) Which of the following accurately describes a primary characteristic of charismatic leaders? A) They tend to set high expectations for themselves and control the expectations of others. B) They tend to set high expectations for themselves and establish high standards for others. C) They tend to establish high standards for themselves and rely on others to accomplish goals. D) They tend to energize others and establish good, stable practices. E) They tend to set high expectations for themselves and establish good, stable practices. Answer: B Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 9.4: Describe transformational and charismatic perspectives on leadership. 67) What type of leadership recognizes the need for change then creates and executes a plan for change? A) Transformational B) Transactional C) Charismatic D) Supportive E) Directive Answer: A Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 9.4: Describe transformational and charismatic perspectives on leadership. 68) Which of the following focuses on the importance of leading for change? A) Transformational leadership B) Expert power C) Risk avoidance D) Coalition formation E) Transactional leadership Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking 17 Copyright © 2022 Pearson Education, Inc.
LO: 9.4: Describe transformational and charismatic perspectives on leadership. 69) Charismatic leaders demonstrate personal excitement, confidence, and a consistent pattern of success as a way to A) envision the future. B) energize others. C) support others. D) display empathy. E) express confidence. Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 9.4: Describe transformational and charismatic perspectives on leadership. 70) Which of the following do charismatic leaders do to enable others? A) Set high expectations B) Envision future trends C) Express confidence D) Demonstrate personal excitement E) Consistently meet or exceed expectations Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 9.4: Describe transformational and charismatic perspectives on leadership. 71) Taking over a leadership role from a charismatic leader is less challenging than taking over from a leader lacking charisma. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical LO: 9.4: Describe transformational and charismatic perspectives on leadership. 72) Few studies have successfully assessed the meaning and impact of charismatic leadership. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 9.4: Describe transformational and charismatic perspectives on leadership. 73) Charismatic leaders let subordinates determine expectations and performance levels. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application 18 Copyright © 2022 Pearson Education, Inc.
LO: 9.4: Describe transformational and charismatic perspectives on leadership. 74) Charismatic leadership can result in blind faith and unethical behaviors. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 9.4: Describe transformational and charismatic perspectives on leadership. 75) Describe the three crucial elements of charismatic leadership. Answer: 1.) Charismatic leaders envision likely future trends and patterns, set high expectations for themselves and for others, and behave in ways that meet or exceed those expectations. 2.) Charismatic leaders energize others by demonstrating personal excitement, personal confidence, and consistent patterns of success. 3.) Charismatic leaders enable others by supporting them, empathizing with them, and expressing confidence in them. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 9.4: Describe transformational and charismatic perspectives on leadership. 76) Compare transformational leadership to transactional leadership. Answer: Transformational leadership focuses on the importance of leading for change (as opposed to leading during a period of stability). According to this view, much of what a leader does involves carrying out what might be thought of as basic management “transactions,” such as assigning work, evaluating performance, and making decisions. Occasionally, however, the leader has to engage in transformational leadership to initiate and manage major change, such as managing a merger, creating a new work team, or redefining the organization’s culture. Thus, transformational leadership is the set of abilities that allows a leader to recognize the need for change, to create a vision to guide that change, and to execute the change effectively. Some experts believe that change is such a vital organizational function that even successful firms need to change regularly to avoid becoming complacent and stagnant. In contrast, transactional leadership is very similar to basic management in that it involves routine, regimented activities. Only a leader with real abilities to influence people can hope to perform both functions successfully. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 9.4: Describe transformational and charismatic perspectives on leadership. 77) Describe a situation in which a leader would choose a more transactional approach to her leadership over a more transformational one. Answer: A company that has successfully reorganized and reinvigorated itself after years of floundering would probably have more need for a leader who is primarily concerned with ensuring that the changes made for better performance remain in place and well-utilized, rather than a leader who will continue to transform the organization. Transformational leadership is the set of abilities that allows a leader to recognize the need for change, to create a vision to guide that change, and to execute the change effectively. In contrast, transactional leadership is essentially the same as management in that it involves routine, regimented activities. 19 Copyright © 2022 Pearson Education, Inc.
Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Application LO: 9.4: Describe transformational and charismatic perspectives on leadership. 78) Identify three crucial elements of charismatic leadership. Answer: Most experts today acknowledge three crucial elements of charismatic leadership. Charismatic leaders envision likely future trends and patterns, set high expectations for themselves and for others, and behave in ways that meet or exceed those expectations. Charismatic leaders energize others by demonstrating personal excitement, personal confidence, and consistent patterns of success. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 9.4: Describe transformational and charismatic perspectives on leadership. 79) Which of the following organizational aspects allows employees to perform capably without the direction of a leader? A) Leadership neutralizers B) Leadership substitutes C) Leadership incentives D) Leadership guidelines E) Leadership obstructions Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 9.5: Identify and discuss leadership substitutes and neutralizers. 80) Which of the following BEST describes the effects of leadership neutralizers in an organization? A) They can make leader behavior ineffective. B) They can make leaders more charismatic. C) They can outweigh the need for leader behavior. D) They can make managers become effective leaders. E) They can make leaders more neutral toward employees. Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 9.5: Identify and discuss leadership substitutes and neutralizers. 81) Which of the following may be an organizational factor that can serve as a substitute for leadership? A) Individual professionalism B) Group divisiveness C) Explicit plans and goals 20 Copyright © 2022 Pearson Education, Inc.
D) A loose system of rules and procedures E) A performance-based reward system Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 9.5: Identify and discuss leadership substitutes and neutralizers. 82) When an employee can perform well without a leader, what is indicated? A) Presence of a rigid reward system B) Presence of a leadership neutralizer C) Presence of a leadership substitute D) Presence of a leadership incentive E) Presence of a highly automated system Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 9.5: Identify and discuss leadership substitutes and neutralizers. 83) Which type of factors result in a leadership behavior that has been effective in the past but is no longer working in a new situation? A) Substitutes B) Neutralizers C) Charisma D) Transactional E) Cross-cultural patterns Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 9.5: Identify and discuss leadership substitutes and neutralizers. 84) Which of the following must occur when a leadership behavior has been neutralized? A) Transformational leadership would have to be avoided B) The leader would have to take on the role of a coach C) Charismatic leadership would have to be used D) The leader would have to be replaced E) A new approach would have to be identified Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 9.5: Identify and discuss leadership substitutes and neutralizers. 85) In addition to elements of the job, which of the following will limit a leader's ability to make a difference, creating a leadership neutralizer? 21 Copyright © 2022 Pearson Education, Inc.
A) Job structure B) Intrinsically satisfying work C) Embedded feedback D) Group factors E) Automation Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 9.5: Identify and discuss leadership substitutes and neutralizers. 86) Which of the following can act as an alternative to traditional leadership? A) Leadership substitutes B) Management C) Ethics D) Virtual leadership E) Nonprogrammed decisions Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 9.5: Identify and discuss leadership substitutes and neutralizers. 87) Which of the following will act as a neutralizer for individual factors of leadership substitutes? A) Rigid rules and procedures B) Explicit plans and goals C) Indifference to rewards D) High levels of group cohesiveness E) Intrinsically satisfying work Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 9.5: Identify and discuss leadership substitutes and neutralizers. 88) Ariel is leading a team for a short-term project. She would like the team to manage itself on a daily basis, with input from her only when needed. Which of the following leadership substitutes should Ariel work to build in the group? A) Rigid rules B) Interdependence C) Embedded feedback D) Experience and training E) Professionalism Answer: B Difficulty: Moderate AACSB: Application of knowledge 22 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Application LO: 9.5: Identify and discuss leadership substitutes and neutralizers. 89) Leadership neutralizers tend to strongly affect a leader's ability to affect a subordinate's performance. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 9.5: Identify and discuss leadership substitutes and neutralizers. 90) Rigid rules and procedures, along with individual professionalism, may render leader behavior unnecessary. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 9.5: Identify and discuss leadership substitutes and neutralizers. 91) High levels of experience and group cohesiveness among subordinates cannot neutralize leadership. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 9.5: Identify and discuss leadership substitutes and neutralizers. 92) Employees can perform their jobs even without the direction of a leader. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 9.5: Identify and discuss leadership substitutes and neutralizers. 93) Discuss neutralizers that would render leadership behavior ineffective when considering organization factors Answer: Organization factors that would render leadership behavior ineffective include explicit plans and goals, rigid rules and procedures, rigid reward systems not tied to performance, and physical distance between the supervisor and the subordinate. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 9.5: Identify and discuss leadership substitutes and neutralizers. 94) Identify individual factors that would act as leadership neutralizers. Answer: Individual factors that would act as leadership neutralizers include individual professionalism, individual ability, knowledge, and motivation, individual training and 23 Copyright © 2022 Pearson Education, Inc.
experience, and indifference to rewards. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 9.5: Identify and discuss leadership substitutes and neutralizers. 95) How can norms and cohesiveness in a work group neutralize leadership? Answer: Norms and cohesiveness among group members can be so strong that there is nothing a leader can do to change things. These group factors are known as leadership neutralizers due to their tendency to render leader behaviors ineffective. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 9.5: Identify and discuss leadership substitutes and neutralizers. 96) Contrast leadership substitutes with leadership neutralizers. Answer: Leadership substitutes are individual, task, and organizational characteristics that tend to outweigh the leader's ability to affect subordinates' satisfaction and performance. That is, they take the place of many needed aspects of effective leadership. Leadership neutralizers are individual, task, and organizational characteristics that render any attempted leadership behavior ineffective. Group norms and cohesion are among some leadership neutralizers. In some cases, certain factors may actually substitute for leadership, making actual leadership unnecessary or irrelevant. In other cases, factors may exist that neutralize or negate the influence of a leader, even when that individual is attempting to exercise leadership. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Application LO: 9.5: Identify and discuss leadership substitutes and neutralizers. 97) According to current theories of gender roles in leadership, which of the following BEST describes the differences in decision making? A) Males tend to be more democratic than females in making decisions. B) Males tend to be more critical than females in making decisions. C) Males tend to be more autocratic than females in making decisions. D) Males tend to be more rational than females in making decisions. E) Males tend to be more charismatic than females in making decisions. Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.6: Discuss leaders as coaches and examine gender and cross-cultural issues in leadership. 98) Which states the correct definition of collectivism? A) A greater focus on group characteristics than on individual characteristics B) A greater focus on the group than on the individual C) A greater focus on the individual within a group than on the individual without a group D) A greater focus on individuals who are most successful 24 Copyright © 2022 Pearson Education, Inc.
E) A greater focus on groups that have been operative for the longest time Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 9.6: Discuss leaders as coaches and examine gender and cross-cultural issues in leadership. 99) Which states the correct definition of individualism? A) A greater focus on individual characteristics than on cultural characteristics B) A greater focus on the individual than on the group C) A greater focus on the individual within a group than on the individual without a group D) A greater focus on individuals who have been present for the longest time E) A greater focus on individuals who are in leadership roles Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 9.6: Discuss leaders as coaches and examine gender and cross-cultural issues in leadership. 100) Which of the following types of leaders has the primary role of helping a less experienced person learn how to function and to advance within an organization? A) Enabler B) Mentor C) Manager D) Taskmaster E) Motivator Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 9.6: Discuss leaders as coaches and examine gender and cross-cultural issues in leadership. 101) When a Japanese firm sends an executive to lead operations in the United States, which of the following will that executive need to acknowledge the importance of? A) Group contributions B) Aggressiveness C) Loud, verbal exchanges D) Recognition E) Diversity of leadership Answer: D Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 9.6: Discuss leaders as coaches and examine gender and cross-cultural issues in leadership. 102) Which of the following best describes the new, modern role of a leader? A) Overseer 25 Copyright © 2022 Pearson Education, Inc.
B) Individualist C) Collectivist D) Coach E) Autocratic Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 9.6: Discuss leaders as coaches and examine gender and cross-cultural issues in leadership. 103) Which of the following identifies international differences and diversity issues within an organization? A) Culture B) Individualism C) Collectivism D) Diversity E) Autocracy Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 9.6: Discuss leaders as coaches and examine gender and cross-cultural issues in leadership. 104) Which of the following describes the work of the leader as a coach? A) Train team members B) Control situations C) Direct work D) Monitor performance E) Oversee activities Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 9.6: Discuss leaders as coaches and examine gender and cross-cultural issues in leadership. 105) Gary and Mike cannot agree on the best way to resolve a customer issue, so they meet with Kim, their manager. Which of the following should Kim do, as she leads by coaching? A) Provide general direct and mediate issues B) Act as a mentor C) Make the decision D) Change the workgroup E) Direct the work Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 9.6: Discuss leaders as coaches and examine gender and cross-cultural issues in leadership. 26 Copyright © 2022 Pearson Education, Inc.
106) A coaching role may include taking on responsibilities as a mentor. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 9.6: Discuss leaders as coaches and examine gender and cross-cultural issues in leadership. 107) The ethical behaviors of top management are less of a concern today compared to the past. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 9.6: Discuss leaders as coaches and examine gender and cross-cultural issues in leadership. 108) A manager working in the United States will typically see a high level of collectivism among workers. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 9.6: Discuss leaders as coaches and examine gender and cross-cultural issues in leadership. 109) Most leadership theories and studies have focused on the roles of both men and women in leadership roles. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 9.6: Discuss leaders as coaches and examine gender and cross-cultural issues in leadership. 110) Male leaders tend to be no more task-focused than female leaders. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 9.6: Discuss leaders as coaches and examine gender and cross-cultural issues in leadership. 111) Todays leaders act as overseers instead of coaches. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 9.6: Discuss leaders as coaches and examine gender and cross-cultural issues in leadership. 112) Leaders who act as coaches generally maintain a low profile and let the group get its work done with little direct oversight. Answer: TRUE 27 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 9.6: Discuss leaders as coaches and examine gender and cross-cultural issues in leadership. 113) Discuss the importance of understanding the role of gender in leadership styles. Answer: Given that most leadership theories and research studies traditionally focused on male leaders, developing a better understanding of how women might (or might not) lead differently is an obvious important next step. Some early observers, for instance, predicted that (consistent with prevailing stereotypes) female leaders would be relatively warm, supportive, and nurturing as compared to their male counterparts. But research suggests that female leaders are not necessarily more nurturing or supportive than male leaders. Likewise, male leaders are not systematically harsher, more controlling, or more task focused than female leaders. The one difference that has arisen in some cases is that women may be slightly more democratic in making decisions, whereas men have a tendency to be somewhat more autocratic. However, much more work needs to be done to better understand the dynamics of gender and leadership. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 9.6: Discuss leaders as coaches and examine gender and cross-cultural issues in leadership. 114) From a coaching perspective, what roles might an organizational leader assume? Answer: The leader may help select team members, provide some general direction, help train and develop the team, and help the team obtain necessary resources. Coaches from different teams may play important roles in linking the activities and functions of their respective teams. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 9.6: Discuss leaders as coaches and examine gender and cross-cultural issues in leadership. 115) How will leadership styles change in a collective culture when compared to an individualistic culture? Answer: Japan is generally characterized by collectivism (group before individual), whereas the United States is based more on individualism (individual before group). When a Japanese firm sends an executive to head up the firm's operation in the United States, that person will likely find it necessary to recognize the importance of individual contributions and rewards and the differences in individual and group roles that exist in Japanese and U.S. businesses. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 9.6: Discuss leaders as coaches and examine gender and cross-cultural issues in leadership. 116) Which part of the management of an organization would be MOST involved with strategic leadership? A) The top level of management B) The supervisory level of management C) The advisory level of management D) The auxiliary level of management 28 Copyright © 2022 Pearson Education, Inc.
E) All levels of management Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 9.7: Describe strategic leadership, ethical leadership, and virtual leadership. 117) Recent corporate scandals that have shaken the public's faith in business leadership have brought increased attention to what area of leadership? A) Virtual leadership B) Ethical leadership C) Strategic leadership D) Employee-focused leadership E) Charismatic leadership Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 9.7: Describe strategic leadership, ethical leadership, and virtual leadership. 118) Which of the current business characteristics has brought the rise of virtual leadership? A) More communication within the organization B) Little communication among employees C) More face-to-face communication within the organization D) Less face-to-face communication within the organization E) Little communication between employees and management Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 9.7: Describe strategic leadership, ethical leadership, and virtual leadership. 119) In exercising strategic leadership, what is a leader MOST likely to do? A) Focus on company efficiency B) Focus on hiring the right people C) Align the company with its external environment D) Avoid environmental impact on the firm E) Engage the firm with community organizations Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.7: Describe strategic leadership, ethical leadership, and virtual leadership. 120) In addition to understanding the organization's history and culture, what must a leader understand in order to be effective at strategic leadership? A) The external environment 29 Copyright © 2022 Pearson Education, Inc.
B) The needs of stakeholders C) The advantages to virtual leadership D) The hiring process E) How employees respond to various leadership styles Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.7: Describe strategic leadership, ethical leadership, and virtual leadership. 121) Which of the following is considered to be one of the biggest challenges facing virtual leaders and their workers today? A) Clear goals and measurements for projects B) Creating and maintaining relationships with employees C) Highly complex work environments D) Inconsistent "big pictures" for employees E) Organizational commitment Answer: B Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Analytical LO: 9.7: Describe strategic leadership, ethical leadership, and virtual leadership. 122) How can virtual leaders ensure effective communication with remote workers? A) Develop a strong one-way process for communication. B) Limit active listening. C) Use multiple channels to communicate. D) Minimize the use of structured work-related events. E) Allow each remote employee to establish ground rules for getting work done. Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 9.7: Describe strategic leadership, ethical leadership, and virtual leadership. 123) Which of the following is the goal of strategic leadership? A) To provide the foundation of ethical leadership B) To encourage stronger relationships with remote workers C) To lead change so as to enhance competitiveness D) To develop skills that allows for effective international leadership E) To help managers assume the role of mentor and coach Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 9.7: Describe strategic leadership, ethical leadership, and virtual leadership. 30 Copyright © 2022 Pearson Education, Inc.
124) In order to be effective at strategic leadership, which of the following must be recognized by the leader? A) The need for more cross-cultural leadership B) Factors that neutralize leadership effectiveness C) Traits of charismatic leadership D) Current strategic advantages and shortcomings E) Situational approaches to leadership that must be changed Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 9.7: Describe strategic leadership, ethical leadership, and virtual leadership. 125) Which of the following can serve to increase the commitment to high ethical standards for leadership? A) Less pressure on risk avoidance tactics B) Increased reliance on programmed decision making C) Stronger grasp on the external environment that affects the organization D) Increased use of virtual leadership tools E) Stronger corporate governance models Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 9.7: Describe strategic leadership, ethical leadership, and virtual leadership. 126) Business leaders are promoted to senior position because they are ethical people. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.7: Describe strategic leadership, ethical leadership, and virtual leadership. 127) Strategic leaders work toward creating a more hierarchical structure. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.7: Describe strategic leadership, ethical leadership, and virtual leadership. 128) Strategic leadership is a leader's ability to understand the complexities of both the organization and its environment. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 9.7: Describe strategic leadership, ethical leadership, and virtual leadership. 31 Copyright © 2022 Pearson Education, Inc.
129) Virtual leadership refers to the role of leaders in a team environment. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 9.7: Describe strategic leadership, ethical leadership, and virtual leadership. 130) Virtual leaders don't need to concern themselves with creating and maintaining relationships with their employees. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.7: Describe strategic leadership, ethical leadership, and virtual leadership. 131) Strategic leaders need to have a complete understanding of the organization, including its history, culture, strengths and weaknesses. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.7: Describe strategic leadership, ethical leadership, and virtual leadership. 132) The goal of a strategic leader is to lead change. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.7: Describe strategic leadership, ethical leadership, and virtual leadership. 133) Today's increase pressure for ethical leadership means that leaders are now being held responsible for their actions. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.7: Describe strategic leadership, ethical leadership, and virtual leadership. 134) Discuss ways a leader can improve communication when their work group is virtual. Answer: Virtual leadership is emerging as an important issue for organizations. Leaders and their employees traditionally worked together in the same physical location and engaged in faceto-face interactions on a regular basis. But in today’s world, both leaders and their employees may work in locations that are far from one another. Increasingly, communication between leaders and their subordinates happens largely by telephone, e-mail, social media, and online platforms like Zoom. One implication may be that leaders in these situations must work harder at creating and maintaining relationships with their employees that go beyond words on a digital screen. Although nonverbal communication, such as smiles and handshakes, may not be possible 32 Copyright © 2022 Pearson Education, Inc.
online, managers can instead make a point of adding a few personal words in an e-mail or text message (whenever appropriate) to convey appreciation, reinforcement, or constructive feedback. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.7: Describe strategic leadership, ethical leadership, and virtual leadership. 135) Why has virtual leadership become an important issue for organizations? Answer: Many organizations are no longer completely based at one physical building. Face-toface interaction is becoming less common as e-mail and other mobile technologies become available. An effective leader thus must have the skills to organize, motivate, and influence members of her or his organization through a variety of media, i.e., possess good virtual leadership skills. Leaders in these situations must work hard at creating and maintaining relationships with their employees that go beyond words on a computer screen. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 9.7: Describe strategic leadership, ethical leadership, and virtual leadership. 136) Explain the concept and importance of ethical leadership. Answer: In the wake of corporate scandals at firms such as Enron, Boeing, and AIG, faith in business leaders has been shaken. Perhaps now more than ever, high standards of ethical conduct are being held up as a prerequisite for effective leadership. More specifically, business leaders are being called on to maintain high ethical standards for their own conduct, to unfailingly exhibit ethical behavior, and to hold others in their organizations to the same standards. The behaviors of top leaders are being scrutinized more than ever, and those responsible for hiring new leaders for a business are looking more closely at the backgrounds of those being considered. Emerging pressures for stronger corporate governance models are likely to further increase the commitment to select only those individuals with high ethical standards for leadership positions in business and to hold them more accountable than in the past for both their actions and the consequences of those actions. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Application LO: 9.7: Describe strategic leadership, ethical leadership, and virtual leadership. 137) Which of the following is the name for choosing one alternative from among several options? A) Decision making B) Assessment C) Evaluation D) Discernment E) Arbitration Answer: A Difficulty: Easy AACSB: Application of knowledge 33 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Concept LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 138) What is the first step in rational decision making? A) Understanding who will make the decision B) Recognizing that a decision is necessary C) Identifying alternatives to the problem D) Choosing an alternative E) Implementing the alternative Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 139) Which of the following describes a coalition? A) An informal group formed to achieve a common goal B) An innate belief about how something should be accomplished C) A pro-business political party D) The network of management within a firm E) The network of employees within a firm Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 140) Which of the following reflects the extent to which a leader is willing to gamble when making a decision? A) Escalation of commitment B) Overconfidence C) Caution D) Intuition E) Risk propensity Answer: E Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 141) An inward belief about something, often without conscious consideration, is frequently referred to as what? A) Intuition 34 Copyright © 2022 Pearson Education, Inc.
B) Risk taking C) Commitment D) Discernment E) Rationality Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 142) In selecting an alternative when making a decision, what should decision makers keep in mind? A) Finding multiple acceptable alternatives is neither possible nor efficient. B) Finding multiple acceptable alternatives should not take very long. C) Selecting one alternative and rejecting all others will be the decision maker's main objective. D) Selecting one alternative and rejecting all others might not be necessary. E) Selecting one alternative and rejecting all others should be a straightforward process. Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 143) Which of the following dispositions is typical for leaders with a high degree of risk propensity? A) Reliance on intuition B) Reliance on rational decisions C) Aversion to use of intuition D) Aversion to rational decisions E) Reliance on ethical norms Answer: A Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 144) What is a prime ingredient in fostering different levels of risk propensity within an organization? A) Organizational culture B) Profitability level C) Gender differences D) Cross-cultural interactions E) Company size Answer: A 35 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 145) Which of the following represents an informal alliance of individuals who seek to achieve a common goal? A) Lobbying B) Escalation of commitment C) Political force D) Coalition E) Leadership Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 146) Which of the following occurs when a decision maker makes a decision and continues to support that decision, even when it appears to be wrong? A) Escalation of commitment B) Legitimate power C) Risk propensity D) Path-glory E) Intuition Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 147) Which types of decisions are unstructured and require considerable time, energy, and resources to make? A) Conditional B) Nonprogrammed C) Ethical D) Strategic E) Programmed Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 36 Copyright © 2022 Pearson Education, Inc.
148) What type of decision-making process should be used for basic operating systems, procedures, and standard organizational transactions? A) Conditional B) Strategic C) Programmed D) Ethical E) Nonprogrammed Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 149) When there is little ambiguity in the decision-making process, what decision-making condition exists? A) A state of recognition B) A state of risk C) A state of rationality D) A state of certainty E) A state of uncertainty Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 150) When does a state of certainty exist in a decision-making process? A) When conditions and alternatives are understood B) When conditions are complex and turbulent C) When potential payoffs and costs are determined D) When decisions are made based on intuition, judgment, and experience E) When the conditions are clearly defined and the need for a decision is clear Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 151) Which decision-making state occurs when each alternative and the associated costs and payoffs of those alternatives are associated with probability estimates? A) A state of recognition B) A state of risk C) A state of rationality D) A state of certainty 37 Copyright © 2022 Pearson Education, Inc.
E) A state of uncertainty Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 152) When a manager must make a guess as to the probabilities associated with each alternative, what decision-making state is that manager working in? A) Rationality B) Certainty C) Risk D) Recognition E) Uncertainty Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 153) Because of the complexity and dynamism of organizations, what decision-making state occurs when risks, alternatives, and consequences are unknown? A) A state of recognition B) A state of risk C) A state of rationality D) A state of certainty E) A state of uncertainty Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 154) Frank is reviewing alternatives so a problem and trying to determine the best alternative for a given situation. Which of the following is Frank working on? A) Strategic leadership B) Coaching and mentoring C) Risk avoidance D) Decision-making process E) Behavioral decision making Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept 38 Copyright © 2022 Pearson Education, Inc.
LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 155) Which of the following is required from the decision maker in order to make the most effective decision? A) Their propensity toward risk B) An understanding of the situation driving the decision C) Whether the decision is programmed or nonprogrammed D) Decision-making conditions E) Stakeholder perceptions of the potential decision Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 156) In which step of the decision-making process does a stimulus initiate the process? A) Initiating alternatives B) Selecting the best alternative C) Recognizing and defining the decision situation D) Evaluating results E) Evaluating alternatives Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 157) Which of the following is the final step in the decision-making process? A) Evaluating the effectiveness of the decision B) Gaining top leadership support C) Evaluating risk propensity D) Identifying political forces that contribute to the nature of decision making E) Forming a coalition to support the decision Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 158) The more important the decision, the more attention needs to be directed to developing alternatives. Answer: TRUE Difficulty: Easy 39 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Analytical LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 159) Managers with a high degree of risk propensity tend to rely heavily on intuition. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 160) When making a decision, finding multiple acceptable alternatives may be possible; however, selecting just one and rejecting all others is critical. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 161) An escalation of commitment indicates the increased support of all members and leadership in the action. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 162) Besides having more structure than a nonprogrammed decision, programmed decisions also recur more often. Answer: TRUE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 163) The complexity and turbulence of contemporary business make decision making under a state of certainty rare. Answer: TRUE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral 40 Copyright © 2022 Pearson Education, Inc.
perspectives on decision making. 164) The common goal of a coalition is often a preferred decision alternative. Answer: TRUE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 165) Discuss the role of risk propensity in decision making and the influence of organizational culture in shaping risk propensity. Answer: The behavioral element of risk propensity is the extent to which a decision maker is willing to gamble when making a decision. Some managers are cautious about every decision they make. They try to adhere to the rational model and are extremely conservative in what they do. Such managers are more likely to avoid mistakes, and they infrequently make decisions that lead to big losses. Others are extremely aggressive in making decisions and willing to take risks. They rely heavily on intuition, reach decisions quickly, and often risk big investments on their decisions. As in gambling, these managers are more likely than their conservative counterparts to achieve big successes with their decisions; they are also more likely to incur greater losses. The organization’s culture is a prime ingredient in fostering different levels of risk propensity. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 166) Discuss how the identification of alternative to a decision changes based on the importance of the decision. Answer: Once the decision situation has been recognized and defined, the second step is to identify alternative courses of effective action. Developing both obvious, standard alternatives and creative, innovative alternatives is useful. In general, the more important the decision, the more attention is directed to developing alternatives. Although managers should seek creative solutions, they must also recognize that various constraints often limit their alternatives. Common constraints include legal restrictions, moral and ethical norms, and constraints imposed by the power and authority of the manager, available technology, economic considerations, and unofficial social norms. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 167) Describe the steps involved in the rational decision-making process. Answer: The rational decision-making process is a series of rational steps used when making a decision. The first step is to recognize and define the decision situation. Next, the decision maker identifies alternative solutions to the defined problem. The decision maker will then evaluate 41 Copyright © 2022 Pearson Education, Inc.
alternatives. The decision maker then implements the chosen alternative. Following up and evaluating the results is the final step. If all decision situations were approached in this logical way, more decisions would prove successful. Yet decisions are often made with little consideration for logic and rationality. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Application LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 168) Discuss ways in which using a rational perspective to decision making will help when making nonprogrammed decisions. Answer: There are three different conditions in which decisions must be made. These are conditions of certainty, risk, or uncertainty. The rational perspective prescribes a logical process for making decisions. It involves six steps: (1) recognizing and defining the decision situation, (2) identifying alternatives, (3) evaluating alternatives, (4) selecting the best alternative, (5) implementing the chosen alternative, and (6) following up and evaluating the results. The behavioral perspective acknowledges that things such as political forces, intuition, escalation of commitment, and risk propensity are also important aspects of decision making. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making. 169) Discuss why the majority of decisions made by managers are made under a state of uncertainty, and how managers can minimize the risk of poor decisions. Answer: Most of the major decision making in contemporary organizations is done under a state of uncertainty. The decision maker does not know all the alternatives, the risks associated with each, or the likely consequences of each alternative. This uncertainty stems from the complexity and dynamism of contemporary organizations and their environments. The emergence of the Internet as a significant force in today's competitive environment has served to increase both revenue potential and uncertainty for most managers. To make effective decisions in these circumstances, managers must acquire as much relevant information as possible and approach the situation from a logical and rational perspective. Intuition, judgment, and experience always play major roles in the decision-making process under conditions of uncertainty. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 9.8: Relate leadership to decision making and discuss both rational and behavioral perspectives on decision making.
42 Copyright © 2022 Pearson Education, Inc.
Business Essentials, 13e (Ebert/Griffin) Chapter 10 Human Resource Management and Labor Relations
1) Which of the following is considered the starting point in attracting qualified new employees? A) Job analysis B) Recruitment C) Planning D) Training E) Compensation Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.1: Define human resource management, discuss its strategic significance, and explain how managers plan for their organization's human resource needs. 2) Which of the following describes ,the purpose of a skills inventory? A) To plan, and identify people for transfer or promotion B) To list key managerial positions C) To describe the specifications for a job D) To assess trends in previous human resource usage E) To hire people from outside the organization Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 10.1: Define human resource management, discuss its strategic significance, and explain how managers plan for their organization's human resource needs. 3) Which of the following outlines the duties of a job, its working conditions, and the tools, materials, and equipment used to perform it? A) Replacement chart B) Job specification C) Job description D) Job analysis E) Skills inventory Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 10.1: Define human resource management, discuss its strategic significance, and explain how managers plan for their organization's human resource needs. 4) Which of the following describes the skills, abilities, and qualifications required for a job? A) Staffing survey B) Advertising write up 1 Copyright © 2022 Pearson Education, Inc.
C) Job specification D) Employee analysis E) Replacement chart Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 10.1: Define human resource management, discuss its strategic significance, and explain how managers plan for their organization's human resource needs. 5) Which of the following collects information on each employee's education, skills, work experiences, and career aspirations? A) Managerial grid B) Employee information system C) Job analysis D) Job specification E) Labor forecast Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 10.1: Define human resource management, discuss its strategic significance, and explain how managers plan for their organization's human resource needs. 6) Which of the following reflects an organization's investment in attracting and motivating an effective workforce? A) Human capital B) Talent management C) HR planning D) Internal forecasting E) Job descriptions Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.1: Define human resource management, discuss its strategic significance, and explain how managers plan for their organization's human resource needs. 7) Where can a manager find information on the skills, abilities and other qualifications needed to perform a job successfully? A) Talent management files B) Job specification C) Human capital systems D) Job analysis E) Job description Answer: B Difficulty: Moderate 2 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Concept LO: 10.1: Define human resource management, discuss its strategic significance, and explain how managers plan for their organization's human resource needs. 8) What is the systematic study of jobs within an organization? A) Talent management B) Job specification C) Human capital systems D) Job analysis E) Job description Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.1: Define human resource management, discuss its strategic significance, and explain how managers plan for their organization's human resource needs. 9) Which of the following indicates an understanding of the skills employees hold and how to best use those skills for the success of the organization? A) Job analysis B) Talent management C) Skills inventory D) Adverse impact E) Human capital Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.1: Define human resource management, discuss its strategic significance, and explain how managers plan for their organization's human resource needs. 10) Jill, the head of Human Resources, is working with the Vice President of Operations to determine which employees have the right skills to move into more senior level positions within three to five years. Which of the following is Jill likely using to plan for specific people and positions? A) External supplies B) Replacement charts C) Job descriptions D) Realistic job previews E) Application forms Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.1: Define human resource management, discuss its strategic significance, and explain how managers plan for their organization's human resource needs. 3 Copyright © 2022 Pearson Education, Inc.
11) Rolland has an open position in his department and he needs to fill it quickly. Where could Rolland go to find an employee with the right skills who is also familiar with the organization and its values? A) State employment commissions B) Colleges C) Employee information system D) Competitors E) Online job boards Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.1: Define human resource management, discuss its strategic significance, and explain how managers plan for their organization's human resource needs. 12) Which of the following is an advantage of using replacement charts to identify potential successors? A) Online job boards can be added to widen the applicant pool B) There is time to plan with jobs to eliminate in the event of an economic downturn C) Salary ranges and benefits can be considered in staffing plans D) There is time to plan developmental experiences for people identified as potential successors E) Job descriptions can be changed to better match the skill set of incoming candidates for open positions Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.1: Define human resource management, discuss its strategic significance, and explain how managers plan for their organization's human resource needs. 13) Which of the following best describes a firm's human resources? A) The total wages and benefits paid to each employee B) The ability to hire the right person at the right time for the right position C) A firm's commitment to its people D) The ability to identify who will move into leadership positions E) All people who comprise the organizations workforce Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.1: Define human resource management, discuss its strategic significance, and explain how managers plan for their organization's human resource needs. 14) When of the following is the first step in the HR planning process? A) Conducting a job analysis B) Forecasting demand for labor 4 Copyright © 2022 Pearson Education, Inc.
C) Forecasting the internal supply of labor D) Determining the external supply of labor E) Developing a plan that matches demand with supply Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.1: Define human resource management, discuss its strategic significance, and explain how managers plan for their organization's human resource needs. 15) Job analysis is the systematic study of jobs within an organization resulting in a job description. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 10.1: Define human resource management, discuss its strategic significance, and explain how managers plan for their organization's human resource needs. 16) Human capital represents the set of organizational activities directed at attracting, developing, and maintaining an effective workforce. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.1: Define human resource management, discuss its strategic significance, and explain how managers plan for their organization's human resource needs. 17) Replacement charts can be used to forecast the external supply of candidates for senior managerial positions in the organization. Answer: FALSE Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Concept LO: 10.1: Define human resource management, discuss its strategic significance, and explain how managers plan for their organization's human resource needs. 18) Talent management reflects the organization's investment in attracting and motivating an effective workforce. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.1: Define human resource management, discuss its strategic significance, and explain how managers plan for their organization's human resource needs. 19) The effective use of Human Resources can positively affect the profitability of an 5 Copyright © 2022 Pearson Education, Inc.
organization. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.1: Define human resource management, discuss its strategic significance, and explain how managers plan for their organization's human resource needs. 20) The first step in determining the need for labor is to match the HR supply to internal demand Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.1: Define human resource management, discuss its strategic significance, and explain how managers plan for their organization's human resource needs. 21) Discuss methods of responding to a shortfall of labor or overstaffing. Answer: After comparing future demand and internal supply, managers can make plans to manage predicted shortfalls or overstaffing. If a shortfall is predicted, new employees can be hired, current employees can be retrained and transferred into understaffed areas, individuals approaching retirement can be enticed to stay on, or labor-saving or productivity-enhancing systems can be installed. If overstaffing is expected to be a problem, the main options are transferring the extra employees, not replacing individuals who quit, encouraging early retirement, and laying off workers. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.1: Define human resource management, discuss its strategic significance, and explain how managers plan for their organization's human resource needs. 22) Describe the purpose of replacement charts at higher levels of an organization. Answer: At higher levels of an organization, managers plan for specific people and positions. The technique most commonly used is the replacement chart, which lists each important managerial position, who occupies it, how long that person will probably stay in it before moving on (either to another position or to retirement), and who is now qualified or soon will be qualified to move into it. This technique allows ample time to plan developmental experiences for people identified as potential successors for critical managerial jobs. When a manager’s performance is reviewed each year, notations are placed in the system about the person’s readiness for promotion, potential positions for promotion, and what development activities are needed to prepare the individual for promotion. Other managers throughout the firm can access the system whenever they have positions available. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.1: Define human resource management, discuss its strategic significance, and explain how managers plan for their organization's human resource needs. 6 Copyright © 2022 Pearson Education, Inc.
23) Discuss ways in which HR functions impact the bottom line of the organization. Answer: most managers understand that the effectiveness of their HR function has a substantial impact on the bottom-line performance of their firm. Poor HR planning can result in spurts of inefficient hiring followed by costly layoffs, which are expensive in terms of unemployment compensation payments, training, public relations, and employee morale. Haphazard compensation systems do not attract, keep, and motivate good employees, and outmoded recruitment practices can expose the firm to expensive and embarrassing discrimination lawsuits. Consequently, the chief HR executive of most large businesses is a vice president directly accountable to the CEO, and many firms develop sophisticated strategic HR plans and integrate those plans with other strategic planning activities. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.1: Define human resource management, discuss its strategic significance, and explain how managers plan for their organization's human resource needs.
24) How do human resource managers use job analysis for human resource planning? Answer: The basis for human resource planning is job analysis. Job analysis is the evaluation of the duties required by a particular job and the qualities required to perform it. HR planning involves job analysis and forecasting the supply and demand for labor. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 10.1: Define human resource management, discuss its strategic significance, and explain how managers plan for their organization's human resource needs. 25) Discuss the strategic importance of human resources within an organization. Answer: Human resources are critical for effective organizational functioning. The importance of HRM (or "personnel," as it is sometimes called) has grown dramatically in the last two decades. Its new importance stems from increased legal complexities, the recognition that HR are a valuable means for improving productivity, and the awareness of the costs associated with poor HRM. The effectiveness of their HR function has a substantial impact on the bottom-line performance of the firm. Poor HR planning can result in spurts of hiring followed by layoffs, which are costly in terms of unemployment compensation payments, training expenses, and morale. Consequently, the chief HR executive of most large businesses is a vice-president directly accountable to the CEO, and many firms are developing strategic HR plans and integrating those plans with other strategic planning activities. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Analytical LO: 10.1: Define human resource management, discuss its strategic significance, and explain how managers plan for their organization's human resource needs. 26) Identify the difference between a job description and a job specification and explain how they each support the job analysis process. Answer: Job analysis is a systematic analysis of jobs within an organization. Most firms have 7 Copyright © 2022 Pearson Education, Inc.
trained experts who handle these analyses. The job description lists the duties and responsibilities of a job; its working conditions; and the tools, materials, equipment, and information used to perform it. The job specification lists the skills, abilities, and other credentials and qualifications needed to perform the job effectively. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 10.1: Define human resource management, discuss its strategic significance, and explain how managers plan for their organization's human resource needs. 27) Which legal concept holds that both employer and employee have the mutual right to terminate an employment relationship any time, for any reason, and without advance notice to the other? A) Quid pro quo B) Affirmative action C) Employment at will D) Mutual consent E) Equal employment opportunity Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 28) Which of the following constitutes an illegal hiring practice under Title VII of the Civil Rights Act of 1964? A) Asking someone about their availability because the position requires a 50-hour work week B) Establishing a diversity committee to help minority employees connect with each other C) Asking a candidate whether or not he attends church, because it is important that candidates are available to work on Saturdays and Sundays D) Keeping track of how many males and females are in the organization E) Requiring an applicant to specify gender on an application Answer: C Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 29) Which key piece of legislation made it illegal to discriminate in all areas of the employment relationship, including hiring, promotion, and compensation? A) Executive Order 11246 B) Civil Rights Act of 1991 C) Equal Pay Act of 1963 D) Title VII of the Civil Rights Act of 1964 E) Fair Labor Standards Act 8 Copyright © 2022 Pearson Education, Inc.
Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 30) Which of the following pieces of legislation made it easier to sue an employer for discrimination, but limited how much could be awarded in damages? A) Equal Employment Opportunity Act of 1972 B) Civil Rights Act of 1991 C) Equal Pay Act of 1963 D) Title VII of the Civil Rights Act of 1964 E) Fair Labor Standards Act Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 31) Which Act established the minimum wage and mandated overtime payable to employees who work more than 40 hours per week? A) ERISA B) Wagner Act C) Fair Labor Standards Act D) Taft-Hartley Act E) Civil Rights Act of 1964 Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 32) Who is charged with enforcing the provisions outlined in Title VII of the Civil Rights Act of 1964? A) Supreme Court B) ERISA C) OSHA D) EEOC E) NLRB Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 10.2: Discuss the legal context of human resource management and identify contemporary 9 Copyright © 2022 Pearson Education, Inc.
legal issues. 33) Which type of plan allows employers to intentionally seek out employees from underrepresented groups within the organization? A) Civil Rights B) Adverse impact C) Employment at will D) Patriot Act E) Affirmative action Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 34) Which Act increased management rights when a union is attempting to organize a group within an organization? A) Taft-Hartley B) OSHA C) Wagner Act D) NLRA E) ERISA Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 35) How does the EEOC define sexual harassment in the workplace? A) A single off-color joke that makes a worker uncomfortable B) Any unwelcomed sexual advances C) Persistent sexual advances D) Unwelcome sexual advances made only by members of the opposite sex E) Behavior that is sexual in nature only when it is instigated by a supervisor Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 36) What legal defense can an employer use when charged with using a pre-employment test that creates adverse impact? A) Evidence that the test identifies those who are better able to do the job than others B) Evidence that the employer sought out minorities 10 Copyright © 2022 Pearson Education, Inc.
C) Evidence that the employer treated all employees the same D) Evidence that the test included goals for underused groups E) Evidence that the test identified how hiring goals will be met Answer: A Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 37) Which of the following is used to identify employment goals for underused groups, and how those goals will be achieved? A) Civil rights B) Affirmative action plans C) Equal employment D) Adverse impact E) Supply and demand Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 38) When must an employer have a written affirmative action plan that details how underused groups will be pursued? A) When the employer applies for a loan B) When the employer wants to issue stock C) When the employer holds government contracts D) When the employer expands operations internationally E) When the employer is privately held Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 39) Who is defined as an older worker under the Age Discrimination in Employment Act? A) Those over 30 years of age B) Those over 40 years of age C) Those over 50 years of age D) Those over 60 years of age E) Those over 70 years of age Answer: B Difficulty: Moderate AACSB: Application of knowledge 11 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Application LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 40) The Age Discrimination in Employment Act requires passive nondiscrimination. How do employers practice passive nondiscrimination? A) By seeking employees who are protected by the Act B) By seeking minorities who are protected by the Act C) By providing special treatment to women and minorities D) By treating all who apply fairly E) By increasing salaries for workers covered by the Act Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 41) Which of the following Acts helps to ensure the financial security of pension funds by regulating how they can be invested? A) Employee Retirement Income Security Act B) Wagner Act C) Age Discrimination in Employment Act D) Equal Pay Act E) Fair Labor Standards Act Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 42) What is the purpose of the Family and Medical Leave Act of 1993? A) To extend the length of maternity leaves B) To allow employees to take a leave of absence with pay C) To allow employees to take a leave of absence for family or medical emergencies D) To increase the percentage of payroll spent on health care for workers E) To ensure financial security for all employees, regardless of circumstance Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 43) Which of the following set up procedures for employees to vote on their desire for union representation? A) Taft-Hartley Act 12 Copyright © 2022 Pearson Education, Inc.
B) Labor-Management Relations Act C) Occupational Safety and Health Act D) Wagner Act E) Patriot Act Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 44) Which Act established the National Labor Relations Board? A) Taft-Hartley Act B) Patriot Act C) Labor-Management Relations Act D) Occupational Safety and Health Act E) Wagner Act Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 45) Which of the following restricted the ability of some individuals and those from other countries to work with potentially dangerous biological agents? A) Civil Rights Act of 1991 B) National Labor Relations Act C) Occupational Safety and Health Act D) Employment at Will E) Patriot Act Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 46) Which of the following is the offer to exchange something of value, such as a promotion or pay raise, in exchange for sexual favors? A) Fair labor standards B) Labor-management relations C) Employment at will D) Quid pro quo E) Hostile work environment Answer: D Difficulty: Moderate 13 Copyright © 2022 Pearson Education, Inc.
AACSB: Analytical thinking Quest. Category: Application LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 47) Which of the following set the minimum wage and requires the payment of overtime for work in excess of 40 hours per week for some workers? A) Quid pro quo B) Affirmative action C) Fair Labor Standards Act D) Equal Pay Act of 1963 E) Title VII of the Civil Rights Act Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 48) Employers may require an AIDS test as a condition of an offer of employment. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 49) The Occupational Safety and Health Act of 1970 directly mandates the provision of safe working conditions. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 50) In spite of employment at will, employees may not be fired for filing workers' compensation claims. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 51) It is illegal to use any pre-employment test that creates adverse impact. Answer: FALSE 14 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 52) ERISA was designed to regulate how pension funds are invested. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 53) The Family and Medical Leave Act of 1993 requires employers to provide up to 12 weeks of paid leave for family and medical emergencies or when a child is born. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 54) The National Labor Relations Board was established by the Wagner Act to enforce the provisions of the Act. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 55) The Patriot Act gives Human Resource Managers access to previously confidential personal information on employees, such as health and financial records. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 56) The Americans with Disabilities Acts forbids discrimination on the basis of disability and requires reasonable accommodations for disabled employees. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept 15 Copyright © 2022 Pearson Education, Inc.
LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 57) Affirmative Action legally mandated nondiscrimination in employment on the basis of race, creed, sex, or national origin. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 58) Discuss the provisions of the Equal Pay Act of 1963. Answer: The Equal Pay Act of 1963 requires that men and women be paid the same amount for doing the same job. At-tempts to circumvent the law by having different job titles and pay rates for men and women who perform the same work are also illegal. Basing an employee’s pay on seniority or performance is legal, however, even if it means that a man and woman are paid different amounts for doing the same job. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 59) Discuss the key provisions of the Occupational Safety and Health Act and how it is enforced in the workplace. Answer: The Occupational Safety and Health Act (OSHA) of 1970 directly mandates the provision of safe working conditions. It requires that employers (1) provide a place of employment that is free from hazards that may cause death or serious physical harm and (2) obey the safety and health standards established by the Department of Labor. Safety standards are intended to prevent accidents, whereas occupational health standards are concerned with preventing occupational disease. The standards are enforced by OSHA inspections, which are conducted when an employee files a complaint about unsafe conditions or when a serious workrelated accident occurs. Spot inspections of plants in especially hazardous industries such as mining and chemicals are also made. Employers who fail to meet OSHA standards may be fined. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 60) Explain the role of equal employment opportunity and the Equal Employment Opportunity Commission. Answer: The basic goal of equal employment opportunity regulation is to protect people from unfair or inappropriate discrimination in the workplace. Problems arise when distinctions among people are not job related. Courts have determined that illegal discriminatory actions by an organization or its managers cause members of a protected class to be unfairly differentiated from other members of the organization. Discrimination is illegal when based on race, color, 16 Copyright © 2022 Pearson Education, Inc.
religion, gender, age, national origin, disability status, and status as a military veteran. The Equal Employment Opportunity Commission (EEOC) is a division of the Department of Justice. The EEOC was created by Title VII of the 1964 Civil Rights Act and has specific responsibility for enforcing Title VII, the Equal Pay Act, and the Americans with Disabilities Act. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Analytical LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 61) What are the two types of sexual harassment as defined by the courts? Answer: In cases of quid pro quo harassment, the harasser offers to exchange something of value for sexual favors. In hostile work environment harassment, the workplace is tainted by offcolor jokes, lewd comments, or other actions that make employees uncomfortable. Companies must deal with sexual harassment by warning, reprimanding, or firing the harasser. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 62) Describe the purpose of the Wagner Act, including how the Act is enforced. Answer: Union activities and management's behavior toward unions constitute another heavily regulated area. The National Labor Relations Act (also known as the Wagner Act), passed in 1935, sets up a procedure for employees to vote on whether to have a union. If they vote for a union, management is required to bargain collectively with the union. The National Labor Relations Board (NLRB) was established by the Wagner Act to enforce its provisions. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 63) Discuss the implications of the Patriot Act for Human Resource Management. Answer: In response to the terrorist attacks of September 11, 2001, the U.S. government passed legislation that increases its powers to investigate and prosecute suspected terrorists. This legislation, known as the Patriot Act, has several key implications for HRM. For instance, certain restricted individuals (including ex-convicts and aliens from countries deemed by the State Department to have repeatedly provided support for acts of international terrorism) are ineligible to work with potentially dangerous biological agents. More controversial are sections granting government investigators access to previously confidential personal and financial records. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 10.2: Discuss the legal context of human resource management and identify contemporary legal issues. 17 Copyright © 2022 Pearson Education, Inc.
64) Which selection technique is MOST likely to introduce bias in the selection of employees? A) Interview B) Application forms C) Aptitude tests D) Drug testing E) Polygraph tests Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 10.3: Identify the steps in staffing a company and discuss ways in which organizations recruit and select new employees. 65) Which of the following is the process of attracting qualified persons to apply for available jobs? A) Realistic job previews B) Recruiting C) Selection D) Hiring E) Interviews Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.3: Identify the steps in staffing a company and discuss ways in which organizations recruit and select new employees. 66) What is the advantage of promoting from within when filling an opening within the organization? A) Less need for a realistic job preview B) Increased influx of high-quality employees C) Increased employee morale D) Increased turnover E) Increased diversity of employees Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 10.3: Identify the steps in staffing a company and discuss ways in which organizations recruit and select new employees. 67) How can a firm help to ensure a new hire has a thorough understanding of a position before accepting the position? A) Only consider internal candidates B) Have the HR department review the job description with the new hire. C) Institute a higher than standard compensation plan. D) Use realistic job previews. 18 Copyright © 2022 Pearson Education, Inc.
E) Use a different application form for each type of position available. Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 10.3: Identify the steps in staffing a company and discuss ways in which organizations recruit and select new employees. 68) Which of the following is a popular selection device, even though it is a poor predictor of job success? A) Drug test B) Reference check C) Credit check D) Physical exam E) Interview Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 10.3: Identify the steps in staffing a company and discuss ways in which organizations recruit and select new employees. 69) Which of the following is the process of considering current employees as candidates for job openings? A) Internal recruiting B) Performance appraisal C) Development D) External recruiting E) Training Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical LO: 10.3: Identify the steps in staffing a company and discuss ways in which organizations recruit and select new employees. 70) Which of the following is an advantage to using a realistic job preview when hiring new employees? A) There will be less need for job shadowing B) The employee is more likely to remain in the job C) Training time is significantly reduced D) Pay and benefits will be less E) The external recruiting process will be less time consuming Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical 19 Copyright © 2022 Pearson Education, Inc.
LO: 10.3: Identify the steps in staffing a company and discuss ways in which organizations recruit and select new employees. 71) Which of the following is considered to be one of the best predictors of job success? A) Application forms B) Reference checks C) Tests of knowledge, skill, and aptitude D) Realistic job previews E) Interviews Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 10.3: Identify the steps in staffing a company and discuss ways in which organizations recruit and select new employees. 72) Companies often use internal recruitment to build morale and keep high-quality employees from leaving. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 10.3: Identify the steps in staffing a company and discuss ways in which organizations recruit and select new employees. 73) When selecting someone to hire, the first step in selection is usually asking the candidate to take a test. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.3: Identify the steps in staffing a company and discuss ways in which organizations recruit and select new employees. 74) Internal recruiting methods include recommendations, and the use of a digital skills inventory system. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.3: Identify the steps in staffing a company and discuss ways in which organizations recruit and select new employees. 75) Recruiting is not just about hiring the right person for the position; it is about a prospective employee being attracted to a position and company. Answer: TRUE Difficulty: Moderate 20 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Application LO: 10.3: Identify the steps in staffing a company and discuss ways in which organizations recruit and select new employees. 76) The most effective pre-employment test is the interview. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.3: Identify the steps in staffing a company and discuss ways in which organizations recruit and select new employees. 77) The goal of the selection process is to predict job success of candidates. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.3: Identify the steps in staffing a company and discuss ways in which organizations recruit and select new employees. 78) Discuss ways in which an organization can improve the validity of the interview as a preemployment test. Answer: Interviews are a popular selection device, although they are actually often a poor predictor of job success. For ex-ample, biases inherent in the way people perceive and judge others when they first meet affect subsequent evaluations. Interview validity can be improved by training interviewers to be aware of potential biases and by tightening the structure of the interview. In a structured interview, questions are written in advance, and all interviewers follow the same question list with each candidate. Structured interviews tend to be used for jobs that are relatively routine, such as some administrative assistant positions, data entry jobs, and college admissions processing positions. For interviewing managerial or professional candidates, a somewhat less structured approach can be used. Although question areas and informationgathering objectives are still planned in advance, specific questions vary with the candidates’ backgrounds. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.3: Identify the steps in staffing a company and discuss ways in which organizations recruit and select new employees. 79) Discuss the cost of hiring the wrong employee for the position. Answer: Hiring the wrong employee can cost the company about half of a low-skilled worker’s annual wages or three to five times upper-level employees’ annual wages. Therefore, hiring the “wrong” employee for $50,000 per year could cost the company at least $25,000. These costs stem from training, counseling, low productivity, termination, and recruiting and hiring a replacement. Difficulty: Moderate 21 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Application LO: 10.3: Identify the steps in staffing a company and discuss ways in which organizations recruit and select new employees. 80) Distinguish between internal and external recruiting. Answer: Internal recruiting means considering present employees as candidates for openings. External recruiting involves attracting people outside of the organization to apply for jobs. The goal of each process is to attract the most qualified persons to apply for available jobs. Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical LO: 10.3: Identify the steps in staffing a company and discuss ways in which organizations recruit and select new employees. 81) Describe how wages, salaries, incentives, and benefits programs help companies attract and keep skilled workers. Answer: A major factor in retaining skilled workers is a compensation system, the total package that a firm offers employees in return for their labor. Wages are paid for time worked and a salary is paid for discharging the responsibilities of a job. Incentive programs are designed to motivate performance and include bonuses, merit salary systems, pay for performance, profitsharing, gainsharing, and pay-for-knowledge plans. Benefit programs include workers' compensation insurance, retirement plans, and cafeteria benefit plans. Finding the right combination of compensation elements is always complicated by the need to make employees feel valued, while holding down company costs. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.3: Identify the steps in staffing a company and discuss ways in which organizations recruit and select new employees. 82) Which of the following links salary increases to performance levels in nonsales jobs? A) Bonuses B) Collective bargaining C) Merit salary systems D) Cafeteria benefit plans E) Workers' compensation insurance Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 10.4: Describe the main components of a compensation and benefits system. 83) When a paycheck is calculated from the number of hours worked during the week, what type of system is being used to pay employees? A) Gainsharing B) Salary 22 Copyright © 2022 Pearson Education, Inc.
C) Profit sharing D) Wage E) Incentive Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.4: Describe the main components of a compensation and benefits system. 84) Which refers to compensation other than wages and salaries and other incentive pay offered by a firm to its workers? A) Profit-sharing B) Gainsharing C) Benefits D) Pay-for-knowledge E) Variable Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 10.4: Describe the main components of a compensation and benefits system. 85) What is the total package that a firm offers employees in return for their labor? A) Wage B) Salary C) Benefits D) Compensation E) Retention plan Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.4: Describe the main components of a compensation and benefits system. 86) What do top executives often receive as incentives, in theory because they are responsible for the value of the incentive? A) Merit salary systems B) Workers' compensation insurance C) Salaries D) Stock options E) Wages Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.4: Describe the main components of a compensation and benefits system. 23 Copyright © 2022 Pearson Education, Inc.
87) What type of pay system rewards middle managers for especially productive output? A) Variable pay B) Merit raises C) Profit-sharing D) Gainsharing E) Pay-for-knowledge Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.4: Describe the main components of a compensation and benefits system.
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88) If a firm ends its fiscal year with profit, which plan can the firm use to distribute part of the excess to employees? A) Gainsharing plan B) Profit-sharing plan C) Cafeteria plan D) Insurance plan E) Salary-sharing plan Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 10.4: Describe the main components of a compensation and benefits system. 89) Which of the following companywide incentive plans distribute bonuses to employees when a company's costs are reduced through greater work efficiency? A) Wage setting plans B) Pay-for-performance plans C) Profit-sharing plans D) Gainsharing plans E) Pay-for-knowledge plans Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 10.4: Describe the main components of a compensation and benefits system. 90) Some employers provide employees with a fixed dollar amount for benefits, allowing employees to choose between various benefits, such as health insurance, additional vacation days, educational reimbursement, and life insurance. What is the name of this plan? A) Gainsharing B) Profit-sharing C) Cafeteria benefits D) Equal employment E) Retention benefits Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 10.4: Describe the main components of a compensation and benefits system. 91) Where is the starting place most employers consider when setting wage and salary benefits? A) Competitors B) Internal pay structure C) Government mandates D) Demands in the marketplace E) Job boards such as LinkedIn and Career Builders Answer: A 25 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 10.4: Describe the main components of a compensation and benefits system. 92) When an employee is at a point where additional money no longer acts as a motivator, which of the following should a firm consider? A) Additional benefits B) Incentive programs C) Extended paid time off work D) Retirement plans E) Training and development Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 10.4: Describe the main components of a compensation and benefits system. 93) Which of the following can be used to encourage and pay workers to learn new skills that allow them to become proficient at different jobs? A) Gainsharing plans B) Pay for performance plans C) Pay-for-knowledge plans D) Worker compensation E) Bonuses Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 10.4: Describe the main components of a compensation and benefits system. 94) Which of the following is a legally required benefit designed to protect workers who are injured on the job? A) Retirement plans B) Gainsharing C) Family Medical Leave Act (FMLA) D) Stock options E) Worker's compensation insurance Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 10.4: Describe the main components of a compensation and benefits system. 95) Wages refer to compensation usually expressed as an amount paid per year. Answer: FALSE 26 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.4: Describe the main components of a compensation and benefits system. 96) The number of variable pay programs in the United States has been consistently falling for the last decade, and it is predicted that they will continue to decline in popularity. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.4: Describe the main components of a compensation and benefits system. 97) Many firms say that merit raises are a better motivator than variable pay. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 10.4: Describe the main components of a compensation and benefits system. 98) In a company-sponsored pension plan, employees are not allowed or required to make contributions. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.4: Describe the main components of a compensation and benefits system. 99) In recent years, some companies have run into problems because they have not set aside enough money to cover the retirement funds they have agreed to provide. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.4: Describe the main components of a compensation and benefits system. 100) In setting wage and salary levels, a firm may start by looking at competitors' levels. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 10.4: Describe the main components of a compensation and benefits system. 101) A major factor in retaining talented employees is a company's pay scale. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge 27 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Application LO: 10.4: Describe the main components of a compensation and benefits system. 102) Workers Compensation Insurance can replace more traditional insurance plans offered by the organization. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.4: Describe the main components of a compensation and benefits system. 103) Describe the purpose of a defined contribution plan. Answer: Company-sponsored retirement plans were historically set up to pay pensions to workers when they retire (these are referred to as defined benefit plans). Many companies today are transitioning to what are called defined contributions plans, also known as 401(k) plans. Under these plans, contributions from the employee, sometimes matched by the employer, are invested in stock and/or bond funds. The individual’s retirement account is subject to greater risk (as well as potentially greater returns) while the employer incurs less risk. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.4: Describe the main components of a compensation and benefits system. 104) Discuss the issues and option employers face as they try to contain the cost of benefits. Answer: As the range of benefits has increased, so has concern about containing the costs of these benefits. Many companies are experimenting with cost-cutting plans while still attracting and retaining valuable employees. One approach is the cafeteria benefits plan. A certain dollar amount of benefits per employee is set aside so that each employee can choose from a variety of alternatives. Cafeteria benefits plan sets limits on benefits per employee, each of whom may choose from a variety of alternative benefits. Another area of increasing concern is health care costs. Medical expenses have increased insurance premiums, which, in turn, have increased the cost to employers of maintaining benefits plans. Many employers are looking for new ways to cut those costs. One increasingly popular approach is for organizations to create their own networks of health care providers. These providers agree to charge lower fees for services rendered to employees of member organizations. In return, they enjoy established relationships with large employers and, thus, more clients and patients. Insurers also charge less to cover the employees of network members because they make lower reimbursement payments Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.4: Describe the main components of a compensation and benefits system. 105) Explain commonly offered benefits and identify at least two benefits that are mandated by the Federal government. Answer: Benefits and compensation other than wages and salaries and other incentives offered by a firm to its workers, account for an increasing percentage of most compensation budgets. Most companies are required by law to pay tax for Social Security retirement benefits and provide workers' compensation insurance. Most businesses also provide health, life, and 28 Copyright © 2022 Pearson Education, Inc.
disability insurance for their workers, as well as paid time off for vacations and holidays. Many also allow employees to use payroll deductions to buy stock at discounted prices. Counseling services for employees with alcohol, drug, or emotional problems are also becoming more common, as are on-site child-care centers. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 10.4: Describe the main components of a compensation and benefits system. 106) Which of the following types of training occurs while the employee is at his or her place of work? A) On-the-job training B) Vestibule training C) Off-site training D) Incentive training E) Remote training Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 10.5: Describe how managers develop the workforce in their organization through training and performance appraisal. 107) A departmental manager is meeting with each of his subordinates to discuss how well each employee has done their job over the past year. What process is he involved in? A) Job description B) Labor negotiations C) Vestibule assessment D) Performance appraisal E) Salary increase distribution Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.5: Describe how managers develop the workforce in their organization through training and performance appraisal. 108) Which of the following indicates that the assessment of one employee is affecting the ability to be objective when rating another employee? A) Halo error B) Recency error C) 360 degree feedback D) Judgmental methods E) Fixed standards Answer: A Difficulty: Difficult AACSB: Analytical thinking 29 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Critical Thinking LO: 10.5: Describe how managers develop the workforce in their organization through training and performance appraisal. 109) A restaurant is undergoing a change in cuisine and style of service. It is important that new staff is hired and existing staff retrained. Why might the HR manager recommend vestibule training as being highly effective in this situation? A) Prospective and present employees can focus on learning and feedback instead of productivity. B) Off-site training has great value for evaluating the effectiveness of performance appraisals. C) Employees will be reluctant to undertake training removed from the workplace. D) The owners can be more confident that the change to the restaurant will be popular with customers. E) Employees will see limited connections to everyday work in this type of training. Answer: A Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Application LO: 10.5: Describe how managers develop the workforce in their organization through training and performance appraisal. 110) Which of the following will help a manager learn the skills needed to be more successful both now and at some point in the future? A) Training B) Development C) Cafeteria-style plans D) Pay-for-knowledge plans E) Vestibule training Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 10.5: Describe how managers develop the workforce in their organization through training and performance appraisal. 111) How can an organization determine if training has been successful? A) Have employees fill out a survey on how well they liked the training. B) Track how much time employees spent at the training program. C) Monitor the waiting list for the training program. D) Test job performance both before and after training has been complete. E) Measure job performance before training has been completed. Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.5: Describe how managers develop the workforce in their organization through training and performance appraisal. 30 Copyright © 2022 Pearson Education, Inc.
112) Which of the following represents a formal process used to aid in decision making about training, raises, and promotions? A) Development B) Evaluation of training C) Vestibule training D) On-the-job training E) Performance appraisals Answer: E Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 10.5: Describe how managers develop the workforce in their organization through training and performance appraisal. 113) When conducting a performance appraisal that uses output as a basis for appraisal, what type of method is being used? A) Objective B) Judgmental C) Ranking D) Comparison E) Rating Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 10.5: Describe how managers develop the workforce in their organization through training and performance appraisal. 114) What is the advantage of using a rating method rather than a ranking method during the performance review process? A) Each employee is compared to all other employees in the group. B) Each employee is compared to a fixed standard. C) The recency error is eliminated. D) Managers do not need to utilize a 360-degree review. E) Providing employees with meaningful feedback is easier. Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 10.5: Describe how managers develop the workforce in their organization through training and performance appraisal. 115) What type of rating system incorporates feedback from customers, subordinates and peers, among others? A) Ranking B) Recency 31 Copyright © 2022 Pearson Education, Inc.
C) 360-degree feedback D) Judgmental E) Rating Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.5: Describe how managers develop the workforce in their organization through training and performance appraisal. 116) One new approach to the appraisal system is the scheduling of conversations, or "checkins". Which of the following is the goal of using this approach instead of a more formal appraisal process? A) The recency effect is eliminated B) Employers can evaluate performance based on personal bias and add that to the ranking system C) Employees receive feedback on what they are doing well and where they need to improve D) Judgement methods of review become more accurate and meaningful E) Increases and incentives are closely aligned with each check-in meeting Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.5: Describe how managers develop the workforce in their organization through training and performance appraisal. 117) Which of the following is a type of error that occurs in the performance appraisal system when a manager only considers the performance of the employee that has occurred in the past few weeks or month instead of their total performance? A) Recency B) Halo C) Intentional D) Judgmental E) Objective Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.5: Describe how managers develop the workforce in their organization through training and performance appraisal. 118) Which of the following is the first step in developing a training plan? A) Devise a mix of training content that is easy to upgrade and update B) Determine evaluation tools for ensure training success C) Decide if training should be on the job or off site D) Review the performance of attendees E) Determine what needs exist 32 Copyright © 2022 Pearson Education, Inc.
Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.5: Describe how managers develop the workforce in their organization through training and performance appraisal. 119) Performance appraisals are designed to show workers how well they are doing their jobs. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 10.5: Describe how managers develop the workforce in their organization through training and performance appraisal. 120) The best method of evaluating the success of training is to ask how the employees liked the training and which aspects they feel will be most relevant to their job. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.5: Describe how managers develop the workforce in their organization through training and performance appraisal. 121) Web-based training allows for a mix of content that is relatively easy to update and revise. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.5: Describe how managers develop the workforce in their organization through training and performance appraisal. 122) Self-contained training facilities used by some larger corporations are referred to as corporate universities. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.5: Describe how managers develop the workforce in their organization through training and performance appraisal. 123) The best way to evaluate the effectiveness of training is to survey attendees on how much they enjoyed the training and what they learned from it. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application 33 Copyright © 2022 Pearson Education, Inc.
LO: 10.5: Describe how managers develop the workforce in their organization through training and performance appraisal. 124) Discuss ways to evaluate the success of a training program. Answer: The effectiveness of training and development programs should always be evaluated. Typical evaluation approach-es include measuring one or more relevant criteria (such as attitudes or performance) before and after the training, and determining whether the criteria changed as a result of the training and development. Evaluation measures collected at the end of training are easy to get, but actual performance measures collected when the trainee is on the job are more important. Trainees may say that they enjoyed the training and learned a lot, but the true test is whether their job performance improves after their training Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.5: Describe how managers develop the workforce in their organization through training and performance appraisal. 125) Discuss the advantages and disadvantages of using web-based training methods. Answer: Web-based and other digital media–based training are especially popular today. Such methods allow a mix of training content, are relatively easy to update and revise, let participants use a variable schedule, and lower travel costs. However, they are limited in their capacity to simulate real activities and facilitate face-to-face interaction. In addition, most training programs rely on a mix of methods. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.5: Describe how managers develop the workforce in their organization through training and performance appraisal. 126) Describe the process for providing feedback on performance during the performance appraisal review. Answer: The last step in most performance appraisal systems is giving feedback to subordinates about their performances. This is usually done in a private meeting between the person being evaluated and his or her boss. The discussion should generally be focused on the facts: the assessed level of performance, how and why that assessment was made, and how it can be improved in the future. Feedback interviews are not easy to conduct, however. Many managers are uncomfortable with providing candid feedback, especially if the feedback is negative and subordinates are disappointed by what they hear. Properly training managers, however, can help them conduct more effective feedback interviews. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.5: Describe how managers develop the workforce in their organization through training and performance appraisal. 127) How do organizations develop workers' skills? Answer: The firm must acquaint new employees with the firm and their jobs. Managers train 34 Copyright © 2022 Pearson Education, Inc.
employees and develop job skills. On-the-job training occurs while the employee is at work. Offthe-job training takes place away from work. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 10.5: Describe how managers develop the workforce in their organization through training and performance appraisal. 128) Workers such as computer scientists, engineers, and software developers who typically require extensive and highly specialized training, are known as what? A) Technical workers B) Knowledge workers C) Contingent workers D) Labor relation workers E) Union workers Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.6: Discuss workforce diversity, the management of knowledge workers, and the use of a contingent workforce as important changes in the contemporary workplace. 129) Which term refers to employees hired to supplement a firm's permanent workforce? A) Union workers B) Contingent workers C) Knowledge workers D) Flextime workers E) Remote workers Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.6: Discuss workforce diversity, the management of knowledge workers, and the use of a contingent workforce as important changes in the contemporary workplace. 130) What is the advantage for a firm who works to hire from a diverse workforce? A) Limited social awareness among employees B) Increased ability to institute cafeteria-style benefits C) A higher quality labor force D) More flexibility in schedules E) Increased employee retention Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 10.6: Discuss workforce diversity, the management of knowledge workers, and the use of a contingent workforce as important changes in the contemporary workplace. 35 Copyright © 2022 Pearson Education, Inc.
131) In addition to increased flexibility, why do organizations use contingent workers? A) There is less need for training. B) Contingent workers can replace knowledge workers. C) Contingent workers often represent a higher quality labor force. D) Contingent workers cost less. E) The organization simply cannot find full time workers. Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 10.6: Discuss workforce diversity, the management of knowledge workers, and the use of a contingent workforce as important changes in the contemporary workplace. 132) Which of the following represents the range of workers' attitudes, values, beliefs and behaviors? A) Knowledge workers B) Worker characteristics C) Contingency workers D) Workplace diversity E) Unionization Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 10.6: Discuss workforce diversity, the management of knowledge workers, and the use of a contingent workforce as important changes in the contemporary workplace. 133) Which sector of the U.S. workforce will represent nearly one quarter of the workforce by 2050, according to the U.S. Department of Labor? A) Those over the age of 40 B) Caucasians C) Hispanics D) Asians E) Blacks Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 10.6: Discuss workforce diversity, the management of knowledge workers, and the use of a contingent workforce as important changes in the contemporary workplace. 134) Which of the following is the likely outcome when a firm fails to update the skills of knowledge workers? A) Lower wages and benefits B) Loss of competitive advantage C) Increased workforce diversity D) Increased reliance on contingency workers 36 Copyright © 2022 Pearson Education, Inc.
E) Increased likelihood of unionization Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 10.6: Discuss workforce diversity, the management of knowledge workers, and the use of a contingent workforce as important changes in the contemporary workplace. 135) In which way can a firm bring a wider array of information to bear on problems, and increase insights on marketing products to a wider range of consumers? A) Increase workforce diversity B) Increase training funds C) Eliminate the use of contingency workers D) Apply vestibule training methods E) Formalize the 360-deree review process Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 10.6: Discuss workforce diversity, the management of knowledge workers, and the use of a contingent workforce as important changes in the contemporary workplace. 136) The range of workers' attitudes, values, beliefs, and behaviors that differ based on age, gender, or ethnicity all represent workforce diversity. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 10.6: Discuss workforce diversity, the management of knowledge workers, and the use of a contingent workforce as important changes in the contemporary workplace. 137) The increased demand for knowledge workers will require firms to use extra measures, such as higher salaries and signing bonuses, to attract qualified employees. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 10.6: Discuss workforce diversity, the management of knowledge workers, and the use of a contingent workforce as important changes in the contemporary workplace. 138) Workplace diversity can create competitive advantage for firms. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 10.6: Discuss workforce diversity, the management of knowledge workers, and the use of a contingent workforce as important changes in the contemporary workplace. 37 Copyright © 2022 Pearson Education, Inc.
139) Knowledge workers can often be replaced with contingency workers. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 10.6: Discuss workforce diversity, the management of knowledge workers, and the use of a contingent workforce as important changes in the contemporary workplace. 140) It is critical to offer highly specialized training to knowledge workers to prevent their skills from becoming obsolete. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 10.6: Discuss workforce diversity, the management of knowledge workers, and the use of a contingent workforce as important changes in the contemporary workplace. 141) Discuss ways to effectively manage contingent and temporary workers. Answer: One key to managing contingent workers effectively is careful planning and analysis. Rather than having to call in workers sporadically, and with no prior notice, organizations try to bring in specified numbers of workers for well-defined periods of time. A second key is recognizing what can and cannot be achieved by using contingent and temporary workers. For instance, these workers may lack the firm-specific knowledge to perform as effectively as a permanent employee would perform. They are also less committed to the organization and less likely to engage in organizational citizen-ship behaviors. Finally, managers must make decisions about how to integrate contingent workers into the organization. These decisions may be as simple as whether to invite contingent workers to the holiday party, or they may be more complicated, such as whether to grant contingent workers access to such employee benefits as counseling services and child care. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 10.6: Discuss workforce diversity, the management of knowledge workers, and the use of a contingent workforce as important changes in the contemporary workplace.
38 Copyright © 2022 Pearson Education, Inc.
142) Explain the meaning of workforce diversity. Answer: Workforce diversity is the range of workers' attitudes, values, beliefs, and behaviors that differ by gender, race, age, ethnicity, physical ability, and other relevant characteristics. As a result of affirmative action efforts, many U.S. organizations are now committed to creating more diverse workforces. Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 10.6: Discuss workforce diversity, the management of knowledge workers, and the use of a contingent workforce as important changes in the contemporary workplace. 143) How can diversity create competitive advantage? Answer: Workforce diversity is the range of workers' attitudes, values, beliefs, and behaviors that differ by gender, race, and ethnicity. By hiring the best people from every group rather than hiring from just one or a few groups, a firm can develop a higher-quality labor force. A diverse workforce can bring a wider array of information to bear on problems and can provide insights on marketing products to a wider range of consumers. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 10.6: Discuss workforce diversity, the management of knowledge workers, and the use of a contingent workforce as important changes in the contemporary workplace. 144) When does the collective bargaining process begin? A) When the contract is ratified by the members B) When the bargaining zone is identified C) When the union is recognized as the official bargaining agent for members D) When union and management representatives agree to contract terms E) When the employer establishes a maximum limit for pay and benefits Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process. 145) What is the name given to a group of individuals working together to achieve shared jobrelated goals such as higher pay, shorter working hours, greater benefits, or better working conditions? A) Management organization B) Company hierarchy C) Labor union D) External organization E) Permanent employees Answer: C Difficulty: Easy AACSB: Application of knowledge 39 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Concept LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process. 145) Which term refers to a labor action in which employees temporarily walk off the job and refuse to work? A) Strike B) Lockout C) Boycott D) Mediation E) Bargaining Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process. 147) Who are temporary or permanent replacements for striking workers? A) Strikebreakers B) Union busters C) Union breakers D) Contingent workers E) Labor relation teams Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process. 148) What is the process of working with employees who are represented by a union? A) Labor relations B) Human resource management C) Negotiation D) Arbitration E) Contingency recruitment Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process. 149) Which is the process by which union leaders and managers negotiate common terms and conditions of employment for the workers represented by unions? A) Striking 40 Copyright © 2022 Pearson Education, Inc.
B) Picketing C) Labor relations D) Collective bargaining E) Compensation planning Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process. 150) Which of the following occurs when union members agree to avoid buying the products of a targeted employer? A) Lockout B) Boycott C) Mediation D) Arbitration E) Slowdown Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process. 151) If negotiations fail, what can a company choose to use to prevent union employees from coming to work? A) Wildcat strike B) Lockout C) Arbitration D) Economic strike E) Mediation Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process. 152) What occurs when a neutral third party dictates a settlement between two sides that have agreed to submit to outside judgment? A) Mediation B) Arbitration C) Strikebreaker D) Impasse E) Picketing Answer: B 41 Copyright © 2022 Pearson Education, Inc.
Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process. 153) In a union contract, future wage increases are often tied to the Consumer Price Index and provide for A) economic strikes. B) contract renegotiations. C) wage reopener clauses. D) pay tied to productivity. E) cost of living adjustments. Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process. 154) What tactic could a unionized employee take to show why they are striking against an employer? A) Picketing B) Boycotting C) Work slowdowns D) Mediation E) Lockouts Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process. 155) Which alternative to striking encourages workers to work at a pace that results in significantly lower productivity for the organization? A) Work slowdown B) Lock out C) Sickout D) Picket E) Boycott Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process. 42 Copyright © 2022 Pearson Education, Inc.
156) Which of the following is an bargaining issue typically most important to union negotiators? A) Job security B) Management rights C) Hiring policies D) Work assignments E) Insurance co-pays Answer: A Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Application LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process. 157) Which of the following is the term that describes when management and labor cannot agree on a new contract after several bargaining sessions? A) Impasse B) Picketing C) Arbitration D) Lockouts E) Work slowdown Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process. 158) Which of the following is used to suggest a settlement on the other parties, even though both parties know the suggestion cannot be imposed? A) Mediation B) Impasse C) Arbitration D) Lockout E) Boycott Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process. 159) Labor relations refers to dealing with employees who are not represented by a union. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge 43 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Concept LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process. 160) A solution to a long-term contract based solely on COLA is called a wage reopener clause that does not allow wage rates to be renegotiated. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process. 161) Although millions of American workers still belong to unions, union membership as a percentage of the total workforce has steadily declined. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process. 162) Wage reopener clauses are required by law. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process. 163) A work slowdown is an alternative to striking where large numbers of workers perform at a much slower pace than normal. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process. 164) A cost of living adjustment is a clause in the labor contract that ties future earnings to changes in consumer purchasing power. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process. 44 Copyright © 2022 Pearson Education, Inc.
165) Most union negotiators include compensation, benefits, and job security as the issues typically most important. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process. 166) Describe the difference between mediation and arbitration. Answer: Rather than wield these often-unpleasant weapons against one another, labor and management can agree to call in a third party to help resolve the dispute. In mediation, the neutral third party (the mediator) can suggest, but cannot impose, a settlement on the other parties. In arbitration, the neutral third party (the arbitrator) dictates a settlement between the two sides, which have agreed to submit to outside judgment. In some disputes, such as those between the government and public employees, arbitration is compulsory, or required by law. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process. 167) Describe the current trends in labor-management relations in the United States. Answer: Since the mid-1960s, U.S. labor unions have experienced increasing difficulties in attracting new members. Today, about 11 percent of all U.S. workers belong to a labor union. Union membership took a jump in 2009, in part due to worker concerns about job security during the 2008-2009 recession, but then resumed its downward trend. Another issue affecting trends in unionism is the geographic shift in the U.S. economy. For the most part, unionism in the United States started in the northern and Midwestern regions and in cities like Detroit, Pittsburgh, Cleveland, St. Louis, and Chicago. But over the past several decades there has been a pronounced shift as businesses have moved their operations to the south and southwest, areas that do not have a strong union heritage. Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process. 168) What options are available to the union when contract negotiations break down? Answer: When contract negotiations break down, unions may strike (refuse to work), picket (publicize grievances at the entrance to the employer's facility), boycott (refuse to buy the products of the employer), or slowdown (perform jobs at a slower pace). These actions taken by the labor union are tactics used to support their cause. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking 45 Copyright © 2022 Pearson Education, Inc.
LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process. 169) What options are available to management when contract negotiations break down? Answer: When contract negotiations break down, management may institute a lockout (workers are denied access to the workplace) or use strikebreakers (hire nonunion workers as temporary replacements for striking employees). Managers and workers both have a range of tactics that they can use to advance their cause. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process. 170) Why is it important for the union to include a cost-of-living adjustment clause when negotiating a union contract? Answer: Compensation includes both current and future wages. One common tool for securing wage increases is a cost-of-living adjustment (COLA). Most COLA clauses tie future raises to the Consumer Price Index (CPI), a government statistic that reflects changes in consumer purchasing power. Almost half of all labor contracts today include COLA clauses. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 10.7: Explain why workers organize into labor unions and describe the collective bargaining process.
46 Copyright © 2022 Pearson Education, Inc.
Business Essentials, 13e (Ebert/Griffin) Chapter 11 Marketing Processes and Consumer Behavior 1) What is the term for the process of creating, communicating, and delivering value to customers while managing customer relationships in ways that benefit the organization and its stakeholders? A) Financial planning B) Controlling C) Operations management D) Marketing E) Demographic profiling Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 2) Which of the following occurs between similar products and is based on buyers' perceptions of the benefits of products offered by particular companies? A) International competition B) Substitute competition C) Brand competition D) Benefit competition E) Placement competition Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 3) Which of the following represents the functions of a product and the emotional satisfaction gained by owning it? A) Features B) Requirements C) Benefits D) Safety devices E) Guarantees Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 4) Which type of goods includes raw materials used to produce other products? 1 Copyright © 2022 Pearson Education, Inc.
A) Substitute products B) Industrial goods C) Consumer goods D) Marketing goods E) Disposable goods Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 5) Which of the following are products with intangible features such as professional advice? A) Personal goods B) Services C) Industrial goods D) Psychographics E) Reseller goods Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 6) Which type of marketing is used to build long-term relationships with customers? A) Industrial marketing B) Relationship marketing C) Social marketing D) Economic marketing E) Consumer marketing Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 7) What is data warehousing? A) A marketing strategy that creates sales agreements that stipulate product delivery B) The process of dividing a market into categories of customer types C) The study of consumer needs and wants and the way in which sellers can best meet them D) The process of collecting, storing, and retrieving data in electronic files E) A customer identification strategy that targets potential buyers Answer: D Difficulty: Moderate AACSB: Application of knowledge 2 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Concept LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 8) Companies who use ad campaigns to raise public awareness of important issues such as texting while driving are working with what type of environment? A) Political-legal B) Sociocultural C) Technological D) Competitive E) Demographic Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 9) Marketing managers often support the activities of political action committees (PACs). In doing this, which environment are they attempting to influence? A) Competitive B) Economic C) Technological D) Political-legal E) Geo-demographic Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 10) A company decides to introduce a line of crackers made with organically grown grains and vegetables. What environmental trend is the company responding to? A) Competitive B) Sociocultural C) Political-legal D) Economic E) Technological Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 11) What do organizations use to build better, stronger information connections with clients? A) Customer relationship management (CRM) 3 Copyright © 2022 Pearson Education, Inc.
B) Data warehousing C) Industrial marketing D) Possession utility E) Data mining Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 12) Which of the following is used to automate the analysis of customer information and how might they be influenced by marketers? A) Data mining B) Brand competition C) Customer relationship management D) Relationship marketing E) Data warehousing Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 13) What type of utility is practiced by those companies who allow marketers to have a voice in product design and identifying features customers want? A) Time B) Possession C) Form D) Value E) Place Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 14) What is created when the ownership of a product, including the setting of selling prices, terms of credit, and ownership documentation is transferred to a customer? A) Place utility B) Time utility C) Value utility D) Possession utility E) Form utility Answer: D 4 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 15) When a domestic marketer competes against foreign firms to sell products of a similar nature, what type of sales competition is created? A) Brand B) Substitute C) International D) Competitive E) Social Answer: C Difficulty: Easy AACSB: Analytical thinking Quest. Category: Application LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 16) Which of the following represent those products that may not look like another, but can still fulfill the same need? A) Consumer-focused B) Value C) Substitute D) Place utility E) Form utility Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 17) Which of the following represent the major force that drive marketing? A) Innovation B) Price C) Value D) Wants and needs E) Cost versus benefits Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 5 Copyright © 2022 Pearson Education, Inc.
18) Each fall, the local department store displays a large collection of hats, gloves, and scarves right next to the door. Often, when shoppers enter the store from the cold parking lot, they stop to look at the display. Which of the following is the department store developing? A) Possession utility B) Industrial goods C) Customer-relationship management D) Data mining E) Place utility Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 19) Which of the following can be described as all of the ways a firm can create value for their constituents? A) The technological environment B) Brand competition C) Marketing D) Possession utility E) The competitive environment Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 20) Marketers must recognize factors outside an organization's boundaries that might affect their marketing program. This is referred to as A) brand competition B) the external environment. C) data mining D) the competitive environment. E) international competition Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 21) Which of the following are the tangible products bought strictly for personal use? A) Consumer goods B) Services C) Relationship goods 6 Copyright © 2022 Pearson Education, Inc.
D) Data E) Industrial goods Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 22) Marketing consists primarily of advertising a product or service. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 23) Benefits add value by providing features that increase the customer's satisfaction. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 24) The formula for value is benefits divided by costs. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 25) Marketing concepts can be extended to the promotion of ideas. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 26) Time utility is created by a sales agreement that stipulates where products will be delivered to customers. Answer: FALSE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking 7 Copyright © 2022 Pearson Education, Inc.
LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 27) The economic environment includes all relevant conditions within the competitive system in which the business competes. Answer: FALSE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 28) Services, such as vacations, accountants, and insurance, often use the same marketing techniques as goods. Answer: TRUE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 29) Discuss the ways in which marketing applies to customers, businesses, and services. Answer: Marketing actually applies to two types of customers: those who buy consumer goods and those who buy industrial goods. These products are all consumer goods, tangible goods that you, the consumer, may buy for personal use. Firms that sell goods to consumers for personal consumption are engaged in consumer marketing, also known as business-to-consumer (B2C) marketing. Marketing also applies to industrial goods, physical items used by companies to produce other products. Marketing techniques are also applied to services, products with intangible (nonphysical) features, such as professional advice, timely information for decisions, or vacation packaging. Service marketing, the application of marketing for services, continues to be a major growth area in the United States. Finally, marketers also promote ideas, such as “inspirational values” Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 30) Discuss what marketers must do to increase value for customers and satisfy customers. Answer: The marketing strategies of leading firms focus on increasing value for customers. Marketing resources are deployed to add benefits and/or decrease costs of products to provide greater value. To satisfy customers, a company may do the following: 1.) Develop an entirely new product that performs better (provides greater performance benefits) than existing products. 2.) Keep a retail store open longer hours during a busy season (adding the benefit of greater shopping convenience). 3.) Offer price reductions (the benefit of lower costs). 4.) Offer information that explains how a product can be used in new ways (the benefit of new uses at no added cost). Difficulty: Moderate 8 Copyright © 2022 Pearson Education, Inc.
AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 31) Explain the elements that comprise the marketing environment. Answer: The marketing environment is comprised of everything outside of an organization's boundaries that might affect it including the political-legal, sociocultural, technological, economic, and competitive environments. Rules, regulations, and legislation make up the political-legal environment. Most industries are affected in some way by political-legal elements. The sociocultural environment includes changes in social values, consumer preferences, language, demographics, etc. The technological environment has had a profound impact on the marketing environment with the invention of new technologies that completely change our lifestyles. The economic environment includes such factors as inflation, interest rates, and recession; because they determine spending patterns by consumers, businesses, and governments, economic factors influence marketing plans for product offerings, pricing, and promotional strategies. The competitive environment encompasses all organizations that supply or provide similar products. All players in the competitive environment compete for consumers' purchasing power. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 32) Describe the three types of competition faced by marketers. Answer: The three types of competition faced by marketers include substitute products, brand competition, and international competition. Substitute products may not look alike, or they may seem very different from one another, but they can fulfill the same need. Brand competition occurs between similar products, such as the auditing services provided by the large accounting firms of Ernst & Young and KPMG. Brand competition is based on buyers' perceptions of the benefits of products offered by particular companies. International competition matches the products of domestic marketers against those of foreign competitors. After identifying which type of competition is present, the marketer can then develop a strategy for attracting more customers. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 33) What is the term for a detailed strategy for focusing marketing efforts on consumers' needs and wants? A) Marketing mix B) Marketing manager C) Product differentiation D) Product development 9 Copyright © 2022 Pearson Education, Inc.
E) Marketing plan Answer: E Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 34) What part of the marketing mix includes communicating information about products and is the most visible component of the marketing mix? A) Product B) Promotion C) Price D) Place E) Psychographics Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 35) Which of the following is used to guide the detailed activities of the marketing plan by identifying what marketing will accomplish in the future? A) Marketing strategy B) Product differentiation C) Marketing objectives D) Distribution policy E) Marketing mix Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 36) Which specific issues do marketing strategies help marketers determine? A) The goals the marketing plan intends to accomplish B) The marketing objectives of what the marketer will accomplish C) The mix of goods or services to fill a customer's needs or wants D) The marketing activities a business will use to achieve marketing goals E) The features that will differentiate a product from competitors Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 37) Why should a marketing strategy utilize the marketing mix, which includes product, price, place, and promotion? 10 Copyright © 2022 Pearson Education, Inc.
A) To control the organization's resources to support marketing activities B) To transfer goods or services to customers C) To develop a clear strategy for planning and implementing marketing activities D) To plan the organization's marketing toward supporting the organization's overall mission E) To attract and satisfy customers in target markets Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 38) Which of the following represents a feature or image that makes one product different from its competitors? A) Marketing strategy B) Product differentiation C) Place distribution D) Personal selling E) Product positioning Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 39) Which of the following can be the overall effect when a good or service is priced higher than competitors? A) There will be an implication of higher quality standards. B) There will be greater demand for the product. C) Sales will start slow, but increase over time. D) There will be a larger market size, but smaller profit. E) There will be a smaller market and smaller profit. Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 40) How do organizations determine how to move products to customers? A) Promotion B) Marketing mix C) Place (or distribution) D) Marketing managers E) Personal selling feedback Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept 11 Copyright © 2022 Pearson Education, Inc.
LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 41) Which of the following do companies offer as one-time direct inducements to buyers in order to tempt buyers into buy goods or services? A) Personal selling B) Sales promotions C) Public relations campaigns D) Integrated marketing E) Advertising Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 42) What is the term for the communication efforts that are designed to build goodwill and build favorable attitudes in consumers? A) Sales promotion B) Advertising C) Promotion D) Public relations E) Personal selling Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 43) When selling industrial goods and services, using representatives who are trained to understand the needs of each customer is a key component of A) advertising. B) personal selling. C) sales promotions. D) publicity. E) interactive marketing. Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 44) Which section of the marketing plan will be used to set the stage for everything that follows? A) Mission B) Objectives C) Sales forecasts D) Strategy E) Product 12 Copyright © 2022 Pearson Education, Inc.
Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 45) The combination of product, price, promotion, and place strategies work together to create A) product differentiation. B) the marketing mix. C) the integrated marketing strategy. D) market segmentation. E) target markets. Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 46) In which way to organizations find a profitable middle ground between high and low profits? A) Distribution plans B) Marketing research C) Pricing strategies D) Market segmentation E) Product differentiation Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 47) Jose sponsored a table at a regional cycling race, and paid to have is product logo printed on the back of all the t-shirts provided to those who entered the race. Which of the following did Jose participate in during the race? A) Personal selling B) Public relations C) Distribution D) Advertising E) Product differentiation Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 48) In order to distribute products, firms must make decisions about how they will distribute products. The distribution methods used by firms is referred to as A) promotions. 13 Copyright © 2022 Pearson Education, Inc.
B) integrated marketing. C) inventory control. D) warehousing . E) channels. Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 49) What can be utilized to ensure a company's marketing and nonmarketing efforts are compatible? A) Market segmentation B) Integrated marketing strategies C) Target marketing D) Public relations E) Personal selling Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.2: Explain the purpose of a marketing plan and identify its main components.
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50) Product differentiation is selecting the best price at which to sell a product. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 51) The goals of the marketing plan are the foundations for the marketing objectives. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 52) The product mix includes consideration of product, pricing, place, and promotion. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 53) A feature or image that makes a product different from existing products is called product differentiation. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 54) Advertising is a one-time inducement, such as a coupon or free gift, to encourage consumers to buy a product. Answer: FALSE Difficulty: Moderate Application of knowledge Quest. Category: Concept LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 55) An integrated marketing strategy ensures the four Ps work tighter and with the company's nonmarketing activities. Answer: TRUE Difficulty: Moderate Application of knowledge Quest. Category: Concept LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 56) Marketing managers are those responsible for the planning, organizing, leading, and controlling an organization's marketing resources. 15 Copyright © 2022 Pearson Education, Inc.
Answer: TRUE Difficulty: Moderate Application of knowledge Quest. Category: Concept LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 57) Describe the distribution decisions firms must consider when getting products to customers. Answer: In the marketing mix, place (or distribution) refers to where and how customers get access to the products they buy. When products are created, they must then be made available to customers at some location (place) such as a retail store, on a digital device, or by direct delivery to the customer. Distribution is the set of activities that moves products from producers to customers. Placing a product in the proper outlet, like a retail store, requires decisions about several activities, all of which are concerned with getting the product from the producer to the consumer. Decisions about warehousing and inventory control are distribution decisions, as are decisions about transportation options. Firms must also make decisions about the channels through which they distribute products. Many manufacturers, for example, sell goods to other companies that, in turn, distribute them to retailers. Others sell directly to major retailers, such as Target and Kroger. Still others sell directly to final consumers Difficulty: Moderate Application of knowledge Quest. Category: Concept LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 58) Why are marketing plans future oriented? Answer: First and foremost, marketing plans are future oriented, showing what will be happening with marketing’s upcoming activities. Every well-developed marketing plan begins with objectives or goals that set the stage for everything that follows. Marketing objectives, the goals the marketing plan intends to accomplish, are the foundation that guides all the detailed activities in the plan. The marketing objectives themselves, however, exist solely to support the company’s overall business mission and typically focus on maintaining or enhancing the organization’s future competitive position in its chosen markets. Difficulty: Moderate Application of knowledge Quest. Category: Concept LO: 11.2: Explain the purpose of a marketing plan and identify its main components.
