TEST BANK for Understanding Business 12th Edition Nickels Test Bank by ACADEMIAMILL

Understanding Business, 12e (Nickels) Bonus Chapter A Working within the Legal Environment 1) The executive branch of the government is responsible for overseeing the legal system. Answer: FALSE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) The U.S. court system is organized solely at the federal and state levels. Answer: FALSE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) Trial courts hear cases involving criminal and civil law. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

4) Criminal law defines crimes, establishes punishments, and includes payment for personal injury. Answer: FALSE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 5) Laws regulating marriage and the payment for personal injuries are part of our body of civil law. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) Laws regulating marriage and personal injury liability are part of our body of criminal law. Answer: FALSE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 7) Business law creates the legal framework for the enforcement of criminal statutes. Answer: FALSE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

8) Appellate courts hear the appeals of decisions made at the trial court level brought by the losing party in the case. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9) Businesses today prefer to have the government set the standards for acceptable behavior. Answer: FALSE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10) Business law refers to a body of regulations that, when enforced, provides a framework within which business may be conducted. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) Business law is enforceable by the courts. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

12) The government's involvement in governing the behavior of business people seems to be increasing. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 13) Statutory law refers to written legislation. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) Common law is the body of law established through legislative action by Congress. Answer: FALSE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) Common law is based on the precedent of earlier court decisions. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

16) The language used in statutory law often requires interpretation by the courts. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 17) Lower courts must abide by the precedents set by higher courts. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) Administrative agencies actually have a greater impact on businesses than courts do. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 19) Administrative agencies are given the power by Congress to pass rules and regulations within a specific area of authority. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

20) The Federal Trade Commission enforces laws and guidelines regarding unfair business practices. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 21) The Federal Trade Commission acts to stop false and deceptive advertising and labeling. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 22) Public utility commissions are federal agencies. Answer: FALSE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 23) Congress is responsible for passing legislation that is enforced by the judiciary. Answer: TRUE Explanation: The judiciary is the branch of our government chosen to oversee the legal system through the court system. Difficulty: 2 Medium Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

24) Congress prohibited discrimination against people with physical disabilities when they enacted the Americans with Disabilities Act. This is an example of common law. Answer: FALSE Explanation: Common law is the body of law that comes from decisions handed down by judges. Difficulty: 2 Medium Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 25) Decisions made by judges in previous cases are an important part of common law. Answer: TRUE Explanation: Common law is the body of law that comes from decisions handed down by judges. Precedents, or decisions made by judges in previous cases, guide judges in the handling of new cases. Difficulty: 2 Medium Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26) The Federal Trade Commission issues and interprets rules and regulations regarding business activities. The Federal Trade Commission is a governmental administrative agency. Answer: TRUE Explanation: An administrative agency is an institution created by Congress with delegated power to pass rules and regulations within its mandated area of authority. Difficulty: 2 Medium Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

27) Bigbux Bank recently changed its advertising campaign. It now announces the bank has the lowest bank fees in the country even though it has not done research to discover whether this is true. Business law is the framework within which a competitor could take Bigbux to court in the event its claims are not true. Answer: TRUE Explanation: Business law refers to rules, statutes, codes, and regulations that are established to provide a legal framework within which business may be conducted and that are enforceable by court action. Difficulty: 3 Hard Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 28) The St. Louis County Planning Commission is an example of a local administrative agency. It oversees land-use proposals and other long-range issues in St. Louis County, Missouri. Answer: TRUE Explanation: An administrative agency is a government organization with delegated power to create rules and regulations within their given area of authority. Difficulty: 3 Hard Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 29) A public utility commission sets rates that can be charged by various public utilities to prevent unfair pricing by regulated monopolies. These public utility commissions are examples of state administrative agencies. Answer: TRUE Explanation: An administrative agency is a federal or state institution created by Congress or state legislatures with delegated power to create rules and regulations within their given area of authority. Difficulty: 3 Hard Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 8 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

30) Lawsuits against the tobacco industry are examples of tort law. Answer: TRUE Difficulty: 1 Easy Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 31) Intentional and unintentional behavior that causes harm or injury is an example of a tort. Answer: TRUE Difficulty: 1 Easy Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32) An intentional tort is a willful act that results in injury. Answer: TRUE Difficulty: 1 Easy Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 33) Tort law involves criminal acts where victims can be awarded compensation. Answer: FALSE Difficulty: 1 Easy Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

34) Tort law includes product liability cases. Answer: TRUE Difficulty: 1 Easy Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) Negligence, in tort law, deals with behavior that causes intentional harm or injury. Answer: FALSE Difficulty: 1 Easy Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) The rule of strict product liability holds a firm liable for a defective product only if the firm knowingly placed a hazardous product on the market. Answer: FALSE Difficulty: 1 Easy Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 37) Companies that produced asbestos decades ago are still subject to the strict product liability provisions of federal tort law. Answer: TRUE Difficulty: 1 Easy Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

38) Producers of government-approved drugs and chemicals cannot be sued by individuals who develop side effects years later. Answer: FALSE Difficulty: 1 Easy Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39) The Class Action Fairness Act is a first step toward setting limits on the amount of damages for which companies are liable should their products harm consumers. Answer: TRUE Difficulty: 1 Easy Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 40) Toyota and General Motors have both been involved in major product liability cases. Answer: TRUE Difficulty: 1 Easy Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 41) A patient injured through the negligence of a health care provider can be awarded compensation through the tort law system. Answer: TRUE Explanation: Tort law relates to wrongful conduct that causes injury to another person's body, property, or reputation. Negligence involves an unintentional behavior that causes harm or injury. Difficulty: 2 Medium Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

42) If an automobile manufacturer unknowingly sells a defective product that causes an injury, the manufacturer is protected from product liability lawsuits. Answer: FALSE Explanation: Product liability is covered under tort law and holds a business liable for negligence in the production, design, sale, or use of products it markets. A company could be liable for damages caused by placing a product on the market with a defect, even if the company did not know of the defect at the time of sale. Difficulty: 2 Medium Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 43) McDonald's was the subject of a product liability suit charging that its food caused obesity, diabetes, and other health problems in children. Answer: TRUE Explanation: McDonald's faced a product liability suit (dismissed) claiming that its food caused obesity, diabetes, and other health problems in children. Some communities, however, have banned trans fats in food, regulated menu information, and eliminated toys in children's products like McDonald's Happy Meals. Difficulty: 2 Medium Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44) Because it is no longer used in construction today, National Asbestos Manufacturing cannot be sued for damages today that are caused by asbestos that may still remain in some buildings. Answer: FALSE Explanation: The rule of strict product liability, meaning liability without regard to fault, indicates that companies that produced lead-based paint could also be subjected to expensive legal cases even though lead paint has been banned in the U.S. for nearly three decades. Difficulty: 3 Hard Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

45) A patent protects an inventor's right to a product or process. Answer: TRUE Difficulty: 1 Easy Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 46) A patent gives inventors exclusive rights to their inventions for 20 years. Answer: TRUE Difficulty: 1 Easy Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 47) Patent owners are prohibited from selling or licensing their patent rights to others. Answer: FALSE Difficulty: 1 Easy Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 48) Submarine patents are primarily designed to generate large patent royalties for their owners. Answer: TRUE Difficulty: 1 Easy Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

49) Recent legislation encourages the use of submarine patents. Answer: FALSE Difficulty: 1 Easy Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 50) A copyright protects an individual's ownership rights to materials such as books, articles, photos, and cartoons, which they created. Answer: TRUE Difficulty: 1 Easy Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 51) If in the normal course of a job an employee creates a cartoon, the copyright belongs to the employer. Answer: TRUE Difficulty: 1 Easy Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 52) Copyrights are filed with the Library of Congress and involve large amounts of paperwork. Answer: FALSE Difficulty: 1 Easy Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

53) Copyrights can be passed on to the creator's heirs. Answer: TRUE Difficulty: 1 Easy Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 54) The holder of an exclusive copyright may charge a fee to anyone who wishes to use the copyrighted material. Answer: TRUE Difficulty: 1 Easy Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 55) A trademark gives exclusive legal protection to a name, symbol, or design that distinguishes the goods or services of one seller from those of competitors. Answer: TRUE Difficulty: 1 Easy Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 56) Unlike a patent, trademarks are not protected from infringement. Answer: FALSE Difficulty: 1 Easy Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

57) Trademarks generally belong to the owner forever, as long as they are properly registered and renewed every 10 years. Answer: TRUE Difficulty: 1 Easy Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 58) The Nike swoosh and the McDonald's golden arches are examples of corporate trademarks. Answer: TRUE Explanation: A trademark gives exclusive legal protection to a name, symbol, or design that identifies the goods or services from one seller and distinguishes them from those of other competitors. Difficulty: 2 Medium Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 59) Congratulations! You've just finished composing a song that will be the next big hit. Your next step is to apply for a patent through the U.S. Patent & Trademark Office. Answer: FALSE Explanation: A patent gives inventors exclusive rights to their inventions for 20 years. A copyright protects an individual's rights to materials such as books, articles, photos, cartoons, and songs. Difficulty: 3 Hard Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

60) Paul is a renowned nature photographer. Each of his works is copyrighted. This means that anyone can use his photos so long as they give Paul notice. Answer: FALSE Explanation: A copyright protects a creator's rights to materials such as books, articles, photos, paintings, and cartoons. They last for the lifetime of the author or artist, plus 70 years. Difficulty: 3 Hard Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 61) The Uniform Commercial Code establishes a standardized set of regulations for business transactions in all 50 states. Answer: TRUE Difficulty: 1 Easy Topic: The Uniform Commercial Code Learning Objective: A-04 Describe warranties and negotiable instruments as covered in the Uniform Commercial Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 62) Regulations covering sales, checks, bank deposits, and bills of lading are contained in the Uniform Commercial Code. Answer: TRUE Difficulty: 1 Easy Topic: The Uniform Commercial Code Learning Objective: A-04 Describe warranties and negotiable instruments as covered in the Uniform Commercial Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

63) The warranty you receive in the box with an iPad is an implied warranty. Answer: FALSE Difficulty: 1 Easy Topic: The Uniform Commercial Code Learning Objective: A-04 Describe warranties and negotiable instruments as covered in the Uniform Commercial Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 64) A warranty guarantees that the product sold will be acceptable for the purpose for which the buyer intends to use it. Answer: TRUE Difficulty: 1 Easy Topic: The Uniform Commercial Code Learning Objective: A-04 Describe warranties and negotiable instruments as covered in the Uniform Commercial Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 65) Batteries and tires sold with an express warranty provide the buyer with a guarantee regarding the life of the product. Answer: TRUE Difficulty: 1 Easy Topic: The Uniform Commercial Code Learning Objective: A-04 Describe warranties and negotiable instruments as covered in the Uniform Commercial Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 66) Implied warranties are guarantees legally imposed on the seller. Answer: TRUE Difficulty: 1 Easy Topic: The Uniform Commercial Code Learning Objective: A-04 Describe warranties and negotiable instruments as covered in the Uniform Commercial Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

67) A full warranty limits the defects or mechanical problems that are covered in a product. Answer: FALSE Difficulty: 1 Easy Topic: The Uniform Commercial Code Learning Objective: A-04 Describe warranties and negotiable instruments as covered in the Uniform Commercial Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 68) Negotiable instruments provide a conditional promise to pay a specified amount of money. Answer: FALSE Difficulty: 1 Easy Topic: The Uniform Commercial Code Learning Objective: A-04 Describe warranties and negotiable instruments as covered in the Uniform Commercial Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 69) A check is an example of a negotiable instrument. Answer: TRUE Difficulty: 1 Easy Topic: The Uniform Commercial Code Learning Objective: A-04 Describe warranties and negotiable instruments as covered in the Uniform Commercial Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 70) Negotiable instruments are forms of commercial paper. Answer: TRUE Difficulty: 1 Easy Topic: The Uniform Commercial Code Learning Objective: A-04 Describe warranties and negotiable instruments as covered in the Uniform Commercial Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

71) When a payee signs the back of a check the payee's signature is referred to as an endorsement. Answer: TRUE Difficulty: 1 Easy Topic: The Uniform Commercial Code Learning Objective: A-04 Describe warranties and negotiable instruments as covered in the Uniform Commercial Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 72) The offer of a 3-year or 36,000-mile warranty by a car dealer on a new vehicle is an example of an implied warranty. Answer: FALSE Explanation: Express warranties are specific representations by the seller and relied upon by the buyer of the goods. The warranty that is spelled out by the car dealer is thus an express warranty. Implied warranties are legally imposed on the seller. It is implied, for example, that the product will conform to the customary standards of the trade/industry in which it competes. Difficulty: 2 Medium Topic: The Uniform Commercial Code Learning Objective: A-04 Describe warranties and negotiable instruments as covered in the Uniform Commercial Code. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 73) The warranty you receive in the box with a toaster is an express warranty. Answer: TRUE Explanation: A warranty guarantees that the product sold will be acceptable for the purpose for which the buyer intends to use it. Express warranties are specific representations by the seller that buyers rely on regarding the goods they purchase. The warranty you receive in the box with a toaster is the express warranty. It spells out the seller's warranty agreement. Difficulty: 2 Medium Topic: The Uniform Commercial Code Learning Objective: A-04 Describe warranties and negotiable instruments as covered in the Uniform Commercial Code. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

74) When Fitness Fanatics, Inc. agrees to replace or repair your defective stationary bike at no charge to you, Fitness Fanatics is fulfilling a full warranty on your bike. Answer: TRUE Explanation: A full warranty requires a seller to replace or repair a product at no charge if the product is defective, whereas a limited warranty typically limits the defects or mechanical problems that are covered. Difficulty: 3 Hard Topic: The Uniform Commercial Code Learning Objective: A-04 Describe warranties and negotiable instruments as covered in the Uniform Commercial Code. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 75) When your younger brother signs the back of his paycheck and gives it to you in payment for money he owes you, he has endorsed the check, and you may deposit it in your checking account. Answer: TRUE Explanation: A paycheck is a negotiable instrument (a form of commercial paper) that is transferable among businesses and individuals and represents a promise to pay a specific amount. Your brother's signature on the back of the paycheck is referred to as an endorsement and payment on the check is transferred to you (or the bearer of the check) when he signs it. Difficulty: 3 Hard Topic: The Uniform Commercial Code Learning Objective: A-04 Describe warranties and negotiable instruments as covered in the Uniform Commercial Code. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 76) A contract is a legally enforceable agreement between two or more parties. Answer: TRUE Difficulty: 1 Easy Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

77) Contract law is a set of laws that covers sales laws and other commercial laws. Answer: FALSE Difficulty: 1 Easy Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 78) In order for a contract to be legal, mutual acceptance is achieved when one party is under duress. Answer: FALSE Difficulty: 1 Easy Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 79) Under contract law, duress means the presence of coercion through force or threat of force. Answer: TRUE Difficulty: 1 Easy Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 80) Under contract law, consideration means something of value. Answer: TRUE Difficulty: 1 Easy Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

81) If a contract is to be legally binding, both parties must give consideration. Answer: TRUE Difficulty: 1 Easy Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 82) In order to be legally binding, a contract must be a written agreement between two or more parties. Answer: FALSE Difficulty: 1 Easy Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 83) Under contract law, a 15-year-old may be a party to a contract. Answer: FALSE Difficulty: 1 Easy Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 84) Under contract law, an agreement for the sale of goods worth $50 or more must be in writing. Answer: FALSE Difficulty: 1 Easy Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

85) A breach of contract occurs when one party fails to follow the terms of the contract. Answer: TRUE Difficulty: 1 Easy Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 86) Under contract law, damages are the monetary settlements awarded to a person who is injured by a breach of contract. Answer: TRUE Difficulty: 1 Easy Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 87) Specific performance means that a person who violates a contract is required to live up to the agreement even if money damages are adequate. Answer: FALSE Difficulty: 1 Easy Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

88) Requiring that both parties are competent for a contract to be legal protects those who might be unable to protect themselves. Answer: TRUE Explanation: A person under the influence of alcohol, drugs, or a person of unsound mind would not posses the mental fitness to enter into a contract. Difficulty: 2 Medium Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 89) If Brad agrees to sing at Sean's wedding for free and then doesn't show up, Sean may sue Brad for breach of contract. Answer: FALSE Explanation: There is not a contract since there was no consideration given for the singing. Since there is no contract, Brad cannot be sued for breach. Difficulty: 3 Hard Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 90) If Fairfield University violates its housing contract with a student, the student is prohibited from suing the university for damages because the contract was for the delivery of services rather than the delivery of goods. Answer: FALSE Explanation: A contract is a legally enforceable agreement between two or more parties. The contract may involve goods or services. Difficulty: 3 Hard Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

91) Candace owns a rare painting and has agreed to a contract whereby she will sell it to the Washingtonian Museum for $7.8 million. At the last minute, she decides she cannot bear to part with her painting and will not sell it to the Washingtonian. The museum can sue Candace for specific performance. Answer: TRUE Explanation: A breach of contract occurs when one party (Candace) fails to follow the terms of a contract. When Candace violated the contract by not selling her painting the court could require her to do so since money damages would not be adequate. The museum would not be able to buy another of these rare paintings anywhere else. Difficulty: 3 Hard Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 92) The Justice Department's antitrust division serves as a watchdog for violations of the Uniform Commercial Code. Answer: FALSE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 93) The Sherman Antitrust Act was designed to prevent large businesses from stifling the competition of smaller or newer firms. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

94) The Sherman Antitrust Act forbids actual monopolies or attempts to monopolize any part of commerce. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 95) The Justice Department's lawsuit against Microsoft is an example of an antitrust case. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 96) The Clayton Act of 1914 prohibits price discrimination. Answer: FALSE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 97) Exclusive dealing means selling goods with the condition that the buyer will not buy goods from a competitor. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

98) A tying contract requires a buyer not to purchase goods from a competitor as a condition of buying product from the seller. Answer: FALSE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 99) An interlocking directorate occurs when a board of directors includes members of the board of competing corporations. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 100) The Clayton Act prohibits interlocking directorates. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 101) The Federal Trade Commission Act of 1914 prohibits unfair methods of competition. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

102) The Federal Trade Commission (FTC) deals with issues such as preventing companies from making misleading "Made in the USA" claims. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 103) The Federal Trade Commission Act of 1914 prohibits minors from entering into contracts. Answer: FALSE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 104) The FTC has jurisdiction over false or misleading advertising. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 105) The Robinson-Patman Act prohibits price discrimination in all transactions except businessto-business transactions. Answer: FALSE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

106) The Robinson-Patman Act applies only to business-to-business transactions. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 107) The Robinson-Patman Act applies only to sellers who knowingly induce an unlawful discrimination in price. Answer: FALSE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 108) One purpose of the Robinson-Patman Act is to outlaw price differences that substantially weaken competition. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 109) The changing nature of U.S. business from manufacturing to knowledge technology has led to the call for new levels of regulation from federal agencies. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

110) Consumerism is a social movement that seeks to increase and to strengthen the rights and powers of buyers in relation to sellers. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 111) The Sarbanes-Oxley Act requires CEOs to verify the accuracy of their firms' financial statements to the SEC. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 112) Alcohol Labeling Legislation of 1988 provides for warning labels on liquor saying that minors should not drink. Answer: FALSE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

113) The Nutrition Labeling and Education Act of 1990 requires truthful and uniform nutritional labeling on all food the FDA regulates. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 114) The intent of the Sherman Antitrust Act of 1890 was to encourage the growth of large business organizations in the U.S. in order to compete with more established firms in Europe. Answer: FALSE Explanation: The Sherman Antitrust Act was designed to prevent large organizations from stifling the competition of smaller or newer firms. Difficulty: 2 Medium Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 115) An interlocking directorate occurs when a contract between a retailer and a wholesaler requires misleading advertising. Answer: FALSE Explanation: An interlocking directorate occurs when a board of directors of one firm includes members of the board of competing businesses. Difficulty: 2 Medium Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

116) When a Fat Burger offers a discount to senior citizens, they have violated the price discrimination provisions of the Robinson-Patman Act. Answer: FALSE Explanation: The Robinson-Patman Act applies to business-to-business transactions and does not apply to business-to-consumer transactions. Difficulty: 3 Hard Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 117) Requiring a Tire Warehouse to carry AutoPRO Performance Tires in order to sell AutoPRO Performance Batteries is prohibited by the Robinson-Patman Act. Answer: FALSE Explanation: The Robinson-Patman Act of 1936 prohibits price discrimination. Tying contracts, as described by this question, are prohibited by the Clayton Act of 1914. Difficulty: 3 Hard Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 118) Traditionally, taxes have been used as a source of funding for government operations and programs. Answer: TRUE Difficulty: 1 Easy Topic: Tax Laws Learning Objective: A-07 Explain the role of tax laws in generating income for the government and as a method of discouraging or encouraging certain behaviors among taxpayers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

119) Taxes have been used as a method of encouraging or discouraging taxpayers from doing something. Answer: TRUE Difficulty: 1 Easy Topic: Tax Laws Learning Objective: A-07 Explain the role of tax laws in generating income for the government and as a method of discouraging or encouraging certain behaviors among taxpayers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 120) The federal government can levy a sin tax in an effort to encourage businesses to hire new employees. Answer: FALSE Difficulty: 1 Easy Topic: Tax Laws Learning Objective: A-07 Explain the role of tax laws in generating income for the government and as a method of discouraging or encouraging certain behaviors among taxpayers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 121) A tax credit is a document that increases a tax bill. Answer: FALSE Difficulty: 1 Easy Topic: Tax Laws Learning Objective: A-07 Explain the role of tax laws in generating income for the government and as a method of discouraging or encouraging certain behaviors among taxpayers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 122) Income taxes include taxes paid on real and personal property. Answer: FALSE Difficulty: 1 Easy Topic: Tax Laws Learning Objective: A-07 Explain the role of tax laws in generating income for the government and as a method of discouraging or encouraging certain behaviors among taxpayers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

123) Sales taxes are the largest source of tax income received by the federal government. Answer: FALSE Difficulty: 1 Easy Topic: Tax Laws Learning Objective: A-07 Explain the role of tax laws in generating income for the government and as a method of discouraging or encouraging certain behaviors among taxpayers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 124) Another name for sin tax is excise tax. Answer: TRUE Difficulty: 1 Easy Topic: Tax Laws Learning Objective: A-07 Explain the role of tax laws in generating income for the government and as a method of discouraging or encouraging certain behaviors among taxpayers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 125) Real property is real estate owned by individuals and businesses. Answer: TRUE Difficulty: 1 Easy Topic: Tax Laws Learning Objective: A-07 Explain the role of tax laws in generating income for the government and as a method of discouraging or encouraging certain behaviors among taxpayers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 126) Money collected from excise taxes goes toward a specific purpose. Answer: TRUE Difficulty: 1 Easy Topic: Tax Laws Learning Objective: A-07 Explain the role of tax laws in generating income for the government and as a method of discouraging or encouraging certain behaviors among taxpayers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

127) The primary objective of a sin tax is to generate additional revenue for the government. Answer: FALSE Explanation: Sin taxes are intended to discourage consumer use of certain products. Nevertheless, the revenue generated from taxes on cigarettes and beer goes to funding state and federal government activities. Difficulty: 2 Medium Topic: Tax Laws Learning Objective: A-07 Explain the role of tax laws in generating income for the government and as a method of discouraging or encouraging certain behaviors among taxpayers. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 128) The European Union currently levies certain Internet taxes. Answer: TRUE Explanation: A tax issue sure to be debated further involves Internet taxation, especially taxing Internet transactions. States claim they are losing billions in sales taxes from such sales transactions. The European Union already levies certain Internet taxes, so the debate in the U.S. is sure to continue. Difficulty: 2 Medium Topic: Tax Laws Learning Objective: A-07 Explain the role of tax laws in generating income for the government and as a method of discouraging or encouraging certain behaviors among taxpayers. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 129) The primary objective of a tax credit is to encourage businesses to behave in certain ways. One example is offering a tax credit to automobile manufacturers for the purchase of robotics used in the manufacture of automobiles. Answer: TRUE Explanation: Taxes or tax credits can be used to discourage or encourage taxpayers to behave in particular ways. The government may encourage businesses to hire new employees or purchase new equipment by offering a tax credit. A tax credit is an amount that can be deducted from a tax bill. Difficulty: 3 Hard Topic: Tax Laws Learning Objective: A-07 Explain the role of tax laws in generating income for the government and as a method of discouraging or encouraging certain behaviors among taxpayers. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

130) Mateo had a very successful year. His small corporation earned over $5,000,000. His company will have to pay part of its income to the federal government for income taxes. Answer: TRUE Explanation: Taxes paid on the income received by businesses are called income taxes and are the largest source of tax income received by the federal government. Difficulty: 3 Hard Topic: Tax Laws Learning Objective: A-07 Explain the role of tax laws in generating income for the government and as a method of discouraging or encouraging certain behaviors among taxpayers. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 131) Nolan and Sadie own a very successful Cajun restaurant. They recently built their own building and own all of the decorations in the restaurant, along with the equipment needed to run the business. They will pay real property taxes on the building and land and personal property taxes on the decorations and equipment. Answer: TRUE Explanation: Real property tax is a tax on real estate owned by individuals and businesses and personal property tax includes taxes on any movable property such as equipment that is owned by the business. Difficulty: 3 Hard Topic: Tax Laws Learning Objective: A-07 Explain the role of tax laws in generating income for the government and as a method of discouraging or encouraging certain behaviors among taxpayers. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 132) Bankruptcy is the legal process by which a person, business, or government entity that is unable to meet financial obligations is relieved of those debts by a court. Answer: TRUE Difficulty: 1 Easy Topic: Bankruptcy Learning Objective: A-08 Distinguish among the various types of bankruptcy as outlined by the Bankruptcy Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

133) A bankruptcy allows creditors to get at least part of their money when there are assets available to divide among the creditors. Answer: TRUE Difficulty: 1 Easy Topic: Bankruptcy Learning Objective: A-08 Distinguish among the various types of bankruptcy as outlined by the Bankruptcy Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 134) The Constitution gives the judiciary the power to establish bankruptcy laws. Answer: FALSE Difficulty: 1 Easy Topic: Bankruptcy Learning Objective: A-08 Distinguish among the various types of bankruptcy as outlined by the Bankruptcy Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 135) The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made it easier for individuals to eliminate most debts in a bankruptcy. Answer: FALSE Difficulty: 1 Easy Topic: Bankruptcy Learning Objective: A-08 Distinguish among the various types of bankruptcy as outlined by the Bankruptcy Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 136) The number of Americans filing for bankruptcy has increased tremendously since the late 1980s. Answer: TRUE Difficulty: 1 Easy Topic: Bankruptcy Learning Objective: A-08 Distinguish among the various types of bankruptcy as outlined by the Bankruptcy Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

137) Though high-profile business bankruptcies such as Sports Authority and Radio Shack dominate the news, over 90 percent of bankruptcy filings each year are by individuals. Answer: TRUE Difficulty: 1 Easy Topic: Bankruptcy Learning Objective: A-08 Distinguish among the various types of bankruptcy as outlined by the Bankruptcy Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 138) In voluntary bankruptcy cases the creditors voluntarily start legal action against the debtor. Answer: FALSE Difficulty: 1 Easy Topic: Bankruptcy Learning Objective: A-08 Distinguish among the various types of bankruptcy as outlined by the Bankruptcy Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 139) Most bankruptcies today are involuntary because creditors want to retrieve as much of their money as possible. Answer: TRUE Difficulty: 1 Easy Topic: Bankruptcy Learning Objective: A-08 Distinguish among the various types of bankruptcy as outlined by the Bankruptcy Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 140) Chapter 11 bankruptcy is a way for sick companies to recover and is designed to help both debtors and creditors find the best solution. Answer: TRUE Difficulty: 1 Easy Topic: Bankruptcy Learning Objective: A-08 Distinguish among the various types of bankruptcy as outlined by the Bankruptcy Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

141) Filing for bankruptcy under the Chapter 11 provisions allows a company to reorganize and continue operations while paying only a proportion of its debts. Answer: TRUE Difficulty: 1 Easy Topic: Bankruptcy Learning Objective: A-08 Distinguish among the various types of bankruptcy as outlined by the Bankruptcy Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 142) A company has to be insolvent before it can file for Chapter 11 bankruptcy. Answer: FALSE Difficulty: 1 Easy Topic: Bankruptcy Learning Objective: A-08 Distinguish among the various types of bankruptcy as outlined by the Bankruptcy Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 143) Chapter 13 bankruptcy permits individuals and small-business owners to repay creditors over a period of three to five years. Answer: TRUE Difficulty: 1 Easy Topic: Bankruptcy Learning Objective: A-08 Distinguish among the various types of bankruptcy as outlined by the Bankruptcy Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 144) Chapter 13 proceedings are more complicated than Chapter 7 bankruptcy proceedings. Answer: FALSE Difficulty: 1 Easy Topic: Bankruptcy Learning Objective: A-08 Distinguish among the various types of bankruptcy as outlined by the Bankruptcy Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

145) The number of Americans filing for bankruptcy has decreased as a result of the Bankruptcy Reform Act. Answer: FALSE Explanation: There has been a significant increase in the number of Americans filling for bankruptcy. Bankruptcy attorneys say the increase in filings is due to a lessening of the stigma of bankruptcy, the changing economy, and an increase in the understanding of bankruptcy. Difficulty: 2 Medium Topic: Bankruptcy Laws Learning Objective: A-08 Distinguish among the various types of bankruptcy as outlined by the Bankruptcy Code. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 146) When Bryan and Lizzie got married they wanted to travel, buy nice houses and cars, and enjoy the good life. They used credit cards to finance their lifestyle, believing they would be fine as long as they could make the minimum payments. One day they discovered that because of rising interest rates, even the minimum payments were out of reach. They decided to declare Chapter 13 bankruptcy. Under this plan, they will have to pay their creditors back over 3 to 5 years. Answer: TRUE Explanation: Chapter 13 bankruptcy permits individuals to pay back creditors over a period of three to five years. The debtor files a proposed plan for paying off debts to the court. If the plan is approved, the debtor pays a court-appointed trustee in monthly installments as agreed on in the repayment plan. The trustee then pays each creditor. Difficulty: 3 Hard Topic: Bankruptcy Learning Objective: A-08 Distinguish among the various types of bankruptcy as outlined by the Bankruptcy Code. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 147) The purpose of governmental deregulation is to eliminate laws that seem to hinder competition. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-09 Explain the role of deregulation as a tool to encourage competition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

148) Both the airline and telecommunications industries have been deregulated. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-09 Explain the role of deregulation as a tool to encourage competition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 149) Deregulation has always benefited consumers. Answer: FALSE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-09 Explain the role of deregulation as a tool to encourage competition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 150) It appears that some regulation of business is necessary to ensure fair and honest dealings with the public. Answer: TRUE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-09 Explain the role of deregulation as a tool to encourage competition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 151) Business and government do not need to work together to create a competitive environment that is fair and open since global competition is increasing. Answer: FALSE Difficulty: 1 Easy Topic: Business Law Learning Objective: A-09 Explain the role of deregulation as a tool to encourage competition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

152) When the airline industry was deregulated, consumers benefited because airlines established new routes and charged lower fares. Answer: TRUE Explanation: At one time, the government restricted airlines with regard to where they could land and fly. When the industry was deregulated, airlines began competing for different routes and charging lower prices. Consumers benefited from the deregulation, but established airlines were challenged to be more competitive. Difficulty: 2 Medium Topic: Business Law Learning Objective: A-09 Explain the role of deregulation as a tool to encourage competition. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 153) The branch of the government responsible for overseeing the legal system is the A) judiciary. B) executive. C) legislative. D) administrative. Answer: A Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 154) ________ refers to rules, statutes, codes, and regulations established to provide a legal framework within which business may be conducted. A) Common law B) Statutory law C) Bankruptcy law D) Business law Answer: D Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

155) The regulation of marriages and payments for personal injuries is covered by A) civil law. B) criminal law. C) appellate law. D) legislative law. Answer: A Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 156) ________ law establishes punishments, and regulates the investigation of people accused of committing crimes. A) Civil law B) Criminal law C) Appellate law D) Business law Answer: B Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 157) The body of law created by court decisions rendered by judges is called ________ law. A) precedent B) statutory C) common D) tort Answer: C Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

158) Which of the following can review and, when necessary, overturn decisions made at the trial court level? A) administrative agencies B) appellate courts C) arbitration judges D) statutory agencies Answer: B Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 159) Common law relies on decisions made by judges in previous cases. These earlier decisions are called A) administrative guidelines. B) precedents. C) arbitration rules. D) statutory models. Answer: B Difficulty: 1 Easy Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

160) While the government regulates business activities, businesses would prefer to set their own standards of behavior. Which of the following is the most likely reason the government has intervened? A) The relationships between businesses and other parties are more complex than ever. B) The public perceives U.S. businesses as moving too slowly in implementing acceptable standards of behavior. C) The judiciary branch of the government is more aware of the needs and desires of society. D) There has been an increase in the number of lawyers. Answer: B Explanation: To hasten the process of business responsibility, the government has expanded its control and enforcement procedures. Difficulty: 2 Medium Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 161) The Environmental Protection Agency is an example of a(n) A) common law agency. B) statutory judicial agency. C) private placement agency. D) administrative agency. Answer: D Explanation: An administrative agency is an institution created by Congress with delegated power to pass rules and regulations within its mandated area of authority. Difficulty: 2 Medium Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

162) The Griggs v. Duke Power Company (1971) case established a precedent on the need to use job-related tests in employment practices. Similar court cases have been decided based on this decision. This is an example of A) common law. B) statutory law. C) administrative law. D) criminal law. Answer: A Explanation: Common law is the body of law that comes from decisions handed down by judges, i.e., precedents. Difficulty: 3 Hard Topic: Statutory and Common Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 163) Lawtown's mayor has just signed legislation requiring fire sprinklers in every public school. This is an example of A) common law. B) statutory law. C) administrative law. D) unwritten law. Answer: A Explanation: Statutory law includes written legislation by local, state, and federal governments. Difficulty: 3 Hard Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

164) Which of the following holds a company liable for negligence in the production, design, sale, or use of products the firm markets? A) breach of contract B) price discrimination C) promotional responsibility D) product liability Answer: D Difficulty: 1 Easy Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 165) Which of the following holds a company liable for damages caused by a defective product even if the firm was unaware of the defect at the time of sale? A) network responsibility B) managerial liability C) patent infringement D) strict product liability Answer: D Difficulty: 1 Easy Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 166) A(n) ________ tort is a willful act that results in injury. A) negligent B) intentional C) common D) statutory Answer: B Difficulty: 1 Easy Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

167) When a person's or company's behavior causes unintentional harm or injury to others they are said to be ________ in tort law. A) out-of-control B) liable C) negligent D) purposeful Answer: C Difficulty: 1 Easy Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 168) The remedy for a tort is A) imprisonment. B) a breach of contract. C) bankruptcy. D) monetary compensation. Answer: D Explanation: Victims of wrongful conduct that results in injury (a tort) are often awarded monetary compensation. Difficulty: 2 Medium Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

169) When McDonald's lost a lawsuit to a person severely burned by hot coffee, McDonald's was found to be guilty of A) negligence. B) liable. C) intentional tort violation. D) packaging liability. Answer: A Explanation: McDonald's lost a lawsuit to a person severely burned by hot coffee she bought at a drive-through window. The jury felt McDonald's failed to provide an adequate warning on the cup. McDonald's was found guilty of negligence or behavior that caused unintentional harm or injury. Difficulty: 2 Medium Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 170) Under the doctrine of strict product liability, a manufacturer can be held liable A) even if when the product was introduced everyone agreed it was safe. B) only if the firm knowingly sold a hazardous product. C) only if the firm purposefully was negligent in the design or production of the product. D) only if the firm intentionally introduced a defective product. Answer: A Explanation: The doctrine of strict product liability holds a firm responsible without regard to fault. Difficulty: 2 Medium Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

171) Julian was injured using a hair dryer manufactured by Epic Electronics. Julian has contacted a lawyer because he feels that Epic is responsible for his injury based on the legal principle of A) restricted endorsement. B) fault free obligations. C) patent infringement. D) strict product liability. Answer: D Explanation: Strict product liability laws hold businesses liable for damages without regard to fault. Difficulty: 3 Hard Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 172) The City of Lawtown filed suit against certain gun manufacturers for financial payments to cover the costs of police work and medical care as a result of gun violence. This suit was based on the legal principle of A) unintentional torts. B) statutory consideration. C) strict product liability. D) common law. Answer: C Explanation: Product liability holds businesses liable for harm that results from the production, design, sale, or use of products they market. Many states have extended product liability to the level of strict product liability—legally meaning liability without regard to fault. Difficulty: 3 Hard Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

173) In 1978, a 13-year-old boy was severely burned in a rear-end collision involving a Ford Pinto. The case went to court and Ford was ordered to pay $125 million in punitive damages based on the legal principle of A) product discrimination. B) product liability. C) breach of contract. D) exclusive dealing. Answer: B Explanation: Product liability holds businesses liable for harm that results from the production, design, sale, or use of products they market. Many states have extended product liability to the level of strict product liability—legally meaning liability without regard to fault. Difficulty: 3 Hard Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 174) We count on companies to provide us with safe products, and to provide us with full disclosure if they are using potentially harmful chemicals in the production and distribution of their products. Under ________, if in a court of law it is proven that a well-known fast food chain is using a potentially harmful chemical in the preparation of their fries, the company is likely to be required to disclose information on this process to its customers. A) strict product liability B) patent infringement C) statutory law D) trademark law Answer: A Explanation: Strict product liability is liability without regard to fault. If a product or process causes undue harm to individuals, the manufacturer or producer is held liable. Difficulty: 3 Hard Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

175) A patent gives inventors exclusive rights to their inventions for A) 20 months. B) 17 years. C) 20 years. D) the lifetime of the inventor plus 50 years. Answer: C Difficulty: 1 Easy Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 176) Which of the following protects the original work of authors and artists (i.e., their books, photos, or cartoons)? A) a trademark B) a copyright C) the Uniform Commercial Code D) a patent Answer: B Difficulty: 1 Easy Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 177) The Nike swoosh and the golden arches of McDonald's are examples of a A) trademark. B) submarine patent. C) copyright. D) commercially protected symbol. Answer: A Difficulty: 1 Easy Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

178) Who owns the copyright of a cartoon character created by an employee of a firm as part of their normal job responsibilities? A) employee who created the cartoon character B) employer of the cartoon character's creator C) cartoon characters are not covered by copyright protection D) union that represents the employee Answer: B Difficulty: 1 Easy Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 179) About ________ percent of patent applications are approved. A) 35 B) 45 C) 55 D) 65 Answer: C Difficulty: 1 Easy Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 180) A(n) ________ patent refers to the situation when some inventors intentionally delay a patent application because they expect others to develop similar products or technology. A) underground B) substandard C) submarine D) under-the-table Answer: C Difficulty: 1 Easy Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 54 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

181) The intent of a patent is to A) increase competition in the marketplace. B) reward innovation and hard work of inventors. C) slow the growth of monopolies. D) encourage copycat inventions. Answer: B Explanation: A patent awards inventors exclusive rights to their inventions for 20 years. Patent owners may sell or license the use of the patent to others. Difficulty: 2 Medium Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 182) Which of the following is true of a copyright? A) It is a specific representation that buyers rely on regarding the goods they purchase. B) It protects a creator's rights to materials such as books, paintings, and cartoons. C) It is filed with the state legislature. D) It is good for 20 years. Answer: B Explanation: A copyright protects a creator's rights to materials such as books, articles, photos, paintings, and cartoons. Difficulty: 2 Medium Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

183) Without the permission of the inventor, Five Star Automobile Manufacturing copied the engine design of an innovative competitor. What is Five Star guilty of? A) corporate liability B) trademark infringement C) profit minimization D) patent infringement Answer: D Explanation: Patents give inventors exclusive rights to their inventions for 20 years. Penalties for violating a patent can be severe. Difficulty: 3 Hard Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 184) Louis opened a new bakery. He had always admired the cute, friendly face of the Pillsbury Doughboy so as a tribute to Pillsbury, he decided to use it as his company's logo. Not long after Pillsbury sued him for A) corporate liability. B) trademark infringement. C) profit minimization. D) patent infringement. Answer: B Explanation: A trademark is a legally protected name, symbol, or design that identifies the goods or services of one seller and distinguishes them from those of competitors. The Pillsbury Doughboy is an example of a trademark. Louis was sued for using Pillsbury's trademark as his logo or for trademark infringement. Difficulty: 3 Hard Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation

185) Which of the following was designed to simplify and standardize the laws affecting businesses involved in interstate trade? A) common law B) statutory law C) the standardized commerce rules D) the Uniform Commercial Code Answer: D Difficulty: 1 Easy Topic: The Uniform Commercial Code Learning Objective: A-04 Describe warranties and negotiable instruments as covered in the Uniform Commercial Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 186) The warranty you receive in the box with your new iPad is a(n) A) implied warranty. B) express warranty. C) uniform warranty. D) commercial warranty. Answer: B Difficulty: 1 Easy Topic: The Uniform Commercial Code Learning Objective: A-04 Describe warranties and negotiable instruments as covered in the Uniform Commercial Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 187) A(n) ________ guarantees that the product you buy will conform to the customary standards of the trade/industry. A) implied warranty B) express warranty C) uniform warranty D) commercial warranty Answer: A Difficulty: 1 Easy Topic: The Uniform Commercial Code Learning Objective: A-04 Describe warranties and negotiable instruments as covered in the Uniform Commercial Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 57 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

188) ________ instruments are forms of commercial paper that are transferable among businesses and individuals that represent a promise to pay a specified amount. A) Uniform B) Contract C) Express D) Negotiable Answer: D Difficulty: 1 Easy Topic: The Uniform Commercial Code Learning Objective: A-04 Describe warranties and negotiable instruments as covered in the Uniform Commercial Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 189) A warranty guarantees that A) the seller will replace or repair the product at no charge if the customer finds a cheaper substitute. B) the buyer has read and understood the information provided in the owner's manual. C) consumers will have access to a customer complaint resolution hot line. D) the product sold will be acceptable for the purpose for which the buyer intends to use it. Answer: D Explanation: A warranty guarantees that the product sold will be adequate for the purpose for which the buyer intends to use it. Difficulty: 2 Medium Topic: The Uniform Commercial Code Learning Objective: A-04 Describe warranties and negotiable instruments as covered in the Uniform Commercial Code. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

190) Which of the following is a requirement for commercial paper to be considered a negotiable instrument? A) It must be signed in approval by a third party. B) It must contain a conditional promise to pay. C) It must be a promise to pay a specified amount of money. D) It must be an oral agreement between two or more parties. Answer: C Explanation: Article 3 of the Uniform Commercial Code states that negotiable instruments must be (1) written and signed by the maker, (2) made payable on demand or at a certain time, (3) made payable to the bearer or to order, and (4) contain an unconditional promise to pay a specified amount of money. Difficulty: 2 Medium Topic: The Uniform Commercial Code Learning Objective: A-04 Describe warranties and negotiable instruments as covered in the Uniform Commercial Code. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 191) You verbally promise to pay your sister tomorrow the $25 that you owe her. This promise however, is not a negotiable instrument because A) it is not in writing. B) it is not payable at a specific time. C) it is not a promise to pay a specific amount. D) it does not contain an unconditional promise. Answer: A Explanation: Article 3 of the Uniform Commercial Code states that negotiable instruments must be (1) written and signed by the maker, (2) made payable on demand or at a certain time, (3) made payable to the bearer or to order, and (4) contain an unconditional promise to pay a specified amount of money. Difficulty: 3 Hard Topic: The Uniform Commercial Code Learning Objective: A-04 Describe warranties and negotiable instruments as covered in the Uniform Commercial Code. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

192) A software development firm based in California and conducting business in Wyoming is unsure about the differences in state laws regarding business transactions. What body of laws standardizes interstate business regulations? A) Uniform Commercial Code B) Universal Business Regulations C) National Commercial Rules D) Unified Commercial Regulations Answer: A Explanation: All states have adopted the Uniform Commercial Code to standardize commercial law. There are, however, sections of Louisiana that have not adopted the Uniform Commercial Code. Difficulty: 3 Hard Topic: The Uniform Commercial Code Learning Objective: A-04 Describe warranties and negotiable instruments as covered in the Uniform Commercial Code. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 193) Which of the following describes the requirement that both parties in a legally binding contract must give something of value? A) competent parties B) mutual acceptance C) consideration D) legal purpose Answer: C Difficulty: 1 Easy Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

194) Which of the following would cause a contract to be void? A) consideration B) mutual acceptance C) competent parties D) duress Answer: D Difficulty: 1 Easy Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 195) A(n) ________ occurs when one party fails to follow the terms of a contract. A) breach of contract B) discharge of obligation C) obligation failure of enforcement D) infringement of contract Answer: A Difficulty: 1 Easy Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 196) A ________ is a legally enforceable agreement between two or more parties. A) warranty B) negotiable instrument C) contract D) combination Answer: C Difficulty: 1 Easy Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

197) Which of the following is a condition required for a legally binding contract? A) discharge of obligation B) warranty C) mutual acceptance D) duress Answer: C Explanation: A contract is legally binding when there is mutual acceptance of the terms. Difficulty: 2 Medium Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 198) When one party fails to follow the terms of a contract, the party has committed a(n) A) obligation violation. B) breach of contract. C) termination by association. D) nonperformance endorsement. Answer: B Explanation: A breach of contract occurs when one party fails to follow the terms of the contract. Difficulty: 2 Medium Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

199) Your neighbor agrees to sell you his car for $3,000. You and your neighbor have provided each other A) duress. B) consideration. C) an endorsement. D) an expressed warranty. Answer: B Explanation: Consideration is something of value. A valid contract requires that both parties give consideration. Difficulty: 3 Hard Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 200) Your 15-year-old brother comes home with the great news that he has decided to buy his first car and has just agreed to give $10,000 to someone on Craig's List. He signed the contract and just needs to pay the seller and pick up the car. Your dad is upset and calls the seller to tell him your brother will not be buying the car. What can the seller do? A) sue your brother for breach of contract B) sue your dad for breach of contract C) sue your brother for specific performance D) nothing Answer: D Explanation: Minors are not considered to be competent to sign contracts; thus the stranger cannot do anything if your brother backs out of the contract. Difficulty: 3 Hard Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

201) Alvin advertises on Craig's List to sell his used lawnmower for $60. Roy tested the lawnmower and then offered Alvin $50 for it. In this case A) the two parties have created a legally enforceable contract. B) Roy's offer represents an acceptance of the original terms. C) there is no agreement and no contract. D) there is no agreement, but there is a valid contract. Answer: C Explanation: No agreement has been reached regarding price; therefore, there is no voluntary acceptance of Alvin's offer and no contract. Difficulty: 3 Hard Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 202) You and your boss agree to terminate your employment contract because you want to devote more time to school. This breach of contract would likely be resolved by A) a specific performance requirement. B) the payment of damages. C) a judge. D) a discharge of obligation. Answer: D Explanation: Discharging the contractual obligation means that since one party has failed to live up to their end of the contract, the other party is not required to fulfill their obligation. Difficulty: 3 Hard Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

203) Which of the following prohibits monopolies, attempts to monopolize, and any restraint of trade? A) Clayton Act B) Sherman Act C) Robinson-Patman Act D) Wheeler-Lea Amendment Answer: B Difficulty: 1 Easy Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 204) Which of the following established a government agency to enforce the laws regulating unfair competition? A) Clayton Act B) Sherman Act C) Federal Trade Commission Act D) Robinson-Patman Act Answer: C Difficulty: 1 Easy Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

205) The social movement designed to increase and strengthen the rights and powers of buyers in business transactions is called A) environmentalism. B) capitalism. C) socialism. D) consumerism. Answer: D Difficulty: 1 Easy Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 206) The Dodd-Frank Wall Street Reform and Consumer Protection Act evolved from the mortgage industry meltdown. The agency that was created to provide consumers with accurate information so they can make informed decisions about loans and other financial instruments is known as the A) Consumer Financial Protection Bureau (CFPB). B) Federal Trade Commission (FTC). C) Due Diligence Agency (DDA). D) Financial Fairness Consortium (FFC). Answer: A Difficulty: 1 Easy Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

207) The purpose of the Sherman Antitrust Act was to A) encourage competition by restraining the growth of monopolies. B) standardize the level of competition. C) encourage the growth of large-scale efficiency found in big businesses. D) minimize the inconsistency of multiple dealers of a single product. Answer: A Explanation: The Sherman Act was designed to prevent large organizations from stifling the competition of smaller or newer firms. Difficulty: 2 Medium Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 208) The use of tying contracts was prohibited by the Clayton Act of 1914 because these contracts A) required retailers to use false and misleading advertising. B) required retailers to purchase unwanted items in order to purchase desired items. C) forced households to buy wanted products in order to buy a desired product. D) forced competitors into price discrimination agreements. Answer: B Explanation: Tying contracts require buyers to purchase unwanted items in order to purchase desired items. Difficulty: 2 Medium Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

209) Willow is concerned that she is not getting full disclosure of information from a mortgage broker who is hoping to refinance the mortgage on her house. Having recently studied business law, you suggest to Willow that she contact the ________ that was formed after the Dodd-Frank Wall Street Reform and Consumer Protection Act became law. A) Federal Trade Commission (FTC) B) Consumer Financial Protection Bureau (CFPB) C) Due Diligence Agency (DDA) D) Financial Fairness Consortium (FFC) Answer: B Explanation: The Consumer Financial Protection Bureau was a government oversight agency created out of the Dodd-Frank Wall Street Reform Act. This agency's mission is to provide full disclosure about mortgage information and other consumer information. Its premise is to keep consumers informed to make better decisions. Difficulty: 3 Hard Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 210) Big Johnson Products charges Moe's Meats a lower price for goods because Moe and Johnson play golf together regularly. Big Johnson charges other firms similar to Moe's Meats more for the same products and this is beginning to hurt the business of the other firms. In fact, Moe's Meats is taking so much business away from the others due to its lower prices that the other firms are in danger of going out of business. This is an example of A) price discrimination. B) price reversal. C) price-cutting. D) price maintenance. Answer: A Explanation: The Robinson-Patman Act of 1936 prohibits price discrimination. Price discrimination is the charging of two different prices to two similar customers for the same good or service resulting in a "substantial" weakening of competition. Difficulty: 3 Hard Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

211) A government policy aimed at reducing the purchase of a specific good through increased taxes has been most often applied to A) cigarettes and liquor. B) sports cars. C) white bread. D) diet soft drinks. Answer: A Difficulty: 1 Easy Topic: Tax Laws Learning Objective: A-07 Explain the role of tax laws in generating income for the government and as a method of discouraging or encouraging certain behaviors among taxpayers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 212) Which of the following refers to a tax designed to reduce the consumption of a specific good? A) control tax B) sin tax C) flat tax D) tax credit Answer: B Difficulty: 1 Easy Topic: Tax Laws Learning Objective: A-07 Explain the role of tax laws in generating income for the government and as a method of discouraging or encouraging certain behaviors among taxpayers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 213) Which of the following do school districts utilize to generate needed funding? A) sin tax B) sales tax C) property tax D) income tax Answer: C Difficulty: 1 Easy Topic: Tax Laws Learning Objective: A-07 Explain the role of tax laws in generating income for the government and as a method of discouraging or encouraging certain behaviors among taxpayers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 69 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

214) ________ often help to pay for highway construction or improvements. A) Sin taxes B) Property taxes C) Income taxes D) Facility taxes Answer: A Difficulty: 1 Easy Topic: Tax Laws Learning Objective: A-07 Explain the role of tax laws in generating income for the government and as a method of discouraging or encouraging certain behaviors among taxpayers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 215) ________ are the largest source of tax income received by the federal government. A) Income taxes B) Property taxes C) Sales taxes D) Excise taxes Answer: A Difficulty: 1 Easy Topic: Tax Laws Learning Objective: A-07 Explain the role of tax laws in generating income for the government and as a method of discouraging or encouraging certain behaviors among taxpayers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

216) The two main purposes of taxes are A) to raise money for taxpayers and to encourage foreign governments to behave in certain ways. B) to raise money for government funding and to encourage or discourage certain taxpayer behaviors. C) to encourage businesses to make a profit and encourage foreign governments to invest in the U.S. D) to strengthen monetary and fiscal policies. Answer: B Explanation: Traditionally, taxes have been used as a source of funding for government operations and programs. They can also be used as a method of discouraging or encouraging certain behaviors among taxpayers. Difficulty: 2 Medium Topic: Tax Laws Learning Objective: A-07 Explain the role of tax laws in generating income for the government and as a method of discouraging or encouraging certain behaviors among taxpayers. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 217) Some economists advocate a ________ on the consumption of such products as gasoline, liquor, cigarettes, and even soda, in the hope that consumers will think about how their purchases are having negative impacts on themselves and their environment. A) progressive tax B) sin tax C) flat tax D) tax credit Answer: B Explanation: Sin taxes are government taxes imposed on products we buy and things we do that are considered harmful, either to ourselves, to others, or to the environment. The idea is to make these products and services more costly so that our buying behavior is discouraged. Difficulty: 2 Medium Topic: Tax Laws Learning Objective: A-07 Explain the role of tax laws in generating income for the government and as a method of discouraging or encouraging certain behaviors among taxpayers. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

218) Paul and Chris own Lucky's Liquor Store. They are careful to pay all of their taxes in full and on time. Recently, the local government has decided to raise the taxes imposed on the sale of cigarettes and liquor. Paul and Chris are upset about this because A) they will certainly have to pay more taxes. B) people will likely buy less cigarettes and liquor from them. C) the government has increased the sales tax. D) their personal property tax will now increase. Answer: B Explanation: Taxes can be used as a method of discouraging certain behaviors among taxpayers. In this case the government wants to reduce consumer use of cigarettes and liquor so it passed a sin tax on those products. The additional cost of the product from increased taxes will perhaps discourage additional consumption of these products. This means people will likely buy less from Paul and Chris. Difficulty: 3 Hard Topic: Tax Laws Learning Objective: A-07 Explain the role of tax laws in generating income for the government and as a method of discouraging or encouraging certain behaviors among taxpayers. Bloom's: Apply AACSB: Reflective Thinking Accessibility: Keyboard Navigation 219) ________ is the legal process by which a person, business, or government entity unable to meet financial obligations is relieved of those debts. A) Emancipation B) Financial release C) Negligence D) Bankruptcy Answer: D Difficulty: 1 Easy Topic: Bankruptcy Learning Objective: A-08 Distinguish among the various types of bankruptcy as outlined by the Bankruptcy Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

220) The section of the Bankruptcy Code that allows a business to reorganize and pay only a limited proportion of its debts is Chapter A) 7. B) 11. C) 13. D) 17. Answer: B Difficulty: 1 Easy Topic: Bankruptcy Learning Objective: A-08 Distinguish among the various types of bankruptcy as outlined by the Bankruptcy Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 221) In which of the following does the creditor start legal procedures? A) debtor initiatives B) voluntary bankruptcy C) involuntary bankruptcy D) creditor restructuring Answer: C Difficulty: 1 Easy Topic: Bankruptcy Learning Objective: A-08 Distinguish among the various types of bankruptcy as outlined by the Bankruptcy Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 222) The number of personal bankruptcies has A) significantly decreased as a result of the Bankruptcy Reform Act. B) increased. C) nearly reached the level of business bankruptcies. D) remained unchanged. Answer: B Difficulty: 1 Easy Topic: Bankruptcy Learning Objective: A-08 Distinguish among the various types of bankruptcy as outlined by the Bankruptcy Code. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

223) Which of the following is considered as a cause for the significant increase in bankruptcies? A) a decrease in the understanding of bankruptcy law B) a decrease in the price to complete the process by bankruptcy lawyers C) an increase in the number of involuntary bankruptcy cases initiated by creditors D) an increase in the ease with which some consumers can get credit Answer: D Explanation: Bankruptcy attorneys attribute the increase in bankruptcy filings to a lessening of the stigma of bankruptcy, the changing economy, an increase in understanding of bankruptcy law and its protections, increased advertising by bankruptcy attorneys, and the ease with which some consumers can get credit. Difficulty: 2 Medium Topic: Bankruptcy Learning Objective: A-08 Distinguish among the various types of bankruptcy as outlined by the Bankruptcy Code. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 224) The financial claims of ________ are given priority when assets are distributed among creditors in a bankruptcy case. A) employees B) customers C) bankruptcy lawyers D) stockholders Answer: C Explanation: Chapter 7 of the bankruptcy code stipulates the order in which the assets are to be distributed among the creditors. First, creditors with secured claims receive the collateral for their claims or repossess the claimed asset. Then the unsecured claims are paid starting with the costs involved in the bankruptcy case. Difficulty: 2 Medium Topic: Bankruptcy Learning Objective: A-08 Distinguish among the various types of bankruptcy as outlined by the Bankruptcy Code. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

225) Utilizing the bankruptcy laws, Speedster Distribution petitioned the court to reorganize and continue operations while paying only a limited proportion of its current debts. This represents an example of a Chapter ________ bankruptcy. A) 7 B) 11 C) 13 D) 14 Answer: B Explanation: Chapter 11 of the bankruptcy code allows a firm to reorganize and continue operations. During this time period, the court appointed trustee monitors the firm's activities to protect the interests of creditors. While only some debts are paid, Chapter 11 is designed to help both debtors and creditors. Difficulty: 3 Hard Topic: Bankruptcy Learning Objective: A-08 Distinguish among the various types of bankruptcy as outlined by the Bankruptcy Code. Bloom's: Apply AACSB: Reflective Thinking Accessibility: Keyboard Navigation 226) ________ is the process of eliminating laws and regulations that hinder competition. A) Downsizing B) Restructuring C) Deregulation D) Reregulation Answer: C Difficulty: 1 Easy Topic: Business Law Learning Objective: A-09 Explain the role of deregulation as a tool to encourage competition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

227) Concerns over the increase in the number of business laws and regulations that were costing the public money led to A) downsizing. B) restructuring. C) deregulation. D) reregulation. Answer: C Difficulty: 1 Easy Topic: Business Law Learning Objective: A-09 Explain the role of deregulation as a tool to encourage competition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 228) Which of the following industries has been deregulated? A) chemicals B) agriculture C) airlines D) steel Answer: C Difficulty: 1 Easy Topic: Business Law Learning Objective: A-09 Explain the role of deregulation as a tool to encourage competition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 229) One result of deregulation in the airline industry has been A) less-intense competition. B) increased aviation-related fatalities. C) higher prices for consumers. D) lower prices for consumers. Answer: D Explanation: When government regulations were lifted, the airlines began competing for different routes and charging lower prices. New airlines were born to take advantage of the new opportunities. Difficulty: 2 Medium Topic: Business Law Learning Objective: A-09 Explain the role of deregulation as a tool to encourage competition. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

230) One of the benefits that deregulation is supposed to provide to customers is A) fewer choices. B) reduced prices. C) less quality. D) improved government oversight. Answer: B Explanation: Consumers have clearly benefited from deregulation through lower prices, as evidenced in the airline industry deregulation. Difficulty: 2 Medium Topic: Business Law Learning Objective: A-09 Explain the role of deregulation as a tool to encourage competition. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 231) Several states now allow for competition in the electric power industry. Business customers, for example, can purchase their electric service from several different utility companies. This activity reflects a movement toward ________ in the utility industry. A) re-regulation B) monopoly pricing C) deregulation D) privatizing Answer: C Explanation: Deregulation refers to the government actions to reduce the laws and regulations that seem to hinder competition. Deregulation has successfully been used in the airline and telecommunication industries. Difficulty: 3 Hard Topic: Business Law Learning Objective: A-09 Explain the role of deregulation as a tool to encourage competition. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

232) Explain the difference between statutory law, common law, and business law. Answer: Statutory law includes state and federal constitutions, legislative enactments, treaties of the federal government, and ordinances—in short, written law. Common law is the body of law that comes from decisions handed down by judges. Common law is often referred to as unwritten law because it does not appear in any legislative enactment, treaty, or other such document. Under common law principles, what judges have decided in previous cases is very important in deciding today's cases. Such decisions are called precedent, and they guide judges in the handling of new cases. Business law refers to rules, statutes, codes, and regulations that are established to provide a legal framework within which business may be conducted and that are enforceable by court action. These areas include product liability, sales, contracts, fair competition, consumer protection, taxes, and bankruptcy, for example. Difficulty: 3 Hard Topic: Business Law Learning Objective: A-01 Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 233) What type of law is tort law? Explain what a tort is as well as the meaning of negligence. Answer: Tort law is an example of common law. A tort is a wrongful act that causes injury to another person's body, property, or reputation. Although torts often are noncriminal acts, victims can be awarded compensation if the conduct that caused the harm is considered intentional. An intentional tort is a willful act that results in injury. Negligence, in tort law, deals with behavior that causes unintentional harm or injury. Difficulty: 3 Hard Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