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59) Describe the elements of the marketing mix. What is their collective role? Answer: The elements of the marketing mix include product, price, promotion, and place. Product includes goods, services, or ideas designed to fill a consumer need or want. Meeting consumer needs often means changing existing products to keep pace with emerging markets and competition; many marketers focus on differentiating their product(s) from those of competitors. Pricing a product involves the selection of the best price at which to sell the product. Prices must support a variety of costs within the organization. Further, both low and high price strategies can be effective in different situations. Place or distribution refers to the proper placement of products in the market. Place decisions including transportation warehousing, and inventory control are all about getting the product from the producer to the consumer. Promotion is the most highly visible component of the marketing mix. Promotion refers to the techniques for communicating information about products. Promotion involves activities surrounding advertising, sales promotions, publicity, and public relations. Collectively, the marketing mix allows a marketer to better relate to the identified target market. Based on the characteristics of the target market, the marketer will build the marketing mix elements around the target market. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 60) Why is product development a challenge for marketers? Answer: Faced with competition and shifting consumer preferences, no firm can count on a single successful product to carry it forever. Even products that have been popular for decades need ongoing renewal. The factor of constant change makes conceiving and developing new products a challenge for marketers. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Synthesis LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 61) Why is product placement an effective marketing tool? Answer: Product placement is effective because the message is delivered in an attractive setting that holds the consumer's interest. Product placement is a promotional activity that can be found in movies, TV, and magazines. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 62) Discuss the relationship between a marketing strategy and a marketing manager. Answer: The marketing team can develop a strategy once they have clarified the marketing objectives. Specifically, marketing strategy identifies the planned marketing programs, all the marketing activities that a business will use to achieve its marketing goals, and when those activities will occur. Because marketing planning is an ongoing process—not just a one-time activity—it can be improved through experience by learning from past successes and mistakes. Marketing managers are the people responsible for planning, organizing, leading, and controlling the organization's marketing resources toward supporting and accomplishing the organization's 17 Copyright © 2022 Pearson Education, Inc.
overall mission. To meet these responsibilities, marketing managers rely on mapping out a clear strategy for planning and implementing all the activities that result in the transfer of goods or services to customers. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Synthesis LO: 11.2: Explain the purpose of a marketing plan and identify its main components. 63) Which is usually the first step in the marketing strategy that allows marketers to focus efforts on a particular group of people or organizations? A) Distribution B) Product differentiation C) Target market selection D) Pricing E) Integration Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.3: Explain market segmentation and how it is used in target marketing. 64) For marketers, what type of variables are lifestyles, opinions, interests, and attitudes? A) Geographic variables B) Demographic variables C) Psychographic variables D) Product use variables E) Labor market variables Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 11.3: Explain market segmentation and how it is used in target marketing. 65) What does the process of product positioning involve? A) Hiring only employees who have the strongest credentials B) Communicating the nature of a product C) Focusing on only one component of the marketing mix D) Disregarding customers' reactions to a company's products E) Reorganizing employees according to seniority Answer: B Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Analytical LO: 11.3: Explain market segmentation and how it is used in target marketing. 66) What market segment is based on where the target market lives and how location affects their lifestyle? 18 Copyright © 2022 Pearson Education, Inc.
A) Demographic B) Behavioral C) Positional D) Geographic E) Psychographic Answer: D Difficulty: Easy AACSB: Analytical thinking Quest. Category: Concept LO: 11.3: Explain market segmentation and how it is used in target marketing. 67) Which of the following describe(s) measurable traits about a consumer, such as income, gender, or marital status? A) Psychographics B) Geographics C) Geo-demographics D) Behaviors E) Demographics Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 11.3: Explain market segmentation and how it is used in target marketing. 68) How does behavioral segmentation identify target markets? A) Patterns displayed by consumers B) Consumer characteristics such as lifestyles C) Research that obtains data by watching and recording behavior D) Dividing the market based on needs and wants E) Using psychographics characteristics Answer: A Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 11.3: Explain market segmentation and how it is used in target marketing. 69) ShipShape Watches wants to sell their watches to those who live in urban communities who make more than $50,000 per year. Which of the following is ShipShape Watches using to find their target market. A) Psychographic variables B) Geographic segmentation C) Product positioning D) Integrated marketing E) Demographic segmentation Answer: E Difficulty: Difficult AACSB: Analytical thinking 19 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Application LO: 11.3: Explain market segmentation and how it is used in target marketing. 70) Which of the following is the combination of traits based on location and population characteristics used to identify consumers and act as a common segmentation tool? A) Psychographic variables B) Behavioral variables C) Marketing variables D) Geo-demographic variables E) Primary variables Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.3: Explain market segmentation and how it is used in target marketing. 71) What type of segmentation is more effective because of the greater number of variables and has consequently become the most common segmentation tool? A) Demographic segmentation B) Psychographic segmentation C) Behavioral segmentation D) Marketing segmentation E) Geo-demographic segmentation Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.3: Explain market segmentation and how it is used in target marketing. 72) What would marketers utilize if they wanted to identify markets where customers had a certain lifestyle, personality, or attitude? A) Place utility B) Geographic segmentation C) Psychographic segmentation D) Possession utility E) Behavioral segmentation Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.3: Explain market segmentation and how it is used in target marketing. 73) What process is used by marketers to communicate the nature of a product to a target segment? A) Product positioning B) Possession utility C) Promotion 20 Copyright © 2022 Pearson Education, Inc.
D) Product differentiation E) Personal influence Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.3: Explain market segmentation and how it is used in target marketing. 74) Which of the following has emerged from the marketing concept that customers' needs and wants are different and firms should focus their marketing efforts? A) Target markets B) Geographic variables C) Rational motives for purchase D) Social networking E) Integrated marketing mix Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.3: Explain market segmentation and how it is used in target marketing. 75) Which of the following is the process of dividing markets into consumer types, based on similar needs and wants? A) Geographic segmentation B) Promotion C) Target marketing D) Market segmentation E) Product position Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.3: Explain market segmentation and how it is used in target marketing. 76) Which type of market segmentation can be changed by marketing efforts, and therefore is particularly important to marketers? A) Behavioral B) Geo-demographic C) Geographic D) Demographic E) Psychographics Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.3: Explain market segmentation and how it is used in target marketing. 21 Copyright © 2022 Pearson Education, Inc.
77) Geographic variables describe populations by identifying traits, such as age, income, gender, ethnic background, marital status, race, religion, and social class. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 11.3: Explain market segmentation and how it is used in target marketing. 78) Target marketing requires dividing a market into categories of customer types or segments. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 11.3: Explain market segmentation and how it is used in target marketing. 79) A description such as single, age 20-34, earning $60,000 a year is an example of a psychographic variable. Answer: FALSE Difficulty: Easy AACSB: Analytical thinking Quest. Category: Application LO: 11.3: Explain market segmentation and how it is used in target marketing. 80) Psychographics cannot be changed by marketing efforts. Answer: FALSE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.3: Explain market segmentation and how it is used in target marketing. 81) Product positioning is a process used by business who have a narrower range of products, and want to aim at just one segment of the market. Answer: TRUE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.3: Explain market segmentation and how it is used in target marketing. 82) Why is it important the marketers identify market segments in directing their marketing efforts/ Answer: Marketers have long known that products cannot be all things to all people. The emergence of the marketing concept and the recognition of customers’ needs and wants led marketers to think in terms of target markets—the particular groups of people or organizations on which a firm’s marketing efforts are focused. By definition, members of a market segment must share some common traits that affect their purchasing decisions. In identifying consumer segments, researchers look at several different influences on consumer behavior. Difficulty: Moderate 22 Copyright © 2022 Pearson Education, Inc.
AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.3: Explain market segmentation and how it is used in target marketing. 83) Explain the difference between demographic and geo-demographic variables. Answer: Demographic segmentation is a strategy used to separate consumers by demographic variables. Demographic variables describe populations by identifying traits, such as age, income, gender, ethnic background, marital status, race, religion, and social class. As the name implies, geo-demographic segmentation is a combination strategy. Geo-demographic variables are a combination of geographic and demographic traits and are becoming the most common segmentation tools. Segmentation is more effective because the greater number of variables defines the market more precisely. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.3: Explain market segmentation and how it is used in target marketing.
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84) Identify demographic and psychographic variables. Answer: Demographic variables describe populations by identifying traits, such as age, income, gender, ethnic background, marital status, race, religion, and social class. Psychographic variables are lifestyles, interests, and attitudes. Psychographic variables are important to marketers because, unlike demographic variables, they can be changed by marketing efforts. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.3: Explain market segmentation and how it is used in target marketing. 85) Explain how marketers identify different market segments. Answer: In identifying market segments, researchers look at a number of different influences on consumer behavior. Some of the variables used for segmentation are geographic, demographic, and psychographic variables. Geographic variables are geographical units that may be considered in developing a segmentation strategy. Demographic variables describe populations, identifying traits such as age, income, gender, etc. Psychographic variables are lifestyles, opinions, interests, and attitudes. Two other segments include geo-demographic and behavioral segments. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.3: Explain market segmentation and how it is used in target marketing. 86) What are target markets? Explain the role that target markets play in market segmentation. Answer: Target markets are groups of people with similar wants and needs. Target marketing requires market segmentation, which is dividing a market into categories of customer types or segments. Once companies identify market segments, they may adopt a variety of marketing strategies that appeal to each segment. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.3: Explain market segmentation and how it is used in target marketing. 87) Which tool used for gaining decision-making information identifies what customers want and how to fulfill those wants? A) Market segmentation B) Market research C) Promotion D) Public relations E) Integrated marketing strategy Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 11.4: Discuss the purpose of marketing research and compare the four marketing research methods. 88) Which of the following describes the goal of market research? 24 Copyright © 2022 Pearson Education, Inc.
A) To better understand how to market items based on how customers behave B) To gain goodwill with consumers by utilizing public relations C) To increase competitiveness by clarifying interactions that affect the marketing decisions D) To conduct studies on customer responses to the marketing mix E) To determine which research method will deliver the most effective results Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.4: Discuss the purpose of marketing research and compare the four marketing research methods. 89) Market research can occur at almost any point in a product's life cycle, but it is typically used A) when entering international markets. B) when sales begin to decline. C) when competitors release newer, competitive products.. D) when developing new products or altering existing products. E) when a new product is ready to be released. Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 11.4: Discuss the purpose of marketing research and compare the four marketing research methods. 90) Lester is an intern in the marketing department of a national pizza company. His manager has asked him to determine how franchise store owners might feel about a potential new product, but current data does not exist. Which of the following types of data will Lester have to use for his project? A) Secondary B) Demographical C) Global D) Psychographic E) Primary Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.4: Discuss the purpose of marketing research and compare the four marketing research methods. 91) Which type of market research involves watching consumers and recording their behavior using tools such as camera feeds and computer recordings? A) Observation B) Primary research C) Surveys D) Focus groups 25 Copyright © 2022 Pearson Education, Inc.
E) Experimentation Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.4: Discuss the purpose of marketing research and compare the four marketing research methods. 92) When gathering opinions about consumer decisions, what type of research tool could be utilized online, by telephone, or face-to-face? A) Observation B) Secondary research C) Surveys D) Focus groups E) Experimentation Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 11.4: Discuss the purpose of marketing research and compare the four marketing research methods. 93) What is the advantage of utilizing focus groups for research? A) They easily generate comparison data with competitors' products. B) They offer fact-based information on products. C) They are more structured and are easier to analyze. D) They allow for more in-depth discussion on complex issues. E) They are less costly and time consuming. Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.4: Discuss the purpose of marketing research and compare the four marketing research methods. 94) Which of the following allows researchers to compare the response of similar people under different circumstances? A) Observation B) Surveying C) Focus group studies D) Experimentation E) Questionnaires Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 11.4: Discuss the purpose of marketing research and compare the four marketing research 26 Copyright © 2022 Pearson Education, Inc.
methods. 95) Which of the following should be used by marketing researchers who want to data provided by the governments on income levels and households in a particular area? A) Psychographics B)Behavioral research C) Primary research D) Segmentation E) Secondary data Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 11.4: Discuss the purpose of marketing research and compare the four marketing research methods. 96) After conducting research, the information must be organized into meaningful information. This is done in which step of the marketing research effort? A) Study the current situation B) Select a research method C) Collect the data D) Analyze the data E) Prepare a report Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 11.4: Discuss the purpose of marketing research and compare the four marketing research methods. 97) Which of the following describes the purpose of the marketing research report? A) To identify sources of secondary data B) To describe methodology and findings C) Too identify what the need is and how to meet it D) To explain the methodology of collecting primary data E) To organize data into meaningful information Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 11.4: Discuss the purpose of marketing research and compare the four marketing research methods. 98) Which of the following should be considered when selecting a research method? A) Effectiveness and cost of different options B) The consumer needs C) Efforts currently underway to fulfill consumer needs 27 Copyright © 2022 Pearson Education, Inc.
D) What existing information is available E) How to create primary data Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 11.4: Discuss the purpose of marketing research and compare the four marketing research methods. 99) Marketing research is the study of behavioral variables. Answer: FALSE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 11.4: Discuss the purpose of marketing research and compare the four marketing research methods. 100) Primary data is data already available from previous research. Answer: FALSE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 11.4: Discuss the purpose of marketing research and compare the four marketing research methods. 101) The advantage of using secondary research is data already exists, saving time, effort, and money. Answer: TRUE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 11.4: Discuss the purpose of marketing research and compare the four marketing research methods. 102) When selecting a research method, a marketing researcher should choose between the use of primary and secondary data. Answer: FALSE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 11.4: Discuss the purpose of marketing research and compare the four marketing research methods. 103) Describe the difference between primary and secondary data. Answer: Most research data can be classified into one of two categories. Secondary data are already available from previous research. Several different U.S. government agencies, including the Census Bureau and the Department of Labor, for instance, provide online data collected by the government on geographic and demographic variables. Using secondary data can save time, 28 Copyright © 2022 Pearson Education, Inc.
effort, and money. However, when secondary sources are unavailable or inadequate, researchers must obtain primary data, new data from newly performed research. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 11.4: Discuss the purpose of marketing research and compare the four marketing research methods. 104) Outline the five steps in the marketing research process. Answer: 1.) Study the current situation. This can be done by asking what is the need and what is being done to meet it. 2.) Select a research method. In choosing from a wide range of methods, marketers must consider the effective-ness and costs of different options. 3.) Collect data. Most research data can be classified into one of two categories, primary and secondary data. 4.) Analyze the data. Once data are collected they must be analyzed and organized into meaningful information. 5.) Prepare a report. This report should describe the study’s methodology and findings. It should also identify solutions and, where appropriate, make recommendations on a course of action. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 11.4: Discuss the purpose of marketing research and compare the four marketing research methods. 105) How has the importance of selling products internationally expanded the role of marketing research? Answer: The importance of selling products in international markets has expanded the role of marketing research. For example, when a company decides to sell goods or services globally, it must decide whether to standardize products across all markets or to specialize by offering different versions for each market. Accordingly, market research’s orientation has become increasingly globalized. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 11.4: Discuss the purpose of marketing research and compare the four marketing research methods. 106) Which of the following is the study of the decision process by which customers come to purchase and consume products? A) Marketing B) Segmentation C) Resource management D) Consumer behavior E) Acculturation Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 11.5: Describe the consumer buying process and the key factors that influence that process. 29 Copyright © 2022 Pearson Education, Inc.
107) Which type of behavior do consumers exhibit by regularly purchasing products because they are satisfied with the performance of the product? A) Psychological influences B) Need recognition C) Brand loyalty D) Emotional motives E) Consumer activism Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 11.5: Describe the consumer buying process and the key factors that influence that process. 108) Which of the following is the influence on consumer behavior that comes from being part of a group with shared values? A) Psychological B) Personal C) Social D) Domestic E) Cultural Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 11.5: Describe the consumer buying process and the key factors that influence that process. 109) Which is the term that describes what happens after the sale to ensure consumers buy the product again? A) Postpurchase evaluation B) Prepurchase evaluation C) Rational motives D) Emotional motives E) Evoked set Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 11.5: Describe the consumer buying process and the key factors that influence that process. 110) Accessing a website in search of articles about a product before its purchase is an example of which part of the consumer buying process? A) Social networking B) Problem solving C) Information seeking D) Psychological influencing E) Recognizing a need 30 Copyright © 2022 Pearson Education, Inc.
Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 11.5: Describe the consumer buying process and the key factors that influence that process. 111) Which consumer influence includes perceptions, ability to learn, and attitudes? A) Psychological B) Personal C) Social D) Loyalty E) Cultural Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 11.5: Describe the consumer buying process and the key factors that influence that process. 112) Family members and friends can have a strong impact on consumer choices when acting as A) psychological influences. B) personal influences. C) social influences. D) loyalty influences. E) cultural influences. Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 11.5: Describe the consumer buying process and the key factors that influence that process. 113) Which of the following best defines the way of living that distinguishes one large group from another? A) Consumer B) Subculture C) Social class D) Culture E) Demographic Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 11.5: Describe the consumer buying process and the key factors that influence that process. 114) How do consumers develop opinions and beliefs about a set of products they will consider buying? A) Through evaluation of alternatives B) Through emotional motives 31 Copyright © 2022 Pearson Education, Inc.
C) Through need recognition D) Through post-purchase evaluation E) Through information seeking Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 11.5: Describe the consumer buying process and the key factors that influence that process. 115) Which of the following is greatly influenced by nonobjective factors such as sociability, imitation, and aesthetics? A) Emotional motives B) Post-purchase evaluation C) Rational motives D) Evaluation of alternatives E) Need recognition Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.5: Describe the consumer buying process and the key factors that influence that process. 116) When making a purchase decision, decisions that include logical evaluation, cost, and quality are what type of decisions? A) Evoked B) Rational C) Comparison D) Consideration set E) Emotional Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 11.5: Describe the consumer buying process and the key factors that influence that process. 117) If a buyer is unhappy with their purchase decision, what are they more likely to do than those who are happy with their purchase decision? A) Use a different decision-making process B) Continue to purchase the same product until a replacement is found C) Tell others D) Rely more on rational motives E) Develop a more limited evoked set of purchase options Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.5: Describe the consumer buying process and the key factors that influence that process. 32 Copyright © 2022 Pearson Education, Inc.
118) Why do marketers study influences on consumer behavior? A) To better understand individual motivations, perceptions, and ability to learn. B) To try to identify social influencers and social media sources of influence. C) To try to explain consumer choices and predict future buying behavior. D) To better understand the effect of family and culture on buying behavior. E) To build brand loyalty in all purchase decisions. Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.5: Describe the consumer buying process and the key factors that influence that process. 119) Which influence on consumer behavior includes lifestyle, personality, and economic status? A) Personal B) Social C) Cultural D) Behavioral E) Rational Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.5: Describe the consumer buying process and the key factors that influence that process. 120) Which of the following describes the evoked set of options consumers developed while seeking information about a good or service? A) The group of products consumers regularly purchase B) The group of products consumers have considered in the past based on lifestyle C) The group of products consumers have bought in the past and will not consider again D) The group of products consumers will consider buying based on nonobjective factors E) The group of products consumers will consider buying based on their information search Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.5: Describe the consumer buying process and the key factors that influence that process. 121) Why do marketers use information gathered from studying the consumer buying process? A) To counteract the influence of culture on the consumer buying decision B) To identify target markets C) To determine which products to discontinue D) To develop marketing plans E) To develop new products Answer: D Difficulty: Moderate AACSB: Analytical thinking 33 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Application LO: 11.5: Describe the consumer buying process and the key factors that influence that process. 122) Rational motives involve nonobjective factors and include sociability, imitation of others, and aesthetics. Answer: FALSE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.5: Describe the consumer buying process and the key factors that influence that process. 123) Focus groups allow researchers to observe a group of participants gathered in one place while they explore issues associated with a product. Answer: TRUE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 11.5: Describe the consumer buying process and the key factors that influence that process. 124) Personal influences on consumer behavior include lifestyle, personality, and economic status. Answer: TRUE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 11.5: Describe the consumer buying process and the key factors that influence that process. 125) Consumers with less brand loyalty are usually satisfied with a product's performance over time. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 11.5: Describe the consumer buying process and the key factors that influence that process. 126) The study of consumer behavior draws heavily on fields such as psychology and sociology. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 11.5: Describe the consumer buying process and the key factors that influence that process. 127) When a consumer has a high degree of brand loyalty, traditional influences on consumer behavior are strong. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept 34 Copyright © 2022 Pearson Education, Inc.
LO: 11.5: Describe the consumer buying process and the key factors that influence that process. 128) Describe psychological, personal, social, and cultural influences on consumer behavior. Answer: Marketers try to explain consumer choices and predict future buying behaviors based on psychological, personal, social, and cultural influences. Psychological influences include an individual's motivations, perceptions, ability to learn, and attitudes. Personal influences include lifestyle, personality, and economic status. Social influences include family, opinion leaders (people whose opinions are sought by others), and such reference groups as friends, coworkers, and professional associates. Cultural influences include culture (the way of living that distinguishes one large group from another), subculture (smaller groups, such as ethnic groups, with shared values), and social class (the cultural ranking of groups according to such criteria as background, occupation, house type, and income). Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.5: Describe the consumer buying process and the key factors that influence that process. 129) Explain each step in the consumer buying process. Answer: The consumer buying process begins with problem/need recognition. At this point, the consumer likely knows there is a product or service available in the marketplace that will fulfill the problem or need. The consumer then seeks information. This process is not always extensive, but before making major purchases, most people seek information from personal sources, public sources, and experience. After seeking information, the consumer has come up with some alternatives; the next step is to evaluate those alternatives. When making a product or service choice, most consumers evaluate alternatives based on price, availabilities, guarantees, etc. A list of pros and cons is often developed for each alternative. Finally, the consumer chooses from among the alternatives when making the purchase decision. Post purchase evaluation includes the consumer's perceptions about the product or service after the purchase. At this point, the consumer feels a certain level of satisfaction or dissatisfaction with the purchase. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Application LO: 11.5: Describe the consumer buying process and the key factors that influence that process. 130) Which of the following is the BEST example of a B2B market transaction? A) A college student buys dorm furniture from an on-campus store. B) A group of teenage girls buy new clothes for the upcoming school year. C) A high-school coach borrows sports equipment from a neighboring school. D) A dentist provides free toothbrushes to patients. E) A chain of ice cream parlors regularly purchases napkins from the same supplier. Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.6: Discuss the four categories of organizational markets and the characteristics of business-to-business (B2B) buying behavior. 131) Which of the following is the basis for the B2B buyer-seller relationship? 35 Copyright © 2022 Pearson Education, Inc.
A) Frequent and enduring buyer-seller relationships B) Incidental buyer-seller interactions C) Buyers and sellers with limited training D) Short-term buyer-seller relationships E) Commercial buyer-seller networks Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.6: Discuss the four categories of organizational markets and the characteristics of business-to-business (B2B) buying behavior. 132) Which firms provide goods and services that are used by the purchasing public? A) Services markets B) Industrial markets C) Reseller markets D) Government markets E) Institutional markets Answer: A Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Concept LO: 11.6: Discuss the four categories of organizational markets and the characteristics of business-to-business (B2B) buying behavior. 133) Before products reach consumers, which market, consisting of wholesalers and retailers, do products pass through? A) Services markets B) Industrial markets C) Reseller markets D) Government markets E) Institutional markets Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 11.6: Discuss the four categories of organizational markets and the characteristics of business-to-business (B2B) buying behavior. 134) Which of the following is used to build social relationship between users of a good or service? A) Institutional marketing B) Web-driven revenue C) Negotiations D) Social networking media E) Reseller relationships Answer: D 36 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.6: Discuss the four categories of organizational markets and the characteristics of business-to-business (B2B) buying behavior. 135) In which way do marketers best use viral marketing? A) To increase use of social media networks B) To identify needs in the international market C) To promote public relations D) To improve branding E) To foster excitement for stimulating sales Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.6: Discuss the four categories of organizational markets and the characteristics of business-to-business (B2B) buying behavior. 136) Which of the following is an advantage of using viral marketing and social networking? A) Marketers can reach a wider audience at a lower cost. B) Consumers can post opinions and feedback about products. C) New markets are easier to identify. D) Companies have more control over what the public experiences. E) Companies can respond to and eliminate negative reviews. Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.6: Discuss the four categories of organizational markets and the characteristics of business-to-business (B2B) buying behavior. 137) When attempting to market a domestic product in an international market, what typically has to happen? A) The product must be priced higher because of currency exchange rates. B) The product must have major redesign work done. C) The home country distribution system must be retrained for the international market. D) The product must have an existing close competitor in the intended market. E) The advertising campaign must be consistent with those used in the home country. Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.6: Discuss the four categories of organizational markets and the characteristics of business-to-business (B2B) buying behavior. 138) How can marketers best develop product promotion in a new, international market? 37 Copyright © 2022 Pearson Education, Inc.
A) Centered on product usage B) Centered on price and innovation C) Centered on cultural values and local customs D) Centered on using a "hard-sell" campaign E) Centered on home country values and customs Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.6: Discuss the four categories of organizational markets and the characteristics of business-to-business (B2B) buying behavior. 139) How can companies reduce the cost and delays involved in entering new international markets? A) By selling items at a loss when determining international pricing B) By redeveloping the product from scratch to better meet consumer needs in the new market C) By avoiding the traditional U.S.-based marketing mix D) By utilizing existing international distribution systems E) By establishing new and unique promotions for the new market. Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.6: Discuss the four categories of organizational markets and the characteristics of business-to-business (B2B) buying behavior. 140) Which of the following do firms use to enhance public relations and branding while stimulating chatter about a product within a target market? A) Consumer-seller relationships B) Segmentation C) Company specialist D) Corporate blogs E) Enduring buyer-seller relationships Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.6: Discuss the four categories of organizational markets and the characteristics of business-to-business (B2B) buying behavior. 141) YumYum Cookies buys ingredients needed to make their cookies from other local companies. Which of the following describes the type of market that YumYum is a part of when they buy the ingredients from others and use them to make cookies for resale? A) Services B) Institutional C) Reseller D) Industrial 38 Copyright © 2022 Pearson Education, Inc.
E) Government Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.6: Discuss the four categories of organizational markets and the characteristics of business-to-business (B2B) buying behavior. 142) Organizations such as hospitals, churches, museums, and charities comprise a market referred to as A) institutional. B) service driven. C) industrial D) governmental. E) reseller Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.6: Discuss the four categories of organizational markets and the characteristics of business-to-business (B2B) buying behavior. 143) Which of the following makes an industrial buyer different from a typical consumer? A) Industrial buyers study trends on social media B) Industrial buyers buy in large quantities C) Industrial buyers buy for one geographic segment at a time D) Industrial buyers often negotiate flat fees regardless of product location E) Industrial buyers only buy products that are later remade into consumer goods Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.6: Discuss the four categories of organizational markets and the characteristics of business-to-business (B2B) buying behavior. 144) Which of the following must change when marketing a product to an international market? A) How consumer research is conducted B) All basic principles of marketing C) How marketing principles are implemented D) The identification of the market segment to pursue E) How consumers evaluate their purchase decisions Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 11.6: Discuss the four categories of organizational markets and the characteristics of business-to-business (B2B) buying behavior. 39 Copyright © 2022 Pearson Education, Inc.
145) The institutional market is made up of businesses that buy goods to be converted into other products or that are used up during production. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 11.6: Discuss the four categories of organizational markets and the characteristics of business-to-business (B2B) buying behavior. 146) The B2B market includes industrial, reseller, and government/institutional markets. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 11.6: Discuss the four categories of organizational markets and the characteristics of business-to-business (B2B) buying behavior. 147) B2B sellers rarely have long-term relationships with buyers. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 11.6: Discuss the four categories of organizational markets and the characteristics of business-to-business (B2B) buying behavior. 148) Companies with an existing distribution network are at a disadvantage in the global context. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 11.6: Discuss the four categories of organizational markets and the characteristics of business-to-business (B2B) buying behavior. 149) Viral marketing relies on the use of the Internet to spread information to consumers. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 11.6: Discuss the four categories of organizational markets and the characteristics of business-to-business (B2B) buying behavior. 150) Describe the implication of social media marketing for students who are studying marketing. Answer: For students of marketing, the social media trend has two clear implications: (1) As consumers using social media, you will receive a growing number of tempting product exposures; and (2) as a user of social media who becomes familiar with its applications and technical operations, you will find a growing number of career opportunities in social media 40 Copyright © 2022 Pearson Education, Inc.
positions. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 11.6: Discuss the four categories of organizational markets and the characteristics of business-to-business (B2B) buying behavior. 151) Describe the effectiveness of viral marketing and social networking as a marketing tool. Answer: Viral marketing and social networking can lead to consumer awareness faster and with wider reach than traditional media messages—and at a lower cost. It works for two reasons. First, people rely on online media for information that they used to get from newspapers, magazines, and television. Equally important, however, is the interactive element—people become participants in the process of spreading the word by forwarding information to and seeking information from other users. Although Facebook is the leader, Twitter is another fastgrowing network, ranking number two in size, with more than 330 million active users and handling about 525 million tweets each day. These numbers reflect not only the huge size of the social media industry but also the enormous population of participants who influence and persuade one another to explore new ideas and products, thus becoming both consumers and sellers. The industry’s growth is attributed especially to (1) increasing numbers of mobile device users, (2) more participants in the older-than-55 demographic who are using Twitter, and (3) greater global reach to more potential users. As companies gain experience, they are using social media in new ways. The continuing growth of social media is changing marketing practices of businesses and consumer behavior, too. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 11.6: Discuss the four categories of organizational markets and the characteristics of business-to-business (B2B) buying behavior. 152) Discuss the typical behaviors of industrial buyers. Answer: Industrial buyers usually buy in bulk or large quantities. Because of this fact, and with so much money at stake, buyers are often experts about the products they buy. On a regular basis, B2B buyers study competing products and alternative suppliers by attending trade shows, by networking with others electronically, by reading trade literature, and by holding technical discussions with sellers’ representatives. As professionals, B2B buyers are trained in methods for negotiating purchase terms. Once buyer–seller agreements have been reached, they also sign formal legal contracts. As a rule, industrial buyers are company specialists in a line of items and are often experts about the products they buy. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 11.6: Discuss the four categories of organizational markets and the characteristics of business-to-business (B2B) buying behavior. 153) Discuss the issues of international promotion. Answer: Occasionally, an ad campaign may be appropriate for global use. However, often U.S. 41 Copyright © 2022 Pearson Education, Inc.
promotional tactics don't succeed abroad. International marketers must be aware that cultural differences can cause negative reactions to improperly advertised products. Product promotions must be carefully matched to local customers and cultural values. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 11.6: Discuss the four categories of organizational markets and the characteristics of business-to-business (B2B) buying behavior. 154) Discuss the three categories of B2B markets. Answer: The three categories of B2B markets are industrial, reseller, and government/institutional. The industrial market includes businesses that buy goods to be converted into other products and goods that are used up during production. The reseller market consists of intermediaries, including wholesalers and retailers, who buy the finished goods and resell them. Federal, state, and local governments and institutions, which consist of nongovernmental organizations, such as hospitals, churches, museums, and charitable organizations, make up the final category of organizational markets. The B2B market is a larger market than the U.S. consumer market. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 11.6: Discuss the four categories of organizational markets and the characteristics of business-to-business (B2B) buying behavior. 155) How does a realistic market potential estimate affect small business success? A) It allows small business owners to know how to modify a product for consumers. B) It allows small business owners to have a clear picture of their target segments. C) It allows for better use of social media-based marketing efforts. D) It increases the ability to be flexible in pricing strategy. E) It provides a more accurate understanding of fixed and variable costs. Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.7: Discuss the marketing mix as it applies to small business. 156) In which area can a small business create an advantage over larger competitors? A) Value B) Price C) Response time D) Marketing E) Shipping costs Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.7: Discuss the marketing mix as it applies to small business. 42 Copyright © 2022 Pearson Education, Inc.
157) When a small business identifies themselves and their products with local groups and events, what aspect of marketing are they pursuing? A) Price B) Promotion C) Product D) Public relations E) Place Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 11.7: Discuss the marketing mix as it applies to small business. 158) What do most small businesses fail to estimate correctly, often resulting in the business failing? A) Price B) Promotion C) Product D) Public relations E) Place Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.7: Discuss the marketing mix as it applies to small business. 159) The only way a small business can compete with larger firms is by offering a more personalized aspect to the buying experience. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 11.7: Discuss the marketing mix as it applies to small business. 160) The ability of a small business to attract and retain customers partly depends on choice of location. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 11.7: Discuss the marketing mix as it applies to small business. 161) What advantages do smaller companies have over larger competitors when it comes to the distribution aspect of the marketing mix? Answer: A smaller company may be able to address customers' needs more quickly and efficiently with an added personal touch. A small company may be able to address a consumer's 43 Copyright © 2022 Pearson Education, Inc.
needs more quickly. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 11.7: Discuss the marketing mix as it applies to small business. 162) Identify the ways small businesses can benefit from an understanding of the marketing mix. Answer: Small businesses need to understand the marketing mix, products, pricing, distribution, and promotion. Small businesses need a thorough understanding of what customers want. Small business pricing errors usually result from a failure to estimate operating expenses accurately, but when small businesses set prices by carefully assessing costs, many earn satisfactory profits. Small business distribution is the ability of many small businesses to attract and retain customers depending partly on the choice of location, especially for new service businesses. Small business promotion includes holding down costs by using less expensive promotional methods, like publicity in local newspapers or identifying themselves and their products with associated groups, organizations, and events. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 11.7: Discuss the marketing mix as it applies to small business.
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Business Essentials, 13e (Ebert/Griffin) Chapter 12 Developing and Pricing Products 1) What happens when companies extend their horizons and identify opportunities outside existing product lines? A) Disconnected product lines B) Multiple product lines C) Uniform product lines D) Universal product lines E) Tailored product lines Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 2) Which defining word or phrase below BEST captures the meaning of capital items? A) Bulk loads B) Used directly in the production process C) Consumed within a year D) Longer lasting E) Governmental purchase Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 3) When developing the marketing mix, what is the basis for any successful marketing strategy? A) Customer needs and wants B) Value packaging C) Product mix offerings D) Features and benefits E) Offering the best product for the least amount of money Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 4) Which of the following describes the bundle of benefits and features associated with a product called? A) Product mix B) Specialty package 1 Copyright © 2022 Pearson Education, Inc.
C) Service mix D) Convenience E) Value package Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 5) Which of the following BEST describes product features? A) All attributes and benefits of the product taken together B) Tangible and intangible qualities built into the product C) Intangible benefits that increase customer satisfaction D) Speed and convenience of a buyer interaction E) Benefits that are used directly in the conversion of a process Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 6) What are products that are consumed rapidly and regularly classified as? A) Industrial goods B) Shopping goods C) Specialty goods D) Convenience goods E) Production goods Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 7) Which type of consumer good is more expensive and therefore receives more evaluation of alternatives before the purchase is made? A) Convenience goods B) Production items C) Shopping goods D) Expense items E) Capital items Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept 2 Copyright © 2022 Pearson Education, Inc.
LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 8) In addition to cost, how are industrial products divided into product categories? A) What area of the organization will use them B) Competitive nature of acquiring the item C) Availability D) How they will be used E) How easily the item can be turned into a consumable good Answer: D Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Application LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 9) What is the grouping of products available for sale by a company called? A) Product line B) Capital mix C) Goods and services D) Specialty goods E) Product mix Answer: E Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 10) Which of the following represents the group of products that are closely related or are sold to the same customer group? A) Product line B) Specialty product C) Product mix D) Convenience mix E) Production mix Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 11) What can a company do to offset the consequences of slow sales in a product line? A) Limit the use of capital items. B) Diversify the product line. C) Add convenience goods. 3 Copyright © 2022 Pearson Education, Inc.
D) Increase the use of shopping goods available to consumers. E) Reclassify specialty products as convenience products. Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 12) A company that buys products to use in the production or creation of other goods or services is a(n) A) convenience buyer. B) entrepreneur. C) industrial buyer. D) capital buyer. E) rebrander. Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 13) Which of the following best describes production items? A) Goods consumed within a year by an organization B) Goods that are specific in nature and where no substitute will be accepted C) Goods that are consumed rapidly and regularly D) Goods used to make other products E) Goods consumed within a year by the buyer Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 14) When a consumer knows what they want to buy and is not willing to accept a substitute, which type of consumer product is being sought? A) Production goods B) Shopping goods C) Convenience goods D) Expense goods E) Specialty goods Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept 4 Copyright © 2022 Pearson Education, Inc.
LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 15) What is the difference between a specialty good and a specialty service? A) A specialty service is an intangible item and a specialty good is a tangible item. B) A specialty good costs more than a specialty service. C) A specialty service is often compared to other services before purchase. D) A specialty good can be compared to other items using the Internet. E) A specialty service is purchased regularly. Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services.
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16) Consumers often spend a great deal of time and money doing research when purchasing a specific service to get exactly what they want. These consumer services are referred to as A) production services. B) specialty services. C) convenience services. D) industrial services. E) shopping services. Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 17) Today's buyers expect products with greater value, more benefits and features at a reasonable cost. How do firms compete for these buyers? A) Enhanced value packages B) Intangible rewards C) Value-added attributes D) Physical features E) Increased customer satisfaction ratings Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 18) Which of the following are the tangible and intangible features that increase the customer's satisfaction? A) Convenience B) Features C) Rewards D) Benefits E) Performance Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 19) While stopping for gas, Tran went into the convenience store and bought two slices of pizza to eat on the way home from work Which type of product did Tran purchase? A) Shopping good B) Capital item C) Convenience good D) Expense item 6 Copyright © 2022 Pearson Education, Inc.
E) Specialty good Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 20) Elizabeth is researching destinations for her honeymoon. In her research, she is comparing packages that include airfare and hotels, and also pricing the cost of the trip if each element was purchased individually. Which type of product is she purchasing? A) Specialty good B) Shopping good C) Convenience service D) Specialty service E) Shopping service Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 21) Which of the following is the basis of classification for organizational products? A) How long it will take to consumer the product and if it will be used in the manufacturing process. B) Whether the products are tangible or intangible. C) If the product is needed to make a new product or if it will be sold to the consumer. D) Who the supplier is and how long it takes for delivery. E) What they cost and how they are used. Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 22) Which of the following are purchased by an organization to be consumed within a year? A) Production items B) Capital items C) Disposable items D) Expense items E) Maintenance items Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.1: Explain the definition of a product as a value package and how to classify goods and 7 Copyright © 2022 Pearson Education, Inc.
services. 23) Granny's Knitting Shop just purchased a building that allows for a larger sales floor, and the ability to hold in-store classes. Which type of purchase did Granny's Knitting Shop make? A) Industrial B) Convenience C) Capital D) Expense E) Production Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 24) A product's features may be intangible. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 25) A value package consists of an in-store advertisement that makes the product attractive and identifies features and benefits. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 26) Shopping goods are purchased more often than convenience goods. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 27) A doctor's office buys a multifunction printer. This purchase is an example of a capital item. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 8 Copyright © 2022 Pearson Education, Inc.
28) The marketing process to the consumer is significantly different than the marketing process for the industrial buyer. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 29) Consumers will often spend a great deal of time and money to find a specialty good and will generally not accept a substitute. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 30) Specialty goods are considered to be important and expensive items, and substitutes are generally not accepted. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 31) How does a product mix differ from a product line? Answer: A product mix is the group of products that a firm makes available for sale. A product line is a group of similar products intended for a similar group of buyers who will use the product in similar ways. A company will have only one product mix but may have multiple product lines. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 32) How do convenience goods, shopping goods, and specialty goods differ? Answer: Consumer products are commonly divided into three categories that differ in terms of typical buyer behavior. Convenience goods (such as milk and bottled water) and convenience services (such as those offered by fast-food restaurants) are consumed rapidly and regularly. They are inexpensive and are purchased often and with little exertion of time and effort. Shopping goods (such as appliances and mobile devices) and shopping services (such as hotel or airline reservations) are more expensive and are purchased less often than convenience products. Consumers often compare brands, sometimes in different stores and via online searches. They 9 Copyright © 2022 Pearson Education, Inc.
may also evaluate alternatives in terms of style, performance, color, price, and other criteria. Specialty goods (such as wedding gowns and tuxedoes) and specialty services (such as catering for wedding receptions or health care insurance) are extremely important and expensive purchases. Consumers usually decide precisely what they want and are not likely to accept substitutes. They often go from source to source, sometimes spending a great deal of money and time to get exactly what they want. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 33) How do expense items differ from capital items? Answer: Expense items are goods or services that are consumed within a year by firms producing other goods or supplying other services. Capital items are permanent goods and services that usually have expected lives of more than a year. How these items are used determines their classification. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 34) Discuss the difference between production items, expense items, and capital items. Answer: Production items are goods or services that are used directly in the conversion (production) process, such as petroleum that is converted into gasoline, and passenger demand information that is converted into bus or train services. Expense items are goods and services that are consumed within a year by organizations producing other goods or supplying other services. The term expense items stems from the tradition of accounting in which expenditures are classified as either (1) expense items or (2) capital items, depending on how quickly they are consumed. Capital items are longer-lasting (expensive and sometimes permanent) goods and services. They have expected lives of more than a year; they typically are expected to last several years. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 12.1: Explain the definition of a product as a value package and how to classify goods and services. 35) After a company has gathered ideas for new products, what is the next step in the development process? A) Test marketing B) Prototype development C) Business analysis D) Concept testing E) Screening Answer: E 10 Copyright © 2022 Pearson Education, Inc.
Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 12.2: Describe the new product development process. 36) Which of the following activities describes the development stage of commercialization? A) Building a prototype B) Testing the product to see if it meets performance requirements C) Selling the product on a trial basis in limited areas D) Beginning full-scale production and marketing E) Testing consumer reaction to the product in limited areas Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 12.2: Describe the new product development process. 37) In which of the following ways is product development different for services than for physical goods? A) Instead of gathering product ideas, the company goes immediately to the testing phase. B) Instead of screening ideas, the company tests all of them, since no prototype is needed. C) Instead of creating a prototype, the company develops a service process design. D) The business analysis step is not needed, since there are no production costs with services. E) The commercialization step is gradual for services, but rapid for physical goods. Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 12.2: Describe the new product development process. 38) What is frequently the most time-consuming stage of product development? A) Testing B) Market analysis C) Design D) Speed to market E) Product idea Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 12.2: Describe the new product development process. 39) On average, how many new product ideas are needed to generate one that reaches the consumer market? A) 25 B) 50 C) 75 11 Copyright © 2022 Pearson Education, Inc.
D) 100 E) 500 Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.2: Describe the new product development process. 40) Which of the following is the single greatest factor in product failure? A) Cost B) Minimal marketing efforts C) Lack of significant difference D) The product is too regional E) Failure in FDA testing Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 12.2: Describe the new product development process. 41) How can a company establish market leadership for a product? A) Introduce the product with a lower price than competitors. B) Do not introduce the product until success is certain. C) Be sure the product supports the overall goals and strategies of the organization. D) Introduce the product before competitors. E) Introduce a product that supports the rest of the product line. Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.2: Describe the new product development process. 42) Why is speed to market critical to market demand? A) It reduces overall cost of product development. B) It allows more time for product recalls. C) It allows the company to conduct more concept testing. D) It produces stronger outcomes on the business analysis process. E) It allows the company to become entrenched in the marketplace. Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 12.2: Describe the new product development process. 43) During what step of the product development stage does the firm consider how well a product or idea supports the firm's objectives? A) Screening 12 Copyright © 2022 Pearson Education, Inc.
B) Concept testing C) Prototype development D) Benefits analysis E) Product idea Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 12.2: Describe the new product development process. 44) During which step of the product development stage does a company conduct market research on benefits and prices? A) Screening B) Concept testing C) Prototype development D) Benefits analysis E) Product idea Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 12.2: Describe the new product development process. 45) Why do firms conduct product testing? A) To determine potential profitability of the product B) To allow for gradual commercialization over time C) To ensure the prototype meets performance requirements D) To determine how well the product fits in with the goals of the organization E) To determine the potential mesh with the firm's objectives Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 12.2: Describe the new product development process. 46) What is the next step in the product development process when test marketing is positive for a product? A) Prototype development B) Business analysis C) Concept testing D) Commercialization E) Product diversification Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 12.2: Describe the new product development process. 13 Copyright © 2022 Pearson Education, Inc.
47) Which of the following includes the tangible and intangible features that characterize a service? A) Process selection B) Service process design C) Product life cycle D) Benefits E) Service value package Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 12.2: Describe the new product development process. 48) Which of the following describes the idea that only a few new products reach the market? A) High mortality rates B) Slow speed to market C) Expensive prototype development D) Lack of product testing E) Lack of screening protocols Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.2: Describe the new product development process. 49) One study indicates that a product that reaches the market only 3 months after the leader loses 12 percent of its lifetime potential market. Which of the following becomes critical in preventing this outcome? A) High mortality rates B) Brand extensions C) Significant differences in products D) Unique benefits E) Speed to market Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.2: Describe the new product development process. 50) Which type of products have the best chance of being successful? A) Those that do not rely on speed to market B) Those that are innovative with unique benefits C) Those that meet minimum profitability goals of the organization D) Those that involve consumers in concept testing E) Those generated by global leaders in the field Answer: B Difficulty: Moderate 14 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Application LO: 12.2: Describe the new product development process. 51) The strategy of introducing new products to respond quickly to customer or market changes is referred to as A) commercialization. B) mortality rate. C) product line. D) speed to market. E) product life cycle. Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.2: Describe the new product development process. 52) Before commercialization of a product, an organization has to determine if the product can meet minimum profitability goals. During which step of the development process is this determined? A) Screening B) Concept testing C) Business analysis D) Prototype development E) Test marketing Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.2: Describe the new product development process. 53) Which part of the service process design considers each step in the service, including sequencing and timing? A) Process selections B) Worker requirements C) Equipment requirements D) Introduction E) Product adaptation Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.2: Describe the new product development process. AACSB: Application of knowledgeAACSB: Application of knowledgeAACSB: Application of knowledgeAACSB: Application of knowledge54) Most ideas for new products eventually reach the market. Answer: FALSE 15 Copyright © 2022 Pearson Education, Inc.
Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 12.2: Describe the new product development process. 55) Product mortality rates suggests that it might take as many as 60 new products ideas before one product finally reaches the market. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 12.2: Describe the new product development process. 56) Speed to market increases the chance that a new product will survive. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 12.2: Describe the new product development process. 57) The process of product development begins with concept testing. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 12.2: Describe the new product development process. 58) For many companies, speed to market with a product is as important as care in developing the product. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 12.2: Describe the new product development process. 59) In the screening stage of product development, companies use market research to get consumers' input about benefits and prices. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.2: Describe the new product development process. 60) Why is new product development expensive? Answer: Mortality rates for new ideas are high, so only a few products reach the market out of many ideas generated. Also, speed to market is often as important as care in developing a product, so companies must move fast as well as carefully. These are the two reasons given in 16 Copyright © 2022 Pearson Education, Inc.
the chapter in answer to the question of why firms devote so many resources to R&D. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 12.2: Describe the new product development process. 61) Where do organizations get new product ideas? Answer: Ideas typically come from consumers, the sales force, R&D departments, suppliers, and engineering personnel. These are the sources mentioned in the chapter. Students may identify other sources as well. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 12.2: Describe the new product development process. 62) What is involved in service process design? Answer: The design involves three parts. First, process selection identifies each step in the service, including sequence and timing. Second, worker requirements are employee behaviors, skills, capabilities, and interactions with customers during the service encounter. Finally, facility requirements designate all the equipment needed to support the delivery of services. Instead of prototype development, services require a three-part service process design: (1) process selection; (2) worker requirements; and (3) facility requirements. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 12.2: Describe the new product development process. 63) Why is speed to market so important for a new product? Answer: According to the textbook, one study reports that a product that is only three months late to market (three months behind the leader) loses 12 percent of its lifetime profit potential. At six months, it will lose 33 percent. Another term is time compression that captures a firm's speed in responding to consumer needs. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 12.2: Describe the new product development process. 64) Describe the role of business analysis when developing a new product. Answer: After gathering consumer opinions, marketers compare production costs and benefits to see whether the product meets minimum profitability goals. This will help to determine whether the organization should continue to move to the next step of the development process, prototype development. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 12.2: Describe the new product development process. 17 Copyright © 2022 Pearson Education, Inc.
65) What is selling the rights to place a brand name on products such as t-shirts referred to as? A) International branding B) National branding C) Private branding D) Regional branding E) Licensed branding Answer: E Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 66) When a wholesaler or retailer develops a brand name and has the manufacturer place that name on the product, what is that product name called? A) National brand B) Private brand C) Luxury brand D) Licensed brand E) Manufacturer brand Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 67) During the product life cycle, when do sales begin to climb rapidly, and the product begin to show profit? A) Introduction B) Maturity C)Product extension D) Growth E) Decline Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 68) During the product life cycle, when does sales growth peak, and earn its highest profit level? A) Decline B) Maturity C) Introduction D) Growth E) Promotion 18 Copyright © 2022 Pearson Education, Inc.
Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 69) Which of the following is likely to increase the life of a product because of modifications that make it appealing in different countries? A) Product extension B) Product adaption C) Rebranding D) New product placement E) Reintroduction Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 70) Using symbols and names to communicate the qualities of a product is a function of what? A) Awareness B) Reintroduction C) Product adaptation D) Product extension E) Branding Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 71) What is one of the key benefits to successful branding? A) Brand extension B) Brand loyalty C) Preferred product placement D) Ease of licensing E) Ease in adaptation Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 19 Copyright © 2022 Pearson Education, Inc.
72) In additional to social networking and viral marketing, how do firms successfully increase brand awareness? A) Reintroduction B) Globalization C) Rebranding D) Product placement E) Product extensions Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 73) Which of the following best describes product placement? A) Placing products on the shelf where they receive the most attention B) Identifying specific products for viral marketing campaigns C) Placing products in movies and television shows D) Placing a national brand next to a store brand for better comparison E) Determining if a product should be sold only online or only in brick and mortar shops Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 74) Which of the following indicates a firm sold the rights to put their name on a product not produced by them? A) Asset brands B) National brands C) Licensed brands D) Private brands E) Private labels Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 75) Which of the following best describes a private label brand? A) A retailer uses packaging as a form of advertising. B) A retailer develops a brand name and has a manufacturer put it on a product. C) A manufacturer puts its name on an unrelated product for a fee. D) A brand name is used throughout a series of products made by the same manufacturer. E) A brand is reintroduced in a new, often global, market. 20 Copyright © 2022 Pearson Education, Inc.
Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 76) How do customers most benefit from packaging design? A) Increased utility B) In-store advertisements C) Less spoilage D) Reduced risk of damage E) Less theft of the product Answer: A Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Analytical LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 77) Which of the following describes the series of stages in a product's commercial life? A) Mortality B) Product life cycle C) Branding D) Development E) The product mix Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.2: Describe the new product development process. 78) During which stage of the product life cycle do marketers focus on making potential customers aware of the product and its benefits? A) Concept testing B) Introduction C) Growth D) Screening E) Business analysis Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 79) Which stage of the product life cycles is typically the longest and may last decades before sales start to slowly decline? 21 Copyright © 2022 Pearson Education, Inc.
A) Development B) Introduction C) Maturity D) Concept testing E) Growth Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 80) In order to keep their product in the maturity stage for as long as possible, YumYum Snack Foods began to market their pretzels in Asia. Which of the following is YumYum using to keep the pretzels in the maturity stage? A) Branding B) Reintroduction C) Introduction D) Product extension E) Product adaptation Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 81) Which of the following is the process of reviving an obsolete product for an entirely new market? A) Product extension B) Reintroduction C) Product adaptation D) Branding E) Introduction Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 82) Which of the following is the extent to which a brand name comes to mind when a consumer considers a particular product category? A) Product adaptation B) Reintroduction C) Brand awareness D) Product placement 22 Copyright © 2022 Pearson Education, Inc.
E) Growth Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 83) Which of the following are brand-name products that are produced by, and widely distributed by the name of the manufacturer? A) Private brands B) Product placements C) Licensed brands D) National brands E) product extensions Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 84) A private brand is a brand name developed by a wholesaler or retailer for their product. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 85) In the introduction state of the product life cycle, the new product attracts enough customers so that sales start to climb rapids, and the product starts to earn profits. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 86) Costco's Kirkland brand is an example of a private brand. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 23 Copyright © 2022 Pearson Education, Inc.
87) Packaging can serve as an in-store advertisement that makes the product attractive, displays the brand name, and identifies features and benefits. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 88) Product placement includes showing actors on television shows using a name-brand product. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 89) The product life cycle describes the commercial life of services as well as goods. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 90) After a product has been in the maturity stage for a few years, marketers must accept that the product will begin to decline. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 91) With product adaptation, the product is modified for greater appeal in different countries. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 92) Product X is just beginning to generate a profit for the first time as the manufacturer lowers prices slightly and sees a significant increase in sales. At what stage in the product life cycle is Product X, and how is this stage identified? Answer: Product X is entering the growth stage. The growth stage is when sales climb, profits begin, and marketers generally continue promotional expenditures to increase sales. 24 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 93) Describe three ways to extend a product's life as it nears the end of the maturity stage. Answer: With product extension, the marketer offers the product globally, moving beyond domestic markets. With product adaptation, the marketer modifies the product for greater appeal in different markets. With reintroduction, the marketer revives products becoming obsolete in one market by introducing it to new markets. Companies try to keep products in the maturity stage as long as they can. Ways to extend product life include product extension, product adaptation, and reintroduction of the product. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 94) What is branding? Explain what branding is and give an example of branding. Answer: Branding is the process of using names and symbols to communicate the qualities of a particular product made by a particular producer. Examples of brands include the name CocaCola and the golden arches of McDonald's. Brands are important because they signal, in a succinct way, the uniformity of quality of a product. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 95) Describe the three types of brand names and give an example of each. Answer: Brand names may be national brands, licensed brands, or private brands. National brands are produced by, widely distributed by, and carry the name of the manufacturer. Examples of national brands include Scotch tape, Scope mouthwash, Coke, and Pepsi. Licensed brands are brand names for whose name the seller has purchased the right from an individual or organization. Examples include Dilbert, the NFL, and Ferrari. Finally, private brand names are found when a wholesaler or retailer develops a brand name and has a manufacturer place that name on the product. Examples of private brands include Sears' Craftsman tools and Kenmore appliances. Brand names have an important function in increasing the attention of the buyer to the differences between brands of similar products. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Application LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 96) Describe the purpose of packaging for a product. 25 Copyright © 2022 Pearson Education, Inc.
Answer: With a few exceptions, products need some form of packaging to reduce the risk of damage, breakage, or spoilage, and to increase the difficulty of stealing small products. A package also serves as an in-store advertisement that makes the product attractive, displays the brand name, and identifies features and benefits. Amazon’s corporate logo, printed on the boxes it uses to ship goods to consumers, has helped build its brand awareness. Also, packaging features, such as no-drip bottles of Clorox bleach, add utility for consumers. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Application LO: 12.3: Describe the stages of the product life cycle (PLC) and methods for extending a product's life. 97) Which of the following terms refers to the monetary amount added to a product's cost to the seller in order to sell it at a profit? A) Profit margin B) Breakeven cost C) Revenue D) Revenue margin E) Markup Answer: E Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 98) Which of the following costs refers specifically to those that change with the quantity of a product sold or produced? A) Annual costs B) Variable costs C) Fixed costs D) Marginal costs E) Market-adjusted costs Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 99) Which of the following costs refers specifically to those that are unaffected by the quantity of a product sold or produced? A) Annual costs B) Variable costs C) Fixed costs D) Marginal costs E) Market-adjusted costs 26 Copyright © 2022 Pearson Education, Inc.
Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 100) Companies who price their product low enough to attract a large number of buyers are most likely pursuing which of the following objectives? A) Stable market pricing B) High profits C) Stable market activity D) Low market volatility E) Market share Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 101) The sales price of a product is given as the product's cost to the seller plus which of the following quantities? A) Breakeven price B) Revenues C) Variable price D) Fixed point E) Markup Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 102) Which of the following gives the correct formula for calculating markup percentage? A) Sales price/markup B) Sales price/fixed costs C) Fixed costs/variable costs D) Markup/sales price E) Sales price/variable costs Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 27 Copyright © 2022 Pearson Education, Inc.
103) Which of the following best defines fixed costs? A) Costs that are needed to acquire a fixed market share B) Costs that are needed to acquire fixed profits C) Costs that are unaffected by the number of goods sold by the firm D) Costs that remain the same from year to year E) Costs that remain the same across all products Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 104) Which of the following best describes pricing objectives? A) The need for the company to compete B) An indication of the company's social and ethical concerns C) A reflection of the company's image D) The ability of a firm to generate revenue E) The goals of the seller achieved by pricing products Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 105) Which pricing objective has the goal of establishing market share? A) Market penetration B) E-business C) Brand recognition D) Brand licensing E) Profit-maximizing Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 106) How do companies achieve continuous sales of more units and higher profits, even with lower unit prices? A) Market penetration B) E-business C) Profit-maximization strategies D) Market domination E) Market share 28 Copyright © 2022 Pearson Education, Inc.
Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 107) Which of the following is a primary advantage for the consumer when using the internet for shopping? A) Objective customer reviews B) Faster delivery C) Elimination of added costs of wholesalers and retailers D) Efficient use of corporate resources E) Cost-oriented pricing Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 108) What is the amount added by a retailer to an item's purchase cost needed to make a profit? A) Gross B) Variable cost C) Breakeven D) Markup E) Fixed cost Answer: D Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 109) Which of the following represents the sales volume where total costs equal total revenue? A) Fixed costs B) Pricing analysis C) Skimming D) Variable costs E) Breakeven point Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 29 Copyright © 2022 Pearson Education, Inc.
110) Which pricing objective would be used if the seller's pricing decision is critical for determining the firm's revenue? A) Market share B) E-business C) Market penetration D) Profit-maximizing E) Breakeven Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 111) Which of the following reflect the price-setting strategy where the firm can cover operating costs and make a profit? A) Cost-oriented pricing B) Breakeven analysis C) Market penetration D) Profit-maximizing E) Price skimming Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 112) Which of the following indicates a sales volume where total costs are equal to total revenue? A) Price skimming B) Fixed pricing C) Cost-oriented D) Profit-maximizing E) Breakeven Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 113) If prices are set too high, the company will make a large profit on each item, but will sell fewer units. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge 30 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Analytical LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 114) One advantage of selling online is that it is easier for sellers to hide prices and enjoy a large markup. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 115) Variable costs of a product are those costs that change with the quantity of a product produced and sold. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 116) The breakeven point is the price at which a company earns the maximum profits. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 117) The only goal of determining prices is to maximize profit for the firm. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 118) Cost-oriented pricing allows a firm to cover variable cost and pay fixed costs. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 119) How has e-business contributed to lower prices? Answer: Doing business online can lower the cost of making products available to buyers for 31 Copyright © 2022 Pearson Education, Inc.
example, by avoiding the added costs of wholesalers and retailers. Comparison shopping is easier online, so consumers can find the best price. Customers also may join together online for greater purchasing power. When pricing for Internet sales, marketers must consider different kinds of costs and different forms of consumer awareness. Many e-businesses reduce both costs and prices because of the Internet's unique marketing capabilities. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 120) Differentiate between fixed costs and variable costs. Answer: Fixed costs remain constant with varying levels of production or sales. Variable costs change with the quantity of a product produced or sold. Examples of fixed costs include rent, insurance, and utilities whereas examples of variable costs include those for raw materials, sales commissions, and shipping. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 121) What is cost-oriented pricing? Answer: Cost-oriented pricing considers the firm's desire to make a profit and takes into account the need to cover production costs. In its simplest formulation, cost-oriented pricing would determine the selling price by adding together seller's cost and profit. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 122) At which point will a firm break even in the launch of a new product? Answer: Breakeven analysis identifies the sales volume where total costs equal total revenues by assessing costs versus revenues for various sales volumes and showing, at any particular selling price, the amount of loss or profit for each volume of sales. Breakeven point is equal to the total fixed cost divided by price minus variable costs. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 123) Describe a situation in which a company might adopt a pricing objective other than profit maximization. Answer: Sometimes a firm may value establishing market share over making immediate profits. Companies may set an initially lower price to get buyers to try products. In such a case, the firm 32 Copyright © 2022 Pearson Education, Inc.
would defer profits to a later time. In addition, companies are also influenced by the need to compete in the marketplace, by social and ethical concerns, and by corporate image. Pricing objectives are the goals that sellers hope to achieve in pricing products for sale. Some companies have profit-maximizing pricing objectives, while others have market share pricing objectives. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 12.4: Identify the various pricing objectives that govern pricing decisions and describe the price-setting tools used in making these decisions. 124) Which of the following is a type of phycological pricing? A) Price fixing B) Odd-even pricing C) Market pricing D) Price lining E) Price skimming Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 12.5: Discuss pricing strategies that can be used for different competitive situations and identify the pricing tactics that can be used for setting prices. 125) Which of the following pricing strategies has stimulation of sales as a higher priority than maximization of profits? A) Price fixing B) Penetration pricing C) Price skimming D) Price pointing E) Price lining Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 12.5: Discuss pricing strategies that can be used for different competitive situations and identify the pricing tactics that can be used for setting prices. 126) Which of the following strategies is involved with price skimming? A) Setting an initial low price to establish a new product in the market B) Setting an initial low price to cover new product costs and still generate a profit C) Setting a limited number of prices for certain categories or products D) Setting an initial high price to establish a new product in the market E) Setting an initial high price to cover new product costs and still generate a profit Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical 33 Copyright © 2022 Pearson Education, Inc.
LO: 12.5: Discuss pricing strategies that can be used for different competitive situations and identify the pricing tactics that can be used for setting prices. 127) Which of the following strategies is involved with penetration pricing? A) Setting an initial low price to establish a new product in the market B) Setting an initial low price to cover new product costs and still generate a profit C) Setting a limited number of prices for certain categories or products D) Setting an initial high price to establish a new product in the market E) Setting an initial high price to cover new product costs and still generate a profit. Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 12.5: Discuss pricing strategies that can be used for different competitive situations and identify the pricing tactics that can be used for setting prices. 128) Which of the following pricing strategies is used by many e-tailers in order to provide flexibility between buyers and sellers in setting a price? A) Penetration pricing B) Psychological pricing C) Breakeven pricing D) Fixed pricing E) Dynamic pricing Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 12.5: Discuss pricing strategies that can be used for different competitive situations and identify the pricing tactics that can be used for setting prices. 129) Which of the following pricing strategies BEST describes price lining? A) Setting an initial low price to establish a new product in the market B) Setting an initial high price to cover new product costs and generate a profit C) Setting individually negotiated prices for certain categories of products D) Setting a limited number of prices for certain categories of products E) Setting individually negotiated prices for all categories of products Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 12.5: Discuss pricing strategies that can be used for different competitive situations and identify the pricing tactics that can be used for setting prices. 130) Which of the following assumptions is the strategy of pricing above the market based on? A) Higher price implies higher quality. B) Higher price means higher customer support. C) Higher prices mean higher customer satisfaction. 34 Copyright © 2022 Pearson Education, Inc.
D) Higher price creates higher demand. E) Higher price means easier distribution. Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 12.5: Discuss pricing strategies that can be used for different competitive situations and identify the pricing tactics that can be used for setting prices. 131) Which of the following scenarios would allow a firm to price below prevailing market price and still succeed? A) The public does not learn that the firm's product is indeed inferior. B) The firm can offer a product of acceptable quality. C) The firm can offer an entirely new product. D) The firm can effectively copy competitors' promotional tactics and marketing strategies. E) The firm can effectively criticize its competitors' products and quality. Answer: B Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 12.5: Discuss pricing strategies that can be used for different competitive situations and identify the pricing tactics that can be used for setting prices. AACSB: Application of knowledge132) How can a good or service provider stimulate demand during off-peak seasons? A) Price lining B) Discounts C) Skimming D) Odd-even pricing E) Bundling Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.5: Discuss pricing strategies that can be used for different competitive situations and identify the pricing tactics that can be used for setting prices. 133) What is the practice of selling products in a foreign market for less than in its home country? A) Countervailing duties B) Skimming C) Odd-even pricing D) Dumping E) Price lining Answer: D Difficulty: Moderate AACSB: Application of knowledge 35 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Concept LO: 12.5: Discuss pricing strategies that can be used for different competitive situations and identify the pricing tactics that can be used for setting prices. 134) If a company offers several products that are similar in nature, how could the company increase sales while saving the consumer money? A) Use a bundling strategy B) Incorporate dynamic pricing C) Sell at a reverse auction D) Use a penetration pricing strategy E) Incorporate a price skimming option Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.5: Discuss pricing strategies that can be used for different competitive situations and identify the pricing tactics that can be used for setting prices. 135) Why would a company use a bundling strategy when selling goods or services? A) To decrease packaging costs B) To increase the sales of bundled items C) To introduce a new product to the market D) To offer all products at a limited range of prices E) To take advantage of psychological pricing Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 12.5: Discuss pricing strategies that can be used for different competitive situations and identify the pricing tactics that can be used for setting prices. 136) Because consumers do not always respond rationally to stated prices, which of the following can companies use to attract consumers A) Penetration pricing B) Dynamic pricing C) Discounts D) Psychological pricing E) Bundling strategies Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 12.5: Discuss pricing strategies that can be used for different competitive situations and identify the pricing tactics that can be used for setting prices. 137) The goal of penetration pricing is to establish a new product in the market by pricing a product low enough so that customers will buy the product. 36 Copyright © 2022 Pearson Education, Inc.
Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 12.5: Discuss pricing strategies that can be used for different competitive situations and identify the pricing tactics that can be used for setting prices.128) Price skimming occurs when a company sets an initially low price to establish a new product in the market. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 12.5: Discuss pricing strategies that can be used for different competitive situations and identify the pricing tactics that can be used for setting prices. 138) Companies using price lining offer all items in certain categories at a limited number of prices. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 12.5: Discuss pricing strategies that can be used for different competitive situations and identify the pricing tactics that can be used for setting prices. 139) Products priced above the market play on the common assumption that a higher price means higher quality. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 12.5: Discuss pricing strategies that can be used for different competitive situations and identify the pricing tactics that can be used for setting prices.AACSB: Application of knowledge 140) Discuss the three options for pricing existing products. Answer: A firm has three options for pricing existing products. It can price above prevailing market prices for similar products to take advantage of the common assumption that higher price means higher quality. It can price below market prices while offering a product of comparable quality to higher-priced competitors. It can also price at or near market prices. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Application LO: 12.5: Discuss pricing strategies that can be used for different competitive situations and identify the pricing tactics that can be used for setting prices. 141) Why would a firm want to set its price above competitors' prices? Answer: Firms set prices above the market price to create the impression that the product with the higher price is of far greater quality. Two examples are Godiva chocolates and Patek Philippe watches, which are priced high to promote images of prestige and quality. 37 Copyright © 2022 Pearson Education, Inc.
Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Application LO: 12.5: Discuss pricing strategies that can be used for different competitive situations and identify the pricing tactics that can be used for setting prices.
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Business Essentials, 13e (Ebert/Griffin) Chapter 13 Distributing and Promoting Products 1) Which of the following refers to the combination of channels that a firm selects to get a product to end users? A) Distribution mix B) Transportation strategy C) Merchandising system D) Marketing plan E) Retail system Answer: A Difficulty: Easy AACSB: Application of knowledge Question Category: Concept LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution. 2) Which distribution channel is used by companies that distribute their goods through their own system of outlets? A) Direct distribution B) Retail distribution C) Wholesale distribution D) Distribution by agents E) Distribution by brokers Answer: B Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution. 3) Which of the following intermediaries matches numerous sellers and buyers as needed, often without knowing in advance who they will be? A) Producer representative B) Retailer C) Syndicated seller D) Sales agent E) Broker Answer: E Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution.
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4) Choosing a distribution network is a strategic decision in that the decision determines the amount and cost of what? A) Channel conflict B) Market coverage C) Online retailing D) Retail coverage E) Channel leadership Answer: B Difficulty: Moderate AACSB: Application of knowledge Question Category: Analytical LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution. 5) Convenience stores utilize which kind of distribution? A) Direct distribution B) Retail distribution C) Wholesale distribution D) Distribution by agents E) Distribution by brokers Answer: C Difficulty: Moderate AACSB: Application of knowledge Question Category: Analytical LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution. 6) Which of the following helps producers distribute goods from sellers to customers? A) Intermediaries B) Sales agents C) Direct wholesalers D) Retailers E) Brokers Answer: A Difficulty: Moderate AACSB: Application of knowledge Question Category: Analytical LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution.
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7) In which type of distribution process does the product move from producer to consumer without the use of intermediaries? A) Wholesale B) Direct channel C) Agency D) Brokerage E) Retail Answer: B Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution. 8) Which of the following is an advantage to nondirect distribution? A) They reduce the cost of items by making bulk purchases. B) They do not charge commissions or markups. C) They provide added value to the producers by preordering services. D) They work with related product lines of very few producers. E) They provide added value by saving buyers time. Answer: E Difficulty: Moderate AACSB: Analytical thinking Question Category: Analytical LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution. 9) Which type of market distribution strategy places low cost goods at as many distribution points as possible? A) Selective B) Conflicted C) Exclusive D) Intensive E) Channeled Answer: D Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution.
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10) If a producer wants a product to have promotional advantage and increased attention in the sales effort, what distribution process should they pursue? A) Selective B) Conflicted C) Exclusive D) Intensive E) Leadership Answer: A Difficulty: Moderate AACSB: Application of knowledge Question Category: Analytical LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution. 11) What is the potential result when members of a channel disagree over the rewards they should receive? A) Channel reward B) Channel conflict C) Channel leadership D) Channel captain E) Channel alienation Answer: B Difficulty: Moderate AACSB: Application of knowledge Question Category: Application LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution. 12) When getting a good or service to market, who is most powerful in determining the roles and rewards of others in the system? A) Channel captain B) Exclusive distributer C) Selective distributer D) Merchant wholesaler E) Sales agent Answer: A Difficulty: Moderate AACSB: Application of knowledge Question Category: Application LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution.
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13) Which component of the distribution mix do agents and brokers represent in exchange for receiving commissions? A) Producers B) Consumers C) Retailers D) Industrial users E) Other intermediaries Answer: A Difficulty: Moderate AACSB: Application of knowledge Question Category: Application LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution. 14) Which of the following takes place when a manufacturer grants the right to sell a product to a very limited number of retailers or wholesalers? A) Intensive distribution B) Direct channel distribution C) Sales agent distribution D) Exclusive distribution E) Selective distribution Answer: D Difficulty: Moderate AACSB: Analytical thinking Question Category: Concept LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution. 15) When would a manufacturer use an exclusive distribution strategy to market a product? A) When there is a need to create promotional advantage B) When the manufacturer has a low-cost product that is new for the market C) To build a strong relationship between the manufacturer and the wholesaler D) When the manufacturer wants to break into a new geographic location E) When the item is a high-cost or prestige product Answer: E Difficulty: Moderate AACSB: Analytical thinking Question Category: Critical Thinking LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution.
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16) The path a product follows from product to end user is referred to as A) physical distribution. B) interactivity. C) product-line retailing. D) retail distribution. E) a distribution channel. Answer: E Difficulty: Moderate AACSB: Analytical thinking Question Category: Critical Thinking LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution. 17) Which of the following work with only a few producers and strive to form long-term relationships with them in meeting the needs of customers? A) Channel captains B) Warehousers C) Sales agents D) Retail outlets E) Syndicated sellers Answer: C Difficulty: Moderate AACSB: Analytical thinking Question Category: Critical Thinking LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution. 18) Which of the following best describes a distribution channel? A) The group of intermediaries that sell products to other businesses for resale to consumers B) The network of interdependent companies that pass products from producers to consumers C) The channel member who is most powerful in determining the roles and rewards of members D) The Internet distribution channel that collects information about buyers and sellers E) The network of sellers who offer commissions for referring customers Answer: B Difficulty: Difficult AACSB: Analytical thinking Question Category: Critical Thinking LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution.
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19) Which of the following is the goal of marketers in pursuing a distribution strategy? A) To make products accessible in just enough locations to satisfy customer needs B) To distribute products through as many channels as possible at the highest price possible C) To create exclusivity by distributing products through highly select outlets D) To establish a channel captain who will promote products E) To eliminate all channel conflict Answer: A Difficulty: Moderate AACSB: Analytical thinking Question Category: Critical Thinking LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution. 20) The distribution mix is the combination of channels that a firm selects to get a product to end users. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Question Category: Concept LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution. 21) Most business products are distributed through direct channels. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution. 22) Agents and brokers buy products from manufacturers and then sell them to other businesses. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Question Category: Application LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution. 23) One drawback of nondirect distribution is higher prices. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Question Category: Analytical LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution.
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24) Intermediaries can expedite the delivery of products, but otherwise add no additional value to a distributional system. Answer: FALSE Difficulty: Difficult AACSB: Application of knowledge Question Category: Analytical LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution. 25) In the distribution process, the channel captain can be an influential wholesaler or large retailer. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Question Category: Analytical LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution. 26) Industrial buyers often rely on the retail distribution channel. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Question Category: Analytical LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution. 27) Describe the role of the channel captain in managing channel conflict. Answer: Usually one channel member–the channel captain–can determine the roles and rewards of the others. The channel captain is often a manufacturer or an originator of a service. Channel conflict occurs when members of the channel disagree over roles or rewards. Manufacturers and services providers may distribute through more than one channel, and many retailers are free to strike agreements with as many producers as capacity permits. In such cases, channel conflict may arise. Conflicts are resolved through better coordination, and a key factor in coordinating the activities of organizations is channel leadership. Difficulty: Moderate AACSB: Application of knowledge Question Category: Analytical LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution.
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28) Describe the three distribution strategies and when each might be used. Answer: Intensive distribution means distributing through as many channels and channel members as possible (both wholesalers and retailers). It is normally used for low-cost consumer goods with widespread appeal, such as candy and magazines. With exclusive distribution, a manufacturer grants the exclusive right to distribute or sell a product to a limited number of wholesalers or retailers, usually in a given geographic area. Such agreements are most common for high-cost prestige products. Using selective distribution, a producer selects only wholesalers and retailers that will give a product special attention in sales effort, display and promotion advantage, and so forth. Selective distribution is used most often for consumer products such as furniture and appliances. Difficulty: Moderate AACSB: Application of knowledge Question Category: Analytical LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution. 29) Explain the primary difference between a retailer and a wholesaler. Answer: The primary difference is to whom the intermediary sells the product. A retailer sells the product to the consumer, i.e., the person or company that will actually use the product as it was created to be used, whereas the wholesaler sells the product to another seller, i.e., a person or company that wants to buy the product only to resell it. Wholesalers are intermediaries helping to distribute goods, either by moving them or by providing information that stimulates their movement from sellers, such as retailers to customers. Difficulty: Moderate AACSB: Analytical thinking Question Category: Analytical LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution. 30) Explain the primary difference between a wholesaler and a sales agent. Answer: The primary difference is the role that each intermediary play within the distribution mix. The wholesaler's role is generally to distribute the product to any retailers that will buy it and resell it. In particular, wholesalers are only indirectly concerned with who the consumers of the product actually are. Sales agents, on the other hand, seek out the consumers for the product directly and negotiate the sales of the product as part of their commission. Thus, they have a more active role in finding and securing consumers for the product. Wholesale distribution and distribution by agents or brokers are two of the four popular distribution channels, along with direct distribution and retail distribution. Difficulty: Difficult AACSB: Analytical thinking Question Category: Analytical LO: 13.1: Explain the meaning of distribution mix and identify the different channels of distribution.
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31) Which type of intermediary buys the product from the manufacturer then resells it to other businesses? A) Drop shippers B) Merchant wholesalers C) Agents D) E-intermediaries E) Brokers Answer: B Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.2: Describe the role of wholesalers and the functions performed by e-intermediaries. 32) Which type of intermediary act as a storage firm allowing small operations to pick up the goods desired? A) Full-service merchant wholesalers B) Drop shippers C) Limited-function merchant wholesalers D) Rack jobbers E) Merchant wholesalers Answer: C Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.2: Describe the role of wholesalers and the functions performed by e-intermediaries. 33) What is the term for the wholesaler who sells directly to retail stores and provides services such as pricing and shelf displays? A) Full-service merchant wholesalers B) Drop shippers C) Limited-function merchant wholesalers D) Rack jobbers E) Merchant wholesalers Answer: D Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.2: Describe the role of wholesalers and the functions performed by e-intermediaries.
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34) What is the advantage of using agents and brokers when a firm does not have its own sales force? A) Agents and brokers have extensive knowledge of the needs of consumers. B) Agents and brokers gather and sort information for online consumers. C) Agents and brokers can act as e-intermediaries for internet sales. D) Agents and brokers have extensive knowledge of the markets and merchandise. E) Agents and brokers encourage syndicated selling. Answer: D Difficulty: Moderate AACSB: Application of knowledge Question Category: Analytical LO: 13.2: Describe the role of wholesalers and the functions performed by e-intermediaries. 35) Which of the following occurs when one website gives a commission to another for referring customers? A) Business to business brokerage B) E-intermediary selling C) Drop shipping D) Limited merchant wholesaling E) Syndicated selling Answer: E Difficulty: Moderate AACSB: Analytical thinking Question Category: Application LO: 13.2: Describe the role of wholesalers and the functions performed by e-intermediaries. 36) Which type of firm helps online consumers gather and sort information about products and helps in the sale of the products by presenting the information in an easy to understand format? A) Shopping agents B) Drop shippers C) Business-to-business brokers D) Syndicated sellers E) Channel captains Answer: A Difficulty: Moderate AACSB: Analytical thinking Question Category: Analytical LO: 13.2: Describe the role of wholesalers and the functions performed by e-intermediaries.
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37) Sherrie's small business needs advice about credit, marketing, and merchandising. Which type of wholesaler will provide information to Sherrie on all of those things? A) Full-service merchant wholesaler B) Drop shipper C) Rack jobber D) Limited-function merchant wholesaler E) E-intermediary Answer: A Difficulty: Moderate AACSB: Analytical thinking Question Category: Analytical LO: 13.2: Describe the role of wholesalers and the functions performed by e-intermediaries. 38) Robert buys his products from a wholesaler who doesn't carry an inventory, but will negotiate with producers, buy the products, and then ship them directly to Robert. While of the following is Robert using to get his inventory? A) Agent B) Drop shipper C) E-intermediary D) Rack jobber E) Full-service wholesaler Answer: B Difficulty: Moderate AACSB: Analytical thinking Question Category: Analytical LO: 13.2: Describe the role of wholesalers and the functions performed by e-intermediaries. 39) Fred wants to book a summer vacation, and visits sites that offer deals on hotel rooms, airfare, and rental cars all on the same site. Which of the following is Fred working with to book his vacation? A) Agent B) Broker C) E-intermediary D) Shopping agent E) Retailer Answer: C Difficulty: Moderate AACSB: Analytical thinking Question Category: Analytical LO: 13.2: Describe the role of wholesalers and the functions performed by e-intermediaries.
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40) While browsing on Pinterest, Garland clicked on a banner ad that offered a weight loss product with guaranteed results. Which of the following occurred when Garland moved off one website by clicking on the link in the banner ad? A) Intensive product distribution B) Channel conflict C) Rack jobbing D) Syndicated selling E) E-intermediary usage Answer: D Difficulty: Moderate AACSB: Analytical thinking Question Category: Analytical LO: 13.2: Describe the role of wholesalers and the functions performed by e-intermediaries. 41) Shopping agents allow consumers to purchase products directly from their site. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Question Category: Application LO: 13.2: Describe the role of wholesalers and the functions performed by e-intermediaries. 42) E-intermediaries include syndicated sellers and shopping agents. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Question Category: Application LO: 13.2: Describe the role of wholesalers and the functions performed by e-intermediaries. 43) Drop shippers carry inventory for retailers. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Question Category: Application LO: 13.2: Describe the role of wholesalers and the functions performed by e-intermediaries. 44) Shopping agents (e-agents) help people shop from factory outlet stores. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Question Category: Application LO: 13.2: Describe the role of wholesalers and the functions performed by e-intermediaries.
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45) Business-to-business brokers are e-commerce intermediaries that provide online valueadding services for business customers. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Question Category: Application LO: 13.2: Describe the role of wholesalers and the functions performed by e-intermediaries. 46) Explain how syndicated sellers add value for customers. Answer: Syndicated selling occurs when one website offers another a commission for referring customers. Expedia.com and Dollar Car Rental illustrate syndicated selling perfectly. When Expedia customers click on the banner for a car rental, they are transferred from the Expedia site to the Dollar site. Dollar pays Expedia a fee for each booking that comes through this channel. Although the Expedia intermediary increases the cost of Dollar's supply chain, it also adds value for customers. Travelers avoid unnecessary online searches and are efficiently guided to a carrental agency. Difficulty: Moderate AACSB: Application of knowledge Question Category: Application LO: 13.2: Describe the role of wholesalers and the functions performed by e-intermediaries. 47) Explain how shopping e-agents help online consumers. Answer: Shopping agents (e-agents) help online consumers by gathering and sorting information. Although they don't take possession of products, they know which websites and stores to visit, give accurate comparison prices, identify product features, and help consumers complete transactions by presenting information in a usable format–all in an instant. Hotwire.com is a well-known shopping agent for a variety of travel products. When you specify the product–hotels, flights, vacations, cars–Hotwire searches for vendors, does price comparisons, lists prices from low to high, and then transfers you to the websites of different estores. Difficulty: Moderate AACSB: Application of knowledge Question Category: Application LO: 13.2: Describe the role of wholesalers and the functions performed by e-intermediaries.
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48) Describe the job of agents and brokers in merchandise distribution. Answer: Agents and brokers, including online e-agents, serve as independent sales representatives for many companies' products. They work on commission, usually about 4 to 5 percent of net sales. Unlike wholesalers, agents and brokers do not own their merchandise. Rather, they serve as sales and merchandising arms for producers or sellers who do not have their own sales forces. The value of agents and brokers lies in their knowledge of markets and their merchandising expertise. They show sale items to potential buyers and, for retail stores, they provide such services as shelf and display merchandising and advertising layout. They remove open, torn, or dirty packages, arrange products neatly, and generally keep goods attractively displayed. Difficulty: Moderate AACSB: Application of knowledge Question Category: Application LO: 13.2: Describe the role of wholesalers and the functions performed by e-intermediaries. 49) Describe the services provided by merchant wholesalers. Answer: Merchant wholesalers buy products from manufacturers and sell them to other businesses. They usually provide storage and delivery. Full-service merchant wholesalers provide value-adding services such as credit, marketing advice, and merchandising services. Limited-function merchant wholesalers and drop shippers provide fewer of these services. Drop shippers don't even carry inventory or handle products. They take orders from customers, negotiate with producers to supply goods, take title to them, and arrange for shipment. Rack jobbers market consumer goods (mostly nonfood items) directly to retail stores, marking prices and setting up displays in a variety of stores. Merchant wholesalers are the largest group of wholesalers. About 80 percent of them are full-service merchant wholesalers who provide the widest variety of services. Difficulty: Moderate AACSB: Application of knowledge Question Category: Analytical LO: 13.2: Describe the role of wholesalers and the functions performed by e-intermediaries. 50) Describe the services provided by e-intermediaries. Answer: E-intermediaries are Internet-based channel members that collect information about sellers and present it to consumers, help deliver products sold online to buyers, or both. Syndicated sellers are Web sites that receive commissions from another Web site for referring customers. Shopping agents help online consumers by gathering and sorting information. Business-to-business brokers provide the value-adding services of wholesalers to business customers buying and selling online. These are the categories of e-intermediaries described in the chapter. Difficulty: Moderate AACSB: Application of knowledge Question Category: Analytical LO: 13.2: Describe the role of wholesalers and the functions performed by e-intermediaries.
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51) Which of the following denotes small retail stores carrying only one product line or category of related products? A) Department stores B) Bargain retailers C) Supermarkets D) Convenience stores E) Specialty stores Answer: E Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet. 52) Which of the following bargain retailers generate large sales volume by offering a wide variety of new products at substantial price reductions? A) Discount houses B) Catalog showrooms C) Second-hand stores D) Factory outlets E) Direct-response bargain marketing Answer: A Difficulty: Moderate AACSB: Application of knowledge Question Category: Analytical LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet. 53) Which of the following represents a popular form of direct-response retailing? A) E-retailing B) Specialty store retailing C) Catalog showroom retailing D) Mail-order retailing E) Brokered retailing Answer: D Difficulty: Difficult AACSB: Application of knowledge Question Category: Application LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet.
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54) What are the three major classifications of retail outlets in the United States? A) Large-sized outlets, medium-sized specialty shops, small-sized convenience stores B) Product-based retailers, bargain-based retailers, convenience-based retailers C) Quality-based retailers, quantity-based retailers, specialty-based retailers D) Producer-owned retailers, franchised retailers, independently owned retailers E) Brick-and-mortar retailers, e-retailers, hybrid retailers Answer: B Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet. 55) Which of the following describes the function of search engines that act as collections of business websites representing diverse products? A) Internet service providers B) Electronic storefronts C) Cybermalls D) E-catalogs E) Interactive retailing Answer: C Difficulty: Difficult AACSB: Application of knowledge Question Category: Concept LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet. 56) Home Shopping Club and QVC are examples of which of the following retail sales outlet? A) Direct selling B) Video retailing C) Electronic shopping D) Virtual selling E) Telemarketing Answer: B Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet.
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57) In which type of product-line retailer would you MOST likely find specialized departments based on types of products? A) A supermarket B) A discount house C) A department store D) A convenience store E) A specialty store Answer: C Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet. 58) In which of the following bargain retailers do the customers view display samples, place orders, and wait briefly while clerks retrieve orders from attached warehouses? A) Off-price store B) Catalog showroom C) Factory outlet D) Wholesale club E) Discount house Answer: B Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet. 59) Which of the following includes firms who contact customers directly to inform them about products that can be purchased immediately? A) Direct-response retailing B) Catalog showrooms C) Wholesale clubs D) Product-line retailers E) Bargain retailers Answer: A Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet.
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60) Which of the following is an advantage for a retailer who is using e-catalogs? A) Inventory in the store does not have to match the catalog. B) The cost to maintain and access the catalog is minimal. C) Specialty products reach a better-defined target market. D) Several virtual storefronts can be represented in the catalog. E) The e-catalog is not dependent on search engines such as Yahoo! or Google. Answer: B Difficulty: Moderate AACSB: Analytical thinking Question Category: Critical Thinking LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet. 61) Which of the following represents the use of online displays of products, allowing customers instant access to information and purchasing options? A) Cybermalls B) Virtual storefronts C) E-catalogs D) Video retailing E) Electronic storefronts Answer: C Difficulty: Difficult AACSB: Analytical thinking Question Category: Critical Thinking LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet. 62) Which of the following is a form of direct-response retailing? A) Online B) Mail order C) Promotion D) Department stores E) Wholesale clubs Answer: B Difficulty: Moderate AACSB: Analytical thinking Question Category: Application LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet.
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63) Which type of retailing is direct selling and telemarketing considered to be? A) Warehousing B) Convenience C) Nonstore D) Bargain E) Online Answer: C Difficulty: Moderate AACSB: Analytical thinking Question Category: Concept LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet. 64) As a product-line retailer, what services do supermarkets emphasize? A) Specialized departments for different products B) Wide variety of services, credit, and delivery options C) Low prices, self-service, and wide selection D) Full product line within a narrow product field E) Knowledgeable sales people and product specialist Answer: C Difficulty: Moderate AACSB: Analytical thinking Question Category: Concept LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet. 65) What is the advantage of shopping at a wholesale club? A) There are large discounts on a wide range of merchandise. B) Customers can view samples and place orders. C) There are a narrow variety of products at highly competitive prices. D) The manufacturer owns the store and prices are discounted. E) Merchandise is sold directly from the factory to the consumer. Answer: A Difficulty: Moderate AACSB: Analytical thinking Question Category: Application LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet.
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66) Which of the following allows sellers to inform, sell to, and distribute to consumers using technology? A) Direct-response retailing B) Online retailing C) Direct selling D) Bargain retailers E) Specialty stores Answer: B Difficulty: Moderate AACSB: Analytical thinking Question Category: Concept LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet. 67) Because they offer easy access, extended hours, and fast service, which of the following generally charges somewhat higher prices for their merchandise? A) Factory outlets B) Warehouse clubs C) Convenience stores D) Direct selling E) Online retailers Answer: C Difficulty: Moderate AACSB: Analytical thinking Question Category: Concept LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet. 68) Susan is hosting a small gathering of her friends and neighbors, and a representative from a purse company will also be there to talk about their product line and take orders immediately. Which of the following does this describe? A) Video retailing B) Online retailing C) Mail order D) Direct selling E) Telemarketing Answer: D Difficulty: Moderate AACSB: Analytical thinking Question Category: Concept LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet.
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69) The ability for consumer to gather information about sellers, and their products form home is the process of A) direct selling. B) catalog marketing. C) telemarketing. D) video retailing. E) online retailing. Answer: E Difficulty: Moderate AACSB: Analytical thinking Question Category: Concept LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet. 70) Discount houses, catalog showrooms, and factory outlets are examples of product-line retailers. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Question Category: Application LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet. 71) Once an online catalog is in place, there are high costs in maintaining and accessing it. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Question Category: Analytical LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet. 72) Effective, knowledgeable sales personnel can often be found in the sales force of specialty stores. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet.
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73) Among the bargain retail operations, convenience stores, in general, provide the most substantial price reductions to the products. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Question Category: Application LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet. 74) Online retailing allows seller to inform, sell to, and distribute to consumers using technology. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Question Category: Application LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet. 75) Identify the three classifications of retail stores in the U.S. and the types of stores associated with them Answer: U.S. retail stores are classified into three areas: (1) product-line retailers, (2) bargain retailers, and (3) convenience stores. Product-line retailers include department stores, supermarkets, and specialty stores. Bargain retailers carry a wide range of products at low prices. They include discount houses, catalog showrooms, factory outlets and wholesale clubs. Convenience stores offer easy accessibility, extended hours, and fast service, and might be found near gas stations or stores such as 7-Eleven Difficulty: Moderate AACSB: Application of knowledge Question Category: Application LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet. 76) Describe the various types of bargain retailers. Answer: Bargain retailers carry wide ranges of products at low prices. Discount houses began by selling large numbers of items at substantial price reductions to cash-only customers. Catalog showrooms mail catalogs and/or send online ads to attract customers into showrooms to view display samples, place orders, and wait briefly while clerks retrieve orders from attached warehouses. Factory outlets are manufacturer-owned stores that avoid wholesalers and retailers by selling merchandise directly from factory to consumer. Wholesale clubs, such as Costco, offer large discounts on a wide range of brand-name merchandise to customers who pay annual membership fees. Difficulty: Moderate AACSB: Application of knowledge Question Category: Application LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet.
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77) Explain direct-response retailing. Answer: Firms contact customers directly to inform them about products and to receive sales orders. Among the types of direct-response retailing are mail order (or catalog marketing), telemarketing, and direct selling door-to-door or through home-selling parties. Difficulty: Easy AACSB: Application of knowledge Question Category: Concept LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet. 78) Why would one expect a product sold at a specialty store to cost more than the same product at a department store? Answer: Department stores provide a variety of products, divided by type into various departments, whereas specialty stores will specialize on one particular product. As a result, consumers would expect a better choice in product and more knowledgeable staff at the specialty store than at the department store. This attention to consumer needs would entail a higher price on the same product at the specialty store than at the department store. Department stores are usually large and handle a wide range of goods, whereas specialty stores are small and serve specific market segments with full product lines in narrow product fields. Difficulty: Difficult AACSB: Analytical thinking Question Category: Critical Thinking LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet. 79) Explain the difference between an electronic storefront and a cybermall. Answer: An electronic storefront is a seller's Web site from which consumers collect information about products and buying opportunities, place orders, and pay for purchases. Search engines serve as cybermalls and are a collection of virtual storefronts representing diverse products and offering speed, convenience, 24-hour access, and efficient searching. After entering a cybermall, shoppers can navigate to electronic storefronts by choosing from a list of stores, product listings, or departments. Difficulty: Difficult AACSB: Analytical thinking Question Category: Analytical LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet.
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80) Discuss the differences in the three types of product-line retailers. Answer: Product-line retailers feature broad product lines and include department stores, which are organized into specialized departments: shoes, furniture, women's petite sizes, and so on. Stores are usually large, handle a wide range of goods, and offer a variety of services, such as credit plans and delivery. Similarly, supermarkets are divided into departments of related products: food products, household products, and so forth. They stress low prices, self-service, and wide selection. In contrast, specialty stores, serve specific market segments with full product lines in narrow product fields, and often feature knowledgeable sales personnel. Difficulty: Moderate AACSB: Application of knowledge Question Category: Critical Thinking LO: 13.3: Describe the different types of retailing and explain how online retailers add value for consumers on the Internet. 81) Which of the following terms refers specifically to the activities needed to move products efficiently from manufacturer to consumer? A) Physical distribution B) Promotion and positioning C) Retailing D) Brokering E) Product placement Answer: A Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.4: Define physical distribution and describe the major activities in the physical distribution process. 82) Within which of the following storage facilities would one expect to see the widest variety of products stored because they store good for many firms? A) Private warehouse B) Public warehouse C) Food storage facility D) Department store stockroom E) Specialty store stockroom Answer: B Difficulty: Moderate AACSB: Application of knowledge Question Category: Analytical LO: 13.4: Define physical distribution and describe the major activities in the physical distribution process.
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83) Which type of warehouse is owned by a single retailer that deals in mass quantities? A) Public warehouse B) Relay warehouse C) Retail stockroom D) Private warehouse E) Storage warehouse Answer: D Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.4: Define physical distribution and describe the major activities in the physical distribution process. 84) Which of the following will a large firm utilize when it needs temporary storage space for a large amount of products in immediate demand? A) Public warehouses B) Store stockrooms C) Relay warehouses D) Private warehouses E) Storage warehouses Answer: A Difficulty: Moderate AACSB: Application of knowledge Question Category: Application LO: 13.4: Define physical distribution and describe the major activities in the physical distribution process. 85) Which of the following is the fastest and most expensive transportation mode for physical consumer goods? A) Railroads B) Airplanes C) Pipelines D) Water carriers E) Trucks Answer: B Difficulty: Easy AACSB: Application of knowledge Question Category: Application LO: 13.4: Define physical distribution and describe the major activities in the physical distribution process.
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86) Which of the following is the slowest and the least expensive mode of transportation? A) Railroads B) Airplanes C) Pipelines D) Water carriers E) Trucks Answer: D Difficulty: Moderate AACSB: Application of knowledge Question Category: Application LO: 13.4: Define physical distribution and describe the major activities in the physical distribution process. 87) Which of the following is MOST directly related to differences in transportation cost from mode to mode? A) Packing necessary for the product B) Fuel efficiency of the carrier C) Regularity of use of a given carrier D) Discount agreements with the carriers E) Delivery speed Answer: E Difficulty: Moderate AACSB: Analytical thinking Question Category: Concept LO: 13.4: Define physical distribution and describe the major activities in the physical distribution process. 88) What can be used to determine what products are sold and when they are sold, to be better able to forecast upcoming demand? A) Upstream sourcing B) Systems integration C) Supply chains D) Large inventories E) Data mining Answer: E Difficulty: Difficult AACSB: Analytical thinking Question Category: Concept LO: 13.4: Define physical distribution and describe the major activities in the physical distribution process.
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89) Which mode of transportation is the fastest and least expensive, but can only be used by a limited number of industries? A) Digital B) Air-freight C) Water D) Rail E) Pipelines Answer: A Difficulty: Moderate AACSB: Application of knowledge Question Category: Analytical LO: 13.4: Define physical distribution and describe the major activities in the physical distribution process. 90) In addition to being one of the fastest modes of transportation for physical goods, what is the advantage of using air-freight? A) It allows for the movement of large, bulky items. B) The routes are fixed and routine. C) There are lower inventory costs because items do not need storage. D) It offers economical and reliable delivery for items such as liquids and gases. E) It offers flexibility for any-distance distribution, is fast, and dependable. Answer: C Difficulty: Moderate AACSB: Analytical thinking Question Category: Analytical LO: 13.4: Define physical distribution and describe the major activities in the physical distribution process. 91) Which of the following is a major part of distribution management for organizations? A) Cyber competition B) E-Commerce C) Warehousing D) Promotional strategies E) Product positioning Answer: C Difficulty: Moderate AACSB: Analytical thinking Question Category: Analytical LO: 13.4: Define physical distribution and describe the major activities in the physical distribution process.