234) Compare and contrast the protection offered by patents, copyrights, and trademarks. Answer: Patents provide inventors exclusive rights to their inventions for 20 years from the date the patent application is filed with the U.S. Patent and Trademark Office. Patent owners have the right to sell or license the use of a patent to others. Copyrights protect a creator's ownership rights to materials such as books, articles, photos, music, paintings, and cartoons. Copyrights filed with the Library of Congress provide for protection for the lifetime of the author or artist plus 70 years and can be passed on to the creator's heirs. A trademark is a legally protected name, symbol, or design that identifies the goods or services of one seller and distinguishes them from those of competitors. Trademarks generally belong to the owner forever, as long as they are properly registered and renewed every 10 years. Difficulty: 3 Hard Topic: Patents, Copyrights, and Trademarks Learning Objective: A-03 Identify the purposes and conditions of patents, copyrights, and trademarks. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 235) What is the Uniform Commercial Code and why is it important? Answer: The Uniform Commercial Code (UCC) is a comprehensive commercial law that covers sales laws and other commercial laws. Since all 50 states have adopted the law (although it does not apply in certain sections of Louisiana), the UCC simplifies trading across state lines. The UCC has 11 articles, which contain laws covering sales, commercial paper such as promissory notes and checks, bank deposits and collections, letters of credit, bulk transfers, warehouse receipts, bills of lading, and other documents of title, investment securities, and secured transactions. Difficulty: 3 Hard Topic: Sales Law: The Uniform Commercial Code Learning Objective: A-04 Describe warranties and negotiable instruments as covered in the Uniform Commercial Code. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

236) Identify the six conditions that must be met for a contract to be legally binding. Answer: 1. An offer is made to do something or sell something. 2. There must be voluntary acceptance of the offer. If one party is under duress, the contract is not legally binding. 3. Both parties must give consideration. Consideration is something of value. 4. Both parties must be competent. Minors, people of unsound mind, or people under the influence of drugs cannot be held to the language of a contract. 5. The contract must involve a legal act. 6. The contract must be in proper form, which usually means it must be in writing. Difficulty: 3 Hard Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

237) Explain two of the major U.S. antitrust laws. Answer: Students should choose two from among the following. The Sherman Antitrust Act was designed to prevent large organizations from stifling the competition of smaller or newer firms. The Sherman Act forbids the following: (1) contracts, combinations, or conspiracies in restraint of trade, and (2) actual monopolies or attempts to monopolize any part of trade or commerce. The Clayton Act of 1914 prohibits exclusive dealing, tying contracts, interlocking directorates, and buying large amounts of stock in competing corporations. Exclusive dealing is selling goods with the condition that the buyer will not buy goods from a competitor when the effect lessens competition. A tying contract requires a buyer to purchase unwanted items in order to purchase desired items. An interlocking directorate occurs when a board of directors includes members of the board of competing corporations. The Federal Trade Commission Act of 1914 prohibits unfair methods of competition in commerce. It set up the five-member Federal Trade Commission to deal with wide-ranging competitive issues from preventing companies from making misleading claims to overseeing mergers and acquisitions. The Robinson-Patman Act of 1936 prohibits price discrimination, which means it outlaws price differences that "substantially" weaken competition unless these differences can be justified by lower selling costs associated with larger purchases. This act applies to business-to-business transactions and does not apply to business-to-consumer transactions. Difficulty: 3 Hard Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

238) Describe bankruptcy and three sections of the Bankruptcy Code. Answer: Bankruptcy refers to the legal process by which a person, business, or government entity unable to meet financial obligations is relieved of those debts by a court. The three sections of the Bankruptcy Code discussed by our text include: Chapter 7 This section is used by businesses and individuals to accomplish a "straight bankruptcy." Chapter 7 calls for a liquidation of nonexempt assets to provide cash to pay creditors. Chapter 11 Used by businesses and some individuals, this provides temporary debt relief allowing for reorganization while the business continues to operate. A firm does not have to be insolvent to file for relief under Chapter 11. The temporary debt relief gives debtors and creditors time to find the best solution. Chapter 13 This section permits individuals and small-business owners to pay back creditors over a period of three to five years. Chapter 13 proceedings are less complicated and less expensive than Chapter 7. Difficulty: 3 Hard Topic: Bankruptcy Learning Objective: A-08 Distinguish among the various types of bankruptcy as outlined by the Bankruptcy Code. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

Mini-Case Nolan and Sadie have just opened a new restaurant on the edge of town, Cajun Kitchen. They own the land and building and have a brand-new kitchen as well as a lovely seating area, filled with mementos from the South. They have a liquor license and make wonderful Southern drinks. They are quite pleased that members of the community are helping their business grow by coming in for a meal or a drink after work. They are good businesspeople who pay their bills on time and as a result have great relationships with the vendors that supply them food. 239) One day as Nolan was speaking with one of his customers a shriek went up from the other side of the restaurant. When he rushed over, he found that one of his customers had spilled hot tea on her arm. If this customer was so inclined, she could ________ and the court would likely find in her favor. A) sue Nolan and Sadie for breach of contract B) sue them for negligence C) sue them under statutory law D) She can do nothing about this except not go to the restaurant ever again. Answer: B Explanation: Negligence, in tort law, deals with behavior that causes unintentional harm or injury. McDonald's was sued in a similar situation when a patron spilled hot coffee on herself and sued. Difficulty: 3 Hard Topic: Tort Law Learning Objective: A-02 Define tort law and explain the role of product liability in tort law. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

240) Sadie was expecting a shipment of food from one of her suppliers and it didn't come. When she called the supplier the phone was disconnected. Later Sadie read that the supplier had gone out of business because it couldn't pay its debts. The supplier likely declared Chapter ________ bankruptcy. A) 7 B) 11 C) 13 D) 17 Answer: A Explanation: Chapter 7 bankruptcy calls for straight bankruptcy, which requires the sale of nonexempt assets of debtors. The business is liquidated as was the case with Sadie's supplier. Difficulty: 3 Hard Topic: Bankruptcy Learning Objective: A-08 Distinguish among the various types of bankruptcy as outlined by the Bankruptcy Code. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 241) Cajun Kitchen sits on a large landscaped lot. Nolan and Sadie have a contract with Green Goddess Lawn Service to mow the lawn and take care of the landscape. They pay $200 per month for this service. After two weeks had gone by with no service, Nolan called the company only to find out that the owner and the crew had decided to take a vacation and would not be back to do the landscaping for another two weeks. Green Goddess A) has discharged its obligation to Nolan and Sadie. B) is liable for specific performance. C) will likely have to pay Nolan and Sadie damages if they decide to sue them. D) will not likely have to pay Nolan and Sadie damages if they decide to sue them. Answer: C Explanation: Damages refers to the monetary settlement awarded to a person who is injured by a breach of contract. Since Green Goddess did not come to cut the grass for four weeks, Nolan and Sadie's business may have suffered as people may have drawn the conclusion that the restaurant was closed. Nolan and Sadie may be able to collect damages if they decide to sue Green Goddess. Difficulty: 3 Hard Topic: Contracts Learning Objective: A-05 List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

242) As it turns out, Nolan and Sadie's good fortune with the restaurant has caused their competitors to lose business. In fact, Cajun Kitchen has been so successful that two other nearby restaurants are in danger of going out of business. Nolan and Sadie have A) engaged in anti-competitive behavior. B) violated the Sherman Antitrust Act. C) engaged in price discrimination. D) done nothing against the law. Answer: D Explanation: Part of capitalism is healthy competition. Nothing in the question indicates that Cajun Kitchen has done anything against the law. In fact, they have a competitive advantage from the design of the restaurant and the good food. They have not violated any of the antitrust laws as they have not monopolized the restaurant industry nor have they attempted to drive their competitors out of business by lowering their prices excessively. Difficulty: 3 Hard Topic: Business Law Learning Objective: A-06 Summarize several laws that regulate competition and protect consumers in the United States. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

Understanding Business, 12e (Nickels) Bonus Chapter B Using Technology to Manage Information 1) Though the types of technology used by businesses have changed over the last several decades, the role of business technology has remained remarkably constant. Answer: FALSE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) In the 1970s business technology was known as data processing. Answer: TRUE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) Data and information are two different names for essentially the same thing. Answer: FALSE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 4) Information is data that has been processed and organized so that it can be used for managerial decision making. Answer: TRUE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

5) During the 1970s, the purpose of data processing was to support the existing business by improving the flow of financial information. Answer: TRUE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) During the 1970s business technology employees often dealt directly with customers. Answer: FALSE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 7) During the 1980s, the role of business technology changed from supporting business to doing business. Answer: TRUE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) In the late 1980s and early 1990s, businesses began to emphasize finding ways to employ new technologies to improve existing methods of doing business. Answer: FALSE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

9) During the 1980s business technology began to emphasize the use of technology to change how business was conducted by introducing new methods. Answer: TRUE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10) Today the role of the chief information officer is to help the business use technology to communicate better with others while offering better service and lower costs. Answer: TRUE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) In today's technological environment, the typical chief information officer (CIO) spends the majority of his or her time overcoming glitches and making sure the organization's information system is up and running. Answer: FALSE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) Information technology brings work to people instead of requiring people to go to work. Answer: TRUE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

13) Business intelligence (BI) changes the traditional flow of information so that the database goes to the individual rather than the individual going to the database. Answer: TRUE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) In the coming years, successful information management will be more concerned with achieving and maintaining stability and predictability, and less concerned with adapting to change. Answer: FALSE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) Information technology has changed the staffing and customer relations of businesses. Answer: TRUE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 16) Business intelligence is any variety of software applications that analyze an organization's raw data and take useful insights from it. Answer: TRUE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

17) Over time, business technology has become much more sophisticated, but its basic application has remained to support the existing operations of businesses by providing key financial information. Answer: FALSE Explanation: During the 1970s, business technology was used primarily to support business by improving the flow of financial information. In the 1980s the emphasis switched from using technology to support business to using technology to do business. In the late 1980s and into the 1990s the emphasis switched again, to using technology to change business methods. As we've hit the 2000s and 2010s, technology keeps evolving and business must evolve too. Difficulty: 2 Medium Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) The experiences of the past several decades show that, while improvements in technology frequently enhance the efficiency of basic business operations, such improvements never actually change the fundamental way that businesses operate. Answer: FALSE Explanation: During the 1970s, business technology was used primarily to support business by improving the flow of financial information. In the 1980s the emphasis switched from using technology to support business to using technology to do business. In the late 1980s and into the 1990s the emphasis switched again, to using technology to change business methods. As we've hit the 2000s and 2010s, technology keeps evolving and business must evolve too. Much of the focus today is on mobile technology and big data. Difficulty: 2 Medium Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

19) As businesses began using business intelligence, managers spent less time finding information and more time using it to make decisions. Answer: TRUE Explanation: Business intelligence filters information to make sure it is relevant, and provides that information to decision makers when it is needed. Knowledge technology thus reduces the time managers spend searching for relevant information, giving them more time for decision making. Difficulty: 2 Medium Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) Samantha's assistant just handed her a report that summarizes and organizes many raw facts and figures into a few key measures that will help her judge whether her department is meeting its key objectives. The summary measures included in the report are information, while the raw facts and figures used to compute these measures are data. Answer: TRUE Explanation: Data refers to raw, unanalyzed, and unorganized facts and figures. Information is the processed and organized data that can be used for managerial decision making. Since the measures in the report have been summarized into a form Samantha finds useful, they are examples of information. Difficulty: 3 Hard Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

21) Ronald is the CIO for a major corporation. His job requires him to have an extensive knowledge of the hardware and software his company uses, but he will seldom be concerned about the methods and procedures used by specific departments. Answer: FALSE Explanation: Today's CIO will be concerned with finding ways to boost business by using technology to change the way the organization operates. Thus the CIO will be concerned with finding ways to implement new technologies that will boost performance in purchasing, operations, marketing, and sales. These new technologies will obviously affect the methods and procedures of a variety of departments within the organization. Difficulty: 3 Hard Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 22) RFID devices collect biological data. Answer: FALSE Difficulty: 1 Easy Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 23) Public data includes electronic traces that people leave when posting to the Internet and sending e-mail. Answer: TRUE Difficulty: 1 Easy Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

24) Your online shopping trail provides information that indicates your personal preferences. Answer: TRUE Difficulty: 1 Easy Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 25) A basic truth in management is that you can never have too much information. Answer: FALSE Difficulty: 1 Easy Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26) In this age of technology, managers can easily become buried in information infoglut. Answer: TRUE Difficulty: 1 Easy Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 27) Useful information has three defining characteristics: (1) it is easily accessible, (2) it is efficiently organized, and (3) it is simple to manipulate. Answer: FALSE Difficulty: 1 Easy Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

28) The quality of management information depends on its accuracy and reliability. Answer: TRUE Difficulty: 1 Easy Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) Timeliness is one of the characteristics of useful management information. Answer: TRUE Difficulty: 1 Easy Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30) Subjectivity is one of the four characteristics of useful information. Answer: FALSE Difficulty: 1 Easy Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 31) Relevance is one of the key characteristics of useful information. Answer: TRUE Difficulty: 1 Easy Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

32) Redundancy is one of the four characteristics of useful information. Answer: FALSE Difficulty: 1 Easy Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 33) The first step in avoiding information overload is to identify four or five key goals and focus only on information that is related to those goals. Answer: TRUE Difficulty: 1 Easy Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 34) Data mining looks for previously unknown relationships among vast amounts of data. Answer: TRUE Difficulty: 1 Easy Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) Major retail firms such as Walmart have used data mining to customize the product offerings for each store. Answer: TRUE Difficulty: 1 Easy Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

36) The success of data mining depends on access to data. Answer: TRUE Difficulty: 1 Easy Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 37) The key to improving management decision making is to provide the manager with as much information as possible. Answer: FALSE Explanation: The effectiveness of additional information is definitely subject to the law of diminishing returns. Managers do need an adequate flow of useful information in order to make good decisions, but a major problem faced by many of today's managers is that they must sort through too much information (a situation referred to as infoglut). This can confuse issues and slow down decision making. Difficulty: 2 Medium Topic: Knowledge Management Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) In order for information to be useful to managers, it must satisfy only two criteria: it must be timely, and it must be easy to manipulate. Answer: FALSE Explanation: Useful management information must satisfy four criteria: (1) quality (accuracy and reliability), (2) completeness, (3) timeliness, and (4) relevance. Information may be timely, but if it is inaccurate, or if it is not relevant to the manager, it is not very useful. Difficulty: 2 Medium Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

39) Doreen is overwhelmed by information overload. Unfortunately, in this day of technology, there is little she can do to control this problem. Answer: FALSE Explanation: There are strategies that can help managers control the flow of information. Perhaps the most effective first step in dealing with information overload is to identify four or five key goals and eliminate information that is not relevant to those goals. This strategy can eliminate much of the information that flows into the manager's office. Difficulty: 3 Hard Topic: Knowledge Management Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 40) Perfect Price Warehouse is a major discount store chain on the east coast. The company wants to do a better job of finding sales patterns and trends that will help it customize the product offerings for different stores. Data mining is one technique that would help Perfect Price Warehouse achieve this goal. Answer: TRUE Explanation: Data mining looks for hidden patterns and relationships in data. Retailers such as Walmart have used data mining to track sales and identify local trends and patterns. They use this information to customize product offerings for individual stores. Difficulty: 3 Hard Topic: Knowledge Management Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 41) An intranet is a companywide network that is based on Internet-type technology, but closed to public access. Answer: TRUE Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

42) Intranets use a different, less sophisticated, type of technology than the Internet. Answer: FALSE Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 43) The software or hardware barrier that a business uses to prevent unauthorized users from gaining access to their intranet is known as a tripware. Answer: FALSE Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44) Firewalls can be constructed using software, hardware, or a combination of both. Answer: TRUE Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

45) The most productive way for firms to use intranets is to publish information that can be accessed by all employees within an organization. Answer: FALSE Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 46) Interactive intranet applications can save money and increase revenue by reducing paper handling and enabling faster decision making. Answer: TRUE Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 47) The extranet is the next stage in the evolution of the Internet, consisting of a revolutionary new fiber optic technology that will enable computer users throughout the world to send and receive data up to 256 times faster than they can using the technology of the early 2010s. Answer: FALSE Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

48) A common use of an extranet is to extend an intranet to outside customers. Answer: TRUE Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 49) Compared to intranets, one advantage of an extranet is that it protects a company's information from hackers. Answer: FALSE Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 50) One problem with most extranets is that they use public lines, which makes it possible for hackers to get into the network. Answer: TRUE Difficulty: 1 Easy Topic: The Heart of Knowledge Management: The Internet Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

51) Extranets now allow small firms to share and process data much as large firms have been able to do using electronic data interchange. Answer: TRUE Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 52) Virtual private networks are quick and easy to set up, but they are less secure than extranets. Answer: FALSE Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 53) Virtual private networks create secure connections over regular Internet lines. Answer: TRUE Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

54) A virtual private network allows information managers to simulate a real intranet in order to identify possible security problems and technical glitches before the company sets up the actual private network. Answer: FALSE Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 55) Enterprise portals are simply web pages with links to company-specific products and services. Answer: FALSE Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 56) Enterprise portals have the ability to identify users and give them access to specific areas of an organization's intranet depending on their relationship to the organization. Answer: TRUE Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

57) Widebeam is the term used to refer to technologies that give users continuous access to the Internet and greatly increase the speed at which data flows to and from their Internet connection. Answer: FALSE Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 58) Bandwidth is the term used to describe the rate at which data flows through the Internet. Answer: TRUE Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 59) Internet2 runs more than 22,000 times faster than today's public infrastructure. Answer: TRUE Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

60) Initially, the very-high-speed Internet2 network service was set up to connect government supercomputer centers with a select group of universities. Answer: TRUE Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 61) Users of Internet2 each pay the same fee for their connection and share bandwidth equally. Answer: FALSE Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 62) The main purpose of an intranet is to allow a company to keep in close contact with its customers. Answer: FALSE Explanation: An intranet is a companywide network that is closed to public access. Customers do not normally have access to the information on an intranet. If customers are allowed into the company network, they do so through a semiprivate network system called an extranet or by setting up a virtual private network (VPN). Difficulty: 2 Medium Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

63) The fact that electronic data interchange technology is so expensive that only large firms can afford to use it puts small firms at a severe disadvantage when it comes to sharing information. Answer: FALSE Explanation: Now the Internet allows almost all firms to share information, process orders, specifications, and invoices. A common way of doing this is by setting up an extranet, which uses Internet technology to allow people on different servers to collaborate. Thus the advantages of EDI technology are no longer available only to large firms. Difficulty: 2 Medium Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 64) The main reason for setting up an enterprise portal is to ensure that only employees of an organization have access to the information on its intranet. Answer: FALSE Explanation: Enterprise portals identify various types of users and allow them access to the intranet based on their roles. These portals often allow customers and suppliers to have access to certain areas of the intranet. Difficulty: 2 Medium Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

65) A major reason for the creation of Internet2 was that private businesses wanted to establish a network that was free from government regulation. Answer: FALSE Explanation: A major reason for the development of Internet2 was that the existing Internet was becoming so crowded that scientists and scholars were having an increasingly difficult time gaining access to the network and transmitting data over it. Internet2 was designed to operate at much faster speeds than today's network and to have the capacity to support heavy-duty applications. Difficulty: 2 Medium Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 66) Homegrown Design, a company that publishes home design software, wants to set up a temporary link with another firm to collaborate and share data on a short-term basis. Homegrown wants to keep the cost of setting up this connection reasonable, but is concerned about hackers and wants to make sure its link is secure. The best way for Homegrown to achieve its goal is to set up an extranet with dedicated lines. Answer: FALSE Explanation: Using dedicated lines for extranet linkages can offer protection from hackers, but the cost is so high that it would be difficult to justify this type of solution for a temporary link. A better solution would be to set up a virtual private network (VPN) that creates secure connections over regular Internet lines. A VPN is simpler and less expensive than a network that uses dedicated lines, but still offers significant protection against hackers. Difficulty: 3 Hard Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

67) Tee Time Golf Resorts currently has an intranet, and is considering making use of an extranet. One of the main reasons Tee Time may want an extranet is to allow a select group of outside customers to have access to information on its intranet. Answer: TRUE Explanation: Intranets are companywide networks that are closed to public access. Extranets are semiprivate networks that allow a selected group of organizations to share information. A common use of extranets is to allow outside customers to gain access to an intranet. Difficulty: 3 Hard Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 68) Information managers at Epic Electronics want to provide a single, seamless interface that will make it easier for customers, suppliers, and employees to gain access to the parts of its intranet that they need. Epic could achieve this result by setting up an enterprise portal. Answer: TRUE Explanation: Enterprise portals serve as entry points to an organization's intranet. They identify users as employees, customers, suppliers, etc., and allow them access to the areas of the intranet relevant to their role. Portals generally are convenient to use because they provide access to all the information various users need through one interface. Difficulty: 3 Hard Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

69) Western University just obtained a link to Internet2. Researchers at Western intend to make very heavy use of their new link for various forms of collaboration, for videoconferencing and for running complex simulations. Unlike the regular Internet, the more bandwidth Western's researchers use on Internet2, the more the university will have to pay. Answer: TRUE Explanation: Unlike the public Internet where bandwidth is divided evenly among users, Internet2 allows users willing to pay more to use more bandwidth. Difficulty: 3 Hard Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 70) Virtual networking is a process that allows software-based networked computers to run multiple operating systems and programs. Answer: TRUE Difficulty: 1 Easy Topic: Virtual Networking Learning Objective: B-04 Explain virtual networking and discuss the benefits and drawbacks for cloud computing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 71) Internal networking shares the resources of all computers with each networked computer. Answer: FALSE Difficulty: 1 Easy Topic: Virtual Networking Learning Objective: B-04 Explain virtual networking and discuss the benefits and drawbacks for cloud computing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

72) Cloud computing is a form of virtualization in which a company's data and applications are stored onsite and accessed via an external hard drive. Answer: FALSE Difficulty: 1 Easy Topic: Virtual Networking Learning Objective: B-04 Explain virtual networking and discuss the benefits and drawbacks for cloud computing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 73) There are three types of cloud computing: private clouds, public clouds, and hybrid clouds. Answer: TRUE Difficulty: 1 Easy Topic: Virtual Networking Learning Objective: B-04 Explain virtual networking and discuss the benefits and drawbacks for cloud computing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 74) The advantages of cloud computing are security, possible instability, and data control. Answer: FALSE Difficulty: 1 Easy Topic: Virtual Networking Learning Objective: B-04 Explain virtual networking and discuss the benefits and drawbacks for cloud computing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 75) Some advantages of cloud computing include flexible capacity and easier access. Answer: TRUE Difficulty: 1 Easy Topic: Virtual Networking Learning Objective: B-04 Explain virtual networking and discuss the benefits and drawbacks for cloud computing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

76) Because cloud computing is often too expensive for small businesses, it is rarely used. Answer: FALSE Explanation: Two of the advantages of cloud computing are reduced software costs and lower equipment costs. This makes cloud computing more accessible to small business owners. Difficulty: 2 Medium Topic: Virtual Networking Learning Objective: B-04 Explain virtual networking and discuss the benefits and drawbacks for cloud computing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 77) Bennett just got started using a storage method called Dropbox. He stores most of his information with this service. Bennett is using cloud computing. Answer: TRUE Explanation: Dropbox is one of the many possible clouds where a person could store their information. Difficulty: 2 Medium Topic: Virtual Networking Learning Objective: B-04 Explain virtual networking and discuss the benefits and drawbacks for cloud computing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 78) The use of computers increases the number of layers of management, resulting in taller organizations. Answer: FALSE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

79) One of the most revolutionary effects of computer networks is that they give employees the ability to do much of their work at home. Answer: TRUE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 80) Telecommuting is popular with workers, but it is costly for businesses. Answer: FALSE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 81) One problem with telecommuting is that it can cause workers to feel like they are isolated and left out of the office loop. Answer: TRUE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 82) The increasing use of computer networks has made computer security more complicated. Answer: TRUE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

83) The use of antivirus software completely eliminates the risk of downloading infected files. Answer: FALSE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 84) A computer virus is a piece of programming code that is inserted into other programming code with the intention of causing some unexpected, and usually undesirable, event for the user of the software. Answer: TRUE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 85) Phishing is an online security threat in which scammers hold data hostage until you pay the hacker to get it back. Answer: FALSE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

86) When ransomware software infects a computer, scammers hold data hostage until you pay the hacker to get it back. Answer: TRUE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 87) In the area of electronic communications, the main focus of corporate and government security officials today is the prevention of credit card fraud. Answer: FALSE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 88) Today the primary concern of corporate and government security officials concerning electronic communication is in the area of cyberterrorism. Answer: TRUE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

89) As the result of the terrorist attacks on September 11, 2001, managers of most major corporations have become much more willing to give the government extensive access to information about problems with electronic communication such as viruses and attacks by hackers. Answer: FALSE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 90) The Critical Infrastructure Protection Board was established after the terrorist attacks of September 11, 2001, as part of the Office of Homeland Security. Answer: TRUE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 91) It is illegal for companies to scan e-mails written by their employees at work unless the employees have given permission in advance or the firm has received approval from a federal judge. Answer: FALSE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

92) Most e-mail messages are automatically encrypted to protect them from being intercepted and read by hackers. Answer: FALSE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 93) Websites often send cookies to a user's computer that are saved on the computer's hard drive. Answer: TRUE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 94) There are sites online that provide users with easy access to personal information about other people. Answer: TRUE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

95) When spyware is inadvertently downloaded to a user's computer the software tracks the user's online behavior. Spyware is installed without the user's knowledge and can infect the computer with a virus. Answer: TRUE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 96) Computer technology has become so stable and mature in recent years that, except for problems caused by viruses and hackers, major glitches are essentially a thing of the past. Answer: FALSE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 97) The cause of almost all instability in computer systems can be traced to poorly designed hardware. Answer: FALSE Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

98) One advantage of networked computers is that they offer much greater computer security than the older mainframe systems. Answer: FALSE Explanation: Networked computers give more people access to more information, and increase the risk that people will be able to obtain information not intended for them. With a mainframe system, there was a single data center, and access to information was easier to control. Difficulty: 2 Medium Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 99) The Internet has greatly slowed the spread of computer viruses by making it possible to share programs and files by downloading them from online sources rather than sharing diskettes. Answer: FALSE Explanation: Although viruses can be spread by using infected diskettes, they can also be spread by downloading infected files over the Internet. Difficulty: 2 Medium Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 100) Studies have shown that all types of workers are likely to become more productive when they are allowed to telecommute. Answer: FALSE Explanation: Some workers react poorly to telecommuting. They feel "out of the loop," miss the energy and social interaction of the office environment, or resent the fact that bringing work home intrudes on their personal lives. Some workers may also have a hard time turning the work off. Studies have shown that telecommuting is most likely to be successful among workers who are self-starters, have few distractions at home, and do not require face-to-face interaction with coworkers. Difficulty: 2 Medium Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

101) Ransomware only infects individuals' personal computers. Big organizations have too many firewalls in place to allow the virus in. Answer: FALSE Explanation: The biggest cyber attack in Internet history took place in May 2017 when ransomware took over 200,000 machines in 150 countries. Large organizations, like Renault and the National Health Service in the UK, were affected. Difficulty: 2 Medium Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 102) Corrine has all the technological tools—a laptop, a tablet, and a smartphone that never leaves her side. The computer in home office has a broadband connection to her company's intranet. If Corrine is like most Americans who have access to all of this modern technology, she will enjoy a much shorter workweek than workers in less technologically advanced nations. Answer: FALSE Explanation: Although advances in information technology often do improve productivity, most Americans take the results of these gains in the form of increased consumption rather than additional leisure. In fact, the types of information technology available to Corrine make it possible for her to work at home, in her car, and even while on vacation. Blessed with all of this technology, Americans like Corrine now tend to work longer hours than workers in any other nation. Difficulty: 3 Hard Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

103) Marcus works for the Critical Infrastructure Protection Board. One of the major challenges he is likely to face is to get CIOs at major corporations to provide the type of information he needs to help his board achieve its mission. Answer: TRUE Explanation: After the terrorist attacks on September 11, 2001, the federal government created the Critical Infrastructure Protection Board as part of the Office of Homeland Security. This board was given the responsibility to devise a plan for improving security for America's critical infrastructure. In order to carry out its mission, the board needs corporations to provide them with information about security issues they face, such as virus infections and attacks by hackers. However, many CIOs are reluctant to give this information to the government because they fear that if investors and the public learn of these problems, they will lose confidence in their companies. Difficulty: 3 Hard Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 104) Zoe has discovered that several of the sites she recently visited have downloaded small files to her computer's hard drive even though she did not request them. The files she discovered are known as crackers. Answer: FALSE Explanation: Small files that websites download to a visitor's computer are known as cookies. These files serve different purposes. Some cookies contain only the user's name and password, but others are used to track the user's movements on the web and send information back to the website to be included in the organization's database. Difficulty: 3 Hard Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

105) Dennis just learned that his company has been reading the e-mails he has sent while at work without getting his permission. Dennis can sue the company for invasion of privacy under the Electronic Communications Privacy Act of 1997. Answer: FALSE Explanation: Companies can legally read the e-mail their employees send. The text does not discuss the Electronic Communications Privacy Act of 1997, because no such law was actually enacted. Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 106) In the 1970s, business technology was known as A) data processing. B) information processing. C) information technology. D) systems analysis. Answer: A Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 107) ________ is raw, unanalyzed, and unorganized facts and figures. A) Statistics B) Ratios C) Data D) Criteria Answer: C Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

108) The primary role of business technology during the 1970s was to A) empower workers by giving them access to ever-greater amounts of information. B) implement new production methods that relied on automated equipment. C) protect proprietary company information from outsiders. D) support existing business by improving the flow of financial information. Answer: D Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 109) During the 1980s business technology became known as A) data processing. B) knowledge management. C) information systems. D) personal computing. Answer: C Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 110) Beginning with the late 1980s the goal of information technology was to A) improve the flow of financial information throughout business organizations. B) use new technologies to offer new methods of conducting business. C) prevent proprietary information from falling into the hands of competitors. D) use new technologies to improve old methods. Answer: B Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

111) ________ is information charged with enough intelligence to make it relevant and useful. A) Knowledge B) Data C) An hypothesis D) A theory Answer: A Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 112) ________ refers to a variety of software applications that analyze an organization's raw data and obtain useful insights from it. A) Information processing B) Data processing C) Artificial intelligence D) Business intelligence Answer: D Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 113) The key distinction between data and information is that data A) are facts and figures that have been stored in databases so that they can be accessed and manipulated by a computer while information has not been. B) is less reliable than information because its accuracy has not been verified. C) is mathematical in nature while information is verbal in nature. D) are raw, unanalyzed facts and figures while information is data that has been processed and summarized so that is can be used by decision makers. Answer: D Explanation: Data are raw, unanalyzed, and unorganized facts and figures. Information is data that has been processed and organized so that it is useful to decision makers. Difficulty: 2 Medium Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 37 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

114) From the 1970s to the present time, the primary role of business technology has A) always been to provide businesses with necessary financial information. B) always been to provide better customer service. C) changed from providing better customer service to improving employee productivity. D) changed from supporting business to providing new ways of doing business. Answer: D Explanation: In the 1970s, the primary role of business technology was to support business by improving the flow of financial information. By the late 1980s (and continuing into the 2010s), business technology began to change the way businesses operated. Difficulty: 2 Medium Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 115) NASDAQ is an example of how information technology can A) help engineers design products that exactly meet the needs of a specific target market. B) be used to create organizations and provide services that are independent of location. C) provide small firms with new opportunities to grow by forming alliances with larger companies. D) help the government measure the environmental impact of business activities. Answer: B Explanation: NASDAQ is an electronic stock exchange that enables people to make trades over the computer. These exchanges have no physical location. Difficulty: 2 Medium Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

116) A major impact of information technology has been to A) encourage the growth of giant corporations. B) create organizations that are independent of location. C) reduce the demand for skilled labor. D) increase overall costs of production. Answer: B Explanation: In the late 1980s, businesses began using new technologies to provide goods and services in new ways that break down barriers of time and space. Businesses that use these new technologies can provide goods and services whenever and wherever customers want them. By breaking down these barriers, information technology has created organizations that are independent of location. Difficulty: 2 Medium Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 117) An important advantage knowledge technology has over older versions of business technology is that it A) delivers timely information directly to the people who need it. B) is much cheaper to incorporate into most business operations. C) allows businesses to locate anywhere and still reach their customers. D) eliminates the need for businesses to store information electronically. Answer: A Explanation: Knowledge technology adds a layer of intelligence to filter appropriate information and deliver it when it is needed. It is designed to reduce the time and effort decision makers spend finding relevant information. Difficulty: 2 Medium Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

118) The use of knowledge technology should result in a(n) A) greater reliance on mainframe computers. B) increase in the number of firms using spreadsheet software. C) reduction in the amount of time managers spend searching for relevant information. D) taller organization as firms hire more information specialists to handle the increased flow of information. Answer: C Explanation: Knowledge technology filters information and provides relevant information to managers when they need it. Use of knowledge technology should reduce the amount of time searching for information, and give managers more time to devote to decision making. Difficulty: 2 Medium Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 119) Edwin, a sales manager, just finished reading some sales statistics comparing his company's performance to that of competitors. The statistics summarize a mass of raw figures into a few meaningful measures that Edwin will use to determine whether he needs to change his sales strategy. The statistics in the printout are A) information, while the raw figures used to compute the statistics are data. B) data, while the raw figures used to compute the statistics are information. C) less useful to Edwin than the raw figures would have been, since summarizing the figures necessarily reduces their accuracy. D) an example of how managers have a tendency to oversimplify by reducing complex issues into a few simple numbers. Answer: A Explanation: Data are raw, unanalyzed, and unprocessed facts and figures. Information is data that has been processed and summarized into a meaningful form that can be used for decision making. Difficulty: 3 Hard Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

120) Bigbux Bank has always tried to make use of the newest technologies to expand the services it offers to its customers. For example, depositors can obtain updated financial information about their accounts and handle certain types of transactions whenever they wish simply by using the bank's mobile app with fingerprint login. The type of technology Bigbux Bank uses to provide these services is known as A) data processing. B) systems processing. C) information technology. D) knowledge processing. Answer: C Explanation: In the late 1980s and into the 1990s businesses started combining new technologies with new methods to change the way of doing business. This approach is known as information technology and it has been used to break down barriers of time and location, allowing firms to provide goods and services whenever and wherever customers want them. Difficulty: 3 Hard Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 121) Which of the following observations would be the strongest evidence that Marshall Manufacturing has adopted knowledge technology? A) Marshall's customers can place orders for its products directly from the company's Internet website. B) Marshall has installed software that searches a variety of databases online for information relevant to each employee's current assignment, and sends the information to the appropriate employee's e-mail address. C) Marshall has provided all of its employees with a personal computer. D) Marshall has initiated a program that allows each employee to sign up for advanced training in the use of spreadsheets, word processors, graphics programs, and other types of software. Answer: B Explanation: Knowledge technology provides relevant information to workers when they need it. A big advantage of knowledge technology is that it reduces the time spent finding and obtaining information, thus giving people more time to decide how to use it. Difficulty: 3 Hard Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

122) Melissa, a new employee at Epic Electronics, is required to perform a variety of bookkeeping and clerical tasks at a workstation. Epic has training software on its workstations that can answer many of the questions she has about what to do on her new job, and how to do it. The software is so good that she rarely asks her supervisor for help. It even tracks the way Melissa performs certain tasks, and offers suggestions to improve her productivity. This software is an example of A) the use of a technique called computer aided production (CAP) that is becoming increasingly important in high-tech industries. B) the trend toward telecommuting. C) the way businesses are using knowledge technology to move relevant information to the people who need it. D) why mainframe computer systems are more efficient than network computer systems. Answer: C Explanation: Knowledge technology changes the flow of information from an individual going to a database to the data coming to the individual. This is what the training program described in this question does. It provides Jamie with the information she needs to work more efficiently right at her workstation. Difficulty: 3 Hard Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 123) Mark, a sales rep with a large technology company, is celebrating today because he just closed a large deal, which means a sizeable commission. Even the finance department is thrilled because Mark used ________ to review the credit history of this customer to be sure the deal would be a profitable one for the company. A) knowledge transfer B) business intelligence C) data processing D) business process information Answer: B Explanation: Business intelligence (BI) refers to a variety of software applications that analyze an organization's raw data and obtain useful insights from it. BI activities include data mining, online analytical process, querying, and reporting. By using BI the sales rep can obtain the right information about the credit history of the customer before closing the sale. This connects the sales activity to the financial requirements in a seamless process. Difficulty: 3 Hard Topic: Knowledge Application Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 42 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

124) Transaction data gathered at the point of sale is known as A) physical-world observations. B) business process information. C) public data. D) personal preference data. Answer: B Difficulty: 1 Easy Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 125) Data from RFID devices, miniature cameras, and wireless access used to understand where people or items are located is called A) physical-world observations. B) biological data. C) public data. D) business process information. Answer: A Difficulty: 1 Easy Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 126) Information mainly used for security purposes such as fingerprinting and retinal scans is known as A) physical-world observations. B) biological data. C) private data. D) public data. Answer: B Difficulty: 1 Easy Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 43 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

127) The amount of information managers receive each day A) is never enough; when it comes to managerial decision making, there is no such thing as too much information. B) has been managed much more efficiently in recent years, largely due to the development of spreadsheets. C) has remained remarkably stable over the years. D) has become so great that it now threatens to bury many decision makers in infoglut. Answer: D Difficulty: 1 Easy Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 128) Two of the characteristics of useful information are A) relevance and timeliness. B) redundancy and simplicity. C) clarity and confidentiality. D) flexibility and durability. Answer: A Difficulty: 1 Easy Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 129) High-quality information is A) accurate and reliable. B) normative and open ended. C) simple and easy to use. D) subjective and unique. Answer: A Difficulty: 1 Easy Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

130) ________ looks for hidden patterns and unknown relationships among the data a firm has accumulated. A) Tracking software B) Econometric analysis C) Data mining D) Data parsing Answer: C Difficulty: 1 Easy Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 131) ________ is the process of collecting, organizing, storing, and analyzing large sets of data to identify patterns to help make decisions. A) Data analytics B) Econometric analysis C) E-mail organization D) Data parsing Answer: A Difficulty: 1 Easy Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

132) A major problem with the rapid expansion in the amount of information available to managers is that A) managers can become overwhelmed with too much information. B) information costs are skyrocketing. C) the capacities of computer hard drives and other storage media are no longer sufficient to store the huge volume of information being generated. D) the need to gather this information has resulted in greater levels of bureaucracy. Answer: A Explanation: A major problem faced by managers today is information overload (sometimes referred to as infoglut). Too much information can confuse issues rather than clarify them, and can slow down decision making. Difficulty: 2 Medium Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 133) The first step a manager should take to cope with information overload is to A) obtain a good database management system and use it to organize information more efficiently. B) hire a qualified information systems analyst. C) identify four or five key goals, and eliminate information that is not related to those goals. D) purchase more sophisticated hardware that can process and store information more efficiently. Answer: C Explanation: A major reason managers are overburdened with information is that much of the information flowing into their offices is not related to their top priorities. Managers can greatly reduce information overload by focusing on information that is relevant to their key goals. Difficulty: 2 Medium Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

134) A firm would use data mining if it wanted to A) store copies of crucial data in several different locations to protect against its loss during disasters such as earthquakes, floods, or terrorist attacks. B) protect its data from unauthorized outsiders. C) increase the rate at which information flows through a firm's intranet. D) discover hidden relationships among the data it accumulates. Answer: D Explanation: The purpose of a data warehouse is to get data out. Data mining is looking for hidden patterns in a data warehouse. Data-mining software discovers previously unknown relationships among the data. Difficulty: 2 Medium Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 135) Data mining would be most helpful to a manager that wants to A) find the most efficient way to reduce the amount of data collected. B) restrict access to the company's data to a few key analysts. C) store data in a more secure location. D) discover unexpected relationships among the data stored by his or her organization. Answer: D Explanation: Data mining looks for hidden patterns in a data warehouse. These patterns can help managers discover unknown relationships among the data. The text explains Walmart's use of data mining to customize the product offerings of individual stores as an example of this approach. Difficulty: 2 Medium Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

136) If a business wanted to gather up-to-the-minute data on its customers, one way to do that would be A) database management. B) data mining. C) social media. D) physical-world observations. Answer: C Explanation: About 90% of the data used by businesses today has been collected in the last two years and most of it has come from "unstructured" sources like social media. With social media monitoring, businesses can collect up-to-the-minute data on customers. Difficulty: 2 Medium Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 137) Brianna, a marketing manager for a chain of clothing stores, recently received an e-mail with some timely and reliable information about trends in men's clothing for next season. Unfortunately, her store sells only women's clothes. The information in the newsletter was not useful to Brianna because it lacked A) redundancy. B) accuracy. C) relevance. D) selectivity. Answer: C Explanation: Useful information has four characteristics: quality (accuracy and reliability), completeness, timeliness, and relevance. The information about men's clothing was not information that met Brianna's needs, so it was not relevant. Difficulty: 3 Hard Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

138) Aubrey is a manager who wants to be well informed. Like many managers, however, she is often overwhelmed by information overload. Which of the following would probably be the most useful first step for her to take in order to deal with this problem? A) Hire an assistant to summarize all of the information for him. B) Identify four or five key goals and eliminate information that is not relevant to those goals. C) Purchase hardware and software that will process the information more efficiently. D) Establish a "time budget" with a specified time period set aside each day for reading reports, studies and other sources of information. Answer: B Explanation: Much of the information that a typical manager deals with is not really relevant to his or her most important goals. Eliminating this irrelevant information can reduce the overall flow of information to a manageable level. Difficulty: 3 Hard Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 139) Steve has convinced top management at his company that they can use data-mining techniques to develop new marketing strategies. One of the keys to the success of his suggestion is A) obtaining a powerful mainframe computer that can perform sophisticated statistical analysis on huge amounts of data. B) converting all data into a quantitative format so that it can be easily manipulated. C) outsourcing all IT functions to an outside expert that can look at the data with "fresh eyes." D) finding a way to access and integrate information from all of the different departments and divisions within the organization. Answer: D Explanation: Perhaps the most important factor in the success of data mining is to obtain access to all of the data that should be mined. Many organizations have multiple data storage systems that run on different incompatible platforms. Moreover, departments and divisions sometimes jealously guard their data. These problems must be overcome before a firm can use data-mining techniques successfully. Difficulty: 3 Hard Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

140) The HR department at Pages and Pages Booksellers wants to reduce the cost of benefits it offers its employees. A department specialist suggested that the company consider ________ its HR system. By sorting and analyzing the demographics and lifestyle characteristics of its employees, Pages and Pages hopes to determine which benefits are most important, and possibly which can be eliminated. Marketers utilize the same technology to keep pace with sales trends. A) pre-programming B) post-programming C) data mining D) data storing Answer: C Explanation: For many companies, the answer to handling the glut of data is to establish data warehouses, which store information about a single subject over a specified period of time. Difficulty: 3 Hard Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 141) A(n) ________ is a companywide network that is based on Internet-like technology, but is closed to public access. A) enternet B) alter-net C) intranet D) inner-net Answer: C Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

142) A company can use a(n) ________ to prevent unauthorized outsiders from accessing information on its intranet. A) firewall B) disconnector C) entry sentry D) tripwire Answer: A Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 143) A(n) ________ is a semiprivate network that uses Internet technology to enable more than one company to access the same information or to allow people on different servers to collaborate. A) crossnet B) extranet C) outernet D) alternet Answer: B Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

144) Many businesses choose to open their intranets to other selected organizations through the use of A) crossnets. B) alternets. C) outernets. D) extranets. Answer: D Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 145) One of the most common reasons firms make use of an extranet is to A) prevent employees from using the Internet for private purposes on company time. B) post information that can be accessed only by employees of the organization. C) extend an organization's intranet to outside customers. D) increase the speed at which employees can access information on the Internet. Answer: C Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

146) The advantages of electronic data interchange are no longer limited to large companies, because even small firms can exchange and process data such as orders, invoices, and payments using A) groupware. B) an extranet. C) spreadsheet software. D) integrated software suites. Answer: B Difficulty: 1 Easy Topic: The Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 147) A(n) ________ serves as an entry point to a variety of resources on an organization's information network. A) personal information manager B) e-transfer page C) enterprise portal D) subscription web page Answer: C Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

148) One of the problems with extranets is that they A) are semiprivate, so it is possible for hackers to gain access to information on the system. B) use an old technology that is not as fast at transferring data as the Internet. C) cannot be accessed by people unless they are employees of the company. D) have no ability to handle common e-mail protocols. Answer: A Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 149) A(n) ________ is a private data network that creates secure connections over regular Internet lines. A) extranet B) secured common linkage network C) virtual private network D) monitored network system Answer: C Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

150) ________ is a new system that is designed to overcome the speed limitations of the Internet and support heavy-duty applications such as videoconferencing and distance education. A) Internet2 B) Supernet C) Maxinet D) Ultranet Answer: A Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 151) ________ technology uses a continuous Internet connection that allows users to send and receive mammoth files that include voice, video, and data much faster than ever before. A) Widebeam B) Least resistance C) Analog D) Broadband Answer: D Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

152) A key element of Internet2 is A) the requirement that all users log on to each site with a unique password. B) the very-high-speed backbone network service (vBNS). C) a new security system that eliminates the risk that unauthorized users will be able to access private information. D) the high-speed resource allocation prioritizer (hsRAP). Answer: B Difficulty: 1 Easy Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 153) A firm that wanted to enable its employees to use and share data without allowing outsiders to gain access could do so by establishing a(n) A) extranet. B) innernet. C) enternet. D) intranet. Answer: D Explanation: An intranet is a companywide network closed to public access. Companies use intranets to give employees access to information such as phone lists and policy manuals. Intranets can also contain interactive applications that allow employees to update information and share it with others. Difficulty: 2 Medium Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

154) The key difference between an intranet and an extranet is that an intranet A) uses technology based on current Internet standards, while an extranet uses technology based on Internet2. B) uses public lines to transmit information, but an extranet uses private lines. C) is closed to public access, while an extranet allows selected outsiders access to the network. D) allows many different organizations to share data and resources, while an extranet is limited to only two organizations. Answer: C Explanation: An intranet is a companywide network that is closed to public access. An extranet is a companywide network that allows outsiders who have specific needs to interact with the company to have access to the network. For example, an extranet may give suppliers access to the network, or it may give researchers at another institution the ability to collaborate with researchers within the organization. Difficulty: 2 Medium Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 155) The organizations that benefit the most from an intranet are the ones that A) publish information on the intranet that all employees can access. B) operate the intranet over a mainframe system. C) base the intranet interface on one of the popular web browsers. D) develop interactive intranet applications. Answer: D Explanation: Interactive intranet applications allow employees to update information and submit forms such as supply requisitions, time sheets, and payroll forms online. This saves money and enables faster decision making. Difficulty: 2 Medium Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

156) A company that wanted to provide a single, unified entry point to its network that would allow different types of users access to different types of resources could do so by establishing a(n) A) enterprise portal. B) broadband interface. C) intranet. D) mainframe network. Answer: A Explanation: An enterprise portal serves as an entry point to a variety of resources. However, these portals are more than simply web pages with links. They identify users when they log on and allow them access to different types of resources depending on their relationship to the firm. Thus customers might be given access to one set of resources, while suppliers were allowed to use other resources. Difficulty: 2 Medium Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 157) Compared to the Internet, a major advantage of Internet2 is that it A) can be accessed even by people without computers; all that is needed is a simple, inexpensive receiver, a television set, and a standard telephone line. B) is owned and operated by the United Nations, and is accessible to people in every nation. C) can move information much faster than the Internet and has the capacity to handle heavy-duty applications. D) allows firms to set up their own protocols for transferring and processing information. Answer: C Explanation: Internet2 runs more than 22,000 times faster than today's public interface and supports heavy-duty applications such as videoconferencing and collaborative research. Difficulty: 2 Medium Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

158) Most successful businesses utilize social media to communicate with customers. An important strategy for consideration is: Successfully implementing social media will A) provide a well-defined purpose for the customer. B) mostly serve as an outlet for sales promotion, for example, the distribution of coupons and deals. C) provide one-way communication: from the business to the customer. D) be socially conscious; it will inform customers of the social changes that surround them. Answer: A Explanation: Companies that successfully implement social media as part of their promotional presence know that the tool must be interactive, two-way conversation between the company and the customer. The use of social media must always serve a unique purpose for the firm's customers. Difficulty: 2 Medium Topic: Social Networking for the Business Environment Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 159) A firm would be most likely to establish an enterprise portal if it wanted to A) prevent outsiders from using its information network. B) allow users to access different areas of its network depending on their relationship to the firm. C) prevent viruses from being downloaded from the company's website. D) search for hidden patterns and unknown relationships among data stored in different information systems. Answer: B Explanation: An enterprise portal is an entry point into a variety of resources available on an organization's network. However, these portals are more than simply web pages with links. They identify users when they log on and allow them access to different types of resources according to their roles: customers, suppliers, employees, etc., within the firm. Thus customers might be given access to one set of resources while suppliers might be allowed to use other resources. Difficulty: 2 Medium Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

160) The main reason a firm would establish a firewall for its intranet is that it wants to A) prevent outsiders from being able to access information on its network. B) protect itself against loss of data in the event of a fire, flood, or other catastrophe. C) create an interface to hook into Internet2 using firewire connections. D) prevent employees from gaining access to the Internet for personal use. Answer: A Explanation: A firewall is hardware or software (or both) that a company uses to protect an organization's information from unauthorized users. Difficulty: 2 Medium Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 161) The most likely reason a firm would decide to establish an extranet would be the desire to A) speed the flow of information on its private network by increasing the bandwidth. B) make the information on its network widely available to the general public. C) share information and collaborate with a select group of outside organizations or individuals. D) overcome the speed and capacity limitations of its external connection to the Internet by gaining access to the very-high-speed Backbone Network Service. Answer: C Explanation: An extranet is a semiprivate network that uses Internet technology so that more than one company can access the same information or so that people on different servers can collaborate. Difficulty: 2 Medium Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

162) Which of the following is the best assessment of the impact extranets have had on the way small businesses operate? A) As yet, extranet technology has had little impact on small businesses, because the technology is too new and expensive. B) The development of extranets has put small firms at a serious competitive disadvantage, because suppliers and customers are more willing to participate in extranets set up by larger organizations. C) The use of extranets enables small firms to share and process data in ways that had been available in the past only to large firms that could afford electronic data interchange technology. D) The extranet has made it easier for small firms to offer their goods and services to the general public because of the increased bandwidth this technology provides. Answer: C Explanation: The extranets have had a major impact on small businesses by allowing them to share and process data such as orders, specifications, invoices, and payments in ways that were previously only available to large firms that could afford to use EDI technology. Difficulty: 2 Medium Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 163) A firm would consider establishing a virtual private network if it wanted to A) prevent people who are not employees from being able to access its network. B) set up a secure network connection with another firm for a short period of time. C) obtain a broadband connection to the Internet. D) simulate a network before it became operational in order to identify any security leaks. Answer: B Explanation: A virtual private network allows firms to establish a secure connection with other firms over regular Internet lines. This is a simpler, less expensive way to set up a secure connection than using dedicated lines. Difficulty: 2 Medium Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

164) Scientists and engineers at Epic Electronics rely on the Internet to keep in touch with their peers at various universities and research organizations. In recent years these researchers have become frustrated because the increasing congestion on the Internet has disrupted their attempts to communicate and collaborate with colleagues at other institutions. Which of the following developments would be most likely to help Epic Electronics researchers overcome this problem? A) set up an intranet B) allow its scientists and engineers to telecommute C) assign each employee a second e-mail address D) gain access to Internet2 Answer: D Explanation: Internet2 uses the very-high-speed backbone network system to speed the flow of information and support heavy-duty applications such as collaborative research. Difficulty: 3 Hard Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 165) A local university, connected to Internet2, employs several professors in its school of engineering that are part of a research project that makes extremely heavy use of the bandwidth this connection provides. In fact, the engineering professors would like to get even more bandwidth. Given the way its designers set up Internet2, the researchers at the university A) are out of luck. One drawback of Internet2 is that, unlike the regular Internet, the technology of Internet2 can allocate only a fixed amount of bandwidth to each user. B) may be able to obtain more bandwidth, but only if the university is willing to pay for it. C) must petition the Internet2 Usage Committee and obtain approval. D) can install a simple bandwidth amplification card in each computer that compresses data, thus allowing it to flow more rapidly. Answer: B Explanation: Unlike the regular Internet, which allocates bandwidth equally, Internet2 allows different users to obtain more bandwidth if they are willing to pay for it. Difficulty: 3 Hard Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

166) Fran is shopping online for jeans and she clicks on a style she likes. The site quickly presents her with a close-up view and additional information that will help her make a decision. When she adds the jeans to her shopping bag, the website quickly shows her that other customers that purchased the same pair of jeans also purchased a particular shirt and boots. As the retailer's website learns more about Fran and her purchase preferences, it is able to push other ideas toward her, and potentially increase the online retailer's units per transaction. The technology that generates this type of intelligence and personalization is called A) social media. B) cookie mining. C) Web 2.0. D) Web 3.0. Answer: D Explanation: Web 3.0 is called the personal web. It advances Web 1.0, known as the static Web, and Web 2.0, known as the social web. Difficulty: 3 Hard Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 167) ________ is a process that allows software-based networked computers to run multiple operating systems and programs, and share storage. A) Public domain softwaring B) Groupwaring C) Virtual networking D) Cloud computing Answer: C Difficulty: 1 Easy Topic: Virtual Networking Learning Objective: B-04 Explain virtual networking and discuss the benefits and drawbacks for cloud computing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

168) ________ is a form of virtualization in which a company's data and applications are stored offsite. A) Data warehousing B) Data mining C) Cloud computing D) Mobile softwaring Answer: C Difficulty: 1 Easy Topic: Virtual Networking Learning Objective: B-04 Explain virtual networking and discuss the benefits and drawbacks for cloud computing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 169) The three types of cloud computing are A) public, private, and personal clouds. B) application, analytic, and informative clouds. C) power, private, and virtual clouds. D) public, private, and hybrid clouds. Answer: D Explanation: The three types of cloud computing are private, public, and hybrid clouds. Difficulty: 2 Medium Topic: Virtual Networking Learning Objective: B-04 Explain virtual networking and discuss the benefits and drawbacks for cloud computing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

170) Gary has been using Dropbox. The cloud he is storing his information to is called a A) private cloud. B) public cloud. C) hybrid cloud. D) analytical cloud. Answer: B Explanation: Dropbox and other similar clouds are public clouds. Difficulty: 3 Hard Topic: Virtual Networking Learning Objective: B-04 Explain virtual networking and discuss the benefits and drawbacks for cloud computing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 171) One of the most revolutionary impacts computer technology has had on business has been to A) allow employees of organizations to do much of their work at home and on the road. B) increase the number of layers of management. C) replace human creativity with artificial creativity. D) make it easier for businesses to keep proprietary information safe and secure. Answer: A Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

172) Employees of a business ________ when they work at home, using computers linked to their organization's office. A) mainstream B) teleproduce C) telecommute D) compucommute Answer: C Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 173) A(n) ________ is someone who breaks into a computer system for illegal purposes. A) network crasher B) drive jockey C) arbitrageur D) hacker Answer: D Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 174) A computer ________ is a piece of programming code that is inserted into other programming to cause an unexpected and often-undesirable event for the victim. A) virus B) cold C) wasp D) firecracker Answer: A Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 66 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

175) When it comes to computers and information technology, government and corporate security officials are now most worried about A) credit card fraud. B) online theft. C) cyberterrorism. D) counterfeiting. Answer: C Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 176) The ________ was created as a part of the Office of Homeland Security and given the responsibility to devise a plan for improving the security of America's critical infrastructure. A) Homeland Security Board B) Critical Infrastructure Protection Board C) Electronic Communications Security Commission D) Committee on Infrastructure Security Procedures Answer: B Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

177) A ________ is a small piece of software code a website downloads onto the hard drives of people who visit the site. A) cookie B) brownie C) data marker D) file portal Answer: A Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 178) Instability in technology A) used to be a major problem, but such problems now are largely a thing of the past. B) still exists, but could be easily eliminated if firms would upgrade to newer equipment and software. C) remains a serious problem that is caused by a variety of factors. D) still exists, but its impact on business is greatly exaggerated by the media. Answer: C Difficulty: 1 Easy Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

179) Which of the following is an advantage of telecommuting? A) Workers are not included in the office loop. B) People who work at home have less trouble letting go of work and relaxing when the workday is over. C) Telecommuting increases travel time and costs. D) Firms may be able to retain workers who would otherwise leave or retire by allowing them to work at home. Answer: D Explanation: Because work is done in the home, there is no separation between the work environment and home environment. People who telecommute often don't know when to turn the work off. Firms may be able to retain valuable employees by allowing them to work at home. Difficulty: 2 Medium Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 180) Which of the following statements about computer viruses is most accurate? A) Viruses could be completely eliminated if people would quit sharing infected files. B) Wild rumors and sloppy reporting have exaggerated the threat computer viruses pose to typical computer users. Almost all real-world computer viruses turn out to be harmless practical jokes. C) The Internet contains built-in safeguards that prevent programs with viruses from being downloaded. D) Although antivirus software can help identify and eliminate known viruses, the software must be updated frequently to remain effective. Answer: D Explanation: Antivirus programs exist, but new viruses are being developed constantly. Existing antivirus programs cannot identify and eradicate these new viruses unless they are updated on a regular basis. Difficulty: 2 Medium Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

181) When ransomware holds your data hostage, what is most likely to happen? A) Hackers will demand you pay them to get your files back. B) Hackers permanently delete specific files. C) Hackers publicly share your personal information on social media. D) Hackers wipe your computer clean and leave it useless. Answer: A Explanation: When malicious software holds your data hostage, it's known as ransomware. Hackers then demand you pay them in order to get your valuable files back. Difficulty: 2 Medium Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 182) The ability of the Critical Infrastructure Protection Board to achieve its mission depends crucially on A) convincing corporations to adopt the more secure Internet2 technology. B) finding ways to create artificially intelligent monitors of electronic communications. C) convincing information managers in the private sector to report problems such as hacker attacks and viruses to the government. D) developing a new wireless technology that provides better data encryption. Answer: C Explanation: The Critical Infrastructure Protection Board cannot do a good job of finding ways to protect the nation's infrastructure if it doesn't know the nature and extent of the threats the infrastructure faces. Since about 85 percent of the system the board needs to protect is in the private sector, it is critical to obtain cooperation from the CIOs and other information managers. Unfortunately, many CIOs are reluctant to report incidents, fearing that the faith and confidence of investors and the general public in their companies would be shaken if such incidents became public knowledge. Difficulty: 2 Medium Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

183) Jeff's bank recently contacted him to tell him someone illegally accessed the bank's computer system and gained access to information about customer account numbers and PIN numbers. The bank is recommending Jeff and other customers change their account numbers and access numbers for security reasons. The bank and Jeff are victims of a A) net crasher. B) software pirate. C) slammer. D) hacker. Answer: D Explanation: A hacker is a person who breaks into computer systems for illegal purposes. Difficulty: 3 Hard Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

184) Alex has never worried about computer viruses. However, a friend who works in IT recently told him about a new wave of viruses. Alex is wondering whether he should pay more attention to this threat, and if so, what he can do to protect his computer. Which of the following represents the best advice for him? A) Trying to prevent viruses is likely to be more costly and troublesome than just dealing with the virus if your computer becomes infected. Moreover, the chance of actually getting a virus is very small, and even if you get one, most viruses do very little real damage. Thus the best course of action is to simply continue to ignore the problem. B) Although viruses are potentially harmful, there is no effective way to prevent their spread. The best approach is to back up important files on a regular basis and reformat the hard drive any time a virus appears. C) The Internet has automatic safeguards that prevent viruses from being transmitted when files are downloaded. Thus, the best way for Tucker to avoid harmful viruses is to use the Internet to send any files he wants to share rather than swapping easily infected diskettes. D) There is no absolutely foolproof way to avoid viruses, but one reasonably effective safeguard is to install antivirus software and use it to scan files before downloading them, particularly from unknown sources. It is important to make sure that the software is updated on a regular basis to remain effective. Answer: D Explanation: Although some viruses can be playful, others can erase or corrupt valuable data, or even cause the infected hard drive to crash. Viruses can be spread both over the Internet and by using an infected USB storage device. One way to protect against known viruses is to use antivirus software. However, since new viruses are always being developed, this software must be updated regularly to remain effective. Difficulty: 3 Hard Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

185) Gretchen works for Securitas Financial Group, but she seldom sees the inside of the offices. Instead, she does most of her work in a home office she put together in a spare bedroom. Her computer is linked to Securitas's office, so her work is distributed as quickly and efficiently as if she were at the office. Gretchen is one of the increasing number of workers who A) have become independent contractors. B) telecommute. C) compucommute. D) use linked-access shareware. Answer: B Explanation: Workers telecommute when they work from their home, using computers linked to their employers' offices. Difficulty: 3 Hard Topic: Business Technology Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 186) What are the four characteristics of useful information? Answer: Useful information has the following characteristics: • Quality. To be useful, information must be both accurate and reliable. • Completeness. There must be enough information to make a decision. However, too much information can reduce its usefulness. Today, many managers suffer from information overload. • Timeliness. Information must be available in time to make a difference. Even if information is accurate, reliable, and complete, it does a decision maker no good if it arrives after the decision has been made. • Relevance. The information must relate to the goals of the decision maker. One of the ways a manager can deal with information overload is to identify a few key goals and eliminate information that is not relevant to those goals. Difficulty: 3 Hard Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

187) What is the key difference between an intranet and an extranet? Why might a firm use a virtual private network instead of an extranet? Answer: An intranet is a companywide network, closed to public access that uses Internet-type technology. Some firms use intranets mainly to publish information for employees to use, while other firms go further and create intranet applications that enable their employees to work more efficiently. Intranets usually make use of software or hardware (or a combination of both) to create a firewall, which prevents unauthorized outsiders from gaining access to corporate information. An extranet is essentially an intranet that is open to selected outsiders. Thus, a firm might allow selected companies, such as key suppliers or customers, to have access to its intranet site. Small firms that use extranet technology can gain many of the benefits of electronic data interchange that used to be available only to large companies that could afford EDI systems. Extranets typically use regular (public) lines for Internet connections. One problem with this approach is that the semiprivate nature of the extranet makes it possible for hackers to get into a corporate system. Although the problem of unauthorized access can be overcome by using dedicated private lines, such a process is expensive and limits usage more than a firm might actually want. A less expensive and more flexible approach is to set up a virtual private network (VPN). A VPN is a private network that sets up secure connections or "tunnels" over regular Internet lines. Difficulty: 3 Hard Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

188) Identify and describe the major security issues confronting information managers. Answer: Among the most serious security issues facing information managers are computer viruses, hackers, phishing, and cyberterrorism. A computer virus is a piece of programming code that is inserted into other programming to cause an unexpected event. Some viruses are relatively harmless, the electronic equivalent of a practical joke. Other viruses are more serious, and some are downright malicious, erasing valuable data or even causing the hard drive of an infected computer to crash. Viruses are generally spread by sharing infected diskettes or by downloading infected files over the Internet. Thus, one way to protect against viruses is to avoid downloading files from questionable sites on the Internet and to take care when sharing diskettes. Antivirus software exists which can detect and eradicate known viruses. Antivirus programs can be used to check files downloaded over the Internet and to scan diskettes. Unfortunately, new viruses are constantly being developed that antivirus programs may have difficulty detecting. Most antivirus programs today allow users to download updates over the Internet that enable the program to identify newer viruses. Hackers are people who use their programming skills to break into computer systems for illegal purposes, such as gaining access to private or personal information or gaining access to someone's bank account. It is easier for hackers to break into systems that use public lines. Thus, one approach to dealing with hackers is to use secured private lines. Another approach is to use virtual private networks. Phishing is another type of online security threat. A scammer will embellish an e-mail with a stolen logo for a well-recognized brand such as eBay, PayPal, or Citibank that makes the message look authentic. Phishing messages often state something like "account activation required" to motivate the victim to click on the link contained in the message. When they click they are sent to a phony website that takes their personal data and uses it to commit fraud. Perhaps the most serious threat to security today comes from cyberterrorism. Cyberterrorists might be able to shut down the nation's communications, transportation, electrical, and financial systems. This threat is so serious that the federal government established the Critical Infrastructure Protection Board as a part of the Office of Homeland Security soon after the terrorist attacks on 9/11. This board is charged with developing a plan to improve the structure of America's information infrastructure. One key to the board's success will be gaining the cooperation of business leaders and information managers in the private sector, because more than 85 percent of the infrastructure is owned by the private sector. Difficulty: 3 Hard Topic: Effects of Information Technology on Management Learning Objective: B-05 Evaluate the human resource, security, privacy, and stability issues affected by information technology. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 75 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Mini-Case Cy Burspace first began working for Epic Electronics in the mid-1970s as a business technology specialist. Today, he is the department head for the company's information systems department. Cy is well known and respected by everyone in the company, and his coworkers recently threw a party to honor his 30th year with Epic. Cy did a lot of reminiscing at the party, telling the newer employees how things were done in the "old days," and comparing them to newer methods. "I'm still amazed at how things have changed. When I first came to Epic, we had a central computer to handle everything. It took up a whole room, but all it really did was generate financial reports for management," said Cy. "Today, employees have their own personal computer, and all are hooked up to a network. All of this connectivity has led to big improvements in our operations. For example, if a production worker wants to find out how many units of a particular component we have in inventory, or wants the name and address of a particular supplier who sells us that component, he or she can get the information in the blink of an eye. In fact, we have even given our suppliers and customers access to our network so that we can share information and provide them with better service. That change has really helped us compete against the bigger firms." "Now," Cy continued, "most of the workers in my department don't even have to be at the office to be connected. We have smartphones and laptops so we can do much of our work from home or while we are on the road." A new employee asked Cy if he was ready to retire. "No way," he said. "I'm in the middle of a major project right now. We're trying to design a single entry point for people to use when logging on to the Epic network. We want to set it up so that the log-on procedure identifies different types of users and automatically gives them access to the types of resources they need. For example, customers who logged on would be allowed to place orders, check on the status of previous orders, and interact with our technical support staff, but would not have access to other, more proprietary parts of our network. We think this approach will be more convenient for everyone. And," he continued, "once I finish that project, the marketing department has asked me to work on developing better ways to store and analyze the vast amounts of data we collect. So my work is cut out for me for quite a while yet."

189) When Cy first came to work for Epic Electronics, the application of business technology was called A) data processing. B) knowledge technology. C) information systems. D) backroom computing. Answer: A Explanation: During the 1970s, the use of business technology was known as data processing, and its major purpose was to support business by improving the flow of financial information. Difficulty: 3 Hard Topic: Business Technology Learning Objective: B-01 Outline the changing role of business technology. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 190) Cy is excited about the ability of customers to obtain access to information on Epic's network so that the company can provide them with better service. This suggests that Epic's is making use of a(n) A) shareware arrangement. B) integrated network. C) mainframe system. D) extranet. Answer: D Explanation: An extranet is a semiprivate network that lets more than one organization access the same information or lets people from different organizations collaborate. One of the most common uses of an extranet is to extend an intranet to outside customers or suppliers. Difficulty: 3 Hard Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

191) Cy's new project to provide a single entry point to his company's network that identifies users and allows them access to the areas of the network they need indicates that he is working on a(n) A) virtual network. B) web router. C) enterprise portal. D) node-to-node network system. Answer: C Explanation: An enterprise portal serves as an entry point to the resources on a company's network. A portal is more than a web page with links. Well-designed portals identify users when they log on to the system and allow them access to areas of the network based on their relationship to the company. Difficulty: 3 Hard Topic: Knowledge Management Learning Objective: B-03 Compare the scope of the Internet, intranets, extranets, and virtual private networks and explain how broadband technology enabled the evolution to Web 2.0 and 3.0. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 192) People in marketing want Cy's help because they are convinced that many hidden patterns and unexpected relationships could be found in the mountains of data the company accumulates. They think that discovering these relationships might help them develop new marketing strategies. This suggests that Cy's next project will be concerned with A) datametric analysis. B) data mining. C) data refining. D) data orienteering. Answer: B Explanation: Data mining looks for hidden patterns and unexpected relationships among data. Difficulty: 3 Hard Topic: Types of Business Information Learning Objective: B-02 List the types of business information, identify the characteristics of useful information, and discuss how data is stored and analyzed. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

Understanding Business, 12e (Nickels) Bonus Chapter C Managing Risk 1) The management of risk is a small part of global business. Answer: FALSE Difficulty: 1 Easy Topic: Risk Management Learning Objective: C-01 Identify the environmental changes that have made risk management important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) An enterprise risk management (ERM) program has a goal of defining which risks the program will manage. Answer: TRUE Difficulty: 1 Easy Topic: Risk Management Learning Objective: C-01 Identify the environmental changes that have made risk management important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) Companies adopt risk management procedures to minimize the chance of business failure due to unplanned events such as security breaches, terrorist attacks, and natural disasters. Answer: TRUE Difficulty: 1 Easy Topic: Risk Management Learning Objective: C-01 Identify the environmental changes that have made risk management important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

4) Risk management involves minimizing the losses from unexpected events. Answer: TRUE Difficulty: 1 Easy Topic: Risk Management Learning Objective: C-01 Identify the environmental changes that have made risk management important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 5) Risk management is getting much simpler thanks to the Internet. Answer: FALSE Explanation: Change is occurring so fast that it is difficult to identify new risks until they are upon us. Difficulty: 2 Medium Topic: Risk Management Learning Objective: C-01 Identify the environmental changes that have made risk management important. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) SpeedyTime Delivery Service is managing risk by requiring all drivers to wear seat belts and hold a commercial driver's license, by monitoring any moving violations each driver obtains, and by keeping that information in the employee records. Additionally, SpeedyTime carries an insurance policy with a very large deductible, preferring to pay for small damages to its trucks out-of-pocket. SpeedyTime has built enterprise risk management into their organization. Answer: TRUE Explanation: Enterprise risk management usually has a few well-defined goals, such as (1) defining which risks the program will manage; (2) what risk management processes, technologies, and investments will be required; and (3) how these efforts will be coordinated across the firm. Difficulty: 3 Hard Topic: Risk Management Learning Objective: C-01 Identify the environmental changes that have made risk management important. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

7) Citrus City Groves on Florida's Gulf Coast, harvests an assortment of citrus fruits. The owners of Citrus City are right to think about how the risk of climate change might impact their crops in the future. Answer: TRUE Explanation: Risk management is getting more complex and more critical for all businesses, including farmers. Difficulty: 3 Hard Topic: Risk Management Learning Objective: C-01 Identify the environmental changes that have made risk management important. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 8) Risk is a term that refers to the chance of loss, the degree of probability of loss, and the amount of possible loss. Answer: TRUE Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9) There are two different kinds of risk: passive and active. Answer: FALSE Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

10) Speculative risk involves a chance of either profit or loss. Answer: TRUE Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) Pure risk involves the chance of either a profit or a loss. Answer: FALSE Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) An entrepreneur takes a speculative risk when starting a new business. Answer: TRUE Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 13) The chance of a fire is an example of a pure risk. Answer: TRUE Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

14) If a pure risk occurs, a company loses money. However, if the events do not occur, the company gains nothing. Answer: TRUE Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) Businesses can often reduce the risk to which they are exposed. Answer: TRUE Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 16) The type of risk that is of most concern to businesspeople is speculative risk. Answer: FALSE Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 17) One way to lower the need for outside insurance is to self-insure. Answer: TRUE Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

18) The beginning of an effective risk management strategy is a good loss-prevention program. Answer: TRUE Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 19) Outsourcing helps some companies avoid risk. Answer: TRUE Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) Self-insurance is the practice of setting aside money to cover routine claims and buying only "catastrophe" policies to cover big losses. Answer: TRUE Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 21) Self-insurance makes more sense for firms that operate one large facility than it does for firms with facilities scattered all over the country. Answer: FALSE Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

22) Going bare is a much less risky strategy for self-insurance. Answer: FALSE Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 23) When a firm that is self-insuring against risk decides to cover losses straight out of its budget, it is said to be "going bare." Answer: TRUE Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 24) A well-designed and implemented risk-prevention program can eliminate the potential of loss. Answer: FALSE Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 25) All risks are insurable. Answer: FALSE Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

26) The federal government provides some insurance protection. Answer: TRUE Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 27) Federal Housing Administration (FHA) insurance provides insurance to property owners in high-crime areas. Answer: FALSE Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 28) The Pension Benefit Guaranty Corporation provides retirement benefits, life insurance, health insurance, and disability income insurance. Answer: FALSE Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) An uninsurable risk is one that no insurance company will cover. Answer: TRUE Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

30) Any risk is insurable as long as you can pay the premium. Answer: FALSE Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 31) Insurable interest means that the policyholder is the one at risk to suffer a loss. Answer: TRUE Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32) Insurance companies will provide coverage only for losses that are accidental. Answer: TRUE Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 33) A terrorist attack is an example of pure risk. Answer: TRUE Explanation: There are two different kinds of risk. Speculative risk involves a chance of either a profit or a loss. Pure risk is the threat of a loss with no chance for profit. A terrorist attack is an example of a pure risk. Difficulty: 2 Medium Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

34) Water sprinklers and smoke detectors can be used to minimize speculative risks. Answer: FALSE Explanation: Pure risk is the threat of loss with no chance for profit. Pure risk involves the threat of fire, accident, or loss. Speculative risk involves the potential of either a profit or a loss. Difficulty: 2 Medium Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) Some companies are avoiding risk through the use of product recalls. Answer: TRUE Explanation: The threat of lawsuits has driven companies to stop making some products and recall them. Difficulty: 2 Medium Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) Typically, the only option that firms have to deal with pure risk is to buy insurance. Answer: FALSE Explanation: Once a pure risk is identified, firms have several options: (1) reduce the risk; (2) avoid the risk; (3) self-insure against the risk; and (4) buy insurance against the risk. Difficulty: 2 Medium Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

37) The best strategy for a profit-seeking insurance company would be to specialize in providing protection to people in a specific geographical area. Answer: FALSE Explanation: Most firms seek to disperse the risk by offering protection in a variety of geographical areas. Difficulty: 2 Medium Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) SpeedyTime Delivery requires their drivers to wear seat belts as they operate their trucks. This is an example of self-insuring as a risk management strategy. Answer: FALSE Explanation: Wearing seat belts is not self-insurance, but rather a way a business like SpeedyTime can reduce risk. Seat belts will minimize the severity of injuries from accidents. Self-insurance is a strategy where firms set aside money to cover routine claims and buy "catastrophe" insurance to cover big losses. Difficulty: 3 Hard Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 39) Soap Stars, Inc. is ready to launch a new shampoo in the marketplace. They will incur a speculative risk. Answer: TRUE Explanation: Speculative risk involves a potential of either profit or loss. Difficulty: 3 Hard Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

40) Marshall Manufacturing has decided to stop producing football helmets due to the potential size of losses involved in product liability cases. This is an example of "avoiding risk" as an alternative risk management strategy. Answer: TRUE Explanation: The threat of lawsuits has driven several companies from offering certain types of goods or services. These firms are avoiding the risk associated with these markets. Difficulty: 3 Hard Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 41) Atlanta Appliances produces all of its products in one gigantic production facility near an earthquake fault line. Atlanta Appliances is the classic example of a firm that should use selfinsurance to manage its risks. Answer: FALSE Explanation: Since a major fire or earthquake could destroy Atlanta Appliances' entire production capacity, self-insurance would be very risky. A firm that had more dispersed facilities would be a better candidate for self-insurance. Difficulty: 3 Hard Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 42) An example of an uninsurable risk would be the potential losses suffered by Patrick's Pizza Pies resulting from a popular new product from Paulie's Pizza Palace. Answer: TRUE Explanation: An uninsurable risk is one that no insurance company will cover. Market risks are generally uninsurable. These losses occur as a result of price or style changes, or new products that make other products obsolete. Difficulty: 3 Hard Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

43) Apple has an insurable interest in the lives of its top executives. Answer: TRUE Explanation: To have an insurable risk in the life of another individual, you must provide evidence of a measurable loss if that individual dies. Many companies do protect against the loss of the knowledge, skills, and leadership of top executives by purchasing life insurance policies. Difficulty: 3 Hard Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 44) Molly's neighbor, Steve, is quite careless and is in danger of burning his house down. Molly tried to buy a fire insurance policy on Steve's house, so she could collect the payment when Steve inevitably burned down his own house. The insurance company would not allow Molly to purchase the policy because she did not have an insurable interest in the property. Answer: TRUE Explanation: To have an insurable risk, Molly must have an insurable interest, which means that the policyholder (Molly) is the one at risk to suffer a loss. Molly cannot buy fire insurance on Steve's house and collect if it burns down. Difficulty: 3 Hard Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 45) An insurance premium is the fee charged by the insurance company in return for their promise to pay for all or part of a loss. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-03 Define insurance policies, and explain the law of large numbers and the rule of indemnity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

46) An insurance policy is a written contract. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-03 Define insurance policies, and explain the law of large numbers and the rule of indemnity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 47) The law of large numbers states that if a large number of people are exposed to the same risk, a predictable number of losses will occur during a given period of time. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-03 Define insurance policies, and explain the law of large numbers and the rule of indemnity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 48) According to the rule of indemnity, an insured person cannot collect more than the actual loss from an insurable risk. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-03 Define insurance policies, and explain the law of large numbers and the rule of indemnity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 49) A stock insurance company is owned by its policyholders. Answer: FALSE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-03 Define insurance policies, and explain the law of large numbers and the rule of indemnity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

50) A mutual insurance company is a nonprofit organization. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-03 Define insurance policies, and explain the law of large numbers and the rule of indemnity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 51) A mutual insurance company is owned by its policyholders. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-03 Define insurance policies, and explain the law of large numbers and the rule of indemnity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 52) An insurance company can use the law of large numbers to predict the number of people in your community that will have a car accident in a given month. Answer: TRUE Explanation: The law of large numbers states that if a large number of people or organizations are exposed to the same risk, a predictable number of losses will occur during a given period of time. Difficulty: 2 Medium Topic: Insurance Policies Learning Objective: C-03 Define insurance policies, and explain the law of large numbers and the rule of indemnity. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

53) Insurance companies make predictions such as how recent health trends will affect the number of heart attacks that men in the United States over the age of 45 will suffer. Answer: TRUE Explanation: The law of large numbers states that if a large number of people or organizations are exposed to the same risk, a predictable number of losses will occur during a given period of time. In this case health trends are the source of risk and medical care or death from heart attacks is the loss. Difficulty: 2 Medium Topic: Insurance Policies Learning Objective: C-03 Define insurance policies, and explain the law of large numbers and the rule of indemnity. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 54) Tom and Sarah are both 24 years old and looking for car insurance. While comparing numbers, they notice the car insurance premiums charged for young male drivers are higher than the premiums for young female drivers. This is due to the rule of indemnity. Answer: FALSE Explanation: The rule of indemnity says that an insured person cannot collect more than the actual loss from an insurable risk. Premiums are charged for anticipated costs to the insurance company. Providing insurance protection for young male drivers is more expensive than the costs of covering female drivers. Difficulty: 3 Hard Topic: Insurance Policies Learning Objective: C-03 Define insurance policies, and explain the law of large numbers and the rule of indemnity. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 55) Donna owns a life insurance policy on her husband Mike through Securitas Mutual Life Insurance Company. As a policyholder, she also owns part of the company. Answer: TRUE Explanation: A mutual insurance company is owned by its policyholders. Difficulty: 3 Hard Topic: Insurance Policies Learning Objective: C-03 Define insurance policies, and explain the law of large numbers and the rule of indemnity. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

56) Property insurance covers losses from fires, accidents, or theft. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 57) Liability losses result from property damage or injuries suffered by others for which the policyholder is held responsible. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 58) One advantage of health savings accounts is that healthy people can use tax-deferred money to save for their future medical needs. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 59) Health savings accounts are managed care plans that have a high deductible. Answer: FALSE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

60) The chances of dying when young are much higher than the chances of becoming disabled when young. Answer: FALSE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 61) Disability insurance replaces part of your income if you become disabled and can no longer work, but you usually must be disabled for a specified period of time before benefits are provided. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 62) Workers' compensation insurance guarantees payment of wages, medical care, and rehabilitation services for employees who are injured on the job. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

63) The premium charged for workers' compensation insurance is the same for all workers, regardless of their occupation. Answer: FALSE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 64) Workers' compensation insurance is required in all states except Louisiana. Answer: FALSE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 65) Professional liability insurance is also sometimes known as malpractice insurance. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 66) Product liability insurance covers liability arising out of defective products sold. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

67) Firms can take out term life-insurance policies on their top executives. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 68) Most homeowners' insurance policies automatically provide adequate coverage for small home-based businesses. Answer: FALSE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 69) An endorsement can provide additional coverage to a homeowner's policy for business equipment. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 70) A fidelity bond covers losses resulting from a second party's failure to fulfill a contract. Answer: FALSE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

71) A surety bond protects employers from employee dishonesty. Answer: FALSE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 72) Risk management is concerned only with risks to individuals and businesses. Answer: FALSE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 73) Worldwide risks need to be prioritized so that international funds can be spent where they can do the most good. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 74) Risks such as global warming are the concern of businesses and governments primarily in the U.S. Answer: FALSE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

75) It's good advice for doctors and lawyers to carry malpractice insurance. Answer: TRUE Explanation: Professional liability insurance, also called malpractice insurance, covers people who are found liable for professional negligence. Difficulty: 2 Medium Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 76) John is part of a highway construction crew and frequently handles explosives. His friend Don is a bookkeeper for a retail store. The amount of workers' compensation premiums paid by John's employer will probably exceed the premiums paid by Don's employer. Answer: TRUE Explanation: The cost of workers' compensation varies by the company's safety record, its payroll, and the types of hazards faced by workers. It costs more to insure a construction worker than to insure a bookkeeper. Difficulty: 3 Hard Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 77) Which of the following is a goal of enterprise risk management? A) defining which risks the program will manage B) deciding how to petition the government for financial help C) assigning risk management to a lobbyist in Washington D) refining the business plan for risk management Answer: A Difficulty: 1 Easy Topic: Risk Management Learning Objective: C-01 Identify the environmental changes that have made risk management important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

78) Risk management for business is critical due in part to A) natural disasters. B) profitability. C) legal requirements. D) international requirements. Answer: A Difficulty: 1 Easy Topic: Risk Management Learning Objective: C-01 Identify the environmental changes that have made risk management important. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 79) Enterprise risk management is A) important to business. B) irrelevant to business. C) only used by nonprofit organizations. D) only used by the Department of Homeland Security. Answer: A Explanation: A survey showed that 80% of organizations either have or are in the process of developing an enterprise risk management into their organizations. The management of risk is a major issue for businesses throughout the country. Difficulty: 2 Medium Topic: Risk Management Learning Objective: C-01 Identify the environmental changes that have made risk management important. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

80) Risk management is A) only a consideration to insurance companies. B) increasing in importance. C) decreasing in importance. D) used exclusively when engaging in global Internet business. Answer: B Explanation: With terrorist attacks, wars, corporate and government scandals, and several major hurricanes and tornadoes, it is no surprise that risk management is increasing in importance. Difficulty: 2 Medium Topic: Risk Management Learning Objective: C-01 Identify the environmental changes that have made risk management important. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 81) Sean is in charge of risk management for First Friends, Inc., a large chain of preschools on the East Coast. He has decided to build enterprise risk management into the organization. The first step Sean should take is to A) decide on the spyware software the organization should buy. B) send a letter to all of the staff informing them that using e-mail for personal purposes will not be allowed. C) remove the playgrounds from all of the locations. D) decide which risks the organization should manage. Answer: D Explanation: An enterprise risk management (ERM) program usually has a few well-defined goals, the first of which is to define which risks the program will manage. Difficulty: 3 Hard Topic: Risk Management Learning Objective: C-01 Identify the environmental changes that have made risk management important. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

82) ________ is a term that refers to the chance of loss, the degree of probability of loss, and the amount of possible loss. A) Speculation B) Hazard C) Insurability D) Risk Answer: D Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 83) ________ risk involves a chance of either profit or loss. A) Insurable B) Managed C) Speculative D) Pure Answer: C Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 84) ________ risk involves the threat of loss with no chance for profit. A) Minimum B) Pure C) Speculative D) Managed Answer: B Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

85) Which type of risk management strategy is a company using when it installs mirrors and surveillance cameras to spot and prevent shoplifting? A) avoiding the risk B) insuring against the risk C) assuming the risk D) reducing the risk Answer: D Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 86) Some businesses will set aside money to cover routine losses and buy "catastrophe" policies to cover big losses. This is an example of which of the following? A) avoiding the risk B) self-insuring against the risk C) reducing the risk D) loss-prevention program Answer: B Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 87) A firm that chooses to self-insure and cover losses out of its budget is said to A) fly blind. B) roll boxcars. C) go bare. D) internalize risk. Answer: C Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

88) An insurance company would not be willing to insure a risk if it A) results from political disruptions. B) has a measurable loss. C) results from an accident. D) has a low probability of occurring. Answer: A Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 89) A policyholder must have a(n) ________ in what is being insured, meaning that the policyholder must be the one at risk to suffer an economic loss. A) speculative interest B) uncertain stake C) unsecured holding D) insurable interest Answer: D Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 90) ________ is the armor individuals, businesses, and nonprofit organizations use to protect themselves from various financial risks. A) A good accountant B) Investment in AAA bonds C) Insurance D) Indemnity Answer: C Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 27 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

91) Organizations spend about ________ percent of gross domestic product on insurance premiums. A) 2 B) 5 C) 10 D) 20 Answer: C Difficulty: 1 Easy Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 92) Sadly, during a war many civilians watch as everything they have is destroyed. Insurance companies will view this type of loss as A) an insurable risk. B) an uninsurable risk. C) a demonstration of the law of large numbers. D) a rule of indemnity. Answer: B Explanation: An uninsurable risk is one that no insurance company will cover, including political risks such as losses from war. Difficulty: 2 Medium Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

93) Amusement parks often have a minimum height restriction on some of their most thrilling rides. This risk management strategy is done in an effort to A) minimize the speculative risk associated with an injury. B) reduce the risk associated with a potential accident. C) self-insure against a catastrophic accident. D) create the perception of a more exciting ride. Answer: B Explanation: Reducing risk can be accomplished by establishing loss-prevention programs or strategies such as the height restriction used by amusement parks. Some amusement parks will discourage pregnant guests or those with a history of heart or back problems from riding certain rides. Difficulty: 3 Hard Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 94) Brad has decided to increase the size of his auto repair business, although he realizes that this decision brings added risk. This is an example of ________ risk. A) speculative B) pure C) insurable D) managed Answer: A Explanation: Speculative risk involves the potential of earning a profit or incurring a loss. Difficulty: 3 Hard Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

95) Arturo is worried about the risk of potential flooding to his restaurant. He decides to buy insurance to cover this ________ risk. A) speculative B) pure C) uninsurable D) managed Answer: B Explanation: Pure risk is the threat of loss with no chance for profit. If a flood occurs, the company will incur a loss; but if a flood does not occur, the company gains nothing. Difficulty: 3 Hard Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 96) Robert, owner and operator of a local nursing home, is designing an addition. Though, he realized that water sprinklers and smoke detectors were now required by state regulations, it was not a problem for him. His existing structure already had sprinklers and detectors because he felt that this was an effective strategy to A) self-insure against the risk of fire loss. B) minimize the speculative risk of a fire. C) reduce the risk of a fire loss. D) avoid the risk of a fire loss. Answer: C Explanation: A firm can reduce risk by establishing loss-prevention programs such as fire drills, health education, safety inspections, equipment maintenance, and accident prevention programs. Water sprinklers and smoke detectors are used to reduce the risk of fire loss. Difficulty: 3 Hard Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

97) AutoPROs recalled thousands of tires when several people died in traffic accidents blamed on faulty tires. This is an example of which of the following? A) avoiding the risk B) self-insuring against the risk C) reducing the risk D) a loss-prevention program Answer: C Explanation: Recalling tires before more people were killed or hurt allowed Firestone and Ford to reduce the potential liability from consumer injuries. Difficulty: 3 Hard Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 98) In an effort to minimize the cost of conventional property/casualty insurance, Epic Electronics decided to manage their risk by self-insuring. The most likely way Epic would try to do this would be to A) cover small and medium-sized losses itself, and carry conventional insurance only for catastrophic losses. B) carry insurance for the small, routine losses and pay for any highly unusual major losses with its own funds. C) buy an insurance policy that covers all risks. D) establish a well-monitored loss-prevention program. Answer: A Explanation: Self-insuring lowers the cost of insurance by having the organization pay for smaller, routine losses, and then buying "catastrophe" policies to cover larger losses. Difficulty: 3 Hard Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

99) Ernesto is opening a new car wash. The required investment of money and time is sizable and although he has high hopes, Ernesto is taking a speculative risk. What does this mean? A) His investment involves a chance of profit or loss. B) His risk can be shifted to an insurance company if he buys product liability insurance. C) He would be best advised to self-insure his exposure to malpractice liability. D) His insurance premium would be based on the law of large numbers. Answer: A Explanation: A speculative risk involves the chance of either profit or loss. All entrepreneurs take speculative risk on the chance of making a profit. Difficulty: 3 Hard Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 100) Simon owns several gas stations. He realizes that among the several risks associated with this type of business is the risk of minor damage to cars from dirty or contaminated fuel. He also knows that there is a small chance of a major loss if a fire occurred at one of his gas stations. Simon wants to control his insurance costs while still maintaining a reasonable risk management program. He is considering self-insurance. If he decides to use this approach, he will probably A) rely entirely on a strategy of risk avoidance. B) decide to cover both types of risk himself. C) decide to self-insure for the smaller, more routine, losses associated with the damage caused by dirty or contaminated fuel, but seek coverage from an insurance company for the potentially much larger loss from a fire. D) decide to cover the risk of fire himself, and take out an insurance policy to cover the risk of contaminated fuel. Answer: C Explanation: Self-insurance is a strategy to lower insurance costs by setting aside money to cover routine claims and then taking out insurance for larger, potentially catastrophic, losses. Difficulty: 3 Hard Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

101) DeMario was turned down when he attempted to buy a life insurance policy on his former Introduction to Business instructor. The most likely reason the insurance company turned down his attempt to insure the life of his former instructor was that A) the chance of the loss could not be measured. B) he did not have an insurable interest in the instructor's life. C) the instructor had already taken out a policy. D) the loss would not be accidental. Answer: B Explanation: In order for a risk to be insurable, the policyholder must have an insurable interest. This means that the policyholder must be at risk to suffer an economic loss. Though DeMario probably would feel very sad at the demise of his instructor, nothing in the question suggests he would suffer an economic loss. Difficulty: 3 Hard Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 102) The National Highway Traffic Safety Administration (NHTSA) provides consumers with recall notices for all makes and models of cars, trucks, motorcycles, and even school buses. In terms of risk management, the purpose of the NHTSA service is A) to reduce risk. B) to avoid risk. C) to self-insure against risk. D) to make available the opportunity for vehicle owners to purchase insurance against risk. Answer: A Explanation: Business and individuals can help manage pure risk. In this example, when auto manufacturers recall vehicles for maintenance and repair, they are effectively reducing the risk of accidents or auto failure. Difficulty: 3 Hard Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

103) New Dimensions Athletic Association was formed to administer youth soccer leagues and tournaments in a popular urban area. All board members recently resigned stating that they could no longer assume the risk of participating on a board that did not insure its volunteer members against serious player injuries and other unanticipated problems. Collectively, these members are A) self-insuring against risk. B) avoiding risk. C) participating in risk reduction. D) filing a grievance against the association. Answer: B Explanation: Risk avoidance means that the business or individual has made the decision not to participate, in order to avoid risk at all cost. Businesses will sometimes make the decision not to sell certain products or services due to their high risk nature. Difficulty: 3 Hard Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 104) Aqua Sprinkler Systems experienced increasing sales for several years. The firm expanded its product offerings, and now serves both commercial and residential customers. Which of the following situations would be considered an uninsurable risk for Aqua Sprinkler Systems? A) a fire that destroys its warehouse B) employee sues company due to injury on the job C) equipment theft that causes work downtime D) drought-resistant grass technology that disrupts sales Answer: D Explanation: An uninsurable risk is one that insurance companies will not cover. When new technologies become marketable, there is always the risk that products that were used for the same purpose become obsolete. Speculative risks are not insurable. Pure risks are usually insurable. Difficulty: 3 Hard Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

105) Risky Business Insurance Company insures business clients against unexpected disasters such as tornadoes and floods. The company operates in several regions in the U.S., and negotiates contracts following standard insurance industry guidelines. A strategic business guideline that the company would follow is A) The amount of loss should be equal to or less than a loss covered by a competitor company. B) There should be documentation that clearly attests to the fact that the loss of buildings, equipment, and even lives is not measurable. C) The company's clients should be dispersed among several geographic areas so that the lack of natural disasters in some areas will compensate for more natural disasters in other areas. D) All insurance companies that sell similar insurance would equally divide the number of claims, so as not to compete unfairly against each other. Answer: C Explanation: There are limits as to what an insurance company will cover in a premium. The industry has criteria that are followed when deciding what is insurable and what is not insurable. Selling premiums to clients in several different regions where weather patterns and geologic events differ will reduce the insurance firm's overall risk. Difficulty: 3 Hard Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 106) The ________ says that an insured person cannot collect more than the actual loss from an insurable risk. A) law of large numbers B) rule of indemnity C) law of diminishing returns D) rule of finite loss coverage Answer: B Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-03 Define insurance policies, and explain the law of large numbers and the rule of indemnity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

107) A ________ insurance company is owned by stockholders, just like any other investorowned company. A ________ insurance company is owned by its policyholders. A) stock; mutual B) corporate; stock C) stock; corporate D) mutual; limited liability Answer: A Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-03 Define insurance policies, and explain the law of large numbers and the rule of indemnity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 108) There have been a series of large judgments in product liability cases against companies producing hair dryers. If this trend continues, insurance companies will respond by ________ the premiums charged for liability insurance for hair dryer manufacturers. A) lowering B) canceling C) increasing D) underwriting Answer: C Explanation: The premium is the fee charged by an insurance company for its coverage. The insurance firm must charge a premium that is adequate to cover its losses and make a profit. As damage awards have increased, so have the premiums charged for the risk protection. Difficulty: 2 Medium Topic: Insurance Policies Learning Objective: C-03 Define insurance policies, and explain the law of large numbers and the rule of indemnity. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

109) Which of the following statements best reflects the concept behind the rule of indemnity? A) If a large number of people are exposed to the same risk, a predictable number of losses will occur during a given period of time. B) If a written contract exists between the insured and an insurance company, the insured is entitled to receive the maximum amount stated in the contract in the event of a loss. C) If an insurance company's premiums generate excess funds, these excess funds must be returned to the policyholders in the form of dividends or reductions in future premiums. D) An insured person cannot collect more than the actual loss from an insurable risk. Answer: D Explanation: The rule of indemnity states that individuals cannot gain from risk management. They can only minimize their losses. Difficulty: 2 Medium Topic: Insurance Policies Learning Objective: C-03 Define insurance policies, and explain the law of large numbers and the rule of indemnity. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 110) Erin received a letter from her employer's insurance company inquiring if her children had health insurance coverage from another provider. According to the ________, the insurance provider has the right to this information. A) rule of 80 B) rule of indemnity C) law of legal compliance D) law of large numbers Answer: B Explanation: The rule of indemnity states that a policyholder cannot expect payment by two different insurance companies for the same claim. Difficulty: 3 Hard Topic: Insurance Policies Learning Objective: C-03 Define insurance policies, and explain the law of large numbers and the rule of indemnity. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

111) Home-based business owners add a ________ to their homeowner's insurance policy to ensure that they have adequate coverage. A) deductible unit B) compensation clause C) rider D) tag Answer: C Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 112) ________ insurance replaces part of your income if you become unable to work for an extended period of time. A) Product liability B) Workers' compensation C) Professional liability D) Disability Answer: D Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

113) ________ insurance guarantees payment of wages, medical care, and rehabilitation services for employees who are injured on the job. A) Product liability B) Workers' compensation C) Professional liability D) Malpractice Answer: B Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 114) ________ insurance provides benefits to the survivors of workers who die as a result of work-related injuries. A) Health B) Professional liability C) Workers' compensation D) Malpractice Answer: C Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

115) The risk of environmental harm is ________ in its proportions on issues such as global warming. A) local B) regional C) national D) international Answer: D Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 116) A characteristic of a health savings account that distinguishes it from other types of health care coverage is that it A) is not tax-deferred. B) allows people to save money for medical expenses in a tax-deferred account. C) covers only emergency procedures. D) provides unlimited access to routine medical services (such as office visits) and minor medical tests and procedures (such as blood tests and X-rays) at no cost. Answer: B Explanation: Health savings accounts (HSAs) are tax-deferred accounts that allow people to save money for medical expenses. Part of the money currently spent on health insurance is deposited into an HSA and used to buy a catastrophic insurance policy that covers major medical expenses. Difficulty: 2 Medium Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

117) Workers' compensation insurance A) covers people who are found liable for professional negligence. B) provides coverage against liability arising out of products sold. C) is only required by 48 states. D) guarantees payment of wages and medical costs for employees who are injured on the job. Answer: D Explanation: Workers' compensation insurance guarantees payment of wages, medical care, and rehabilitation services for employees who are injured on the job. Difficulty: 2 Medium Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 118) Risk management now includes the evaluation of A) worldwide risks such as global warming. B) worldwide issues such as poverty. C) European issues such as the value of the euro. D) political risks in South America. Answer: A Explanation: Risk management goes beyond the protection of individuals, businesses, and nonprofit organizations from known risks. It means the evaluation of worldwide risks such as global warming. Difficulty: 2 Medium Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

119) Lyla owns a small jewelry business with only four employees. She opened her business recently and makes just enough to pay her bills each week. Yesterday, just before the end of her first quarter in business, she received a notice from the government indicating that she needed to provide evidence of workers' compensation insurance. Lyla A) realized she was required to provide this insurance so she immediately got a policy. B) is not required to carry workers' compensation because she has less than ten employees. C) doesn't need workers' compensation because her business is in Louisiana. D) doesn't need workers' compensation because she is not in the construction business. Answer: A Explanation: All 50 states require employers to provide workers' compensation insurance. Difficulty: 3 Hard Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 120) Antonio is a silversmith and works with various metals. At the end of the day, he reclaims and separates each metal by using an inexpensive toxic acid though other methods are available. The risk of fire as well as health dangers to Antonio is unknown. What should Antonio do? A) Dispose of the used acid by pouring it down the drain since the government will take care of any environmental issues that come from polluting the water. B) Get a fire insurance policy and make sure to visit the doctor regularly. C) Switch to another potentially less dangerous method of separating each metal. D) Pour it out in back of the studio in the gutter. Answer: C Explanation: Risk management should be the concern of each individual as well as the international community. No insurance company can protect humanity from every risk especially those that may contribute to global warming so many companies are going out of their way to protect the environment. Difficulty: 3 Hard Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

121) Explain the four ways of managing risk. Answer: The four ways of managing risk include (1) reduce the risk; (2) avoid the risk; (3) selfinsure against the risk; and (4) buy insurance against the risk. A firm can reduce risk by establishing loss-prevention programs such as fire drills, health education, safety inspections, equipment maintenance, accident prevention programs, and so on. Product recalls such as those by Johnson & Johnson Company, Ford, and Firestone also reduce risk. Employees can also reduce risk by their own behavior such as wearing a seat belt while driving on the job. Some companies are avoiding risk by not accepting hazardous jobs and by outsourcing shipping and other functions. Some companies are losing outside members of their boards of directors for lack of liability coverage protecting them from legal action against the firms they represent. Many companies cut back on their investments in the early 2000s to avoid losses. Many companies and municipalities have turned to self-insurance because they either can't find or can't afford conventional property/casualty policies. Such firms set aside money to cover routine claims and buy only "catastrophic" insurance policies to cover big losses. Insurance is the armor individuals, businesses, and nonprofit organizations use to protect themselves from various financial risks. For this protection, organizations spend about 10 percent of gross domestic product on insurance premiums. Some insurance protection is provided by the federal government such as unemployment compensation and social security. Difficulty: 3 Hard Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

122) Explain the difference between speculative risk and pure risk. Which type of risk is of more concern to businesspeople? Answer: Pure risk is of more concern to businesspeople because it can wipe out the entire company. Pure risk is the threat of loss with no chance for profit. Pure risk involves the threat of fire, accident, or loss. If such events occur, a company loses money; but if the events do not occur, the company gains nothing. Speculative risk involves a chance of either profit or loss. It includes the chance a firm takes to make extra money by buying new machinery, acquiring more inventory, and/or making other decisions in which the probability of loss may be relatively low and the amount of loss is known. An entrepreneur takes speculative risk on the chance of making a profit. Difficulty: 3 Hard Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation 123) Explain what makes the acceptance of risk possible for insurance companies. Answer: The law of large numbers states that if a large number of people or organizations are exposed to the same risk, a predictable number of losses will occur during a given period of time. Once the insurance company predicts the number of losses likely to occur, it can determine the appropriate premiums for each policy it issues. The premium is supposed to be high enough to cover expected losses and yet earn a profit for the firm and its stockholders. Today, many insurance companies are charging high premiums not for past risks but for the anticipated costs associated with the increasing number of court cases and high damage awards. Difficulty: 3 Hard Topic: Insurance Policies Learning Objective: C-03 Define insurance policies, and explain the law of large numbers and the rule of indemnity. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

124) Explain the benefits of workers' compensation. Who is required to carry this type of insurance? Answer: Workers' compensation insurance guarantees payment of wages, medical care, and rehabilitation services (e.g., retraining) for employees who are injured on the job. This insurance also provides benefits to the survivors of workers who die as a result of work-related injuries. Employers in all 50 states are required to provide this insurance. Difficulty: 3 Hard Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation Mini-Case The Bookworm is a bookstore and café located on a busy downtown main street in Denver. The owner, Waata Reader, prides himself on the vast selection of books available in the store. The store has three stories, with both stairs and an elevator to each level. In the back of the first floor is the café, which serves pastries and coffee drinks. Many times customers will linger there over a cup of coffee, deciding which book to purchase. Waata has expanded several times and now has 22 people on the staff. 125) Bookworm sales have been down for the last year due to new competition from a national chain and Waata is understandably concerned. He recently called his insurance agent to see if this downturn in sales was covered by his business policy. The agent, Will B. Safe, told Waata A) he could submit a claim and most likely the company would cover it. B) market risks are uninsurable and in fact, his business policy does not cover those. C) personal risks such as the decrease in his store's sales are not insurable. D) the company would definitely cover Waata's losses. Answer: B Explanation: An uninsurable risk is one that no insurance company will cover. Examples of things that you cannot insure include market risks (e.g., losses that occur because of price changes, style changes, or new products that make your product obsolete); political risks (e.g., losses from war or government restrictions on trade); some personal risks (such as loss of a job, NOT a decrease in sales at the store); and some risks of operation such as a strike or equipment malfunction. Difficulty: 3 Hard Topic: Four Ways of Managing Risk Learning Objective: C-02 Explain the four ways of managing risk, and distinguish between insurable and uninsurable risk. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 45 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

126) One of Waata's staff members has been out on sick leave because she had an emergency appendectomy. She brought the hospital bills in to Waata for his opinion. It seems she had been covered by two health insurance policies for some time and now she thinks she may be able to collect from both companies in payment for the operation. Waata assured his employee that A) she could look forward to a check from both companies once they had paid the medical bills. B) because of the rule of indemnity she would not be able to profit from her operation. C) because of the law of large numbers both insurance companies would pay her directly. D) because her risk was insurable, she would be able to collect from both insurance policies. Answer: B Explanation: The rule of indemnity says that an insured person or organization cannot collect more than the actual loss from an insurable risk. One cannot gain from risk management; one can only minimize losses. One cannot, for example, buy two insurance policies and collect from both for the same loss. Difficulty: 3 Hard Topic: Insurance Policies Learning Objective: C-03 Define insurance policies, and explain the law of large numbers and the rule of indemnity. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 127) When one of Waata's employees was stocking a particularly high shelf one morning; he reached a bit too far and fell off the ladder. Luckily he just broke his arm and returned to work later that day. His medical bills due to this accident were covered under A) workers' compensation. B) disability insurance. C) liability insurance. D) his own health insurance. Answer: A Explanation: Workers' compensation insurance guarantees payment of medical care for employees who are injured on the job. Employers in all 50 states are required to provide this insurance. Difficulty: 3 Hard Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

128) One afternoon Waata was called to the café. One of Waata's staff had inadvertently spilled hot coffee on a customer's arm and the customer was left with a burn. Waata sent the customer off to the local hospital for treatment knowing that his ________ insurance would cover the claim. A) extended product liability B) malpractice C) public liability D) major medical Answer: C Explanation: Public liability insurance provides protection for businesses against losses resulting from personal injuries or damage to the property of others for which the insured is responsible. Waata was responsible for the spilled coffee and the burn. Difficulty: 3 Hard Topic: Insurance Policies Learning Objective: C-04 Discuss the various types of insurance businesses can buy to manage risk. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

Understanding Business, 12e (Nickels) Bonus Chapter D Managing Personal Finances 1) The value of education is often exaggerated when searching for a good job. Answer: FALSE Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) The U.S. government provides several types of financial incentives to encourage people to attend college. Answer: TRUE Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) The first step in getting control of your finances is to prepare a budget. Answer: FALSE Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 4) Your personal balance sheet will reflect the same fundamental accounting equation as the balance sheet for a business: assets = liabilities + owners' equity. Answer: TRUE Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

5) On your personal balance sheet, your assets should include anything of value that you own. Answer: TRUE Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) If your personal liabilities exceed your assets, you are on the road to financial security. Answer: FALSE Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 7) Your computer and car should both be listed on the asset side of your personal balance sheet. Answer: TRUE Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) Credit-card debt represents an asset on a consumer's balance sheet. Answer: FALSE Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

9) A major source of revenue on your personal income statement is your salary or wages from your job. Answer: TRUE Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10) One step toward the goal of taking control of your finances is to keep track of all your expenses. Answer: TRUE Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) If you find yourself regularly running out of cash, your only real option is to focus your attention on finding ways to increase your income. Answer: FALSE Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) Once you have evaluated your current financial situation and know your sources of income and expenses, you have reached the point where you can establish a personal budget. Answer: TRUE Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

13) Managing the finances of a household is similar to managing the finances of a small business. Answer: TRUE Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) With respect to personal financial planning, the first thing to do with any extra money you have is to start a savings plan. Answer: FALSE Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) In order to get in the habit of saving, personal financial advisors suggest that you save first and wait to pay off any debts until you've accumulated at least $10,000 in cash, savings accounts, CDs, and other liquid assets. Answer: FALSE Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 16) It is usually better to use any money left after paying monthly bills to pay off debts that carry high interest rates rather than putting that money into a savings account. Answer: TRUE Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

17) Financial planners regularly suggest that you borrow money to pay for large purchases. Answer: FALSE Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) The best way to save money is to pay yourself first. Answer: TRUE Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 19) Most financial experts will tell you to save about one month's earnings for contingency purposes. Answer: FALSE Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) Borrowing money for ordinary expenses is a necessary part of life. Answer: FALSE Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

21) Your big-screen HDTV would be listed as an asset on your personal balance sheet. However, the loan you took out to buy the TV would be listed as a personal liability. Answer: TRUE Explanation: Assets are things of value that you own. Liabilities represent your debts. Difficulty: 2 Medium Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 22) Listing all of your personal assets is the first step in preparing your own income statement.

Answer: FALSE Explanation: Assets are found on the balance sheet, not the income statement. Difficulty: 2 Medium Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 23) Tracking business and personal spending by categories is an important technique to control expenditures. Answer: TRUE Explanation: Individuals and businesses often experience cash flow problems. One way to get control of your cash outflows is to keep track of every cent you spend. Developing certain categories can make this task easier and more informative. Difficulty: 2 Medium Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

24) Your personal budget is the same thing as your personal income statement. Answer: FALSE Explanation: An income statement identifies actual revenue (everything you earned from your job, investments, etc.) and subtracts costs, and expenses to determine your actual net income over a given period. A budget is a financial plan that helps you think about how you can achieve future goals. Difficulty: 2 Medium Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 25) Financial planners encourage individuals to borrow only to cover immediate expenses. Answer: FALSE Explanation: If you have to borrow money, only borrow to buy assets that have the potential to increase in value or generate income, such as a house. Difficulty: 2 Medium Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26) For individuals, budgets are usually more trouble than they are worth. Answer: FALSE Explanation: Creating a financial plan and tracking expenses can be tedious. However, you will gain the benefit of controlling your finances in order to reach your goals. Difficulty: 2 Medium Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

27) A good way to save money is to spend all of your regular income, but have a strict rule to put any money from unexpected or unusual sources (such as overtime pay, bonuses, gifts, gambling payouts, or contest prizes) into a savings account. Answer: FALSE Explanation: The best way to save money is to pay yourself first. That is, take your paycheck and immediately take out money for savings. Unexpected or unusual income cannot be counted on, and would be too erratic and uncertain to ensure an adequate level of saving. Difficulty: 2 Medium Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 28) You should never borrow to cover regular expenses, but it makes perfectly good sense to use credit to cover unexpected expenses such as car or home repairs. Answer: FALSE Explanation: Financial experts advise that it is better to budget for emergencies by establishing a contingency fund of highly liquid assets such as savings accounts or money market funds to cover most unexpected expenses. Except in highly unusual circumstances, borrowing should only be used to buy assets that will appreciate in value or generate income. Difficulty: 2 Medium Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) Serena is attending her local community college with the goal of getting a good job someday. She knows that financial planning begins first with making money. Answer: TRUE Explanation: Benjamin Franklin said investment in education always pays the best interest. Today, a person with an undergraduate degree earns about twice as much as someone with only a high school diploma. Difficulty: 3 Hard Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

30) Luke wants to get better control of his personal finances. He should begin by setting up a personal balance sheet and a personal income statement. Answer: TRUE Explanation: The first step towards taking control of your personal finances is to take inventory of your current situation. This is accomplished by preparing a personal balance sheet and a personal income statement. Difficulty: 3 Hard Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 31) Even though they are in debt, most of today's college graduates are capital-rich. Answer: FALSE Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32) Most people find it relatively easy to live frugally. Answer: FALSE Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

33) In order to accumulate enough wealth to get started toward achieving their goals, many people have to make significant sacrifices in their standard of living for several years. Answer: TRUE Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 34) Once they've accumulated enough money, buying a low-priced home is often a good investment for young adults. Answer: TRUE Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) Personal financial planners recommend renting a home, rather than incurring the cost of buying a home. Answer: FALSE Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) Before getting married, a couple should discuss and agree upon a financial strategy. Answer: TRUE Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

37) After marriage, one great financial strategy is to live on one income and to save the other. Answer: TRUE Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) If possible, it is almost always better to buy a single home rather than an attached home. Answer: FALSE Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39) One drawback to buying a home compared to renting is that your monthly mortgage payments will increase, while rental payments are fixed. Answer: FALSE Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 40) When you buy a home, the monthly payments for the home may remain relatively fixed, but your payments for taxes and utilities are likely to increase. Answer: TRUE Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

41) Interest paid on a home loan is deductible from taxable income. Answer: TRUE Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 42) The federal government discourages home ownership through high tax rates. Answer: FALSE Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 43) The three keys that have the greatest influence on how the value of your home increases over time are: (1) size (square feet), (2) age, and (3) design features. Answer: FALSE Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44) From an investment viewpoint, it is a good idea to buy a large home in an area of town where homes are less expensive. Answer: FALSE Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

45) Historically, the best place to invest has been in U.S. government savings bonds. Answer: FALSE Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 46) Most financial experts believe that the stock market is likely to grow more slowly in the future than it did in the last 50 years. Answer: TRUE Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 47) Though stock prices do sometimes go down, investing in the stock market has generally provided very attractive returns over the long run. Answer: TRUE Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 48) A contrarian would advise you to buy stock when stock prices are falling and most other people are selling. Answer: TRUE Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 13 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

49) Funds invested in savings accounts and certificates of deposit (CDs) have traditionally outperformed stocks as a means of generating long-term financial gains. Answer: FALSE Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 50) A person using a credit card to make a purchase may end up paying much more than if he or she had paid cash. Answer: TRUE Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 51) A good manager of personal finances, like a good businessperson, uses borrowed funds whenever possible. Answer: FALSE Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

52) If you use a credit card to make purchases, you should make a strong effort to pay off the balance in full each month. Answer: TRUE Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 53) Credit cards can be used to categorize and track your purchases. Answer: TRUE Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 54) Excessive debt is as much a problem of young consumers as it is of other age groups. Answer: TRUE Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 55) More than half of all debtors seeking help at the National Foundation for Credit were between the ages of 18 and 32. Answer: TRUE Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

56) One danger of a credit card is that consumers often buy items they wouldn't normally buy if they had to pay cash. Answer: TRUE Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 57) Accumulating money through savings allows you to participate in the growth of a capitalist society. Answer: TRUE Explanation: The path to success in a capitalist system is to have capital (money) to invest. Difficulty: 2 Medium Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 58) Buying an attached home and living in one side, while renting the other side, generally turns out to be more trouble than it is worth, since you have to satisfy not only your own needs, but also the needs of the renters. Answer: FALSE Explanation: For many young investors, buying two attached homes has proven to be a very attractive investment. The rental income from the attached unit will help cover the mortgage payment, the mortgage interest and real estate taxes are tax deductible, and the values of the attached homes usually appreciate over time. Difficulty: 2 Medium Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

59) When young people decide to buy a house, the best approach is to buy a house in an inexpensive part of town so they can get a larger house for less money. Answer: FALSE Explanation: The key to success when investing in housing is location. It is usually better from a financial standpoint to buy a small home in a great part of town rather than a larger home in a not-so-great setting. Difficulty: 2 Medium Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 60) House payments tend to rise at a faster rate than do rent payments on a similar sized house. Answer: FALSE Explanation: Other than taxes and utilities, house payments on a fixed-interest rate mortgage are relatively fixed. As your income rises, the house payments get easier to make, but renters often find that rents tend to go up as fast as or faster than income. Difficulty: 2 Medium Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 61) The tax shelter offered by home ownership increases the overall cost of owning your home. Answer: FALSE Explanation: Interest on home loans and real estate taxes paid are both deductible from taxable income on an individual's federal income tax return. This, in effect, lowers the cost of home ownership. Difficulty: 2 Medium Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

62) Investors who desire a very stable and predictable income from their investments (such as people who are nearing retirement) would be reluctant to invest heavily in the stock market. Answer: TRUE Explanation: The stock market has consistently proven to be a good place to invest money for long-term growth. However, as evidenced by the recent sharp decline in stock prices, the stock market definitely has its ups and downs. Also, though some analysts are bullish, many experts predict that the market will grow more slowly over the next few years than it has in the past, increasing the time it will take to recover from any market reversals. Younger investors who are patient will still have time to recover from short-term drops in the stock market. However, older investors do not have as long a time horizon and may want a more stable and predictable place to invest their money. Difficulty: 2 Medium Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 63) During the first few years of a home mortgage, almost all the payments go for interest on the loan. This high interest is a reason it is better for young people to rent rather than buy. Answer: FALSE Explanation: The federal government allows homeowners to deduct interest on their mortgage from income, thus reducing their income tax liability. Thus, the fact that almost all of the mortgage payment in the first few years goes to interest means that the homeowner can deduct almost the entire cost of the mortgage payment from his or her taxable income. Difficulty: 2 Medium Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

64) One of the keys to financial success is never to apply for a credit card. Answer: FALSE Explanation: Credit cards can be expensive if they are used extensively. However, credit cards can be a convenient and safe way to make certain types of purchases, and if users pay off the monthly balance before interest is charged, they can avoid the expense of finance charges. Many merchants demand credit cards as a form of identification. Credit cards also provide a recordkeeping system for purchases. Finally, credit cards offer some protection against theft: if cash is stolen, it is simply gone; if a credit card is lost or stolen, the holder can simply cancel the card, thus limiting the loss. Difficulty: 2 Medium Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 65) The best strategy to follow in using credit cards is to pay only the minimum amount required each month. Answer: FALSE Explanation: Relatively high interest rates are charged on credit-card balances not paid within the grace period. Paying only the monthly minimum can result in very high finance charges. Difficulty: 2 Medium Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 66) If you are in the 25 percent tax bracket and your home mortgage interest is $1,000 per month, then your after-tax mortgage interest cost is $750 per month. Answer: TRUE Explanation: The tax deduction allowed by the Internal Revenue Service is $250 (25% times $1,000 interest per month). This is then subtracted from the $1,000 interest payment per month, resulting in an after-tax mortgage interest cost of $750. Difficulty: 3 Hard Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 19 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

67) Shulei graduated from college two years ago. She has already accumulated enough money in her savings account and money market to meet her basic needs, and now wants to begin investing a portion of each paycheck to earn a high rate of return over the long run. Shulei's best choice as a young woman would be to put money into a bank savings account regularly. Answer: FALSE Explanation: Though it has its ups and downs, over the long run the stock market has consistently outperformed other popular investment vehicles. In particular, stocks have generally offered a much higher long-run return than savings accounts. Difficulty: 3 Hard Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 68) During a recent drop in the stock market, Damon took the opportunity to buy a wide variety of stocks even though many of his friends and relatives were selling. His investment strategy appears to be consistent with contrarian views. Answer: TRUE Explanation: The contrarian approach is to buy when everyone else is selling and sell when others are buying. Most people tend to sell when the stock market suffers a big drop, but contrarians look at such a drop as an opportunity to buy at a low price. This approach takes courage, but it can be a way to great financial success. After all, the way to make money is to buy low and sell high. Difficulty: 3 Hard Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 69) Term life insurance is a combination insurance plan and savings plan. Answer: FALSE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

70) Term life insurance offers pure insurance with no savings feature. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 71) The younger you are when you buy term life insurance, the lower the premiums tend to be. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 72) Multiyear level-premium insurance is a form of term insurance with fixed premiums for the life of the policy. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 73) Whole life insurance premiums provide the insured with both pure insurance and a savings plan. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

74) Unlike whole life policies, a universal life insurance policy typically invests part of the premium in very aggressive, high-risk assets. Answer: FALSE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 75) The death benefits of a variable life insurance policy vary depending upon the performance of the investment. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 76) An annuity is a contract to make regular payments to a person for life or for a fixed period. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 77) Fixed annuities have become much more popular than variable annuities. Answer: FALSE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

78) Variable annuities offer investment choices identical to mutual funds. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 79) People who have health insurance seldom need disability insurance. Answer: FALSE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 80) If you are relatively healthy, there is no real reason to buy disability insurance. Answer: FALSE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 81) Everything else constant, the higher the deductible on your car insurance policy, the higher the premium for your car insurance. Answer: FALSE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

82) Many employers offer health insurance coverage for their full-time employees. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 83) Disability insurance provides a relatively low-cost way of protecting against lost income due to an accident or illness that prevents you from working for an extended period of time. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 84) Due to the high cost of the insurance premiums, many people have found that it makes financial sense to carry medical insurance only if their employer provides it. Answer: FALSE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 85) The chances of becoming disabled at an early age are much higher than your chances of dying from an accident. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 24 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

86) Guaranteed replacement cost insurance coverage provides the insured with the depreciated cost of assets. Answer: FALSE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 87) Most homeowner's insurance policies do not cover certain types of expensive items unless you purchase a rider for the additional coverage. Answer: TRUE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 88) An umbrella policy is an inexpensive policy that provides financial protection only in the event of clearly defined major catastrophes such as hurricanes or earthquakes—events which are referred to in the insurance industry as "rainy days." Answer: FALSE Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

89) One strategy used to lower car insurance premiums is to choose a policy with a large deductible. Answer: TRUE Explanation: By being willing to cover relatively small losses yourself, you reduce the risk of payment for the insurance company. This will result in a lower premium. Difficulty: 2 Medium Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 90) Mike is young and newly married. He and his wife plan to have children in the near future, and Mike wants to get a significant amount of life insurance coverage at as low a cost as possible. He would be well advised to purchase a term insurance policy. Answer: TRUE Explanation: Term insurance would most likely be the preferred approach in this situation. If Mike's primary concern is insurance protection for his family, straight term insurance would provide the greatest amount of coverage per dollar spent. Difficulty: 3 Hard Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 91) Casey wants to obtain life insurance at the lowest possible cost, but is leery of term insurance because she has heard the premiums tend to go up every few years. One way for her to avoid this concern would be to purchase multiyear level-premium insurance. Answer: TRUE Explanation: Generally, term insurance is less expensive than whole life or universal life because it provides pure protection. A new form of term insurance, called multiyear levelpremium insurance, guarantees the same premium for the life of the policy. Using this approach, many term insurance policies today offer fixed premiums for 20 years or more. Difficulty: 3 Hard Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 26 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