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92) Which of the following is considered to be the cornerstone of supply chain as a business strategy? A) E-commerce B) Warehousing C) Product placement D) Distribution E) Promotional strategy Answer: D Difficulty: Moderate AACSB: Analytical thinking Question Category: Analytical LO: 13.4: Define physical distribution and describe the major activities in the physical distribution process. 93) Most products are well suited to distribution by high-speed digital transmission. Answer: FALSE Difficulty: Moderate AACSB: Analytical thinking Question Category: Application LO: 13.4: Define physical distribution and describe the major activities in the physical distribution process. 94) Because railroads do not have limited delivery routes, they can economically transport highvolume, heavy, bulky items, such as cars, steel, and coal. Answer: FALSE Difficulty: Moderate AACSB: Analytical thinking Question Category: Application LO: 13.4: Define physical distribution and describe the major activities in the physical distribution process. 95) Many firms have turned to distribution through supply chains as a cornerstone of business strategy. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Question Category: Critical Thinking LO: 13.4: Define physical distribution and describe the major activities in the physical distribution process.
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96) Pipelines are used to effectively and economically move specialty products such as liquids and gases. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Question Category: Critical Thinking LO: 13.4: Define physical distribution and describe the major activities in the physical distribution process. 97) Why do some firms now use distribution through supply chains as a cornerstone of business strategy? Answer: Instead of just offering advantages in product features, quality, price, and promotion, many firms have turned to supply chains that depend on distribution as a cornerstone of business strategy. This approach means assessing, improving, and integrating the entire sequence of activities–upstream suppliers, wholesaling, warehousing, transportation, delivery, and follow-up services–involved in getting products to customers. Difficulty: Difficult AACSB: Application of knowledge Question Category: Critical Thinking LO: 13.4: Define physical distribution and describe the major activities in the physical distribution process. 98) Describe the advantages of using trucks to transport goods for organizations. Answer: With 3.5 million professional truck drivers and a fleet of approximately 15 million vehicles, trucks haul more than two-thirds of all tonnage carried by all modes of U.S. freight transportation. The advantages of trucks include flexibility for any-distance distribution, fast service, and dependability. Increasing truck traffic, however, raises concerns about highway safety and traffic congestion. Trucks have satellite capabilities, anti-collision radar, vehicledetection sensors, computers for shifting through 10 speeds, and roomy cabs with sleepers, refrigerators, and microwaves. Difficulty: Moderate AACSB: Application of knowledge Question Category: Critical Thinking LO: 13.4: Define physical distribution and describe the major activities in the physical distribution process. 99) Why is water the least expensive mode of transportation? Answer: Networks of waterways, oceans, rivers, and lakes let water carriers reach many areas throughout the world. Boats and barges are used mostly for moving bulky products. Unfortunately, water is one of the slowest modes of transportation. Speed of delivery is a major factor when considering the cost of transporting physical goods-air is the fastest and most expensive, whereas water is the slowest and least expensive. Difficulty: Moderate AACSB: Application of knowledge Question Category: Analytical LO: 13.4: Define physical distribution and describe the major activities in the physical distribution process. 30 Copyright © 2022 Pearson Education, Inc.
100) What limits the economic side of using railroads for transportation? Answer: Railroads can economically transport high-volume, heavy, bulky items, such as cars, steel, and coal. However, their delivery routes are limited by fixed, immovable rail tracks. Railroads are operated efficiently in coordination with other transportation modes, such as trucks and water carriers. Difficulty: Moderate AACSB: Application of knowledge Question Category: Critical Thinking LO: 13.4: Define physical distribution and describe the major activities in the physical distribution process. 101) Which of the following terms refers to finding the most effective techniques for communicating information about and selling a product? A) Market share B) Advertising C) Promotion D) Profit management E) Customer relations Answer: C Difficulty: Easy AACSB: Application of knowledge Question Category: Concept LO: 13.5: Identify the objectives of promotion and the considerations in selecting a promotional mix, and discuss the various kinds of advertising promotions. 102) Which of the following describes two of the primary objectives of promotion? A) Positioning and communicating information B) Positioning and developing new uses for products C) Developing new uses for products and communicating information D) Adding value to a product and eliminating competition E) Controlling sales volume and eliminating competition Answer: A Difficulty: Moderate AACSB: Application of knowledge Question Category: Critical Thinking LO: 13.5: Identify the objectives of promotion and the considerations in selecting a promotional mix, and discuss the various kinds of advertising promotions.
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103) Which of the following BEST characterizes the difference between the roles of advertising and personal selling in the promotional mix of a firm? A) Advertising is very expensive with little return, whereas personal selling is also very expensive, with better returns. B) Advertising targets a specific audience about a product, whereas personal selling is always dependent on the clients that a seller has. C) Advertising involves public relations with the overall population of consumers, whereas personal selling involves personalized relationships with select individuals. D) Advertising is a relatively new method of promotion, whereas personal selling is the oldest method of promotion. E) Advertising is nonpersonal in its communication about a product, whereas personal selling is highly individualized. Answer: E Difficulty: Difficult AACSB: Analytical thinking Question Category: Critical Thinking LO: 13.5: Identify the objectives of promotion and the considerations in selecting a promotional mix, and discuss the various kinds of advertising promotions. 104) Which of the following is included in the final stage in the buyer decision process? A) The marketer asks for feedback on the quality of the product. B) The marketer promotes more advanced versions of the product. C) The marketer provides customer assistance for use of the product. D) The marketer reminds the buyer that he or she made a wise purchase. E) The marketer promotes related products by the same company. Answer: D Difficulty: Moderate AACSB: Application of knowledge Question Category: Critical Thinking LO: 13.5: Identify the objectives of promotion and the considerations in selecting a promotional mix, and discuss the various kinds of advertising promotions. 105) Which of the following refers to the total message any company sends to customers about products and services? A) Promotion B) Communication mix C) Positioning D) Pull strategy E) Push strategy Answer: B Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.5: Identify the objectives of promotion and the considerations in selecting a promotional mix, and discuss the various kinds of advertising promotions.
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106) The process of developing and establishing an easily identifiable product image and the nature of the product in the minds of consumers is done through what process? A) Promotion B) Communication mix C) Positioning D) Pull strategy E) Push strategy Answer: C Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.5: Identify the objectives of promotion and the considerations in selecting a promotional mix, and discuss the various kinds of advertising promotions. 107) Which marketing strategy uses direct-to-consumer advertising to encourage customers to seek out a product? A) Push strategy B) Promotional mix strategy C) Positioning strategy D) Pull strategy E) Added value strategy Answer: D Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.5: Identify the objectives of promotion and the considerations in selecting a promotional mix, and discuss the various kinds of advertising promotions. 108) What is the most important factor to consider when developing the promotional mix for a product? A) Position B) Communication mix C) Delivery method D) Price E) Target audience Answer: E Difficulty: Moderate AACSB: Analytical thinking Question Category: Application LO: 13.5: Identify the objectives of promotion and the considerations in selecting a promotional mix, and discuss the various kinds of advertising promotions.
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109) What is the specific communication device that sellers use to send a message to potential customers? A) Advertising media B) Personal selling C) Real-time media D) Promotional mix E) Media mix Answer: A Difficulty: Moderate AACSB: Analytical thinking Question Category: Concept LO: 13.5: Identify the objectives of promotion and the considerations in selecting a promotional mix, and discuss the various kinds of advertising promotions. 110) Which of the following is the ultimate objective of any promotion? A) To increase speed to market B) To add value C) To position products D) To communicate information E) To increase sales Answer: E Difficulty: Moderate AACSB: Analytical thinking Question Category: Concept LO: 13.5: Identify the objectives of promotion and the considerations in selecting a promotional mix, and discuss the various kinds of advertising promotions. 111) Which of the following describes the goal of promotional mixes? A) To communicate the nature of the product B) To identify which market segments are likely to purchase the product C) To adapt the product to the needs of the consumer D) To communicate a product's value-added benefits E) To see how a product compares to that of a competitor Answer: D Difficulty: Moderate AACSB: Analytical thinking Question Category: Concept LO: 13.5: Identify the objectives of promotion and the considerations in selecting a promotional mix, and discuss the various kinds of advertising promotions.
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112) Pepsi is offering to set up a Superbowl display in local grocery stores to stimulate the purchase of the product by consumers. Which type of promotional strategy is Pepsi using? A) Direct marketing B) Advertising C) Push D) Personal selling E) Pull Answer: C Difficulty: Moderate AACSB: Analytical thinking Question Category: Concept LO: 13.5: Identify the objectives of promotion and the considerations in selecting a promotional mix, and discuss the various kinds of advertising promotions. 113) Which of the following is created when a marketing uses a combination of tools to promote a product? A) Direct marketing B) Promotional mix C) Publicity D) Public relations E) Push strategy Answer: B Difficulty: Moderate AACSB: Analytical thinking Question Category: Concept LO: 13.5: Identify the objectives of promotion and the considerations in selecting a promotional mix, and discuss the various kinds of advertising promotions. 114) Which of the following element of the promotional mix should be used to educate consumers about available products? A) Advertising and personal selling B) Demonstrations C) Sales promotions D) Publicity E) Convenient purchase options Answer: A Difficulty: Moderate AACSB: Analytical thinking Question Category: Concept LO: 13.5: Identify the objectives of promotion and the considerations in selecting a promotional mix, and discuss the various kinds of advertising promotions.
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115) Promotion refers to the process of establishing an easily identifiable product image in the minds of consumers. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.5: Identify the objectives of promotion and the considerations in selecting a promotional mix, and discuss the various kinds of advertising promotions. 116) Sales promotions are short-term promotional activities designed to stimulate consumer buying or cooperation from distributors, sales agents, or other members of the trade. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.5: Identify the objectives of promotion and the considerations in selecting a promotional mix, and discuss the various kinds of advertising promotions. 117) In promotion, a pull strategy involves marketing a product to wholesalers and retailers who then persuade customers to buy it. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Question Category: Concept LO: 13.5: Identify the objectives of promotion and the considerations in selecting a promotional mix, and discuss the various kinds of advertising promotions. 118) The ultimate goal of any promotion is to increase the number of stores that carry the product. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.5: Identify the objectives of promotion and the considerations in selecting a promotional mix, and discuss the various kinds of advertising promotions. 119) Real-time ad tracking allows advertisers to measure demographics of the target audience. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.5: Identify the objectives of promotion and the considerations in selecting a promotional mix, and discuss the various kinds of advertising promotions.
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120) How do advertising real-time ad tracking in the creation of their media mix? Answer: Advertisers always want better information about who looks at ads and for how long. The makers of the tracking system claim accuracy of up to 90 percent for determining gender, approximate age, and ethnicity. Once perfected, the system might measure your demographics, identify you with a target audience, and then instantly change the presentation to a preferred product and visual format to attract and hold your attention. Marketers must find out, then, who their customers are, to which media they pay attention, what messages appeal to them, and how to get their attention. Thus, marketers use several different advertising media, specific communication devices for carrying a seller's message to potential customers. The combination of media through which a company advertises is called its media mix. Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.5: Identify the objectives of promotion and the considerations in selecting a promotional mix, and discuss the various kinds of advertising promotions. 121) Discuss the purpose of a promotional mix. Answer: First, a firm must identify which market segments are likely to purchase its product and how its product measures up against competitors. Then, it can focus on promotional choices for differentiating its product and positioning it in the minds of the target audience. Promotional mixes are often designed to communicate a product's value-added benefits to distinguish it from the competition. Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.5: Identify the objectives of promotion and the considerations in selecting a promotional mix, and discuss the various kinds of advertising promotions. 122) While the ultimate objective of any promotion is to increase sales, marketers may have other objectives. In particular, why would adding value to a product be seen as an important objective for a promotion team? Answer: By adding perceived value to a given product, promotion can distinguish that product in a positive light from a very large set of competitors, thus increasing reputation and consumer regard for both the product and the firm. Promotional mixes are often designed to communicate a product's value-added benefits to distinguish it from the competition. For example, Mercedes automobiles and Ritz-Carlton Hotels promote their products as upscale goods and services featuring high quality, style, and performance, all at a higher price. Difficulty: Difficult AACSB: Analytical thinking Question Category: Critical Thinking LO: 13.5: Identify the objectives of promotion and the considerations in selecting a promotional mix, and discuss the various kinds of advertising promotions.
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123) What is a push strategy of promotion? Answer: A company using a push strategy markets its product to wholesalers and retailers. They, in turn, persuade customers to buy the products. A push strategy is one of two prominent types of promotional strategies. It involves marketing to intermediaries, while a pull strategy appeals directly to consumers, so they will demand the product from retailers. Difficulty: Moderate AACSB: Analytical thinking Question Category: Concept LO: 13.5: Identify the objectives of promotion and the considerations in selecting a promotional mix, and discuss the various kinds of advertising promotions. 124) Which type of selling is being utilized when a manufacturer sells products to other businesses, who then sell the products to consumers? A) Industrial B) Retail C) Processor D) Creative E) Missionary Answer: A Difficulty: Moderate AACSB: Analytical thinking Question Category: Concept LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions. 125) A firm that wanted to conduct a short-term activity in order to boost consumer buying would use which of the following strategies? A) Sales promotions B) Special offers C) Trade shows D) Point-of-sale displays E) Missionary selling Answer: A Difficulty: Moderate AACSB: Analytical thinking Question Category: Analytical LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions.
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126) Which of the following is crucial for high-priced consumer products such as homes and cars, to persuade buyers to complete a purchase? A) Creative selling B) Interactive marketing C) Missionary selling D) Order processing E) Trade shows Answer: A Difficulty: Moderate AACSB: Application of knowledge Question Category: Application LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions. 127) Which of the following are examples of premiums? A) Contests that reward winners with free samples of the product B) Free items given out at trade shows C) Coupons for reduced prices on certain products D) Reduced-price items available upon purchase of a product E) Reduced-price items available during a sales promotion Answer: D Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions. 128) Which of the following BEST describes the purpose of point-of-sale displays? A) To inform customers about the benefits of the products B) To entice customers to compare products C) To make it easier for customers to find products D) To promote the reputation of the company offering certain products E) To target specific messages about the product to customers Answer: C Difficulty: Moderate AACSB: Application of knowledge Question Category: Analytical LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions.
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129) Which of the following describes BEST what distinguishes publicity among all other forms of promotion? A) Publicity is more directed than other forms of promotion. B) Publicity is less effective than other forms of promotion. C) Publicity is more impersonal than other forms of promotion. D) Publicity is less expensive than other forms of promotion. E) Publicity is easier to control than other forms of promotion. Answer: D Difficulty: Moderate AACSB: Application of knowledge Question Category: Critical Thinking LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions. 130) In which type of selling does the buyer typically go to the seller? A) Industrial selling B) Missionary selling C) Creative selling D) Personal selling E) Retail selling Answer: E Difficulty: Moderate AACSB: Application of knowledge Question Category: Analytical LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions. 131) If a firm is more interested in promoting a product and less interested in making a sale, what type of selling should be used? A) Industrial selling B) Missionary selling C) Creative selling D) Personal selling E) Retail selling Answer: B Difficulty: Moderate AACSB: Analytical thinking Question Category: Concept LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions.
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132) What do salespeople do to determine if a potential buyer has the authority to buy and ability to pay? A) Prospecting B) Present and demonstrate products C) Qualify the potential buyer D) Close the sale E) Encourage sales promotions Answer: C Difficulty: Moderate AACSB: Analytical thinking Question Category: Application LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions. 133) Which of the following is a key activity in relationship marketing? A) Approaching B) Presenting and demonstrating C) Handling objections D) Closing E) Following up Answer: E Difficulty: Moderate AACSB: Analytical thinking Question Category: Analytical LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions. 134) What is the term for company-influenced information that seeks to build positive relations with the public? A) Promotion B) Public relations C) Creative selling D) Publicity E) Interactive marketing Answer: B Difficulty: Moderate AACSB: Analytical thinking Question Category: Concept LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions.
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135) For B2B promotions, who typically sponsors trade shows where companies display and demonstrate their products? A) Retailers B) Manufacturers C) Wholesalers D) Marketers E) Industry sponsors Answer: E Difficulty: Moderate AACSB: Analytical thinking Question Category: Analytical LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions. 136) Which of the following is often the most critical part of the selling process, where the salesperson asks the prospect to buy the product? A) Prospecting B) Handling objections C) Demonstration D) Approach E) Closing Answer: E Difficulty: Moderate AACSB: Analytical thinking Question Category: Analytical LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions. 137) How do salespeople identify potential customers? A) Prospecting B) Closing C) Qualifying D) Publicity E) Direct marketing Answer: A Difficulty: Moderate AACSB: Analytical thinking Question Category: Analytical LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions.
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138) Which of the following is a form of e-mail where consumers allow companies to contact them with information about sales and promotions? A) Public relations B) Permission marketing C) Direct marketing D) Interactive marketing E) Prospecting Answer: B Difficulty: Moderate AACSB: Analytical thinking Question Category: Analytical LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions. 139) A company that sells eco-friendly products should use direct mail with caution because many consumers view catalogs and other direct mail as environmentally irresponsible. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Question Category: Application LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions. 140) A marketer seeking to reach a highly targeted audience would probably get better results from Internet advertising than from newspaper advertising. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Question Category: Analytical LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions. 141) The oldest and most expensive form of sales is personal selling, in which a salesperson communicates one-on-one with potential customers to identify their needs and align them with the product. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Question Category: Concept LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions.
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142) Interactive marketing is nonpersonal selling that tries to get consumers to make purchases from home, at work, or by using a mobile device while traveling. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions. 143) To attract attention in stores, companies use point-of-sale (POS) displays to ease finding products and to eliminate competitors from consideration. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions. 144) Premiums reward frequent buyers for making repeat purchases. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions. 145) The Internet has replaced the need for traditional direct marketing. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions.
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146) Explain the importance of direct marketing. Answer: Direct (or interactive) marketing is one-on-one nonpersonal selling that tries to get consumers to make purchases away from retail stores and, instead, to purchase from home, at work, or using a mobile device. This fast-growing selling method includes nonstore retailers (catalogs, telemarketing, home video shopping); direct mail; direct response advertising (such as infomercials and direct response magazine and newspaper ads); and, most important, online connections. When used by B2B businesses, direct marketing is primarily lead generation so a salesperson can close the sale where interest has been shown. In B2C businesses, it has primarily a selling goal. The advantage of direct marketing is that you can target the message to the individual and you can measure the results. Difficulty: Moderate AACSB: Application of knowledge Question Category: Concept LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions. 147) What is the difference between retail and industrial selling? Answer: Retail selling is selling a consumer product for the buyer's personal or household use. Industrial selling is selling products to other businesses, either for the purpose of manufacturing or for resale. Levi's, for instance, sells jeans to Walmart (industrial selling). In turn, consumers purchase Levi's jeans at Walmart stores (retail selling). Difficulty: Moderate AACSB: Application of knowledge Question Category: Analytical LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions. 148) What is the difference between coupons and premiums? Answer: Coupons use certificates entitling buyers to discounts in order to encourage customers to try new products, lure them away from competitors, or induce them to buy more of a product. Premiums are free or reduced-price items, such as pencils, coffee mugs, and six month lowinterest credit cards, given to consumers in return for buying a specified product. Coupons and premiums are types of sales promotions, short-term promotional activities designed to encourage consumer buying, industrial sales, or cooperation from distributors. They can increase the likelihood that buyers will try products, enhance product recognition, and increase purchase size and sales revenues. Difficulty: Moderate AACSB: Analytical thinking Question Category: Concept LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions.
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149) List and describe the three personal selling tasks. Answer: The three personal selling tasks are order processing, creative selling, and missionary selling. In order processing, a salesperson receives an order and sees to its handling and delivery. Creative selling can help to persuade buyers when the benefits of a product are not entirely clear. A company may use missionary selling when its purpose is to promote itself and its products rather than simply to close a sale. Personal selling is the oldest and most expensive form of sales. A salesperson communicates one-on-one with potential customers to identify their needs and align them with the product. Salespeople gain credibility by investing a lot of time getting acquainted with potential customers and answering their questions. Difficulty: Moderate AACSB: Analytical thinking Question Category: Application LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions. 150) Summarize the steps in the personal selling process for creative selling. Answer: The salesperson engages in prospecting (identifying potential customers) and qualifying prospects. Next, the salesperson approaches each prospect and establishes a positive first impression. Then the salesperson presents information, which may include a product demonstration. The process continues with handling any objections and closing the sale. The process is completed with follow-up to ensure the customer is satisfied. The steps in the personal selling process for creative selling are prospecting and qualifying, approaching, presenting and demonstrating, handling objections, closing, and following up. Difficulty: Moderate AACSB: Analytical thinking Question Category: Application LO: 13.6: Outline the tasks involved in personal selling and describe the various types of sales promotions.
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Business Essentials, 13e (Ebert/Griffin) Chapter 14 Information Technology (IT) for Business
1) Which of the following allows companies to produce in large volumes, but for customers to purchase based on unique feature and options they prefer? A) Mass production B) Unit production C) Process management D) Mass-customization E) Anti-virus software Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 14.1: Discuss the impact information technology (IT) is having on the business world. 2) How can e-commerce help businesses with scattered geographical locations better compete? A) By coordinating remote deliveries B) By creating portable offices C) By creating leaner, more efficient organizations D) By fostering increased collaboration E) By improving management processes Answer: A Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.1: Discuss the impact information technology (IT) is having on the business world.
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3) Which of the following allow(s) businesses to save time and travel expenses by enabling employees and suppliers to communicate from any location? A) Coordinated activities in a centralized location B) Portable offices C) Delivery of goods from several remote locations D) Simpler corporate structures E) Increased e-commerce Answer: B Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.1: Discuss the impact information technology (IT) is having on the business world. 4) How do IT communications support leaner, more efficient organizations? A) By eliminating information linkages between employees and customers B) By supporting shared activities between buyers and sellers C) By providing better use of employee skills and greater efficiencies D) By allowing for more rapid exchange of information in the global market E) By improving the management process Answer: C Difficulty: Difficult AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.1: Discuss the impact information technology (IT) is having on the business world. 5) Which of the following is an essential element in coordinating design and testing while minimizing costs? A) Streamlined management processes B) Improved global communications C) Digital collaboration on a massive scale D) Global technical collaboration E) Fewer employees with a wider range of skills Answer: C Difficulty: Difficult AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.1: Discuss the impact information technology (IT) is having on the business world.
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6) Flexible production and speedy delivery found in mass customization are dependent on which of the following? A) Unique features B) Buyers tastes C) Coordination between customers and manufacturers D) Adaptable assembly lines E) Information technology Answer: E Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.1: Discuss the impact information technology (IT) is having on the business world. 7) Which of the following describes the use of online networks and other electronic tools for retailing and business-to-business transactions? A) Cyberinvasion B) Information technology C) E-commerce D) Intranet E) Hypertext transfer protocol Answer: C Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.1: Discuss the impact information technology (IT) is having on the business world. 8) How can information technology be used to help companies be more attentive to customers and increase customer satisfaction? A) Creation of a learner organization with simpler structures. B) Instantaneous access to customer comments that can be used to solve problems in real time. C) Coordination of work at one central location with information that flows to several remote locations. D) Improved mass customization and increased delivery speeds. E) Creation of new business opportunities and growth areas Answer: B Difficulty: Difficult AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.1: Discuss the impact information technology (IT) is having on the business world. 9) Electronic commerce (e-commerce) is popular with consumers, but has hurt productivity. Answer: FALSE Difficulty: Easy AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.1: Discuss the impact information technology (IT) is having on the business world. 3 Copyright © 2022 Pearson Education, Inc.
10) Information networks are leading to leaner companies with fewer employees and simpler organizational structures. Answer: TRUE Difficulty: Easy AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.1: Discuss the impact information technology (IT) is having on the business world.
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11) Mass-customization tends to reduce the volume in which companies produce. Answer: FALSE Difficulty: Easy AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.1: Discuss the impact information technology (IT) is having on the business world. 12) An application server, an e-mail server, and a print server are all computers that provide services that may be shared by users. Answer: TRUE Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.1: Discuss the impact information technology (IT) is having on the business world. 13) Information technology has eliminated the geographic separation of employees and barrier to getting work done. Answer: TRUE Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.1: Discuss the impact information technology (IT) is having on the business world. 14) The use of IT has inhibited the growth of new business because of ease of access to information over social media. Answer: FALSE Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.1: Discuss the impact information technology (IT) is having on the business world. 15) Describe information technology. Answer: The effect of information technology (IT) on business cannot be overstated. In fact, IT—the various appliances and devices for creating, storing, exchanging, and using information in diverse modes, including visual images, voice, multimedia, and business data—has altered the very foundations of all organizations, radically changing the way people inside and outside those organizations interact. Information Technology (IT) is the various appliances and devices for creating, storing, exchanging, and using in-formation in diverse modes, including visual images, voice, multimedia, and business data. Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.1: Discuss the impact information technology (IT) is having on the business world. 16) Explain the principle of mass-customization. Answer: Mass-customization is a principle in which companies produce in large volumes, but each unit features the unique options the customer prefers. This process is seen as an advance on the traditional assembly line. 5 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.1: Discuss the impact information technology (IT) is having on the business world. 17) How has information technology affected organizational structure in terms of the number of employees and the organizational structure? Answer: Information technology is leading to leaner organizations with fewer employees and simpler structures. Firms are able to use networks to link employees, customers and suppliers. Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Application LO: 14.1: Discuss the impact information technology (IT) is having on the business world. 18) How might networks and technology lead to leaner companies? Answer: Networks and technology lead to fewer employees and simpler structures. Networks enable firms to maintain information linkages among both employees and customers. More work and customer satisfaction can be accomplished with fewer employees. Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.1: Discuss the impact information technology (IT) is having on the business world. 19) Discuss the impacts information technology has had on the business world. Answer: The growth of IT has changed the very structure of business organizations. Its adoption provides new modes of communication, including portable offices, resulting in the geographic separation of the workplace from headquarters for many employees. By providing instantaneous access to company information, IT has layered the workforces in many companies, enabling them to streamline with fewer employees and simpler structures, which contributes to greater flexibility in serving customers and enables closer coordination with suppliers. IT's global reach facilitates project collaboration with remote business partners and the formation of new market relationships around the globe. Just as electronic collaboration has changed the way employees interact with each other, IT networks have created new manufacturing flexibility for mass customization, and Internet access has brought new opportunities for small businesses. Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.1: Discuss the impact information technology (IT) is having on the business world. 20) Which of the following BEST describes an extranet? A) A software and hardware system that prevents outsiders from accessing a company's network B) A tool that searches Web pages containing the user's search terms and then displays pages that match C) A private network of internal websites and other sources of information available to a company's employees D) An system that allows outsiders limited access to a firm's internal information system E) A delivery system linked to production schedules 6 Copyright © 2022 Pearson Education, Inc.
Answer: D Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 21) What type of system allows customers electronic access to a supplier's delivery times, potentially increasing sales, profits, customer service, and loyalty? A) Distribution channel B) Intranet C) Electronic conferencing D) Extranet E) Product availability Answer: D Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 22) What system allows for simultaneous communication of people from various locations? A) Electronic communication systems B) Electronic conferencing C) Group conferencing D) Data communication networks E) Data mining Answer: B Difficulty: Easy AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 23) What advantage does a communication system using VSAT satellite have? A) Speed B) Low cost C) Privacy D) Groupware E) Spyware Answer: C Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 7 Copyright © 2022 Pearson Education, Inc.
24) What can a company use that it has total control over its communications without dependence on other companies? A) Its own website B) Its own VSAT system C) An extranet D) Its own groupware site E) Enterprise planning Answer: B Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 25) What is the most common type of network used in businesses? A) Intranet B) Client-server C) Blogs D) Hotspot E) Anti-virus Answer: B Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 26) What is a major limitation of Wi-Fi? A) High cost B) Availability C) Productivity D) Limited distance E) Installation challenges Answer: D Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 27) What are keyboards, monitors, and printers examples of? A) Controls B) Hardware C) Software D) Databases E) Servers Answer: B 8 Copyright © 2022 Pearson Education, Inc.
Difficulty: Easy AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 28) Who generally has access to intranets? A) Employees B) Suppliers C) Customers D) Shareholders E) Dealers Answer: A Difficulty: Easy AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 29) What system allows outsiders limited access to a firm's internal information systems? A) Intranets B) Firewalls C) Extranets D) Directories E) Satellites Answer: C Difficulty: Easy AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used.
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30) What type of network links computers and workstations, usually within one building? A) Satellite communication B) Global positioning C) Personal digital D) Wide area E) Local area Answer: E Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used.
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31) In client-server networks, who or what is the usual client? A) The computer through which users make requests for information B) The application through which users answer information requests C) The customer who does business online D) The supplier who checks the availability of components E) The network which supports the database and software systems Answer: A Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 32) What feature does a firewall provide? A) Internet access B) Protection from electrical surges C) Connectivity between stations in a LAN D) Privacy protection E) Links to computers in a WAN Answer: D Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used.
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33) What advantage does a super Wi-Fi network offer over other wireless technologies? A) Signals flow freely through physical objects. B) Software tells the computer what resources and applications to use. C) More data can be stored and converted. D) A wireless local area network can be used instead of a wide area network. E) The client-server network can link other resources, such as printers. Answer: A Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 34) Which of the following links all computers in an organization over long distances? A) WiMAX B) Wide area networks C) Wireless networks D) Local area networks E) Wi-Fi Answer: B Difficulty: Easy AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used.
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35) "Hotspots" in places such as coffee shops and airports access Internet connections using A) wide area networks. B) simple storage service (S3). C) public cloud computing. D) wireless local area networks. E) client-server networks. Answer: D Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Application LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 36) Which of the following is a disadvantage of wireless local area networks? A) There is often a fee to access the hotspot. B) The network is only available for an area of about 30 miles. C) The hotspot must be able to utilize the worldwide interoperability for microwave access system. D) The connection can be interrupted by walls and beams. E) There are limited natural-sounding voice interface capabilities. Answer: D Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Application LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 37) What is used to provide privacy protection on a wireless wide area network? A) WiMax B) Groupware C) Firewalls D) Data warehousing E) Data mining Answer: C Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used.
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38) What does a wireless wide area network use to link computers and electronic devices over long distances? A) Application programs B) Hotspots C) Access points D) Client-server networks E) Airborne electronic signals Answer: E Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 39) Which of the following is a communications protocol used to access interlinked documents and web pages? A) Hypertext transfer protocol B) Internet C) World wide web D) Intranets E) Extranets Answer: A Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 40) Which of the following communications tools have a transmitter-receiver that sends signals to and receives signals from a satellite, allowing for voice, video, and data transmissions? A) Computer network B) VSAT satellite communications C) World wide web D) Hypertext transfer protocol E) Hyperlink transmission Answer: B Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 41) In which way does cloud computing modify traditional networks? A) By utilizing long-distance telephone wires, microwave signals, or satellite communications to increase the wide area network B)By linking together two or more computes wirelessly to share data or resources C) By adding an external component that replaces functions previously performed by application 14 Copyright © 2022 Pearson Education, Inc.
servers D) By transmitting signals in a direct line to a satellite E) By replacing the communications protocol used for the world wide web with hyperlinks Answer: C Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 42) Which of the following allows users to rent Internet storage space to store and manage data, search files online, upgrade software, and download and share data? A) Groupware B) Wifeless network C) VSAT communication satellite D) Public cloud E) Hotspot Answer: D Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 43) Which of the following is software that allows group members to and perform group writing and other collaboration from their own computer, even if remotely located? A) Client-server network B) Public cloud C) Extranet D) Intranet E) Groupware Answer: E Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 44) Electronic conferencing is popular because it reduces travel expenses and saves money. Answer: TRUE Difficulty: Easy AACSB: Integration of real-world business experiences Quest. Category: Application LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 45) One pitfall with VSAT satellite communications is that they tend to lack privacy. 15 Copyright © 2022 Pearson Education, Inc.
Answer: FALSE Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 46) In a client-server network, the client is typically a customer or supplier. Answer: FALSE Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 47) System software tells the computer's hardware how to interact with the software, what resources to use, and how to use them. Answer: TRUE Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 48) IBM's Visualization Data Explorer is an example of groupware. Answer: FALSE Difficulty: Easy AACSB: Integration of real-world business experiences Quest. Category: Application LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 49) Hypertext transfer protocol (HTTP) is a basic communications protocol used to receive email. Answer: FALSE Difficulty: Easy AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 50) Hardware consists of programs that tell a computer how to function. Answer: FALSE Difficulty: Easy AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are 16 Copyright © 2022 Pearson Education, Inc.
used. 51) Firms can lease lines from communications vendors to link computers over long distances, called wide area networks. Answer: TRUE Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 52) Groupware is a type of local are network with wireless access points. Answer: FALSE Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 53) Describe the difference between a public and a private cloud. Answer: Amazon’s Simple Storage Service (S3) is an example of a public cloud that rents Internet storage space where users can store any amount of data and retrieve it anytime from anywhere on the Web. S3 services have become cost savers for companies by eliminating the need for buying, installing, and maintaining in-house server computers, many of which have excessive unused storage capacity “just in case it’s needed in the future.” S3 allows you to store and manage your application data, search files online, upgrade software quickly, and then download and share data. In contrast with public clouds, private cloud services such as JustCloud and ZipCloud provide an added layer of security by surrounding the user-company’s storage with a firewall to ensure against intrusion. Private clouds provide added flexibility for creating customized data storage, automated data integration, and integrated software applications to better meet users’ needs. Networks can be classified according to geographic scope and means of connection (either wired or wireless). Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 54) Identify the IT resources businesses have at their disposal and how these resources are used. Answer: The Internet and the World Wide Web serve computers with information and provide communication flows among networks around the world. For many businesses, the Internet is replacing the telephone, fax machine, and standard mail as the primary communications tool. To support internal communications, many companies maintain internal websites, intranets accessible only to employees. Some firms give limited access to outsiders via extranets for coordination with suppliers and customers. VSAT satellite networks provide private longdistance communications for voice, video, and data transmissions. Computer networks enable the sharing of information, hardware, software, and other resources over wired or wireless 17 Copyright © 2022 Pearson Education, Inc.
connections. Software includes programs to meet specific user needs, such as groupware with voice and video connections for remote collaboration. Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Synthesis LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 55) Why is electronic conferencing a desirable alternative for business? Answer: Electronic conferencing eliminates the need for travel and saves money by allowing groups of people to communicate from various locations. People can interact as if they were in the same room, even though they are not. This form of technology saves travel and related expenses. Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 56) Differentiate between data conferencing and videoconferencing. Answer: Data conferencing allows people in remote locations to work simultaneously on one document. Videoconferencing allows participants to see one another on video screens while the conference is in progress. The net result is that people are able to collaborate on projects while located in different parts of a town, city, country, or the world. Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 57) How do companies use intranets to improve productivity and performance? Answer: An intranet is a private network of internal websites and other sources of information available to a company's employees. The readily accessible information can result in shortened lead times in production as well as quicker delivery times to customers. The ease of accessing and sharing information has a positive impact on productivity and performance efficiency. Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Application LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 58) Discuss the advantages to developing a super Wi-Fi network. Answer: More powerful than today's networks, the super Wi-Fi has further reach, stretching across major metropolitan areas and covering much of the rural countryside as well. Super WiFi's stronger signals will flow more freely without obstruction through concrete walls, steel beams, forests, and hills. The proposal would enable users to surf the Internet and make mobile phone calls without paying a monthly cell phone bill or Internet bill. Scientists have also 18 Copyright © 2022 Pearson Education, Inc.
encouraged the government to use the bandwidth from old television frequencies to support super Wi-Fi. Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 59) Compare wide area networks with local area networks and indicate why a firm would use one over the other. Answer: Computers that are linked over long distances—statewide or even nationwide— through long distance telephone wires, microwave signals, or satellite communications make up what are called wide area networks (WANs). Firms can lease lines from communications vendors or maintain private WANs. In local area networks (LANs), computers are linked in a smaller area such as an office or a building, using telephone wires, fiber-optic, or co-axial cables. For example, a LAN unites hundreds of operators who enter call-in orders at TV's Home Shopping Network facility. The arrangement requires only one computer system with one database and one software system. Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Application LO: 14.2: Identify the IT resources businesses have at their disposal and how these resources are used. 60) Which of the following BEST describes enterprise resource planning? A) An information processing application for routine business activities of a company's business units B) An information system for organizing and managing a firm's activities across product lines, departments, and geographic locations C) A system used for transforming data into information for use in decision making D) A computer-based electronic technology that assists in designing products by simulating a real product and displaying it in three-dimensional graphics E) An internal inventory of a company's product lines Answer: B Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems. 61) Which of the following allows for instantaneous information designed to improve the management process? A) Mass customization B) Global exchange software C) Collaboration software D) Enterprise resource planning E) Shared activity planning 19 Copyright © 2022 Pearson Education, Inc.
Answer: D Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems. 62) Who is the person in charge of operating the systems used for gathering, organizing, and distributing information? A) Production Manager B) Operations Manager C) Information Systems Manager D) Research and Development Manager E) Communications Manager Answer: C Difficulty: Easy AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems. 63) What is the term used for searching, sifting, and reorganizing pools of data to uncover useful information? A) Data warehousing B) Data access C) Data tapping D) Data cleaning E) Data mining Answer: E Difficulty: Easy AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems.
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64) Who most often uses information and knowledge at the core of their work? A) Middle managers B) Board of directors C) Top-level managers D) Knowledge workers E) Network administrators Answer: D Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems. 65) Which software can help to design products ranging from cell phones to auto parts at lower costs compared to manual modeling methods? A) Decision support systems B) Operations software C) Computer-aided manufacturing software D) Computer-aided design software E) Data warehousing software Answer: D Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems. 66) Which of the following describes a management information system? A) A system that supports managers by providing daily reports, schedules, plans, and budgets that can be used for making decisions B) An easy-access application of an information system designed for instant access by upperlevel managers C) An information processing application for use in business activities involving well-defined processing steps D) An interactive system that locates and presents information needed to support the decisionmaking process E) A repository of information resources related to the collection of data Answer: A Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems. 67) Which of the following BEST describes a decision support system? A) A system that supports an organization's managers by providing daily reports, schedules, plans, and budgets that can be used for making decisions 21 Copyright © 2022 Pearson Education, Inc.
B) A quick-reference, easy-access application of information systems specifically designed for instant access by upper-level managers C) A system of hardware and software that imitates human behavior D) An interactive system that creates virtual business models for a particular kind of decision and tests them with different data to see how they respond E) A processor that plans production and delivery schedules Answer: D Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems. 68) What is the electronic collection, storage, and retrieval of data referred to as? A) Management information systems B) Data warehousing C) Data mining D) Information linkage E) Knowledge information systems Answer: B Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems. 69) What do manufacturers use to design and control equipment used in the creation of products? A) Computer-aided design B) Information linkages C) Computer-aided manufacturing D) Decision support systems E) Knowledge software Answer: C Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems. 70) Which type of system aids in the decision-making process by creating virtual business models and then test them with data? A) Computer-aided design B) Information linkages C) Computer-aided manufacturing D) Decision support systems E) Knowledge software Answer: D 22 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems. 71) Which of the following is the meaningful, useful interpretation of raw facts and figures? A) Data B) Leverage C) Client-server networking D) Information E) Cloud computing Answer: D Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems. 72) Which of the following can organizations use to track your online activities and delivery ads targeted specifically to you based on those activities. A) Decision support systems B) Computer-aided design C) Hotspots D) Data mining E) Cloud computing Answer: D Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems. 73) In which way can employees access shared information from other departments without being overburdened by information they do not need? A) By accessing information from the extranet B) By avoiding hotspots and other open sources of information C) By only using a private cloud for information D) By using information systems based on business functions E) By using data mining and l=linkages with suppliers Answer: D Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems. 23 Copyright © 2022 Pearson Education, Inc.
74) Which of the following allows knowledge workers to create, store, use, and share new information for useful applications? A) Decision support systems B) Management information systems C) Enterprise resource planning systems D) Knowledge management systems E) Computer-aided manufacturing systems Answer: D Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems. 75) The application of electronic technologies for searching, sifting, and reorganizing pools of data to uncover useful information is called data warehousing. Answer: FALSE Difficulty: Easy AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems. 76) Through data mining, a manager can access demographic information on customers, for example, in order to decide which advertising media may be best to use. Answer: TRUE Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Application LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems. 77) An information system may be a set of several information systems that share information. Answer: TRUE Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems. 78) Computer-aided design (CAD) can increase the productivity of knowledge workers. Answer: TRUE Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Analytical LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems. 24 Copyright © 2022 Pearson Education, Inc.
79)Almost everything you do on the Internet leaves a trail of information about you. Answer: TRUE Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Analytical LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems. 80) As knowledge work continues to advance, so will the need for a more system-based approach to knowledge. Answer: TRUE Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Analytical LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems. 81) How has the rise of knowledge workers changed previous thinking about how information should be shared? Answer: It is interesting that with the dawn of the knowledge worker, the previous thinking concerning how information and knowledge should be segmented to employees—in other words, that employees needed to understand or think only about information that was directly pertinent to their job—is being challenged. This is because knowledge work crosses many areas of the company, and, as such, those involved need to know how other areas of the company function, what the requirements of those areas are, and what the limitations of those areas are. As knowledge work continues to advance, the need for a more systems-based approach to knowledge sharing is being felt every day. Difficulty: Difficult AACSB: Integration of real-world business experiences Quest. Category: Analytical LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems. 82) Describe how data mining is used by managers. Answer: After collecting information, managers use data mining, the application of advanced statistical analyses and electronic technologies for searching, sifting, and reorganizing pools of data to uncover useful information. Data mining helps managers plan for new products, set prices, and identify trends and shopping patterns. By analyzing what consumers actually do, businesses can determine what subsequent purchases they are likely to make and then send them tailor-made ads. And data mining is happening at every click within the Internet. Data warehousing and data mining are used as a partial solution. With every click on a website, what you looked at is tracked and catalogued. Then, based on the patterns of your browsing, previous buying history, and so forth, a company determines which of the items viewed you are most likely to purchase. Difficulty: Moderate AACSB: Integration of real-world business experiences 25 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Analytical LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems. 83) What is the purpose of a knowledge information system? Answer: A knowledge information system supports knowledge workers by providing resources to create, store, use, and transmit new knowledge for useful applications. An example of a knowledge information system is a database to organize and retrieve information for data analysis. Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems. 84) What is the difference between data and information? Answer: The term data refers to raw facts and figures. The term information usually refers to a useful interpretation of data. Therefore, data is the basis of information that drives managerial decisions. Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems. 85) How is a decision support system used by managers? Answer: A decision support system (DSS) is an interactive computer-based system that creates virtual business models and tests them with different data to see how they respond. This type of system is particularly useful for managers who face a particular kind of decision repeatedly since it is designed to challenge managers and provide helpful recommendations. Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems. 86) Describe the role of information systems, the different types of information systems, and how businesses use such systems. Answer: An information system enables users to collect, process, and transmit information for use in decision making. Because they work on different kinds of problems and in different areas of businesses, users have access to the specialized information systems that satisfy their different information needs. Knowledge information systems support knowledge workers by providing resources to create, store, use, and transmit new knowledge for useful applications. Management information systems support managers by providing reports, schedules, plans, and budgets that can then be used for making decisions at all levels, ranging from detailed daily activities to longrange business strategy. The many uses of information systems include experimenting to test the effectiveness of potential decisions, data mining to identify shopping trends and to plan for new 26 Copyright © 2022 Pearson Education, Inc.
products, workforce scheduling, and planning delivery schedules from suppliers and to customers. Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Synthesis LO: 14.3: Describe the role of information systems, the different types of information systems, and how businesses use such systems. 87) Which cybercriminal activity refers to the act of luring Internet users to bogus websites? A) Computer virus distribution B) Spamming C) Phishing D) Trojan horse distribution E) Piracy Answer: C Difficulty: Easy AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.4: Identify the threats and risks information technology poses to businesses. 88) Which term refers to the unauthorized use of personal information from a computer system? A) Espionage B) Leverage C) Denial of service D) Identity theft E) Network flooding Answer: D Difficulty: Easy AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.4: Identify the threats and risks information technology poses to businesses. 89) What is spam? A) A form of firewall B) Intellectual property C) Junk e-mail D) A form of hacking E) Wireless mooching Answer: C Difficulty: Easy AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.4: Identify the threats and risks information technology poses to businesses. 90) Phishing or pharming involve which of the following? A) Intellectual property theft B) Firewalls that prevent hacking 27 Copyright © 2022 Pearson Education, Inc.
C) Viruses sent from one station to another in a LAN D) Deceptive e-mails that imitate legitimate websites E) Trading of company secrets Answer: D Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.4: Identify the threats and risks information technology poses to businesses. 91) In order for a virus to spread from computer to computer, what must it always attach itself to first? A) All available computer memory B) A worm C) A router D) A piece of hardware E) A program Answer: E Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Analytical LO: 14.4: Identify the threats and risks information technology poses to businesses. 92) Which type of IT threat can spread without a computer user needing to open any software? A) Worms B) Trojan horses C) Spam D) Spyware E) Computer viruses Answer: A Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.4: Identify the threats and risks information technology poses to businesses. 93) What type of users would download spyware? A) Users seeking to prevent viruses from attacking B) Users who are lured by "free" software C) Users who wish to prevent spam from entering their computer D) Users who want easy access to their coworkers' files E) Users who are keen to share documents Answer: B Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.4: Identify the threats and risks information technology poses to businesses. 94) Which of the following is a cybercriminal who gains unauthorized access to a computer or 28 Copyright © 2022 Pearson Education, Inc.
network? A) Worm B) Hacker C) Spy D) Spammer E) Trojan horse Answer: B Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.4: Identify the threats and risks information technology poses to businesses. 95) What type of hack floods a network with bogus requests for information and resources, overloading and shutting down the network? A) Wireless mooching B) File-swapping C) Identity theft D) Denial of service (DoS) E) Pharming Answer: D Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.4: Identify the threats and risks information technology poses to businesses. 96) What is the term for a file that attaches itself to a program, then moves from computer to computer within a networked system, with the intention of contaminating files? A) Spam B) Trojan horse C) Hack D) Worm E) Spyware Answer: D Difficulty: Easy AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.4: Identify the threats and risks information technology poses to businesses. 97) What is the term for something that is produced by the mind, such as a new invention, that has commercial value? A) Identity-based property B) Decision support systems C) Knowledge information systems D) Management information systems E) Intellectual property Answer: E Difficulty: Moderate 29 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Concept LO: 14.4: Identify the threats and risks information technology poses to businesses. 98) Why do firms want to prevent hackers from stealing intellectual property? A) Crooks may create unauthorized duplications. B) Rights are no longer protected. C) Ownership becomes unclear. D) Commercial value is lost. E) The intellectual property can no longer be trademarked. Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 14.4: Identify the threats and risks information technology poses to businesses. 99) What is another name for a falsified web page? A) Phishing B) Spoofed C) Spyware D) Pharming E) Denial of Service3 Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 14.4: Identify the threats and risks information technology poses to businesses. 100) Which of the following provide little to no protection from hackers? A) Firewalls B) Free Wi-Fi C) Routers D) Antivirus software E) Encryption systems Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 14.4: Identify the threats and risks information technology poses to businesses. 101) Jolanta received an e-mail that her car insurance premium was overdue. The e-mail included instructions and a live link to a website that instructed Jolanta to provide her social security number and credit card information. Even though the website looked real, it turned out to be fake, and she became the victim of identity theft. Which of the following did the cybercriminals use to get Jolanta's personal information? A) Hacking B) Worms 30 Copyright © 2022 Pearson Education, Inc.