92) Cynthia is trying to find a way to reduce her car insurance premium. She would be well advised to decrease her insurance policy's deductible. Answer: FALSE Explanation: Other things held constant, the higher the deductible, the lower the insurance premium. Difficulty: 3 Hard Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 93) Joe wants life insurance to provide benefits for his family if he were to die. He also wants part of his premium to go into a savings plan that he will need if he lives to retirement age. His best strategy to achieve insurance and savings with one premium is term insurance. Answer: FALSE Explanation: Term insurance is strictly insurance protection. Whole life insurance and variable life insurance policies would offer Pete the opportunity to achieve his goals. Difficulty: 3 Hard Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 94) As a recent college graduate just starting out on his own, Tyrone needs health, disability, home, and auto insurance. He may be able to save money by obtaining an umbrella policy. Answer: TRUE Explanation: An umbrella policy allows people to meet all of their insurance needs for things like health, home, and auto through one carrier. Most firms offer discounts to clients who purchase umbrella policies. Difficulty: 3 Hard Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

95) About half of the U.S. population accumulates enough money to afford a comfortable retirement. Answer: FALSE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 96) About 35% of U.S. households do not have a retirement account. Answer: FALSE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 97) Social Security is the term used to describe the Old Age, Survivors, and Disability Insurance Program. Answer: TRUE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 98) One problem with the Social Security system is that the number of people retiring and living longer is declining dramatically. Answer: FALSE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

99) It is likely that young adults today will benefit from the recent trend in the Social Security system to increase benefits and expand the cost-of-living adjustments. Answer: FALSE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 100) The number of workers paying into Social Security per retired individual receiving benefits is decreasing. Answer: TRUE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 101) Regardless of potential changes, you can count on Social Security to provide you with a comfortable retirement. Answer: FALSE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 102) An individual retirement account (IRA) is a tax-deferred investment plan that encourages workers to save for retirement. Answer: TRUE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

103) A traditional IRA affords workers who qualify the opportunity to deduct from their reported income the money they put into a qualified retirement account. Answer: TRUE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 104) Both the Roth and traditional IRA allow individuals to put as much money as they want into their retirement account. Answer: FALSE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 105) A Roth IRA allows workers who qualify to get an up-front deduction for any money they invest in the plan. Answer: FALSE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 106) An advantage of both traditional and Roth IRAs is that both the income invested and the earnings from these investments are never taxed. Answer: FALSE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

107) The benefit of opening an IRA while you're young is the compounding of the money invested tax-free over your working lifetime. Answer: TRUE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 108) Funds deposited into an IRA cannot be withdrawn until you retire. Answer: FALSE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 109) In order to qualify as a tax shelter, IRA saving plans must be invested in mutual funds. Answer: FALSE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 110) Withdrawals from an IRA prior to age 59½ generally are subject to taxes and a penalty. Answer: TRUE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

111) Earnings from traditional IRA investments are taxable at the time they are earned. Answer: FALSE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 112) A simple IRA, which allows workers to contribute larger amounts than a regular IRA, is available to employees who work for firms with fewer than 100 employees. Answer: TRUE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 113) MyRA is a Roth IRA-type retirement savings plan for low and middle-income individuals. Answer: TRUE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 114) The money a worker invests in a 401(k) retirement account reduces that worker's present taxable income. Answer: TRUE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

115) Employers often match part of the contribution of their employees into a 401(k) retirement plan. Answer: TRUE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 116) Only large corporations with at least 500 employees can offer their employees a simple 401(k) retirement plan that allows for greater contribution maximums. Answer: FALSE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 117) Many small-business owners invest in 401(k) plans for their retirement. Answer: FALSE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 118) The best way to invest in a 401(k) plan is to use all of the money to buy stock in the company where you work. Answer: FALSE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

119) Keogh plans are intended to help small business owners save for retirement. Answer: TRUE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 120) Keogh plans are most useful for stockholders of major corporations who earn most of their income from dividends rather than wages or salaries. Answer: FALSE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 121) Employees of small businesses can contribute to a Keogh plan. Answer: FALSE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 122) IRAs, 401(k), and Keogh plans all include incentives to encourage saving for retirement. Answer: TRUE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

123) Earnings of Keogh plans are not taxed until the funds are withdrawn from the retirement account. Answer: TRUE Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 124) The best financial planners are actually insurance salespeople. Answer: FALSE Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 125) If you have minor children, the first step in estate planning is to select their guardian. Answer: TRUE Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 126) The person who is named in your will to assemble the assets in your estate, handle taxes, and distribute the assets is called your proxy. Answer: FALSE Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

127) The reason you would prepare a durable power of attorney is to make sure that someone was named to take over your finances if you become incapacitated. Answer: TRUE Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 128) Recent demographic trends suggest that the financial condition of the Social Security program soon will begin to improve. Answer: FALSE Explanation: The number of people retiring is increasing dramatically, and on average retirees are living longer. At the same time, the number of people paying into the Social Security system is declining. This will put a great strain on the system in upcoming years and is likely to result in some or all of the following: cuts in benefits, later retirement ages, reduced cost of living adjustments, and higher Social Security taxes. Difficulty: 2 Medium Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 129) An individual retirement account (IRA) is a tax-deferred investment plan designed to encourage workers to save for retirement. Answer: TRUE Explanation: Within certain income limits, both the initial investment and the earnings of a traditional IRA are tax-deferred until the funds are removed from the retirement plan. Difficulty: 2 Medium Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

130) IRA funds are not available for withdrawal until you are 59½ years old. Answer: FALSE Explanation: The funds can be withdrawn prior to the investor turning 59½ years old; however a 10 percent penalty for early withdrawal must be paid as well as the taxes due on the IRA's earnings. The government recently relaxed these restrictions even further, allowing people with IRAs to withdraw a certain amount to help pay for education or a first home. Difficulty: 2 Medium Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 131) A person in the 25 percent tax bracket who invests $1,000 in a traditional IRA immediately postpones $250 in taxes. Answer: TRUE Explanation: Funds invested in a traditional IRA are sheltered from current taxes. Earnings of $1,000 would have been taxed at the 25 percent rate, $1,000 x 25% = $250. If the $1,000 is invested in a traditional IRA, the tax liability is deferred until the funds are withdrawn at retirement. Difficulty: 3 Hard Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 132) Bree expects to be in a much higher tax bracket when she retires than she is now, so she wants to invest in a retirement account in which her withdrawals will be tax-free. One way for her to achieve this is through a traditional IRA. Answer: FALSE Explanation: The earnings of a traditional IRA are tax-deferred, not tax-free. With a traditional IRA, earnings are taxed as income at the time they are withdrawn. A better choice for Bree would be a Roth IRA. With a Roth IRA, Bree would not receive a deduction in the period when she contributed to the IRA, but would be able to withdraw the earnings tax-free after she retires (assuming that she is at least 59½). Difficulty: 3 Hard Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

133) Ricky wants to decrease his current taxable income and save for retirement. He should consider a traditional IRA. Answer: TRUE Explanation: A traditional IRA gives qualified individuals an incentive to save for retirement by allowing them to deduct from their reported income the money they put into an account. Difficulty: 3 Hard Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 134) Elizabeth has just opened a 401(k) retirement plan. The money she invests in this plan will reduce her present taxable income. Answer: TRUE Explanation: Both the money invested and the earnings from the plan are tax-deferred until the funds are withdrawn. Difficulty: 3 Hard Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 135) Carlton owns a small sports memorabilia shop. He can participate in a Keogh plan to save for his retirement. Answer: TRUE Explanation: Keogh plans are like an IRA for entrepreneurs. Self-employed individuals invest in a Keogh plan because they do not have the benefit of a corporate retirement system. Difficulty: 3 Hard Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

136) Ryan is in need of advice regarding investments, taxes, and insurance for himself and his family. He would be well advised to seek the advice of an insurance salesperson. Answer: FALSE Explanation: Personal financial advisors can help you to develop a comprehensive plan that covers investments, taxes, insurance, and other financial matters. Not all insurance salespeople will have the expertise to develop a comprehensive plan. Moreover, such salespeople often are more interested in selling the products offered by their companies than in providing unbiased advice about a variety of alternatives. Difficulty: 3 Hard Topic: Financial Planning Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 137) Arlene has just made out a will. The will names her brother Aaron as the executor. This means that Aaron will have the authority to take over Arlene's finances if she becomes incapacitated. Answer: FALSE Explanation: An executor named in a will normally is responsible only for situations in which the owner of the estate dies, not cases where the person is incapacitated. Thus, the executor named in a will is not normally given the authority to take over an incapacitated person's finances. A durable power of attorney is used to name someone to handle a person's finances if he or she becomes incapacitated. Difficulty: 3 Hard Topic: Estate Planning Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 138) Financial planning begins with A) spending money wisely. B) earning money. C) insuring your assets against an unexpected loss. D) saving money. Answer: B Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

139) Throughout history an investment in ________ has yielded an excellent return, regardless of the state of the economy or political changes. A) antiques B) a good education C) government bonds D) savings accounts Answer: B Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 140) The only way to accumulate enough money to do all of the things you want to do late in life is to A) take an inventory of your financial assets. B) make more than you spend. C) avoid bankruptcy. D) satisfy the demands of your creditors. Answer: B Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 141) Which of the following would be included as an asset in the preparation of a personal balance sheet? A) credit-card debt B) home mortgage C) your salary from a part-time job D) your computer Answer: D Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

142) In preparing an income statement for yourself, the wages from your job would be shown as A) your revenue. B) an expense. C) an asset. D) your owner's equity. Answer: A Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 143) When you prepare your personal balance sheet, remember that your ________ is equal to your total assets minus any liabilities you have. A) net income B) net worth C) tax base D) cash equivalent value Answer: B Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 144) The first step you would take to get control of your personal finances is to A) keep track of all your expenses. B) prepare a budget. C) take inventory of your assets. D) start a savings program. Answer: C Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

145) Personal financial planners often encourage their clients to write down every single penny they spend each day. The main purpose of this is to A) focus attention on the spending levels for each item. B) eliminate the need for accountants. C) do a better job of tax planning. D) accumulate data needed to prepare a personal balance sheet. Answer: A Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 146) A(n) ________ is a personal financial plan that allows you to take control of future spending. A) expense tracker B) revenue sheet C) budget D) debt manager Answer: C Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 147) Budgets are A) useful for businesses, but too restrictive to be used by individuals or households. B) a financial plan of projected revenues and expenses. C) just another name for cash flow statements. D) only helpful to people who earn more than $50,000 per year. Answer: B Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

148) Preparing and living with a personal budget is A) not necessary if you have sufficient income. B) similar to activities needed to handle the finances of a small business. C) often more trouble than the benefits justify. D) an excellent technique to prepare for a career in accounting. Answer: B Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 149) A financial planner would encourage you to borrow money A) only to buy assets that are likely to generate income or increase in value. B) to pay your day-to-day expenses and then to invest your income. C) only when facing bankruptcy. D) in order to reduce your debt level. Answer: A Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 150) Many financial experts advise that you set up a contingency fund equal to about ________ of your earnings and keep these funds in highly liquid accounts. A) two months B) six months C) one year D) three years Answer: B Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

151) Once you have set up a budget and handled your ordinary expenses, the first thing to do with any extra money you have is to A) start a savings plan. B) pay off your debts. C) start your own business. D) spend it on the things you would like but that aren't included in your budget. Answer: B Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 152) Which of the following accounting statements would assist an individual in taking inventory of personal assets and liabilities? A) income statement B) balance sheet C) budget D) statement of cash flows Answer: B Explanation: The balance sheet will reflect the accounting equation: assets = liabilities plus owners' equity (or net worth). Difficulty: 2 Medium Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

153) Young married couples that find themselves running out of money at the end of the month might be well advised to A) keep track of all of their expenses. B) keep track of cash spent on major purchases. C) prepare a balance sheet. D) apply for additional credit cards. Answer: A Explanation: The only way to get control of your cash outflow is to keep track of every cent you spend. This discipline will highlight the various categories of your spending so that you can see where you are spending too much, and will help you control the vague "miscellaneous" expenditures. Difficulty: 2 Medium Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 154) The best way to save money is to A) pay yourself first by taking out money for savings from each paycheck before deciding what to do with the remaining money. B) start your own business designed to create business tax deductions. C) prepare a balance sheet. D) pay yourself last. Answer: A Explanation: The best way to save money is to pay yourself first. When you receive your paycheck, take out money for savings, and then plan what to do with the rest. Difficulty: 2 Medium Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

155) Alvin's credit card charges him 18% interest on his unpaid balance. His bank is offering him 1% interest on a savings account. The first thing Alvin should do with any extra money he may have is to A) invest in the stock market. B) open a savings account at the bank. C) pre-pay for necessities, like rent and utilities. D) pay off the credit card balance. Answer: D Explanation: The risk-free return generated by paying off the credit card balance is greater than the other options. While the stock market has the potential of earning more than the credit card debt, it is important to adjust the potential earnings for the risk inherent in stock market investing. Difficulty: 3 Hard Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 156) Recent college graduates, Jason and Elizabeth, are newlyweds. Although they acquired a significant amount of debt during college, both recently got good-paying jobs and appear to have promising careers. Given their situation, down the road Jason and Elizabeth A) are almost certain to be able to retire comfortably when the time comes, given the high level of income they are likely to earn. B) could be able to retire comfortably, but doing so will take planning and discipline on their part. C) have little chance of enjoying a comfortable retirement because the college debts will take years to repay and become a major burden. D) will probably find that Social Security will provide an adequate retirement, but that they may need to supplement this with a modest pension if they really want to enjoy the fine life in their golden years. Answer: B Explanation: It's true that the first step in financial planning involves making money, and Jason and Elizabeth appear in good shape to earn attractive incomes. However, making money is only the first step; it is also necessary to spend wisely and to save. This takes planning and discipline. Difficulty: 3 Hard Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

157) Brad and Tori are experiencing marriage difficulties regarding money. One technique to help them control and forecast their future financial situation, as well as allow them to achieve their financial goals, would be to prepare a(n) A) income statement. B) balance sheet. C) budget. D) asset inventory. Answer: C Explanation: A budget will allow the couple to plan for their financial goals (perhaps retirement and college for kids). The budgeting process involves keeping records of expenses that will assist the couple in controlling cash outflows. Difficulty: 3 Hard Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 158) Dani has prepared her personal balance sheet and found that her total assets are $54,000 and her total liabilities (largely college loans) are $48,000. What does this show for Dani? A) Her net income is only $6,000. B) Her net worth is $6,000. C) Her cash flow will not be sufficient to repay her college loans. D) Her balance sheet is out of balance. Answer: B Explanation: A balance sheet is based on the fundamental accounting equation: Assets = Liabilities + Owners' equity (or net worth). Thus, to find her net worth, Lucy can subtract her debts from her assets. Difficulty: 3 Hard Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

159) Denny plans to start his business program this semester at a local university. Denny will likely find that A) his time would be better spent pursuing a career after high school. B) he will have more fun and excitement than his friends that don't attend college. C) his choice of a business major will virtually guarantee him a comfortable retirement income if he sticks with it. D) his investment in his education will be important in his future. Answer: D Explanation: Throughout history, an investment in business education has paid off. One way to start the path to becoming a millionaire is to finish college. Difficulty: 3 Hard Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 160) The path to success in a capitalist system is to A) spend more on capital goods than you do on consumer goods. B) have access to debt markets. C) have money to invest. D) work hard with the goal of moving up in the management of your employer. Answer: C Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

161) In order to accumulate capital, young adults are likely to have to A) accept a lifestyle that sacrifices some amenities. B) live beyond their means. C) rely on credit cards for basic purchases in order to conserve on cash. D) borrow funds from a bank. Answer: A Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 162) The key to generating enough capital for investment for many individuals is to A) obtain as many credit cards as possible in order to maximize spending power. B) live frugally. C) borrow money from friends and family. D) buy only high-quality consumer goods. Answer: B Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 163) Investing in a home is generally considered a A) poor choice when compared to renting. B) wise investment. C) luxury that should be postponed as long as possible. D) good decision, but only if you've saved enough to pay in full with cash. Answer: B Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

164) Which of the following is a benefit of buying a home rather than renting? A) Real estate taxes and utilities will be fixed. B) It reduces the need to carry insurance. C) Paying for a home is a good way to force yourself to save. D) The entire purchase price of the home can be deducted from taxable income, but this deduction must be spread over at least 15 years. Answer: C Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 165) Buying ________ is often an attractive strategy for young couples, since they can live in one unit and rent the other half to supplement their income, while taking tax deductions on interest and real estate taxes. A) a semiprivate housing unit B) a ranch apartment C) a biplex D) attached homes Answer: D Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

166) The goal of accumulating capital is to allow an individual to A) buy the things that satisfy present wants and needs. B) have funds available to invest. C) buy now, pay later. D) establish a good credit rating. Answer: B Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 167) Real estate professionals agree that the key to getting the optimum return on the purchase of a home is A) construction quality. B) location. C) tax advantages. D) design features. Answer: B Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 168) About ________ of all U.S. households own stock in corporations. A) 16 percent B) 30 percent C) half D) three-fourths Answer: C Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

169) According to contrarians, the big decline in the stock market during the Great Recession was A) a great opportunity to invest in stocks. B) proof that the stock market was not as sound an investment as most people thought. C) a sign that more government regulation was needed to prevent big losses. D) proof that the future of capitalism should rely more on small, unincorporated businesses rather than big corporations. Answer: A Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 170) Real estate taxes and mortgage interest payments are both A) expenses of home ownership on which the government levies a tax. B) tax deductible for renters. C) tax deductible for homeowners. D) taxable income for renters and homeowners. Answer: C Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

171) The total cost of purchasing a sound system or HDTV with cash is ________ the cost when using credit cards to finance the same assets. A) the same as B) greater than C) less than D) less stable than Answer: C Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 172) A benefit of using credit cards is that they A) have lower interest rates than other forms of credit. B) provide a record that makes it possible to keep track of purchases easily. C) help consumers be more disciplined when it comes to spending decisions. D) allow the consumer to spread out payments and reduce overall costs. Answer: B Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 173) When purchasing with a credit card, it's important to remember that ________ if you do not pay the balance in full within a stated time period. A) the credit limit is reduced B) no returns are allowed C) interest is charged on the remaining balance D) discounts are available Answer: C Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 53 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

174) One disadvantage of having credit cards for personal use is that A) they offer no protection if they are stolen. B) they are less convenient than other forms of credit. C) many companies have a policy that prevents employees from having both personal credit cards and credit cards for business use. D) they can make it easy to pile up a large amount of debt quickly. Answer: D Difficulty: 1 Easy Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 175) Which of the following is a benefit unique to buying two attached homes, as opposed to the purchase of a single-family home? A) Real estate taxes are tax deductible. B) The rent income will help make the mortgage payment. C) Mortgage interest payments are tax deductible. D) The value of the home may increase over time. Answer: B Explanation: Only attached homes allow for rental income to help cover the payment on the mortgage. Difficulty: 2 Medium Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

176) The factor likely to have the greatest impact on how fast the value of a home appreciates over time is the A) interest rate on the mortgage. B) style and design features built into the home. C) location of the home. D) size of the home. Answer: C Explanation: The three keys to making the optimum return on the investment in a home are location, location, and location. A small home in a good location is usually a better investment than a large home in a less desirable area. Difficulty: 2 Medium Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 177) Mortgage interest payments and property taxes are A) tax deductible for homeowners. B) expenses that make home ownership less attractive than renting. C) both likely to increase each year at a faster rate than your income. D) both likely to decline the longer you own the home. Answer: A Explanation: IRS rules allow homeowners to deduct mortgage interest and property taxes from taxable income. This makes owning a home more financially attractive than it might first appear. Mortgage interest will decline over the years as more of the loan is repaid. However, property taxes may increase. Difficulty: 2 Medium Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

178) The greatest return over a period of several years is likely to be earned by investing in a A) small home in a great location. B) savings account in a bank. C) large home in a deteriorating neighborhood. D) moderate size home in a rural setting. Answer: A Explanation: Location is the key factor in real estate value. It's better, from a financial viewpoint, to buy a smaller home in the part of town near the services that people desire. Historically, bank savings accounts have not performed as well as many other investments such as real estate. Difficulty: 2 Medium Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 179) For a young person, one of the worst places to invest money for the long-term is: A) a duplex. B) a bank savings account. C) a home. D) the stock market. Answer: B Explanation: Bank savings accounts, while safe, offer a very low return relative to other investments—a fact many young people do not seem to know. Though riskier, real estate and the stock market are usually better choices for long-term investments than a bank account. The stock market does tend to go up and down, but over a longer period of time, it has proven to be one of the best investments. Difficulty: 2 Medium Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

180) From a financial viewpoint, it is best to buy a A) large home in a good neighborhood. B) very large home in a neighborhood where homes are relatively inexpensive. C) medium-sized home in a neighborhood where homes are the least expensive. D) small home in an excellent neighborhood. Answer: D Explanation: A home in an excellent location usually is the best financial investment. It is better to buy a smaller home in a great location. Difficulty: 2 Medium Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 181) Which of the following is true of credit cards? A) They are a cheaper way to finance your education. B) They are an efficient way to keep track of purchases. C) They are an effective way of controlling the amount of debt the consumer incurs. D) They are less convenient than carrying cash or writing a check. Answer: B Explanation: The danger of a credit card is the flip side of its convenience. Too often, consumers buy goods and services that they would not normally buy if they had to pay cash or write a check on funds in the bank. Consumers often pile up debts they are unable to pay. One advantage of credit cards is that they are an efficient way to keep track of purchases. Difficulty: 2 Medium Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

182) Which of the following is an advantage of home ownership? A) Home ownership is a good way to control the costs of utilities, maintenance, and insurance. B) Mortgage interest and real estate taxes are tax deductible. C) Money invested in a house is a highly liquid investment. D) Home ownership provides a guaranteed rate of return that is more stable than the return earned by investing in the stock market. Answer: B Explanation: IRS rules allow homeowners to deduct mortgage interest payments and property taxes from their taxable income, thus lowering their income tax payments. Difficulty: 2 Medium Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 183) Which of the following is the best advice about the use of credit cards? A) Except for very small purchases, credit cards should always be used instead of cash. B) The best approach to credit cards is never even to apply for one. C) Credit cards are an important part of a personal financial system, but pay the balance in full during the period when no interest is charged. D) Credit cards are most useful when making large purchases (over $500), because they allow you to spread out the payments to fit into your budget. Answer: C Explanation: Credit cards are an important element in a personal financial system. For example, they can be used as a form of identification, can help track purchases, and can offer some protection against loss in the event of theft or robbery. However, credit cards also have disadvantages: they generally carry relatively high interest rates and can encourage people to spend beyond their means. Thus, people should make sure they pay off the balance each month to avoid these problems. Difficulty: 2 Medium Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

184) Dmitry emigrated to the United States from a formerly communist country. He is looking to you for advice on how to succeed in a capitalist system. He would be well advised to A) find a job and live frugally in order to save money to invest. B) rely heavily on government assistance programs to maintain a relatively comfortable life style. C) get a credit card, even if it has a very low credit limit, and use it to establish a good credit rating. D) follow the buy now, pay later rule of personal finance. Answer: A Explanation: The path to success in a capitalist system is to have capital (money) to invest. For most people, this requires gaining employment (making money), then saving it by living frugally. Difficulty: 3 Hard Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 185) Joe and Megan are newly married college graduates. Both have jobs with bright futures. One strategy that they could use to accumulate capital for investment purposes, would be to A) borrow heavily to buy a house. B) use their credit cards to acquire assets while prices are relatively low. C) live on just one of their incomes and save the other. D) quit their jobs and return to school to earn graduate degrees. Answer: C Explanation: Living on one income is difficult for most couples to do. However, an early life style of sacrifice can provide a pool of savings for investment purposes. Ultimately, buying a home is likely to be a good investment, but it makes sense to accumulate the capital for a sizable down payment before doing so. Difficulty: 3 Hard Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

186) During her sophomore year in college Carrie received an email from First Bank telling her she was eligible for a credit card along with a free gift. Carrie was excited until she remembered that any cash she has usually "burns a hole" in her pocket, and she spends it quickly. Carrie would likely not be successful with a credit card because A) she has difficulty in getting access to credit. B) she would use it to make impulse purchases that she could not afford. C) she would not spend up to the limit immediately. D) her dad would not agree to cosign for her. Answer: B Explanation: The danger of a credit card is the flip side of its convenience. Too often consumers buy goods and services that they wouldn't normally buy if they had to pay cash or write a check on funds in the bank. Carrie is not the type who can stick to a financial plan so it may be better for her not to have a credit card at all. Difficulty: 3 Hard Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 187) Given a 25% tax bracket, the after-tax cost of a house mortgage interest payment of $1,000 would be: A) $ 250. B) $ 750. C) $1,000. D) $1,250. Answer: B Explanation: Interest on a home mortgage is tax deductible. The $1,000 interest is sheltered from the tax rate of 25 %. This saves the taxpayer $250, yielding an after-tax cost of $750. Difficulty: 3 Hard Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

188) Dylan and Wyatt are good friends who have similar jobs that pay them well. Both have established budgets that allow them to invest several hundred dollars each month. Dylan has a strategy of putting most of his money in bank CDs and a savings account. Wyatt has opted for a strategy of investing in the stock market. According to the evidence of the past 50 years, it is likely that over the long run A) Dylan and Wyatt will experience very similar rates of return. B) Dylan will experience a significantly higher return than Wyatt. C) Wyatt will experience a significantly higher return on his investments than Dylan, but will also experience more ups and downs over the years. D) Dylan will experience a slightly higher return, but Wyatt's return will be more stable and predictable. Answer: C Explanation: This question asks the student to consider the evidence of the past 50 years. Although it has had its ups and downs, during this period the stock market has proven to provide a more attractive long-run return than other types of investments. Difficulty: 3 Hard Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 189) Nancy has been following the stock market, and has noticed that it has been declining for the last several weeks. While many of her friends and family have sold stock, Nancy looks at this situation as a good opportunity to buy. Nancy's views are consistent with the ________ approach to investing in the stock market. A) contrarian B) revisionist C) arbitrarian D) negativist Answer: A Explanation: The average investor tends to sell stocks when their values have declined and buy stocks when their values have risen. Contrarians go against the grain. They tend to buy when most others are selling. The logic of this approach is that the best time to buy stock is when prices are low—i.e. when the market is in decline. Difficulty: 3 Hard Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

190) Quinn is excited about getting her first credit card. However, she should be aware of the fact that A) credit cards are no longer accepted in many places as a valid source of credit. B) credit cards require that at least 25% of the balance be paid each month. C) there will be a finance charge even if Hannah pays her entire credit card balance in full and on time. D) the convenience of credit cards can lead to excessive debt. Answer: D Explanation: The convenience of credit cards can lead consumers to buy goods and services that they would not normally buy if they had to pay cash or write a check on funds in the bank. Difficulty: 3 Hard Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 191) Patrick is in the habit of using his credit card for expenditures made on business trips. The most likely reason he does this is to A) lower his business expenses. B) take a deduction on the interest he pays on his credit card balance. C) pad his expense account. D) keep track of his purchases. Answer: D Explanation: Credit cards are an easy way to keep track of purchases for budgeting and financial planning purposes. It's sometimes easier to write one check at the end of the month for several purchases than to carry cash around. Difficulty: 3 Hard Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

192) ________ life insurance offers pure insurance protection for a given period of time. A) Term B) Temporary C) Managed premium D) Equity-based Answer: A Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 193) One disadvantage of term life insurance is that A) when renewed it usually is at a higher premium. B) the risk of lost income from the death of the insured is shifted to the insurance company. C) it is pure insurance protection for a given time period. D) it is generally not available to young people. Answer: A Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 194) Which of the following is a form of term insurance that guarantees fixed premiums for the life of the policy? A) universal life insurance B) planned annuity life insurance C) declining coverage, fixed payment insurance D) multiyear level-premium insurance Answer: D Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

195) ________ is a form of life insurance that provides both a savings plan and pure insurance coverage. A) Term life insurance B) Growth-centered life insurance C) Whole life insurance D) Multiyear level-premium insurance Answer: C Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 196) Which of the following is a form of whole life insurance that provides a death benefit that varies with the performance of the investments of the insurance company? A) flexible whole life insurance B) variable life insurance C) adjustable benefit insurance D) multiyear level-premium insurance Answer: B Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

197) A contract that calls for regular payments to an individual for life or for a fixed period of time is called a(n) A) annuity. B) fixed dividend plan. C) mutual fund. D) level premium agreement. Answer: A Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 198) Your chances of becoming disabled at an early age are ________ than your chance of dying from an accident. A) the same B) much less C) much greater D) slightly less Answer: C Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

199) Purchasing ________ insurance is a relatively low cost way of protecting yourself from lost income due to an accident or prolonged illness. A) flexible term B) health C) contingent annuity D) disability Answer: D Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 200) ________ insurance provides protection from the cost of medical care for illnesses and injuries. A) Term B) Health C) Renters D) Homeowner's Answer: B Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 201) ________ insurance provides protection from losses of furniture, appliances, and clothes. A) Term B) Health C) Disability D) Homeowner's Answer: D Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 66 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

202) A homeowner's insurance policy that includes a provision for ________ would provide the homeowner with enough cash to replace the items lost with new items. A) actual book value protection B) cash in lieu of coverage C) guaranteed replacement cost D) full collateral damage protection Answer: C Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 203) One strategy to lower the cost of automobile insurance is to purchase a policy with a A) low deductible. B) high deductible. C) liability coverage rider. D) health coverage rider. Answer: B Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 204) A(n) ________ can be added to a homeowner's insurance policy that provides for coverage at a reasonable cost for items that the policy otherwise would not cover. A) rider B) opener C) extender D) modifier Answer: A Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 67 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

205) Many insurance providers offer ________ policies that give a discount to families who buy several types of insurance coverage from them. A) umbrella B) universal C) multi-use D) rider-enhanced Answer: A Difficulty: 1 Easy Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 206) A comparison of variable life insurance to a standard whole life plan would reveal that A) they are essentially identical. B) variable life offers only pure insurance but does so at a very low cost, while a standard whole life plan costs more but offers both insurance and a savings plan. C) both a standard whole life and variable life insurance offer both life insurance and savings, but variable life invests the savings more aggressively than whole life. D) variable life is only available to people who want at least $1 million in coverage—and are willing to pay for it. Answer: C Explanation: Variable life is a variation of whole life that invests savings more aggressively than do ordinary whole life plans. This can lead to higher returns on saving, but is a riskier strategy that could result in a variation in the death benefit. Difficulty: 2 Medium Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

207) A common purpose of a rider added to a homeowner's policy is to A) provide coverage for items that the standard policy does not cover. B) limit the insurance company's liability for certain types of losses. C) waive the provision that requires the owners to get a health exam. D) allow the policy holder to obtain health, disability, and auto insurance under their homeowner's plan. Answer: A Explanation: Most homeowner's policies do not automatically cover things like expensive jewelry or silverware. However, insurance companies offer riders to their standard policies which provide additional protection for these types of items at a reasonable cost. Difficulty: 2 Medium Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 208) Which of the following deductible levels would result in the lowest premium for automobile insurance? A) $ 200 B) $ 500 C) $ 750 D) $1,000 Answer: D Explanation: The higher the deductible, the lower the premium. Difficulty: 2 Medium Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

209) Nate and Audrey are married and have careers in business. If one of the two were to die, there would be a sudden drop in income. To provide protection from this risk the couple should purchase A) disability insurance. B) life insurance. C) health insurance. D) car insurance. Answer: B Explanation: Life insurance is used to protect a family or business from the sudden loss of income that occurs as the result of the death of an income earner. Difficulty: 3 Hard Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 210) Mateo and Maya have decided to take out an umbrella policy from an insurance company. The main reason they would probably want to do this would be to A) protect against major disasters, which are known as "rainy days." B) ensure that any children they have will be guaranteed the right to buy insurance at some future date. C) save money by having one company provide a variety of different types of coverage. D) take out one life insurance policy that covers both of them. Answer: C Explanation: Under an umbrella policy, one insurance company provides a variety of different types of insurance, such as homeowner's, auto, and health coverage. This may be attractive because companies often provide substantial discounts for this type of policy arrangement. Difficulty: 3 Hard Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

211) Although he has a good health insurance policy, Shaun is concerned that a serious accident or lengthy illness would still be devastating to his family because of the lost income and other expenses not covered by his policy. Shaun would probably be interested in obtaining A) disability insurance. B) a premium waiver provision. C) health extension coverage. D) a rider on his homeowner's policy. Answer: A Explanation: Health insurance usually covers much of the cost of treating an illness or accident, but it does not usually cover lost income or other expenses associated with long-term health problems. Disability insurance can be used to supplement health insurance and cover many of these extra costs. Difficulty: 3 Hard Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 212) Henry and Mila are newlyweds and received some very expensive wedding gifts, including some beautiful silverware and jewelry. Their homeowner's policy A) automatically covers these items. B) does not automatically cover such items and they must take out a separate policy specifically for those types of items. C) does not automatically cover these items, but a rider can be used to add this coverage. D) automatically covers these items from theft, but not from damage due to fire, explosion, or vandalism. Answer: C Explanation: Most homeowner's policies do not cover expensive items such as wedding rings and silver items. However, it is possible to purchase riders to the standard policies which will cover such items at a reasonable cost. Difficulty: 3 Hard Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

213) Almost ________ U.S. adults has accumulated enough money by retirement age to live comfortably. A) 1 in 10 B) 1 in 4 C) 1 in 2 D) 8 in 10 Answer: A Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 214) The Social Security program was established in A) 1889. B) 1935. C) 1953. D) 1976. Answer: B Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 215) The number of workers paying into Social Security for each retiree receiving Social Security benefits is A) fixed by law. B) increasing. C) decreasing. D) not fixed by law, but has remained relatively constant for several decades. Answer: C Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

216) In the future, the Social Security system is likely to A) raise taxes and reduce benefits. B) increase cost-of-living adjustments. C) establish a younger retirement age. D) adequately provide for all the retirement income the typical retiree needs to live comfortably. Answer: A Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 217) Trends in the number of workers contributing to the Social Security system and the number of workers drawing benefits from the system suggest that future generations will A) have more frequent cost-of-living adjustments. B) see significant improvements in the level of benefits. C) face a later retirement age in order to qualify for full Social Security benefits. D) not be allowed to invest in private pension plans. Answer: C Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 218) The tax-deferred investment plan that allows employees to save part of their income for retirement is called a(n) A) 60/40 plan. B) individual retirement account (IRA). C) 704(i) plan. D) Keogh plan. Answer: B Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

219) The earnings on a traditional IRA are A) never taxed, in order to encourage people to invest for their retirement. B) tax-free until the Social Security system is improved. C) taxed as income when they are withdrawn after retirement. D) available to the investor without a penalty. Answer: C Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 220) A Roth IRA offers employees an incentive to save for their retirement by A) deferring taxes on income contributed to the IRA. B) eliminating taxes on the withdrawals from the IRA. C) eliminating taxes on the income contributed to the IRA. D) allowing employers to match the employee's contribution to the IRA. Answer: B Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 221) Investments in IRA accounts A) are limited to money market funds and government bonds. B) can be in stocks, bonds, mutual funds, or even precious metals. C) are matched by the employer. D) are taxed at the lowest individual tax rate regardless of the actual tax bracket of the investor. Answer: B Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

222) One benefit of a simple IRA is that it allows A) employees of small companies to save more than a regular IRA. B) employees to invest in the corporate bonds of their employers. C) business owners to use employee retirement funds to help finance their small business. D) employees to withdraw funds from the IRA prior to retirement without penalty. Answer: A Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 223) A retirement plan where employers often match part of an employee's contribution is known as a A) simple IRA. B) Roth IRA. C) Keogh plan. D) 401(k) plan. Answer: D Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Knowledge thinking Accessibility: Keyboard Navigation 224) Withdrawals from a traditional IRA prior to the age of 59½ are A) tax deferred until you reach 65 years of age. B) tax-free. C) normally subject to a penalty and taxes on the income that is withdrawn from the IRA. D) subject to a possible denial after review by the Internal Revenue Service. Answer: C Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

225) The simple IRA plans allow employees of ________ companies to contribute larger amounts than the traditional IRA. A) nonprofit B) small C) big D) international Answer: B Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 226) The tax-sheltered program to encourage self-employed people to accumulate retirement funds is called a(n) A) 401(k) plan. B) IRA plan. C) COLA plan. D) Keogh plan. Answer: D Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 227) The people who assist families in developing a comprehensive program that covers investments, taxes, insurance, and retirement plans are called A) insurance salespeople. B) financial planners. C) portfolio managers. D) stockbrokers. Answer: B Difficulty: 1 Easy Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

228) For someone with a family that includes young children, the first step in estate planning should be to A) establish a will. B) set up a trust fund for each child. C) select a guardian for the children. D) give each child his or her own savings account. Answer: C Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 229) A ________ is a document that names a guardian for your children, states how you want your assets distributed, and names an executor to handle your estate when you die. A) trust arrangement B) durable power of attorney C) proxy sheet D) will Answer: D Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 230) A(n) ________ is the person named in a will to assemble and value the assets of the deceased, handle tax matters, and distribute the assets. A) executor B) guardian C) arbiter D) intermediator Answer: A Difficulty: 1 Easy Topic: Financial Planning Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

231) The earnings of a traditional individual retirement account (IRA) are A) taxed at the time they are earned. B) not taxed. C) taxed when the funds are withdrawn. D) subject to the double taxation of all dividends. Answer: C Explanation: The earnings of an IRA are tax-deferred until they are withdrawn. At that time, the applicable tax rate should be lower for the retiree. Difficulty: 2 Medium Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 232) The biggest advantage of the Roth IRA is that A) income contributed to the retirement plan is tax-free. B) withdrawals from the retirement plan are tax-free. C) taxes on the income contributed to the retirement plan are deferred until the funds are withdrawn. D) withdrawals from the retirement plan are tax-deferred until the individual reaches 59½ years of age. Answer: B Explanation: People who invest in a Roth IRA do not get the up-front deductions on their taxes offered by a traditional IRA. The biggest advantage lies in the provision that the earnings of the fund are tax-free when they are withdrawn. Difficulty: 2 Medium Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

233) The increase in the number of retirement plans approved by the federal government likely indicates that A) the government budget is approaching a surplus. B) most people have faith in the troubled Social Security system. C) Social Security cannot be counted on to provide an individual with ample funds for retirement. D) as a nation our values have shifted so that we now enjoy the value of saving more and consuming less. Answer: C Explanation: The government has established incentives for you to save money now for retirement because of the problems foreseen in the Social Security system. Difficulty: 2 Medium Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 234) For workers who qualify, the earnings from income invested in a traditional IRA are A) not taxed until the funds are withdrawn. B) never taxed. C) taxed at the time they are earned, but at the lowest individual rate. D) taxed both at the time the money is earned and at the time the earnings are withdrawn. Answer: A Explanation: Neither the money invested nor the earnings of an IRA are taxable for qualified employees until the funds are withdrawn. Part of the tax advantage is that when workers retire, they will likely then be taxed at a lower rate. Difficulty: 2 Medium Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

235) A Keogh retirement plan would be used by a(n) A) self-employed engineering consultant. B) employee at a small manufacturing firm. C) CEO of a major corporation. D) librarian at a city library. Answer: A Explanation: A Keogh plan is like an IRA for people who are self-employed, but it permits much larger contributions (currently up to $54,000 per year). It is intended to encourage selfemployed people to accumulate retirement funds. The only self-employed individual listed in the answers is the engineering consultant. Difficulty: 2 Medium Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 236) Financial planners encourage individuals to begin contributing funds into an IRA as early as possible. The major benefit of early and regular contributions is that A) the earnings will be able to grow over a longer time span, which can result in major financial gains. B) the financial planners will earn a commission for a longer period of time. C) the inflation rate is very low now and will probably rise in the future, thus reducing the real value of future contributions. D) the tax rates are likely to be lower in the future, so higher tax savings on contributions will be maximized by making the contributions now. Answer: A Explanation: The key decision for workers is to begin early to contribute into an IRA, so that the magic of compounding can turn that money into a sizable retirement fund. Difficulty: 2 Medium Topic: Financial Planning Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

237) Which of the following is an indication that the government recognizes Social Security money will not provide you with ample funds for retirement? A) The government has provided cost-of-living adjustments to Social Security recipients. B) The government has invested the contributions in high-yielding investment securities. C) The government has established incentives for workers to save their own money for retirement. D) The government has passed legislation to require Social Security to maintain a balanced budget. Answer: C Explanation: Congress has authorized tax shelters for individuals saving for their own retirement. Individual retirement accounts IRAs, 401(k) plans, and Keogh plans all offer the benefit of postponing the tax liability of earnings on investments until the money is withdrawn at retirement. Difficulty: 2 Medium Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 238) John is thinking about preparing a durable power of attorney. This indicates that he wants to A) ensure that a single lawyer will be able to handle all of his legal needs. B) declare that his current will is invalid. C) eliminate the taxes on his estate when he dies. D) appoint someone to take over his finances if he should become incapacitated. Answer: D Explanation: A durable power of attorney is a document that gives an individual you name the power to take care of your finances if you become incapacitated. Difficulty: 3 Hard Topic: Financial Planning Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

239) As an employee of Marshall Manufacturing, Sherry has an opportunity to invest pre-tax income in an employer-sponsored retirement plan. Her employer will contribute 50 cents for every dollar that Sherry contributes to this fund. What is this an example of? A) individual retirement account (IRA) plan B) 401(k) plan C) Keogh plan D) restricted private investment (RPI) plan Answer: B Explanation: Many firms offer 401(k) retirement plans. In addition to the benefit of taxdeferred investment and earnings, employers often match a portion of the employee's contribution as part of the firm's fringe benefits package. Difficulty: 3 Hard Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 240) Christian quit his job to open his own online consulting business. He now realizes that he no longer has the benefit of a corporate retirement system. He should consider investing in a(n) A) simple 401(k) plan. B) simple IRA plan. C) automated trust account. D) Keogh plan. Answer: D Explanation: The tax-deferred alternative for self-employed people is to establish a Keogh plan. It's like an IRA for entrepreneurs. One big advantage of Keogh plans is that the maximum that can be invested is much greater than for a traditional IRA. (Keogh's maximum currently is $54,000. The government is allowing a gradual increase in IRA contributions, but even in 2017 the maximum contribution to an IRA is only $5,500.) Difficulty: 3 Hard Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

241) Thomas contributed $2,800 to a Roth IRA. He is currently in the 25% tax bracket. How will his contribution affect his income tax for the current year? A) It will reduce the amount of taxes he owes in the current tax year by $700. B) It will increase the amount of taxes he owes in the current year by $700. C) It will reduce the amount of taxes he owes in the current year by $2,100. D) It will have no effect on the amount of taxes he owes this year. Answer: D Explanation: A contribution to a Roth IRA does not reduce taxes in the year of the contribution. The advantage of a Roth IRA is that the withdrawals are not taxed (at least as long as they occur after age 59½.) Difficulty: 3 Hard Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 242) Terrence is in the 30% tax bracket. What is the after-tax cost of a $3,000 contribution to his traditional IRA account? A) $900 B) $1,440 C) $2,100 D) zero Answer: C Explanation: Contributions to a traditional IRA create a tax shelter in the same year the contribution is made. The taxes on the $3,000 would have been $900 ($3,000 × 30%). Therefore, the after-tax cost of the $3,000 contribution is $2,100 ($3,000 – $900). Difficulty: 3 Hard Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

243) Claire has contributed to a Roth IRA for the last several years. She is now in her late sixties and has just retired. She plans to withdraw $3,000 this year from her Roth IRA. If she is in the 25 percent tax bracket, how much tax will she have to pay on her withdrawal? A) $ 750 B) $1,000 C) $2,250 D) She will not owe any taxes on this withdrawal. Answer: D Explanation: The Roth IRA does not offer an up-front tax advantage when the contributions are made. The advantage of this newest IRA is that the withdrawals of earnings from the Roth IRA are tax-free. Difficulty: 3 Hard Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 244) Connor is worried that his health may soon deteriorate to the point where he will no longer be able to take care of his own finances. One way he could ease his mind would be to A) name an executor to his will. B) prepare a durable power of attorney. C) transfer title to all of his real estate and financial assets to a relative he trusts. D) invest all of his financial assets into a Keogh plan. Answer: B Explanation: A durable power of attorney is a document that gives an individual you name the power to take over your finances if you become incapacitated. Difficulty: 3 Hard Topic: Financial Planning Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

245) What advice might a personal financial advisor offer a recent college graduate desiring to become financially secure? Answer: The first step is to recognize that success in a capitalist system requires capital (money) to invest. This is accomplished by having a job and spending less than you earn. Once the graduate has money to invest, a capital-generating strategy requires that for the first five or six years after graduation, the graduate should live frugally. The lifestyle is one of sacrifice, not luxury. The first real estate investment might be to purchase two attached homes. This investment offers the advantage of rent income and the tax advantages of home ownership. Savings should likely be in stocks rather than the bank because the return is higher and the graduate has a long-term view of investing. Finally the graduate should learn to manage credit by paying off the cards each month and using them only for convenience or to have an efficient record of purchases. Difficulty: 3 Hard Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 246) What are the advantages of investing in a home? Answer: One of the better investments persons can make is home ownership. Homes historically have grown in value each year, particularly if located in the "best part of town." Once you buy a home, the payments are relatively fixed. As income rises, the house payments get easier and easier to make. Paying for a home is a good way of forcing yourself to save. You must make the payments every month. Home ownership also offers tax relief in that both real estate taxes and mortgage interest are deductible from federally taxed income. Finally, a home is the one investment in which you can live. Difficulty: 3 Hard Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

247) Identify and discuss the six steps that individuals can take to gain control of their personal finances. Answer: Step 1. Take inventory of your financial position. This is accomplished by the preparation of a personal balance sheet and an income statement. Step 2. Keep track of all your expenses. This can be a chore, but a necessary one. The goal here is to identify clearly where the money is going when it is spent. Step 3. Prepare a budget. Once you know your financial position and the sources of revenues and expenses, a budget can be prepared. This will enable you to plan for the achievement of financial goals, as well as control the family cash flow. Step 4. Pay off your debts. The first thing to do with any extra money identified in the budget is to pay off high-interest debt. It is better to pay off high-cost debt than to save the money in a lower-interest savings account. Step 5. Start a savings plan. The best way to save money is to pay yourself first. That is, take out money for savings before any other expenditure is made. Step 6. If you have to borrow money, only borrow to buy assets that have the potential to increase in value, such as a house. Don't borrow for day-to-day expenses. Difficulty: 3 Hard Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

248) Compare the basic features of the traditional IRA and Roth IRA. Answer: Both the traditional and Roth IRAs offer tax incentives to encourage people to save for their retirement. The difference is when the tax incentives occur. The traditional IRA offers a tax deduction from taxable income for contributions made by qualified employees and allows the earnings to grow tax-free, but taxes any withdrawals made at the time of retirement. The newer Roth IRA does not offer a tax deduction for the contributions made to the retirement plan, but it does allow earnings to grow tax-free and it also allows retirees to make tax-free withdrawals after age 59½. Difficulty: 3 Hard Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 249) How does term insurance differ from whole life insurance? Describe the newer types of life insurance that have been offered in recent years. Answer: Term life insurance offers pure insurance with no savings feature. Whole life insurance offers insurance protection, but also offers savings. Because term insurance does not offer savings it is less expensive than whole life. One drawback of term insurance is that it provides coverage for only a limited number of years, and the premiums can increase over time. A new version of term insurance, called multiyear level-premium life insurance attempts to address this problem, by guaranteeing a fixed premium for the life of the policy, which may run for many years. This has proven very popular. In fact, about 40 percent of recent term insurance policies have guaranteed a set rate for at least 20 years. Because of its saving feature, whole life insurance may be attractive to people who have a hard time sticking to a saving plan. However, the typical whole life policy tends to invest funds very conservatively. This is a safe approach, but the earnings tend to be modest. A newer version, called variable life insurance, tends to take a more aggressive approach, investing savings in stocks and other assets that offer the potential of high yields. The death benefit provided by variable life will depend on the performance of the investments. During the Great Recession, returns often were disappointing, but history suggests that over the long term this type of policy will offer an attractive alternative to the traditional whole life policy. Difficulty: 3 Hard Topic: Insurance Policies Learning Objective: D-03 Explain how buying the appropriate insurance can protect your financial base. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 87 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

250) Describe the major steps involved in estate planning. Answer: For people with young children, the first step in estate planning is to select a guardian. The person selected should have a genuine concern for the children, and should have a compatible parenting style and moral beliefs. It is also important to ensure that adequate resources will be available to take care of the children's needs. The second step in estate planning is to prepare a will. This document should name the guardian for any children, state how assets are to be distributed, and name an executor to handle, assemble, and value the estate's assets, deal with tax issues, and carry out the terms described in the will. The third step is to prepare a durable power of attorney. This document names an individual who could manage the estate's finances if the owner became incapacitated. It is also possible to establish a durable power of attorney for health care to make medical decisions if the person who owns the estate is unable to make those decisions. Difficulty: 3 Hard Topic: Financial Planning Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

Mini-Case Ira Roth and Penny Weiss met and married in the early 2000s, during their days at State University. Both came from families with limited financial resources. They had to work at parttime jobs during school, and still needed student loans to help pay for their college education. Ira and Penny shared a strong work ethic and had a great desire to succeed financially and enjoy the good life. Penny and Ira quickly experienced financial success. Ira used his finance degree and extensive knowledge of computers to obtain a high-paying job in banking. Penny, who cleaned homes to earn money during college, used her experience to start her own business. Her entrepreneurial spirit surprised Ira and their friends, and she built a successful cleaning business with a growing base of residential clients and even a few commercial customers. She soon had to hire several part-time employees to keep up with demand. With money rolling in, Ira and Penny began to live the good life, buying an expensive new car, a state-of-the-art home electronics, and expensive wardrobes. As busy as they were, and as hard as they both worked, they often found it easier to dine at a nice restaurant rather than fix meals at home. When the Great Recession hit later in the decade, Ira was lucky enough to keep his job, but was forced to take a significant pay cut. The economic downturn forced some of the households and businesses that used Penny's company to cut back on professional cleanings, so her business suffered too. Soon the couple was struggling to pay the rent on their upscale apartment. They began relying on credit cards to cover expenses, but after a few months the credit limits on their cards had been reached. They fell behind in paying off their student loans and started getting some unpleasant calls from bill collectors. The stress and frustration led to arguments that began to threaten their personal relationship. With their personal finances out of control, Ira and Penny knew that they had to make changes to save not only their financial dreams, but also their marriage. However, they were at a loss as to where to start. Family members encouraged them to seek the advice of a financial planner. The couple reluctantly agreed that this was something they needed to do. 251) One of the first things the financial planner is likely to have them do would be to A) open an individual retirement account (IRA). B) borrow money to pay for their excess expenses. C) take inventory of their financial position. D) return to school and pursue a graduate degree. Answer: C Explanation: Preparing a personal balance sheet and income statement will allow the couple, as well as the financial planner, to gain better insights into the couple's financial situation. Difficulty: 3 Hard Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 89 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

252) By using the financial planner's advice, Penny and Ira were able to find ways to cut back on their spending and began to live more modestly. They began to have a few hundred dollars left over each month after handling their normal expenses. Which of the following is the first thing they should do with their extra money? A) buy one nice household item that they will both enjoy as a reward for their thriftiness B) pay off their debts, starting with the ones that have the highest finance costs C) start a savings account at a local bank D) buy bonds in a major corporation Answer: B Explanation: Saving and investing money is certainly a desirable goal, but before doing so Ira and Penny should pay off any debts, especially those with high interest rates, such as credit cards. Many credit cards charge interest rates in double digits. Paying off a credit card that charges 17 percent is essentially like earning a 17 percent tax-free return on an investment. In recent years few bonds, much less bank savings accounts, have come close to matching that sort of return. Difficulty: 3 Hard Topic: Financial Planning Learning Objective: D-01 Outline the six steps for controlling your assets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 253) As their situation began to improve, the financial adviser began discussing investment strategies with Penny and Ira. He suggested that they might want to invest in the stock market. He surprised them by saying that they should try to buy stocks during a major downturn in the market—just when most people were trying to sell. This statement suggests that the financial advisor agreed with the A) ontrarian approach to investing. B) concept of "buying short." C) use of leverage in the stock market. D) random walk theory of investment strategy. Answer: A Explanation: When it comes to investing, contrarians go against the grain. They tend to buy when most others are selling. The logic of this approach is that the best time to buy stock is when prices are low—i.e., when the market is in decline. Difficulty: 3 Hard Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

254) Once Ira and Penny achieved a more solid financial foundation, they began to consider the purchase of a home. From a financial standpoint, a sound strategy for them to consider would be to A) buy a large house in a modest neighborhood. B) buy a house in one of the best areas of town, even if they can afford only a relatively small house. C) buy a house that will minimize their total real estate taxes. D) make sure that their house payments are less than the rent they were paying on their old apartment. Answer: B Explanation: The key to housing values is location. It is usually a better investment to buy a small house in a great neighborhood than to buy a bigger house in a less desirable part of town. Difficulty: 3 Hard Topic: Building a Financial Base Learning Objective: D-02 Explain how to build a financial base, including investing in real estate, saving money, and managing credit. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 255) In saving for retirement, Penny could take advantage of the unique tax shelter offered only to small-business owners in a A) 401(k) plan. B) simple IRA plan. C) Roth plan. D) Keogh plan. Answer: D Explanation: The Keogh plan is like an IRA for entrepreneurs. It offers the same tax shelter that an IRA does, but allows for a greater sum of money to be contributed each year tax-free. Difficulty: 3 Hard Topic: Retirement Learning Objective: D-04 Outline a strategy for retiring with enough money to last a lifetime. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

Understanding Business, 12e (Nickels) Chapter 01 Taking Risks and Making Profits within the Dynamic Business Environment 1) Businesses provide goods, jobs, and services to others. Answer: TRUE Difficulty: 1 Easy Topic: Definition of Business Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) Businesses seek to earn a profit by providing goods and services to others. Answer: TRUE Difficulty: 1 Easy Topic: Definition of Business Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) Revenue is the amount a business earns above and beyond what it spends for expenses and costs. Answer: FALSE Difficulty: 1 Easy Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

4) Profit is the amount of money a business earns above and beyond what it spends for salaries and other expenses. Answer: TRUE Difficulty: 1 Easy Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 5) Since all businesses make a profit, starting a business is not risky. Answer: FALSE Difficulty: 1 Easy Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) An entrepreneur risks time and money to start and manage a business. Answer: TRUE Difficulty: 1 Easy Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 7) If a business's costs and expenses are greater than its revenue, it will suffer a loss. Answer: TRUE Difficulty: 1 Easy Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

8) Profits of a business include the salaries paid to its employees. Answer: FALSE Difficulty: 1 Easy Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9) Revenue is the total amount of money a business takes in during a given period by selling goods and services. Answer: TRUE Difficulty: 1 Easy Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10) Risk is the chance an entrepreneur takes of losing time and money on a business that may not prove profitable. Answer: TRUE Difficulty: 1 Easy Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) The United States has one of the highest standards of living in the world. Answer: TRUE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

12) The term "standard of living" refers to the amount of debt people can incur on a given income. Answer: FALSE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 13) Health care availability, a clean environment, and good schools all contribute to a high quality of life. Answer: TRUE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) Maintaining a high quality of life requires the combined efforts of businesses, nonprofit organizations, and government agencies. Answer: TRUE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

15) Stakeholders are all the people who stand to gain or lose by the policies and activities of a business. Answer: TRUE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 16) Stakeholders include customers, employees, stockholders, suppliers, dealers, bankers, government officials, and environmentalists. Answer: TRUE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 17) Outsourcing means selling goods and services to people in other countries. Answer: FALSE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) Outsourcing has caused complications in many states where jobs have been lost to overseas companies. Answer: TRUE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 5 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

19) Insourcing refers to the practice of global companies setting up design and production facilities in the United States. Answer: TRUE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) The knowledge and skills learned in business courses are seldom relevant to students who work for nonprofit organizations or volunteer groups. Answer: FALSE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 21) Businesses and nonprofit organizations often strive to accomplish the same objectives. Answer: TRUE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 22) Nonprofit organizations use financial gains to meet stated social or educational goals of the organization rather than personal profit. Answer: TRUE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

23) The only real purpose of a business is to make money for entrepreneurs. Answer: FALSE Explanation: Businesses don't just make money for entrepreneurs. Businesses provide all of us with necessities such as food, clothing, housing, medical care, and transportation, as well as other goods and services that make our lives easier and better. Difficulty: 2 Medium Topic: Definition of Business Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 24) The only way a firm can increase its profits is to increase its sales revenue. Answer: FALSE Explanation: Revenues minus expenses = profits. A firm with stable or even declining sales might be able to improve profits by reducing expenses. Difficulty: 2 Medium Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 25) The amount of profit or loss earned by a business can be found by subtracting the firm's expenses from its revenues. Answer: TRUE Explanation: Revenues minus expenses = profits. Difficulty: 2 Medium Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

26) Nonprofit organizations are similar to for-profit businesses in that they often provide goods and services that satisfy the needs of society. Answer: TRUE Explanation: Businesses are not the only organizations that produce goods and services. Government agencies, public schools, and charities such as the Salvation Army provide goods or services, but are classified as nonprofit organizations since there is no profit motive. Difficulty: 2 Medium Topic: The Private Enterprise System Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 27) Unlike businesses, employees of nonprofit organizations are not required to learn the business skills of information management, marketing, or financial management. Answer: FALSE Explanation: In order to achieve their goals, nonprofit organizations need people with many of the same skills required by for profit businesses. For example, even though nonprofit organizations do not seek a profit, they still may deal with large sums of money and must keep financial records. Nonprofit organizations also need people with leadership, marketing, and information management skills. Difficulty: 2 Medium Topic: The Private Enterprise System Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 28) Business decisions should consider the interests of customers, employees, suppliers, government leaders, and stockholders. Answer: TRUE Explanation: All stakeholders stand to gain or lose by the policies and activities of a business. A major challenge of businesses is to improve profits while trying to accommodate the interests of all stakeholders. Difficulty: 2 Medium Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

29) Businesses satisfy the demands of all stakeholders by balancing the demands of customers and stockholders. Answer: FALSE Explanation: Customers are interested in benefiting from the products and/or services produced by businesses. Stockholders are usually profit oriented. Stakeholders also encompass customers, suppliers, employees, stockholders, government organizations, environmental groups, and other organizations that are somehow affected by the business in question. Difficulty: 2 Medium Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30) An effort to please one group of stakeholders eventually pleases all stakeholders. Answer: FALSE Explanation: Balancing the demands of all stakeholders is a tremendous challenge for organizations. Trade-offs are common. Benefiting one group may have a negative impact on another group of stakeholders. For example, the need to stay competitive may call for outsourcing jobs to other countries, but that might do great harm to the community because many jobs would be lost. Difficulty: 2 Medium Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 31) Insourcing creates new jobs, and helps offset the number of jobs being outsourced. Answer: TRUE Explanation: Many companies are setting up design and production facilities here in the United States. For example, Hyundai is doing design and engineering work in Detroit and producing cars in Montgomery, Alabama. Such insourcing creates many new jobs, and helps offset the number of jobs being outsourced. Difficulty: 2 Medium Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

32) Sarah has started her own candy company. While she recognizes the risks involved in operating a business, she is still willing to invest her time, effort, and money in hopes of earning a profit. Sarah is an example of an entrepreneur. Answer: TRUE Explanation: An entrepreneur is someone who risks time and money to start and manage a business. Difficulty: 3 Hard Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 33) Brandford Books, an eclectic bookstore in a Phoenix suburb, generated total revenues of $17 million while incurring expenses of $14 million. By the end of the year, Brandford Books earned a profit of $3 million. Answer: TRUE Explanation: The profit a firm earns is found by subtracting total costs from total revenue. $17 million − $14 million = $3 million Difficulty: 3 Hard Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation 34) Since businesses strive to earn a profit, their owners benefit at the expense of the rest of society. Answer: FALSE Explanation: In the pursuit of profit, businesses create jobs; produce goods and services that contribute to a higher standard of living; and pay taxes that support important government programs. Thus, businesses benefit others in society as well as their owners. Difficulty: 3 Hard Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