C) Pharming D) Trojan horses E) Spyware Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 14.4: Identify the threats and risks information technology poses to businesses. 102) Which of the following accesses a user's files and transmits information to someone outside the host system without the user ever being aware it happened? A) Spam B) Encryption C) Antivirus software D) Spyware E) Phishing Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 14.4: Identify the threats and risks information technology poses to businesses. 103) Spyware authors can use stolen information to create their own intellectual property. Answer: TRUE Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.4: Identify the threats and risks information technology poses to businesses. 104) Trojan horses are malicious programs that replicate themselves like viruses. Answer: FALSE Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.4: Identify the threats and risks information technology poses to businesses. 105) Intellectual property is something produced by a computer that has personal value. Answer: FALSE Difficulty: Easy AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.4: Identify the threats and risks information technology poses to businesses. 106) Identify theft is among the fastest-growing crimes in the world. Answer: TRUE Difficulty: Moderate AACSB: Integration of real-world business experiences 31 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Concept LO: 14.4: Identify the threats and risks information technology poses to businesses. 107) Someone found guilty of sending spam can be tried in court and fined. Answer: TRUE Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.4: Identify the threats and risks information technology poses to businesses. 108) Explain the difference between a computer virus, a worm, and a trojan horse as they relate to information technology. Answer: Viruses, worms, and Trojan horses are three kinds of malicious programs that, once installed, can shut down any computer system. A computer virus exists in a file that attaches itself to a program and migrates from computer to computer as a shared program or as an e-mail attachment. It does not infect the system unless the user opens the contaminated file, and users typically are unaware they are spreading the virus by file sharing. Worms are a particular kind of virus that travel from computer to computer within networked computer systems, without your needing to open any software to spread the contaminated file. The worm replicates itself rapidly, sending out thousands of copies to other computers in the network. Traveling through Internet connections and e-mail address books in the network’s computers, it absorbs system memory and shuts down network servers, web servers, and individual computers. Unlike viruses, a Trojan horse does not replicate itself. Instead, it most often comes into the computer, at your request, masquerading as a harmless, legitimate software product or data file. Once installed, however, the damage begins. For instance, it may simply redesign desktop icons (as a “prank”) or, more maliciously, delete files and destroy information. Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.4: Identify the threats and risks information technology poses to businesses. 109) Why is span considered to be such a threat to the Internet? Answer: Spam, junk e-mail sent to a mailing list or a newsgroup (an online discussion group), is a greater nuisance than postal junk mail because the Internet is open to the public, e-mail costs are negligible, and massive mailing lists are accessible through file sharing or by theft. Spam operators send unwanted messages ranging from explicit pornography to hate mail to advertisements, and even destructive computer viruses. In addition to wasting users’ time, spam also consumes a network’s bandwidth, thereby reducing the amount of data that can be transmitted in a fixed amount of time for useful purposes. U.S. industry experts estimate spam’s annual damage in lost time and productivity at between $28 and $66 billion in the United States alone and that it could be as high as $620 billion globally. Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.4: Identify the threats and risks information technology poses to businesses. 110) Identify the threats and risks information technology poses on businesses. 32 Copyright © 2022 Pearson Education, Inc.
Answer: IT has attracted abusers that do mischief, with severity ranging from mere nuisance to outright destruction costing companies millions. Hackers break into computers, stealing personal information and company secrets, tampering with data, and launching attacks on other computers. Once inside a computer network, hackers are able to commit identity theft, the unauthorized stealing of personal information to get loans, credit cards, or other monetary benefits by impersonating the victim. Even the ease of information sharing on the Internet poses a threat. It has proven costly for companies who are having an increasingly difficult time protecting their intellectual property, such as software products, movies, and music. Another IT risk facing businesses is system shutdown and destruction of software, hardware, or data files by viruses, worms, and Trojan horses. Spam's damage can also be costly in lost time and productivity. Difficulty: Difficult AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.4: Identify the threats and risks information technology poses to businesses. 111) Which of the following BEST describes a firewall? A) A software and hardware system that prevents outsiders from accessing a company's internal network B) A tool that searches web pages containing the user's search terms and then displays pages that match C) A private network of internal websites and other sources of information available to a company's employees D) An Internet connection allowing outsiders limited access to a firm's internal information system E) An extranet site that gives customers access to different product lines Answer: A Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.5: Describe the ways in which businesses protect themselves from the threats and risks information technology poses. 112) Where are firewalls typically located? A) Where two networks meet B) In the formal security policy guidelines C) On the internal router D) In the anti-virus software E) In the encryption system Answer: A Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.5: Describe the ways in which businesses protect themselves from the threats and risks information technology poses. 113) Which of the following determines how data that has previously been tested for security will travel to its destination? 33 Copyright © 2022 Pearson Education, Inc.
A) Firewall B) Router C) Access tests D) Encryption system E) Spy sweeper Answer: B Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.5: Describe the ways in which businesses protect themselves from the threats and risks information technology poses. 114) Which type of software searches incoming e-mail and data for indications of a known virus? A) Malware B) Firewalls C) Antivirus software D) Routers E) Spyware Answer: C Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.5: Describe the ways in which businesses protect themselves from the threats and risks information technology poses. 115) How does encryption software work? A) By intercepting and reviewing e-mail before delivering it to the proper address B) By looking for signatures of known viruses and virus-like characters C) By acting as a traffic switch and determining which route the message should take D) By scrambling messages for anyone who does not have the key to decoding E) By blocking suspicious messages where the internal network and the Internet meet Answer: D Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.5: Describe the ways in which businesses protect themselves from the threats and risks information technology poses. 116) What do firms use to avoid privacy invasion and improve productivity? A) Spyware B) Routers C) Encryption software D) Spam-filtering software E) File swapping software Answer: D Difficulty: Moderate 34 Copyright © 2022 Pearson Education, Inc.
AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.5: Describe the ways in which businesses protect themselves from the threats and risks information technology poses. 117) What is the process of sending an e-mail that appears to have come from a trusted source, but is really spam? A) Pharming B) Hacking C) Sweeping D) Spoofing E) Phishing Answer: D Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.5: Describe the ways in which businesses protect themselves from the threats and risks information technology poses. 118) Which of the following strengthens identity-theft protection by specifying how documents with personal information must be disposed of? A) Spamhaus Project B) CAN-SPAM Act of 2003 C) Federal Trade Commission D) Fair and Accurate Credit Transactions Act E) Webroot Spy Sweeper Project Answer: D Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Application LO: 14.5: Describe the ways in which businesses protect themselves from the threats and risks information technology poses. 119) Which of the following is an ethical issue when it comes to Internet privacy? A) Not allowing employees to use work computers for personal reasons B) Using data mining on work equipment, including cell phones C) Using cyber-insurance to recoup some of the losses incurred by hackers D) Using encryption software to scramble messages E) Asking a job seeker for their Facebook username and password Answer: E Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Application LO: 14.5: Describe the ways in which businesses protect themselves from the threats and risks information technology poses. 120) Where can users go to find up-to-date information on anything from scam alerts to victim 35 Copyright © 2022 Pearson Education, Inc.
issues and legislation as a means to strengthen identity-theft protection. A)Spamhaus Project B) Internet service providers C) Encryption systems D) FACTA website E) Identify Theft Resource Center Answer: E Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Application LO: 14.5: Describe the ways in which businesses protect themselves from the threats and risks information technology poses. 121) Which of the following is one of the jobs performed by a network administrator? A) Ensure operating systems and security protection is up-to-date B) Monitoring software for potential weaknesses C) Elimination of worms and trojan horses on a regular basis D) Writing the company security policy E) Installing routers to prevent viruses Answer: A Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Application LO: 14.5: Describe the ways in which businesses protect themselves from the threats and risks information technology poses. 122) Which of the following is typically the most involved in preventing spam through the banning of spamming to subscribers? A) Supreme Court B) Internet service providers C) CAN-SPAM D) The Federal Trade Commission E) Network administrators Answer: B Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Application LO: 14.5: Describe the ways in which businesses protect themselves from the threats and risks information technology poses.
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123) A router scrambles e-mail messages to get around security systems. Answer: FALSE Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Concept LO: 14.5: Describe the ways in which businesses protect themselves from the threats and risks information technology poses. 124) A company's security policy can prevent certain data from passing through its firewall. Answer: TRUE Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.5: Describe the ways in which businesses protect themselves from the threats and risks information technology poses. 125) In addition to wasting users' time, spam consumes a network's bandwidth, thereby reducing the amount of data that can be transmitted in a fixed amount of time for useful purposes. Answer: TRUE Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Analytical LO: 14.5: Describe the ways in which businesses protect themselves from the threats and risks information technology poses. 126) Worms, Trojan horses, and other infection software are collectively known as malware. Answer: TRUE Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Application LO: 14.5: Describe the ways in which businesses protect themselves from the threats and risks information technology poses. 127) The SPAM Act of 2003 is designed to strengthen identity-theft protection. Answer: FALSE Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Application LO: 14.5: Describe the ways in which businesses protect themselves from the threats and risks information technology poses. 128) Because there is no legal precedent, the Supreme Court will not pursue cases on digital privacy. Answer: FALSE Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Application 37 Copyright © 2022 Pearson Education, Inc.
LO: 14.5: Describe the ways in which businesses protect themselves from the threats and risks information technology poses. 106) Malware includes all viruses, worms, Trojan horses and any other infectious software. Answer: TRUE Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Application LO: 14.5: Describe the ways in which businesses protect themselves from the threats and risks information technology poses. 129) How does anti-virus software combat malware? Answer: Combating viruses, worms, Trojan horses, and any other infectious software (collectively known as malware) has become a major industry for systems designers and software developers. Installation of any of hundreds of antivirus software products protects systems by searching incoming e-mail and data files for “signatures” of known viruses and viruslike characteristics. Contaminated files are discarded or placed in quarantine for safekeeping. Many viruses take advantage of weaknesses in operating systems, such as Microsoft Windows, to spread and propagate. Software distributors, for their part, are continuously monitoring their own products for potential weak-nesses and updating them to thwart malware. Network administrators must make sure that the computers on their systems are using the most up-to-date operating system that includes the latest security protection Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Application LO: 14.5: Describe the ways in which businesses protect themselves from the threats and risks information technology poses. 130) Discuss the ethical concerns that have developed due to improvements in information technology. Answer: It is obvious that IT developments and usage are progressing faster than society’s appreciation for the potential consequences, including new ethical concerns. Along with IT’s many benefits, its usage is creating previously unanticipated problems for which solutions are needed, yet they don’t exist. Ease of access to computers, mobile devices, and the Internet, together with messaging capabilities and social networking, promote widespread public exposure of people’s private lives, including personal information about how they think and feel. Just how this information should be used, by whom, under what conditions, and with what restrictions, if any, are issues teeming with ethical considerations. Difficulty: Moderate AACSB: Integration of real-world business experiences Quest. Category: Application LO: 14.5: Describe the ways in which businesses protect themselves from the threats and risks information technology poses.
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131) Describe the ways in which businesses protect themselves from the threats and risks information technology poses. Answer: Most systems guard against unauthorized access by requiring users to have protected passwords. In addition, many firms rely on safeguards, such as firewalls, so that only messages that meet the conditions of the company's security policy are permitted to flow in or out of the network. Firms can protect against identity theft by using assistance from advisory sources such as the Identity Theft Resource Center and by implementing the identify-theft protection provisions of the federal FACTA rule for maintaining and destroying personal information records. To combat viruses, worms, and Trojan horses, anti-virus software products search incoming e-mails and data files for "signatures" of known viruses and virus-like characteristics. Contaminated files are discarded or placed in quarantine for safekeeping. Additional intrusion protection is available by installing anti-spyware and spam filtering software, and from lawsuits against spammers. Difficulty: Difficult AACSB: Integration of real-world business experiences Quest. Category: Critical Thinking LO: 14.5: Describe the ways in which businesses protect themselves from the threats and risks information technology poses.
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Business Essentials, 13e (Ebert/Griffin) Chapter 15 The Role of Accountants and Accounting Information 1) Which of the following terms refers to the comprehensive system for collecting, analyzing, and communicating financial information? A) Bookkeeping B) Accounting C) Controlling D) Auditing E) Budgeting Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 2) Which of the following refers to the rules and procedures governing the content and form of financial reports? A) National bookkeeping standards B) Core competencies for accounting C) Accounting and financial rules D) National guidelines of accounting principles E) Generally accepted accounting principles Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 3) Which of the following terms refers to the recording of financial transactions? A) Bookkeeping B) Finance C) Controlling D) Budgeting E) Auditing Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants.
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4) Which of the following terms refers to the examination of a company's accounting system to determine whether its financial reports fairly represent its operations? A) Financial analysis B) Forensic accounting C) Portfolio analysis D) Audit E) Preliminary investigation Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 5) Which are the two major forms of accounting in a company, and are based on the users they serve? A) Managerial and forensic B) Financial and managerial C) Bookkeeping and advisory D) Corporate and individual E) Public and private Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 6) Which of the following bodies formulates the generally accepted accounting principles (GAAP) ? A) Accounting Disclosure Board B) Financial Accounting Standards Board C) Association of Certified Fraud Examiners D) Securities and Exchange Commission E) CPA Vision Project Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 7) Which of the following bodies requires firms to file disclosures so potential investors have valid information? A) Accounting Disclosure Board B) Financial Accounting Standards Board C) Association of Certified Fraud Examiners 2 Copyright © 2022 Pearson Education, Inc.
D) Securities and Exchange Commission E) American Institute of Certified Public Accountants Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 8) Which of the following BEST describes a certified fraud examiner? A) A specialized managerial accountant concerned with issues of fraud B) A specialized certified public accountant concerned with issues of fraud C) A specialized forensic accountant concerned with issues of fraud D) An accounting agent for the Securities and Exchange Commission concerned with issues of fraud E) An accounting agent provided by the Sarbanes-Oxley Act of 2002 concerned with issues of fraud Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 9) Which of the following areas of the Certified Fraud Examiner (CFE) exam includes why people commit fraud and a professional code of ethics? A) Fraud prevention and deterrence B) Financial transactions C) Fraud investigation D) Fraud litigation E) Legal elements of fraud Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 10) What do businesses use to identify, record, and retain financial information and includes the people, reports, procedures and other resources needed to compile transactions? A) Accounting information systems B) Financial accounting C) Bookkeeping D) Accounting E) Managerial accounting Answer: A Difficulty: Moderate 3 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Application LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 11) How do certified public accountants ensure a company's financial reports really represent its operations? A) By reviewing GAAP standards B) By conducting an audit C) Through the filing of tax information D) By acting as consultants to noncertified accountants E) By acting as advisory to senior management Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 12) What is the goal of the CPA Vision Project? A) To eradicate fraud in public companies B) To increase the role of CPAs in providing consulting services to corporate managers C) To better identify core competencies needed for noncertified public accountants in the public sector D) To better define the role of accountants by identifying core competencies for accounting E) To lobby for laws that better support the accounting field and eliminate fraud Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 13) Which type of accountant uses audits to assist in the investigation of companies and as litigation support in crimes against companies? A) Management accountants B) Private accountants C) Forensic accountants D) Financial accountants E) Controllers Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 4 Copyright © 2022 Pearson Education, Inc.
14) Which of the following requires auditor rotation by prohibiting the same person from being the lead auditor for more than five consecutive years? A) The Association of Certified Fraud Examiners B) The Securities and Exchange Commission C) The American Institute of Certified Public Accountants D) The Financial Accounting Standards Board E) Sarbanes-Oxley Act of 2002 Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 15) Which of the following is a designation for those who have passed the Institute of Management Accountant's experience and examination requirements? A) Certified management accountant (CMA) B) Certified public accountant (CPA) C) Controller D) Private accountant E) Forensic accountant Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 16) Who is responsible for ensuring the accounting information system provides the reports and statements needed for management planning and decision making? A) Auditor B) Controller C) Fraud examiner D) Managerial accountant E) Bookkeeper Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 17) Those accountants who are hired by firms as salaried employees and who specialize in areas such as financial planning, internal auditing, and taxation are called A) forensic accountants. B) certified management accountants. C) private accountants. 5 Copyright © 2022 Pearson Education, Inc.
D) certified public accountants. E) fraud examiners. Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 18) In which way can a CPA help a business make restructuring operations and investment decisions? A) Tax planning B) Litigation advice C) State certification D) Personal financial planning E) Advice on corporate mergers Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 19) Which of the following was designed to restore and maintain public trust in corporate accounting practices? A) Sarbanes-Oxley Act B) Certified fraud examiners C) Investigative accounting D) Forensic accountants E) CPA Vision Project Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 20) Which of the following serves the internal users of accounting information, and is used to make decisions about projects and future activities? A) Certified public accounts B) Managerial accounting C) Noncertified public accountants D) Financial accounting E) Management advisory services Answer: B Difficulty: Moderate AACSB: Analytical thinking 6 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Critical Thinking LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 21) There are several emerging competencies for success in accounting. Which of the following requires an accountant to combine financial information with other kinds of information to gain new insights and understanding for solving problems? A) Dedication to meeting customer needs B) Skills in strategic, thinking, and critical problem solving C) Ability to integrate diverse information D) Proficiency with information technology E) Communications, interpersonal skills, and effective leadership Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 22) Which of the following is concerned with the external environment of an organization and reports on the activities of the company as a whole rather than individual departments or divisions, or projects and operations? A) Certified public accountants B) Managerial accounting C) Auditing D) Advisory services E) Financial accounting Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 23) An audit examines whether a firm's financial statement conforms to generally accepted accounting principles. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 24) Bookkeeping is a comprehensive system for collecting, analyzing, and communicating financial information. Answer: FALSE Difficulty: Moderate 7 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Concept LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 25) Due to concerns over accounting fraud, certified public accountants are now licensed by the Securities and Exchange Commission. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 26) In order to increase the quality of current accountants, the CPA Vision Project has reasserted the ability to use and calculate large amounts of numerical data as a primary competency for accountants. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 27) It is common that a CPA who is hired to audit a firm's finances will also be hired to help design a more efficient financial information system. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 28) A key component of the Sarbanes-Oxley Act of 2002 was increased government oversight over the certification examinations given by the accounting professional organizations such as the Institute of Management Accountants. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 29) In the private accounting field, certified management accountants use accounting to investigate and support litigation in crimes against companies. Answer: FALSE Difficulty: Moderate 8 Copyright © 2022 Pearson Education, Inc.
AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 30) A firm's controller is often the firm's chief accounting officer. Answer: TRUE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 31) Under the Sarbanes-Oxley Act of 2002, it is illegal for accounting firms to provide management advisory services to corporate managers. Answer: FALSE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 32) Discuss the purpose of the CPA Vision Project. Answer: A continuing talent shortage in accounting has led the profession to rethink its culture and lifestyle. With grassroots participation from CPAs, educators, and industry leaders, the AICPA, through its CPA Vision Project, is redefining the role of the accountant for today’s world economy. The Vision Project identifies a unique combination of skills, technology, and knowledge, called core competencies for accounting, that will be necessary for future CPAs. The AICPA summarizes the project’s core purpose as follows: “CPAs … Making sense of a changing and complex world.” Those skills, which include communication, critical thinking, and leadership, go far beyond the ability to “crunch numbers.” They include certain communications skills, along with skills in critical thinking and leadership. Indeed, the CPA Vision Project foresees CPAs who combine specialty skills with a broad-based orientation to communicate more effectively with people in a wide range of business activities. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 33) Discuss the provision of the Sarbanes-Oxley Act of 2002 (Sarbox). Answer: Federal regulations, primarily the Sarbanes-Oxley Act of 2002 (Sarbox or SOX), have been enacted to restore and maintain public trust in corporate accounting practices. Sarbox restricts the kinds of nonaudit services that CPAs can provide. Under the Sarbox law, for example, a CPA firm can help design a client’s financial information system, but not if it also does the client’s auditing. By prohibiting auditing and nonauditing services to the same client, Sarbox encourages audits that are independent and unbiased. Sarbox imposes requirements on 9 Copyright © 2022 Pearson Education, Inc.
virtually every financial activity in publicly traded corporations, as well as severe criminal penalties for persons committing or concealing fraud or destroying financial records. CFOs and CEOs, for example, have to pledge that the company’s finances are correct and must personally vouch for the methods and internal controls used to get those numbers. Companies have to provide a system that is safe for all employees to anonymously report unethical accounting practices and illegal activities without fear of retaliation. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 34) Give three examples of management advisory services. Answer: As consultants, some accounting firms also provide management advisory services ranging from personal financial planning to planning corporate mergers. Management advisory services include production scheduling, computer feasibility studies, and accounting information system design. As consultants, accounting firms provide a range of management advisory services. The staffs of the largest CPA firms include engineers, architects, mathematicians, and psychologists, all of whom are available for consulting. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 35) For what types of organizations do forensic accountants work? Answer: Forensic accountants may be called on by law enforcement agencies, insurance companies, law firms, and business firms. Forensic accountants may be called upon for both investigative accounting and litigation support in crimes against companies, crimes by companies, and civil disagreements. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 36) Identify the potential users of accounting information. Answer: The potential users of accounting information include business managers, employees, unions, investors, creditors, tax authorities, and government regulatory agencies. Users of accounting information have varied needs. Business managers, for example, use accounting information to develop goals and plans, set budgets, and evaluate future prospects, whereas tax authorities use it to plan for tax inflows, determine the tax liabilities of individuals and businesses, and ensure that correct amounts are paid on time. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by 10 Copyright © 2022 Pearson Education, Inc.
public accountants, private accountants, management accountants, and forensic accountants. 37) Discuss the role of a private accountant within large and small firms. Answer: Private accountants perform day-to-day activities within a firm. Large businesses employ specialized accountants in such areas as budgeting, financial planning, internal auditing, payroll, and taxation. In small businesses, a single person may handle all accounting tasks. Although private accountants may be either CPAs or non-CPAs, most are management accountants who provide services to support managers in various activities (marketing, production, engineering, and so forth). Many hold the certified management accountant (CMA) designation, awarded by the Institute of Management Accountants (IMA). Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 15.1: Explain the role of accountants and distinguish among the kinds of work done by public accountants, private accountants, management accountants, and forensic accountants. 38) Which of the following terms refers to any economic resource that is expected to benefit a firm or individual who owns it? A) Asset B) Liability C) Equity D) Account E) Deposit Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 15.2: Explain the accounting equation and how it is used. 39) Which of the following terms refers to the amount of money that owners would receive if they sold all of a company's assets and paid all of its liabilities? A) Asset B) Owners' equity C) Inventory D) Profit E) Credit Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 15.2: Explain the accounting equation and how it is used. 40) Which of the following describes a liability? A) The potential profit from selling a firm's assets and settling all of its debts B) A debt owed by a firm to an outside organization or individual C) Any economic resource expected to benefit a firm or an individual who owns it D) Any economic deficit expected to cost a firm or an individual who owns it 11 Copyright © 2022 Pearson Education, Inc.
E) The amount of money originally invested in a business by its owners Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 15.2: Explain the accounting equation and how it is used. 41) A company has an assets-to-liabilities ratio of 3:2 and total assets worth $6 million. What is its owners' equity? A) $1 million B) $2 million C) $4 million D) $9 million E) $12 million Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 15.2: Explain the accounting equation and how it is used. 42) How much profit does a company which has a total of $5 million invested by its owners and $4 million in liabilities need to make in order to have an assets-to-liabilities ratio of 2:1? A) $2 million B) $3 million C) $5 million D) $7 million E) $8 million Answer: D Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Application LO: 15.2: Explain the accounting equation and how it is used. 43) Which of the following represents the accounting equation? A) Assets = Liabilities + Owners' Equity B) Owners' Equity = Assets + Liability C) Liability = Assets + Owners' Equity D) Assets = Liabilities - Owners' Equity E) Assets = Liabilities × Owners' Equity Answer: A Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Application LO: 15.2: Explain the accounting equation and how it is used. 44) Why is a company's owners' equity important for investors and lenders? A) Owners' equity indicates potential profit. 12 Copyright © 2022 Pearson Education, Inc.
B) Owners' equity determines how quickly liabilities will increase. C) Owners' equity determines how much will be paid out as dividends. D) Owners' equity indicates how much the owner has invested in the company. E) Owners' equity indicates the level of security. Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 15.2: Explain the accounting equation and how it is used. 45) Which of the following would be consider an asset for accounting purposes? A) Leadership skills B) Knowledge workers C) Use of technology D) Customers E) Buildings Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 15.2: Explain the accounting equation and how it is used. 46) A company with a very high amount of liabilities will always find it more difficult to secure loans than a company with a very low amount of liabilities. Answer: FALSE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 15.2: Explain the accounting equation and how it is used. 47) The percentage of liabilities in a company's assets plus the percentage of owners' equity in its assets is always equal to 100. Answer: TRUE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 15.2: Explain the accounting equation and how it is used. 48) Owners' equity is net worth minus liabilities. Answer: FALSE Difficulty: Easy AACSB: Analytical thinking Quest. Category: Analytical LO: 15.2: Explain the accounting equation and how it is used. 49) If a company's assets exceed its liabilities, owners' equity is negative. Answer: FALSE 13 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 15.2: Explain the accounting equation and how it is used. 50) For accounting purposes, the term "owners' equity" is the same as "net worth." Answer: TRUE Difficulty: Easy AACSB: Analytical thinking Quest. Category: Analytical LO: 15.2: Explain the accounting equation and how it is used. 51) Describe the relationship between owners' equity and the profitability of the company. Answer: When a company operates profitably, its assets increase faster than its liabilities. Owners’ equity, therefore, will increase if profits are retained in the business instead of paid out as dividends to stockholders. Owners’ equity also increases if owners invest more of their own money to increase assets. However, owners’ equity can shrink if the company operates at a loss or if owners withdraw assets. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 15.2: Explain the accounting equation and how it is used. 52) What two sources of capital make up owners' equity? Answer: Owners' equity includes the amount that the owners originally invested and any profits earned by and reinvested in the company. Owners' equity is the amount of money that owners would receive if they sold all of a company's assets and paid all of its liabilities. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 15.2: Explain the accounting equation and how it is used. 53 What is the accounting equation? Answer: Assets = Liabilities + Owners' Equity. The accounting equation underlies all recordkeeping procedures and is the most basic tool of accounting. Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 15.2: Explain the accounting equation and how it is used. 54) What distinguishes the two most commonly used categories of owners' equity? A) The amount of equity within each type of asset—current versus fixed and intangible B) The financial form of the equity—cash investments versus stock and bond investments C) The source of the equity—paid-in capital versus retained earnings D) The use of the equity—invested versus saved E) The age of the equity—older investments and earnings versus newer investments and earnings Answer: C Difficulty: Moderate 14 Copyright © 2022 Pearson Education, Inc.
AACSB: Analytical thinking Quest. Category: Application LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 55) What are the major categories within an income statement? A) Operating costs and profits, investing costs and profits, and financing costs and profits B) Current revenue, long-term revenue, and net revenue C) Revenue, sales, and income D) Assets, liabilities, and owners' equity E) Revenues, cost of revenues, operating expenses, and net income Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 56) Which of the following is the difference between revenues and the cost of revenues? A) Net income B) Gross profit C) Accounts payable D) Interest expense E) Cash flow Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 57) Which of the following BEST demonstrates cash flow from operations? A) Transactions involved in buying and selling goods and services B) Net cash used in or provided by investment C) Cash flow from borrowing or issuing stock D) Outflows for payments of dividends E) Inflows of cash that will be used to repay borrowed money Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 58) Which of the following is considered to be the most important internal financial statement for planning, controlling, and decision making? A) Income statement 15 Copyright © 2022 Pearson Education, Inc.
B) Flow of cash statement C) Balance sheet D) Budget E) Statement of projected earnings Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 59) Which of the following statements BEST describes the difference between current and longterm liabilities? A) Current liabilities are debts that need to be paid within a pay cycle, whereas long-term liabilities do not. B) Current liabilities are those which will cost less in debt interest than long-term liabilities. C) Current liabilities are debts that must be paid within a year, long-term liabilities do not. D) Current liabilities are debts on tangible assets, whereas long-term liabilities are debts on intangible assets. E) Current liabilities are debts on current assets, whereas long-term liabilities are debts on fixed and intangible assets. Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 60) Which of the following refers to the financial statement detailing a firm's assets, liabilities, and owners' equity? A) Income statement B) Statement of cash flow C) Balance sheet D) Expense report E) Annual budget Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 61) Which of the following describes assets such as land, building, and equipment? A) Liquid assets B) Fixed assets C) Intangible assets D) Current assets 16 Copyright © 2022 Pearson Education, Inc.
E) Limited assets Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 62) Which of the following BEST describes depreciation? A) The process of increasing the value of fixed assets over time B) The process of deducting operating expenses from the value of fixed assets C) The process of reducing the value of fixed assets over time D) The process of distributing the cost of liabilities over time E) The process of distributing the cost of intangible assets over time Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 63) Which of the following describes assets such as patents and trademarks? A) Liquid assets B) Fixed assets C) Intangible assets D) Current assets E) Limited assets Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 64) Which of the following refers to the amount paid for an existing business beyond the value of its other assets? A) Goodwill B) Excess compensation C) Licensing D) Asset promotion E) Liability deduction Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 17 Copyright © 2022 Pearson Education, Inc.
65) Which of the following refers to the difference calculated by subtracting income and expense taxes from the operating income of an organization? A) Gross revenue B) Net income C) Gross profit D) Cash flow E) Leverage Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 66) What does a statement of cash flow describe? A) Gross profit compared to operating expenses B) Value of revenues compared to cost of revenues C) Yearly cash receipts and cash payments D) Cost of obtaining materials needed to produce products E) Funds that flow into the business from the sale of the goods or services provided Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 67) Which of the following best describes the revenues of an organization? A) Gross profit compared to operating expenses B) Value of revenues compared to cost of revenues C) Yearly receipts and cash payments D) Cost of obtaining materials needed to produce products E) Funds that flow into the business from the sale of the goods or services provided Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 68) Which of the following are the three categories on a company's statement of cash flows A) Operating activities, purchase activities, taxes B) Profit inflow, debt outflow, taxes C) Profitable activities, deficit activities, taxes D) Operating activities, investing activities, taxes E) Operating activities, investing activities, financing activities 18 Copyright © 2022 Pearson Education, Inc.
Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 69) Which of the following is a detailed statement of receipts and expenditures that is not shared outside the company? A) Retained earnings B) Revenues C) Operating income D) Statement of cash flows E) Budget Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 70) Public's Golf Course hires groundkeepers before golf season begins. These people are necessary to ensure the golf course is ready on opening day. Where would an accountant record the salaries and other costs associated with these workers? A) Net profit B) Net earnings C) Budget D) Operating expenses E) Retained earnings Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 71) Which of the following represents the amount earned by an organization that was not distributed to stockholders? A) Profit B) Revenue C) Retained earnings D) Net income E) Intangible assets Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept 19 Copyright © 2022 Pearson Education, Inc.
LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 72) Assets are categorized by the capacity in which they benefit the company. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 73) The most liquid asset for a firm is marketable securities that can be sold very quickly. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 74) Retained earnings are net profits minus dividend payments to stockholders. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 75) Current assets are all assets that are able to be liquidated in a short amount of time. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 76) Income statements show a firm's annual profit or loss. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 77) Marketable securities are short-term investments that are considered to be completely liquid. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge 20 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Application LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 78) The balance sheet for a company is a statement of its financial condition at one point in time. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 79) Describe the importance of current assets. Answer: Current assets include cash and assets that can be converted into cash within a year. The act of converting some-thing into cash is called liquidating. Assets are normally listed in order of liquidity, the ease of converting them into cash. Debts, for example, are usually paid in cash. A company that needs but cannot generate cash—a company that’s not “liquid”—may be forced to sell assets at reduced prices or even to go out of business. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 80) Explain fixed assets and how accountants spread the cost of an asset over the years of its useful life. Answer: Fixed assets (such as land, buildings, and equipment) have long-term use or value, but as buildings and equipment wear out or become obsolete, their value decreases. Accountants use depreciation to spread the cost of an asset over the years of its useful life. To reflect decreasing value, accountants calculate an asset's useful life in years, divide its worth by that many years, and subtract the resulting amount each year. Therefore, every year the remaining value (or net value) decreases on the books. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 81) What is the statement of cash flow required by the SEC and why is it required? Answer: Some companies prepare only balance sheets and income statements. However, the SEC requires all firms whose stock is publicly traded to issue a third report, the statement of cash flows, which describes yearly cash receipts and cash payments. Because it provides the most detail about how the company generates and uses cash, some investors and creditors consider it one of the most important statements of all. It shows the effects on cash of three aspects of a business: operating activities, investing activities, and financing activities. Difficulty: Moderate AACSB: Analytical thinking 21 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Analytical LO: 15.3: Describe the three basic financial statements and show how they reflect the activity and financial condition of a business. 82) Which of the following terms refers to the formal recording and reporting of revenues in financial statements? A) Full disclosure B) Revenue recognition C) Compliance D) Ethical practice E) Materiality Answer: B Difficulty: Easy AACSB: Analytical thinking Quest. Category: Analytical LO: 15.4: Explain the key standards and principles for compiling and reporting financial statements. 83) Which of the following requires managers to share information about events inside the company and explain certain transaction? A) Earning cycle reports B) Revenue recognition C) Statement of cash flow D) Solvency ratios E) Full disclosure Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 15.4: Explain the key standards and principles for compiling and reporting financial statements. 84) When should earnings be reported under revenue recognition? A) When the sale is complete B) When the product is delivered and the sale price has been collected C) When the sale is agreed to D) At the end of each quarter E) When preparing annual financial reports for the SEC Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 15.4: Explain the key standards and principles for compiling and reporting financial statements. 85) Revenue from the earnings of a particular transaction is able to be reported as soon as the product or service is delivered. 22 Copyright © 2022 Pearson Education, Inc.
Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 15.4: Explain the key standards and principles for compiling and reporting financial statements. 86) The primary goal for the standard practices and principles in accountant reporting is to ensure external users that the information is accurate and has meaning. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 15.4: Explain the key standards and principles for compiling and reporting financial statements. 87) Full disclosure requires managers to include their interpretation and explanation of the financial statement. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 15.4: Explain the key standards and principles for compiling and reporting financial statements. 88) Why is activity timing important in revenue recognition? Answer: The end of the earnings cycle determines the timing for revenue recognition in a firm’s financial statements. Revenues are recorded in the accounting period in which the product is delivered and collectible (or collected). This practice ensures that the statement gives a fair comparison of what was gained (revenues) in return for the resources that were given up (cost of materials, labor, and other production and delivery expenses) for the transaction. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 15.4: Explain the key standards and principles for compiling and reporting financial statements. 89) Explain what is covered by GAAP and why it is important to use these standards. Answer: Accountants follow standard reporting practices and principles when they prepare external reports. The common language dictated by standard practices and spelled out in GAAP is designed to give external users confidence in the accuracy and meaning of financial information. GAAP cover a range of issues, such as when to recognize revenues from operations and how to make full public disclosure of financial information. Without such standards, users of financial statements wouldn't be able to compare information from different companies, and would misunderstand—or be led to misconstrue—a company's true financial status. Forensic accountants watch for deviations from GAAP as indicators of possible fraudulent practices. Difficulty: Moderate 23 Copyright © 2022 Pearson Education, Inc.
AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 15.4: Explain the key standards and principles for compiling and reporting financial statements. 90) Discuss the principle known as full disclosure. Answer: To help users better understand the numbers in a firm's financial statements, GAAP requires that financial statements also include management's interpretations and explanations of those numbers. The idea of requiring input from the manager is known as the full disclosure principle. Because they know about events inside the company, managers prepare additional information to explain certain events or transactions or to disclose the circumstances behind certain results. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 15.4: Explain the key standards and principles for compiling and reporting financial statements. 91) Which of the following ratios measures a firm's ability to meet its current debt obligations? A) Short-term solvency ratio B) Long-term solvency ratio C) Profitability ratio D) Activity ratio E) Equity ratio Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 15.5: Describe how computing financial ratios can help investors and other stakeholders interpret information from financial statements to determine the financial strengths of a business. 92) Which of the following ratios measures a firm's potential earnings? A) Short-term solvency ratios B) Long-term solvency ratios C) Profitability ratios D) Activity ratios E) Equity ratios Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 15.5: Describe how computing financial ratios can help investors and other stakeholders interpret information from financial statements to determine the financial strengths of a business. 93) Which of the following ratios evaluates management's use of resources? A) Short-term solvency B) Long-term solvency 24 Copyright © 2022 Pearson Education, Inc.
C) Activity D) Profitability E) Equity Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 15.5: Describe how computing financial ratios can help investors and other stakeholders interpret information from financial statements to determine the financial strengths of a business. 94) Which type of ratio measures a firm's ability to generate cash to meet current obligations by selling inventory and collecting revenue? A) Earnings per share B) Debt C) Revenue recognition D) Current E) Activity Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 15.5: Describe how computing financial ratios can help investors and other stakeholders interpret information from financial statements to determine the financial strengths of a business. 95) Which of the following indicates a firm will be able to pay its bills in a satisfactory manner? A) A debt to equity ratio of 1:1 or higher B) An activity ratio of 5:1 or less C) A net income to common shares outstanding ratio of 1:1 or less D) A current ratio of 2:1 or higher E) A profitability ratio of 5:5 or higher Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 15.5: Describe how computing financial ratios can help investors and other stakeholders interpret information from financial statements to determine the financial strengths of a business. 96) Why is the long-term solvency ratio important for stakeholders? A) It may indicate excessive inventories that cannot be sold. B) It indicates the earnings per share a stakeholder can expect to receive. C) It indicates the efficiency with which a firm uses resources. D) It indicates the firm's ability to generate cash. E) It may indicate collapse or takeover opportunities. Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application 25 Copyright © 2022 Pearson Education, Inc.
LO: 15.5: Describe how computing financial ratios can help investors and other stakeholders interpret information from financial statements to determine the financial strengths of a business. 97) When might high debt levels be a benefit to an organization? A) When trying to make otherwise unaffordable investments B) When trying to prevent a leveraged buyout C) When determining earnings per share on common stock D) When calculating the current ratio to determine short-term solvency E) When the firm's short run credit risk is strong Answer: A Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Application LO: 15.5: Describe how computing financial ratios can help investors and other stakeholders interpret information from financial statements to determine the financial strengths of a business. 98) What is the term for the amount a firm will pay shareholders based on the size of their investment in the company? A) Leverage per share B) Earnings per share C) Solvency return D) Current ratio return E) Profitability ratio Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 15.5: Describe how computing financial ratios can help investors and other stakeholders interpret information from financial statements to determine the financial strengths of a business. 99) Which of the following is an indication of how efficiently a firm is using its resources? A) Earnings per share B) Debt C) Activity ratio D) Leverage E) Profitability Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 15.5: Describe how computing financial ratios can help investors and other stakeholders interpret information from financial statements to determine the financial strengths of a business. 100) Which of the following indicates a company's total liabilities? A) Leverage B) Current ratio C) Debt 26 Copyright © 2022 Pearson Education, Inc.
D) Full disclosure E) Buyout Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 15.5: Describe how computing financial ratios can help investors and other stakeholders interpret information from financial statements to determine the financial strengths of a business. 101) Bill owns several shares of stock in a technology firm. Each quarter he receives a dividend from the company based on the profitability of the company. How does the company determine the net profit they earned for each share of stock? A) Price earnings ratio B) Leverage C) Earnings per share D) Short-term solvency E) Current ratio Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 15.5: Describe how computing financial ratios can help investors and other stakeholders interpret information from financial statements to determine the financial strengths of a business. 102) Which of the following compares a firm's current share price to its current earnings per share? A) Solvency B) Profitability ratio C) Price earnings ratio D) Solvency E) Current ratio Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 15.5: Describe how computing financial ratios can help investors and other stakeholders interpret information from financial statements to determine the financial strengths of a business. 103) Activity ratios allow investors to compare the relative efficiencies of similar companies. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 15.5: Describe how computing financial ratios can help investors and other stakeholders interpret information from financial statements to determine the financial strengths of a business. 104) The most commonly used liquidity ratio is found by calculating current assets to current liabilities. 27 Copyright © 2022 Pearson Education, Inc.
Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 15.5: Describe how computing financial ratios can help investors and other stakeholders interpret information from financial statements to determine the financial strengths of a business. 105) A long-term ratio of 2:3 indicates that the company has more equity than debt by a half. Answer: FALSE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 15.5: Describe how computing financial ratios can help investors and other stakeholders interpret information from financial statements to determine the financial strengths of a business. 106) Major projects, such as corporate mergers or buyouts, can adversely affect the long-term solvency ratio of a company. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 15.5: Describe how computing financial ratios can help investors and other stakeholders interpret information from financial statements to determine the financial strengths of a business. 107) The current ratio measures the same information that the short-term solvency ratio measures. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 15.5: Describe how computing financial ratios can help investors and other stakeholders interpret information from financial statements to determine the financial strengths of a business. 108) In which way to investors use profitability ratios. Answer: Defined as net income divided by the number of shares of common stock outstanding (that is, shares in the hands of investors), earnings per share determines the size of the dividend that a firm can theoretically pay shareholders. As an indicator of a company’s wealth potential, investors might use this ratio to decide whether to buy or sell the firm’s stock. As the ratio goes up, stock value increases because investors know that the firm can better afford to pay dividends. Naturally, stock loses market value if financial statements report a decline in earnings per share. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 15.5: Describe how computing financial ratios can help investors and other stakeholders interpret information from financial statements to determine the financial strengths of a business. 109) Discuss why it is important for stakeholders to understand financial statements. 28 Copyright © 2022 Pearson Education, Inc.
Answer: Financial statements present a lot of information, but how can it be used? How, for example, can statements help investors decide what stock to buy or help lenders decide whether to extend credit? Answers to such questions for various stakeholders—employees, managers, unions, suppliers, the government, customers—can be answered this way: Statements provide data, which can, in turn, reveal trends and be applied to create various ratios (comparative numbers). We can then use these trends and ratios to evaluate a firm’s financial health, its progress, and its prospects for the future. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 15.5: Describe how computing financial ratios can help investors and other stakeholders interpret information from financial statements to determine the financial strengths of a business. 110) What is a leveraged buyout? Answer: In a leveraged buyout, a firm takes on sometimes huge debt to buy out other companies. If owning the purchased company generates profits above the cost of borrowing the purchase price, leveraging often makes sense. Unfortunately, many buyouts have caused problems because profits fell short of expected levels or because rising interest rates increased payments on the buyer's debt. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 15.5: Describe how computing financial ratios can help investors and other stakeholders interpret information from financial statements to determine the financial strengths of a business. 111) Discuss earnings per share and how they are used. Answer: Defined as net income divided by the number of shares of common stock outstanding, earnings per share determines the size of the dividend that a firm can pay shareholders. As an indicator of a company's wealth potential, investors use this ratio to decide whether to buy or sell the firm's stock. As the ratio goes up, stock value increases because investors know that the firm can better afford to pay dividends. Naturally, stock loses market value if financial statements report a decline in earnings per share. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 15.5: Describe how computing financial ratios can help investors and other stakeholders interpret information from financial statements to determine the financial strengths of a business. 112) Which organization provides maintains and enforces the ethical conduct for public accountants? A) AICPA B) SEC C) GAAP D) FASB E) CMA Answer: A Difficulty: Moderate 29 Copyright © 2022 Pearson Education, Inc.
AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 15.6: Discuss the role of ethics in accounting. 113) Why is ethics in accounting practices important? A) Stakeholders can seek a higher return on their investment B) Accounting methods depend on the veracity of their application. C) To ensure consistency between firms D) To allow for uniformity in CPA standards and application E) To allow multinational firms to understand international investment Answer: B Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 15.6: Discuss the role of ethics in accounting. 114) What does the success of the AICPA code depend on? A) Understanding of the code by its users B) The exercising of moral judgement in all things C) The acceptance and use by the professionals governed by the code D) Lack of misleading statements that destroys public confidence in the accounting profession E) Supporting the public interest in accounting practices Answer: C Difficulty: Difficult AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 15.6: Discuss the role of ethics in accounting. 115) Demonstrating a commitment to the profession by respecting and maintaining the public trust and serving the public honorably is an example of what type of obligation under the code of Ethics for CPAs? A) Responsibilities as a professional B) Being objective and independent C) Maintaining technical and ethical standards through due care D) Serving the public interest E) Increasing profitability Answer: D Difficulty: Difficult AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 15.6: Discuss the role of ethics in accounting. 116) Under the Code of Ethics for CPAs, what are CPA professionals required to do in regards to all their responsibilities as professionals? A) The CPA should demonstrate commitment to the profession by respecting and maintaining the public trust. B) The CPA should perform all professional activities with highest regards for profitability. 30 Copyright © 2022 Pearson Education, Inc.
C) The CPA should exercise "due care," through professional improvement. D) The CPA should identify conflicts of interest and the appearance of conflicts of interest in performing their professional responsibilities. E) The CPA should use a high level of morality that is sensitive to bringing credit to their profession. Answer: E Difficulty: Difficult AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 15.6: Discuss the role of ethics in accounting. 117) What can a CPA do to maintain technical and ethical standards through due care? A) Update competence through continuing accounting education and improving the quality of services. B) Abide by the meaning and intent of the Code when determining the type of services offered to clients. C) Be independent from clients when certifying that statements are true and genuine. D) Promote the public's confidence in the profession at every opportunity. E) Serve the public honorably. Answer: A Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 15.6: Discuss the role of ethics in accounting. 118) Unethical accounting methods have affected public confidence only in the company found to have committed accounting violations. Answer: FALSE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Application LO: 15.6: Discuss the role of ethics in accounting. 119) Ethical behavior requires that a CPA give precedence to public trust in the profession over the directions of her or his employer. Answer: TRUE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 15.6: Discuss the role of ethics in accounting. 120) One of the purposes of ethics in accounting is to maintain public confidence in business institutions, financial markets, and the products and services of the accounting profession. Answer: TRUE Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking 31 Copyright © 2022 Pearson Education, Inc.
LO: 15.6: Discuss the role of ethics in accounting. 121) What are the six ethics-related areas enforced by the American Institute of Certified Public Accountants? Answer: These areas include responsibilities; the public interest; integrity; objectivity and independence; due care; and scope and nature of services. Accountants must comply with these six ethics-related areas in order to maintain certification with the AICPA. Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Application LO: 15.6: Discuss the role of ethics in accounting. 122) Why is it important to have ethical codes in the field of accounting? Answer: The purpose of ethics in accounting is to maintain public confidence in business institutions, financial markets, and the products and services of the accounting profession. Without ethics, all of accounting's tools and methods would be meaningless because their usefulness depends, ultimately, on veracity in their application. In addition to the business world's many favorable opportunities and outcomes, there are also instances of misconduct. Amid public reports of unscrupulous activity, ethics remains an area in which one person who is willing to do the right thing can make a difference. Difficulty: Moderate AACSB: Ethical understanding and reasoning Quest. Category: Critical Thinking LO: 15.6: Discuss the role of ethics in accounting. 123) Which of the following statements BEST describes the need for global accounting standards? A) The complexity of the global market increases the risk of unethical accounting behavior by allowing accountants to choose which national GAAP standards are best for their clients. B) The rise of the global market increases the risk of money laundering and offshore accounting. C) The rise of the global market increases the risk of fraudulent business transactions across borders. D) The rise of the global market increases the risk of international dumping and profit-skimming. E) The rise of the global market increases the risk of the creation of dummy companies and accounts for the purpose of dumping toxic assets. Answer: A Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 15.7: Describe the purpose of the International Accounting Standards Board and explain why it exists. 124) Which of the following would universal accounting procedures support? A) Allowing for the international promotion of CPA B) Allowing stakeholders to interpret and compare financial statements accurately C) Ensuring conformity to U.S. standards of ethics D) Ensuring all multinational firms report information accurately 32 Copyright © 2022 Pearson Education, Inc.
E) Preventing fraudulent business operations Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 15.7: Describe the purpose of the International Accounting Standards Board and explain why it exists. 125) Who is responsible for developing and gaining support for global accounting standards and gaining support and cooperation to implement those standards? A) Securities and Exchange Commission B) Sarbanes-Oxley C) International Accounting Standards Board D) Financial Accounting Standards Board E) Institute of Management Accountants Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 15.7: Describe the purpose of the International Accounting Standards Board and explain why it exists. 126) How does the lack of global accounting standards affect U.S.-based companies? A) Unethical U.S. companies will use whichever standard creates the most benefit for them. B) Using standards in countries where they do business allows for greater opportunity in the international market. C) Reporting performance in a variety of consolidated statements for global affiliates will minimize understanding, thereby minimizing attempted leveraged buyouts. D) There may be inconsistent and conflicting information that creates confusion for stakeholders. E) Assets can be values according to one standard, revenue and debt according to other standards, in an overall goal of presenting positive performance levels. Answer: D Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 15.7: Describe the purpose of the International Accounting Standards Board and explain why it exists. 127) When valuing assets, the U.S. GAAP allows an asset to be decreased if its value decreases, but cannot be increased if the value increases later. What is the IASB standard for this activity? A) The value of the asset must remain as initially recorded. B) The value of the asset must be increased annually. C) The value of the asset can be averaged over time. D) The value of the asset can be increased to reflect the increased market value. E) The value of the asset must remain the same for four accounting cycles, then can be changed to reflect current market value. Answer: D 33 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 15.7: Describe the purpose of the International Accounting Standards Board and explain why it exists. 128) In which accounting standard did the FASB and the IASB jointly propose new standards designed to improve the comparability of disclosures in financial statements? A) In devaluing financial assets B) In revenue recognition C) In valuing assets D) In expected loss modeling E) In fair value disclosure Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 15.7: Describe the purpose of the International Accounting Standards Board and explain why it exists. 129) Which of the following was the catalyst for the creation of the IASB? A) The rapid increase in the number of public organizations worldwide B) The Enron-Arthur Andersen scandal C) The record number of bankruptcies and the collapse of the global economy D) The increase of incidences of accounting fraud by multinational organization E) The upsurge of multinational organizations and the global economy Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 15.7: Describe the purpose of the International Accounting Standards Board and explain why it exists. 130) Before IASB standards are accepted worldwide, which of the following must occur? A) The IASB must develop a new licensing process for CPAs. B) The ideas that losses can be reported ahead of time must be included. C) The IASB must develop and include an international code of ethics. D) U.S. companies must be allowed to choose between IASB and GAAP reporting standards. E) The IASB must show the standards are adequate for use in the U.S. financial reporting system. Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 15.7: Describe the purpose of the International Accounting Standards Board and explain why it exists. 131) In general, the accounting standards from the IASB and from the U.S. GAAP align nearly 34 Copyright © 2022 Pearson Education, Inc.
perfectly. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 15.7: Describe the purpose of the International Accounting Standards Board and explain why it exists. 132) The International Accounting Standards Board is the prominent international organization for global accounting standards. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 15.7: Describe the purpose of the International Accounting Standards Board and explain why it exists. 133) The IASB has replaced GAAP in setting ethical standards that must be followed by all international firms. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 15.7: Describe the purpose of the International Accounting Standards Board and explain why it exists. 134) When taking the CPA exam, it is likely many questions will be taken from IASB standards in addition to GAAP standards. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 15.7: Describe the purpose of the International Accounting Standards Board and explain why it exists. 135) Discuss what the IASB must do to implement the new standards in the U.S. Answer: To fully implement any given procedure, IASB must first demonstrate that its standards are developed adequately for use in the U.S. financial reporting system. Doing so includes ensuring that investors have developed an under-standing of and education in using IASB standards. Accounting education, too, is being updated to prepare U.S. accounting students for IASB, as well as updating practitioners in CPA firms. The AICPA has begun a process of introducing international standards in the CPA examinations. A number of the exam’s questions now address some areas of difference between U.S. GAAP and International Financial Reporting Standards. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application 35 Copyright © 2022 Pearson Education, Inc.
LO: 15.7: Describe the purpose of the International Accounting Standards Board and explain why it exists. 136) What is the International Accounting Standards Board? Answer: Established in 2001 and housed at London, England, the International Accounting Standards Board (IASB) is an independent, nonprofit organization responsible for developing a set of global accounting standards and for gaining the support and cooperation of the world's various accounting organizations to implement those standards. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 15.7: Describe the purpose of the International Accounting Standards Board and explain why it exists. 137) Why are efforts to standardize global accounting practices important? Answer: Although more than 138 countries have adopted IASB's accounting practices, over 50 others continue to use their national GAAP. U.S.-based global companies may prepare different financial reports using local accounting practices for each country in which they conduct business. They also report the company's overall performance in a set of consolidated statements that combines the financial results of all its global affiliates using U.S. GAAP. However, using different accounting standards can result in vastly different pictures of a firm's financial health. Income statements, balance sheets, and statements of cash flows using local GAAPs versus IASB practices, for example, may contain conflicting information with inconsistencies leading to confusion and misunderstandings among investors and other constituents. To emphasize this point, Hans Hoogervorst, Chairman of the IASB, notes that a company using IASB standards can report balance sheet figures that are twice the size of those using U.S. GAAP accounting standards. Such inconsistencies in reporting are unacceptable in a global economy and, protection against them is a goal of IASB. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 15.7: Describe the purpose of the International Accounting Standards Board and explain why it exists. 138) Discuss the fair value discloser standard that is being jointly developed by the FASB and the IASB. Answer: In fair value disclosure, the FASB and IASB jointly propose new standards for improving the comparability of fair value disclosures in financial statements. Unlike dissimilar disclosure practices among many local GAAP, both groups want the reported fair value for an asset, a liability, and an item in shareholders' equity to have the same meaning under both FASB and IASB procedures. The disclosure should identify the techniques and inputs used to measure fair value so users can more clearly assess and compare financial statements. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 15.7: Describe the purpose of the International Accounting Standards Board and explain why it exists. 36 Copyright © 2022 Pearson Education, Inc.
Business Essentials, 13e (Ebert/Griffin) Chapter 16 Understanding Money and the Role of Banking 1) Which of the following banking instruments has a fixed term and is intended to be held to maturity? A) Demand deposits B) Time deposits C) Money market mutual funds D) Credit card accounts E) Savings accounts Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 16.1: Define money and identify the different forms that it takes in the nation's money supply. 2) Which of the following BEST describes the portability characteristic of money? A) If it wears out, it can be replaced. B) Units of money can be matched with the value of goods. C) It can be exchanged across national borders. D) It allows people to measure the relative value of goods and services. E) It is light and easy to handle. Answer: E Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 16.1: Define money and identify the different forms that it takes in the nation's money supply. 3) Which of the following is a consequence of the divisibility characteristic of money? A) Units of money do not expire after a certain time limit. B) Units of money can be accurately matched with the value of goods. C) Units of money are easily carried. D) Units of money have relatively stable value. E) Units of money of different nations are easily converted to other units of money. Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 16.1: Define money and identify the different forms that it takes in the nation's money supply. 4) Which of the following affects the value of money? A) How much currency is in circulation B) How many units the currency can be divided into C) How portable the form of currency is 1 Copyright © 2022 Pearson Education, Inc.
D) How durable the form of currency is E) How much currency has been saved Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.1: Define money and identify the different forms that it takes in the nation's money supply. 5) Which of the following BEST describes the durability characteristic of money? A) Units of money do not expire after a certain time limit. B) Units of money can be matched with the value of goods. C) Units of money allow people to measure the relative value of goods and services. D) Units of money of different nations are easily converted to other units of money. E) Units of money have lasting value. Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.1: Define money and identify the different forms that it takes in the nation's money supply. 6) Which of the following BEST describes the stability characteristic of money? A) Units of money do not expire after a certain time limit. B) Units of money of different nations are easily converted to other units of money. C) Units of money can be matched with the value of goods. D) Units of money allow people to measure the relative value of goods and services. E) Units of money have relatively constant value. Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.1: Define money and identify the different forms that it takes in the nation's money supply. 7) Money frees society from a system of barter. In doing so, money is performing which of the following functions? A) Store of value B) Measure of worth C) Unit of account D) Determination factor E) Medium of exchange Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.1: Define money and identify the different forms that it takes in the nation's money 2 Copyright © 2022 Pearson Education, Inc.
supply. 8) Which of the following is part of the M-2 supply? A) Currency at hand B) Currency amount of written checks C) Currency available through a debit card D) Currency in checking accounts E) Currency value of time deposits Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 16.1: Define money and identify the different forms that it takes in the nation's money supply. 9) Which of the following is part of the M-1 money supply? A) Certificates of deposit B) Time deposits C) Money market mutual funds D) Checks E) Credit cards Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 16.1: Define money and identify the different forms that it takes in the nation's money supply. 10) What measure of the money supply is most often used by businesses and governments for economic planning? A) M-2 B) Currency C) Demand deposits D) Liquidity E) M-1 Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 16.1: Define money and identify the different forms that it takes in the nation's money supply. 11) Why are credit cards excluded from the measure of the nation's money supply? A) Because debt continues to accrue as the credit card is used B) Because money is not moved until the debt is paid C) Because there are few spending controls on credit cards D) Because credit cards represent a convenience, not a service 3 Copyright © 2022 Pearson Education, Inc.
E) Because only the interest paid on the credit card is considered liquid money Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 16.1: Define money and identify the different forms that it takes in the nation's money supply. 12) Which of the following describes an economy where goods and services can be exchanged for other goods and services instead of money? A) Store of value B) Barter C) Brokerage D) Regulated E) Open market Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 16.1: Define money and identify the different forms that it takes in the nation's money supply. 13) Which of the following is the value of money for consumers and businesses. A) Increased returns on investments B) Convenience and simplicity C) To measure the worth of ourselves and others D) To ensure the continuation of financial institutions E) To pay for goods and services Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 16.1: Define money and identify the different forms that it takes in the nation's money supply. 14) Which of the following does U.S. law require creditors to accept in payment of debt? A) Checks B) Cash C) Credit cards D) Debit cards E) Time deposits Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 16.1: Define money and identify the different forms that it takes in the nation's money supply. 4 Copyright © 2022 Pearson Education, Inc.
15) Any object can serve as money if it is portable, divisible, durable, and stable. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical LO: 16.1: Define money and identify the different forms that it takes in the nation's money supply. 16) The overall value of the U.S. M-2 has grown considerably primarily to the increased use of credit cards and debit cards. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 16.1: Define money and identify the different forms that it takes in the nation's money supply. 17) The divisibility characteristic of money is illustrated by a financial company's ability to divide its monetary assets among several investments. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 16.1: Define money and identify the different forms that it takes in the nation's money supply. 18) The reason why a savings account is not considered a component of the M-1 money supply is that it bears interest. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 16.1: Define money and identify the different forms that it takes in the nation's money supply. 19) A check is an order to a bank to withdraw funds at any time. Answer: FALSE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 16.1: Define money and identify the different forms that it takes in the nation's money supply. 20) The M-1 money supply counts only the most liquid forms of money. Answer: TRUE Difficulty: Moderate 5 Copyright © 2022 Pearson Education, Inc.
AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 16.1: Define money and identify the different forms that it takes in the nation's money supply. 21) Discuss the reasons why the M-1 money supply no longer serves as a reliable predictor of the nation's real money supply? Answer: M-1 was the traditional measure of liquid money. Because it was closely related to gross domestic product, it served as a reliable predictor of the nation’s real money supply. This situation changed in the early 1980s, with the intro-duction of new types of investments and the easier transfer of money among investment funds to gain higher interest returns. As a result, most experts today view M-2 as a more reliable measure than M-1. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 16.1: Define money and identify the different forms that it takes in the nation's money supply. 22) Discuss the impact of credit and debit cards on the money supply. Answer: The use of credit and debit cards (both physical cards and online apps such as Apple Pay and Venmo that function in the same way) has become so widespread that many people refer to them as “plastic money.” Credit cards, however, are not money and, therefore, are not included in M-1 or M-2 when measuring the nation’s money supply. Spending with a credit card creates a debt, but does not move money until later when the debt is paid by cash or check. Debit card transactions, in contrast, transfer money immediately from the consumer’s bank account, so they affect the money supply the same way as spending with a check or cash, and are included in M-1. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 16.1: Define money and identify the different forms that it takes in the nation's money supply. 23) What are the components of the M-1 money supply? Answer: The M-1 money supply is made up of currency (cash), checks, and checking accounts (demand deposits). The oldest and most basic measure of the supply of money, M-1 counts only the most liquid, or spendable, forms of money. Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 16.1: Define money and identify the different forms that it takes in the nation's money supply. 24) What are the components of the M-2 money supply? Answer: The M-2 money supply includes everything that is in the M-1 money supply (currency, checks, and checking accounts). In addition, M-2 includes time deposits, money market mutual funds, and savings accounts. M-2 includes everything in M-1 plus other forms of money that are 6 Copyright © 2022 Pearson Education, Inc.
not quite as liquid. Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 16.1: Define money and identify the different forms that it takes in the nation's money supply. 25) Why are savings accounts not considered a component of M-1, whereas checking accounts are? Answer: M-1 comprises all currency in circulation and immediately available for circulation. This includes checks, since it makes the currency in a checking account immediately useable. On the other hand, currency in a savings account is not available for immediate use, since it needs to be withdrawn physically from the bank in order to enter circulation. Like time deposits and money market mutual funds, savings deposits are not quite as liquid as checks and other M1 forms of money. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 16.1: Define money and identify the different forms that it takes in the nation's money supply. 26) Which of the three functions of money does a time deposit account MOST exemplify? Answer: By definition, a time deposit account has a fixed term, at the end of which it has accrued a much higher value than the original investment. Thus, investment in a time deposit is a method to store (and gain) value. A time deposit demonstrates in a smaller way the other two main functions of money, as a medium of exchange and a measure of worth. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Analytical LO: 16.1: Define money and identify the different forms that it takes in the nation's money supply. 27) Which of the following financial institutions earn profits from loans taken from the funds in each of its depositors' accounts? A) Securities investment firms B) Pension funds C) Finance companies D) Commercial banks E) Nondeposit institutions Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 28) Which of the following financial institutions are considered to be owned by their depositors? 7 Copyright © 2022 Pearson Education, Inc.
A) Commercial banks and savings and loan associations B) Savings and loan associations and mutual savings banks C) Mutual savings banks and credit unions D) Credit unions and pension funds E) Pension funds and savings institutions Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 29) Which of the following terms represents a promise by the bank to pay a firm on behalf of another firm, if specified conditions are met? A) Banker's acceptance B) Bank trust service C) Certified check D) Letter of credit E) Currency exchange agreement Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 30) Which of the following represents a pool of managed funds that provide retirement income for members? A) Insurance companies B) Finance companies C) Securities investment dealers D) Nondeposit institutions E) Pension funds Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 31) Which type of pension service includes tax-deferred funds that wage earners and their spouses can use to supplement their retirement funds? A) Trust services B) Securities investment deals C) Pension funds D) Individual retirement accounts (IRAs) E) Savings 8 Copyright © 2022 Pearson Education, Inc.
Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 32) What types of firms lend to businesses needing capital or long-term funds? A) Insurance companies B) Pension and trust services C) Commercial finance companies D) Pension funds E) Securities investment dealers Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 33) What type of nondeposit institution will buy and sell stocks and bonds on behalf of clients and for its own accounts? A) Insurance companies B) Pension and trust services C) Finance companies D) Pension funds E) Securities investment dealers Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 34) What is the interest rate offered by banks to only their most creditworthy commercial customers? A) Fixed B) Prime C) Variable D) Prime plus 1 E) Below prime Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 9 Copyright © 2022 Pearson Education, Inc.
35) Which of the following allows a bank's customers to conduct account-related activities any time they choose to? A) Bank acceptance notes B) Letters of credit C) Commercial banks D) Electronic funds transfers E) Automated teller machines Answer: E Difficulty: Easy AACSB: Analytical thinking Quest. Category: Concept LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 36) How does an automated teller machine aid in the customer's ability to conduct transactions whenever needed? A) By processing payments in real time, electronically B) By allowing a customer to have a line of credit until business can be conducted within regular banking hours C) By taking deposits and making loans on demand D) By allowing electronic account-related activities every day of the week, 24 hours a day E) By transferring funds from the Reserve Bank to meet transaction needs Answer: D Difficulty: Easy AACSB: Analytical thinking Quest. Category: Application LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 37) If a U.S. firm wishes to buy products from an overseas supplier, what would the firm use to guarantee a specific payment at a future date? A) Currency exchange guarantee B) Letter of credit C) Brokerage service D) Banker's acceptance E) Security intermediary Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 38) Banks offer a variety of services for customers, including banker's acceptances. Which type of service offered by a bank would include a banker's acceptance option? A) Pension services B) International services 10 Copyright © 2022 Pearson Education, Inc.
C) Financial advice D) Electronic funds transfer E) Automated teller machines Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 39) The management of estates and funds offered by a commercial bank on behalf of an individual can be conducted by a bank through A) trust services. B) letters of credit. C) banker's acceptance notes. D) individual retirement accounts. E) securities investments deals. Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 40) Which of the following describes the role of brokerage services in money management? A) To make recommendations on investment opportunities B) To management electronic fund transfers C) To manage investment and trust accounts D) To manage international payments by multinational firms E) To buy and sell bonds for investors Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 41) Andrew has not written a check since he was in college. Instead, all of his banking is done online, including the deposit of his paycheck, paying bills, and transferring money to friends when they go out. Which of the following has Andrew come to rely on for his banking activities? A) Brokerage services B) Electronic funds transfers C) ATMS D) Credit cards E) Letters of credit Answer: B Difficulty: Moderate 11 Copyright © 2022 Pearson Education, Inc.
AACSB: Analytical thinking Quest. Category: Application LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 42) Which of the following is an example of a nondeposit institution that would take in money, provide interest and make loans? A) Credit unions B) Mutual savings banks C) Insurance companies D) Commercial banks E) Savings institutions Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 43) In order to save money on transactional costs, the U.S. Treasury is moving to electronic fund transfers for payments rather than issuing checks. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 44) Savings and loan associations began primarily to loan money to small and medium-sized businesses. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 45) Individual retirement accounts can be opened only by self-employed people such as doctors, small business owners, and consultants. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 46) In mutual savings banks, all depositors are considered owners of the bank. 12 Copyright © 2022 Pearson Education, Inc.
Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 47) The traditional IRA is the only type of IRA that offer tax-deferred benefits to wage earners. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 48) Deceased persons can have trust accounts. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 49) Explain the purpose of a trust department at a financial institution. Answer: Many commercial banks offer trust services, the management of funds left in the bank’s trust. In return for a fee, the trust department will perform such tasks as making your monthly bill payments and managing your in-vestment portfolio. Trust departments also manage the estates of deceased persons. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 50) Discuss the use of and growth of electronic funds transfers. Answer: Electronic funds transfer (EFT) provides for payments and collections by transferring financial information electronically. PayPal, Venmo, and similar services offer online payments and money transfers among businesses and individuals, nationally and internationally, in various currencies, requiring only that recipients have an e-mail address. Consumers using debit cards and mobile devices instead of writing personal checks enjoy EFT’s convenience and speed at the checkout. In addition, EFT systems provide automatic payroll deposit, ATM transactions, bill payment, and automatic funds transfer. Such systems can help a businessperson close an important business deal by transferring money within a few seconds. The U.S. Treasury reports that it costs around $1.03 to issue a check payment, but only $0.105 to issue an EFT payment. The U.S. Social Security system estimates that it has saved more than $1 billion since it began phasing out paper check payments in 2013 and in-stead started using paperless payments for federal benefits 13 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 51) What is the difference between a public pension fund and a private pension fund? Answer: A public pension fund includes Social Security and nearly $3 trillion in retirement programs for state and local government employees. In contrast, a private pension fund is operated by employers, unions, and other private groups. A pension fund is a pool of funds that is managed to provide retirement income for its members. Private pension funds cover about 43 million people and have total assets of $13 trillion, down from $15 trillion before the recent recession. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 52) It has been discovered that the bank involved has been selling its riskiest mortgage accounts to the insurance company, which in turn has been selling these accounts packaged with other more stable loans at a sharply discounted price to other banks. Gavin asks his aides why this would be a beneficial relationship between the two institutions. What would his aides say? Answer: By selling the risky loans out, the commercial banks are able to gain an initial profit from these loans and then reduce the loss from the probable defaults of the loans. The insurance company, on the other hand, can earn a profit through selling more lucrative loan packages to other banks with the risky loans outweighed by the price of the more stable ones. Unlike commercial banks, insurance companies and other nondeposit institutions use inflowing funds for purposes other than earning interest for depositors. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 53) Why would a consumer utilize trust services offered by commercial banks? Answer: Many commercial banks offer trust services, which manage the funds left in the bank's trust. In return for a fee, the trust department will perform such tasks as making your monthly bill payments and managing your investment portfolio. Trust departments also manage the estates of deceased persons. Trust services are beneficial for those who are unwilling or unable to manage finances and investment portfolios. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 16.2: Describe the different kinds of financial institutions that compose the U.S. financial system and explain the services they offer. 14 Copyright © 2022 Pearson Education, Inc.
54) Which of the following actions can the Federal Deposit Insurance Company take in the event of a failure of one of its insured banks? A) Seize the assets of the investors and settle the bank's debts. B) Allow the bank to stay afloat by granting a loan of federal money. C) Conduct an inquiry into the investors' assets and actions to determine if there was any malfeasance that caused the bank failure. D) Allow another bank to take responsibility for the failed bank's liabilities through sale of the failed bank. E) Settle the bank's debts through its insurance deposit fund and regulate the bank's transactions more strictly. Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 16.3: Explain how financial institutions create money and describe the means by which they are regulated. 55) Which of the following statements BEST explains how financial institutions create money? A) By opening new checking accounts and giving more people access to readily available cash B) By issuing money through government contracts C) By taking deposits and loaning out these funds D) By paying interest on its accounts and investments E) By giving interest from its accounts to its clients Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 16.3: Explain how financial institutions create money and describe the means by which they are regulated. 56) Which of the following agencies guarantees the safety of all of its members' bank accounts? A) Internal Revenue Service B) Federal Open Market Committee C) Federal Reserve Bank D) Federal Deposit Insurance Corporation E) Federal Exchange Commission Answer: D Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 16.3: Explain how financial institutions create money and describe the means by which they are regulated. 57) Why does the government take an active role in the regulation of the U.S. financial system? A) Commercial banks are essential in paying for international trade. B) To generate fees in addition to those paid to the FDIC C) To help commercial banks dispose of assets 15 Copyright © 2022 Pearson Education, Inc.
D) Commercial banks are essential to the creation of money. E) To allow commercial banks to settle debt Answer: D Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 16.3: Explain how financial institutions create money and describe the means by which they are regulated. 58) What recourse is available to the FDIC when a bank fails? A) Funds can be taken from the insurance deposit fund to pay off creditors. B) Employee behavior is monitored and analyzed to ensure ethical behavior. C) Interest rates can be raised to offset the cost of payouts. D) Other banks are purchased to cover the cost of the failure. E) Bank assets can be disposed of in order to pay off debt. Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 16.3: Explain how financial institutions create money and describe the means by which they are regulated. 59) When a bank's assets are sold to settle debt during a bank failure, what happens to the resulting gain? A) Remaining funds are added to the insurance deposit funds. B) Remaining funds are deducted to those paid by the insurance deposit funds. C) Remaining funds are used to buy and consolidate smaller banks. D) Remaining funds are dispersed to depositors to help offset losses. E) Remaining funds are returned to the bank to aid in recovery. Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 16.3: Explain how financial institutions create money and describe the means by which they are regulated. 60) Which of the following is the goal of government regulation of commercial banks? A) To maintain the supply of money in the economy B) To aid in the creation of new money C) To ensure a sound and competitive financial system D) To move the economy away from a cash basis and to an electronic basis E) To protect banks from failure Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 16.3: Explain how financial institutions create money and describe the means by which they 16 Copyright © 2022 Pearson Education, Inc.
are regulated. 61) Which of the following is the goal of the Federal Deposit Insurance Corporation? A) To protect the banking industry B) To protect the deposits of customers C) To protect U.S. banking interests in the world market D) To regulate the electronic exchange of funds E) To ensure the success of pension funds Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 16.3: Explain how financial institutions create money and describe the means by which they are regulated. 62) Through the Federal Deposit Insurance Corporation, a deposit in a member bank is currently insured up to $50,000. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 16.3: Explain how financial institutions create money and describe the means by which they are regulated. 63) Banks create money through contracts with the government to mint bills and coins. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.3: Explain how financial institutions create money and describe the means by which they are regulated. 64) The Federal Deposit Insurance Corporation is the government agency that regulates American banks. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.3: Explain how financial institutions create money and describe the means by which they are regulated. 65) Money deposited into a commercial bank has the potential of increasing the overall money supply. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application 17 Copyright © 2022 Pearson Education, Inc.
LO: 16.3: Explain how financial institutions create money and describe the means by which they are regulated. 66) When the value of your money goes down, your purchasing power decreases. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.3: Explain how financial institutions create money and describe the means by which they are regulated. 67) The FDIC is responsible for ensuring a bank does not fail. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.3: Explain how financial institutions create money and describe the means by which they are regulated. 68) Describe the role of the FDIC when a bank fails. Answer: The FDIC becomes responsible for disposing of failed banks. One option is to sell them to other banks that are then responsible for the liabilities of the failed banks. Alternatively, the FDIC can seize the assets of the failed banks and undertake two activities: (1) pay insurance to depositors and (2) dispose of the banks’ assets and settle their debts, all at the lowest cost to the FDIC’s insurance deposit fund. The resulting net gain (or loss) is put into (or paid from) the insurance deposit fund. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.3: Explain how financial institutions create money and describe the means by which they are regulated. 69) Describe the role of the FDIC in the supervision of banks and thrift institutions. Answer: The Federal Deposit Insurance Corporation (FDIC) supervises banks and insures deposits in banks and thrift institutions. The FDIC is a government agency created by President Franklin D. Roosevelt in 1933 to restore public confidence in banks during the Depression era. More than 99 percent of the nation’s commercial banks and savings institutions pay fees for membership in the FDIC. In return, the FDIC guarantees the safety of all accounts—checking, savings, and CDs—of every account owner up to the maximum of $250,000. If a bank collapses, or fails, the FDIC promises to pay each depositor for losses up to $250,000 per account. A person with more money can establish accounts in more than one bank to protect sums in excess of $250,000. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.3: Explain how financial institutions create money and describe the means by which they are regulated. 18 Copyright © 2022 Pearson Education, Inc.
70) Explain how current financial institutions can create money. Answer: Financial institutions provide a special service to the economy: They create money. They don’t actually print bills and mint coins, but by taking in deposits and making loans, they expand the money supply. The money supply expands because banks are allowed to loan out most (although not all) of the money they take in from deposits. If you deposit $100 in your bank and banks are allowed to loan out 90 percent of all their deposits, then your bank will hold $10 in reserve and loan $90 of your money to borrowers. (You still have $100 on deposit.) Meanwhile, a borrower—or the people paid by the borrower—will deposit the $90 loan money in a bank (or banks). The bank will then have another $81 (90 percent of $90) available for new loans. The banks, therefore, have turned your original $100 into $271 ($100 + $90 + $81). The chain continues, with borrowings from one bank becoming deposits in the next. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Application LO: 16.3: Explain how financial institutions create money and describe the means by which they are regulated. 71) Which of the following terms refers to the percentage of its deposits a bank must hold, in cash or on deposit, with a Federal Reserve Bank? A) Discount rate B) Key rate C) Prime rate D) Federal insurance premium E) Reserve requirement Answer: E Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 72) Which of the following terms refers to the interest level at which member banks can borrow money from the Federal Reserve System? A) Discount rate B) Key rate C) Prime rate D) Federal insurance premium E) Reserve requirement Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 73) Which of the following terms refers to the interest level at which commercial banks lend 19 Copyright © 2022 Pearson Education, Inc.
reserves to each other, usually overnight? A) Discount rate B) Key rate C) Prime rate D) Federal insurance premium E) Reserve requirement Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 74) Which of the following BEST describes the "open-market operations" of the Federal Reserve System? A) The development of new financial opportunities for banks B) The minting of new money to disperse into the money market C) The control of interest rates among banks D) The maintenance of a well-functioning lending system among banks E) The buying and selling of securities by the Fed Answer: E Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 75) Which of the following political bodies appoints the members of the board of governors for the Federal Reserve System? A) The Senate B) The House of Representatives C) The President of the United States D) The Council of American Governors E) The Supreme Court Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 76) How are the individual Federal Reserve Banks organized? A) By size of financial institution members—small, medium, large, etc. B) By type of financial institution members—commercial banks, credit unions, etc. C) By geographical districts—Southeast, Northeast, West, etc. D) By financial purpose—buying, lending, interest controlling, etc. E) By legislative districts—10th District of Massachusetts, 1st District of Colorado, etc. 20 Copyright © 2022 Pearson Education, Inc.
Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 77) Which of the following BEST describes the primary function of the Federal Reserve System? A) Developing new financial markets B) Controlling the money supply C) Managing interbank relationships D) Acting as a bank for the federal government E) Developing new financial markets Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 78) Which of the following statements BEST describes why U.S. Treasury securities have always been considered risk-free investments? A) They are backed by the U.S. government. B) They have a guaranteed rate of return. C) They are easily sold. D) They are readily available for purchase. E) They earn a great profit on the international money market. Answer: A Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Application LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 79) Which of the following statements BEST describes why a decrease in reserve requirements often results in an increase in the money supply? A) Banks have more money to better determine their interest rates. B) Banks have more money to pay off their debts. C) Banks have more money to lend out. D) Banks have more money to offset lower interest rates. E) Banks have more money to reward their employees for meritorious financial ventures. Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 21 Copyright © 2022 Pearson Education, Inc.
80) When the discount rate increases, which of the following aspect of the money supply decreases? A) Value of loans from the Federal Reserve Banks to individual banks. B) Value of loans from individual banks to other financial institutions. C) Number of banks issuing loans to individuals. D) Number of loans from the Federal Reserve Banks to individual banks. E) Number of loans from the Federal Reserve Banks to individuals. Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 81) Which of the following is a leading indicator for economic growth and indicates a period of widespread price increases throughout an economic system? A) Inflation B) Interest rates C) Investments D) Quantitative easing E) Newly minted currency Answer: A Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 82) Which of the following is responsible for formulating he Fed's monetary policies? A) The Chairperson for the Board of Governors B) All member banks C) Reserve banks D) The Board of Governors E) The Federal Open Market committee Answer: E Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 83) Which of the following are required to be members of the Fed? A) Credit unions B) Savings and Loans C) Finance companies D) Nationally chartered commercial banks E) State-chartered banks 22 Copyright © 2022 Pearson Education, Inc.
Answer: D Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 84) In which way does the Fed manage the nation's economic growth? A) By acting as a clearing house for checks B) By guaranteeing the accounts of all depositors C) By managing money supply and interest rates D) By allowing banks to borrow money at prime rate E) By printing paper money for circulation into the economy Answer: C Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 85) Which of the following does the Fed do when it wants to reduce the money supply? A) Sells treasury securities B) Increases interest rates C) Shortens the maturity date on T-bonds D) Decrease the federal funds rate E) Decrease the reserve requirement Answer: B Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 86) An overly large decrease in the reserve requirement by the Federal Reserve System could result in inflation. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 87) As the government's bank, the Fed produces the nation's paper currency and lends money to the government. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge 23 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Application LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 88) Like most of the federal government, the governors of the Federal Reserve System are democratically elected by the citizens of the United States. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 89) One of the daily responsibilities of the Federal Reserve System is to regulate the current federal funds rate. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 90) The Federal Reserve Bank has the responsibility of ensuring the reasonableness of the interest rates for business and personal loans within the United States. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 91) When the reserve requirement set by the Fed is low, the money available to lend expands. Answer: TRUE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 92) Explain why open-market operations is effective in managing the money supply. Answer: Open-market operations refer to the Fed’s sale and purchase of securities (usually U.S. Treasury notes and short-term bonds) in the open market, as directed by the Fed’s Open-Market Committee. Open-market operations are particularly effective because they act quickly and predictably on the money supply. The Fed buys government securities from a commercial dealer, whose bank account is credited for the transaction, thus giving that bank more money to lend, so this transaction expands the money supply. The opposite happens when the Fed sells securities. Selling Treasury securities to investors allows the U.S. government to raise money and contract 24 Copyright © 2022 Pearson Education, Inc.
the money supply. These securities may include Treasury bills (T-bills), T-notes, and T-bonds with maturity dates ranging from short term (a few weeks) to long term (up to 30 years). Treasury securities are highly liquid because they are actively traded on national securities markets, and traditionally have been considered a risk-free investment because they are backed by the U.S. government. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 93) What does the Fed use to control the nation's money supply? Answer: The Fed’s role in controlling the nation’s money supply stems from its role in setting policies to help reach these goals. To control the money supply, the Fed uses reserve requirements, interest rate controls, and open-market operations. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 94) Explain the four functions of the Fed. Answer: As the government’s bank, the Fed produces the nation’s paper currency and decides how many bills to pro-duce and destroy. It also lends money to the government by buying bonds issued by the Treasury Department to help finance the national deficit. As the bankers' bank, the Fed provides storage for commercial banks, which are required to keep funds on reserve at a Federal Reserve Bank. In addition, individual banks that need money can borrow from the Fed and pay interest on the loans. The Fed also clears checks for commercial banks to ensure that cash is deducted from the check writer’s bank ac-count and deposited into the check receiver’s account. With electronic payments, however, the number of paper checks processed is steadily declining. The Fed is responsible for the implementation of U.S. monetary policy, the management of the nation’s economic growth by managing the money supply and interest rates. By controlling these two factors, the Fed influences the ability and willingness of banks throughout the country to loan money. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 95) Describe the role of the Board of Governors for the Federal Reserve. Answer: The Fed’s board of governors consists of seven members appointed by the U.S. president for overlapping terms of 14 years. The chair of the board serves on major economic advisory committees and works actively with the ad-ministration to formulate economic policy. The board plays a large role in controlling the money supply. It alone determines the reserve requirements, within statutory limits, for depository institutions. It also works with other members of the Fed to set discount rates and handle the Fed’s sale and purchase of government 25 Copyright © 2022 Pearson Education, Inc.
securities. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 96) How does the Fed's monetary policy influence banks' willingness to loan money? Answer: Monetary policy is the management of the nation's economic growth through money supply and interest rates; by controlling these factors, the Fed influences banks' ability and willingness to loan money. For example, in 2009, the Fed launched its most aggressive buying of long-term Treasury bonds in history–$300 billion–to fight the recession. The purchases were intended to push up market prices for Treasuries and thereby drive down interest rates. As longterm Treasury rates fell, other interest rates soon followed, including rates for home mortgages, business loans, and consumer loans. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 97) What happens to demand and price during times of inflation? Answer: Demand for goods and services increase and prices increase during times of inflation; this results directly from too much money in an economic system. In contrast, deflation occurs when the supply of goods outpaces the supply of money, so demand for goods and services falls. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 98) A recent report to the House reveals that unemployment continues to be high and that the economy is sluggish. At the same time, the discount rate is very close to zero, and the reserve requirement for banks was recently lowered to an all-time low. What actions might the Federal Reserve System do in order to stimulate the economy? Answer: Given the two main tools for controlling the money supply and stimulating the economy–discount rate and reserve requirement–are incredibly low with no discernible effect, the Federal Reserve System would probably choose to buy bonds through open market operations more actively. This would free up more cash for investment in the economy and hopefully start reducing unemployment. While some claim such bond purchases are essential for economic recovery, critics fear they may stimulate destructive spiraling inflation. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 16.4: Discuss the functions of the Federal Reserve System and describe the tools that it uses to control the money supply. 26 Copyright © 2022 Pearson Education, Inc.
99) Which of the following is the goal of the government's emergency interventions for U.S. financial institutions? A) Limiting lending B) Increasing the availability of the M-1 supply C) Increasing assurances of repayment D) Stabilizing the financial system E) The elimination of warrants Answer: D Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Analytical LO: 16.5: Identify three important ways in which the money and banking system is changing. 100) Which of the following laws requires financial institutions to use customer identification programs to verify identities and compare them with government lists of terrorists? A) The Check Clearing for the 21st Century Act B) The USA Patriot Act C) The Bank Secrecy Act D) The Federal Reserve Act E) The Emergency Economic Stabilization Act Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.5: Identify three important ways in which the money and banking system is changing. 101) Which of the following federal laws made transactions between banks significantly more efficient by allowing banks to use electronic payments instead of paper checks? A) The Check Clearing for the 21st Century Act B) The Bank Secrecy Act C) The USA Patriot Act D) The Federal Reserve Act E) The Economic Emergency Recovery Act Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 16.5: Identify three important ways in which the money and banking system is changing. 102) Which of the following will allow for the transfer of money between accounts in order to allow an individual to make retail purchases, without increasing funds at the individual's disposal? A) Smart cards B) Blink cards C) Debit cards D) E-commerce cards E) Credit cards 27 Copyright © 2022 Pearson Education, Inc.
Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.5: Identify three important ways in which the money and banking system is changing. 103) Which of the following use a computer chip that sends a radio-frequency signal when an individual is making a retail purchase with a credit card? A) Smart cards B) Blink cards C) Debit cards D) E-commerce cards E) Point of sale terminals Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.5: Identify three important ways in which the money and banking system is changing. 104) Which of the following use an embedded computer chip that is programmed with "electronic money" for individual consumer purchases? A) Smart cards B) Blink cards C) Debit cards D) E-commerce cards E) Credit cards Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.5: Identify three important ways in which the money and banking system is changing. 105) In order to provide a return for its investments, what does the government require when the Fed loans money to a bank? A) Assets that serve as collateral B) TARP payments C) Above prime interest D) Reserve requirements E) FDIC insurance Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.5: Identify three important ways in which the money and banking system is changing. 106) According to the Bank Secrecy Act, which of the following is required when a bank receives a wire transfer or cash transaction in excess of $10,000. 28 Copyright © 2022 Pearson Education, Inc.
A) All assets be frozen until researched B) Tracking and reports of the transaction C) Closing of all accounts belonging to the account holder D) Proof of identity for the send and receiver of the transaction E) Paper checks instead of electronic funds transfers Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.5: Identify three important ways in which the money and banking system is changing. 107) Which of the following is the world's largest electronic payment system, processing nearly $5 trillion in transactions each day? A) Automated Clearing House Network B) Blink C) Fedwire D) Bank of America E) The Federal Reserve Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.5: Identify three important ways in which the money and banking system is changing. 108) Banks are subject to prosecution when they fail to maintain systems for identifying and reporting suspicious activities. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.5: Identify three important ways in which the money and banking system is changing. 109) An example of a point-of-sale (POS) terminal is making a payment at the grocery store and having the system transfer funds from your account to the store's account. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 16.5: Identify three important ways in which the money and banking system is changing. 110) The Federal Reserve System has been instrumental in providing interbank clearing of electronic payments for the nation's financial institutions. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.5: Identify three important ways in which the money and banking system is changing. 29 Copyright © 2022 Pearson Education, Inc.
111) A smart card is essentially a credit card, with funds guaranteed by the Fed. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.5: Identify three important ways in which the money and banking system is changing. 112) Several banks were bailed out with TARP funds in 2009. In return the U.S. Treasury received dividend-paying ownership of the banks it bailed out. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.5: Identify three important ways in which the money and banking system is changing. 113) Discuss the role of the Automated Clearing House Network in the banking system. Answer: ACH is an electronic funds transfer system that provides interbank clearing of electronic payments for the nation’s financial institutions. The ACH network allows businesses, government, and consumers to choose an electronic-over-paper alternative for payments (instead of written checks). The system is green, safe, and efficient. ACH payments include internetinitiated debit and credit payments by businesses and consumers; business-to-business (B2B) electronic payments; direct deposit of payroll, Social Security benefits, and tax refunds; federal, state, and local tax payments; e-checks; direct payment of consumer bills: mortgages, loans, utility bills, and insurance premiums; and e-commerce payments. In 2019, the ACH system processed over 24.7 billion payments that were initiated or received by customers at more than 15,000 U.S. businesses and financial institutions. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.5: Identify three important ways in which the money and banking system is changing. 114) What is a debit card? Answer: Debit cards allow only the transfer of money between accounts. They do not increase the funds at an individual's disposal. They can, however, be used to make retail purchases. Debit cards are used more than credit cards as payment for U.S. consumer transactions. Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 16.5: Identify three important ways in which the money and banking system is changing. 115) What is the difference between a credit card and a debit card? Answer: Credit cards allow users to borrow money and pay the money back over time. Unlike credit cards, debit cards allow only the transfer of money between accounts. The risk of financial loss is greater for debit cards compared to credit cards. Federal law limits the credit card user's liability to $50 for stolen or fraudulent use. Protection against debit card losses can be higher– ranging up to $500–depending on how quickly the lost card is reported. 30 Copyright © 2022 Pearson Education, Inc.
Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical LO: 16.5: Identify three important ways in which the money and banking system is changing. 116) Describe the Check Clearing for the 21st Century Act and its effect on the writing of checks for the future. Answer: The Check Clearing for the 21st Century Act (Check 21), which became federal law in 2004, allows a receiving bank to make an electronic image of a paper check and electronically send the image to the paying bank for instant payment instead of waiting days for the paper check to wind its way back to the sender. More banks are adopting check image processing (Check 21) and benefitting from its speed and cost efficiency, less paper handling, reduced reliance on physical transportation, faster collection times, and elimination of expensive float. Today, almost 99 percent of the items processed by the Fed are images instead of in paper form. The days of writing a check, mailing it, and having several days to put money in the account to cover it are numbered as a result of faster check clearing. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.5: Identify three important ways in which the money and banking system is changing. 117) Which of the following indicates the relative strength of the currencies of two countries? A) Trade rate B) Exchange rate C) Trade balance D) Relative gross national products E) International loan rate Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 16.6: Discuss some of the institutions and activities in international banking and finance. 118) Which of the following institutions simplifies financial settlements between buyers and sellers in different countries? A) The U.S. State Department B) The International Monetary Fund C) The World Bank D) Commercial banks E) The Internet Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.6: Discuss some of the institutions and activities in international banking and finance. 119) In which way does the World Bank differ from true international banks? 31 Copyright © 2022 Pearson Education, Inc.
A) The World Bank does not charge interest to governments with emerging markets. B) The World Bank provides funds for national improvements in order to increase trade in developing countries. C) The World Bank is comprised and run by a group of 150 member nations. D) The World Bank is designed to promote the stability of exchange rates among member nations. E) The World Bank only lends money to those with negative trade balances. Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 16.6: Discuss some of the institutions and activities in international banking and finance. 120) Which of the following describes one of the requirements that the International Monetary Fund (IMF) has imposed on certain developing countries? A) The government decreases spending in order to bring inflation under control. B) Private industries decrease prices in order to bring inflation under control. C) The government increases loans in order to create more money in the local markets. D) The local banks increase loans in order to create more money in the local markets. E) The government and private industries partner in creating more jobs in the region. Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 16.6: Discuss some of the institutions and activities in international banking and finance. 121) Which of the following affects the movement of funds between international buyers and sellers? A) Buyer's home country government trade policies B) Seller's home country government policies C) International government policies D) Currency exchange rates E) International payment process Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.6: Discuss some of the institutions and activities in international banking and finance. 122) Why do exchange rates change daily? A) Because exchange rates reflect global supply and demand B) Because exchange rates reflect political decisions C) Because exchange rates reflect the economic health of the country D) Because exchange rates are closely tied to the unemployment rates E) Because exchange rates are based on the travel industry Answer: A Difficulty: Moderate 32 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Analytical LO: 16.6: Discuss some of the institutions and activities in international banking and finance. 123) When the value of a currency is strong in the international market, what happens to trade? A) Trade increases because the cost of the item is more affordable in the international market. B) Trade decreases because the cost of the item is more expensive in the international market. C) Trade increases because sales decrease, creating a more competitive market. D) Trade decreases because the manufacturers limit production of the item. E) Trade increases with a slower revenue growth. Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 16.6: Discuss some of the institutions and activities in international banking and finance. 124) In the United States, who has the greatest influence on the value of the U.S. dollar? A) The World Bank B) The International Monetary Fund C) The Federal Reserve D) The European Central Bank E) The United Nations (U.N.) Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.6: Discuss some of the institutions and activities in international banking and finance. 125) Why does a government lower interest rates to affect the value of the currency? A) To strengthen the value of the currency in the world market B) To make goods cheaper and more attractive in the world market C) To stimulate inflation D) To increase the number of foreign imports, thereby increasing trade E) To offset the price of must-have commodities, such as oil Answer: B Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Application LO: 16.6: Discuss some of the institutions and activities in international banking and finance. 126) What is the role of the International Monetary Fund? A) To provide long-term loans to member countries B) To provide a system of rules and procedures for member countries who trade with each other C) To limit the amount of loans available to member nations who have negative trade balances D) To promote stable exchange rates E) To determine the value of currency and exchange rates for member nations Answer: D 33 Copyright © 2022 Pearson Education, Inc.
Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 16.6: Discuss some of the institutions and activities in international banking and finance. 127) In the global economy, how is the value of one currency determined when compared to another? A) World Bank rate B) International monetary fund C) Inflation rate D) Exchange rate E) Automated Clearing House network Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 16.6: Discuss some of the institutions and activities in international banking and finance. 128) Why do exchange rates matter to companies? A) Strong exchange rates could stimulate sales in foreign markets. B) Inflation could be caused by an exchange rate that is too strong. C) Poor exchange rates must be offset by government contribution. D) Exchange rates indicate the strength of the overall economy. E) Exchange rates affect the prices of goods and services. Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.6: Discuss some of the institutions and activities in international banking and finance. 129) In the international payment process, when does money not have to actually flow between two countries? A) When there is stability in the exchange rate B) When one of the countries is preparing to make a large purchase C) When the difference in payments can be covered by the World Bank D) When there is a pending change in currency exchange rates E) When trade is balanced Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.6: Discuss some of the institutions and activities in international banking and finance. 130) Which of the following is the goal of the World Bank? A) To promote stability of exchange rates B) To provide temporary, short term loans to member countries C) To encourage cooperation on international monetary issues D) To increase productive capacity in borrowing countries 34 Copyright © 2022 Pearson Education, Inc.