35) Jose earned the same amount of money this year as he did last year. Thus, his standard of living must be the same as it was last year. Answer: FALSE Explanation: The standard of living refers to the amount of goods people can buy with the money they have. There are two factors that determine the standard of living: a person's earnings and the price of goods and services. If the prices of goods and services have increased or decreased over the past year, Jose's standard of living will change even if the amount of money he earns is the same. Difficulty: 3 Hard Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 36) Christina quit her job in Chicago to take a less stressful position in a small town located in a scenic area. She now earns less money and has had to cut back on her purchases of material goods, but she has more free time and really enjoys the clean air and scenic beauty of her new home. Christina has accepted a lower standard of living in order to enjoy a higher quality of life. Answer: TRUE Explanation: The standard of living is the amount of goods and services people can buy with the money they have. The quality of life is a broader measure of social welfare that refers to the general well-being of a nation's citizens. If citizens benefit from a cleaner environment, more political freedom, or more leisure time, their overall welfare (quality of life) may improve even if they are not able to purchase more goods and services with their incomes. Difficulty: 3 Hard Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

37) Political freedom, quality education, access to health care, and a clean environment are all factors that contribute to an improved quality of life. Answer: TRUE Explanation: The quality of life focuses on the general well-being of a society, and includes factors such as freedom, security, leisure time, and other factors beyond the goods and services people can buy with their incomes. Difficulty: 3 Hard Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 38) People living in San Francisco, CA, on average earn more money than people living in Kansas City, MO. The citizens of San Francisco enjoy a higher standard of living than the citizens of Kansas City. Answer: FALSE Explanation: The standard of living depends on the price level as well as the income people earn. For example, as our text indicates, people in Germany and Japan may earn more money than Americans, but they have a lower standard of living because the prices they pay for goods and services are higher. Difficulty: 3 Hard Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

39) The major difference between businesses and nonprofit organizations is that only businesses can increase the standard of living, while only nonprofit organizations can improve the quality of life. Answer: FALSE Explanation: The standard of living refers to the amount of goods people can buy with their money. Both businesses and nonprofit organizations can produce and distribute goods and services, so they both affect the standard of living. Similarly, both businesses and nonprofit organizations can have an impact on the physical environment, health care, and other determinants of the quality of life. Difficulty: 3 Hard Topic: The Private Enterprise System Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 40) A charitable organization, such as the American Red Cross or Salvation Army, is classified as a for-profit organization. Answer: FALSE Explanation: A charitable organization is not classified as a for-profit organization since it does not seek a profit. Charities are classified as nonprofit organizations. Difficulty: 3 Hard Topic: The Private Enterprise System Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

41) It was recently reported that Japan succeeded in improving its people's standard of living and establishing a relatively affluent society. This report clearly indicates that both income levels and the price of goods and services rose significantly during that time period. Answer: FALSE Explanation: If the people of Japan improved their standard of living, this means that they can purchase more with their current income than they were able to do in the past. In order to purchase the same or more goods than they were able to purchase in the past, the price of goods and services either stayed the same or decreased; or the price of goods and services stayed the same, but income levels rose. Difficulty: 3 Hard Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 42) Starting a business is a riskier path toward business success than working your way up the ranks of a large business. Answer: TRUE Difficulty: 1 Easy Topic: Define Entrepreneurship Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 43) Working as an entrepreneur is the only way to succeed in business. Answer: FALSE Difficulty: 1 Easy Topic: Define Entrepreneurship Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

44) Paid vacations and health care insurance are among the benefits provided by the government to entrepreneurs. Answer: FALSE Difficulty: 1 Easy Topic: Define Entrepreneurship Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 45) Land, sometimes called a natural resource, is the most critical factor of production in explaining why some countries are poor while others are rich. Answer: FALSE Difficulty: 1 Easy Topic: The Factors of Production Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 46) Money is one of the five factors of production that contribute to the creation of wealth. Answer: FALSE Difficulty: 1 Easy Topic: The Factors of Production Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 47) Tools, machinery, and buildings are examples of capital resources. Answer: TRUE Difficulty: 1 Easy Topic: The Factors of Production Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

48) The major advantage rich nations have over poor nations is an abundance of land and labor. Answer: FALSE Difficulty: 1 Easy Topic: The Factors of Production Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 49) Entrepreneurship is one of the five factors of production that contribute to the creation of wealth. Answer: TRUE Difficulty: 1 Easy Topic: The Factors of Production Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 50) Business consultant Peter Drucker said that the most important factor of production is knowledge. Answer: TRUE Difficulty: 1 Easy Topic: The Factors of Production Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 51) Most business experts agree that entrepreneurship and the effective use of knowledge are the most important contributors to the creation of wealth. Answer: TRUE Difficulty: 1 Easy Topic: The Factors of Production Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 16 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

52) The business environment refers to the surrounding factors that either help or hinder the development of businesses. Answer: TRUE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 53) Countries with an inadequately trained workforce and few entrepreneurs often achieve the highest levels of income by relying on a large number of workers. Answer: FALSE Explanation: Poor countries often have plenty of labor and access to adequate capital. However, the two factors of production that are most critical in generating national wealth are entrepreneurship and knowledge. A country found lacking in these would experience relatively low levels of income. Difficulty: 2 Medium Topic: The Factors of Production Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 54) If they wish to create more wealth, poor nations should focus on policies that increase entrepreneurship and the effective use of knowledge. Answer: TRUE Explanation: Poorer nations often have plenty of labor and land, as well as access to capital. However, the absence of entrepreneurship and knowledgeable workers seems to be the reason that most poor countries remain poor. Difficulty: 2 Medium Topic: The Factors of Production Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

55) Aaron recently opened Twangy Tunes, a small recording studio in Nashville, TN. He probably could have set up shop in several major cities, but Nashville offered him the two most important factors, according to Peter Drucker, that would enhance the creation of wealth: labor and political freedom. Answer: FALSE Explanation: According to leading economists and business analysts like Peter Drucker, entrepreneurship and knowledge are the two key factors that enhance the creation of wealth. Difficulty: 3 Hard Topic: The Factors of Production Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 56) Gary recently completed his degree in management and is planning to start a business rehabilitating apartment buildings. After researching several potential areas, he chose Los Angeles due to its high population. Greg felt that this factor would create a large labor pool, the most important of the five factors of production. Answer: FALSE Explanation: While labor is included in the factors of production, entrepreneurship and knowledge are considered the most important factors in the creation of wealth. Difficulty: 3 Hard Topic: The Factors of Production Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

57) Jackson is supposed to be studying for finals but his mind keeps wandering to the beach. Several years ago, his Uncle Mitch made it big and now owns a small resort near Fort Lauderdale. He promised Jackson a management trainee position and the opportunity to buy into the company by contributing a portion of his paycheck each month back into the business. As he daydreams about being his own boss, he should realize that freedom to succeed also means freedom to fail. Answer: TRUE Explanation: Entrepreneurship promises its participants the opportunity for great success; however, the potential of failure also looms in the process. Difficulty: 3 Hard Topic: Define Entrepreneurship Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 58) Taxes and government regulations are part of the economic and legal environment in which businesses operate. Answer: TRUE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 59) High taxes and government restrictions help to encourage entrepreneurs by providing greater incentives for people to work hard and create profit. Answer: FALSE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

60) One of the best things the governments of developing countries can do to increase wealth is to minimize interference with the free exchange of goods and services. Answer: TRUE Difficulty: 1 Easy Topic: The Private Enterprise System; The Impact of Information Technology on Business Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 61) In countries where businesses cannot enter into binding contracts, business owners assume additional risk. Answer: TRUE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 62) In an effort to increase wealth and their country's standard of living, many governments are taking over major industries and operating them as nonprofit organizations. Answer: FALSE Difficulty: 1 Easy Topic: The Private Enterprise System; The Impact of Information Technology on Business Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 63) Corruption and illegal activities are expected in a capitalist system and can be beneficial. Answer: FALSE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

64) One way for a government to actively promote entrepreneurship is to establish a currency that's tradable in world markets so that you can buy and sell goods anywhere in the world using that currency. Answer: TRUE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 65) Honesty, integrity, and high ethical standards are essential to a capitalist economic system like the one that operates in the United States. Answer: TRUE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 66) Laws that allow companies to write enforceable contracts decrease the risk of doing business. Answer: TRUE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

67) In rich countries such as the United States, changes in the level of taxation have little impact on the incentives of entrepreneurs. Answer: FALSE Explanation: High taxes and excessive regulation tend to discourage entrepreneurship even in wealthy nations. In the United States, those states with the highest taxes and most burdensome regulations tend to drive out entrepreneurs while states with lower taxes and fewer regulations tend to attract them. Difficulty: 2 Medium Topic: The Private Enterprise System Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 68) The failure to uphold high ethical business standards by a few companies can negatively impact the entire U.S. business community. Answer: TRUE Explanation: Unethical business standards negatively affect the business community and our nation's economy. Ethics are so important that the news media will widely report unethical behavior. Difficulty: 2 Medium Topic: The Private Enterprise System Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

69) The government of the small nation of Gordonia owned the nation's telephone company and landlines. This relatively poor government relied on taxes to develop this industry and provide service to its citizens. If the government wanted to improve people's access to phone service, its best course of action would involve selling the telephone company to private investors. Answer: TRUE Explanation: Government can actively promote entrepreneurship by encouraging private ownership of businesses. If the government owns the businesses there is little incentive for people to work hard to create profits. Difficulty: 3 Hard Topic: The Private Enterprise System Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation 70) The government of Willopolis is trying to attain a higher quality of life by imposing strict regulations to protect the environment and ensure safe working conditions in its industries. The government also has established programs to help the poor, financing them by raising tax rates. These efforts by Willopolis's government should create an atmosphere that encourages entrepreneurship. Answer: FALSE Explanation: One of the things a government can do to encourage entrepreneurship and the formation of wealth is to keep regulations and taxes to a minimum. Difficulty: 3 Hard Topic: The Private Enterprise System Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 71) Though it has received a lot of attention, the development of information technology (IT) has had less of an impact on the way businesses operate than many other changes. Answer: FALSE Difficulty: 1 Easy Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

72) An increase in productivity indicates that more can be produced in a given time period with the same amount of resources. Answer: TRUE Difficulty: 1 Easy Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 73) Technology can help businesses become more efficient and productive. Answer: TRUE Difficulty: 1 Easy Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 74) Productivity is the amount of output you generate given the amount of input such as hours worked. Answer: TRUE Difficulty: 1 Easy Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 75) Effectiveness means producing goods and services using the least amount of resources. Answer: FALSE Difficulty: 1 Easy Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

76) Effectiveness means producing the desired result. Answer: TRUE Difficulty: 1 Easy Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 77) Technology refers to everything that makes business operations more effective, efficient, and productive. Answer: TRUE Difficulty: 1 Easy Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 78) E-commerce is the buying and selling of goods online. Answer: TRUE Difficulty: 1 Easy Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 79) The online B2B market consists of selling goods and services to consumers. Answer: FALSE Difficulty: 1 Easy Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

80) The rise of online marketing has become particularly important in doing business in the B2B markets. Answer: TRUE Difficulty: 1 Easy Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 81) The business-to-business segment of e-commerce is of less importance than the business-toconsumer segment of e-commerce. Answer: FALSE Difficulty: 1 Easy Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 82) Technology allows firms to be more responsive to their customers' wants and needs. Answer: TRUE Difficulty: 1 Easy Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 83) Bar codes are a form of technology that has enhanced a company's ability to be responsive to consumer needs. Answer: TRUE Difficulty: 1 Easy Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

84) An electronic storage file where information is kept is called a CPU. Answer: FALSE Difficulty: 1 Easy Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 85) The databases of a business often include a great deal of information about the firm's customers. Answer: TRUE Difficulty: 1 Easy Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 86) Information in a database allows firms to carry only the products that the local population wants. Answer: TRUE Difficulty: 1 Easy Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 87) Identity theft is when individuals or firms access people's personal information and then use it for illegal purposes and activities. Answer: TRUE Difficulty: 1 Easy Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

88) The main difference between B2C and B2B e-commerce is that B2C is only used online, while B2B combines e-commerce with traditional (bricks-and-mortar) outlets. Answer: FALSE Explanation: The major difference between B2C and B2B is the customer. B2C stands for business-to-consumer. Businesses involved in B2C sell mainly to households. B2B stands for business-to-business. Businesses involved in B2B sell mainly to other businesses. Difficulty: 2 Medium Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 89) One of the major advantages to firms involved in e-commerce is that the technology is still so new that the online firms face very little competition. Answer: FALSE Explanation: The rise of e-commerce has led to intense competition. The rise of Internet marketing drew hundreds of competitors into the fray. Difficulty: 2 Medium Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 90) Natalie has joined several other investors to form a new company that sells cosmetics products to consumers online. Natalie has invested in a B2C e-commerce company. Answer: TRUE Explanation: B2C companies specialize in selling goods to consumers. Difficulty: 3 Hard Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

91) Workers in the island nation of Rainland have enjoyed an increase in the number of holidays and a reduction in the average length of the workday. This has reduced the total number of hours they work each year. However, the output per worker is higher now than it was before the reduction in hours. These facts imply that productivity on the island has increased. Answer: TRUE Explanation: Productivity is measured by dividing total output by work hours. Since output is higher while work hours have dropped, productivity must be higher. Difficulty: 3 Hard Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 92) SmoothCoats produces industrial coatings for the steel industry. Until recently it relied on wholesalers to distribute its products to other businesses, but now it also sells directly to its B2B customers through its website. This is an example of the largest and most important type of ecommerce transaction. Answer: TRUE Explanation: As important as the Internet has been in the consumer market (B2C), it has become even more important in the business-to-business (B2B) market. Difficulty: 3 Hard Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Apply AACSB: Knowledge Application; Analytic Thinking Accessibility: Keyboard Navigation 93) As emerging technologies become widespread, businesses tend to find better uses for them. However, in the case of the Internet, businesses that sell B2B have not benefited from directly selling to their business customers in the same way that B2C companies have done. Answer: FALSE Explanation: The Internet has become an important business tool in both the B2B market and the B2C market. Difficulty: 3 Hard Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

94) Julia finds it easy to do all her holiday shopping online. She can take comfort in the fact that new technologies if installed properly are seldom used in unethical ways. Answer: FALSE Explanation: Although technological wonders such as the Internet have improved the way we communicate with customers and friends, problems such as identity theft have surfaced. Difficulty: 3 Hard Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 95) Technological innovation has a ripple effect. Kevin, a certified tech-nerd, is being courted by companies to write the next generation of antivirus software. Kevin should take this job because it will provide future opportunities for him. Answer: TRUE Explanation: The Internet has created tremendous job opportunities for specialists like Kevin. Difficulty: 3 Hard Topic: The Risks Associated with Information Technology Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 96) To remain competitive in today's market, firms must produce a quality product and offer outstanding service at a reasonable price. Answer: TRUE Difficulty: 1 Easy Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 97) Producing a high-quality product will ensure success in the competitive environment. Answer: FALSE Difficulty: 1 Easy Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

98) Successful firms follow a customer-driven strategy, as opposed to the management-driven strategy used in the past. Answer: TRUE Difficulty: 1 Easy Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 99) Zero defects means that there is a company goal of no mistakes in making products. Answer: TRUE Difficulty: 1 Easy Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 100) Today's businesses have a managerial focus rather than a customer focus. Answer: FALSE Difficulty: 1 Easy Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 101) Competition is fierce! One way to respond quickly to customer needs is to develop a strategy of empowering employees. Answer: TRUE Difficulty: 1 Easy Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

102) A policy of empowerment encourages managers to make decisions quickly for their frontline employees. Answer: FALSE Difficulty: 1 Easy Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 103) Empowerment means giving frontline workers the responsibility, authority, and freedom to respond quickly to customer requests. Answer: TRUE Difficulty: 1 Easy Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 104) The goal of empowerment in the workplace is to prevent mistakes. Therefore, giving management more control over the actions of lower-level workers will prevent mistakes. Answer: FALSE Difficulty: 1 Easy Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 105) The primary focus of successful firms is designing and producing high-quality goods. Advertising is then used to convince consumers to buy their superior products. Answer: FALSE Explanation: Successful businesses are customer-driven, meaning that they listen to the wants and needs of customers and adjust their products, policies, and practices to better meet customer demands. Difficulty: 2 Medium Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

106) It's important that firms are as efficient as possible. This is done by becoming managementdriven for efficiency. Answer: FALSE Explanation: Business has become more customer-driven, not management-driven as in the past. This means that customers' wants and needs must come first. Difficulty: 2 Medium Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 107) Customer-driven organizations require managers to closely direct and control their employees. Answer: FALSE Explanation: Customer-driven organizations will exceed their customers' expectations by empowering their frontline employees. The movement toward empowerment suggests that lower-level workers are likely to assume more responsibility in the future, while managers will give up some of their authority. Managers must train frontline people to make decisions without the need to consult managers. Difficulty: 2 Medium Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 108) Buddy and Pablo are worthy competitors in the bakery business in Baltimore. Buddy recently negotiated a contract with a supplier for really cheap chocolate. He knows that bakery customers want cheap products. In this competitive environment, keeping the price down is all that matters. Answer: FALSE Explanation: In the current competitive environment of every industry, customers are looking for high quality and good value, at competitive prices. Difficulty: 3 Hard Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

109) Bonnie runs a house cleaning service. Although she and her employees could service 12 households in one day, they average eight homes per day. Bonnie recently restructured her crew and provided each housekeeper with an incentive to acquire two new customers each month through customer referrals. As a recent business graduate, you would tell her she's probably on the right track. Answer: TRUE Explanation: Companies now have to offer both high-quality products and good value, but also outstanding service at competitive prices. Through restructuring, owners/managers often give up some of their authority and empower employees to make decisions that exceed customer's expectations. Difficulty: 3 Hard Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation 110) The statistical study of the human population to describe its size, age, gender, and income is known as diversity recognition. Answer: FALSE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 111) The U.S. population tends to buy the same things and spend time in roughly the same way as people did a decade ago. Answer: FALSE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

112) Demographic changes create new business opportunities. Answer: TRUE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 113) Diversity groups identified in the market today can include extroverts, introverts, atheists, and the religious. Answer: TRUE Difficulty: 1 Easy Topic: Cultural Diversity in the Workplace Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Remember AACSB: Diversity Accessibility: Keyboard Navigation 114) Companies have responded to a diverse customer base by hiring a more diverse workforce. Answer: TRUE Difficulty: 1 Easy Topic: Cultural Diversity in the Workplace Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Remember AACSB: Diversity Accessibility: Keyboard Navigation 115) Currently people between the ages of 45 and 54 are the richest group in the United States. Answer: FALSE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

116) New welfare rules have made it easier for single parents to remain at home with their young children without being required to seek employment. Answer: FALSE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 117) In some cities, the number of legal and illegal immigrants has caused governments to adapt by changing signs and forms to other languages. Answer: TRUE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 118) The federal government requires companies to take diversity very seriously, even recommending establishing a chief diversity officer in the executive suite. Answer: FALSE Difficulty: 1 Easy Topic: Cultural Diversity in the Workplace Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Remember AACSB: Diversity Accessibility: Keyboard Navigation 119) One factor that has had a major effect on businesses is the growth of single-parent families. Answer: TRUE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

120) Businesses that cater to older consumers in the future will likely not be successful. Answer: FALSE Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 121) Businesses use demographic studies to understand where people live, their lifestyles, and what they are likely to buy. Answer: TRUE Explanation: Demography is the statistical study of the human population to learn its size, density, and characteristics. Since many goods and services appeal to customers with specific demographic characteristics (such as age or income), studying demographic trends can help businesses determine whether the demand for a good is likely to rise or fall. Difficulty: 2 Medium Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 122) Diversity management would not be an issue if firms would treat all of their employees the same. Answer: FALSE Explanation: A diverse workforce can consist of minorities, women, people with disabilities, people with different sexual orientations, and with different religious beliefs. These differences can be a strength only if management works to meet the needs of each group while achieving the organizational goals. The interaction of these different views can encourage new perspectives and creative approaches to solving problems. Difficulty: 2 Medium Topic: Cultural Diversity in the Workplace Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Understand AACSB: Diversity Accessibility: Keyboard Navigation

123) Demographic trends suggest that businesses will benefit from offering flexible work schedules, elder care, and child care to help employees balance the demands of job and family. Answer: TRUE Explanation: The increase in the number of single–parent families is a powerful demographic trend. Successful organizations will adjust and accommodate these changes in their social environment. Difficulty: 2 Medium Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 124) The current Social Security system will ensure that the young people of today will have Social Security benefits in the future when they retire. Answer: FALSE Explanation: The current Social Security system means that today's workers pay for today's retirees. To date this has worked since there are more workers supporting each retiree. However, soon, less money will be coming into Social Security than will be going out and there will be a shortfall, suggesting that today's young people will not have Social Security benefits in the future. Difficulty: 2 Medium Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 125) Jorge, a recent college graduate, is thinking of investing in a home health care business. He believes this will be a profitable venture because of the increasing number of people in the U.S. that will be over 65 years of age in the near future and more likely to need this type of service. This accurately describes a demographic trend that will affect his business choice. Answer: TRUE Explanation: When scanning the social environment for opportunities and threats, business professionals study demographic changes in their respective markets. Demographic changes like age can have a significant impact on business choices and career opportunities. Difficulty: 3 Hard Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

126) Elizabeth is a single mother of small children. Her employer is considering providing family leave. Since she is a single mom with two young children, she is unlikely to benefit from this program. Answer: FALSE Explanation: Family leave allows workers to take time off to attend to a sick child and should be quite beneficial to Elizabeth since she has two small children. Difficulty: 3 Hard Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 127) Jeff is an emergency room nurse at a regional hospital in Arizona. On a weekly basis, he will serve a number of patients who are not legally U.S. citizens. Fortunately, he speaks enough Spanish to communicate with the patients. Jeff is experiencing the realities of the social environment in some states. Answer: TRUE Explanation: There is a sizeable Spanish–speaking population that lives in this state. The social environment in many states and many countries can differ. Both for-profit and nonprofit companies must adjust to accommodate for changes in the social environment. Difficulty: 3 Hard Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 128) Globalization has increased among nations. Answer: TRUE Difficulty: 1 Easy Topic: Competition Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

129) An important environmental change in the global environment is the growth of international competition. Answer: TRUE Difficulty: 1 Easy Topic: Competition Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 130) Improved distribution systems have led to more global trade. Answer: TRUE Difficulty: 1 Easy Topic: Competition Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 131) Global trade has suffered because of increased problems with the Internet. Answer: FALSE Difficulty: 1 Easy Topic: Competition Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 132) Globalization has greatly increased living standards around the world. Answer: TRUE Difficulty: 1 Easy Topic: Competition Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

133) China and India have become major U.S. competitors. Answer: TRUE Difficulty: 1 Easy Topic: Competition Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 134) The threat of terrorism increases the costs of operating most businesses. Answer: TRUE Difficulty: 1 Easy Topic: Competition Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 135) Wars are costly to all companies. Answer: FALSE Difficulty: 1 Easy Topic: Competition Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 136) War and terrorism have had a significant effect in drawing many resources away from the U.S. economy and led to many additional costs for businesses. Answer: TRUE Difficulty: 1 Easy Topic: Competition Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

137) In most industries, the only producers that pose a serious threat to U.S. manufacturers are those in Japan and Western Europe. Answer: FALSE Explanation: Producers in countries like China and India have become major U.S. competitors. Difficulty: 2 Medium Topic: Competition Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 138) Companies that participate in the defense industry by making weapons and other companies that make armored vehicles and even food companies do well when the U.S. is at war. Answer: TRUE Explanation: Although wars are quite costly for most companies, there are some whose revenues and profits grow. These are usually companies with government contracts that support the war effort. Difficulty: 2 Medium Topic: Competition Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 139) According to the box, "Hollywood Climbs the Great Wall,” casting American actors of Chinese descent attracts larger audiences in China rather than casting a Chinese actor. Answer: FALSE Explanation: Though more than half of the top ten grossing films in China are from Hollywood, producers are looking to cast Chinese actors in their movies to appeal to audiences in China. Most recently the producers of the "Jumanji” remake were seeking a Chinese actor to feature in their film. Difficulty: 2 Medium Topic: Competition Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

140) One of the problems with globalization is that distribution systems and communication systems lack efficiency. Answer: FALSE Explanation: Distribution systems and communication systems have improved dramatically, and have contributed to world trade. Difficulty: 2 Medium Topic: Competition Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 141) The evidence for climate change is highly suspect. Well-known U.S. companies are taking a wait-and-see approach toward addressing climate change. Answer: FALSE Explanation: Climate change is a key question on the minds of most companies. Difficulty: 2 Medium Topic: Corporate Social Responsibility Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 142) Michael James owns a small manufacturing company that makes ventilation systems used in the construction of buildings. As the U.S. continues to be involved in wars around the globe, Michael may notice that his business will be growing more slowly in the future as more money continues to be put into the war effort. Answer: TRUE Explanation: Recent wars have drawn trillions of dollars from the American economy. Many companies have lost workers to the armed forces and have grown more slowly as money has been diverted to the war effort. Difficulty: 3 Hard Topic: Competition Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

143) Lacey owns a bakery in Dallas. She read online that the homeland security threat level has been increased due to anticipated terrorist activities, especially in large cities in the U.S. She will likely not be able to get insurance to cover any losses her business may suffer should an attack occur in Dallas. Answer: TRUE Explanation: Lacey's restaurant is located in a large U.S. city. Firms have found it difficult to get insurance against terrorist attacks. Difficulty: 3 Hard Topic: Competition Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 144) After several years of working and going to school part time, Hakim recently earned a degree in marketing at a local college. The growth in global markets may increase Hakim's job opportunities, but it will also require him to continually update his skills or seek additional education. Answer: TRUE Explanation: As businesses expand to serve global markets, new jobs will be created. But global markets will also create more competition. In order to remain competitive, U.S. workers will have to continually update their knowledge and skills. Difficulty: 3 Hard Topic: Competition Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

145) Maria is an engineer for Blustery Breezes, a small manufacturer of wind turbines. Recently, a larger company, PowerMen Electric, has shown interest in investing in this small operation. This is not surprising since firms that are creating products for alternative sources of energy are attracting the attention of governments and other businesses. Answer: TRUE Explanation: Energy and sources of energy promise to be key considerations that will attract the attention of government and other businesses. Difficulty: 3 Hard Topic: Competition Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation 146) Over many years the nature of U.S. business has changed very little from century to century. Answer: FALSE Difficulty: 1 Easy Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 147) The number of U.S. jobs in manufacturing has increased in the past five years. Answer: FALSE Difficulty: 1 Easy Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

148) Technology helped the manufacturing industry to become more productive. Answer: TRUE Difficulty: 1 Easy Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 149) While the proportion of workers employed in agriculture has remained relatively constant, the average size of farms has steadily decreased over the past century. Answer: FALSE Difficulty: 1 Easy Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 150) Increases in productivity have allowed fewer farmers to feed more and more people. Answer: TRUE Difficulty: 1 Easy Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 151) The advice provided by a personal trainer is an example of the service industry. Answer: TRUE Difficulty: 1 Easy Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

152) Almost all of the growth in employment opportunities since the mid-1980s has been generated by the service sector. Answer: TRUE Difficulty: 1 Easy Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 153) Although employment in the service sector has increased rapidly in recent years, the vast majority of workers are still employed in the goods-producing sector. Answer: FALSE Difficulty: 1 Easy Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 154) There are currently more high-paying jobs in the service sector than in the goods-producing sector. Answer: TRUE Difficulty: 1 Easy Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

155) The best employment strategy for today's college graduates is to search for jobs that are closely related to their college major. Answer: FALSE Difficulty: 1 Easy Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 156) The growth in the service sector in the United States appears to be giving way to an information-based global era. Answer: TRUE Difficulty: 1 Easy Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 157) The transition from an agricultural economy to a manufacturing economy to a service-based economy has resulted in a serious increase in long-term unemployment. Answer: FALSE Difficulty: 1 Easy Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

158) One reason given for the decline in the number of U.S. workers employed in manufacturing is that manufacturing firms in the U.S. have become more efficient. Answer: TRUE Explanation: Technology has allowed U.S. workers to be more productive, resulting in the need for fewer workers. Many American manufacturing firms have downsized because of this increased efficiency. Difficulty: 2 Medium Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 159) The continuing increase in the number of U.S. workers in the service sector means that more and more workers are employed in low-wage positions. Answer: FALSE Explanation: Some jobs in the service sector do pay low wages, but there are actually more high-paying jobs in the service sector than in the goods-producing sector. Service jobs include high-wage positions in such industries as health care, accounting, architecture, law, and telecommunications. Difficulty: 2 Medium Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

160) Historically jobs lost in one sector of the economy have been replaced by increased employment opportunities in other sectors. Answer: TRUE Explanation: The history of our nation's economy shows that as jobs were lost in agriculture earlier in the last century, displaced farm workers were often able to find employment in the growing manufacturing sector. More recently, declines in manufacturing employment have been offset by rapid growth in the service sector. The latest growth area for new jobs is in information technology. Difficulty: 2 Medium Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 161) Kira is a financial planner who helps people find ways to save for retirement and lower their taxes. Kira is employed in the service sector of the economy. Answer: TRUE Explanation: The service sector produces intangible goods. Financial planning is one type of service. Difficulty: 3 Hard Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 162) After losing her manufacturing job in the U.S. automobile industry, Cho has found that well-paid service-sector jobs require retraining and further education. Answer: TRUE Explanation: High-paying service-sector jobs can be found in health care, accounting, finance, entertainment, telecommunications, architecture, law, and software engineering. However, these jobs require specialized training and education. Difficulty: 3 Hard Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

163) An entity that seeks to earn a profit by providing a good or service is known as a(n) A) industry. B) corporation. C) business. D) service. Answer: C Difficulty: 1 Easy Topic: Definition of Business Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 164) ________ is the amount a business earns after deducting what it spends for salaries and other expenses. A) Profit B) Revenue C) Interest D) Dividends Answer: A Difficulty: 1 Easy Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 165) A business incurs a ________ if its costs and expenses exceed its revenues. A) loss B) liability C) debit D) dividend Answer: A Difficulty: 1 Easy Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

166) ________ is the chance a business owner will lose the time and money invested in a business that proves to be unprofitable. A) Depreciation B) Risk C) Fallibility D) Redundancy Answer: B Difficulty: 1 Easy Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 167) The total amount of money that businesses take in by selling goods and services is called ________. A) profit B) revenue C) loss D) retained earnings Answer: B Difficulty: 1 Easy Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 168) A(n) ________ is a person who assumes the risk of starting a business. A) manager B) entrepreneur C) employee D) stakeholder Answer: B Difficulty: 1 Easy Topic: Define Entrepreneurship Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 52 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

169) Starting a business always involves ________. A) profit B) loss C) revenue D) risk Answer: D Difficulty: 1 Easy Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 170) Often in business the greater the risk, the ________. A) greater the potential reward B) lower the expected revenues C) lower the value provided to society D) greater the number of stakeholders Answer: A Difficulty: 1 Easy Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 171) ________ is a measure of the general well-being and satisfaction derived from a variety of factors including political freedom, safety, education, and a clean environment. A) Standard of living B) Quality of life C) Gross national income D) Social satisfaction index Answer: B Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

172) The amount of goods and services people can buy with the money they have is called their: A) nominal income. B) consumer price index. C) profit margin. D) standard of living. Answer: D Difficulty: 1 Easy Topic: The Private Enterprise System; The Impact of Information Technology on Business Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 173) The customers, employees, stockholders, suppliers, creditors, and others who stand to gain or lose by the policies and activities of a business represent the firm's: A) market makers. B) economic environment. C) stakeholders. D) social mentors. Answer: C Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 174) The most important difference between for-profit businesses and nonprofit organizations is that: A) businesses do not benefit society. B) nonprofit organizations seek to make a profit for their owners and organizers. C) nonprofit organizations do not seek a profit for their owners or organizers. D) nonprofit organizations do not file tax returns. Answer: C Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 54 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

175) Last year, Archer Electronics reported revenues of $34 million while its total expenses were $10 million. Based on this information, Archer reported A) profits of $24 million. B) profits of $34 million. C) losses of $24 million. D) losses off $34 million. Answer: A Explanation: Profits are found by subtracting costs and expenses from revenues, so Adventure Enterprises profits are $34 million - $10 million = $24 million Difficulty: 2 Medium Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 176) A common characteristic of most entrepreneurs is that they: A) accept the risks involved in starting and managing a business. B) have a high level of scientific and technical expertise. C) possess a great deal of personal wealth. D) have experience in running large, complex organizations. Answer: A Explanation: An entrepreneur is a person who risks time and money to start and manage a business. Difficulty: 2 Medium Topic: Define Entrepreneurship Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

177) Which of the following is the best example of a business whose goal is to earn a profit? A) A community college B) The American Red Cross C) Boy Scouts of America D) Apple Answer: D Explanation: Apple is the only one of the organizations listed which seeks to earn a profit. All of the others are nonprofit organizations. Difficulty: 2 Medium Topic: Definition of Business Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 178) In order to make an intelligent investment decision, entrepreneurs should: A) limit their options to those business investments that are backed by the U.S. government. B) invest in businesses that have generated a stable rate of profit for at least the past 10 years. C) invest only in business opportunities where it is possible to take an active role in management. D) compare the risks of potential investments to their expected profits and find the right balance between profit and risk. Answer: D Explanation: Those companies with high risk also often possess the potential for high profits. Entrepreneurs must weigh risk and profit and find the right balance. Difficulty: 2 Medium Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

179) Honda and Hyundai have insourced for years to design and manufacture cars in the United States. Insourcing A) helps offset the number of jobs being outsourced. B) increases the number of jobs being outsourced. C) damages the United States economy. D) causes jobs to be lost to overseas competitors. Answer: A Explanation: Companies including Honda and Hyundai have set up design and production facilities in the United States. Insourcing creates many new jobs, and helps offset the number of jobs being outsourced. Because insourcing creates jobs, it actually helps the U.S. economy. Difficulty: 2 Medium Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 180) Public schools, charities, and government agencies generally ________. A) are incorporated B) do not seek to earn a profit C) provide goods rather than services D) do not have any stakeholders Answer: B Explanation: Although schools, charities, and government agencies often provide goods and services, they do not seek a profit. Therefore, they are nonprofit organizations rather than businesses. Difficulty: 2 Medium Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

181) For-profit businesses and nonprofit organizations are similar in that they both: A) contribute to the welfare of society. B) seek to earn a profit. C) have a limited life. D) must be controlled by a board of directors. Answer: A Explanation: A business is an activity that seeks to profit by providing goods and services to others. Nonprofit organizations, such as charities and government agencies, also provide goods and services to satisfy the needs of people within a society, but they do not seek a profit. Difficulty: 2 Medium Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 182) The standard of living for a nation's people depends mainly on: A) the quality of the natural environment. B) how much political freedom they have. C) their income and the prices of the goods and services they buy. D) the amount of labor and capital available employed in the manufacturing sector. Answer: C Explanation: The standard of living of a country refers to the amount of goods and services people can buy with the money they have. Difficulty: 2 Medium Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

183) World-class businesses attempt to meet the needs of: A) their customers, even if it comes at the expense of employees and other stakeholders in the business. B) their employees, even if it means shortchanging customers by charging higher prices. C) all stakeholders. D) exclusively their owners, since they are ultimately the ones who pay the bills. Answer: C Explanation: Stakeholders are all the people affected by a business. World-class firms of the future will attempt to meet the needs of all of stakeholders. Difficulty: 2 Medium Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 184) Michelle recently started selling her invention: A bed that looks like it floats in mid-air. The bed is actually suspended by magnetic forces. Michelle is a(n) A) arbitrageur. B) entrepreneur. C) speculator. D) account manager. Answer: B Explanation: An entrepreneur is a person who assumes the risk of starting a business. Difficulty: 3 Hard Topic: Define Entrepreneurship Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

185) Donnell wants to invest some money that he just inherited. He found that his bank offers a savings account paying a guaranteed .3% rate of return. However, he would like to earn a higher return. Donnell should keep in mind that to earn a higher return on his money he A) will have to invest overseas. B) should invest in a business that has a very stable and predictable rate of return. C) will probably have to accept a higher level of risk. D) will probably have to engage in illegal activities. Answer: C Explanation: Investing in a savings account (certificate of deposit) at a bank entails very little risk, but earns a relatively small return. Business opportunities that offer the potential for high profits are often associated with a high level of risk. An investor must weigh the potential profit of an investment with its risk. Difficulty: 3 Hard Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 186) Which of the following is the most accurate statement about the impact of business on society? A) When businesses earn a profit for their owners, they usually do so at the expense of the rest of society, which proves it is never a win-win situation. B) While businesses often improve the standard of living within a society, they can do little to improve the quality of life. C) Businesses often improve the quality of life, but can do little to improve the standard of living of most people due to inflation. D) Businesses can have a positive impact on both the standard of living and the quality of life within a society. Answer: D Explanation: Businesses are part of an economic system that helps create a higher standard of living and quality of life for everyone. Difficulty: 3 Hard Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

187) Though the prices of things she buys have gone up, Jin's income has remained stable over the past few years . Nevertheless, Jin feels better off because the environment is cleaner, the crime rate has dropped, she has more relaxation time, and the quality of medical care has improved. If Jin's experience is typical, we can assume that the standard of living has A) increased, but the quality of life has decreased. B) increased, and so has the quality of life. C) declined, but the quality of life has increased. D) declined, and so has the quality of life. Answer: C Explanation: The standard of living refers to how much people can buy with their income. Since prices have gone up faster than her income, Jin's standard of living has declined. However, quality of life refers to a broader measure of general well-being. The improved quality of the environment, safer streets, increased leisure time, and improved medical care would all contribute to an improvement in general well-being, and hence would increase the quality of life. Difficulty: 3 Hard Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 188) Eve and her three college friends enjoy perfumes. As a special gift to each of them last holiday season, she found a way to make scented candles with each friend's favorite perfume scent. The three friends loved her gift idea and encouraged Eve to create more and sell them online. Recently, she is filling orders from her website, and turning a profit. Eve is proof that: A) me-too businesses work. B) when you successfully fill a market need, you can make money. C) the Internet is a way to distribute just about anything. D) the cost of supplies to make candles is relatively cheap. Answer: B Explanation: In order to stay competitive, entrepreneurs must find a market niche–something the market needs. Difficulty: 3 Hard Topic: Define Entrepreneurship Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

189) Green Goddess Developers is a large nationwide landscape company with home offices in Libertyville, IL. The local media often gushes over the gorgeous landscaping that surrounds the 30-acre headquarters. At the back end of the complex are several large warehouses and garages that hold large equipment. The grounds surrounding the warehouses look like a park. Across the street from the garages are several shops and businesses. The CEO, Patty, often talks about how thankful she is that the town permits her to store equipment at that site, and vows to always maintain the premises for her neighbors, not to mention that she asks 100 employees to come to work there every day. Which of the following statements describes Patty's business philosophy? A) Patty is a nice woman whose company made a lot of money, so she is willing to spread it around. B) Patty understands that even though it may cost a little more, stakeholder considerations are very important if you want your business to thrive. C) Patty is more concerned about town politics than about the company profits. She should ask his employees if they would rather have that money in their pockets than on the lawns. D) Patty is taking a business risk that her trucks and equipment will not make too much noise as they enter and exit the garages. Answer: B Explanation: When considering the social environment of one's business, it is important to consider all stakeholders that your business affects. Stakeholders include customers, employees, suppliers, and even other businesses and residential areas that are located within proximity of your business location. Difficulty: 3 Hard Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Apply AACSB: Knowledge Application; Analytic Thinking Accessibility: Keyboard Navigation 190) Which of the following entails the greatest amount of risk? A) Working for the government B) Working for a large business C) Working for a small business D) Starting a business Answer: D Difficulty: 1 Easy Topic: Define Entrepreneurship Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

191) The resources that contribute to the creation of wealth are known as ________. A) production coefficients B) factors of production C) production technologies D) production aggregates Answer: B Difficulty: 1 Easy Topic: The Factors of Production Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 192) Which of the following is a factor of production? A) Bonds B) Money C) Knowledge D) Service Answer: C Difficulty: 1 Easy Topic: The Factors of Production Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 193) As a factor of production, the term capital includes: A) Stocks and bonds issued by corporations. B) Natural resources such as land and water. C) Tools, machinery, and buildings. D) Services provided by the government that enable businesses to be more productive. Answer: C Difficulty: 1 Easy Topic: The Factors of Production Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

194) Two factors of production that seem to contribute the most to a nation's ability to create wealth are: A) land and labor. B) land and capital. C) entrepreneurship and labor. D) entrepreneurship and knowledge. Answer: D Difficulty: 1 Easy Topic: The Factors of Production Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 195) ________ is/are the external and internal circumstances that surround the business. A) The business environment B) The factors of production C) The business corral D) The business disciplines Answer: A Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

196) Entrepreneurs weigh the differences between the benefits of starting a business and those things that they are likely to forego because they choose to work for themselves. Such things they are likely to pass up on are: A) the freedom to make their own decisions. B) local government benefits such as enterprise zone tax credits. C) employer-paid benefits such as paid vacation and health insurance. D) tickets to sporting events that trading partners may provide. Answer: C Explanation: Entrepreneurs and small business owners do not receive the employer-paid benefits that a large firm can offer, including such things as paid vacations and health insurance benefits. They give up these opportunities for the freedom to work for themselves and keep the profits that their businesses realize. Difficulty: 2 Medium Topic: Define Entrepreneurship Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 197) Which of the following is a benefit of owning your own business? A) Freedom to keep the profits from your business B) Government-supported health insurance C) More camaraderie with employees D) Shorter work hours Answer: A Explanation: One of the benefits of owning your own business is the freedom to keep the profits after taxes. Another is the enjoyment of being your own boss. Difficulty: 2 Medium Topic: Define Entrepreneurship Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

198) Mary Kay owns a nursery. The trucks, handcarts, and forklift she purchased for the business are called ________ investments. A) natural resources B) intangible resources C) current asset D) capital Answer: D Explanation: As a factor of production, capital includes tools, machinery, equipment, such as the trucks, hand carts, and forklift machines mentioned in this question. Difficulty: 2 Medium Topic: The Factors of Production Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 199) As you consider the factors of production, which of the following did management theorist Peter Drucker believe to be one of the most important contributing factors to increasing our nation's wealth? A) Land B) Labor C) Knowledge D) Capital Answer: C Explanation: According to the late Peter Drucker, knowledge is and will be the most important factor of production in our economy. He specifically refers to the high-tech workers in the Silicon Valley as knowledge workers. Difficulty: 2 Medium Topic: The Factors of Production Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

200) When we compare the factors of production in wealthy versus poor nations, we find A) poor nations have plenty of land and knowledge, but very little labor. B) poor and wealthy nations (both) have an abundance of knowledge; it is the land that varies, with rich nations always having more. C) wealthy nations have knowledge and entrepreneurial opportunities, while poor nations are often lacking in these areas. D) wealthy nations have land and labor, while poor nations have capital and entrepreneurship. Answer: C Explanation: The factors of production known as knowledge and entrepreneurship contribute toward a nation's opportunity to innovate and create new products and services. Entrepreneurs use their knowledge to grow their businesses and increase wealth. Difficulty: 2 Medium Topic: The Factors of Production Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 201) A nation progresses socially when it has good schools, clean air and water, and more. Which of the following statements addresses conditions for social progress? A) Social progress will evolve when capital is apportioned to everyone in equal amounts. B) A city, state, or nation's social progress needs the right business environment. C) The foundation for social progress is a handful of wealthy entrepreneurs willing to spread the wealth. D) Social progress can only improve when there is a strong labor pool to draw from. Answer: B Explanation: The foundation for social progress is having the right business environment. When businesses create wealth and jobs, they are able to contribute to the social progress in the area where they operate. The result is usually good schools and other social services, such as police protection and good health environment. Difficulty: 2 Medium Topic: The Private Enterprise System Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

202) Which of the following statements about factors of production is the most accurate? A) The five factors of production are energy, capital, labor, leadership, and money. B) Wealth creation in poor nations is slowed by chronic shortages of labor. C) Each of the factors of production is equally important in creating wealth. D) Entrepreneurship and knowledge are the most important in creating wealth. Answer: D Explanation: There are five major categories of factors of production: land, labor, capital, entrepreneurship, and knowledge. Poor nations often have plenty of labor and land, but lack entrepreneurship and knowledge resources. Thus, the only accurate statement is that knowledge and entrepreneurship are the most important factors of production for the creation of wealth. Difficulty: 3 Hard Topic: The Factors of Production Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 203) Cantlivia is a small and poor nation, but its current prime minister has a desire to create more wealth for her citizens. The prime minister has received recommendations from several of her advisors. Which of the following recommendations is likely to create the most wealth for Cantlivia? A) Acquire more land by invading a neighboring country that is even poorer and weaker than Cantlivia. B) Use foreign aid from other nations to purchase more tools and machinery. C) Establish a business environment that promotes and rewards entrepreneurship. D) Establish barriers to trade to protect Cantlivia businesses from foreign competition. Answer: C Explanation: The factors of production that seem to contribute most to the generation of wealth are entrepreneurship and knowledge. Thus, one key to promoting wealth creation is to foster entrepreneurship. Difficulty: 3 Hard Topic: The Factors of Production Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

204) Brendan and Sean combined their love of baseball with a business venture. They purchased a small cart and began selling memorabilia outside of their hometown stadium. Their first year went well, but the past two years have been quite a struggle. Due to poor economic conditions and the team's horrible record, ticket sales at the stadium are down, which has significantly hurt their sales as well. As a recent business graduate, you explain to Brendan and Sean that A) this type of business is always high risk because it is seasonal. B) the business does not fill a sufficient need for most people. C) environmental circumstances are dynamic and tough to control. D) social entrepreneurs are currently getting most of the attention. Answer: C Explanation: The business environment consists of surrounding factors that either help or hinder the development of businesses. In this case the economic environment has severely affected the number of people attending hockey games. Business environments are dynamic. They are constantly changing and business must learn to navigate the changes. Difficulty: 3 Hard Topic: The Private Enterprise System Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 205) Pete is a recent finance graduate who has two passions: music and finance. Upon graduation, he was offered an opportunity to join a struggling rock band with a lot of potential, or a job at a large well-established financial services company. By joining the band, he will forego which of the following? A) Added benefits such as health insurance provided to employees of large corporations. B) The freedom to contribute as an innovator in his work environment. C) Long hours at work, while he learns the business and contributes to making it successful. D) Job protection. Answer: A Explanation: Entrepreneurial ventures and small businesses, particularly in their infancy, cannot offer owners/employees the same benefits as large, established companies. In this case, it is the health benefits Pete will forego. Difficulty: 3 Hard Topic: Define Entrepreneurship Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

206) China is a nation with a vast amount of land and a very large population. Another characteristic of this nation is its people's affinity for saving money. Referring to the five factors of production, the government of China has made significant progress in building its business environment by focusing on factors that needed improvement. Its best strategy would be to A) increase the supply of labor. B) increase sources for capital. C) increase entrepreneurship. D) encourage neighboring nations to provide the necessary land for business development. Answer: C Explanation: Entrepreneurship is one of two factors of production that management theorists believe to be most important for wealth creation. The other is knowledge. Difficulty: 3 Hard Topic: The Factors of Production Learning Objective: 01-02 Explain how entrepreneurship and the other factors of production contribute to the creation of wealth. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 207) Taxes and government regulations are part of the ________ environment of business. A) economic and legal B) competitive C) social D) technological Answer: A Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

208) Businesses favor: A) minimal government spending because it keeps taxes to a minimum. B) more government services because it minimizes tax consequences. C) maximum government spending because it raises business profits. D) less government spending because it lowers business profits. Answer: A Difficulty: 1 Easy Topic: The Private Enterprise System; The Impact of Information Technology on Business Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 209) In order to create more wealth and provide better services, some nations recognize that ________. A) raising taxes benefits all businesses. B) a good strategy is to minimize interference with the free exchange of goods and services. C) restricting trade with other countries always helps domestic businesses. D) taking control of privately owned businesses and making them government-run will decrease taxes and improve the lives of everyone. Answer: B Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 210) In countries where businesses are government owned, A) there is less incentive to work hard. B) the right amount of each good is produced. C) profits tend to be higher. D) the quality of goods is high but profits are low. Answer: A Difficulty: 1 Easy Topic: The Private Enterprise System; The Impact of Information Technology on Business Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 71 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

211) High tax rates tend to: A) promote economic development. B) make a nation's currency tradable. C) discourage entrepreneurship. D) reduce the amount of money created by the government. Answer: C Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 212) Contemporary governments promote business development by A) increasing business regulations. B) providing government ownership of businesses. C) permitting businesspeople to conduct business without the use of contracts. D) establishing a currency that's tradable in world markets. Answer: D Explanation: The government can establish a currency that's tradable in world markets so that businesspeople can buy and sell goods and services anywhere in the world using that currency. Difficulty: 2 Medium Topic: The Private Enterprise System Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

213) Which of the following policies would tend to foster entrepreneurship? A) Minimize taxes and regulations. B) Promote more regulations to protect the environment. C) Develop policies to reduce corruption between individuals. D) Encourage public ownership of businesses. Answer: A Explanation: Minimizing taxes and fewer government regulations are favorable policies toward the creation of businesses. Difficulty: 2 Medium Topic: The Private Enterprise System Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 214) When corruption is present in the business environment: A) company leaders may threaten competitors and minimize competition. B) factories are easier to build without a government permit. C) it promotes fair competition. D) laborers can make more money. Answer: A Explanation: Governments should help to minimize corruption in business for several reasons. It's hard to do business in many poor countries because the governments ignore corruption among businesses and the governments are also corrupt. It's very difficult in such countries to get permission to build a factory or open a store without a government permit, which is obtained largely through bribery of public officials. Among businesses themselves, leaders can threaten competitors and minimize competition. Difficulty: 2 Medium Topic: The Private Enterprise System; The Impact of Information Technology on Business Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

215) Which of the following government policies would be least likely to encourage entrepreneurship? A) Passage of laws that enable businesspeople to write enforceable contracts B) Establishment of a currency that is tradable in world markets C) Establishment of strict regulations specifying exactly how products should be made to ensure safety and affordability D) Passage of laws that eliminate corruption in government and business Answer: C Explanation: One of the things governments can do to encourage entrepreneurship is keep business regulations to a minimum. Regulations may be desirable in other respects, but they tend to discourage entrepreneurship by making the formation and management of businesses more difficult and expensive. Difficulty: 3 Hard Topic: The Private Enterprise System; The Impact of Information Technology on Business Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

216) Blockbuster stores shuttered their doors but Netflix is still growing. Both companies participated in the video rental business. Netflix evaluated the lifestyle needs of video customers, understanding that time, family, and work obligations called for more convenient methods to receive video entertainment. Netflix embraced the opportunity to stream videos directly to customers and create their own content. The company also managed to keep customer costs down, by passing along the savings it realized in labor. Blockbuster did not pay enough attention to competitor movements, permitting Netflix to quickly capture video market share. Which external environment probably had the least effect on Netflix's success? A) Social environment B) Competitive environment C) Economic and legal environment D) Technological environment Answer: C Explanation: Netflix embraced new opportunities in technology to stream online. It also saw opportunities in the social environment. With single- and dual-income families pressed for time, customers are seeking added conveniences. Netflix differentiates its product, positioning itself as friendlier and cheaper. Blockbuster was very slow to react to competitive pressures. Although customers enjoyed the cheaper prices, the technological environment made it cheaper for Netflix to keep costs down and pass along savings to the customer. The economic downturn had little effect on this situation; and the firms operated within the legal limits of the law. Difficulty: 3 Hard Topic: The Private Enterprise System Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

217) A New York Times article about Bernie Madoff and his illegal Ponzi scheme stated, "When money goes global, fraud does too." Although the goal of investors who trusted Madoff's investment company was to earn the highest return possible on their investments, they turned a blind eye toward the fact that some of those returns were too good to be true. Individual investors, companies, and even charities lost large sums of money by investing with Madoff's company. Which of the following statements relates to this story? A) The unethical behavior of one company had a worldwide ripple effect that can impact the well-being of an economy. B) Too much regulation caused the capitalistic nature of Mr. Madoff's business model to fail. C) People lost money because of the fluctuations in world trading currencies, questioning the legitimacy of trading abroad. D) Investors did not sign contracts with Mr. Madoff's company. The government can only protect individuals and companies who sign enforceable contracts. Answer: A Explanation: Unethical behavior can have a steamrolling effect on business as consumers lose confidence and the overall effect on the economy turns negative. Difficulty: 3 Hard Topic: The Private Enterprise System Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 218) Chao sells custom bicycles. He buys several bike parts including wheels and tires from Upright Strides, Inc. Although several government-supported regulations help Chao in his business, regulations that make it easy for his business to enjoy good vendor relationships are A) lower taxes that business-to-business customers pay to each other. B) laws that permit minimal corruption in banking institutions. C) laws that permit small businesses to use the government as an intermediary when doing business with other small businesses. D) laws that support enforceable contracts between firms. Answer: D Explanation: Without enforceable contracts between firms, small and large businesses cannot efficiently conduct business. The government can lessen the risks of entrepreneurship by passing laws that enable people to write good business contracts that are enforceable in court. Difficulty: 3 Hard Topic: The Private Enterprise System Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

219) Walter Waterson owns a lawn irrigation system business. He manages the installations and maintenance of these systems. Several customers are golf courses, but he serves a large group of residential customers as well. When he started the business 10 years ago, he promised to always operate within the legal limits of the law, but lately, the competition is eating him alive. Large competitors have hired illegal immigrants to perform the manual labor, and they do not pay taxes on these employees—they just pay them in cash at the end of the week. Employment taxes are a burden to him. Walter does not want to hire illegal workers. There's a risk if you permit an illegal worker to drive a truck; or, if he/she has an accident on the job. You have just studied business ethics in your class. You inform Walter that A) taxes only need to be paid for the owners. B) he is not only taking a chance that a bigger problem may occur, he is indirectly setting the ethics code for his business. C) small businesses may not be able to worry about ethics codes. These types of documents are better suited for big business. D) it is not unethical to try to better the lives of others. Everyone needs jobs. Answer: B Explanation: As will be read in Chapter 4, management's business ethics sets the tone for the company's value system. Corruption and illegal activities at some companies do negatively affect the business community as a whole. Difficulty: 3 Hard Topic: The Ethical Concerns that Affect Business Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 220) The emergence of an information-based economy are important parts of the ________ environment in which businesses operate. A) economic and legal B) technological C) competitive D) global Answer: B Difficulty: 1 Easy Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

221) Technology affects people in: A) all industries. B) most industries. C) information technology industries with the exception of agriculture. D) primarily high-income countries. Answer: A Difficulty: 1 Easy Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 222) Employers provide tools and technology for their employees in order to: A) increase the cost of production and profitability. B) improve their efficiency and productivity. C) reduce corruption in business and eliminate scandals. D) encourage the private ownership of businesses. Answer: B Difficulty: 1 Easy Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 223) Efficiency means: A) producing the desired result. B) producing goods and services using the least amount of resources. C) the amount of output you generate given the amount of input. D) the buying and selling of goods using the most amount of resources. Answer: B Difficulty: 1 Easy Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

224) ________ refers to the amount of output generated with a given amount of input, e.g., the number of pizzas produced per worker per hour. A) Efficiency B) Technology C) Telecommuting D) Productivity Answer: D Difficulty: 1 Easy Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 225) ________ means producing the desired result. A) Effectiveness B) Technology C) E-production D) Productivity Answer: A Difficulty: 1 Easy Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 226) ________ means producing items using the least amount of resources. A) Efficiency B) Technology C) E-production D) Productivity Answer: A Difficulty: 1 Easy Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

227) The two main types of e-commerce are: A) online and offline. B) EDI and EDC. C) wholesale and retail. D) B2B and B2C. Answer: D Difficulty: 1 Easy Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 228) When businesses sell to other businesses online, these transactions are known as: A) B2C transactions. B) e-wholesale transactions. C) B2B transactions. D) intermediate e-commerce transactions. Answer: C Difficulty: 1 Easy Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 229) Companies that sell goods to consumers online are engaging in ________ transactions. A) B2C B) IOU C) B2B D) Y2K Answer: A Difficulty: 1 Easy Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

230) The series of lines on a product packaging that the cashier scans when you check out at a grocery store or discount store is called a A) bar code. B) zip code. C) scan code. D) laser code. Answer: A Difficulty: 1 Easy Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 231) An electronic storage file where firms keep customer information is known as a(n) ________. A) MP3 file B) management information system C) database D) e-mail server Answer: C Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 232) ________ is illegally obtaining and illegally using private information about a person, such as using someone's credit card number. A) Petty theft B) Identity theft C) Banking theft D) Online theft Answer: B Difficulty: 1 Easy Topic: The Risks Associated with Information Technology Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

233) One advantage of a database is it A) permits a retail store to directly gather information on the customers who do business with its competitors, so it can target promotional materials to those people. B) creates efficiency in that the store can quickly replenish items that are purchased. C) prevents identity theft. D) prevents stores from exchanging customer information with each other. Answer: B Difficulty: 1 Easy Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 234) Which of the following is an advantage of utilizing technology? A) Technology increases the cost of production. B) Technology reduces the need for a marketing plan. C) Productivity increases. D) Management becomes isolated from the demands of stakeholders. Answer: C Explanation: Technology is everything from phones to software programs that make businesses more efficient and productive. Productivity is the amount of output you generate given the amount of input. Difficulty: 2 Medium Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

235) Which of the following best describes the main difference between B2B and B2C transactions? A) B2B transactions involve transactions where the buyers and sellers are both businesses, while B2C involves transactions between businesses and consumers. B) B2B transactions focus on financial transactions while B2C e-commerce focuses on the sale of manufactured goods. C) B2B transactions refer to business between nonprofit organizations while B2C e-commerce is carried out by business firms seeking to earn a profit. D) B2B transactions involve sales in foreign markets while B2C e-commerce is restricted to domestic markets. Answer: A Explanation: B2B stands for business-to-business and B2C stands for business-to-consumer. Difficulty: 2 Medium Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 236) In recent years, businesses in general have experienced a lasting impact due to the emergence of A) motor-related technologies B) technologies related to brain studies C) counterfeit technologies D) information technologies Answer: D Explanation: Tools and machines developed throughout history have changed the technological environment. Information technology benefits workers in all industries and provides businesses with the ability to be more responsive to customer needs. Difficulty: 2 Medium Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

237) NetKnowledge is an online company that provides support services for businesses that need help in setting up and maintaining their websites. NetKnowledge is an example of a company that is engaged in ________ e-commerce. A) B2C B) N2Y C) Y2K D) B2B Answer: D Explanation: Since NetKnowledge is providing services to other businesses over the Internet, it is engaging in business-to-business (B2B) transactions. Difficulty: 3 Hard Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 238) Lux Ladies, Inc., is a company that specializes in expensive and unusual gifts for all occasions. It keeps a large file of information on all of its regular customers, including names, addresses, and type of gifts they have ordered in the past, and the size and frequency of their orders. The electronic file which stores this information is a(n) A) spreadsheet. B) MP3 file. C) PERT file. D) database. Answer: D Explanation: A database is an electronic storage file where information is kept. Difficulty: 3 Hard Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

239) New orders are coming in quickly for SmartTech, and management is confident that new contracts will take them through the next couple of years. The company has started investing again, but not in people. The number of employees is the same as when the company and its competitors faced the Great Recession. Most likely due to ________, the company is producing more product and services with less people. A) the lack of skilled labor B) new competition C) social changes D) technological advancement Answer: D Explanation: Due to the efficiency of new technology, businesses can produce the same or more, with less labor. As we emerged from the Great Recession, unemployment remained high because firms invested in technology that permitted them to produce at pre-recession levels with fewer employees. Difficulty: 3 Hard Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Apply AACSB: Knowledge Application; Analytic Thinking Accessibility: Keyboard Navigation 240) Which of the following predictions about the impact of e-commerce on traditional businesses is the most accurate? A) E-commerce will have little impact on most traditional businesses, because only a few types of products can be sold effectively online. B) Traditional brick-and-mortar firms will enter the e-commerce market by creating their own websites. C) E-commerce will prove to be very successful in competing against traditional firms in B2C markets, but will have much less success in B2B markets. D) Brick-and-mortar businesses will cease to exist within 20 years. Answer: B Explanation: Businesses that provide their customers with quality products at good prices with great service will succeed. Established firms have quickly adapted the technology necessary to compete in the e-commerce market. Difficulty: 3 Hard Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

241) Tyler Brown recently noticed that he was seeing more Facebook advertisements than he had in the past even though he had not requested any of them. Which of the following best explains why this is happening? A) Tyrell was a victim of identity theft. B) Tyrell gave his personal information to a business, which then traded it to other companies, and these companies then began targeting their advertisements. C) All businesses routinely have all customers' personal information. D) Tyrell's accountant gave his information to the marketers. Answer: B Explanation: The information Tyler gave a business when he purchased something from it was entered into its database and then traded to another company so that many more retailers know what Tyler buys and from whom he buys it. Difficulty: 3 Hard Topic: The Private Enterprise System Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 242) Klara wants to compare the price of a wallet she saw at Nordstrom Rack with other stores that may have the same wallet. She locates the product on three different websites, including Amazon. Klara's quest is an example of how customers are using ________ to solve problems. A) price shopping B) databases C) information technology D) social networking Answer: C Explanation: The Internet has led to the growth of e-commerce. Customers can interactively use the Internet to compare items, their quality, and price. It has dramatically changed the shopping experience. Difficulty: 3 Hard Topic: The Risks Associated with Information Technology Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

243) Sean McGowan renewed his membership at Bargain Barn. Shortly after renewing the card, Sean started receiving calls from collection agencies claiming that he owed money. He quickly learned that another Sean McGowan also owned a Bargain Barn card and missed many payments. Bargain Barn had linked Sean's personal information with the other Sean McGowan's personal information. Sean experienced A) buyer's remorse. B) database fraud C) information trafficking D) identity theft Answer: D Explanation: Identity theft is obtaining private information about a person, such as Social Security number and/or credit card number, and using that information for illegal purposes, such as buying things with it. Difficulty: 3 Hard Topic: The Risks Associated with Information Technology Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 244) Opportunities and advancements in the technological environment during the past 20 years have opened the doors for a number of products that enhance the lives of consumers. Identity theft and other forms of cybercrime are also by-products of these technological advancements. Which of the following statements describes a form of identity theft? A) Smartphone apps that permit the consumer to price compare by scanning the barcode of a product, such as a cell phone. B) Hacking into a business's database to obtain customer credit card numbers, and then selling those numbers to others for use. C) GPS technology that permits you to find the exact location of a person, by entering that person's phone number into your application. D) The application of cookies to a consumer's computer system that identify his/her purchasing patterns. Answer: B Explanation: It is a criminal offense to participate in unauthorized entry into a company's private (internal) database, where sensitive information, such as credit card numbers, is stored. Difficulty: 3 Hard Topic: The Risks Associated with Information Technology Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Apply; Analyze AACSB: Knowledge Application Accessibility: Keyboard Navigation

245) Hussein got a call yesterday from First Bank, the company that issued his credit card inquiring about an $105.00 charge made in Buenos Aires, Argentina. Upon learning that Hussein was in Detroit and had not made this purchase, the bank quickly took steps to cancel the card and issue a new one. Given the circumstances that Hussein's credit card number had an illegal transaction, he may also want to A) check his computer's firewall to make sure it's working. B) cancel his account and eliminate credit cards from his life. C) change his passwords and store them in a password manager. D) diversify his spending habits by using one of several credit cards when making purchases. Answer: C Explanation: Taking preventative measures in protecting your passwords is an important step in preventing identity theft. Difficulty: 3 Hard Topic: The Risks Associated with Information Technology Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 246) In today's competitive environment, good value means: A) making products with zero defects. B) superior quality that translates into durable products. C) offering the latest trends without seeming like you are over the top. D) providing quality products and services at competitive prices. Answer: D Difficulty: 1 Easy Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

247) Successful businesses are keenly focused on their A) customers. B) managers. C) creditors. D) bureaucrats. Answer: A Difficulty: 1 Easy Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 248) Empowerment means: A) giving employees the authority to make decisions. B) making certain that employees always defer to management when making decisions. C) hiring employees that do not require training due to the costly nature of this activity. D) asking employees to write the policies which govern their jobs. Answer: A Difficulty: 1 Easy Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 249) Empowerment requires managers to focus more on ________ lower-level employees. A) directly supervising B) training C) simplifying the jobs of D) controlling and correcting Answer: B Difficulty: 1 Easy Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

250) To implement a policy of empowerment, the organization will restructure so that: A) managers have more responsibility and employees learn to follow directions. B) employees assume more responsibility. C) workers agree to work overtime without extra pay. D) an entire level of management is removed from the organization. Answer: B Explanation: Empowering employees leads to developing entirely new organization structures to meet the changing needs of customers and employees. It may take years to restructure an organization so that managers are willing to give up some of their authority and employees are willing to assume more responsibility. Difficulty: 2 Medium Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 251) Which of the following statements about the competitive environment is most accurate? A) Firms that produce a quality product will always succeed in the competitive marketplace. B) Traditional firms will be unable to successfully compete against the new online firms unless they immediately create a way to reach customers through the Internet. C) Firms that empower their employees will continue to perform poorly in the competitive environment. D) Companies now have to offer both high-quality products and outstanding service at competitive prices. Answer: D Explanation: Companies now have to offer both high-quality products and outstanding service at competitive prices (value). Difficulty: 2 Medium Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

252) In order to compete well and gain market share, contemporary businesses are changing to be more A) customer-driven. B) cash-driven. C) management-driven. D) production-driven. Answer: A Explanation: Competition among businesses has never been greater. The nature of the competitive environment has encouraged businesses to offer high-quality products and outstanding service. The goal is to be customer-driven. Difficulty: 2 Medium Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 253) Juan is a salesperson for Floor Masters, Inc. He really appreciates the amount of freedom and authority the company gives its sales people in order to better meet the needs of customers. Juan's experience suggests that Floor Masters practices A) centralized management. B) fast response theory. C) enfranchisement. D) empowerment. Answer: D Explanation: Empowerment means giving frontline workers more freedom to respond quickly to customer requests. Difficulty: 3 Hard Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

254) Gina is working as a marketing trainee for a streaming video company. Her boss called a meeting for next week with one thing on the agenda: "Bring with you your ideas about how we can gain a competitive advantage." Gina plans to provide the following response: A) Create a management-driven environment with lots of employee training. B) Create a customer-driven environment where we constantly try to create customer value. C) Restructure the organization so that there is always a manager on duty to chat with online customers who are having problems with their orders. D) Always match the promotions of our competitors; price is the only thing customers care about. Answer: B Explanation: Businesses must be customer-driven. While consumers demand high quality, they also have come to expect reasonable prices and exceptional service. In today's highly competitive business environment, providing a quality product is no longer enough. Consumers and industrial buyers now expect more. Difficulty: 3 Hard Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 255) Tabitha called in a food order to feed her office team. When she arrived to pick up, it was not what she ordered. The store associate quickly made it right, and offered an extra dozen bagels to make up for the mistake. There was no need to check with the supervisor, as the employee was ________ to make decisions that translate into good customer service. A) structured B) empowered C) asked by the customer D) deputized Answer: B Explanation: Empowerment means permitting employees to make decisions in the process of doing their job. Difficulty: 3 Hard Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

256) Which of the following statements best describes how firms must treat their frontline workers in order to remain competitive? Frontline workers must be ________. A) empowered with the authority to respond quickly to the unmet needs of customers B) closely supervised to reduce the risk of product liability and discrimination lawsuits C) eliminated and replaced with automated equipment whenever possible D) relieved of any burden to make a customer decision Answer: A Explanation: In order to meet the needs of customers, firms must give their frontline workers more freedom to respond quickly to customer requests. This is the concept of empowerment, which is an important theme throughout the text. Difficulty: 3 Hard Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 257) Markus is in charge of production for a family-owned company that makes and sells kitchen utensils. He has stated that speed of delivery is the most important factor for success in the competitive environment. Which of the following would be the best response to Markus? A) You are right on target, Markus. Time is money. B) You are the man, Markus. As long as our price is competitive, speedy delivery will win in today's changing marketplace. C) Well Markus, speed isn't everything. What would exceed our customers' expectations? Some consumers may put more importance on high quality and/or lower prices. D) Dude, you couldn't be more wrong. Quality is the name of the game. He who has the best product will win in the competitive environment. Answer: C Explanation: Successful organizations are customer-driven. This means that customers' wants and needs are the first priority. All decisions are focused on the blend of price, service, and quality that will best delight the customers. Difficulty: 3 Hard Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

258) The statistical study of human population to learn its size, density, and characteristics is called A) psychographics. B) econometrics. C) demographics. D) geometrics. Answer: C Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 259) Businesses collect ________ information on where people live, what they buy, and how they spend their time. A) geometric B) econometric C) demographic D) anthropologic Answer: C Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 260) Diversity is more than recruiting and keeping minorities. Diversity means appreciating and understanding other differences in our customers and in our workforce. The best description of these differences is: A) people with disabilities, people with different sexual orientations, religious preferences, and even personality differences such as extraverts and introverts. B) gender roles. C) surface-level things such as green eyes versus brown eyes. D) racial differences and gender differences. Answer: A Difficulty: 1 Easy Topic: Cultural Diversity in the Workplace Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Remember AACSB: Diversity Accessibility: Keyboard Navigation 94 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

261) Efforts are under way to serve the needs of a diverse population. Diversity means: A) selling products to immigrants. B) dealing sensitively with workers and cultures around the world. C) providing government programs such as free health care for illegal and legal immigrants. D) meeting employment quotas so that diverse groups are always represented in your workforce. Answer: B Difficulty: 1 Easy Topic: Cultural Diversity in the Workplace Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Remember AACSB: Diversity Accessibility: Keyboard Navigation 262) Due to population shifts, A) businesses that cater to older consumers will see higher growth. B) businesses that cater to older consumers will see slower growth. C) businesses that sell electronic devices will see a significant decline. D) health care will emerge as the only business sector that will grow. Answer: A Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 263) Which of the following industries will most likely benefit from an aging population? A) Financial services to help clients plan for their education B) Home health care businesses C) Children's day-care centers D) Auto industry Answer: B Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

264) The Social Security system: A) continues to burden businesses due to the fact that businesses must provide and pay for this benefit for their employees. B) met the needs of our nation when it was first introduced, but needs an overhaul. C) will continue to serve the needs of U.S. citizens into the distant future, due to the fact that there are so few retirees placing a strain on it. D) is failing because the U.S. government failed to invest the money that employees contributed. Answer: B Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 265) People over 65 years old represent A) the unemployed generation. B) the single-parent family generation. C) a potentially lucrative market. D) a group that has never contributed to Social Security. Answer: C Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 266) Businesses are supporting single-parent families with: A) Social Security benefits. B) a more lenient welfare system. C) more flexible work benefits such as flextime and family leave. D) limited benefits due to the declining numbers of these families. Answer: C Difficulty: 1 Easy Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

267) Which of the statements about demography is most accurate? Demographic studies: A) focus on factors that have great political relevance, but little relevance to business firms. B) suggest that the number of single-parent families is declining. C) provide businesses and individuals with insights into business and career opportunities for the future. D) are an important source of information about changes in health patterns. Answer: C Explanation: Demography is the statistical study of the human population to learn its size, density, and characteristics. Demographics can provide important insights into which markets are growing and which are declining. Difficulty: 2 Medium Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 268) Which of the following business policies would most likely help a single-parent family? A) Requiring the employee to work regularly scheduled hours each day B) Allowing sick leave to be used only if the employee is ill C) Requiring education outside of regular business hours to help the employee advance D) Allowing family leave and flextime Answer: D Explanation: Single parents have convinced some businesses to implement programs such as family leave (where workers can take time off to attend to a sick child) and flextime (where workers can come in or leave at selected times). Difficulty: 2 Medium Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

269) The immigrant population (both legal and illegal) is having the most dramatic effect on A) car and truck makers. B) mining and minerals industry. C) schools, hospitals, and other services industries. D) ice cream and confection industry. Answer: C Explanation: The service industry is greatly impacted by immigration. As the immigrant population increases, more social services are needed, particularly health services and education services. The government costs have increased due to the need for accommodations in several different languages. Difficulty: 2 Medium Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 270) Retired people will be draining the U.S. economy of wealth. This is due to A) the fact that most have smoked all their lives and now are accumulating large healthcare bills. B) the fact there are not enough workers in subsequent generations to support the ongoing drain of older persons into the Social Security system. C) their lack of interest in supporting restaurants, resorts, educational institutions, and serviceintensive companies. D) the fact that they refuse to use current information technology to improve efficiency. Answer: B Explanation: A particular situation that will be negatively impacting the social environment is the number of aging Americans and the drain on the Social Security system. Today's workers pay for today's retirees. When the system was enacted in 1940, there were 42 workers for each retiree. Today the ratio has become much smaller. With baby-boomers retiring, the ratio is projected to drop to two workers for every one retiree by 2030. Difficulty: 2 Medium Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

271) If you were to discuss and analyze the social changes affecting the future of business, which of the following statements should be part of that conversation? A) It is becoming more difficult to provide expert pre-natal care for women, resulting in a negative impact on the future of childbirth. B) The increase in older citizens may impact an employee's take-home pay if programs such as Social Security will need to be funded at a higher level. Skilled employees may require higher wages to make up the shortfall. C) With less money to spend, older Americans over 65 will no longer require transportation, entertainment, education, and lodging. This is highly likely to negatively impact these industries. D) Business taxes are very likely to spike due to the fact that welfare laws are making it relatively easy for single parents to stay home with their children, rather than find jobs. Answer: B Explanation: The increasing rate and number of retiring workers have impacted the U.S. Social Security system put in place by President Franklin D. Roosevelt in the 1940s. It is currently a hot topic affecting the social environment of businesses by how much of their earnings current employees will need to contribute or whether current employees should have to contribute to this system. Many young employees speculate that the Social Security fund will run out of money by the time they are ready to retire. Difficulty: 2 Medium Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 272) Casey is looking into opening a day care in her community. She is aware of many singleparent families that need a place for their children to stay while they work, but she is concerned about the long-term prospects for such a business. Casey thinks the future of her day care will depend on whether birth rates and the number of single-parent families keep growing. These concerns illustrate how businesses can be affected by ________ trends. A) econometric B) demographic C) holographic D) psychometric Answer: B Explanation: Demography is the statistical study of the human population to learn its size, density, and characteristics. Birth rates and the number of single-parent families are both demographic factors. Difficulty: 3 Hard Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 99 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

273) HealthLink Hospital is looking into introducing a flextime program for its employees. A group of workers who would probably benefit from flextime is A) workers who do not have access to computers at home. B) workers who have little self-motivation to work eight-hour days. C) frontline workers who frequently go out to meet with home furnishing designers. D) single-parent families. Answer: D Explanation: Flextime is the practice of coming in or leaving work at selected times. This allows workers with young children the flexibility they often need. Difficulty: 3 Hard Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 274) Pets on the Run, Inc., a mobile pet care company, is planning for the future. As a business student who has studied social trends, which of the following statements reflects the need for Pets on the Run's service in the future? A) Mobile pet care will not be needed because the majority of people are working which means that nobody is home. B) People will always prefer to take their pets to the veterinary clinic and groomer. C) The aging population will be a sizeable market for this firm. D) People who would require this service would be higher income individuals. Retired people would not be a market for this firm because they do not have money to care for pets. Answer: C Explanation: People are living longer and living longer in their homes. There are many business opportunities to serve the aging population. As pets have become important family members, the aging population is likely to be a sizeable market for pet care and in-home pet care. Difficulty: 3 Hard Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

275) The global environment: A) is a new frontier. B) is far reaching and affects all the other business environments. C) is shrinking. D) has not affected the United States due to its strong gross domestic product. Answer: B Difficulty: 1 Easy Topic: Globalization Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 276) The threat of terrorism more often ________ the cost of operating a business. A) increases B) decreases C) stabilizes D) destabilizes Answer: A Difficulty: 1 Easy Topic: Globalization Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 277) An increase in global trade will: A) increase prices. B) decrease jobs. C) increase political instability. D) increase global competition. Answer: D Difficulty: 1 Easy Topic: Globalization Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

278) Globalization A) has greatly improved living standards around the world. B) has significantly reduced living standards around the world. C) has opened doors to only a handful of markets. D) has greatly changed companies that hire people to sell products, but not companies that hire people to provide services. Answer: A Difficulty: 1 Easy Topic: Globalization Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 279) Greening refers to A) the need for more carbon dioxide in our air. B) firms acquiring more greenbacks (U.S. dollars) from world trade. C) finding ways to save energy and lessen the harm on our environment. D) the agricultural industry's push to develop and produce new green vegetables to feed the world. Answer: C Difficulty: 1 Easy Topic: Globalization Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

280) Efficiency in distribution systems around the world has led to A) increased world trade. B) decreased world trade. C) decreased international competition. D) reduced standards of living around the world. Answer: A Explanation: Two things that have led to more trade are efficiency in distribution and communication. Difficulty: 2 Medium Topic: Globalization Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 281) Airline companies around the world are experiencing increased costs in part due to A) decreases in the cost of fuel. B) decreasing world trade. C) the threat of terrorism. D) lack of interest in flying. Answer: C Explanation: The threat of terrorism has led to increased costs for airlines. They have had to install stronger cockpit doors, buy more security equipment, and hire new security personnel. Difficulty: 2 Medium Topic: Globalization Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

282) War and terrorism in many parts of the world should lead to A) a decrease in warring nations. B) consumers spending more because they feel more patriotic. C) an increase in prosperity and peace throughout the world. D) consumer and economic hardship due to increased military spending. Answer: D Explanation: War and terrorism will cause hardships for consumers and the economy due to the movement of government funds from social programs and issues to military spending. Difficulty: 2 Medium Topic: Globalization Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 283) World trade has both benefits and costs. Which of the following statements best attests to this fact? A) The U.S. economy and all businesses that participate in this economy were negatively impacted by recent wars. B) The standard of living for citizens in developing nations has significantly decreased due to globalization. C) Economists are convinced that global job creation will never occur if our politicians support world trade. D) Large companies and small companies agree that the green movement is a global issue. Firms are embracing opportunities to bring value to consumers by creating green products and services. Answer: D Explanation: The green movement has provided many opportunities for new business offerings. The other statements are false. Difficulty: 2 Medium Topic: Globalization Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

284) The green movement is A) a trend that started with the U.S. government. B) concerned with depletion of natural resources. C) developing more green food products to feed the world's poor. D) our concern with the fact that everywhere we look, things are remaining green for longer periods of time. Answer: B Explanation: The greening trend is about saving energy and natural resources and concern with what we leave behind. Difficulty: 2 Medium Topic: Globalization Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 285) The threat of terrorism A) benefits most businesses because just about all companies contribute toward averting these threats. B) will certainly affect companies that participate in global trade, but most large U.S. companies do their business domestically. C) has increased the quality of life of most people because companies employ more workers when the threat is high, and workers help companies increase profits. D) is costly to most firms because it is costly to governments who increase taxes to pay for added protection. Answer: D Explanation: The threat of terrorism adds greatly to business costs, including the cost of security personnel, security equipment, and insurance. The government has also experienced huge costs increases because of homeland security issues. While many businesses will struggle in this new environment, others stand to gain; particularly those in the defense industry. Difficulty: 2 Medium Topic: Globalization Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

286) According to the box, "Hollywood Climbs the Great Wall,” Chinese investors are not only distributing Hollywood films in their home country, they are also A) producing films to distribute in South America. B) buying companies that manufacture cameras and sound equipment. C) creating theatrical education programs in the nation's universities. D) investing in American entertainment companies and working to make China a moviemaking power. Answer: D Explanation: Chinese investors are not just interested in distributing Hollywood films. They're also investing in entertainment companies in the U.S., like AMC Theatres. Difficulty: 2 Medium Topic: Globalization Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Understand AACSB: Reflective Thinking 287) Tomas recently graduated with honors from his college. He has bragged to his friends that his academic performance has prepared him so well for a successful career that he can find a job with ease and forget school or training in his future. In evaluating the future of the workplace, Tomas is A) exactly right. His past performance should carry him to success. B) completely wrong. Studies show that a college education has little to do with success. C) overconfident. Global competition means that continuous learning will be needed in the future to adapt to rapid changes. D) probably right. Specialized training today is a key to continued success in the future. Answer: C Explanation: The highly competitive nature of the global economy and rapid changes in technology mean that students must keep their skills and knowledge up to date even after they graduate. Difficulty: 3 Hard Topic: Globalization Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

288) Dennis and Donna recently moved to Kansas on a three-acre site. They purchased their home within biking distance to the hospital where they work, and their bikes have room for groceries if they need to purchase food on the way home, although they plan to grow some crops on their own. Dennis and Donna are examples of a growing number of people who A) have developed a health-conscious attitude. B) want to change their lifestyle to be more in tune to saving energy. C) dislike urban centers and wish to live in the country. D) stay away from urban areas due to increased threats of terrorist attacks in those localities. Answer: B Explanation: An important social trend is saving energy and producing products that cause less harm to the environment, or going green. Difficulty: 3 Hard Topic: Globalization Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 289) Which of the following statements describes a recurring theme about today's ecological environment? A) Most people agree that there is strong evidence that the temperature of the planet is going down. B) Smart businesses know that green business is currently a trend and they should proceed with caution because most green initiatives are more costly than wars and terrorism. C) There is a strong push by customers for businesses to develop products and services that clearly save energy. D) Clearly, the greening issue is an American trend that has not captured the attention of the international business community. Answer: C Explanation: Ecologically, customers want businesses to sell products and services that do not leave a carbon footprint. The greening movement is a well-respected movement with global implications. Difficulty: 3 Hard Topic: Globalization Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

290) Bart Broekelman recently returned from Afghanistan where he was a member of the highly skilled special operations forces. He is now back home in the United States where he uses the G.I. Bill in order to go to school. This is one example of A) how an event such as a war educates young people about conditions abroad. B) the cost of war. C) the benefits of war on education. D) a squeeze on employer benefits. Answer: B Explanation: Wars are very costly. The government diverts funds from other services to pay for wars. In order to provide incentives for young men and women to serve in the military, the government also pays for benefits for those that return. Difficulty: 3 Hard Topic: Globalization Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 291) Since the 1800s, the U.S. has evolved A) straight from an agrarian economy to an information technology economy. B) from a business to business economy to a business to consumer economy. C) from an agrarian economy to a manufacturing economy to a service-oriented economy. D) from a manufacturing economy to a service economy, to a cottage economy, and now we are trending back to an agrarian economy. Answer: C Difficulty: 1 Easy Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

292) Businesses that produce and sell tangible products such as steel and machines are part of the A) manufacturing industry. B) knowledge-based industry. C) service industry. D) production sector. Answer: A Difficulty: 1 Easy Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 293) The service industry represents about ________ of the value of the U.S. economy. A) 30% B) 50% C) 60% D) 80% Answer: D Difficulty: 1 Easy Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 294) Health care, insurance, recreation, and other intangible products are provided by the A) information-based sector. B) service industry. C) industrial sector. D) manufacturing industry. Answer: B Difficulty: 1 Easy Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

295) Since the beginning of the 1900s, the agricultural sector of the United States has: A) seen the number of family farms more than double. B) become less and less competitive in the global economy. C) produced a consistent output per farm. D) experienced a significant drop in employment, mainly because of tremendous improvements in efficiency. Answer: D Difficulty: 1 Easy Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 296) In recent years, almost all new job creation in the U.S. has occurred in the ________ sector. A) service B) manufacturing C) agricultural D) telecommunications Answer: A Difficulty: 1 Easy Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 297) The new era of business is likely to be dominated by the A) service sector. B) information-based sector. C) manufacturing sector. D) continued decline in productivity. Answer: B Difficulty: 1 Easy Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 110 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

298) Appliance repair firms, tax consultants, law firms, and insurance companies are all business firms that are part of the ______ sector. A) production B) management C) neo-industrial D) service Answer: D Explanation: All of these companies provide an intangible product. Thus, they are included in the service sector. Difficulty: 2 Medium Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 299) Manufacturing firms in the U.S. have consistently been laying off workers. The best explanation of this trend is that A) firms have been trying to weaken unions by reducing their reliance on labor. B) workers in the U.S. have become less productive and are no longer able to compete in the global economy. C) firms in many industries have become so efficient that they need fewer workers. D) the economy has been in a prolonged depression that has lasted more than a decade. Answer: C Explanation: While layoffs in manufacturing seem to imply that American firms are becoming less competitive, the opposite is actually the case. The layoffs are the result of tremendous improvements in productivity in recent years, which have enabled U.S. manufacturing firms to produce more goods with fewer workers. Difficulty: 2 Medium Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

300) Which of the following best describes recent job growth in the service sector? A) The service sector has generated almost all new jobs in the American economy since the mid1980s, but the rate of job growth in services has slowed in recent years. B) Jobs in the service sector have increased slowly over the past decade, but most new jobs are created in the manufacturing industries. C) Employment in the service sector has declined in recent years, and this decline is expected to continue. D) There has been little change in the number of jobs in the service sector in recent years; however, employment is expected to increase rapidly. Answer: A Explanation: The service sector has grown rapidly over the past two decades. However, the growth rate has slowed in recent years. Difficulty: 2 Medium Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 301) According to the box, "Services Expand the Circular Economy,” technology is helping turn products into services by A) restricting what customers can and cannot buy for personal use. B) producing items that are designed to reach obsolescence quickly. C) offering new ways to access items like movies or music and by adding sensors to allow companies to develop new business models. D) developing more disposable items. Answer: C Explanation: Products we commonly would buy, like DVDs and CDs, are now being streamed on demand. Difficulty: 2 Medium Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Understand AACSB: Reflective Thinking

302) Which of the following organizations is an example of the goods-producing sector of the economy? A) Samsung Electronics B) Princeton University C) Bank of America D) Barnes Hospital Answer: A Explanation: Firms in the goods-producing sector produce tangible products. Of the organizations listed in this question, only Samsung produces a tangible product. Difficulty: 3 Hard Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 303) Certain industries of the U.S. economy, such as farming and heavy equipment manufacturing, have experienced a significant decline in employment. Which of the following best explains this job loss? A) The cause is a decline in the productivity of labor in these industries. B) Workers lost these jobs because technological advances increased productivity. C) The U.S. economy cannot compete in these industries any longer. D) Government regulations have eliminated profit opportunities in these industries. Answer: B Explanation: History shows that technology has allowed business organizations to be more productive and therefore require less labor. This scenario first was observed in agriculture as productivity increases resulted in fewer farm jobs. Technological improvements in manufacturing have also resulted in increased productivity and fewer jobs. Difficulty: 3 Hard Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

304) Nairi is an information savvy, 20-something who is trying to select between two marketing job offers. She can either join a company that makes candles and other home scents, or she can join a company enhancing the LTE phone service. She is quite impressed that the home scent business is growing as the economy is starting to bounce back. She is also aware of A) declines in the telecommunications business now that new cell phone service companies are springing up everywhere. B) a decline in the domestic hardware market due to older Americans losing interest in keeping up their living quarters. C) an information-based global revolution that might make her career at a telecommunications company more lucrative in the long run. D) an increase in the price of the actual cell phones must indicate that there is still a great demand for phones. Answer: C Explanation: Futuristic business professionals believe we are in the midst of an informationbased global revolution that will alter all sectors of the economy: agricultural, industrial, and service. Difficulty: 3 Hard Topic: The Private Enterprise System Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

305) Describe three ways that governments can foster entrepreneurship and encourage the creation of wealth. Answer: One of the best things government can do is help decrease the risk of starting businesses. This strategy will increase entrepreneurship and subsequently increase wealth. The government can do this by keeping taxes and regulations to a minimum. High taxes and burdensome regulations increase the cost of doing business and undermine incentives to work hard and take risks. Laws that encourage entrepreneurship have been enacted all across the U.S. and the world. Entrepreneurs tend to favor those states and local areas where taxes are lowest and regulations are least restrictive. Another way for government to actively promote entrepreneurship is to allow private ownership of businesses. This will create profit opportunities for individuals willing to take the risk of starting their own business. Successful new businesses help to create more jobs and income in their communities. The government can pass laws that enable businesses to write enforceable contracts, thus reducing the risk of operating a business. The government can establish a currency that is tradable in world markets, making it possible for firms to compete in world markets. Government can pass and enforce laws that reduce corruption among government officials and businesses. Corrupt practices such as the need to bribe government officials to get contracts approved not only make it more expensive to do business, they also tend to undermine competition by giving the corrupt firms an unfair advantage. Difficulty: 3 Hard Topic: The Private Enterprise System; The Impact of Information Technology on Business Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Analyze AACSB: Analytic Thinking

306) Describe how businesses can use technology to be more responsive to customers. Answer: Businesses continually search for new technologies that will allow them to be more responsive to customer needs. Things such as bar-code technology, scanners for checkout counters and inventory systems, and databases are proving to be valuable tools for most businesses. Particularly, databases store customer information. They help businesses plan and replenish inventory more expediently, because management can determine exactly what was purchased and how often, and by whom. The Internet has offered businesses a new way to reach customers, and a way to provide information to customers that help with buying decisions. Both B2B and B2C buyers and sellers converse online. The B2B market continues to expand as quickly as the B2C market. Businesses are also responsive to customer privacy. Due to the increase in identity theft, companies sometimes promise to not share or sell customer information to other businesses or entities. Difficulty: 3 Hard Topic: The Impact of Information Technology on Business Learning Objective: 01-04 Describe the effects of technology on businesses. Bloom's: Analyze AACSB: Analytic Thinking 307) Competition among businesses has never been greater. Identify and describe two ways that businesses can become more competitive. Answer: Businesses can compete by exceeding customer expectations and empowering employees. Businesses are becoming more customer-driven. They are putting the wants and needs of customers first, and adjusting their products, policies, and practices to make sure customers are satisfied. Keeping the customer happy means producing a good quality product, providing great service, and keeping prices low. Businesses also compete by responding to the needs of their employees. In order to be more flexible and more responsive, many businesses have empowered their lower level employees, allowing them to make decisions and respond to the needs of customers without consulting management. For empowerment to work, managers must do a better job training, supporting, and motivating frontline workers. Managers will have to give up some of their authority and find ways to encourage workers to accept more responsibility. Difficulty: 3 Hard Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Analyze AACSB: Analytic Thinking

308) What is demography? Identify two demographic trends in the United States and discuss how they will impact U.S. businesses. Answer: Demography is the statistical study of populations to learn about their size, density, and characteristics. The United States is experiencing several demographic trends that will have important impacts on how and where we live, what we buy, and how we spend our time: Respecting Diversity. Diversity has come to mean much more than recruiting and keeping minority and female employees. Many more groups are now included in diversity efforts, including seniors, people with disabilities, people with different sexual orientations, atheists, religious, extroverts, introverts, married people, and singles. Companies have responded to this diverse customer base by hiring a more diverse workforce to serve them. Businesses will need to be sensitive to these cultural changes and find ways to optimize the contributions of people from different ethnic and cultural backgrounds. If handled correctly, this diversity can be a source of strength for American businesses. Aging Population. There will be a large increase in the number of older Americans that will occur over the next few decades. This is the result of the aging baby-boom generation. As America ages, the markets for products that appeal to elderly consumers will grow. Thus, there should be a boom in the demand for medicine, retirement homes, home health care, and a variety of recreational goods. Retired people will also be draining the economy of wealth. Paying Social Security to senior citizens in the future will draw huge amounts of money from the economy. In the past, the government estimated that there were 42 workers for each retiree. Now it is projected there will be fewer than 2 workers for each retiree by 2030. People are living longer and the baby-boom generation is retiring. Single-Parent Families. One final trend has been the rapid growth in the number of singleparent households. Single parents have encouraged businesses to offer programs such as flexible work schedules and family leave that will allow the parent to remain home with sick children. Difficulty: 3 Hard Topic: Competition Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Analyze AACSB: Analytic Thinking

309) Describe what we mean by greening and thinking green. List five ways that people and businesses are participating in the green movement. List business opportunities that may emerge from this movement. Answer: Greening refers to a movement to save energy and natural resources, to produce products and services that cause less harm to the environment. Ways that people can contribute toward sustaining what we have include: → heating or cooling their dwellings less. → Using reusable bags when shopping. → Using light bulbs and other home appliances that take less energy. → Recycling glass, plastics, papers, aluminum, iron, steel, and other recyclable products. → Buying products such as autos and trucks that are fuel efficient or hybrids. → Walking and bicycling when possible. → Using other sources of energy other than fossil fuels to heat and cool buildings. → Flushing-out and recycling water. → Purchasing locally grown produce and other foods to avoid added shipping. Green business opportunities include businesses that haul away hazardous waste; green restaurants that only use green materials and serve locally grown foods; green construction companies that sell and install energy-saving products, including solar panels and green building materials that meet LEED certification (Leadership in Energy and Environmental Design); and organic farms. Difficulty: 3 Hard Topic: Corporate Social Responsibility Learning Objective: 01-07 Identify what businesses must do to meet global challenges, including war and terrorism. Bloom's: Analyze AACSB: Analytic Thinking

310) Trace the evolution of American business. Identify the key trends, and discuss the implications these trends have for the future. Answer: For most of our nation's history, the agricultural sector led the way. But now, the number of farmers make up less than 1 percent of today's population. This loss of farm workers was not a sign that farming was a declining industry. Rather, it reflected tremendous improvements in efficiency and productivity. Today American agricultural workers are so productive that more food can be produced with a small fraction of the workers employed a century earlier. Many of the workers displaced by the rising productivity in agriculture found employment in the manufacturing sector, which expanded rapidly during the early 1900s. However, technological breakthroughs in manufacturing led to higher productivity. Eventually manufacturing firms were able to produce more output with fewer workers, and employment in manufacturing began to fall, just as in farming. Again, this was a sign of strength rather than decline. Many workers who lost jobs in manufacturing found employment in the service sector. Since the mid-1980s this sector has generated almost all of the new job growth in the American economy. This is a very broad sector, and many (but certainly not all) jobs pay quite well. In fact, there are more high paying jobs in service industries than in manufacturing. Although the service sector is likely to continue to grow, the rate of growth is likely to slow. The U.S. economy now seems to be leaving the service era and moving into an era that can be characterized as an information-based global revolution that will alter all sectors of the economy: agricultural, industrial, and service. These trends suggest several lessons to keep in mind. First, declines in employment are often a sign of increased efficiency and improved productivity rather than declining competitiveness. Second, declines in employment in one sector do not necessarily mean the economy as a whole will suffer from higher unemployment or a loss of wealth. Historically, as employment in one sector declines, workers can move into other sectors where employment is growing. This transition can be painful, but it may benefit society as a whole and create more wealth in the long run. Finally, the evolution of the American business sector is not over. Workers today must be aware of the possibility of changes in the job market. The best strategy is to remain flexible, watch trends, and be ready and willing to move to where the jobs are. The current consensus is that we are in the midst of an information-based revolution, where the global economy will set world quality standards for products and services. Businesses and governments will continue to support technologies that provide the necessary information to make better business decisions. Difficulty: 3 Hard Topic: The Evolution of Business Learning Objective: 01-08 Review how past trends are being repeated in the present and what those trends mean for tomorrow. Bloom's: Analyze AACSB: Analytic Thinking 119 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Mini-Case Eli Moneybags works for Second Commercial Bank, one of the largest banks in the Southwestern U.S. He is a loan officer, specializing in mortgages. Tio Jaime, Eli's favorite (and wealthiest) uncle, passed away last month and left him a sizable amount of money. Eli is looking at the best way to invest his newly acquired wealth. He is considering many options, ranging from simply putting the money into a savings account to the possibility of starting his own business. Although his bank job pays well and offers pleasant working conditions, Eli is frustrated because he has little freedom or flexibility to deal with customers since every decision he makes must be approved by his supervisor. He is also a bit bored and looking for a new challenge. He thinks he might get a lot of satisfaction from owning his own business. Eli has not made a definite decision yet, but has talked to a lot of people searching for a good idea for a new business. If he can come up with an idea he likes, he might just quit his current job and use his inheritance to go into business for himself! 311) As he starts his research, Eli notices that some opportunities appear to be riskier than others. When considering various opportunities, Eli should keep in mind that A) he will be better off picking a low-risk business opportunity, since the safest ones are usually the most profitable as well. B) even though some opportunities appear riskier than others, the level of risk actually varies little from one opportunity to another. C) high-risk business opportunities often have the potential for high returns as well. D) government regulations are in place to protect investors and entrepreneurs from failure, so there is no need to worry about risk. Answer: C Explanation: In many cases, business opportunities that have the potential for earning high profits also carry a high level of risk. Investors must weigh profit and risk and choose opportunities that offer an acceptable trade-off between the two. Difficulty: 3 Hard Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

312) Eli's frustration with his lack of freedom at work indicates that Second Commercial A) prefers the use of cross-functional teams rather than individual initiative. B) has not adopted a strategy of empowerment. C) knows that the best way to ensure good customer service is to closely monitor its lower-level employees. D) is trying to please customers as well as other stakeholders. Answer: B Explanation: Empowerment means giving lower-level workers the freedom and flexibility to respond quickly to customers without consulting with managers. Difficulty: 3 Hard Topic: Competition Learning Objective: 01-05 Demonstrate how businesses can meet and beat competition. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 313) Two of his friends approached Eli with a proposal to start a language school. Eli is fluent in English and Spanish, and also has an education degree. He is strongly considering the idea but wants to know if there is a growing demand for his services. He learns that an important demographic trend is A) the service sector is likely to decline in significance in the next few years. B) the number of young children in the U.S. will decrease significantly over the next few years as the population of the country levels off. C) the number of immigrants from South and Central America is increasing steadily in his area and across the nation. Professionals in hospitals and schools need to know how to speak Spanish. Immigrants need to know how to speak English. D) the number of retirees is decreasing, making way for a younger generation. Answer: C Explanation: Legal and illegal immigrants have had a dramatic effect on many cities. The schools and hospitals and other services have been affected. Some local governments are making every effort to adapt, including changing signs, brochures, websites, and forms to include other languages. Difficulty: 3 Hard Topic: The Private Enterprise System Learning Objective: 01-06 Analyze the social changes affecting businesses. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

314) As he explores his options for starting a new business, Eli has looked into the tax implications and government regulations that he would encounter. He wants to maintain an office in a different location from his home. He has discovered that some nearby communities offer tax credits and lower taxes than his town. His decision will be influenced by the ________ environment. A) demographic B) technological C) socio-religious D) economic and legal Answer: D Explanation: The economic environment includes taxes and government regulations. As the textbook notes: Entrepreneurial decisions about where to locate a business can be strongly influenced by differences in taxes and government regulations. Difficulty: 3 Hard Topic: The Private Enterprise System Learning Objective: 01-03 Analyze the effects of the economic environment and taxes on businesses. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 315) If Eli starts his own business, his firm's activities and policies will impact many different groups of stakeholders, including employees, customers, creditors, suppliers, and people living in the community where his business is located. Which of the following statements represents how Eli should deal with these various groups? Eli should A) take the needs of all of these groups into account, and try to satisfy each group as much as possible. B) concentrate on meeting the needs of his customers, since they are crucial to the success of his business, but ignore the needs of other groups in order to keep costs low. C) satisfy whichever group complains the loudest, using the "squeaky wheel gets the grease" philosophy. D) concentrate on maximizing his own profits and let everyone else look out for themselves. Answer: A Explanation: All of the groups mentioned in this question are stakeholders in a business. They are all affected by the products, policies, and practices of the firm and their concerns need to be addressed. Difficulty: 3 Hard Topic: The Factors that Affect the Success or Failure of an Organization Learning Objective: 01-01 Describe the relationship between profit and risk, and show how businesses and nonprofit organizations can raise the standard of living for all. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

Understanding Business, 12e (Nickels) Chapter 02 Understanding Economics and How It Affects Business 1) America's business success is largely due to an economic and social climate that allows businesses to operate freely. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) Global economics and politics have significant influence on businesses in the United States. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) The study of how society chooses to employ resources to produce goods and services and to distribute them for consumption among various competing groups and individuals is known as demographics. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 4) Economists study how people use resources to produce and distribute goods and services for consumption among competing groups and individuals. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 1 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

5) Microeconomics is the economic perspective that looks at the operation of a nation's economy as a whole. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) Microeconomics focuses on the decisions and behavior of people and organizations in particular markets. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 7) Resource development is concerned with finding the best way to utilize the fixed amount of resources a society has available. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) Resource development is the study of how to increase resources and to create the conditions that will make better use of those resources. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

9) Peace and prosperity will flourish if we can find the one best way to divide existing resources among nations. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10) Thomas Malthus believed that overpopulation was a major cause of poverty. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) In developing nations of the world, population has leveled off and is not expected to increase dramatically in the future. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) Economic progress can occur when business owners provide jobs and economic growth for their employees, their communities, and themselves. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

13) Economist Adam Smith's important contribution was an inquiry as to why some nations are wealthy, while others remain poor. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) Adam Smith believed the self-interest of businesspeople would lead them to create needed goods, services, and jobs. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) The "invisible hand" in Adam Smith's theory turns self-directed gain into social and economic benefits for all. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 16) According to Adam Smith, the "invisible hand" refers to the government's effort to always keep a check on the wealth creation of individuals, so that no one business could control a market for a particular good or service. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

17) Studies about the effects of population growth on the economy are part of macroeconomics. Answer: TRUE Explanation: Macroeconomics looks at the operation of a nation's economy as a whole. This includes population growth/decline. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) An economist is examining how consumers in the automobile market have responded to recent price increases by car manufacturers. He is examining a microeconomic situation. Answer: TRUE Explanation: Microeconomics examines the economic behavior of consumers and organizations in particular markets. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 19) Macroeconomics looks at long-run economic problems while microeconomics examines short-run economic problems. Answer: FALSE Explanation: The key distinction between macroeconomics and microeconomics is that macroeconomics is concerned with the performance of the economy as a whole while microeconomics is concerned with the behavior of people and organizations in particular markets. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

20) Thomas Malthus believed that people in most countries would never be able to achieve high standards of living unless the problems of overpopulation were addressed. Answer: TRUE Explanation: Thomas Malthus viewed rapid population growth as a major problem that would prevent standards of living from rising above subsistence levels. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 21) Adam Smith believed that since businesspeople are motivated to improve their own prosperity, their actions are unlikely to benefit society as a whole.

Answer: FALSE Explanation: The principle of the invisible hand says that activities directed toward self-gain actually end up helping others. For example, when entrepreneurs start up a new business in search of personal profits, they end up creating jobs for others and producing goods and services that satisfy the wants of consumers. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 22) Adam Smith believed that an economic system couldn't truly prosper unless people were taught to value the welfare of others above their own personal gain. Answer: FALSE Explanation: Smith believed that people would only work hard and create wealth if they were rewarded for doing so. Thus, self-gain is the primary source of motivation in Smith's view of the economy. Smith also pointed out that this desire for self-gain would result in the production of goods and services and the creation of jobs that would benefit others within the economy. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

23) The concept of the invisible hand begins with the assumption that the primary motivation of entrepreneurs is that they will prosper from their own hard work. Answer: TRUE Explanation: The concept of the invisible hand suggests that the primary motivation of entrepreneurs is their own individual gain. However, in seeking to earn a profit for themselves, entrepreneurs will create jobs and produce goods and services that satisfy the wants of others. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 24) Adam Smith's research focused on determining the best way to distribute a fixed amount of resources, rather than on how to create more wealth. Answer: FALSE Explanation: Smith's views focused on wealth creation through promoting entrepreneurship. Rather than simply dividing up existing wealth among competing groups, Smith sought to define the conditions under which more wealth could be created. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 25) Large educated populations can contribute to an economy by offering knowledge and entrepreneurship. Answer: TRUE Explanation: Education is an important component of innovation. Educated populations usually have a stronger desire to innovate because these people tend to use their knowledge to think critically, and to synthesize information in order to solve problems. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

26) As indicated by the "World Population is Popping" box, the predicted population increase in some of the world's poorest countries will present economic challenges. Answer: TRUE Explanation: By 2050, China, India, and Nigeria are anticipated to be the three largest countries. Challenges like combatting malnutrition, providing education, and affording adequate healthcare will be difficult tasks for poor countries. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Analyze AACSB: Ethics Accessibility: Keyboard Navigation 27) Adam Smith believed that incentives to seek personal gain would create wealth, but that the government must then step in to make sure that this wealth is equitably distributed. Answer: FALSE Explanation: Smith believed the invisible hand turned self-directed behavior into benefits for all. He felt that as society in general prospered, people would naturally help the less fortunate. He did not foresee the need for active government policies to redistribute income. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 28) In capitalist countries, the government decides what to produce and how the goods and services will be produced. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

29) Capitalism is the foundation of the U.S. economic system. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30) State capitalism is the combination of freer markets and some government control. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 31) The most fundamental of all rights in capitalism is the right to private property. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32) Under capitalism, the government prohibits people and businesses from competing with each other. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

33) A basic right under capitalism is the right of businesses to receive government funding. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 34) Free-market capitalism has made it more difficult for individuals to gain wealth. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) Due to the fundamental rights afforded to us by a free-market capitalistic system, people are more willing to take calculated risks. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) A free-market economic system is one in which the market of buyers and sellers decides what is produced, how much is produced, and how it is distributed. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

37) Under the basic principle of supply, as the price goes down, manufacturers and suppliers of a product tend to supply less of the product to the market. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) Demand refers to the quantity of a good that consumers are willing and able to buy at different prices at a specific time. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39) At the equilibrium price, the quantity consumers desire to buy equals the quantity sellers desire to sell. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 40) If the quantity supplied in a market exceeds the quantity demanded, a shortage will exist. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

41) If a shortage exists in a market for a good, the price of that good will tend to fall. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 42) The point of intersection between the supply and demand curves is called the stress point. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 43) In the long run, the market price tends to adjust toward the equilibrium point. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44) Countries that rely on a free market system are plagued by persistent shortages or surpluses of goods and services. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

45) One of the drawbacks of free markets is the fact that competition in such markets undermines the ability of price to adjust to its equilibrium value in the long run. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 46) In perfect competition, each firm produces a product that is clearly differentiated from the products of other firms in the same market. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 47) A monopoly occurs when there is a single seller for a product or service. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 48) Economists refer to a market in which a few sellers dominate the supply side as monopolistic competition. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

49) Product differentiation is a key to success in monopolistic competition. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 50) In the United States, laws prohibit the creation of most types of monopolies. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 51) One strength of a free-market economic system is that it emphasizes the fair and humane treatment of the less fortunate in society.

Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 52) The greed of businesspeople represents one of the greatest dangers to the operation of a free market system. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

53) In a free market economic system, the lack of government control and regulation means that businesses find it easy to take advantage of customers by offering poor-quality products at high prices. Answer: FALSE Explanation: One of the fundamental characteristics of free markets is competition. Because businesses compete with each other, they must provide customers with quality products at fair prices and offer good service. Firms that produce poor products, charge high prices, or provide poor service will lose business to companies that provide customers with a better deal. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 54) History shows that free-market capitalism leads to a fair and equitable distribution of wealth. Answer: FALSE Explanation: In many nations, capitalism has led to an unequal distribution of wealth. In fact, some businesspeople have sought personal gain through the exploitation of workers. Examples of this sort of exploitation include child labor, sweatshops employing immigrants for long hours at low wages under dismal working conditions, and even outright slavery. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 55) A surplus currently exists for fidget spinners. In a free-market economic system, the government must step in and buy any spinners that consumers do not buy in order to eliminate the surplus and establish equilibrium. Answer: FALSE Explanation: Markets for products tend to move toward equilibrium through price adjustments. If there is a surplus of fidget spinners, the price of fidget spinners will fall, and buyers and sellers will adjust until equilibrium is achieved. Thus, adjustments in market price will restore equilibrium without government intervention. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

56) Sarah owns a candle shop. She had been charging $5 for each scented jar candle. At this price her customers bought an average of 421 jars each week. For the last few weeks, she has reduced her price to $3.95 per candle, and her customers have purchased an average of 695 jar candles each week. These results are consistent with the economic concept of demand. Answer: TRUE Explanation: Generally speaking, the quantity demanded tends to rise when the price of a good falls. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 57) Fatima resides in a country where the economic system is primarily based on free-market capitalism. Fatima is likely to have the freedom to buy and sell property. Answer: TRUE Explanation: The right to private property is the most fundamental of all rights under capitalism. This right means that people can buy, sell, and use land, buildings, machinery, inventions, and other forms of property. They can also pass the property on to their children. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 58) Meredith notices that just a few big companies produce most of the flavored teas she sees in the grocery store. She would be correct in describing the flavored tea industry as an oligopoly. Answer: TRUE Explanation: An oligopoly exists when a few large sellers dominate a market. Examples of oligopolistic markets include aircraft, automobiles, soft drinks, and breakfast cereals. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

59) Shimmer Sisters, a popular nail polish and cosmetics company, is gaining popularity among teens and young professionals. Differentiating itself from the sea of companies that compete for the same business, it focuses on creating products using trending color palettes and the finest ingredients. Shimmer Sisters clearly operates in an oligopolistic environment. Answer: FALSE Explanation: Shimmer Sisters competes against several companies. Monopolistic competition refers to a large number of sellers who produce very similar products. Buyers perceive the products to be different due to the firms' ability to differentiate themselves from each other. An oligopoly is a market in which just a few sellers dominate the market. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 60) Glittering Gems is a popular fashion jewelery company. Although it is gaining in popularity among younger women, its promotional strategy continues to focus on the tarnish-free finish that is applied to every earring, necklace, and ring. Due to the fact that its industry faces monopolistic competition, the company knows that it must continue to differentiate itself from the competition. Answer: TRUE Explanation: Glittering Gems competes against several companies. Monopolistic competition refers to a large number of sellers who produce very similar products. Buyers perceive the products to be different due to the firms' ability to differentiate themselves from each other. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

61) As you drive to school in the morning, you will probably flip through several radio stations before deciding to settle on one for the duration of the drive. For instance: you can listen to a "fair and balanced" talk show; an "intelligent talk" program; an interactive "call-in" talk show; a "self-improvement" talk show; and, even an "all sports" talk show. With so much monopolistic competition in radio programming, radio stations focus on offering you something just a little different. Answer: TRUE Explanation: Monopolistic competition refers to a large number of sellers who produce very similar products. Buyers perceive the products to be different due to the firms' ability to differentiate themselves from each other. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 62) The nation of Winstone's economic system closely approximates pure capitalism. While Winstone's economy is likely to generate a great deal of wealth, it may do a poor job of providing an acceptable level of income for the elderly or disabled. Answer: TRUE Explanation: A strength of capitalism is its ability to generate wealth. A weakness of capitalism is that it results in a very unequal income distribution that may not be very responsive to those who are too old or infirmed to compete in the market system. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

63) This morning on Facebook, you clicked a link to an article about the downfall of a multinational entertainment company. The report shows that despite profits plummeting 35%, the company's CEO received a 9% raise. As you read on, you learn that the company's board of directors approved undeserved salary increases. This is an example of how inequality and greed can infiltrate the free-market economic system. Answer: TRUE Explanation: One of capitalism's limitations is the fact that it has brought "inequality" to many parts of the world. Without government regulation, greed can perpetuate in this type of economic system. Business owners and business executives can often negotiate higher salaries and bonuses that are not based on performance. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 64) You read the Electricity City Utility Company has problems. Its headquarters had an expansive retaining wall collapse during a flood last week. This led to toxic coal ash flows that buried homes and even caused a few fatalities. An editorial claims that the company will not be held accountable to the same standards as the asbestos companies that paid severe fines and even went out of business due to their lack of attention to environmental clean-up. You agree with the writer because you recently studied about the various competitive markets and utility companies clearly fall under monopolistic competition. Answer: FALSE Explanation: Utility companies are considered regional monopolies. The U.S. legal system has permitted monopolies in the markets for public utilities that sell natural gas, water, and electric power. As is often the case, when there is only one company serving a wide area, consumers do not have a choice, and the firms are not as eager to maintain their capital investments. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

65) The PowerPlus Utility Company recently built a nuclear power plant in a southern state and started competing against Electricity City Utility Company that has served customers in that region for 65 years. Due to deregulation, consumers now have a choice among utility companies in this area. Although PowerPlus has made a sizeable capital investment, if it successfully grows market share, eventually prices for electricity may stabilize or fall. Answer: TRUE Explanation: New legislation has ended the monopoly status of utilities in some areas of the U.S., permitting new competitors to seek customers in regions where they could not operate in the past. The purpose of deregulation is to increase competition among these utility companies, and to eventually lower prices for consumers. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 66) Socialists believe that the primary economic function of the government is to promote rapid economic growth. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 67) In socialist economies, the government owns some, if not most, basic businesses such as telecommunications systems and utilities. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

68) The top tax rate on personal income in most socialist economies is usually lower than the top tax rate on personal income in capitalist economies. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 69) The major benefit of socialism is that it creates strong incentives to work hard and take the risks associated with starting and operating a business. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 70) Socialists believe that wealth should be more evenly distributed than what actually occurs in a free-market capitalistic system. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 71) Workers in socialist countries often get longer vacations and more social benefits than workers in free-market economies. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

72) Over the past decade, socialist economies have proven to be more successful at creating wealth and jobs than capitalist economies. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 73) One drawback of socialism is that it may result in a reduction in the individual's incentive to work hard. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 74) Brain drain is the loss of the best and brightest people from their home countries to other countries. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 75) High tax rates in socialist countries are a major reason these nations have experienced a brain drain. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

76) Incentive to own and operate businesses is high in nations whose governments are proponents of socialistic practices. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 77) One of the benefits of communism is that it allows individuals a great deal of freedom to make their own economic decisions. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 78) Communism is an economic and political system in which the state makes almost all economic decisions and owns almost all the major factors of production. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 79) Most communist countries today are suffering from severe economic problems. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

80) A major distinction between capitalism and socialism concerns the distribution of income. Answer: TRUE Explanation: Under capitalism, self-interest is the driving force, so people must be rewarded for what they produce. This can result in unequal distribution of income. Under socialism, the emphasis is on a more equal distribution of income, so those earning more are often expected to share their incomes with those who earn less. This is often accomplished by placing high tax rates on people with high incomes and using the tax revenues to pay for programs that benefit people with lower incomes. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 81) Countries that wish to avoid shortages and surpluses of goods should adopt a communist system. Answer: FALSE Explanation: In a communist system, prices do not reflect supply and demand as they do in a free market system. Thus, the government has no way of knowing what to produce to best satisfy the wants of consumers. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 82) Workers in nations who are strong proponents of communism work much harder and longer hours. Answer: FALSE Explanation: Communism is a political system of a command economy that favors government ownership of most property and government control over most economic decisions. Under a communist system, the government generally maintains a great deal of control over its citizen's lives. Businesspeople are not inspired to work hard because the government takes most of their earnings. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

83) In the small nation of Evensplitalia, the government owns several of the key businesses and provides a wide range of social services. The government strongly emphasizes income equality and eliminating the great income disparities among its citizens. These features of Evensplitalia's economy are consistent with a socialist economic system. Answer: TRUE Explanation: Socialism is based on the premise that the government should own basic businesses in order to distribute profits more evenly. In most socialist economies, the government provides a wide range of social services and emphasizes an even distribution of income. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 84) Mariska left her home country to become a nanny for a family in a suburb of San Diego, California. One of the benefits of her new job is she can attend the community college near her family's home. However, when she arrived, she experienced the differences from a predominately socialist nation and a capitalist nation. Mariska noted that public transportation in California was limited and expensive, making it difficult to get to school. For a negligible fee, the government in her home country provided public transportation for everyone. Mariska's home country's economic system was more characteristic of socialism. Answer: TRUE Explanation: Socialism is an economic system based on the premise that some, if not most, basic businesses such as steel mills, coal mines, and utilities should be owned by the government so that profits can be more evenly distributed among the people. Nations that practice socialism usually collect higher taxes than those that practice capitalism, in order to pay for things such as transportation that are offered to everyone. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

85) Socialism and communism are both variations of a free-market economy. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-04 Analyze the trend toward mixed economies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 86) In free-market economies, the government plays a major role in deciding which goods are produced and who will get them. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-04 Analyze the trend toward mixed economies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 87) Governments that were predominantly capitalist are moving toward socialism, while governments that were predominantly socialist are moving toward capitalism. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-04 Analyze the trend toward mixed economies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 88) Like most nations, the United States has a mixed economy. Answer: TRUE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-04 Analyze the trend toward mixed economies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

89) Most countries throughout the world can be classified as either purely capitalist or purely socialist. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-04 Analyze the trend toward mixed economies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 90) There is general agreement in the United States on the degree to which the government should be involved in the economy. Answer: FALSE Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-04 Analyze the trend toward mixed economies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 91) Subtle differences, such as the right to one's religious preference, make the command economic system known as communism more like a mixed economy than a socialistic system. Answer: FALSE Explanation: Mixed economies evolve when governments recognize the negative effects of purely capitalist or purely socialist or communist systems, and implement programs that capture the characteristics of the other economic systems in the hopes of creating a more balanced economy. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-04 Analyze the trend toward mixed economies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

92) In the past, socialist nations have realized that some of the government-run businesses do not grow as quickly as businesses that operate for a profit. Answer: TRUE Explanation: Under socialism, basic industries such as telecommunications, utilities, and broadcasting are usually owned and managed by the government. Tax revenues pay for the maintenance of these industries. They often lag behind similar industries in other countries that are privately owned and operated for a profit. In socialist nations, the taxes collected to support these industries are not enough. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-04 Analyze the trend toward mixed economies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 93) Although mixed economies tend to improve economic conditions, moral values prevent communist nations such as North Korea and Vietnam from progressing in this direction. Overall, economic progress continues to be very slow in these nations. Answer: FALSE Explanation: North Korea and Vietnam recognize the economic benefits of opening their doors to new business and permitting these businesses to operate without government intervention. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-04 Analyze the trend toward mixed economies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 94) In a mixed economy, the government's goal is to grow the economy and maintain some measure of social equality. Answer: TRUE Explanation: Mixed economies exist when the market and the government are both involved in the allocation of resources. Socialist economies have adopted some elements of free-market systems in order to stimulate more growth, while free-market economies have adopted a larger role for the government to promote a more equitable distribution of income. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-04 Analyze the trend toward mixed economies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

95) Cashland is a nation that supports a free-market economy with private ownership of businesses. But lately, the government of Cashland has developed policies designed to help the needy and lessen the level of income inequality. These programs are funded by relatively high taxes on businesses and workers. These arrangements suggest that the economy of Cashland is trending toward pure capitalism. Answer: FALSE Explanation: Pure capitalism is a system that emphasizes individual freedom and the profit motive. Socialism, on the other hand, emphasizes wealth equality. To achieve that goal, socialist countries levy high taxes to provide for social programs designed to bring about a more equitable distribution of wealth. Cashland has elements of both capitalism and socialism, so it is best described as a mixed economy. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-04 Analyze the trend toward mixed economies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 96) Serena is a vocal critic of socialism. She often points out that governments in many socialistic countries have cut back on government services and have thusly reduced taxes. Serena believes that this trend will ultimately result in every country adopting pure capitalistic ideals. Recent evidence shows that her views are essentially correct. Answer: FALSE Explanation: It is true that the governments of many socialist nations have reduced their social programs and have cut taxes, which suggest a movement to become more like free-market economies. However, they have not totally abandoned the socialist approach. Also, Serena's observations ignore the increasing government involvement in many free-market economies. The result of these trends is the emergence of mixed economies rather than a move toward pure freemarket or pure command economies. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-04 Analyze the trend toward mixed economies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

97) Recently the government of Evensplitia announced that it is standing behind the concept of state-owned utilities and public schools in the nation. Although not all its industries are owned and managed by the government, this would lead one to believe that Evensplitia has a preference for socialism. Answer: TRUE Explanation: Socialism is a command economic system where the government owns and operates some of the major industries such as the transportation industry, utilities, telecommunications and broadcasting, and the school system. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-04 Analyze the trend toward mixed economies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 98) Most nations recognize that private enterprise is detrimental to business growth and what is best for consumers. Recently, Evensplitia had the opportunity to sell its government-owned telecommunications system to a private firm. Instead it realized that it would be better off if it raised taxes so that it could maintain the status quo. Answer: FALSE Explanation: Privately owned businesses tend to grow and prosper as compared to businesses that are owned by governments. Governments are often unable to financially support these businesses at much beyond a level of subsistence. Most countries that have sold or privatized their government-held businesses have found that these particular industries have expanded at a faster rate. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-04 Analyze the trend toward mixed economies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 99) We use indicators such as the gross domestic product (GDP), the interest rate, and the price indexes to measure the health of our economy. Answer: FALSE Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

100) The total value of a country's output of final goods and services in a given year is known as the gross domestic product (GDP). Answer: TRUE Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 101) The measurement of total sales volume at all stages of production is called the gross domestic product (GDP). Answer: FALSE Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 102) Any output produced by U.S. firms is included in the value of U.S. GDP, even if the output was produced in a foreign country. Answer: FALSE Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 103) GDP figures do not include the value of illegal activities. Answer: TRUE Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 31 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

104) To be classified as unemployed, a person must be at least 16 years old and trying to find a job within the past four weeks. Answer: TRUE Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 105) Frictional unemployment occurs because the economy is experiencing a recession. Answer: FALSE Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 106) Structural unemployment refers to unemployment caused by the restructuring of firms or by a mismatch between the skills or location of job seekers and the requirements or location of available jobs. Answer: TRUE Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 107) Inflation refers to a general rise in the prices of goods and services over time. Answer: TRUE Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

108) Inflation refers to the persistent rise in the purchasing power of money. Answer: FALSE Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 109) Disinflation refers to a situation in which prices continue to rise, but not at the rate they were rising previously. Answer: TRUE Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 110) Deflation means prices are declining and is an indication that economic conditions are deteriorating. Answer: TRUE Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 111) The consumer price index (CPI) measures what is happening to prices at the wholesale level. Answer: FALSE Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 33 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

112) The CPI measures the pace of inflation or deflation. Answer: TRUE Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 113) The CPI is based on the prices of a carefully selected market basket of goods, all of which consumers can purchase at a supermarket. Answer: FALSE Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 114) Some wages, tax brackets, interest rates, and government benefits are based on the CPI. Answer: TRUE Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 115) Core inflation figures omit healthcare prices, but not energy prices. Answer: FALSE Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

116) The producer price index measures what is happening to prices at the wholesale level.