E) T encourage the development of a system for international payments Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.6: Discuss some of the institutions and activities in international banking and finance. 131) To whom does the IMF make loans to? A) To developing nations wanting to build roads and schools B) To nations wanting to increase tourism and trade C) To nations suffering from temporary negative trade balances D) To nations with weak currencies E) To nations who are trading partners with the World Bank Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.6: Discuss some of the institutions and activities in international banking and finance. 132) The international payments process that moves money between buyers and sellers on different continents is subject to worldwide policy systems. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.6: Discuss some of the institutions and activities in international banking and finance. 133) In international payments, equal money inflows and outflows can result in no money being transferred between countries. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 16.6: Discuss some of the institutions and activities in international banking and finance. 134) The one area the Federal Reserve System has very little control over is the strength of the U.S. dollar against other currencies. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 16.6: Discuss some of the institutions and activities in international banking and finance. 135) The international monetary fund makes interest free and condition free loans to those countries seeking international expansion. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge 35 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Analytical LO: 16.6: Discuss some of the institutions and activities in international banking and finance. 136) Describe why an firm would care about exchange rates? Answer: Currencies matter greatly to companies when they buy, sell, and invest with other companies around the globe. Individuals, too, have similar concerns, as when farmers buy grain from Brazil and tractors made in Japan or India, sometimes at higher prices and other times at lower prices, depending on the currency exchange rates of the countries involved. Those exchange rates can be the difference between making a living and losing money during any year. Prices for consumer products depend on currency exchange rates, too. As an investor looking toward retirement, you may buy an individual retirement account (IRA) or, alternatively, invest in any of the many other global opportunities for accumulating wealth to meet future needs and dreams. In all of these endeavors, the success or disappointments in your decisions—if and when to buy and to not buy—will be influenced by changes in currency exchange rates. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 16.6: Discuss some of the institutions and activities in international banking and finance. 137) Describe the potential outcome when the U.S. Federal Reserve uses low interest rate policies to stimulate the economy. Answer: In contrast, the U.S. Federal Reserve continues with low interest rate policies to stimulate the ailing economy and in doing so contributes to a relatively weak dollar. The weaker dollar makes U.S. goods cheaper and more attractive on the world’s markets, thus maintaining or even increasing U.S. export sales. At the same time, the weaker dollar makes foreign imports more expensive, so U.S. consumers can afford fewer imported products, many of which are available only from foreign manufacturers. Some must-have commodities, too, such as petroleum, are priced worldwide in U.S. dollars, so as the dollar’s value falls, the price of oil increases because it takes more of those weaker U.S. dollars to buy each barrel. We see, then, some of the ways that banking and banking policies significantly influence currency values. Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Analytical LO: 16.6: Discuss some of the institutions and activities in international banking and finance. 138) Why might nations decline International Monetary Fund funds? Answer: Such nations may not want to accept the economic changes proposed by the IMF because these nations may reject the IMF's requirement that they cut back social programs to bring inflation under control, for example. The IMF may impose various conditions when it makes loans to nations suffering from temporary negative trade balances. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 16.6: Discuss some of the institutions and activities in international banking and finance.
36 Copyright © 2022 Pearson Education, Inc.
Business Essentials, 13e (Ebert/Griffin) Chapter 17 Managing Business Finances 1) Which value of a stock is calculated by dividing the firm's owners' equity by the total number of common shares of stock owned by all shareholders? A) Par value B) Market value C) Book value D) Dividend value E) Total value Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 17.1: Explain the concept of the time value of money and the principle of compound growth, and discuss the characteristics of common stock. 2) What is a stock's market value? A) The current price of a share of stock in the stock market B) The average price of one share of stock over the past year C) The face value of a share of stock, set by the issuing company's board of directors D) The price of the stock plus the previous year's dividend E) The monthly average of a stock's price over a year Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 17.1: Explain the concept of the time value of money and the principle of compound growth, and discuss the characteristics of common stock. 3) Which of the following is the name for a portion of the ownership of a corporation? A) Schedule C B) Stock C) Partnership D) LLC E) Dividend Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 17.1: Explain the concept of the time value of money and the principle of compound growth, and discuss the characteristics of common stock. 4) The time it takes to double an investment can be estimated by using which of the following? A) Book value B) The Rule of 72 C) Blue-chips 1 Copyright © 2022 Pearson Education, Inc.
D) Dividends E) Market value Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 17.1: Explain the concept of the time value of money and the principle of compound growth, and discuss the characteristics of common stock. 5) Which of the following multiplies the earning capacity on an initial investment as interest payments accumulate and earn even more interest? A) Compound growth B) Rule of 72 C) Time value of money D) Interest E) Market value Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.1: Explain the concept of the time value of money and the principle of compound growth, and discuss the characteristics of common stock. 6) How is the market value of a stock determined? A) Interest rates B) The firm's owners' equity C) Number of shares available D) Profit-seeking potential E) How much buyers are willing to pay Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.1: Explain the concept of the time value of money and the principle of compound growth, and discuss the characteristics of common stock. 7) Partial ownership of a firm that is considered to be the strongest and financially sound is done through which method? A) Buying of mutual funds B) Buying of blue-chip stocks C) Dividend reinvestment D) Funding of aggressive growth opportunities E) Buying of load funds Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept 2 Copyright © 2022 Pearson Education, Inc.
LO: 17.1: Explain the concept of the time value of money and the principle of compound growth, and discuss the characteristics of common stock. 8) Which of the following is considered to be one of the riskiest of all investments? A) Blue-chip stock B) Mutual funds C) No-load funds D) Common stock E) Load funds Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 17.1: Explain the concept of the time value of money and the principle of compound growth, and discuss the characteristics of common stock. 9) Which of the following should be a key consideration when evaluating alternative investments? A) Amount of dividends paid on an annual basis B) How quickly the investment will grow C) The safety and security of the organization and the stock D) How quickly the value of the investment will double E) Relationship between potential returns and investment risk Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 17.1: Explain the concept of the time value of money and the principle of compound growth, and discuss the characteristics of common stock. 10) Which of the following is the idea that when money is invested, it grows by earning interested or some other form or return? A) Time value of money B) Return on investment C) Rule of 72 D) Dividend payments E) Securities investments Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 17.1: Explain the concept of the time value of money and the principle of compound growth, and discuss the characteristics of common stock. 11) Which of the following is the most basic form of ownership in a company? A) Blue chip stock B) Common stock C) Mutual funds 3 Copyright © 2022 Pearson Education, Inc.
D) Bonds E) no-load funds Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 17.1: Explain the concept of the time value of money and the principle of compound growth, and discuss the characteristics of common stock. 12) Which of the following is used to indicate the value of stock in an organization? A) Book value B) Yield C) Market value D) Dividend reinvestment E) Time value of money Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 17.1: Explain the concept of the time value of money and the principle of compound growth, and discuss the characteristics of common stock. 13) Which of the following is a payment made to shareholders based on the number of shares held, and paid out of the company's earnings? A) Capital B) Investments C) Blue-chips D) Dividends E) Compound growth Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 17.1: Explain the concept of the time value of money and the principle of compound growth, and discuss the characteristics of common stock. 14) Because of the uncertainties involved in stock prices, investment professionals believe dayto-day prices to be a generally poor indicator of any stock's real value. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 17.1: Explain the concept of the time value of money and the principle of compound growth, and discuss the characteristics of common stock. 15) Dividend payments are optional and variable. The corporation's CEO decides whether and when a dividend will be paid, as well as the amount that is best for the future of the company's employees. 4 Copyright © 2022 Pearson Education, Inc.
Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.1: Explain the concept of the time value of money and the principle of compound growth, and discuss the characteristics of common stock. 16) According to the Rule of 72, the higher the interested earned on an investment, the sooner you will double your money. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.1: Explain the concept of the time value of money and the principle of compound growth, and discuss the characteristics of common stock. 17) Companies who offer stock might use profits for expansion instead of offering dividends. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.1: Explain the concept of the time value of money and the principle of compound growth, and discuss the characteristics of common stock. 18) The market value of a stock is determined based on owner's equity divided by the number of shares owned by all shareholders. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.1: Explain the concept of the time value of money and the principle of compound growth, and discuss the characteristics of common stock. 19) Uncertainties in the market can quickly affect a stock's value, even the value of what are considered to be blue-chip stocks. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.1: Explain the concept of the time value of money and the principle of compound growth, and discuss the characteristics of common stock. 20) Discuss the role of dividends for shareholders and organizations. Answer: A dividend is a payment to shareholders, on a per-share basis, from the company’s earnings. Dividend payments are optional and variable. The corporation’s board of directors decides whether and when a dividend will be paid, as well as the amount that is best for the future of the company and its shareholders. Many companies distribute be-tween 30 and 70 5 Copyright © 2022 Pearson Education, Inc.
percent of their profits to shareholders. The so-called blue-chip stocks, those issued by the strongest, well-established, financially sound and respected firms have historically provided investors steady income through consistent dividend payouts. However, some firms, especially fast-growing companies, do not pay dividends. Instead, they use cash earnings for expanding the company so that future earnings can grow even faster. What’s more, any company can have a bad year and decide to reduce or omit dividend payments to stockholders. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.1: Explain the concept of the time value of money and the principle of compound growth, and discuss the characteristics of common stock. 21) Explain the principle of compound growth. Answer: Compound growth is the compounding of interest paid to the investor over given time periods. With each additional time period, interest payments accumulate, are capitalized, and earn more interest, thus multiplying the earning capacity of the investment. The principle of compound growth is the basis for the time value of money. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 17.1: Explain the concept of the time value of money and the principle of compound growth, and discuss the characteristics of common stock. 22) Explain the Rule of 72. Answer: The Rule of 72 is used to figure out how long it takes to double an investment. You can find the number of years needed to double your money by dividing the annual interest rate (in percent) into 72. The Rule of 72 can also calculate how much interest you must get if you want to double your money in a given number of years. The Rule of 72 lesson for the investor is clear: seek higher interest rates because money will double more frequently. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 17.1: Explain the concept of the time value of money and the principle of compound growth, and discuss the characteristics of common stock. 23) Differentiate between market value and book value. Answer: Market value is the current price of a share in the stock market and reflects the amount that buyers are willing to pay for a share of the company's stock. Book value for a share of common stock is determined as the firm's owners' equity (from the balance sheet) divided by the number of common shares owned by all shareholders. Book value is used as a comparison indicator because the market value for successful companies is usually greater than its book value. When market price falls to near book value, some profit-seeking investors buy the stock on the principle that it is underpriced and will possibly increase in the future. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 17.1: Explain the concept of the time value of money and the principle of compound 6 Copyright © 2022 Pearson Education, Inc.
growth, and discuss the characteristics of common stock. 24) Which of the following terms refers to a bundling of stocks, bonds, and other securities? A) Blue-chips B) Mutual funds C) Exchanges D) Commodities E) Dividends Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 17.2: Identify reasons for investing and the investment opportunities offered by mutual funds and exchange-traded funds. 25) To avoid paying a commission on an investment, what type of fund might an investor choose? A) Blue-chip stock B) Mutual funds C) No-load funds D) Common stock E) Load funds Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.2: Identify reasons for investing and the investment opportunities offered by mutual funds and exchange-traded funds. 26) Investments such as money market mutual funds offer what advantage to investors? A) Higher dividends B) Growth that matches the S&P 500 C) Guaranteed market appreciation D) Aggressive growth E) Safety and stability Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 17.2: Identify reasons for investing and the investment opportunities offered by mutual funds and exchange-traded funds. 27) Which type of investment would preserve capital investment but seek capital appreciation? A) Blue-chip stock B) Balanced funds C) Aggressive growth funds D) No-load funds 7 Copyright © 2022 Pearson Education, Inc.
E) Mutual funds Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 17.2: Identify reasons for investing and the investment opportunities offered by mutual funds and exchange-traded funds. 28) Which type of investment will sacrifice current income potential for long-term returns? A) Blue-chip stock B) Balanced funds C) Aggressive growth funds D) No-load funds E) Mutual funds Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 17.2: Identify reasons for investing and the investment opportunities offered by mutual funds and exchange-traded funds. 29) What is the advantage of exchange-traded funds (ETFs) over mutual funds? A) They can be traded throughout the day like a stock. B) The cost of the fund management is passed on to the holder. C) They do not require the services of a broker to complete a transaction. D) They allow for less frequent trading with lower overall transaction fees. E) They regularly out-perform mutual funds. Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 17.2: Identify reasons for investing and the investment opportunities offered by mutual funds and exchange-traded funds. 30) When an investor wants to enter the market with a minimum amount of investment, what type of opportunities would offer them ease of entry and low operating expenses? A) Securities B) Bonds C) Blue-chip stock D) Exchange-traded funds E) Mutual funds Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 17.2: Identify reasons for investing and the investment opportunities offered by mutual funds and exchange-traded funds. 8 Copyright © 2022 Pearson Education, Inc.
31) In which of the following type of mutual funds are investors charged a sales commission when they buy in or sell out? A) No-load B) Blue chip C) Aggressive growth D) Load E) Exchange-traded Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 17.2: Identify reasons for investing and the investment opportunities offered by mutual funds and exchange-traded funds. 32) When an investor wants stability and safety in their investment, which type of investments should they consider? A) Corporate bonds B) Common stock C) Exchange-traded D) U.S. government bonds E) Growth funds Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 17.2: Identify reasons for investing and the investment opportunities offered by mutual funds and exchange-traded funds. 33) Which of the following allows investors to time transactions during the day to buy or sell when the market reaches a desired price? A) Mutual funds B) Securities markets C) Stock exchange D) Intraday trading E) Discount brokerages Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 17.2: Identify reasons for investing and the investment opportunities offered by mutual funds and exchange-traded funds. 34) An exchange-traded fund (ETF) is a bundle of stocks (or bonds) that are in an index that tracks the overall movement of a market. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept 9 Copyright © 2022 Pearson Education, Inc.
LO: 17.2: Identify reasons for investing and the investment opportunities offered by mutual funds and exchange-traded funds. 35) Mutual funds tend to outperform the market by as much as 80 percent annually. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 17.2: Identify reasons for investing and the investment opportunities offered by mutual funds and exchange-traded funds. 36) An advantage to exchange-traded funds is the lower annual operating expenses. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 17.2: Identify reasons for investing and the investment opportunities offered by mutual funds and exchange-traded funds. 37) What are the three most common objectives for investing. Answer: Three of the most common objectives are (1) financial stability, (2) conservative growth, and (3) aggressive growth. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 17.2: Identify reasons for investing and the investment opportunities offered by mutual funds and exchange-traded funds. 38) Describe the three areas of advantage offered by exchange-traded funds. Answer: ETFs offer three areas of advantage over mutual funds. First, they can be traded throughout the day like a stock, they have low operating expenses, and they do not require high initial investments. Because they are traded on stock exchanges (hence, “exchange traded”), ETFs can be bought and sold—priced continuously—any time throughout the day. Second, whereas many mutual funds pass the costs of expensive active management on to shareholders, an ETF is bound by a rule that specifies what stocks will be purchased and when; once the rule is established, little or no active human decisions are involved. Finally, unlike mutual funds, ETFs require no minimum investment, meaning they offer ease of entry for investors getting started without much money. However, because ETFs must be bought and sold through a broker, they require payment of a brokerage commission (transaction fees). Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 17.2: Identify reasons for investing and the investment opportunities offered by mutual funds and exchange-traded funds. 39) Explain what exchange-traded funds are and how they are tracked. Answer: As with an index mutual fund, an exchange-traded fund (ETF) is a bundle of stocks (or 10 Copyright © 2022 Pearson Education, Inc.
bonds) that are in an index that tracks the overall movement of a market; unlike a mutual fund, however, an ETF can be traded like a stock. Each share of an ETF rises and falls as market prices change continuously for the market being tracked. Because they are traded on stock exchanges (hence, exchange traded), ETFs can be bought and sold—priced continuously—any time throughout the day. Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 17.2: Identify reasons for investing and the investment opportunities offered by mutual funds and exchange-traded funds. 40) Which is the oldest and most widely cited U.S. stock market index? A) Standard & Poor's Composite Index of 500 Stocks B) The NYSE index C) Dow Jones Industrial Average D) Moody's Stock List E) The NASDAQ Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 41) New stocks and bonds are sold in what market? A) The New York Stock Exchange B) Secondary securities market C) Primary securities market D) Electronic Communication network E) Investment banking Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 42) Which of the following is the federal government agency that regulates U.S. securities markets? A) New York Stock Exchange B) Federal Reserve C) Commerce Department D) Securities and Exchange Commission E) Treasury Department Answer: D Difficulty: Moderate AACSB: Application of knowledge 11 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Concept LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 43) Which of the following is an organization of individuals coordinated to provide an institutional setting in which stock can be bought and sold? A) Stock exchange B) Brokerage houses C) Investment banks D) Over-the-counter market E) Mutual funds Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 44) Which of the following is a basis for a firm to be listed on the New York Stock Exchange? A) Headquarters in New York B) Total value of outstanding stock C) Industry in which the company operates D) Type of stock E) Global operations Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 45) Which of the following receives and executes buy-and-sell orders for other people in return for commissions? A) Stock exchanges B) Stock brokers C) Investment banks D) Stock agents E) Savings banks Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 46) Which of the following is a summary of price trends in a specific industry and/or the stock market as a whole? 12 Copyright © 2022 Pearson Education, Inc.
A) Investment index B) Average index C) Dow Jones Industrial Average D) Market index E) Prospectus Answer: D Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 47) Which of the following is a function performed by an investment bank? A) Handling a client's portfolio in the secondary market B) Establishing relationships for a client with a commercial bank C) Underwriting purchases of stocks and bonds D) Arranging travel abroad for purchasers of foreign currencies E) Providing insurance services for clients Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 48) Which of the following is considered by many to be the BEST single indicator of the U.S. equities market? A) NASDAQ Composite B) Russell 2000 C) Dow Jones Industrial Average D) Standard & Poor's Composite Index E) New York Stock Exchange Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 49) Which stock exchange list domestic and global firms, and has a higher proportion of technology companies, allowing for a lower representation of sectors such as financial, consumer products, and industrials. A) The Dow Jones Industrial Average B) The New York Stock Exchange (NYSE) C) The NASDAQ D) The S&P 500 E) The Russell 2000 13 Copyright © 2022 Pearson Education, Inc.
Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 50) Which of the following allows after-hours trading and protects traders' anonymity? A) National Association of Securities Dealers Automated Quotation (NASDAQ) B) New York Stock Exchange (NYSE) C) Electronic Communication Networks (ECNs) D) Standard & Poor's 500 E) Mutual funds Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 51) For investors who do not want investment advice and wish to avoid paying higher commissions, what is the best type of broker assistance firm? A) Mutual fund advisors B) Investment banks C) Stock broker D) Discount broker E) Full-service broker Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 52) Which of the following is indicative of a bull market? A) Stock prices that are averaging 20 percent off peak B) Rising stock prices for 12 months or more C) Falling stock prices for 6 months or more D) A spike in the value of the Dow Jones Industrial Average E) Investors who are motivated to sell stocks based on current value Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 14 Copyright © 2022 Pearson Education, Inc.
53) In which type of market would investors be motivated to sell because they feel prices will fall further? A) Bear market B) Blue-chip market C) Bull market D) Large cap market E) Composite market Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 54) Which of the following is tracked to determine if there is a bear or bull market? A) The Dow Jones Industrial Average B) Market indexes C) The value of blue-chip stocks D) Technology-based economies E) Exchange-traded funds Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 55) Which index focuses specifically on the smallest U.S. companies, based on market capitalization? A) S&P 500 B) Dow Jones Industrial Average C) NYSE D) Russell 2000 E) NASDAQ Composite Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 56) For which reason might an investor use a full-service broker? A) To gain specialized access to new stocks and investments not available through other means B) To gain access to research and industry analysis information C) To limit the amount they pay in commissions D) They don't have time to keep track of the latest market developments E) To take advantage of book-entry ownership of shares of stock 15 Copyright © 2022 Pearson Education, Inc.
Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 57) Which of the following would be responsible for advising companies on the timing and financial terms of new security issues? A) Mutual fund managers B) Secondary securities market advisors C) Stock exchanges D) Investment banks E) Full-service brokers Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 58) Which of the following is the most important difference between the traditional stock exchange, known as the trading floor, and the electronic market A) Use of electronic communication tools B) How buy and sell orders are recorded C) Which exchanges are represented D) Geographic location E) The fee for the buy and sell services performed Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 59) The largest stock exchange in the world is the Tokyo exchange. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 60) Unlike the Dow and the S&P 500, all NASDAQ-listed companies are included in the index for a total of some 3,100 firms. Answer: TRUE Difficulty: Moderate 16 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Application LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 61) Stocks are known as securities because they represent a secured interest in a company. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 62) Mutual funds are traded in securities markets. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 63) In a secondary securities market, new stocks and bonds are bought and sold by firms and governments. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 64) An investment bank is a financial institution that specializes in issuing and reselling new securities. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Analytical LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 65) A stock exchange is an organization of individuals coordinated to provide an institutional auction setting in which stocks can be bought and sold. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 17 Copyright © 2022 Pearson Education, Inc.
66) The New York Stock Exchange, the world's oldest electronic stock market, has orders gathered and executed exclusively on a computer network. Answer: FALSE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 67) Stock brokers earn commissions from the individuals and organizations for which they place orders. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 68) An investment bank operates in the secondary securities market. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 69) When an investment bank engages in underwriting, that investment bank is taking on risk in the process of launching new securities. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 70) The Russell 2000 Index focuses primarily on technology companies, small-company stocks, and has a smaller representation of sectors such as financial, consumer products, and industrials. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 71) Describe the services provided by a discount broker and why an investor would use one. Answer: As with many other products, brokerage assistance can be purchased either at discount or at full-service prices. Discount brokers offer well-informed individual investors who know 18 Copyright © 2022 Pearson Education, Inc.
what they want to buy or sell a fast, low-cost way to participate in the market. Some discount brokers charge no fees to buy or sell a U.S. stock listed on a major exchange. In other cases, though, fees may vary based on the number of trades executed and the value of those trades. Further, fees vary across different kinds of investment vehicles—stocks, bonds, and so forth. Price differences are obvious even among the discount brokers, but the highest discount price is well below the price of a full-service broker. Sales agents receive fees or salaries, not commissions. Unlike many full-service brokers, many discount brokers do not offer in-depth investment advice or person-to-person sales consultations. They do, however, offer automated online services, such as stock research, industry analysis, and screening for specific types of stocks Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 72) Describe the purpose of ECNs and the advantages of using this type of system. Answer: The SEC authorized the creation of electronic communication networks (ECNs) in 1998. These networks are electronic trading systems that bring buyers and sellers together outside traditional stock exchanges by automatically matching buy and sell orders at specified prices. ECNs gained rapid popularity because the trading procedures are fast and efficient, often lowering transaction costs per share to mere pennies. They also allow after-hours trading (after traditional markets have closed for the day) and protect traders’ anonymity. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 73) Describe the services provided by investment banks. Answer: Investment banks provide three important services: (1) They advise companies on the timing and financial terms of new issues; (2) by underwriting new securities, they bear some of the risk of issuing them; and (3) they create the distribution networks for moving new securities through groups of other banks and brokers into the hands of individual investors. An investment bank has traditionally been a financial institution that specializes in issuing and reselling new securities. Following the financial collapse of 2008, major investment banks became bank holding companies, instead they have continued to provide the three services identified in the answer. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 74) Describe the differences between primary and secondary securities markets. Answer: In primary securities markets, businesses and governments buy new stocks and bonds, a process often handled by an investment bank. The primary securities markets also offer private placements or new securities sold to a single buyer or small group of buyers. Secondary 19 Copyright © 2022 Pearson Education, Inc.
securities markets are where investors buy and sell existing stocks and bonds. The trading in the secondary securities market is handled by stock exchanges and by online trading with electronic communication networks. These differences are described in the chapter's definitions of these markets. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 75) More Americans are investing in the stock market through online trading. Explain the value of online trading. Answer: The popularity of online trading stems from convenient access to the Internet, fast nononsense transactions, and the opportunity for investors to manage their own investments while paying low fees for trading. Online investors buy into and sell out of the stocks of thousands of companies daily. Consequently, keeping track of who owns what at any given time has become a monumental burden. Relief has come from book-entry ownership. Historically, shares of stock have been issued as physical paper certificates. Now they are simply recorded in the companies' books, thereby eliminating the costs of storing, exchanging, and replacing certificates. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 17.3: Describe the role of securities markets and identify the major stock exchanges and stock markets. 76) What is the term for buying several different kinds of investments rather than just one? A) Spreading B) Shorting C) Margin buying D) Diversification E) Management Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 17.4: Describe the risk-return relationship and discuss the use of diversification and asset allocation for investments. 77) What is the term for the proportion of funds invested in each of several investment alternatives? A)Collateral B) Portfolio C) Working capital D) Asset allocation E) Diversification Answer: D Difficulty: Easy 20 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Concept LO: 17.4: Describe the risk-return relationship and discuss the use of diversification and asset allocation for investments. 78) Which of the following is figured by dividing the yearly dollar amount of dividend income by the investment's current market value? A) Bond yield B) Current dividend yield C) Debenture D) Trading volume E) Earnings per share Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 17.4: Describe the risk-return relationship and discuss the use of diversification and asset allocation for investments. 79) The profit realized when the market value of an investment increases is known as which of the following? A) Capital gains B) Asset allocation C) Diversification D) Price appreciation E) Profiteering Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 17.4: Describe the risk-return relationship and discuss the use of diversification and asset allocation for investments. 80) When do investors expect a higher rate of return on their investments? A) When there is greater risk B) When the investment requires less upfront capital C) When the investment is stable D) When there is a short time commitment E) When the investment is for a larger share of the offering Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 17.4: Describe the risk-return relationship and discuss the use of diversification and asset allocation for investments. 81) What is the increase in the dollar value of an investment, at two points in time, known as? 21 Copyright © 2022 Pearson Education, Inc.
A) Dividend payout B) Total return C) Interest yield D) Capital gain E) Price appreciation Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 17.4: Describe the risk-return relationship and discuss the use of diversification and asset allocation for investments. 82) Why should an investor consider diversification and asset allocation? A) To offset capital gains B) To achieve desired risk-return balance C) To increase total returns D) To achieve higher dividend yields E) To improve price-appreciation values Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 17.4: Describe the risk-return relationship and discuss the use of diversification and asset allocation for investments. 83) What is the proportion of investments in each investment alternative referred to as? A) Portfolio B) Dividend yield C) Asset allocation D) Risk-reward relationship E) Diversification Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 17.4: Describe the risk-return relationship and discuss the use of diversification and asset allocation for investments. 84) What type of investment offers low returns, but is insured by the U.S. government? A) Common stock B) Mutual funds C) Exchange-traded funds D) Treasury bills E) Securities Answer: D Difficulty: Moderate AACSB: Application of knowledge 22 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Application LO: 17.4: Describe the risk-return relationship and discuss the use of diversification and asset allocation for investments. 85) Which type of investment return depends on whether the investment is increasing or decreasing in dollar value? A) Total return B) Diversification C) Dividends D) Risk-return ratio E) Price appreciation Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.4: Describe the risk-return relationship and discuss the use of diversification and asset allocation for investments. 86) Which of the following is included when establishing an investment portfolio? A) Asset allocation B) Degree of acceptable risk C) Risk-return strategy D) Collateral E) Expected annual percentage rate Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.4: Describe the risk-return relationship and discuss the use of diversification and asset allocation for investments. 87) Which of the following is the sum of a portfolio's capital gain and dividend yield? A) Asset allocation B) Total financial return C) Security D) Degree of risk-reward E) Diversification Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.4: Describe the risk-return relationship and discuss the use of diversification and asset allocation for investments. 88) Aggressive growth funds are designed for investors who can accept the risk of loss inherent in common stock investing with severe price fluctuations, but also the potential for superior returns over time. 23 Copyright © 2022 Pearson Education, Inc.
Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Critical Thinking LO: 17.4: Describe the risk-return relationship and discuss the use of diversification and asset allocation for investments. 89) An investment's current dividend yield plus its capital gain rate is known as its total return. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 17.4: Describe the risk-return relationship and discuss the use of diversification and asset allocation for investments. 90) A portfolio represents the proportion of funds invested in each of the investment alternatives. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 17.4: Describe the risk-return relationship and discuss the use of diversification and asset allocation for investments. 91) Long-term investments tend to be less risky than short-term investments. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 17.4: Describe the risk-return relationship and discuss the use of diversification and asset allocation for investments. 92) Portfolio diversification is the process of allocating a predetermined portion of fund invested into each investment opportunity. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 17.4: Describe the risk-return relationship and discuss the use of diversification and asset allocation for investments. 93) Describe the risk-return relationship. Answer: Individual investors have different motivations and personal preferences for safety versus risk. That is why, for example, some individuals and firms invest in stocks, while others invest only in bonds. Each type of investment, then, has a risk–return (risk–reward) relationship: Safer investments tend to offer lower returns, and riskier investments tend to offer higher returns (rewards). Difficulty: Moderate 24 Copyright © 2022 Pearson Education, Inc.
AACSB: Application of knowledge Quest. Category: Concept LO: 17.4: Describe the risk-return relationship and discuss the use of diversification and asset allocation for investments. 94) What do investors look at when evaluating potential investments? Answer: In evaluating potential investments, investors look at returns from dividends (or from interest), returns from price appreciation, and total return. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 17.4: Describe the risk-return relationship and discuss the use of diversification and asset allocation for investments. 95) Explain how dividend yield and interest dividend yield are computed. Answer: The rate of return from dividends paid to shareholders is commonly referred to as the current dividend yield (or, in the case of interest from a loan, the current interest yield) and is calculated by dividing the yearly dollar amount of dividend income by the investment’s current market value Difficulty: Difficult AACSB: Application of knowledge Quest. Category: Application LO: 17.4: Describe the risk-return relationship and discuss the use of diversification and asset allocation for investments. 96) What are low grade bonds usually called? A) Bankruptcy B) Default bonds C) Junk bonds D) Corporate bonds E) Grade B bonds Answer: C Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 97) What is the formula for measuring a firm's working capital? A) Current assets = working capital /current liabilities B) Working capital = current assets - current liabilities C) Current liabilities = current assets + working capital D) Working capital = current assets × current liabilities E) Current liabilities = current assets / working capital Answer: B Difficulty: Easy AACSB: Application of knowledge 25 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Analytical LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 98) Which of the following is a formal pledge obligating the issuer to pay interest periodically and repay the principal at maturity (a preset future date) to the lender? A) Commercial bank loan B) Corporate bond C) Mutual fund D) Bond indenture E) Prospectus Answer: B Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 99) What type of loan is guaranteed by collateral? A) Unsecured loan B) Venture capital loan C) Angel investor loan D) Secured loan E) Corporate bond Answer: D Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 100) What is the advantage to a small business when planning for shortfalls in cash flow? A) Financial resources can be saved in a savings account until needed. B) Banks are more likely to offer loans if they know when the money will be needed. C) Loans can be obtained in advance and minimize their costs. D) Lower interest loans can be sought for the needed time frame. E) Small businesses will appear more professional, resulting in favorable banking relationships. Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 101) What can an angel investor offer to small businesses when the small business doesn't have enough history to get a loan from a commercial bank? A) A credit history B) Venture capital 26 Copyright © 2022 Pearson Education, Inc.
C) Stock options D) Financial oversight E) Bonds Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 102) How are federal and state projects, such as roads and schools, typically financed? A) Municipal bonds B) Common stock C) Angel investors D) Corporate bonds E) TARP loans Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 103) What is the legal document that identifies a borrower's obligation and the financial returns to lenders when issuing corporate bonds? A) Bondholder's claim B) Risk claim analysis C) Initial public offering D) Mortgage-backed security E) Bond indenture Answer: E Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 104) What is the result of a borrower who fails to make payments to the lender when due? A) Bankruptcy B) Default C) Risk ratings D) Bondholder's claim E) Bond indenture Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept 27 Copyright © 2022 Pearson Education, Inc.
LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 105) According to rating services such as Moody's, what type of rating would a bond have if it was one of the safest investments possible, but produced lower returns? A) AAA B) BBB C) Caa D) CCC E) D Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 106) What type of loan allows a borrower to maintain a compensating balance at the bank instead of putting up collateral? A) Unsecured loan B) Venture capital loan C) Angel investor loan D) Secured loan E) Corporate bond Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 107) How can an investor request the courts to enforce a bond's terms of payment? A) File for bankruptcy B) Ask for an improved risk rating on the bond C) File a bondholders' claim D) Have the bond converted to stock E) Have the bond converted to a mortgage-backed security Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 108) When can a bondholder file a bondholders' claim? A) When purchasing an initial issue of the bond B) When buying a bond from a brokerage service 28 Copyright © 2022 Pearson Education, Inc.
C) When the borrower is filing for bankruptcy D) When selling a bond before maturity E) When the borrower fails to make a payment that is due Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 109) When a new bond is issued, when does the bond's par value have to be repaid? A) When the company files for bankruptcy B) Before the company goes into default C) On the maturity date D) On the issue date E) When the company makes enough profit to cover the value of the bond Answer: C Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 110) How is the risk involved in purchasing bonds affected by the bond's maturity date? A) The sooner the maturity date, the greater the rate of return is on the bond. B) The further the maturity date, the less likely a bondholders' claim will be filed. C) The sooner the maturity date, the lower the initial offering price of the bond. D) The further the maturity date, the greater the chance for unforeseen circumstances that affect the bond. E) The sooner the maturity date, the greater the chance for significant market changes that affect the bond. Answer: D Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 111) How does an issuer of mortgage-backed security pay off debt obligations? A) Through the sale of mortgages to consumers B) Through an increase in interest rates on mortgages C) Through the assets of the lending institutions D) Through the closing of a mortgage loan E) Through the influx of cash from mortgage payments Answer: E Difficulty: Moderate AACSB: Application of knowledge 29 Copyright © 2022 Pearson Education, Inc.
Quest. Category: Application LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 112) What is a mortgage-backed security? A) A bundled group of home mortgages that form a debt obligation B) A bundled group of investments with AAA credit-ratings C) A bundled group of bonds D) A bundled group of stocks E) A bundled group of loans made to risk assessment firms Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 113) In a secured loan, what is the amount of money that is loaned and must be repaid? A) Principle B) Interest C) Annual percentage rate D) Collateral E) Mortgage Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 114) Where can a small business with no credit history go to obtain a guaranteed loan? A) Angel investor B) Small Business Administration C) Banks D) Stock market E) Corporate bond market Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 115) In which capital producing method does the lender have no claim to ownership of the company and does not receive dividends? A) Blue-chip stocks B) Angel investing C) Corporate bonds 30 Copyright © 2022 Pearson Education, Inc.
D) Unsecured stocks E) Venture capital Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 116) Municipal bonds may be issued by federal, state, or local governments. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 117) A bond is said to be in default if the borrower fails to make payment when due to lenders. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Application LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 118) Bankruptcy is the court-granted permission not to pay some or all debts. Answer: TRUE Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 119) Most small business entrepreneurs understand and take advantage of establishing bank credit early on. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 120) Angle investors often require the sale of bonds to raise capital. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept 31 Copyright © 2022 Pearson Education, Inc.
LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 121) Describe how the Small Business Administration can help a new business obtain a longerterm loan. Answer: Obtaining longer-term loans is more difficult for new businesses than for established companies. With unproven repayment ability, start-up firms can expect to pay higher interest rates than older firms. If a new enterprise displays evidence of sound financial planning, however, the U.S. Small Business Administration may support a guaranteed loan. The presentation of a sound business plan demonstrates to potential lenders that the borrower may be a good credit risk. The business plan is a document that tells potential lenders why the money is needed, the amount, how the money will be used to improve the company, and when it will be paid back. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 122) When are corporate bonds attractive to a firm? Answer: Bonds are attractive when firms need large amounts for long periods of time. A corporate bond is a formal pledge (an IOU) obligating the issuer to pay interest periodically and repay the principal at maturity (a preset future date) to the lender. Interest payments and repayment of principal are financial obligations; payments to bondholders have priority over dividend payments to stockholders in cases of financial distress. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 123) Explain the difference between angel investors and venture capital. Answer: Angel investors help many firms grow rapidly by providing what is known as venture capital-private funds from wealthy individuals or companies that seek investment opportunities in new growth companies. In most cases, growth companies turn to angel investors and venture capital because they have not yet built enough credit history to get a loan from commercial banks or other lending institutions. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 124) When giving an unsecured loan, what might a bank require? Answer: The bank requires the borrower to maintain a compensating balance, and the borrower must keep a portion of the loan amount on deposit with the bank in a non-interest-bearing account. Firms with bad credit scores typically cannot get unsecured loans. Because access to 32 Copyright © 2022 Pearson Education, Inc.
such loans requires a good credit history, many firms establish a relationship with a commercial bank and over time build a good credit record by repaying loan principal and interest on time. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 125) What is an angel investor? Answer: Outside individuals who provide additional capital for growth to successfully launched businesses are called angel investors. In return for their investment, angel investors typically expect a sizable piece of ownership in the company as well as a formal say in how the company is run. Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 126) What do angel investors receive in return for their investment? Answer: Angel investors typically expect a sizable piece of ownership in the company (up to 50 percent of its equity), They may also want a formal say in how the company is run. If the firm is bought by a larger company or if it sells its stock in a public offering, the angel investor may receive additional payments. Difficulty: Easy AACSB: Analytical thinking Quest. Category: Application LO: 17.5: Describe the various ways that firms raise capital and identify the pros and cons of each method. 127) What is the term for a division of stock that gives stockholders a greater number of shares but does not change each individual's proportionate share of ownership? A) Stock dividend B) Stock split C) Stock yield D) Stock warrant E) Stock exchange Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 17.6: Identify the reasons a company might make an initial public offering of its stock, explain how stock value is determined, and discuss the significance of market capitalization. 128) What is the first sale of a company's stock to the general public called? A) IPO B) Common offering 33 Copyright © 2022 Pearson Education, Inc.
C) Par value D) Venture capital E) Portfolio Answer: A Difficulty: Easy AACSB: Application of knowledge Quest. Category: Concept LO: 17.6: Identify the reasons a company might make an initial public offering of its stock, explain how stock value is determined, and discuss the significance of market capitalization. 129) When issuing shares of stock, what is being given to stock holders in exchange for their investment in the organization? A) Dividends B) Voting rights C) Increased par value D) Tax advantages E) Long-term growth on investments Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 17.6: Identify the reasons a company might make an initial public offering of its stock, explain how stock value is determined, and discuss the significance of market capitalization. 130) When is a company susceptible to a hostile takeover? A) When a bull market is in effect B) When stock prices are high, but assets are decreasing C) When stocks are low priced, but assets have high value D) When the international market is in recession E) When angel investors demand repayment of their venture capital Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 17.6: Identify the reasons a company might make an initial public offering of its stock, explain how stock value is determined, and discuss the significance of market capitalization. 131) When a security bought through an IPO is resold, where does the gain or loss go? A) The investor who bought the security B) The bank that financed the IPO C) Stakeholders with vested interests in the company D) The investor who sold the security E) The company Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application 34 Copyright © 2022 Pearson Education, Inc.
LO: 17.6: Identify the reasons a company might make an initial public offering of its stock, explain how stock value is determined, and discuss the significance of market capitalization. 132) Which of the following allows a company to generate long-term funding from within the organization? A) Long-term loans B) Equity financing C) Debt financing D) Market capitalization E) Stock splits Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 17.6: Identify the reasons a company might make an initial public offering of its stock, explain how stock value is determined, and discuss the significance of market capitalization. 133) What is determined when the value of outstanding shares is multiplied by the number of outstanding shares? A) Market capitalization B) Stock split value C) Earnings per dollar of investment D) Dividend value E) Earnings per share Answer: A Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 17.6: Identify the reasons a company might make an initial public offering of its stock, explain how stock value is determined, and discuss the significance of market capitalization. 134) How does a corporate raider attempt to take control of a company and its assets? A) Buying shares of stock on the open market B) Joining the Board of Directors C) Attend the annual shareholders' meeting to solicit support D) Increase the value of shares on the market prompting a large sell off E) Buying stock in competitor's companies Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Analytical LO: 17.6: Identify the reasons a company might make an initial public offering of its stock, explain how stock value is determined, and discuss the significance of market capitalization. 135) What is the outcome when a corporate raider takes over an organization? A) The value of assets decreases. B) Assets are sold off at a profit. C) The value of the stock increases. 35 Copyright © 2022 Pearson Education, Inc.
D) The company can be reorganized into a stronger, more productive organization. E) A hostile takeover is avoided. Answer: B Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Analytical LO: 17.6: Identify the reasons a company might make an initial public offering of its stock, explain how stock value is determined, and discuss the significance of market capitalization. 136) Where can an investor learn information about a firm's proposed security offering and the issuing company? A) The Russell 2000 Index B) The annual report C) The prospectus D) The SEC E) The retained earnings statement Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 17.6: Identify the reasons a company might make an initial public offering of its stock, explain how stock value is determined, and discuss the significance of market capitalization. 137) Which of the following describe the net profits kept for the firm's use rather than paid out in dividends to stockholders? A) Equity financing B) Market capitalization C) Retained earnings D) Return on investment E) Capital Answer: C Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 17.6: Identify the reasons a company might make an initial public offering of its stock, explain how stock value is determined, and discuss the significance of market capitalization. 138) When might a firm take out a long-term loan instead of issuing stock or bonds? A) When they has a longer-time frame in which to apply for the loan. B) When there are few lenders with large sums of money willing to invest C) When they wish to avoid restrictions on the organization or the loan repayment D) When they don't want to share their reasons for acquiring the loan. E) When they have long term assets to use as collateral Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application 36 Copyright © 2022 Pearson Education, Inc.
LO: 17.6: Identify the reasons a company might make an initial public offering of its stock, explain how stock value is determined, and discuss the significance of market capitalization. 139) Which of the following determines the price for a share of a company's stock? A) Potential for a stock split B) Insider trading C) Activities of competitors D) Portfolio asset allocations E) Supply and demand Answer: E Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 17.6: Identify the reasons a company might make an initial public offering of its stock, explain how stock value is determined, and discuss the significance of market capitalization. 140) Initial public offerings (IPOs) are the first sale of a company's stock to the general public and are a major source of funds that fuel continued growth for many firms. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Concept LO: 17.6: Identify the reasons a company might make an initial public offering of its stock, explain how stock value is determined, and discuss the significance of market capitalization. 141) The investment industry categorizes firms according to size of capitalization. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.6: Identify the reasons a company might make an initial public offering of its stock, explain how stock value is determined, and discuss the significance of market capitalization. 142) In case of financial distress, the firm would pay its stockholders before paying its bondholders. Answer: FALSE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.6: Identify the reasons a company might make an initial public offering of its stock, explain how stock value is determined, and discuss the significance of market capitalization. 143) A stock split is a type of dividend paid to shareholders. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application 37 Copyright © 2022 Pearson Education, Inc.
LO: 17.6: Identify the reasons a company might make an initial public offering of its stock, explain how stock value is determined, and discuss the significance of market capitalization. 144) Firms can finance their capital needs though debt and equity financing. Answer: TRUE Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.6: Identify the reasons a company might make an initial public offering of its stock, explain how stock value is determined, and discuss the significance of market capitalization. 145) Describe why common stock can be more expensive than bond interest. Answer: The use of equity financing by means of common stock can be expensive because paying dividends is more expensive than paying bond interest. Interest paid to bondholders is a business expense and therefore a tax deduction for the firm. Payments of cash dividends to shareholders are not tax deductible. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.6: Identify the reasons a company might make an initial public offering of its stock, explain how stock value is determined, and discuss the significance of market capitalization. 146) Discuss the advantages and disadvantages of issuing corporate bonds. Answer: Bonds are attractive when firms need large amounts for long periods of time. The issuing company gains access to large numbers of lenders through nationwide bond markets. However, bonds entail high administrative and selling costs. They may also require stiff interest payments, especially if the issuing company has a poor credit rating. Bonds also impose binding obligations on the firm, in many cases for up to 30 years, to pay bondholders a stipulated sum of annual or semiannual interest, even in times of financial distress. If the company fails to make a bond payment, it goes into default. Difficulty: Moderate AACSB: Application of knowledge Quest. Category: Application LO: 17.6: Identify the reasons a company might make an initial public offering of its stock, explain how stock value is determined, and discuss the significance of market capitalization. 147) Discuss how a stock split works if a company has 100,000 common shares outstanding that are trading at $100 per share. Answer: If a company has 100,000 common shares outstanding that are trading at $100 per share, but the company wants it priced in the $20 to $80 range, it can declare a 2-for-1 stock split, meaning the company gives shareholders one additional share for each share they own. Now the company has 200,000 shares outstanding, but its financial performance has not changed, so the stock price immediately falls to $50 per share. However, every shareholder's investment value is unchanged. They previously owned one share at $100, and now they own two shares at $50 each. Corporations may use stock splits to lower the stock's price, believing it will attract a larger pool of investors. If the price gets too high, many investors can't afford to buy shares. Difficulty: Difficult 38 Copyright © 2022 Pearson Education, Inc.
AACSB: Analytical thinking Quest. Category: Analytical LO: 17.6: Identify the reasons a company might make an initial public offering of its stock, explain how stock value is determined, and discuss the significance of market capitalization. 148) Explain the difference between debt financing and equity financing. Answer: Firms can meet their capital needs through debt financing (from outside the firm) and equity financing (putting the owners' capital to work), Both outside sources and inside sources can be used; however, there are pros and cons to each. Although debt financing often has strong appeal, equity financing-looking inside the company for long-term funding-is sometimes preferable. Equity financing includes either issuing common stock or retaining the firm's earnings. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Critical Thinking LO: 17.6: Identify the reasons a company might make an initial public offering of its stock, explain how stock value is determined, and discuss the significance of market capitalization. 149) The use of special knowledge about a firm, which results in an unfair advantage or generates profit or other types of gain, is known as what? A) Equity financing B) Market capitalization C) Insider trading D) Prospectus information E) FINRA violation Answer: C Difficulty: Difficult AACSB: Analytical thinking Quest. Category: Concept LO: 17.7: Explain how securities markets are regulated. 150) Before the Securities and Exchange Commission allows a firm to issue a public offering of new securities, what must be filed? A) Incidents of insider trading B) A prospectus C) The firm's history of reinvesting retained earning D) A statement of equity financing to be used E) The firm's corporate bond rating Answer: B Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 17.7: Explain how securities markets are regulated.
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151) Which of the following is the enforcement agency that oversees a market's activities and the way securities are issued within that market? A) SEC B) FINRA C) Galleon group D) Prospectus E) Attorney general Answer: A Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Concept LO: 17.7: Explain how securities markets are regulated. 152) Established in 2003, this group protects U.S. investors by overseeing brokerage firms and securities representatives. A) The attorney general's office B) The SEC C) The Galleon group D) FINRA E) The prospectus evaluation committee Answer: D Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 17.7: Explain how securities markets are regulated. 153) Describe the mission of FINRA. Answer: Along with the SEC’s enforcement efforts, the stock exchanges and securities firms have adopted self-regulation by participating with the Financial Industry Regulatory Authority (FINRA) in detecting and stopping insider action and violations of other industry regulations. Established in 2003, FINRA’s mission is to protect U.S. investors by overseeing the nation’s brokerage firms and securities representatives. The major U.S. stock markets are under a contract that allows FINRA to regulate those markets by writing rules, examining securities firms, enforcing the rules, and enforcing federal securities laws as well. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 17.7: Explain how securities markets are regulated. 154) The SEC offers rewards to persons who provides information on those practicing insider trading. Answer: TRUE Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 17.7: Explain how securities markets are regulated. 155) Discuss the role of the SEC in monitoring and regulating the securities industry. 40 Copyright © 2022 Pearson Education, Inc.
Answer: The U.S. SEC is the regulation and enforcement agency that oversees the markets’ activities, including the ways securities are issued. The SEC was created in 1934 to prevent numerous abuses and questionable practices that contributed to the stock market crash of 1929. The SEC regulates the public offering of new securities by requiring that all companies file a prospectus before proposed offerings commence. To protect investors from fraudulent issues, a prospectus contains pertinent information about both the offered security and the issuing company. False statements in a prospectus are subject to criminal penalties. The U.S. government, along with various state agencies, plays a key role in monitoring and regulating the securities industry. Businesses cannot exist in the United States without the public’s trust and the public’s willingness to participate in business ownership and everyday transactions with companies. Regulation of the U.S. securities markets plays a vital role in maintaining the public’s trust in fair and open business ownership. Difficulty: Moderate AACSB: Analytical thinking Quest. Category: Application LO: 17.7: Explain how securities markets are regulated.
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