Answer: TRUE Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 117) Productivity of workers in the U.S. is helped by the use of better machinery. Answer: TRUE Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 118) The higher the measurement of productivity, the higher the likely costs of production. Answer: FALSE Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 119) An increase in productivity means that a worker is now able to produce more goods and services in the same amount of time. Answer: TRUE Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

120) As productivity increases, the cost of producing goods and services is likely to fall. Answer: TRUE Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 121) In the service sector of the economy, the influx of machinery such as computers increases output per worker, but does little to improve the quality of services. Answer: FALSE Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 122) An economy is said to be in a recession if GDP declines for two or more consecutive quarters. Answer: TRUE Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 123) A depression is a severe recession that is often accompanied by deflation. Answer: TRUE Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

124) A prediction that GDP will increase significantly over the next six months is bad news for most businesspeople. Answer: FALSE Explanation: An increase in the GDP would indicate that the output of final goods and services is rising. This indicates a healthy and growing economy, which would be good news to most businesses. Difficulty: 2 Medium Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 125) Although changes in the CPI provide interesting insights into the overall performance of the economy, these changes have little practical impact on the lives of ordinary people. Answer: FALSE Explanation: Changes in the CPI indicate whether the economy is experiencing inflation, disinflation, or deflation. For example, a significant increase in the CPI indicates that prices of a wide variety of consumer goods are rising. Moreover, changes in the CPI can directly influence the wages some people receive (through cost of living adjustments), the interest rates some people pay, the benefits the government pays to various recipients, and the tax brackets that are used to determine the income tax rate applied to earnings. Difficulty: 2 Medium Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 126) It is understandable that productivity is rising faster in the service sector because service businesses have newer technologies than the manufacturing sector and fewer laborers. Answer: FALSE Explanation: A problem in the service sector is that it's difficult to measure the output per worker due to the unique nature of services. Difficulty: 2 Medium Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 37 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

127) A rising GDP, rising unemployment rate, and rising inflation rate signify a healthy economy. Answer: FALSE Explanation: A rising GDP, declining unemployment rate, and decreasing inflation would signify a healthy economy. Difficulty: 2 Medium Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 128) A problem with the CPI is that it measures the price changes of only food and clothing, while ignoring what happens to the prices of such important items as medical care and energy. Answer: FALSE Explanation: The CPI is based on the prices of food, apparel, energy, healthcare, housing, transportation, education, and other services. Difficulty: 2 Medium Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 129) Willow was laid off from her job 7 months ago. At first, she looked for a new job nearly every day. However, in the last 6 weeks, Willow has become depressed about not finding a job and quit looking. Based on the criteria used by the government, Willow is a civilian whose job status is included in computing the national unemployment rate. Answer: FALSE Explanation: The unemployment rate refers to the number of civilians at least 16 years old who are unemployed and tried to find a job within the prior four weeks. Willow has not tried to find a job in six weeks, so she would not be included in the computation of the unemployment rate. Difficulty: 3 Hard Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

130) Michael and Casey are having an argument. Casey believes that over the past year, the economy is experiencing rapid inflation, while Michael says that the economy actually experienced disinflation during this period. The easiest way for Michael and Casey to settle their argument is to look at GDP figures for the past year. Answer: FALSE Explanation: GDP measures the market value of final goods produced in a country in a given year. An increase in GDP may be due to inflation, or it may be due to an increase in the production of final goods, or it may be due to a combination of both of these factors. Thus, looking at GDP by itself does not provide a clear answer to what has happened to prices. Michael and Casey would be better served by looking at the changes in price indexes such as the CPI. The CPI tracks movements in the average level of prices for a market basket of consumer goods over time. Difficulty: 3 Hard Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 131) Aubrey is the office manager of a service company. Recently, she approved the request for new computers and office equipment for the entire office. If Aubrey's company is like most service companies, she will probably see a big jump in the productivity figures reported for workers in her office. Answer: FALSE Explanation: In the service sector, improvements in technology and in the number of computers and other types of machinery used by workers often improve the quality of the service, but not the output per worker. Thus, the productivity figures are unlikely to change very much. Difficulty: 3 Hard Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

132) 140. The government of Ativa has made great progress in its efforts to control its rapid inflation. Although prices are still on the rise, the rate of increase has slowed considerably. This suggests that Ativa is experiencing disinflation. Answer: TRUE Explanation: Disinflation occurs when the rate of inflation is slowing. Difficulty: 3 Hard Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 133) The nation of Forlornistan is reporting a decline in GDP for the fourth consecutive year, with no relief in sight. With unemployment at record levels and businesses failing faster than at any time in the past century, Forlornistan is likely experiencing a depression. Answer: TRUE Explanation: An economy is in a recession if its GDP declines for 2 consecutive quarters (six months). A depression is a severe recession. Since Forlornistan GDP has shown decline for four years and other economic conditions (the unemployment rate and the number of business failures) are described as being the worst the nation has experienced in the past century, it appears that the definition of a depression is satisfied. Difficulty: 3 Hard Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

134) Sean received an ad for bundled television, phone, and Internet service that cost substantially more than he is currently paying. At the same time, he received a notice from his utility company that summer rates would be increasing. His textbooks are costing twice as much as they did last year, and yesterday, gas cost 30 cents more per gallon than it did last week. He can't help but marvel at how prices are rising when so many people have lost their jobs and are cutting back on expenditures. He is certain that this situation is an example of stagflation. Answer: TRUE Explanation: Stagflation is the term used to describe the situation where the economy is slowing, yet prices are still rising. In the situation described here, Sean is experiencing rising prices and a rising unemployment rate. Difficulty: 3 Hard Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 135) Brianne graduated from college and is looking for her first job. She received a degree in nursing from a well-regarded local university. Brianne has several leads and has heard the nursing market is still strong, so she is convinced that she will locate a good job in the near future. Brianne's current situation is an example of structural unemployment. Answer: FALSE Explanation: Structural unemployment is caused by problems such as mismatches between the skills workers have and the skills employers need or due to restructuring within an industry. The description of Brianne situation is not consistent with this type of unemployment. Her situation is really an example of frictional unemployment. This type of unemployment refers to workers who have quit their job for personal reasons or those who are entering the labor market after being out of it to go to school or to raise a family. Difficulty: 3 Hard Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

136) Fiscal policy refers to the federal government's efforts to keep the economy stable by controlling the amount of money in circulation. Answer: FALSE Difficulty: 1 Easy Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 137) Fiscal policy involves the federal government's efforts to stabilize the economy by increasing or decreasing taxes and/or government spending. Answer: TRUE Difficulty: 1 Easy Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 138) When the government attempts to stabilize the economy by changing taxes or government expenditures, it is using fiscal policy. Answer: FALSE Difficulty: 1 Easy Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 139) The national deficit is the difference between our nation's exports and its imports. Answer: FALSE Difficulty: 1 Easy Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 42 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

140) The size of the national debt increases when the federal government runs a deficit. Answer: TRUE Difficulty: 1 Easy Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 141) The U.S. national debt equals the sum of government deficits over time,. Answer: TRUE Difficulty: 1 Easy Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 142) The Federal Reserve Bank is responsible for controlling the money supply. Answer: TRUE Difficulty: 1 Easy Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 143) Monetary policy is directly under the control of the U.S. Department of the Treasury. Answer: FALSE Difficulty: 1 Easy Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

144) One of the major ways the Fed influences economic conditions is through its control of interest rates. Answer: TRUE Difficulty: 1 Easy Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 145) High tax rates that put money into the government's funds tend to slow spending, and ultimately slow the economy. Answer: TRUE Explanation: Fiscal policy refers to the federal government's efforts to keep the economy stable by increasing or decreasing taxes or government spending. When the government raises taxes, the result is a tightening of consumer and business spending, which has the tendency of slowing the economy. This draws money away from the private sector. Difficulty: 2 Medium Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 146) If the government wants to jump-start the economy resulting in more consumer spending, it will raise taxes. Answer: FALSE Explanation: Fiscal policy refers to the federal government's efforts to keep the economy stable by increasing or decreasing taxes or government spending. When the government raises taxes, the result is a tightening of consumer and business spending, which has the tendency of slowing the economy. This draws money away from the private sector. Difficulty: 2 Medium Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

147) Monetary policy is implemented to ease the up and down swings of business cycles, while fiscal policy is implemented to create swings when the cycle is stalled in an economic boom.

Answer: FALSE Explanation: Fiscal and monetary policies have the purpose of bringing stability to the nation's economy. Fiscal policy involves government spending by raising or lowering taxes; monetary policy is enacted by the Fed (Federal Reserve Board) by raising or lowering interest rates. Difficulty: 2 Medium Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 148) If the national debt is $20 trillion, the national deficit will be considerably higher. Answer: FALSE Explanation: The national deficit is the amount of money the federal government spends beyond what it collects in taxes for a given fiscal year. The national debt is the sum of government deficits over time. Difficulty: 2 Medium Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 149) Government spending on defense decreases the national deficit. Answer: FALSE Explanation: Any government spending, including money spent on defense increases the national deficit because it decreases the amount of revenue that the government has collected. Difficulty: 2 Medium Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

150) To jump-start the economy, the Fed is likely to lower interest rates, in order to encourage individuals and businesses to spend money. Answer: TRUE Explanation: The Fed meets once each month to review economic growth and make decisions with respect to raising or lowering interest rates. If the Fed lowers interest rates, it is trying to encourage individuals and businesses to borrow more money and spend it in ways that improve their quality of life, as well as increase the GDP. If the Fed raises interest rates, it is trying to discourage individuals and businesses from borrowing money, so as to slow down the economy. Difficulty: 2 Medium Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 151) The best way to avoid national budget deficits is to increase our exports and decrease our imports. Answer: FALSE Explanation: Budget deficits are not the same thing as trade deficits. A federal budget deficit arises in a given fiscal year if government spending exceeds tax revenues. Difficulty: 2 Medium Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 152) In order to restrict spending by businesses and households, the Fed would take measures designed to lower interest rates. Answer: FALSE Explanation: The Fed conducts monetary policy by managing the money supply and interest rates. Lower interest rates would reduce the cost of borrowing, thus leading to more spending. If the Fed wanted to restrict spending, it would be more likely to raise interest rates. Difficulty: 2 Medium Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

153) Senator Spendital recently made a speech condemning the continuous deficits in the federal budget. He is now proposing an increase in tax rates to raise more revenue for the government and thus gradually reduce the size of the national debt over a period of several years. The strategy Senator Spendital is proposing is a common type of monetary policy. Answer: FALSE Explanation: When the government changes the level of taxes and government expenditures, its actions are referred to as fiscal policy. Difficulty: 3 Hard Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 154) Prestigious economics professor, Tom Ruland, recently urged government policy makers to cut taxes and increase government spending in order to pull the economy out of a downturn. The policy measures called for by the professor are examples of fiscal policy. Answer: TRUE Explanation: Fiscal policy involves changes in government spending and taxes to help stabilize the economy. Difficulty: 3 Hard Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

155) Dan and Susan Greene are purchasing their first home in Savannah, Georgia. They are seeking pre-qualification on a home loan. The unemployment rate for Georgia is 10.2% and GDP is declining. Chances are pretty good that the Fed will raise interest rates in order to loosen the supply of money, resulting in a more expensive loan for Dan and Susan. Answer: FALSE Explanation: A 10.2% unemployment rate, as well as declining GDP, are good indications that the economy is in a recession, and/or downward business cycle. In a recessionary climate, the Fed is likely to lower interest rates to induce spending. Dan and Susan may be able to qualify for a lower interest rate. Difficulty: 3 Hard Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 156) Quinn owns a local salon. She wants to update her shop with new customer massage chairs and work stations for her nail technicians. If the Fed were to lower interest rates by 1.5 percentage points, at the same time that the government increased the tax rate by 1.5%, she could immediately conclude that updating her shop would not increase or decrease her financial position. Answer: FALSE Explanation: If Quinn applies and gets a loan to update her shop, she will have to pay a percentage annually on the principle of the loan. We do not know the loan amount, so we do not know the dollar amount of deductible loan expense. Taxes are paid on profits, after we deduct all applicable expenses. Since we don't know the deductible dollar amount of interest expense, nor do we know the dollar amount that Quinn will pay in taxes, we are unable to determine if the percentage increase or decrease in taxes would be a wash. Difficulty: 3 Hard Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

157) The Fed is concerned that the economy is growing too rapidly. Given these concerns, it is likely to pursue policies to restrict the supply of money and raise interest rates. Answer: TRUE Explanation: The Fed is in charge of monetary policy. This involves controlling the supply of money and interest rates. When the Fed wants to slow down the economy it will restrict the money supply and increase interest rates to reduce the amount of borrowing. Difficulty: 3 Hard Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 158) Kyle O'Donnell needs a new car and he is planning to borrow the money from a nearby bank. The other day, he read online that the Federal Reserve is likely to implement policies in the next few weeks that are designed to stimulate the economy. If he waits until after the Fed implements its new policies, Kyle would probably get a lower interest rate on his car loan. Answer: TRUE Explanation: The Fed usually pursues policies to decrease interest rates when it wants to stimulate the economy. If Kyle wants a low interest rate on his car loan, he should wait until the Fed acts to stimulate the economy. Difficulty: 3 Hard Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

159) Economics is the study of how a society ________. A) invests wisely in the stock market. B) employs resources to produce goods and services and distribute them among competing groups and individuals. C) employs statistical techniques to make predictions about the evolution of society over the long run. D) governs itself for the good of its citizens. Answer: B Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 160) ________ is the study of how a society employs its limited resources to produce goods and services and how it distributes them among competing groups and individuals. A) Economics B) Capitalism C) Marketing D) Socialism Answer: A Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 161) ________ studies the operation of a nation's economy as a whole. A) Microeconomics B) Socioeconomics C) Econometrics D) Macroeconomics Answer: D Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

162) ________ looks at the behavior of individual people and organizations in specific markets. A) Macroeconomics B) Finite economics C) Microeconomics D) Nanoeconomics Answer: C Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 163) Resource development is A) the study of how society chooses to employ resources to produce goods and services and distribute them for consumption among various competing groups and individuals. B) the study of how to increase the amount of available resources and create conditions that will make better use of these resources. C) the part of economics that looks at the operation of a nation's economy as a whole. D) the part of economics that looks at particular markets. Answer: B Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 164) The study of how to increase the amount of available resources and create conditions that will make better use of these resources is known as A) human resource management. B) microeconomics. C) econology. D) resource development. Answer: D Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

165) Economist Thomas Malthus believed that ________ would limit economic progress. A) depletion of gold reserves B) overpopulation C) the tendency of governments to levy high tax rates D) the inability of workers in developed nations to compete against cheap foreign labor Answer: B Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 166) A key to economic growth and development is to A) locate more deposits of gold and other precious metals. B) emphasize a fair and equitable distribution of income. C) provide people with better education. D) allow government planning to guide the allocation of resources. Answer: C Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 167) ________ is considered by some to be the father of modern economics. A) John Maynard Keynes B) Adam Smith C) Thomas Piketty D) Thomas Malthus Answer: B Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

168) Which of the following is an important premise of Adam Smith's conclusions about economic prosperity? A) Individual freedom is necessary if a society is to prosper. B) Understanding the concept of survival of the fittest will lead to prosperity. C) Determining what motivates people will lead to prosperity. D) Command economies and structured markets must be in place before we can work toward prosperity. Answer: A Explanation: Adam Smith believed that freedom was vital to the survival of any economy, especially the freedom to own land or property and to keep the profits from working the land or running a business. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 169) Which of the following would be a topic emphasized in a macroeconomics course? A) The factors that determine how fast a nation's economy is growing B) How a company decides the amount it will charge for one of its products C) How a consumer chooses which goods to buy D) The factors that determine the wages for labor in the mining industry Answer: A Explanation: Macroeconomics is concerned with the performance of a nation's economy as a whole. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

170) Which of the following would be a topic emphasized in a microeconomics class? A) How a nation's GDP is computed B) The nation's unemployment rate C) How market conditions determine the price of a specific product D) How the government can provide adequate healthcare Answer: C Explanation: Microeconomics is concerned with the behavior and performance of people and organizations in particular markets. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 171) The main goal of resource development is to find ways to A) increase the amount of resources and create conditions that will make better use of those resources. B) allocate existing resources more efficiently among competing uses. C) find the right balance between policies that promote economic growth and policies designed to promote other goals such as a fair distribution of income. D) promote the central planning of resource utilization so that resources can be allocated to the uses that will benefit society the most. Answer: A Explanation: Resource development is the study of how to increase resources and to create the conditions that will make better use of those resources. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

172) Thomas Malthus was pessimistic about the ability of a society to achieve high standards of living for most of its citizens because he believed that A) government has a natural tendency to run deficits that would eventually bankrupt a nation. B) significant population growth would result in shortages of food and resources. C) owners of businesses would deliberately exploit their employees in an attempt to earn greater profits, and this would ultimately lead to a worker's revolt. D) high tax rates would eventually undermine people's incentives to work hard and create wealth. Answer: B Explanation: Thomas Malthus believed that human population would continue to grow until the economy was unable to support any more people. This would result in a situation where the standard of living of most people would be at a subsistence level. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 173) Economics was called the "Dismal Science" by Thomas Carlyle because A) too many people would result in food shortages and shortages of other resources. B) it was a very complex area of study based on mathematics. C) the world population was growing slower than expected in the 1700s, leading economists to call it a dismal period of time. D) there were too many old people and not enough young people to care for them. Answer: A Explanation: Thomas Carlyle called economics the "dismal science" because of the argument made by Thomas Malthus in the late 1700s and early 1800s that there would soon be too many people and not enough food and other resources to support them. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

174) How is it that people working in their own self-interest produce goods, services, and wealth for others? A) By taking advantage of a vast supply of labor, people working in their own self-interest could hire others at very low wages. B) In order to earn money and produce goods that improve lives, self-directed gain would provide jobs, and subsequently wages for others. C) The government pays entrepreneurs in the U.S. to produce goods, services, and wealth for others. D) Entrepreneurs tend to include themselves in a group of people who need charitable support. A portion of the entrepreneur's profit (as required by law) goes to the charity of one's choice to support the less fortunate. Answer: B Explanation: The way people can become wealthy by their own efforts is to sell what they produce to others. As the business grows, labor is hired to produce more. This is the "invisible hand" concept that turns self-directed gain into social and economic benefits for all. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 175) Adam Smith believed that countries would prosper if businesspeople were free to start and run their own businesses. Businesspeople would make a profit by providing the goods, services, and ideas that others in the economy wanted, and they would hire others to help increase those profits, leading to social and economics benefits for many. This idea was called the A) kinked demand theory. B) invisible hand. C) spending multiplier. D) demand accelerator. Answer: B Explanation: Adam Smith believed that self-interest would lead profit-seeking entrepreneurs to produce goods and services wanted by consumers, and to hire others to grow their businesses. This would prove to be social and economic gain for the entrepreneur and for others. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

176) In the box "World Population is Popping," the textbook describes how the world's population is growing at an incredible rate and discusses the challenges that will face different countries. Which of the following statements best illustrates the challenges that can arise? A) Europe's population is expected to grow by 12% in 2050. With so many children, there will not be enough schools or teachers to provide an adequate education. B) North American growth will slow down and there will be fewer businesspeople to provide the services we have become accustomed to. C) China and India will remain the two most populated countries and will not need to make any changes. D) Nigeria will experience the world's fastest growth and though its continent has the world's fastest growing middle class, combating hunger and poverty, providing healthcare, and expanding education will pose a challenge. Answer: D Explanation: Population forecasts estimate the global population will increase to 9.7 billion by 2050. With that, Nigeria is anticipated to overtake the United States as the third largest country in the world. For some of the world's poorest countries, the increase in population poses large challenges in poverty, healthcare, nutrition, and education. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 177) Louisa is a gifted baker. She plans to open a small café in which she will be the head pastry chef. Louisa is willing to work the long hours because she believes that hard work will allow her business to succeed and earn her sizeable profits. Louisa's efforts are most consistent with the economic theory developed by A) Thomas Malthus. B) Karl Marx. C) Adam Smith. D) Thomas Piketty. Answer: C Explanation: In Smith's view, if businesspeople are allowed to follow their own self-interest they will be motivated to work hard and provide needed products that increase the wealth of society as a whole. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

178) Brendan considers himself to be a follower of Thomas Malthus. Which of the following statements would he be most likely to make? A) The key to economic growth is to keep taxes and government regulations to a minimum. B) Command economies are more likely to encourage economic growth than free-market economies. C) Allowing people to follow their self-interest is the best way to generate economic growth and prosperity. D) A society will not experience sustainable economic progress unless it accepts the need to limit population growth. Answer: D Explanation: Thomas Malthus worried that overpopulation would make long-term economic prosperity impossible. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 179) Which of the following statements would a follower of Adam Smith most likely make? A) The federal government should use its ability to spend and tax to guide the decisions of businesses and consumers. B) The federal government puts too much emphasis on economic growth instead of aiding in social issues. C) The federal government should help in alleviating overpopulation. D) The federal government should give people the freedom to follow their own interests; theoretically their efforts will lead to economic growth that benefits society as a whole. Answer: D Explanation: Adam Smith believed that self-interest could motivate people to work hard and start businesses that created jobs and wealth that benefited society as a whole. This was a basic message of Smith's famous invisible hand principle. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

180) Marco has noticed that as older adults purchase tablets, they do not know much about how to use them and are frequently aggravated. He decided he could earn a nice profit by developing courses and offering one-on-one help to aid his customers in overcoming their deficiencies. Although the business struggled at first, he is experiencing a good deal of success now. Marco has many satisfied customers, and the business has grown to the point where he now employs several workers, some of whom were previous clients. Marco's experience is an example of A) socialism at work. B) the principle of comparative advantage. C) the invisible hand concept. D) the multiplier principle. Answer: C Explanation: The invisible hand concept suggests that people who seek to serve their own interests can produce products and create jobs that benefit others in society. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 181) For many years, Senator Juliana Higdon has called for more government regulation of business. "After all," the senator said recently, "businesses are out to make a profit, not to create jobs or serve their customers. The government needs to pass more laws to require businesses to take the interests of consumers and workers into account." From these comments, it is clear that Senator Higdon A) agrees with the ideas of Thomas Malthus. B) does not accept the "invisible hand" idea brought forth by Adam Smith. C) is unaware of the fact that most businesses in the United States are owned by the government. D) does not realize that government regulation is already the main determinant of business decisions in capitalist economies. Answer: B Explanation: The concept of the invisible hand, developed by Adam Smith in his famous book, The Nature and Causes of the Wealth of Nations, says that in an effort to earn a profit, entrepreneurs produce goods that satisfy the wants of consumers and create jobs for workers. It is clear from her statements that Senator Higdon does not accept this philosophy. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

182) According to the invisible hand concept, the best way for a society to encourage the creation of jobs and the production of the products most wanted by consumers would be to A) permit government-owned industries, such as telecommunications, transportation, and energy, and operate these firms as nonprofit organizations. B) allow private ownership of businesses, but use extensive regulations to force businesses to behave as the government wishes. C) allow entrepreneurs personal freedom to follow their own self-interest. D) impose high taxes on individuals, and use the revenue to subsidize businesses to encourage them to produce the maximum rate of output. Answer: C Explanation: Personal freedom is an important premise of wealth creation. Entrepreneurs, acting in their own self-interest need the personal freedom to own property and keep the earning from their hard work. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 183) A young couple living in rural west-central Missouri heard about the closing of a local grocery store. Although a small operation, it served a small community that would now have to travel another 20 miles to the nearest grocery store. With help from a local realtor and banker, the couple purchased the store, remodeled it, and reopened it. As new storeowners, they had to carefully watch cash flow. As their customer base began to grow, they began offering hot food, and hired others to help with the operation. The economic benefit created in this story is called: A) an economic intervention. B) an economic crisis control. C) the invisible hand. D) the deliberate process. Answer: C Explanation: Personal freedom is an important premise of wealth creation. Entrepreneurs, acting in their own self-interest need the personal freedom to own property and keep the earning from their hard work. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

184) ________ is the name of a free-market economic system in which most of the factors of production and distribution -- such as land, factories, railroads, and stores -- are owned by individuals. A) Socialism B) Capitalism C) Communism D) Marginalism Answer: B Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 185) Under capitalism, A) most of the means of production and distribution are privately owned and operated for profit. B) the primary function of the government is to distribute wealth more evenly. C) utilities, health care, education, and other important services are operated by the government. D) markets operate to carry out the decisions made by central planners. Answer: A Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 186) The foundation of the U.S. economic system is based on A) capitalism. B) the ideas of Thomas Malthus. C) equality. D) the saying, "from each according to ability, to each according to need." Answer: A Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

187) Which of the following is a basic right under capitalism? A) Freedom of collusion B) Freedom from taxation C) The right to vote D) The right to compete Answer: D Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 188) The freedom of people to decide where they want to work and live, and what they want to buy or sell are basic capitalist rights under A) eminent domain. B) freedom of expression. C) freedom of choice. D) freedom of competition. Answer: C Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 189) The freedom for people to buy, sell, and use land, buildings, machinery, and inventions are basic capitalist rights under A) the right to own private property. B) freedom of expression. C) freedom of choice. D) freedom of competition. Answer: A Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

190) A free market is one in which decisions about what to produce and in what quantities are made by A) the Fed. B) the president. C) the market. D) Congress. Answer: C Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 191) In a free-market economic system, ________ is the key determinant used to signal to producers what to produce and how much to produce. A) the market curve B) trend C) price D) quantity Answer: C Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 192) The quantity of a good or service that producers are willing to sell at different prices during a specific time period is known as the A) supply of that product or service. B) demand for that product or service. C) elasticity of that product or service. D) utility of that product or service. Answer: A Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

193) A simple supply curve shows that an increase in the price of a good will cause the quantity supplied to A) decrease. B) increase. C) remain constant. D) fluctuate randomly around its equilibrium value. Answer: B Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 194) A simple supply curve shows a relationship between the A) amount of labor a firm hires and the amount of output it can produce. B) amount of time required to produce a good and the relevant production costs. C) price of a good and the quantity of that good sellers are willing to offer for sale at a specific point in time. D) amount of a good a firm produces and the amount demanded by consumers. Answer: C Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 195) A(n) ________ curve shows the relationship between the price of a good and the quantity of that good people are willing and able to buy in a given time period. A) demand B) supply C) utility D) equilibrium Answer: A Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

196) A typical demand curve shows that A) as people earn higher wages, they buy more of a specific good. B) as supply increases, the amount purchased decreases. C) people tend to buy more of a good than they really want. D) people tend to buy more of a good when its price decreases. Answer: D Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 197) When the supply curve and demand curve for a particular good are shown together on a single graph, the point at which the two curves intersect identifies the A) total profit earned by producers. B) total amount of labor that will be employed in that market. C) amount of time it takes to bring together the buyers and sellers of the good. D) equilibrium price of the good. Answer: D Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 198) When prices are free to adjust over time, in the long run, the market price of a good tends to A) rise above the equilibrium price in the long run. B) equal the equilibrium price. C) fall below the equilibrium price in the long run. D) have no specific relationship to the equilibrium price. Answer: B Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

199) If a shortage exists for a good in a free-market economy, the A) price of the good will rise. B) price of the good will fall. C) government will order suppliers to increase the production of that good. D) government must establish a rationing system to make sure that the good is fairly distributed. Answer: A Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 200) ________ is the market situation in which there are many sellers in a market and no seller is large enough to dictate the price of a product. A) Oligopoly B) Monopolistic competition C) Perfect competition D) Microeconomic competition Answer: C Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 201) ________ exists when a large number of firms produce goods that are similar but customers believe there is a difference. A) Perfect competition B) Monopolistic competition C) Oligopoly D) A monopoly Answer: B Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

202) ________ exists when the entire supply of a good is controlled by a single seller. A) Perfect competition B) Oligopoly C) Pure capitalism D) A monopoly Answer: D Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 203) An oligopoly is a market that is characterized by A) one seller that totally dominates the supply of the product. B) a large number of small companies all producing very similar products. C) a few large sellers who dominate the market. D) several small firms that compete primarily by differentiating their products. Answer: C Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 204) Which of the following statements about capitalism is the most accurate? A) In capitalist economies, most resources are owned by the government. B) A strength of capitalism is its ability to deal with environmental problems. C) Capitalism is characterized by unequal distribution of wealth and income. D) A drawback of capitalism is that people have little freedom to pursue their own goals. Answer: C Explanation: One of the criticisms of capitalism is that it tends to result in unequal distribution of income and wealth. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

205) When the market price of a good is below the equilibrium price, and all other determinants are unchanged A) the quantity demanded will be greater than the quantity supplied. B) the supply curve will be to the right of the demand curve. C) a surplus will exist in the market. D) the government will regulate the price of the good to ensure equilibrium is attained. Answer: A Explanation: At the equilibrium price, quantity supplied equals quantity demanded. However, as price falls the quantity demanded of a product tends to increase, while the quantity supplied decreases. The result is that quantity demanded will exceed the quantity supplied when the market price is below the equilibrium price, so eventually a shortage will exist. Of course, the presence of a shortage will put upward pressure on prices, so that the market price will move toward the equilibrium price. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 206) When the market price of a good is above its equilibrium value, and all other determinants are unchanged A) a shortage will exist in the market. B) the quantity demanded will be greater than the quantity supplied. C) the government will regulate the price of the good to ensure equilibrium is attained. D) a surplus will exist in the market. Answer: D Explanation: At equilibrium, the quantity demanded is equal to the quantity supplied. At higher prices, the quantity supplied is greater than the equilibrium quantity, while the quantity demanded is lower than the equilibrium quantity. Thus, a surplus will exist. Of course, this is a temporary situation. The presence of a surplus will put downward pressure on the market price and move it toward the equilibrium price. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

207) Just a few sellers dominate the markets for laundry detergents, soft drinks, and automobiles. Economists would classify these markets as A) monopolistic competition. B) perfect competition. C) oligopolies. D) monopolies. Answer: C Explanation: An oligopoly is a form of competition in which just a few sellers dominate a market. High initial investment tends to create a barrier to new competitors. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 208) There's a large number of bakeries in the United States and each of these bakeries produces similar, but not identical, products. Some bakeries will claim to have the best cupcakes in town, while others will brag about other items like cookies or specialty breads. The bakery market is an example of A) monopolistic competition. B) perfect competition. C) an oligopoly. D) a monopoly. Answer: A Explanation: Monopolistic competition is a market structure that is characterized by a large number of firms selling products that are very similar but are perceived by buyers as different. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

209) The presence of competition in free markets A) is undesirable because it results in unnecessary duplication of efforts. B) usually results in better quality and lower prices. C) is rare, since most markets eventually evolve into monopolies. D) is undesirable, because one big firm can usually produce goods more efficiently than a large number of small firms. Answer: B Explanation: In competitive markets, consumers have a choice of many firms. Competition puts pressure on each firm to provide a good quality product and to charge a fair price. Firms that fail to do so will lose their customers. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 210) A benefit of a free market can be that A) businesses provide customers with quality products at fair prices. B) businesses all make the same amount of profit. C) all businesses do better with more government regulation. D) the government dictates the number of competitors there are in each industry. Answer: A Explanation: One benefit of the free market is that it allows open competition between companies. Businesses must provide customers with quality products at fair prices with good service; otherwise, they will lose customers to those businesses that do provide good products, good prices, and good service. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

211) One of the greatest concerns associated with capitalism is that A) it rarely creates wealth. B) some people may let greed guide their behavior. C) there is very little economic freedom for consumers. D) producers are unlikely to supply the goods and services that consumers value the most. Answer: B Explanation: One of the dangers of free markets is that businesspeople and others may let greed dictate how they act. Some businesspeople have deceived the public about their products, and others have deceived their stockholders about the value of their stock. All this was done in order to increase the executives' personal assets. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 212) Which of the following statements most accurately identifies a limitation of the free-market economic system? A) Free-market economies offer little opportunity for the poor to work their way out of poverty. B) Free-market economies have been unable to create wealth as rapidly as other types of economic systems. C) Free-market economies are generally plagued by shortages of needed consumer goods. D) Free-market economies tend to result in unequal distribution of wealth. Answer: D Explanation: Free-market economies have been a major factor in the creation of wealth enjoyed by many of the world's nations. This type of system gives people opportunities to work their way out of poverty. And, the ability of market prices to adjust will help eliminate shortages (and surpluses) of goods and services. However, the incentive structure in a free-market economy naturally leads to inequality in the distribution of income and wealth. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

213) According to the box, "Bad Medicine for Consumers?" the hypothetical pharmaceutical firm you work for recently increased the price of a chemotherapy drug from $300 to $3,000! What concern associated with capitalism best illustrates this ethical dilemma? A) Some businesspeople may let greed guide guide their behavior. B) Through the lack of quality healthcare, the number of cancer patients has increased and the demand for chemotherapy drugs is greater than the supply. C) Thanks to many different kinds of chemotherapy drugs, there is now a surplus and prices need to increase to make a profit. D) The government regulates pharmaceutical costs and can raise or lower the price as it sees fit. Answer: A Explanation: One of the dangers of free markets is that businesspeople and others may let greed dictate how they act. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 214) Colin lives in a nation whose government embraces capitalism. He owns his own home and car, as well as his own business and building. Colin maintains ownership due to A) eminent domain. B) the freedom of choice. C) the right to own private property. D) the freedom of competition. Answer: C Explanation: One of the four basic rights enjoyed by people in a capitalist economy is the right to private property, which means that people are free to buy, sell, and use land, machinery, and other property. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

215) The market price of corn is falling. In a free-market economy, the most likely explanation of this price change is that: A) the government has decided to set a higher price so that firms competing in the market make an adequate profit. B) there is a surplus in the market for apples. C) the supply of money has decreased. D) the equilibrium price is lower than the market price. Answer: B Explanation: In a free market, prices are the result of the interaction of supply and demand. Market prices tend to rise when there is a shortage (i.e. when the quantity demanded exceeds the quantity supplied), and fall when there is a surplus (i.e. when quantity supplied exceeds quantity demanded). Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 216) An incredibly rare stone known as Diamontite is used in many consumer products, including watch faces, smartphones, computer monitors, and tablets. In one year, the price of Diamontite has gone from $8/lb. to $107/lb. Under these circumstances and the fact that more companies are looking to use Diamontite in their products, a graph of the supply and demand for this product would show A) the current price of Diamontite to be below the equilibrium price for this rare gem. B) the price of Diamontite to be above the equilibrium price for this rare gem. C) the price of Diamontite to reflect the adjustment of quantity demanded and quantity supplied. D) consumer demand for any products using Diamontite to shift to the right indicating the desire to purchase the rare gem at any price. Answer: B Explanation: When there is a shortage of a natural resource, it becomes scarce. The continued demand for the product will cause the price to increase, at least temporarily, above the equilibrium point where the quantity supplied and the quantity demanded constitute the market price: the price that sellers are willing to sell the product for, and buyers are willing to buy. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

217) The price of the Samsung Galaxy Tablet is falling. In a free-market economic system where everything else is equal, the most likely explanation is A) there is a Galaxy Tablet shortage in the United States. B) sellers cannot keep up with market demand. C) the government determined that the product was not worth the price tag that the producer was asking. D) the product has competition at the equilibrium price. Answer: D Explanation: If producers (sellers) are able to supply the amount of Samsung Galaxy Tablets needed at the market price, but in the short run, the price is falling, everything else being equal, the likely problem is added competition in the marketplace. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 218) Reality, Inc. is a major producer of reality television shows. The company faces fierce competition from three other major producers of similar shows. Together, Reality, Inc. and its three rivals control almost all of reality television. Their market environment is called A) an oligopoly. B) a duopoly. C) monopolistic competition. D) a quasi-monopoly. Answer: A Explanation: An oligopoly is a market structure in which a few sellers dominate the market. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

219) On its website, Papa John's Pizza compares itself to the competition with the following message: "better ingredients, better pizza." The company is looking to achieve A) product differentiation. B) an equilibrium price. C) a monopoly. D) a perfectly competitive market. Answer: A Explanation: Through tactics such as advertising, branding, and packaging, sellers try to convince buyers that similar products are different in some way. In a monopolistic competition market, successful product differentiation gives a seller a competitive advantage over others offering similar products. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 220) A major premise of a socialist system is A) to make sure that the people who create wealth are allowed to keep that wealth. B) to reduce the inequality in the distribution of wealth. C) to create incentives to encourage entrepreneurs to create jobs and economic growth. D) to keep tax rates extremely low so that businesses do not need to support government projects. Answer: B Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

221) A major benefit of socialism is the A) ability to stimulate rapid economic growth. B) ability to keep taxes low. C) emphasis on social equality. D) emphasis on private enterprise instead of public ownership. Answer: C Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 222) Under the ________ system there is very little incentive to work hard or to produce quality goods or services. A) capitalist B) socialist C) communist D) mixed economy Answer: C Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 223) Brain drain has occurred in many socialistic nations because A) socialism encourages an unequal distribution of income, leaving many without medical and social services. B) the government does little to protect the natural environment. C) workers tend to have to work longer hours and receive fewer benefits under socialism. D) tax rates on well-respected professionals such as doctors tend to be very high. Answer: D Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

224) Communism is an economic system in which A) the government and private citizens own equal shares of the economic resources. B) almost all of the productive resources are owned by private businesses. C) the government makes almost all of the major economic decisions. D) individual consumers make all economic decisions. Answer: C Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 225) In recent years, countries with communist economic and political systems have A) enjoyed periods of great prosperity. B) experienced economic depression. C) placed even more importance on individual ownership of businesses. D) grown very slowly, but have avoided the severe problems that have plagued some capitalist economies in Asia and Europe. Answer: B Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 226) The economic and political system in which the government owns almost all the major factors of production is called A) communism. B) capitalism. C) ethnocentrism. D) socialism. Answer: A Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

227) Communist values are disappearing because A) people in communist nations are tired of the strong religious teachings of the system. B) communist businesses have grown too quickly and they cannot keep up with demand. C) communist leaders are all militaristic. D) food and other product shortages overwhelm citizens since the government must guess what citizens need. Answer: D Explanation: Under a communist system, the government must guess about what people need. The economy does not have a mechanism such as price to help determine consumer demand for goods and services. People get more of some things, and often less of things that they want and need. There is no choice. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 228) Which of the following statements provides the most accurate comparison of socialism and communism? A) Under socialism, the government owns most businesses, while under communism the church owns most businesses. B) Both socialism and communism strive to achieve a more equal distribution of income and wealth, but under communism, the government takes greater control. C) Socialism strives for an equal distribution of income but communism wants income to go primarily to those who own and operate private businesses. D) Communism believes that the government should always strive to balance its budget, while socialism accepts deficit spending as the price of achieving true equality. Answer: B Explanation: Both socialism and communism share the goal of achieving a more equal distribution of income. However, communism relies even more heavily on the government to achieve this goal than socialism. Under communism the government makes almost all major economic decisions, and is more intrusive in the lives of its citizens than is government in a socialist economy. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

229) Which of the following people would tend to favor a socialist economy? A) Fred prefers to live in a country with low marginal tax rates. B) Lizzie prefers to live in a country that encourages rapid economic growth. C) Kara prefers to live in a country with limited government regulation. D) Bryan prefers to live in a country that promotes social equality. Answer: D Explanation: One benefit of socialism is its emphasis on social equality. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 230) Which of the following people would tend to favor a communist economy? A) Fred prefers to live in a country with low marginal tax rates. B) Lizzie prefers to live in a country that encourages rapid economic growth. C) Kara prefers to live in a country where the government makes almost all of the economic decisions. D) Bryan prefers to live in a country with limited government regulation. Answer: C Explanation: Communism is an economic and political system in which the state makes almost all economic decisions and owns almost all the major factors of production. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

231) One of the most significant problems faced by communist nations is A) inequality in the distribution of wealth and income. B) severe inflationary pressures due to rapid economic growth. C) too little government regulation of economic activity. D) persistent shortages of basic goods such as food and clothing. Answer: D Explanation: The problem with a system where all economic decisions are made by the state is that the government has no way of knowing what to produce. As a result, shortages of many items regularly develop. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 232) Javier left his home country to become a gardener for a family in a suburb of San Francisco, California. One of the benefits of his new job is he can attend the community college near the family's home. However, when he arrived, he experienced the differences from a predominately socialist nation and a capitalist nation. Javier was dismayed to learn that public transportation in California was limited and expensive, making it difficult to get to school. For a negligible fee, the government in his home country provided public transportation for everyone. Javier's home country's economic system was more characteristic of ________. A) pure capitalism. B) socialism. C) mercantilism. D) communism. Answer: B Explanation: Under socialism, businesses produce most of the wealth, but the government owns key businesses such as steel mills, coalmines and utilities. Socialism places a great deal of emphasis on social equality, and the governments of socialist countries generally implement a wide range of social programs designed to promote this equality. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

233) Sasha is a well-educated entrepreneur who operated a small business in her home country of Evensplitia. At the encouragement of American relatives, Sasha recently immigrated to the United States and applied for citizenship. "In Evensplitia, tax rates were very high," Sasha complained. "The government used my taxes to finance all sorts of social programs to help the less fortunate. While I want to help, it has really undermined the profit incentive of individuals such as me. I feel those high taxes have stunted economic growth." Sasha's comments illustrate the reason many socialist countries are experiencing a(n) A) antitrust problem. B) depression. C) brain drain. D) budget surplus. Answer: C Explanation: Socialist economies tend to be characterized by high marginal tax rates on bright and talented individuals such as doctors, engineers, lawyers, business owners, and gifted artists and performers. This has encouraged many of these individuals to immigrate to other countries, such as the United States, which have lower marginal tax rates. This problem is called the brain drain. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Analyze AACSB: Knowledge Application Accessibility: Keyboard Navigation 234) Recently, the government of Evensplitia announced that it is standing behind the concept of state-owned utilities, public schools, and the communications industry of the nation. Although not all industry is owned and managed by the government, these ideas would lead one to believe that the nation has a preference for a ________ state. A) capitalist B) socialist C) communist D) nationalist Answer: B Explanation: A nation whose government owns several but not all important industries is operating under the political system known as socialism. Usually the utility companies, telecommunications companies, and broadcasting companies are among those owned by the government. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

235) Today, the economic systems of most nations could most accurately be classified as A) pure capitalism. B) pure socialism. C) command economies. D) mixed economies. Answer: D Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-04 Analyze the trend toward mixed economies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 236) Both socialism and communism are variations of A) command economies. B) competitive economies. C) free-market economies. D) plutocratic systems. Answer: A Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-04 Analyze the trend toward mixed economies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 237) A major trend around the world today is that A) free-market economies are moving more toward socialism and socialist economies are moving more toward capitalism. B) productivity in the service sector is increasing much more rapidly than productivity in agriculture and manufacturing. C) governments in socialist economies are increasing their use of social programs and relying on higher tax rates to finance these programs. D) governments in countries with capitalist economies are paying less attention to environmental concerns and issues involving social equality. Answer: A Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-04 Analyze the trend toward mixed economies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

238) A command economic system is characterized by A) reliance on the forces of supply and demand to determine what is produced. B) reliance on the government to determine what is produced and who gets the output. C) an extremely rapid rate of economic growth. D) freedom of choice and freedom of competition. Answer: B Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-04 Analyze the trend toward mixed economies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 239) The social and economic goals of ________ include private ownership of land and business. A) capitalism B) socialism C) communism D) a mixed economy Answer: A Difficulty: 1 Easy Topic: Economics and the Types of Economic Systems Learning Objective: 02-04 Analyze the trend toward mixed economies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

240) During the a recession, the government of Cashland flooded several banking, financial services, and insurance firms with government funds in exchange (at least temporarily) for government ownership rights. This move signaled the government's concern that the global banking system might collapse if these firms ended up in bankruptcy. This decision for government involvement in these firms demonstrates A) the unforgiving nature of capitalism. B) the desire for more individuals in the Cashland to live under a socialist system. C) the trend of mostly capitalist nations to move toward socialism. D) the freedoms the Cashland government has under capitalism. Answer: C Explanation: The trend is clearly toward more mixed economies; even in the United States. Socialist nations are taking on more capitalist perspectives and capitalist nations are adapting some socialist principles. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-04 Analyze the trend toward mixed economies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 241) As "global" trends become "local," and as we see more opportunities to compete in the global market, A) the long-term trend is for most nations to operate as mixed economies. B) disagreements about the best economic system to embrace will cause many nations to close their doors to outside commerce. C) the only industries that governments will want to own are the ones that are profitable. D) the forecast is for socialist nations to trend toward communism and for capitalist nations to trend toward socialism. Answer: A Explanation: The trend in the global economy is toward mixed economies since neither freemarket nor command economies have resulted in optimal economic conditions. Difficulty: 2 Medium Topic: Economics and the Types of Economic Systems Learning Objective: 02-04 Analyze the trend toward mixed economies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

242) Over the years, the government of Evensplitia has focused on implementing programs that promote equality. In the short term, though, Evensplitia's legislators are concerned about the very slow rate of growth that has plagued its national economy. In order to address this problem, the government is likely to A) take control of more major industries. B) reduce taxes and cut back on some social programs. C) make sure to balance its budget. D) avoid the use of fiscal policies and reduce the supply of money in circulation. Answer: B Explanation: The government of Evensplitia has emphasized achieving equality, but now wants to encourage more growth. In order to encourage faster growth, countries typically adopt a more market-oriented approach by cutting back on social programs and reducing taxes. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-04 Analyze the trend toward mixed economies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 243) In an effort to promote rapid growth, the government of Cashland has kept taxes low, offered little regulation of business activities, and implemented only modest social programs. The government is now facing political pressure to do more to clean up the environment and to reduce the inequalities of income and wealth. Cashland's government is currently taking a A) purely capitalist approach to achieve its economic goals, and is likely to continue doing so in the future. B) purely socialist approach to achieve its economics goals, and is likely to continue doing so in the future. C) predominately socialist approach to achieving economic goals, but the current pressures it faces suggest it is likely to adopt a more capitalist approach in the future. D) predominately capitalist approach toward achieving economic goals, but the current pressures it faces suggest it is likely to adopt a more socialist approach in the future. Answer: D Explanation: Cashland's low taxes and limited government regulation are consistent with capitalism. However, the political pressures to implement policies that will deal with environmental problems and promote social equality suggest that the government may adopt a more socialist approach in the future. This movement toward mixed economic systems is a major trend in the world economy. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-04 Analyze the trend toward mixed economies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

244) The prime minister of Equalia has called for the nation's legislators to enact new legislation designed to shift the country away from socialism toward a more capitalistic system. The prime minister acknowledges that some citizens will be unhappy with the radical changes. The most likely source of dissatisfaction with a move toward capitalism is A) decrease in wealth. B) people will have less economic freedom. C) tax rates will have to increase. D) a trend toward unequal distribution of wealth. Answer: D Explanation: Capitalism tends to encourage the creation of wealth, and allows people a great deal of economic freedom. Moreover, tax rates tend to be lower in capitalist economies than in socialist economies. However, capitalism does tend to result in a more unequal distribution of income and wealth. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-04 Analyze the trend toward mixed economies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 245) If nearly 28% of Cashland's citizens under the age of 65 are without healthcare and an advocacy group convinces its current administration to vote for basic healthcare for everyone, which of the following is likely to occur? A) More rapid economic growth B) Higher taxes than in past years C) Increasing reliance on markets to determine economic outcomes D) An increase in the number of insurance companies Answer: B Explanation: Socialism attempts to create more equality—in part by relying on government programs financed by high taxes to help the less fortunate—in this case, the reportedly 28% of Cashland's citizens who are going without adequate healthcare because they cannot afford it. In order for the government to subsidize their healthcare, it will most likely have to increase taxes to pay for it. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-04 Analyze the trend toward mixed economies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

246) Several years ago, the nation of Equalia had a government-owned telecommunication system that lagged far behind other nations. In several rural areas, there was only a single landline phone for an entire village. The taxes collected for the purpose of maintaining the telephone system were very meager, so the notion of expanding service was almost impossible. The government of Equalia decided to sell the phone company to a private firm. The private firm expanded rapidly. It reported that even poor consumers were willing to pay for a private landline. This government decision and subsequent sale demonstrates move toward A) nationalism. B) communism. C) socialism. D) capitalism. Answer: D Explanation: In order to generate business growth, countries that were predominantly under a socialist system have trended toward capitalism, while countries that were predominantly capitalistic have added social and government sponsored programs. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-04 Analyze the trend toward mixed economies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 247) The U.S. economic system relies on A) the private sector to measure its economic well-being. B) industries that produce capital equipment to determine how well things are going. C) frictional unemployment statistics as the sole measure of economic health. D) key economic indicators such as GDP, to measure economic progress. Answer: D Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

248) The total value of final goods and services produced within a nation's borders in a given year is known as that nation's A) aggregate production quota. B) aggregate domestic output. C) index of aggregate economic output. D) gross domestic product. Answer: D Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 249) Three important economic indicators of the United States are the unemployment rate, the price indices, and the A) debt to equity ratio (DER). B) gross resource utilization index (GRUI). C) gross domestic product (GDP). D) gross output (GO). Answer: C Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 250) The four basic types of unemployment are frictional, structural, seasonal, and A) cyclical. B) procedural. C) industrial. D) traditional. Answer: A Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 88 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

251) ________ unemployment refers to persons who purposefully quit their jobs and have not yet found a new job. A) Frictional B) Structural C) Cyclical D) Seasonal Answer: A Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 252) ________ unemployment refers to unemployment caused by the restructuring of firms or by a mismatch between the skills of job seekers and the requirements of available jobs. A) Frictional B) Structural C) Cyclical D) Seasonal Answer: B Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

253) ________ unemployment refers to loss of jobs due to a recession or a similar downturn in the economy. A) Frictional B) Structural C) Cyclical D) Seasonal Answer: C Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 254) ________ unemployment results when the demand for labor varies during the year. A) Frictional B) Structural C) Cyclical D) Seasonal Answer: D Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 255) The ________ is a statistic used to measure the pace of inflation or deflation. A) consumer price index B) gross domestic product C) index of leading indicators D) index of inflationary trends Answer: A Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

256) The measure used to report price changes at the wholesale level is the A) gross domestic product (GDP). B) consumer price index (CPI). C) gross output (GO). D) producer price index (PPI). Answer: D Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 257) ________ refers to a general rise in the price level of goods and services over time. A) Acceleration B) Recession C) Inflation D) Escalation Answer: C Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 258) ________ is a condition characterized by slowing price increases. A) Deflation B) Disinflation C) Stagflation D) Uniflation Answer: B Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

259) ________ is a condition in which the average level of prices is actually falling. A) Deflation B) Disinflation C) Stagflation D) Uniflation Answer: A Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 260) A ________ is a severe recession that is usually accompanied by deflation. A) stagflation B) retraction C) depression D) dissolution Answer: C Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 261) In recent years, U.S. manufacturing sector has experienced ________ productivity. A) rising B) relatively stable C) falling slowly D) falling very rapidly Answer: A Difficulty: 1 Easy Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

262) There are innovations involving new ways to produce and conserve energy. If we can turn this new technology into marketable products and services that produce energy to run our businesses and homes, the U.S. could see a surge in output of goods and services. What would be measured to document this surge? A) Gross domestic product B) Consumer price index C) Consumer marginal index D) Number of workers who are frictionally employed Answer: A Explanation: GDP is the measure of the value of a nation's total output of final goods and services over a given year. Difficulty: 2 Medium Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 263) One reason the CPI is monitored very closely by government, businesses, and workers is that A) it indicates whether we are running a budget surplus or a deficit. B) some wages, interest rates, tax rates, and government benefits are tied to changes in the value of the CPI. C) it is the best measure of worker productivity in the service sector. D) the gross domestic product is computed from the reported increases in the CPI. Answer: B Explanation: As a measure of inflation, the CPI is an index which is often used to determine cost of living increases in wages, salaries, interest rates, and other payments. Income tax brackets and some government benefits, such as Social Security payments, are also adjusted when the CPI changes. Difficulty: 2 Medium Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

264) The U.S. strongly relies on GDP data. However, it is only the total value of finished goods produced by the country. Officials are looking to measure total sales volume at all stages of production. What statistic would be most useful to them? A) Consumer price index B) Producer price index C) Gross output D) Productivity Answer: C Explanation: Gross output (GO) is a measure of total sales volume at all stages of production. GO is almost twice the size of GDP and is more consistent with economic growth theory. Difficulty: 2 Medium Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 265) Which of the following indicators provides the clearest indication that an economy is experiencing deflation? A) A decrease in the unemployment rate B) A decrease in GDP C) An increase in the PPI D) A decrease in the CPI Answer: D Explanation: Deflation refers to a situation where the average level of prices is actually declining. The CPI is an index of consumer prices. Thus a decline in the CPI is a clear indication that prices are declining. Difficulty: 2 Medium Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

266) Which of the following statements about business cycles in the U.S. is most accurate? A) Business cycles occur precisely every 5 years. B) Long-term business cycles have only two phases—boom and bust. C) Seasonal business cycles occur within a year. D) Business cycles are based on theories. Answer: C Explanation: Business cycles are the periodic rises and falls that occur in economies over time. Economists look at a number of types of cycles, from seasonal cycles that occur within a year to cycles that occur every 48 to 60 years. Economist Joseph Schumpeter identified the four phases of long-term business cycles as boom, recession, depression, and recovery. Finally, business cycles are based on facts, but what those facts describe can be explained only by using theories. Difficulty: 2 Medium Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 267) Which of the following statements about productivity in the service sector of the U.S. economy is most accurate? A) Productivity in the service sector has increased much more rapidly than productivity in the manufacturing sector. B) Improving productivity in the service sector is much less important than improving productivity in the manufacturing sector, because the service sector does not really produce anything. C) Productivity in the service sector is easier to measure than productivity in agriculture. D) Measures of productivity in the service sector do a poor job of taking quality improvements into account. Answer: D Explanation: The text cites many examples to illustrate that the quality of output in the service sector has improved dramatically. However, current measures of productivity concentrate on quantity rather than quality. Thus, these current measures understate how improvements in the service sector are contributing to rising standards of living. Difficulty: 2 Medium Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

268) Cashland's banking system recently crashed. This eventually led to companies being unable to borrow money to run their businesses and employees needed to be terminated. These circumstances cut into consumer's purchasing power, causing a severe decline in the prices of goods and services, better known as ________. A) disinflation. B) deflation. C) contra inflation. D) overproduction. Answer: B Explanation: Deflation means that prices are actually declining. Disinflation occurs when the rate of increase in prices is slowing down, i.e. the inflation rate is declining. Difficulty: 3 Hard Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 269) Which of the following strategies may have a net effect on inflation? A) Decreasing interest rates and decreasing taxes B) Proportionately increasing wages and increasing prices C) Decreasing prices and decreasing taxes D) Proportionately increasing prices and decreasing wages Answer: B Explanation: Inflation refers to rising prices. Inevitably this occurs with time. If we increase wages in the same proportion that we increase prices of goods and services, it will have a net effect because even though the cost of goods and services is rising, this is offset by the increase in wages. Difficulty: 3 Hard Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

270) Forlornistan is a country in the midst of a serious economic downturn. Forlornistan's GDP has declined steadily for over three years and is now at its lowest level in over sixty years. Forlornistan's unemployment rate is at an all-time high and the nation's CPI is falling. Forlornistan's economic condition is referred to as a A) period of stagflation. B) balance of trade deficit. C) depression. D) retraction. Answer: C Explanation: A recession exists when GDP falls for two consecutive quarters (six months). A depression is a severe recession. Since GDP has fallen for more than three years, the unemployment is near an all-time high, and the average level of prices is falling, it is clear that the economy is experiencing a depression. Difficulty: 3 Hard Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 271) Over dinner with his friend Nathan, Dominic complained about how prices have increased a great deal over the past year. Nathan disagreed and said that the prices of some goods have gone up a bit, but other prices have declined, noting that you can get some good buys on houses right now. Nathan feels that the average price of consumer goods hasn't changed. Nathan and Dominic can refer to the ________ to learn how government economists currently view the price situation. A) GDP B) CPI C) PPI D) MEW Answer: B Explanation: The consumer price index, or CPI, provides information on changes in consumer prices. Difficulty: 3 Hard Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

272) Olivia recently left her job at a large corporation because she saw little chance for advancement. Although she is still searching for a new position, she believes the economy is healthy and she hears that several firms are hiring people with her qualifications. Which of the following statements about Olivia's current situation is most accurate? A) Olivia is not considered unemployed because she voluntarily quit her job. B) Olivia is an example of cyclical unemployment. C) Olivia is an example of frictional unemployment. D) Olivia is likely to find employment quickly if she seeks training in a different field. Answer: C Explanation: Frictional unemployment refers to jobseekers entering the labor market for the first time (or after a long absence) or are temporarily between jobs. Workers who are frictionally unemployed typically have skills that are in demand, but are in the process of job search and have not yet accepted employment. This appears to be the case for Olivia. Difficulty: 3 Hard Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 273) Shelly's company produces computers, phones, and tablets. About six months ago, Shelly began to keep track of number of hours worked at the company, and the resulting output. When she compared the results, she found that the number of workers (and the hours they worked) remained relatively steady over the past six months; however, the work site's output improved considerably. This indicates that A) productivity at the work site has increased. B) the work site sold off some of its excess inventory. C) the company's prices have increased faster than the wages paid to workers. D) the company should hire more workers. Answer: A Explanation: Productivity measures the amount of output a given amount of labor can produce in a given time period. If output is increasing, while work hours are unchanged, that means that productivity is increasing. Difficulty: 3 Hard Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

274) Colby is a new college graduate who just started a job as an engineering trainee for a sizeable defense company. Now that he is earning good money, he hopes to start saving for his first house and also make contributions to his retirement plan. As he looks over his monthly bills, Colby is concerned that he'll never get ahead of the game. His grocery bill, car payment, and mounting gas payments keep him in the "just making ends meet" group. As his mind wonders back to his college days, he reflects on a time when gas and food seemed a lot more reasonable. Chase is experiencing the effects of A) inflation. B) conditions of low demand. C) involuntary CPI. D) cyclical unemployment. Answer: A Explanation: Chase is experiencing the effects of inflation, or rising prices. When prices rise, but salaries stay the same, we cannot purchase the same amount of those goods and services that we did in the past. Difficulty: 3 Hard Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

275) Gabby and Gus Malloy recently got preapproved on a loan for their first house purchase. They are speculating on how much they should bid on their number one choice—a small, threebedroom bungalow near a major college town. Which of the following indicators may be an important factor in whether they are able to successfully put in a low bid? A) The federal tax rate in that area B) The unemployment rate in that area C) The producer's price index in that area D) The CMI - consumer's marginal index Answer: B Explanation: When people are trying to determine the market value of a large investment such as a house, it is important to review key economic indicators in the area—indicators such as the unemployment rate that would cause housing prices to increase or decrease. If the area has a high unemployment rate, there will not be as many persons interested in buying houses. In fact, the recent recession resulted in significant home foreclosures, where banks could not collect on previous loans. With fewer people interested in purchasing homes due to high unemployment, the market value will decrease. The opposite also holds true: when business is booming and people are relocating to hot spots to work, the market value of homes rises. Difficulty: 3 Hard Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

276) Patrick just landed a job working for an up and coming online gaming company in Palo Alto, California. In a lot of ways, this is his dream job come true—the chance to work for a company that makes gaming software and live in California at the same time. As his plane lands at San Jose International, he pictures a snazzy apartment with a palm tree right outside the front door. A few hours later, as he meets a property manager of a large apartment complex, his heart sinks. The price of apartments is outrageous! Back at the hotel, he checks the Bureau of Labor Statistics site to try to get a better picture of why the cost of housing is so high in this region of the country. Which factors may be causing the rise in the price of housing? A) A low unemployment rate and increasing GDP B) A high consumer's marginal index and low PPI C) A low CPI and high state tax rate D) A decreasing Disruptive Technologies Index and high unemployment Answer: A Explanation: An increase in gross domestic product (GDP) signifies a higher demand for goods and services. When firms are producing, they usually have a need for more workers. If more workers move into the area, the demand for additional housing becomes greater. This will often result in a housing shortage because workers desire to live close to where they work. These circumstances will increase the price of available housing. Difficulty: 3 Hard Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 277) ________ policy refers to the efforts of the federal government to keep the economy stable by increasing or decreasing taxes and/or government spending. A) Monetary B) Incomes C) Fiscal D) Cyclical Answer: C Difficulty: 1 Easy Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

278) Fiscal policy involves increases or decreases in A) the money supply. B) interest rates. C) government spending and taxes. D) exports and imports. Answer: C Difficulty: 1 Easy Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 279) When the federal government's collection of tax revenues is less than what it spends in a given year, it results in a A) Federal Reserve allowance. B) GDP deflator. C) balance of payments deficit. D) national deficit. Answer: D Difficulty: 1 Easy Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 280) When the government runs a continual budget deficit, it increases the A) national debt. B) balance of payments deficit. C) federal capital account. D) money supply. Answer: A Difficulty: 1 Easy Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

281) In the U.S., the ________ has the role of managing the money supply and interest rates. A) United States Treasury B) Federal Reserve Bank C) State Department D) Federal Deposit Insurance Corporation Answer: B Difficulty: 1 Easy Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 282) One way to lessen the U.S. government budget deficit is to A) cut spending. B) increase spending. C) call in government savings bonds. D) increase government social programs such as welfare, food stamps, and Medicare. Answer: A Difficulty: 1 Easy Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 283) Efforts by the Federal Reserve Bank (the Fed) to control the money supply and interest rates are known as ________ policy. A) fiscal B) income C) monetary D) securities Answer: C Difficulty: 1 Easy Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

284) The Federal Reserve Bank operates A) as a semi-private organization not under the direct control of the government. B) under the direct control of the executive branch of the government. C) under the direction of the Banking Oversight Committee of Congress. D) as a special agency of the U.S. Treasury. Answer: A Difficulty: 1 Easy Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 285) Which of the following statements about government deficit spending is most accurate? A) The federal government violates the law by running deficits because the U.S. Constitution requires the government to balance its budget each year. B) Although the government used to run big deficits, it has consistently run surpluses since the late 1980s. C) The government has used deficit spending to lower the national debt. D) One reason the government has a hard time reducing deficits is that there is a great deal of pressure on the government to expand its spending each year. Answer: D Explanation: The national deficit is the difference between the government's tax revenues and its expenditures. Every year there are calls for new social programs (or increases in allocation for existing programs) and additional needs for military spending. This continuous pressure to increase spending makes it difficult to reduce the level of deficit spending. Difficulty: 2 Medium Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

286) As you're checking out the online edition of your local newspaper, you quickly scan a report in the business section that says government spending will again exceed tax revenues in the current year. What does this mean for the economy? A) The total national debt is likely to increase. B) The national deficit is likely to decrease. C) The rate of inflation is likely to fall. D) The monetary policies pursued by the Fed need tightening. Answer: A Explanation: When its tax revenues fall short of its expenditures, the federal government runs a deficit. Since the national debt is the sum of all deficits, running another deficit will increase the debt. Difficulty: 2 Medium Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 287) Which of the following statements about the Federal Reserve Bank (the Fed) is most accurate? A) The Fed is an agency of the U.S. Treasury Department that has the responsibility of collecting tax receipts for the IRS. B) The Fed manages the U.S. money supply and interest rates. C) The Fed is the primary government agency involved in carrying out our nation's fiscal policies. D) The Fed is the agency of the government that ensures the U.S. maintains enough gold reserves to pay any foreign debts that result from international trade. Answer: B Explanation: The Fed operates as a semi-private organization that has the goal of keeping the economy growing without causing inflation. It does this by managing the supply of money and interest rates. Difficulty: 2 Medium Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

288) Keynesian economic theory suggests A) reducing government involvement in the free-market economy. B) proposing long-term solutions in order to create wider swings in the business cycle. C) a more permanent government involvement in the banking system, even creating a national banking system that owns and operates most of the global and regional banks. D) short-term increases in government spending to stimulate the economy. Answer: D Explanation: Keynesian economic theory and later adaptations suggest that government policy could be effective in helping manage the economy. By increasing government spending on infrastructure such as the building and repair of roads, bridges, schools, and utilities, the government could help stimulate the economy. Difficulty: 2 Medium Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 289) Senator Shulei Lee is alarmed at the state of the economy. Unemployment is high and GDP is low. Senator Lee has called for Congress to take action to increase government spending and cut taxes in order to stimulate the economy. The actions called for by Senator Lee are examples of A) monetary policy. B) fiscal policy. C) discretionary income policy. D) social investment policy. Answer: B Explanation: Changes in the level of government spending and taxes to help stabilize the economy are known as fiscal policies. Difficulty: 3 Hard Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

290) The chair of the Federal Reserve Bank spoke to the American public. The message she conveyed is that Fed economists are worried about inflation and believe the best course of action would be to slow the economy. Which of the following policies is the Fed most likely to pursue? A) Increase taxes B) Decrease interest rates C) Restrict the money supply and increase interest rates D) Devalue the dollar on international currency exchanges Answer: C Explanation: When the Fed is concerned about inflation it is likely to try to slow down the economy by increasing interest rates and restricting the money supply. Difficulty: 3 Hard Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 291) Ben recently lost his job at a major U.S. auto plant in one of the rust belt states. After looking unsuccessfully for work in a similar industry for several months, he plans to start interviewing with road and bridge repair companies. He speculates that if the government begins to contract with companies that repair highways and bridges, he may find steady work, at least in the short term. Which of the following statements best describes the strategy behind his thoughts? A) The best way for the government to reign in on too much money floating around the system is to hire people and pay them wages. B) Ben doesn't understand the causes of unemployment. We obviously don't need any more autos on the roads if the plant has closed. Repairs will slow down rather than increase. C) If the current administration asks the Fed to raise interest rates, it will do more than if the current administration begins contracting with road repair companies. D) By increasing government spending through road and bridge repair and construction, the government will intervene in the free-market economic system to help jump-start a weak economy. Answer: D Explanation: Keynesian economic theory believes that government intervention is sometimes necessary in the short term in order to jump-start an ailing economy. By employing citizens and paying them wages, workers would start spending again, which would help stabilize wide swings in the business cycle. Difficulty: 3 Hard Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 107 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

292) In one of her weekly live videos, the Federal Reserve Chairman remarked that inflation had begun to tick upward. However, unemployment in the U.S was still quite high and economic growth had slowed. With short-term interest rates close to 0 (zero), the Chair did not visualize that ________ policy would be able to do anything for the high unemployment problem. She felt that ________ policy would be more useful for bolstering employment, but that would require local and state governments and the federal government to provide tax breaks for corporations. A) federal; state B) fiscal; monetary C) monetary; fiscal D) fiscal; federal Answer: C Explanation: Monetary policy is the responsibility of the Federal Reserve Bank and the open market committee. Fiscal policy involves raising and lowering taxes. It is the responsibility of Congress to pass legislation, which affects the amount of taxes businesses pay. Difficulty: 3 Hard Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 293) The nation of Forlornia is in the middle of a severe financial crisis. The prime minister has increased government spending by trillions, in order to revive the ailing economy. Her strategy followed the economic theory known as A) Malfusian. B) Bernankeism. C) Keynesian. D) Greenspanian. Answer: C Explanation: Keynesian economic theory and later adaptations suggest that government policy could be effective in helping manage the economy. By increasing government spending on infrastructure such as the building and repair of roads, bridges, schools, and utilities, the government will purchase goods and services and put people to work. Difficulty: 3 Hard Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

294) If businesses are producing at capacity, and the nation is experiencing almost full employment (a very low rate of unemployment—less than 2%), the Fed may decide to A) lower interest rates. B) raise taxes. C) lower taxes. D) increase interest rates. Answer: D Explanation: When the business cycle is experiencing a boom, businesses begin producing close to capacity, most people who want to be employed are employed, and spending is robust, the government may decide to curb inflation (rising prices) by raising interest rates to make borrowing less attractive. If borrowing is less attractive, the demand for goods and services will go down, and subsequently prices will remain stable. Difficulty: 3 Hard Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 295) Discuss the views of economist Adam Smith. How does the "invisible hand" philosophy suggested by Smith benefit society as a whole? Answer: Adam Smith believed in a free-market system (also called capitalism). Smith favored a system characterized by economic freedom: the right to private ownership of property, the freedom of choice, and the freedom to compete. In his view, self-interest would lead profitseeking entrepreneurs to produce those goods most desired by consumers, and subsequently create jobs for others. Thus, self-interested behavior would also serve the best interests of society as a whole. This is the central idea of the invisible hand concept. He also assumed that as people became wealthier, they would naturally seek to help the less fortunate. Smith's views suggested that the role of government in the economy would be quite limited. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

296) Explain the significance of "price" in a free-market economic system. Answer: In a free-market economy, the mechanism of price determines what gets produced, how much gets produced, and to whom it is distributed. Price (the market value placed on a good or service) is determined by the interaction of buyers and sellers. Supply is the relationship between the price of a good and the quantity sellers are willing to sell in a given time period. The supply relationship can be illustrated with a graph. This graph will show that the higher the price, the more producers are willing to sell. Generally, the supply graph is demonstrated by a positively sloping curve. Demand is the relationship between the price of a good and the quantity buyers are willing to buy in a given time period. This relationship can also be illustrated with a graph. The graph will show that the higher the price, the less people are willing to buy. Generally, the demand graph is demonstrated by a negatively sloping curve. The equilibrium price of a good is the price where the quantity supplied at a certain price is equal to the quantity demanded at a certain price. On a graph, it is found where the supply curve intersects the demand curve. The market price of a good tends to move toward this equilibrium price. If the market price is higher than the equilibrium price, quantity supplied will exceed quantity demanded, and this surplus will put downward pressure on price, moving the market toward equilibrium. If the market price is lower than the equilibrium price, the quantity demanded will be greater than the quantity supplied. Thus, a shortage will exist which will put upward pressure on the market price. The upward movement of price will move the market toward equilibrium. Once the equilibrium price is achieved, there is neither a shortage nor a surplus. Thus at the equilibrium price there is no further pressure for price to rise or fall (unless something happens to cause the supply or demand relationships to change). Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

297) Identify and describe the 4 basic rights that form the foundation of capitalism. Answer: The four basic rights are the right to private property, the right to own and operate a business and earn a profit, the right to freedom of competition, and the right to freedom of choice. The right to private property means that individuals can buy, sell, and use land, buildings, machinery, and other forms of property, and can pass on their property to their children. The right to own a business and keep all of its profits means that in capitalism businesses are privately owned and operated to further the interests of the owner. People who start businesses thus have a strong incentive to work hard and produce goods and services that are in demand. This is a key element of the invisible hand principle described by Adam Smith. The right to freedom of competition means that individuals are free to start businesses and compete with other businesses. This competition creates incentives for businesses to innovate, produce quality products, and charge fair prices. The right to freedom of choice means that people are free to choose where they work, what career to pursue, where to live, and what to buy and sell. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

298) When describing the state of the U.S. economy, reporters often refer to the nation's GDP, its unemployment rate, and the CPI. Explain what each of these terms means and why each measure is significant. Answer: GDP is the acronym for gross domestic product, which is the total value of a nation's output of final goods and services for a specific year. It is a broad indicator of the overall performance of the economy. Increases and decreases in GDP indicate whether the nation's economy is growing, staying the same, or decreasing. For example, when GDP falls for two or more consecutive quarters the economy is said to be in a recession. The unemployment rate measures the numbers of civilians 16 or older that do not have a job, but are also actively seeking to find work. A high unemployment rate indicates that a lot of people who are able to work and want a job are without jobs. This is obviously undesirable, leading to less output and lower incomes in the economy. The unemployment rate is significant because when people are unemployed they generally stop spending. If too many people and businesses stop spending, firms stop producing. The CPI is the consumer price index. The CPI consists of monthly statistics that measure the pace of inflation or deflation. The prices of goods and services—including food, energy, housing, apparel, and medical care—are measured to determine if there are significant changes. The CPI is an important figure because some wages and salaries, rents and leases, tax brackets, government benefits, and interest rates are based on it. If the CPI index rises too quickly, it will affect the standard of living of most persons. Difficulty: 3 Hard Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

299) Compare and contrast fiscal policy and monetary policy. Discuss how each of these approaches can be used to influence the state of the economy. Answer: Fiscal policy refers to changes in the level of government spending and/or taxation that are intended to help keep the economy more stable. For example, during a recession, the government might try to stimulate the economy by encouraging additional spending. One way to do this would be to cut taxes on individuals or businesses, thus giving them more income to spend. Another approach would be for the government to increase its own level of spending on social programs, defense programs, or in other areas. On the other hand, when the economy is overheated and experiencing inflationary pressures, the government might try to use fiscal policies to reduce the overall demand for goods and services. This could be done by increasing taxes or by cutting government spending on social programs, defense programs, or in other areas. Monetary policy refers to actions by the Federal Reserve Bank (the Fed) to control the supply of money and interest rates. When the level of economic activity is declining, the Fed normally will reduce interest rates, thus making it more attractive for businesses and households to borrow. This will encourage more spending on goods and services, thus stimulating the economy. When the economy is growing too rapidly (and thus creating inflationary pressures) the Fed may pursue policies designed to increase interest rates, thus reducing attractiveness to borrowing and subsequently reducing the demand for goods and services. When spending is curbed, demand goes down, which also has the effect of stabilizing inflation. Difficulty: 3 Hard Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

Mini-Case Cooper Collins is a bright, hard-working engineer who once owned a successful engineering consulting firm in his native country of Evensplitia. Cooper was discouraged by the high tax rates in Evensplitia, so he immigrated to the United States seven years ago. Soon after moving to the U.S., Cooper again tried his hand at entrepreneurship and opened Coop's Consulting. The company struggled at first, and almost went bankrupt midway through its second year. However, Cooper never lost faith, the company survived, and eventually developed a great reputation in the community. Coop's Consulting began experiencing sustained growth early in its fourth year. In fact, Cooper hired additional employees to keep up with the increasing workload. His company, which started with only Cooper and two other full-time workers, now provides jobs for 43 fulltime employees as well as many part-time workers and interns. Despite these past successes, business ownership is not without complications. The company suffered its first drop in business since its very early years. Cooper is convinced that the problem is not with his company, but rather due to a downturn in the U.S. economy. He heard a national broadcast last week reporting that the value of the total output of final goods and services in the U.S. declined over the last quarter. The anchor went on to state that many economists believe that this downward trend is likely to continue for several more months. Cooper is concerned that he will have to lay off some of his employees if the economy doesn't improve. He hopes that the government does something soon to put the economy back on track. 300) Cooper created Coop's Consulting to earn a profit, but by working hard and increasing his market share, he was able to create jobs for others. This is an example of the ________ concept. A) circular flow B) invisible hand C) equitable income D) social dividend Answer: B Explanation: The invisible hand concept says that self-interest (the desire to earn a profit) leads entrepreneurs to create jobs and produce goods and services that satisfy wants, thus benefiting society as a whole. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-01 Explain basic economics. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

301) Cooper's native country of Evensplitia was much different from the United States. In addition to its higher tax rates, the government offered more extensive social programs that were designed to redistribute income and reduce inequality. Although small businesses were privately owned and operated in Evensplitia, many basic industries were owned and operated by the government. From this information, you would classify Evensplitia's economic system as ________. A) capitalism. B) socialism. C) communism. D) pluralism. Answer: B Explanation: The existence of relatively high tax rates and the emphasis on government programs to redistribute income are hallmarks of socialism. Under socialism, governments frequently own some, if not most, basic businesses. However, socialism, unlike communism, does allow at least some private ownership of businesses as well. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-03 Compare socialism and communism. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 302) The broadcast that reported a decline in total output for the United States probably got some of its information from the government's measurement of ________. A) GDP B) CPI C) federal deficit D) balance of payments Answer: A Explanation: GDP is the total value of output produced by a nation's economy. Difficulty: 3 Hard Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

303) The newscast cited forecasts that national output might continue to fall in the future. If total output shows decline for two consecutive quarters, economists would classify this as a ________. A) depression B) retraction. C) period of stagflation. D) recession. Answer: D Explanation: A recession occurs when GDP (the nation's total output) declines for two consecutive quarters. Difficulty: 3 Hard Topic: Key Economic Indicators and How they Affect Business Learning Objective: 02-05 Describe the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 304) Cooper recently saw a report online that the Fed will try to help get the U.S. economy back on track. If the Fed takes action, Cooper would likely see A) lower interest rates. B) an increase in the size of the government's budget deficit. C) lower government spending. D) an increase in the minimum wage. Answer: A Explanation: The Fed is concerned with monetary policy. The Fed achieves its goals by bringing about changes in the supply of money and interest rates. During recessions the Fed normally pursues policies to reduce interest rates in order to stimulate additional spending. The Fed is not directly involved in changing the level of government spending or taxes (and thus does not directly affect the size of the deficit). It is Congress, not the Fed, which would enact legislation needed to increase in the minimum wage. Difficulty: 3 Hard Topic: Fiscal and Monetary Policy Learning Objective: 02-06 Contrast fiscal policy and monetary policy, and explain how each affects the economy. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

305) Besides a slowdown in the general economy, Coop's Consulting faces threats of competition from several other companies that provide engineering consulting services. In order to gain more business, Cooper tries to convince potential clients that his company offers better service than the competition. He has advertised heavily in professional magazines, often quoting some of his highly satisfied clients. The market Coop's Consulting operates in is an example of A) perfect competition. B) monopoly. C) oligopoly. D) monopolistic competition. Answer: D Explanation: Monopolistic competition is characterized by many firms competing by offering differentiated products. Coop's Consulting use of advertising indicates that it is trying to differentiate its product from the many competitors it faces in the market. Difficulty: 3 Hard Topic: Economics and the Types of Economic Systems Learning Objective: 02-02 Explain what capitalism is and how free markets work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

Understanding Business, 12e (Nickels) Chapter 03 Doing Business in Global Markets 1) Today, over 90% of the companies doing business globally believe it is important for their employees to have experience working in other countries. Answer: TRUE Difficulty: 1 Easy Topic: Globalization Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) Importing is the selling of products to another country. Answer: FALSE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) Exporting is the selling of products to another country. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

4) The United States imports more products and services than any nation in the world. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 5) The United States is the largest exporter in the world. Answer: FALSE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) Competition among exporting nations is mild. Answer: FALSE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 7) One reason countries trade with other countries is that even technologically advanced nations cannot produce all the products their people want and need. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

8) Free trade is the movement of goods and services between nations without political or economic barriers. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9) Global trade is the exchange of goods and services between countries. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10) Global trade includes the exchange of art, sports, and cultural events. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) Absolute advantage is the basis for most global trade today. Answer: FALSE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

12) Comparative advantage theory states that a country should sell to other countries those products that it produces most efficiently and buy from other countries those products it cannot produce as efficiently. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 13) A country has an absolute advantage if the production of a specific product is more efficient than all other nations. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) Today, there are more countries that have some form of absolute advantage in a product or service, than years ago. Answer: FALSE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

15) Free trade results in a mutually beneficial exchange between and among nations. Answer: TRUE Explanation: Trading countries generally benefit from a free-trade environment because global trade enables a nation to produce what it is most capable of producing and to buy what it needs from others in a mutually beneficial exchange relationship. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 16) With respect to free trade, many American citizens prefer "fair trade, not free trade." Answer: TRUE Explanation: Many in the U.S. take the position: "fair trade, not free trade." Free trade continues to be a hotly debated topic. Figure 3.2 in the textbook provides common pros and cons on this subject. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 17) Opportunities for college graduates in international business continue to decrease, since it is too expensive to travel abroad. Answer: FALSE Explanation: Business graduates today have many opportunities to work for companies that participate in international trade. The consumer market for international trade is well over 7 billion, as opposed to the market of over 325 million people in the U.S. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

18) An example of a U.S. import would be the purchase of oil by U.S. companies from Saudi Arabia. Answer: TRUE Explanation: U.S. imports include goods and services that originate in another country purchased by a U.S. citizen or government. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 19) According to the theory of comparative advantage, a country should buy from other countries those goods it produces most efficiently. Answer: FALSE Explanation: The theory of comparative advantage states that a country should produce and sell to other countries those products that it produces most effectively and efficiently. Conversely, a country should buy those products produced more efficiently by other countries. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) In order to enjoy the highest standard of living possible, comparative advantage theory states that all nations should strive to become self-sufficient. Answer: FALSE Explanation: The theory of comparative advantage states that a country should export those goods that it produces most efficiently and import those goods that it cannot produce as efficiently. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

21) Products made in Canada are sold in the U.S. because these two nations agree to eliminate economic and political barriers between nations. They participate in free trade. Answer: TRUE Explanation: Free trade is the buying and selling between and among nations without political or economic barriers. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 22) Shortly after graduating college, Roberto took his place in his family's company in Miami. Roberto's father and uncle started a company that buys bauxite, copper, and other minerals from Chile, and brings them into the U.S. Every day, Roberto brokers trades with mines in Chile. The company is in the export business. Answer: FALSE Explanation: The company is in the business of importing. They buy minerals from another nation and bring the product into the U.S. Exporting is selling product to another country. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 23) Banana plantations in Hawaii cannot produce nearly enough of all the bananas consumed by Americans. The fact that the U.S. grows and sells bananas gives it a comparative advantage in bananas. It is not an absolute advantage and that is why we choose to import bananas from South America, as well. Answer: FALSE Explanation: The U.S. does not have a comparable advantage or an absolute advantage in bananas. We cannot produce bananas as efficiently as other nations (comparative advantage) and we are not the only nation in the world that produces bananas (absolute advantage). Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 7 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

24) Small businesses are less involved in global trade today than in the past. Answer: FALSE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 25) Many students in studying abroad programs at U.S. colleges and universities have discovered profitable opportunities by importing goods from their home countries into the United States. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26) International trade is not limited to multinational corporations. Small businesses do about 30% of all exporting out of the U.S. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 27) Just about anything that can be sold in the United States can also be sold to buyers in other countries. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

28) Foreign travel can help in identifying global business opportunities. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) If your business has an outstanding product, exporting offers a quick, easy, no-hassle way to improve your profitability. Answer: FALSE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30) U.S. exports boost the U.S. economy. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 31) A favorable balance of trade occurs when the value of a country's imports exceeds the value of its exports. Answer: FALSE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

32) A favorable balance of trade occurs when the value of a country's exports exceeds the value of its exports. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 33) The balance of payments measures the inflows and outflows of money from tourism, foreign aid, military expenditures, and foreign investments as well as flows resulting from exports and imports. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 34) A trade deficit is the same as an unfavorable balance of trade. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) The United States enjoys a trade surplus in the global market. Answer: FALSE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

36) The United States' highest trade deficit is with China. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 37) Even though the U.S. exports a vast amount of goods globally, it exports a much lower percentage of its products than other countries do. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) Dumping is the practice of selling products in foreign markets at lower prices than what domestic firms are charging for the same product. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39) In order to prevent dumping, U.S. law stipulates that foreign firms selling similar products as domestic firms to U.S. customers must charge at least 10% more than what U.S. firms charge. Answer: FALSE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

40) The United States currently enjoys a favorable balance of trade with the rest of the world. Answer: FALSE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 41) A favorable balance of trade occurs when the value of a nation's exports exceeds its imports. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 42) In any given year, the United States' cash outflow to other nations exceeds its cash inflow from other nations. Answer: TRUE Explanation: The U.S. has bought more goods from other nations than it has sold to other nations. Thus it owes more money to other nations than other nations owe the U.S. Its cash outflow exceeds its cash inflow. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

43) Though illegal in the United States, some firms will practice dumping in order to gain a foothold in a new market. Answer: TRUE Explanation: By offering products at a cheaper price than in domestic markets, foreign-based producers can attract customers who would have otherwise purchased domestically made goods. This strategy is illegal in the United States. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44) As the most powerful economy in the world, the United States does not need to concern itself with having an unfavorable balance of payments. Answer: FALSE Explanation: The balance of payments is the difference between money coming into a country from exports and money leaving the country from imports plus money flows from other sources, including foreign investments. The United States, like any other nation, can have an unfavorable balance of payments. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 45) The island nation of Hasalot exports $350 of goods and services and imports $180 of goods and services. Hasalot has an unfavorable balance of trade of $170. Answer: FALSE Explanation: An unfavorable balance of trade, or trade deficit, occurs when the value of imports exceeds that of exports. In this case, Hasastan has a favorable balance of trade of $170. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

46) If tourists from Norway spend money at Orlando's Island of Adventure theme park, it will increase the U.S.'s unfavorable balance of payments. Answer: FALSE Explanation: An unfavorable balance of payments occurs when more money is flowing out of a country than is flowing into that country. Foreign tourists spending money in the U.S. provide an inflow of money. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 47) A Brazilian steel manufacturer started selling certain categories of steel in the United States. However, the Brazilian manufacturer is selling the steel at a price significantly lower than it sells the same product back in Brazil. This practice may be a violation of U.S. law. Answer: TRUE Explanation: U.S. laws against dumping are specific and require foreign firms to price their products to include 10% overhead costs plus an 8% profit margin, making the price of goods in the U.S. at least the same as the price in the home market. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 48) Japanese auto manufacturers, such as Toyota and Nissan, have invested billions of dollars in the United States by building new factories, warehouses, and offices. These investments increase favorably the balance of payments for the United States. Answer: TRUE Explanation: The balance of payments is the difference between money coming into a country from exports and money leaving the country from imports plus money flows from other sources, including foreign investments. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 14 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

49) When the U.S. provides foreign aid to countries abroad, a balance of payments outflow occurs. Answer: TRUE Explanation: United States dollars spent elsewhere in the form of tourism, foreign aid, military expenditures, and foreign investment are all examples of balance of payments outflows. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 50) The value of German exports coming to the United States is greater than the value of the goods Germany buys from the U.S. This results in a U.S. trade deficit with Germany. Answer: TRUE Explanation: A trade deficit occurs when the value of the country's imports exceed that of its exports. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 51) When competing in global markets, business organizations utilize a variety of strategies to reach foreign buyers. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

52) Through licensing, domestic firms give foreign manufacturers/producers the right to produce their product and use their trademark in exchange for royalties. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 53) When a firm agrees to license its product, it gains notoriety but gives up all revenues. Answer: FALSE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 54) Franchising is popular both domestically and internationally. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 55) An advantage of licensing is that licensors spend little or no money to produce and market their products. These costs are paid for by the licensees. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

56) The U.S. government is reducing Export Assistance Centers due to businesses' lack of interest in their support. Answer: FALSE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 57) Export trading companies assist businesses in reaching buyers, and dealing with customs, documentation, and payment. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 58) One advantage of licensing is the relatively low cost of entering a foreign market. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 59) One advantage of licensing as a strategy to enter the global market is the sharing of trade secrets. Answer: FALSE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 17 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

60) While franchising is popular in the United States, it is not an accepted strategy for firms in the global market. Answer: FALSE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 61) One advantage of franchising is that the parent corporation does not need to concern itself with adapting to the culture of another country. Answer: FALSE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 62) Contract manufacturing is when a firm pays foreign manufacturers to produce its product. The foreign manufacturer places the domestic company's label on the products. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 63) Contract manufacturing requires heavy start-up costs by the domestic company. Answer: FALSE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

64) Contract manufacturing is a form of outsourcing. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 65) A joint venture is a partnership in which two or more companies join to undertake a major project. All parties commit financing and risk to the project. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 66) According to current U.S. laws, American firms are prohibited from participating in joint ventures with foreign firms. Answer: FALSE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 67) A disadvantage of creating a foreign subsidiary is the loss of control over technology and expertise used in the production of the product. Answer: FALSE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 19 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

68) Foreign direct investment refers to the buying of goods produced in another country. Answer: FALSE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 69) Expropriation occurs when a host government takes over the assets of a foreign company. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 70) A corporation that manufactures or markets its products in many different countries and has multinational stock ownership and management can be classified as a multinational corporation. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 71) Firms with a physical presence in several different nations are considered multinational corporations. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

72) Sovereign wealth funds are investment funds controlled by governments that hold large stakes in foreign companies. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 73) As a form of franchising, sovereign wealth funds are getting very little attention as a strategy for doing business in foreign markets. Answer: FALSE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 74) One characteristic of an international joint venture is all parties sharing the risk of a major project. Answer: TRUE Explanation: Joint ventures create a partnership in which companies join to undertake a major project. Benefits of international joint ventures are (1) shared technology and risk; (2) shared marketing and management expertise; and (3) entry into markets where foreign companies are often not allowed unless goods are produced locally. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

75) A firm looking to enter a foreign market with a limited investment should consider licensing. Answer: TRUE Explanation: An advantage of licensing is that licensors spend little money to produce and market their products. These costs come from the licensee's pocket. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 76) A firm may export everything it produces overseas and still not be considered a multinational. Answer: TRUE Explanation: Only firms that have manufacturing capacity or other physical presence in various nations can be called multinational. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 77) Strategic alliances almost always result in one company taking over the financial interests of another company. Answer: FALSE Explanation: A strategic alliance represents a long-term partnership between two or more companies established to help each firm build competitive market advantages. The firms maintain separate financial management. Their purpose is to help each other develop new market opportunities. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

78) Governments directly participate in global markets through sovereign wealth funds. Answer: TRUE Explanation: Foreign investment in the U.S. indicates foreign investors' preferences over investment in other countries by investing in permanent property and businesses in the U.S. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 79) The appeal of global marketing strategies is that they all involve the same amount of risk. Answer: FALSE Explanation: Licensing one's product, franchising, and contract manufacturing involve less risk than foreign direct investment. Acquiring subsidiaries by directly purchasing assets and property in another nation involves more risk. If political unrest should emerge in a nation where your business owns substantial assets, the result could be loss of business, employees, and even the loss of your property and assets. The challenge of global marketing strategies is that they all do not involve the same amount of risk. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 80) When Nestlé, a Swiss company, purchased Ralston Purina, a U.S. company, Ralston Purina became a foreign licensee. Answer: FALSE Explanation: When one firm purchases another firm in a foreign country, the purchased firm is called a foreign subsidiary. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

81) Contract manufacturing is a low-cost way for Banana Republic to outsource the production of its clothing designs. Answer: TRUE Explanation: Contract manufacturing involves the production of private-label goods by a foreign company to which a domestic company then attaches its brand name or trademark. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 82) Jessie has crafted a new technique for drying flowers that still keeps the vibrant color of fresh flowers. After unsuccessfully trying to sell the dried flowers at her shop, Flowers and Weeds, she discovered that although dried flowers are out of style in the U.S., these flower arrangements are still highly sought after in several nations abroad. It is difficult to preserve the ingredients that go into her formula for more than a month. She decides to partner with firms in Europe and Asia to make and sell her formula, but you suggest she license it to foreign companies and agree to royalties when they create the formula and sell it. Your advice makes better sense. Answer: TRUE Explanation: Often, a small domestic business can expand its market by going abroad. By licensing her product to foreign firms, she can increase her market and potentially her revenues and profits. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

83) A Kia Motors assembly plant in Georgia is an example of foreign direct investment in the United States. Answer: TRUE Explanation: Foreign direct investment in the United States is the buying of permanent property and businesses in the United States like the Kia plant. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 84) Disney contracted with a firm in China to open a Disneyland theme park in Shanghai. This is an example of a joint venture. Answer: TRUE Explanation: A joint venture is a partnership in which two or more companies (often from different countries) join to undertake a major project – like a theme park. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 85) Digital Life Gaming has avoided contract manufacturing its consoles abroad due to the significant start-up costs in buying land and setting up its own manufacturing plants. They have made the right decision. Answer: FALSE Explanation: Contract manufacturing involves the production of goods by a foreign company. The benefit is the avoidance of heavy start-up costs. The company entering into contract manufacturing agreements does not purchase the foreign manufacturer. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

86) The Tsingtao Brewing company pays a fee to Anheuser-Busch InBev for the right to brew and distribute Budweiser in China. Tsingtao is the licensor and the fee paid is a royalty. Answer: FALSE Explanation: In this licensing agreement, Tsingtao Brewing is the licensee and Anheuser-Busch InBev is the licensor. The fee paid is indeed the royalty. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 87) The purchase of U.S.-based Anheuser-Busch by Belgian brewer InBev is an example of foreign direct investment. Answer: TRUE Explanation: Foreign direct investment involves the purchase of property, business(es), or another form of investment by a foreign company in another nation other than where the company originates. In this situation, a large Belgian company purchased the assets of another company, in the same industry. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 88) The website for Electricity City noted, "Russia has been a country in which Electricity City has made substantial investments. We are one of the largest foreign companies in Russia, operating multiple businesses, including an equipment fleet with more than 1,500 large units." With physical presence in Russia, Brazil, New Zealand, France, Turkey, Nigeria, Canada, and other countries, Electricity City is an example of a multinational company. Answer: TRUE Explanation: A multinational corporation is a company with a physical presence in several different nations. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 26 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

89) In recent years, the government of Norway has invested over $905 billion in foreign companies, including several U.S. companies. This move constitutes the creation of a sovereign wealth fund, an emerging type of foreign direct investment. Answer: TRUE Explanation: Sovereign wealth funds are investment funds controlled by governments. These funds purchase the bonds and stock of foreign companies. This is a fast-growing form of foreign direct investment. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 90) Sociocultural, economic, and legal/regulatory hurdles cause significant challenges in global trade. Answer: TRUE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 91) From a sociocultural perspective, U.S. businesspeople are often accused of ethnocentricity. Answer: TRUE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

92) Successful multinational corporations disregard cultural differences between countries where they own property and perform business transactions. Answer: FALSE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 93) Sociocultural differences that affect global businesses include customs, language, and religion. Answer: TRUE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 94) In the past, foreign companies have adapted to U.S. culture more easily than U.S firms have adapted to foreign cultures. Answer: TRUE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 95) Effective human resource management styles are transferable from one culture to another. Answer: FALSE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

96) Effective marketing strategies focus on the product and ignore the sociocultural differences in the global environment. Answer: FALSE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 97) Many U.S. companies fail to think globally. Answer: TRUE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 98) In global markets, there is not a central system of law. Answer: TRUE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 99) The Foreign Corrupt Practices Act of 1978 created an advantage for American businesspeople to compete in global markets. Answer: FALSE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

100) An exchange rate is the value of one nation's currency relative to the currencies of other nations. Answer: TRUE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 101) Global markets consider the U.S. dollar to be a weak currency. Answer: FALSE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 102) Under a system of floating exchange rates, the value of a country's currency is determined by government regulation. Answer: FALSE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 103) Devaluation refers to a decline in the value of a nation's currency relative to other currencies. Answer: TRUE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

104) Bartering is the exchange of goods or services for other goods or services without the exchange of money. Answer: TRUE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 105) Countertrading is a form of exchange where firms will put certain products "on the counter" offering them to foreign customers at a cheaper price than what they would offer them to domestic customers. Answer: FALSE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 106) Efficient currency exchange markets have eliminated countertrade in global business transactions. Answer: FALSE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 107) Currency fluctuations can be an advantage to firms trading in the global market. Answer: TRUE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

108) Technological differences can prevent some companies from successfully doing business abroad. Answer: TRUE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 109) The introduction of standardized international laws regulating business organizations has greatly simplified global trade. Answer: FALSE Explanation: Businesses are faced with a myriad of laws and regulations in global markets. There is no central system of law. Difficulty: 2 Medium Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 110) The same proven management styles used by companies in their domestic operations can be employed in their foreign subsidiaries. Answer: FALSE Explanation: In some countries management has more position power where they make unilateral decisions. In other countries, decision making is a shared responsibility between management and workers. Difficulty: 2 Medium Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

111) A devaluation of the U.S. dollar would make American goods cheaper to foreign buyers. Answer: TRUE Explanation: After devaluation, it would take less foreign currency to acquire U.S. dollars. Therefore foreign buyers would find that it costs less of their currency to buy U.S.-made goods. Difficulty: 2 Medium Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 112) From a sociocultural perspective, foreign companies have experienced a good amount of success in adapting their products and services to the U.S. market. Answer: TRUE Explanation: In the past, foreign companies have had great success in reaching U.S. customers. U.S. companies, on the other hand, have often failed to understand cultural differences when marketing abroad. Difficulty: 2 Medium Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 113) When it comes to ethics, successful American businesspeople are encouraged to follow the policy of "when in Rome, do as the Romans." Answer: FALSE Explanation: American businesspeople are required to follow U.S. laws when competing in global markets (specifically the Foreign Corrupt Practices Act of 1978). Difficulty: 2 Medium Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

114) Since patent and copyright laws are the same in all nations, they are not of much impact to firms that compete globally. Answer: FALSE Explanation: Unfortunately there is no universal set of laws that govern the global market. Companies often must adapt legally market-by-market. Difficulty: 2 Medium Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 115) American businesspeople often fail to adapt to foreign markets because they feel that the American culture is superior to other cultures in the world. Answer: TRUE Explanation: American businesspersons have been accused of being ethnocentric because they feel the American culture is superior to all others. Difficulty: 2 Medium Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 116) Differences in electrical systems throughout the world could weaken a U.S. firm's ability to sell its products to other countries. Answer: TRUE Explanation: Technological differences affect the nature of exportable products. Difficulty: 2 Medium Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

117) There's a problem overseas of the reproduction of music originally recorded by popular American artists. It seems that a recording made in the U.S. can be copied within a couple of hours and then immediately sold abroad. The U.S. government is able to readily prosecute these foreign companies. Answer: FALSE Explanation: U.S. patent and copyright laws do not transcend international borders. What the U.S. may consider a patent or copyright infringement may not be considered as such in a foreign country. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 118) A United States company won a large contract with a company in Sri Lanka by giving government and company representatives American cars. The company also promised to provide monetary gifts in exchange for the business. Fortunately, U.S. law, under the Foreign Corrupt Practices Act, permits U.S. companies to operate in this manner. Answer: FALSE Explanation: The Foreign Corrupt Practices Act defines bribery or payments to foreign businesses or the management of foreign businesses in exchange for business contracts as illegal. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 119) While studying abroad, Joe found that his U.S. dollars did not stretch as far as he had hoped. Every time he exchanged U.S. dollars for euros, he gave up more dollars in exchange for fewer euros. Obviously, the dollar was weak against the euro. Answer: TRUE Explanation: A low value of the dollar means a dollar is traded for less foreign currency. This is the case here. A high value of the dollar means a dollar is trading for more foreign currency. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

120) The Ozark Bike Company recently entered into an agreement with a large Japanese retailer to distribute its bicycles in Japan. Ozark Bike Company sees itself in a favorable position because the yen is gaining strength compared to the U.S. dollar making it cheaper for Japanese customers to buy U.S. products. Answer: TRUE Explanation: A low value of the dollar means a dollar is traded for less foreign currency. A high value of the dollar means a dollar is trading for more foreign currency. When the U.S. dollar is losing strength against the foreign currency, it is cheaper for foreign customers to buy U.S. products. In this case, the customer will trade fewer yen for the value of the U.S. bicycles. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 121) Nicky Larson, a well-known American celebrity, promoted a line of clothing that was accused of supporting child labor in a Bangladesh factory. Although her image was immediately tarnished, she quickly was able to close down the unethical operation due to a violation of international law. Answer: FALSE Explanation: Antitrust, labor relations, patents, copyrights, trade practices, taxes, product liability, child labor, prison labor, and other issues are governed differently country by country. There is no guarantee that foreign firms will operate under the same laws that U.S. firms operate under. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation

122) Game Guys, Inc. needed a special silicon substrate. The company executives knew that a new start-up in India, Silicon Sisters, Inc., was the best in the world at efficiently massproducing the product. The Indian company needed MSG (metallurgical grade silicon) in order to make the substrate, which it knew it could get from a Chinese firm. The Chinese firm (mostly owned by the Chinese government) agreed to supply the silicon to Silicon Sisters if it could get a certain quantity of gaming hardware from Game Guys. This beneficial exchange is described as countertrading. Answer: TRUE Explanation: Countertrading is the exchange of goods and services, without the exchange of currency. It is a form of bartering. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 123) Johanna Breese, a graduate student from Carnegie Mellon, connected with the culture of Madagascar when she created lamba hoany (a native garment) with artful messages to save the more than 150 rare species of animals that inhabit Madagascar. In contrast to many Americans trying to do business abroad, Johanna successfully adapted her message to the native culture when she imprinted it on the native garment. Answer: TRUE Explanation: Adapting products to sociocultural factors can be a key to success in global markets. Johanna obviously understood this in preparing her garments. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 124) Trade protectionism is the use of government regulations to encourage the import of goods and services. Answer: FALSE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

125) Countries often use trade protectionism measures to protect their domestic industries from foreign competition. Answer: TRUE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 126) Under mercantilism, the basic economic idea was to achieve a favorable balance of trade. Answer: TRUE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 127) Protective tariffs are designed to raise money for the government. Answer: FALSE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 128) An import quota is a complete ban on the import or export of certain products. Answer: FALSE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

129) A complete ban on the import or export of a specific good is called an embargo. Answer: TRUE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 130) Restrictive standards that detail exactly how a product must be sold in a country are examples of protective tariffs. Answer: FALSE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 131) Though not as specific or formal as tariffs, nontariff barriers can be just as detrimental to free trade. Answer: TRUE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 132) The main goal of the General Agreement on Tariffs and Trade (GATT) was to reduce trade restrictions among world nations. Answer: TRUE Difficulty: 1 Easy Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

133) The World Trade Organization (WTO) was established to mediate trade disputes among nations. Answer: TRUE Difficulty: 1 Easy Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 134) One of the goals of the World Trade Organization (WTO) is to eliminate national subsidies on agricultural products. Answer: TRUE Difficulty: 1 Easy Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 135) A common market is a group of countries that have no internal tariffs among member nations, yet have a common external tariff. Answer: TRUE Difficulty: 1 Easy Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 136) A major goal of the Mercosur common market consisting of several South American countries is to better expand the movement of goods and services. Answer: TRUE Difficulty: 1 Easy Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

137) In 1999, the European Economic Community adopted a common currency known as the euro. Answer: TRUE Difficulty: 1 Easy Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 138) CAFTA permits the United States, Canada, and Mexico to reduce trade barriers with one another while maintaining independent trade agreements with other countries. Answer: FALSE Difficulty: 1 Easy Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 139) Since the approval of the North American Free Trade Agreement (NAFTA), the value of U.S. exports to Mexico and Canada has increased. Answer: TRUE Difficulty: 1 Easy Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 140) Opponents of the North American Free Trade Agreement (NAFTA) warned that it would have serious economic consequences such as the loss of U.S. jobs. Answer: TRUE Difficulty: 1 Easy Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

141) According to the theory of mercantilism, a country should develop policies that encourage a favorable balance of trade. Answer: TRUE Explanation: The basic idea of mercantilism is to sell more goods to other nations than you buy from them. Difficulty: 2 Medium Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 142) The principle of mercantilism encouraged nations to keep economics separate from politics. Answer: FALSE Explanation: Mercantilism resulted in tariffs, which basically are taxes on imports, thus making imported products more expensive to buy. This helps to achieve the economic goal of a favorable balance of trade. Difficulty: 2 Medium Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 143) If a protective tariff is placed on an imported product, the added cost will go to the government. Answer: FALSE Explanation: The goal of protective tariffs is to raise the retail price of imported products so that domestic products will be more competitive. Revenue tariffs are designed to raise money for the government. Difficulty: 2 Medium Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

144) The ban on the sale of Cuban cigars in the United States is an example of an import quota. Answer: FALSE Explanation: The ban on Cuban cigars is an example of an embargo, which represents a complete ban on the import or export of certain products. An import quota limits the number of products in certain categories that a nation can import. Difficulty: 2 Medium Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 145) Imported wines such as a bordeaux from France or a prosecco from Italy often sell at a higher price than wine made in Napa Valley, California. This is due to the protective tariff importers pay for the foreign wine. Answer: TRUE Explanation: Protective tariffs raise the retail price of imported products so domestic goods are more competitively priced. Difficulty: 2 Medium Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 146) The purpose of enacting some type of protectionist policy toward foreign goods is to limit competition from abroad, particularly when the country has domestic companies that produce and sell the same products and services. Answer: TRUE Explanation: Trade protectionism is the use of government regulations to limit the import of goods and services. Advocates believe it allows the domestic firms to survive and grow. Difficulty: 2 Medium Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

147) The North American Free Trade Agreement (NAFTA) requires member nations to negotiate uniform trade agreements with nonmember nations. Answer: FALSE Explanation: The nations participating in NAFTA have formed a free-trade area rather than a common market. Unlike common markets, free-trade areas allow member nations to maintain independent trade agreements with nonmember nations. Difficulty: 2 Medium Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 148) With the achievements of the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO), nearly all barriers to trade expansion are finally removed. Answer: FALSE Explanation: Although GATT and the WTO have certainly helped eliminate many international trade problems and disputes, others still remain. For example, WTO did not resolve many of the legal and regulatory problems that impede trade expansion. Difficulty: 2 Medium Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 149) The objectives of the North American Free Trade Agreement (NAFTA) include allowing free immigration among Canada, Mexico, and the U.S. Answer: FALSE Explanation: The objectives of NAFTA were to (1) eliminate trade barriers and facilitate crossborder movement of goods and services among the three countries; (2) promote conditions of fair competition in this free-trade area; (3) increase investment opportunities in the three nations; (4) provide effective protection and enforcement of intellectual property rights; (5) establish a framework for further regional trade cooperation; and (6) improve working conditions in North America. Difficulty: 2 Medium Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

150) A free-trade agreement among Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and the U.S. is known as the Central American Free Trade Agreement. Its strategy is to open new markets for all member countries and to raise tariffs among participating nations. Answer: FALSE Explanation: The Central American Free Trade Agreement (CAFTA) was passed in 2005, among several Central American countries. One of its goals was to lower tariffs among participating nations and to open new market opportunities for all. The United States withdrew from CAFTA after public support faltered over fears of more job losses. Difficulty: 2 Medium Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 151) Often, the strategy of common markets is debatable, but GATT is certain that such alliances do not prohibit individual member nations from expanding globally. Answer: FALSE Explanation: GATT and the WTO take issue with whether or not common markets inhibit the global expansion of individual member nations. Member nations agree to an external tariff directed toward all nonmember nations—nations that do not belong to their trading bloc. Difficulty: 2 Medium Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 152) One of the rules of a common market is that all participating nations will uphold a common external tariff on goods and services imported from countries that are not of the trading bloc. Goods imported from nonmember countries are more expensive than goods coming from member countries. Answer: TRUE Explanation: Member nations agree to an external tariff directed toward all nonmember nations. Nonmember nations do not belong to their trading bloc. Difficulty: 2 Medium Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

153) If two nations have a trade dispute, the World Trade Organization may be asked to mediate and provide a decision within one year's time. Answer: TRUE Explanation: The World Trade Organization (WTO) was established by 164 member nations to mediate trade disputes among member nations. The goal is to provide a decision within a year, as opposed to languishing for years as in the past. Difficulty: 2 Medium Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 154) Serentia, a small nation, has a small automotive industry and is struggling to keep up with larger international automobile manufacturers. Other countries in Serentia's trading bloc have agreed on an import quota on other nations, which limits the number of cars that any country in the trading bloc can buy from other auto manufacturers. This strategy is necessary to help Serentia's auto manufacturer while it is in its infancy. Answer: TRUE Explanation: Import quotas are designed to limit the number of a particular product that a nation can import. This is usually a strategy enacted by a nation trying to protect a weak product or grow an industry that is in its infancy. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

155) A small wine and cheese store in Milwaukee sells dozens of different types of cheese— Bulgarian, French, Danish, Greek, and a domestic from its home state of Wisconsin. The domestic cheese sells for less than $2.00 per pound, while all the international cheeses are priced at over $4.00 per pound. Clearly, there is an embargo on international food products. Answer: FALSE Explanation: The domestic cheese is priced less than the other cheeses because importers paid a protective tariff on the international cheeses, and the cost is passed on to the consumer. If there were a government embargo against the international cheese, the grocery store would be unable to legally sell any of the imported products. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 156) The nation of Taubestan requires that all imported beverages be contained in clear, welllabeled recyclable glass bottles. Several international beverage manufacturers refuse to trade with the country because the cost of glass bottles cuts into their profits to the point where it just isn't worth it. Taubestan has created a nontariff barrier. Answer: TRUE Explanation: Nontariff barriers are not as specific or formal as tariffs. They are usually restrictive standards that a country places on imported products. The standards help to restrict trade with foreign companies. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 157) With all its perception of opportunity, the expansion of global trade is still plagued by terrorism, nuclear proliferation, rogue states, and other issues. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

158) China and Russia present enormous trading opportunities. However, due to political risks in those counties, foreign direct investment is halted. Answer: FALSE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 159) While Asia represents an important source of U.S. imports, few export opportunities exist for U.S. firms to sell goods and services to Asian consumers. Answer: FALSE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 160) China is currently one of the three largest exporters in the world today. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 161) India and Russia are emerging markets that present enormous business opportunities. Answer: TRUE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

162) Profitable opportunities in global markets are diminishing for small and medium-sized businesses. Answer: FALSE Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 163) Offshore outsourcing is another term used to describe the act of U.S. firms selling their domestically manufactured goods to foreign customers. Answer: FALSE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 164) A "second wave" of offshore outsourcing involves sizable numbers of skilled, welleducated, middle-income workers in service-sector jobs. Answer: TRUE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 165) One advantage of offshore outsourcing is that consumers benefit from lower prices. Answer: TRUE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 49 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

166) A concern with the second wave of offshore outsourcing is greater job loss for servicesector working Americans. Answer: TRUE Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 167) Only large firms have the resources needed to successfully compete in the global environment. Answer: FALSE Explanation: Small businesses are often better prepared to take the leap into global markets than large, cumbersome corporations saddled with bureaucracies. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 168) As a market for U.S. exports, China represents the only major business opportunity on the continent of Asia. Answer: FALSE Explanation: There are many emerging economies that have attracted the attention of American firms, especially in Asia. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

169) China's one-party political system, its past human rights abuses, and issues related to counterfeiting of products continue to concern some U.S. firms about doing business there. Answer: TRUE Explanation: While global investment and entrepreneurship in China are leading it to wealth and economic interdependence with the rest of the world, China also has a one-party political system, human rights issues, and problems with product piracy and counterfeiting that prevent it from being a free trader's dream. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 170) In the past few decades, U.S. manufacturers shifted focus from manufacturing and assembling products, to the design and architecture of products. Now, a new shift: the offshore outsourcing of design and architecture can be an even more serious disruption to the U.S. economy. Answer: TRUE Explanation: As lower-level manufacturing became more simplified, U.S. companies shifted focus from assembling products to design and architecture. Soft goods companies like LeviStrauss and Nike have outsourced manufacturing for several decades. A new, second wave of offshore outsourcing is causing more disruption to the U.S. economy due to loss of white-collar jobs, as well as manufacturing jobs. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

171) Don was messing around with his new tablet and checking out its features, but he was struggling. His warranty gave him three months of free technical support, so he quickly called the tech support number. After waiting on hold, he finally got through to a technician but though they were both speaking English, the technician's accent was difficult for Don to understand. As he listened carefully to every word the technician provided, he thought to himself, "There are some pros and cons to outsourcing. I'm not certain the service is adding value for the customer." Don was correct. Answer: TRUE Explanation: Although the producers of products and services find offshore outsourcing to be a more cost-efficient way to provide service to customers, the customers' perceptions of this service does not always meet with their expectations. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 172) Telewhiz, Inc., just contracted with a firm in the Philippines to provide customer service for its smartphone customers. Although there were cheaper labor markets that Telewhiz could have tapped, customers have reported that they understand English-speaking Filipino people better than English-speaking people in other countries. As an outsourcing option, it is a good compromise. Answer: TRUE Explanation: Firms should consider how offshore outsourcing benefits the customer. If customers can receive the same or comparable service that they would receive from a domestic call center, the move offshore is probably a good decision. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

173) Your college career is coming to an end and you're trying to decide on the last two business electives to take. You are leaning toward international marketing and international financing because you recall reading that Forrester Research estimates millions of jobs will move to global markets in the next 10 years. Answer: TRUE Explanation: Reputable business researchers such as Forrester Research predict that many current graduates will be working abroad in the near future due to the blue-collar and whitecollar jobs that are moving offshore. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 174) You sell paint products and accessories for painters. Recently, you were in contact with merchants from India who have taken an interest in your products and are willing to talk more about entering into a contractual deal to purchase your goods. This opportunity may be just the thing to get your business out of its slump, because you learned from your Introduction to Business class that very few barriers exist between U.S. and Indian markets. Answer: FALSE Explanation: Unfortunately, several trade barriers currently exist between U.S. and India. Indian retailers will only buy product from Indian wholesalers. U.S. companies find it difficult to sell directly to Indian retailers. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

175) ________ is the selling of products to another country. A) In-trading B) Exporting C) Importing D) Dumping Answer: B Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 176) ________ is buying products from another country. A) Importing B) Outsourcing C) Retailing D) Exporting Answer: A Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 177) The largest importer in the global market today is A) Japan. B) Russia. C) Germany. D) the United States. Answer: D Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

178) In volume of exports, the two leading nations are A) the U.S. and China. B) the U.S. and Canada. C) China and Germany. D) China and France. Answer: C Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 179) The global market is ________ potential customers. A) over 7 billion B) over 300 million C) under 200 billion D) under 30 billion Answer: A Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 180) Which of the following continents is home to the largest percentage of the world's population? A) Africa B) Europe C) North America D) Asia Answer: D Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

181) A nation has a ________ in the production of a good or service if it can produce that good or service more effectively or efficiently than it can produce other goods. A) supreme advantage B) primary efficiency C) qualified advantage D) comparative advantage Answer: D Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 182) ________ occurs when a country has a monopoly on producing a product or is able to produce it at a cost well below that of all other countries. A) Comparative advantage B) Absolute advantage C) Complete advantage D) Dumping advantage Answer: B Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 183) The theory of comparative advantage exists because A) there are too many products and services to choose from today. B) customers are always comparing the quality of service from companies in the same industry. C) no nation can produce all the products its people want and need. D) free-trade agreements became the trend during the past 15 years. Answer: C Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 56 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

184) One advantage of free trade is A) jobs are shifted to low-wage global markets. B) service jobs are moved overseas. C) advanced production operations are built in low-wage countries. D) innovation for new products occurs which keeps firms competitively challenged. Answer: D Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 185) The concept of free trade means A) buyers and sellers contract with each other and offer some goods at no cost. B) goods and services can be traded freely across borders without political and/or economic barriers. C) there is no exchange of currency for these products. D) there is no exchange of currency, but the trading partners determine the value of the product and perform a bartering process to exchange goods. Answer: B Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

186) Why does it make sense to trade with other nations? A) After producing all the product and service its people want and need, a nation can sell the excess products to the world. B) Some nations have lots of natural resources and technological know-how. They have an ethical obligation to offer the rest to other nations. C) Other nations need foreign currency. D) A nation will produce what it can produce most efficiently and effectively and buy from other nations what they can produce most efficiently and effectively. Answer: D Explanation: There are several reasons why countries trade with other countries. First, no nation, not even the most technologically advanced one, can produce all of the products that its people want and need. Second, other nations would seek to trade with that country in order to meet the needs of their own people. Third, some nations have an abundance of natural resources but limited technological know-how, while other countries have sophisticated technology but few natural resources. Global trade enables a nation to produce what it is most capable of producing and to buy what it needs from others in a mutually beneficial exchange relationship. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

187) Which of the following statements is the best description of comparative advantage? A) The best way for a nation to ensure full employment is to be completely self-sufficient and not at all reliant on trading with other nations. B) Each nation should produce those goods that it can produce more efficiently and effectively than other nations, and buy the goods it cannot produce as efficiently as the nations that can. C) The nation that has the largest reserves of gold and other highly valued natural resources will enjoy a position of comparative advantage in trade relationships. D) A nation should produce those goods for which domestic demand is comparatively strong, and should import those goods for which domestic demand is comparatively weak. Answer: B Explanation: The theory of comparative advantage is the guiding principle supporting free trade. It states that each nation should produce and export the goods it produces more effectively or efficiently than other nations and should import the goods produced more efficiently by other nations. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 188) The theory of ________ states that a nation should produce and sell goods to other countries that it produces most efficiently, and buy goods from other nations that they produce more efficiently. A) comparative advantage B) absolute advantage C) mercantilism D) bilateral advantage Answer: A Explanation: Comparative advantage is the guiding principle behind international trade. The theory of comparative advantage states that a country should produce and sell to other countries those products that it produces most effectively and efficiently. Countries should buy from other countries those products it cannot produce as effectively or efficiently. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

189) Free trade between nations generally results in A) industrialized nations gaining at the expense of developing nations. B) an increase of jobs in developed nations. C) mutually beneficial exchange relationships. D) higher prices for imported goods. Answer: C Explanation: Free trade eliminates excessive tariffs and restrictive standards between trading nations. The result is the efficient production of goods and mutually beneficial exchange. However, it is well documented that free-trade agreements between developed and lessdeveloped nations usually result in a loss of jobs for the developed nations. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 190) A free-trade agreement is likely to result in A) an increase in imported goods and services. B) an absolute advantage. C) less competition. D) productivity increases in all product categories, for all participating nations. Answer: A Explanation: With the reduction of tariffs and nontariff barriers, all participating nations are likely to increase their imports. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

191) The tiny nation of Tinian is extremely efficient in the mining of tin. However, its climate and terrain make it difficult to produce corn. According to the theory of comparative advantage, Tinian should A) produce both tin and corn in order to remain self-sufficient. B) watch the global market to see which product is bringing the highest price. C) import the resources needed to produce corn. D) concentrate its production on tin and buy corn from an efficient producer. Answer: D Explanation: The theory of comparative advantage contends that a nation should produce and export those goods that it produces efficiently and effectively, and import those goods that other countries produce more efficiently and effectively. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 192) Taubestan produces nearly 97% of the quinoa consumed around the world, and most of it is sold to wealthy nations. Although there are other areas where the seed will grow, including some areas in wealthier nations, the majority of the quinoa sold is imported from Taubestan. This country has a(n) ________ in the production of quinoa. A) absolute advantage B) comprehensive advantage C) comparative advantage D) tertiary advantage Answer: C Explanation: Taubestan does not have an absolute advantage in the production of quinoa because it produces a significant amount of the popular seed. A comparative advantage definitely exists because the country sells most of the production of this seed to wealthier nations and imports items that it does not produce as efficiently. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

193) Erin, an American citizen, says that her laptop was made in Japan. Erin purchased a(n) A) imported item. B) exported item. C) protected good. D) generic good. Answer: A Explanation: Importing is buying products made in another country. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 194) Home of Households, Inc., has an appliance manufacturing plant in the Chicago area. The company specializes in producing smaller washers and dryers for countries where consumers have less living space. Home of Households participates in the global market through A) importing. B) dumping. C) exporting. D) balancing trade. Answer: C Explanation: Exporting is selling products to another country. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

195) The nation of Hasalot is home to roughly 95% of the world's Diamontite, a rare stone used in consumer products including watch faces, smartphones, computer monitors, and tablets. The fact that this is necessary for the production of many products we use today means Hasalot can almost name its price! Which of the following describes this situation? A) Hasalot has a near absolute advantage in Diamontite. B) Hasalot has a comparative advantage in Diamontite. C) Hasalot's rare earth industry is considered perfect competition. D) Hasalot's rare earth industry participates in monopolistic competition. Answer: A Explanation: An absolute advantage is defined as an advantage that exists when a country has a monopoly in the production of a certain item, or is able to produce it more efficiently and effectively than all other countries. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 196) Many of the toys sold in the United States are imported from Taiwan because the Taiwanese can produce these products more efficiently than U.S. companies. This is an example of A) bilateral advantage. B) comparative advantage. C) absolute advantage. D) unilateral advantage. Answer: B Explanation: The theory of comparative advantage states that a nation should buy from other countries those products it cannot produce as effectively or efficiently as do those other countries. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

197) Climate and terrain in several South American countries are conducive to growing coffee beans efficiently. While other countries have the ability to grow the bean, they are not as efficient and effective because of short seasons and climate concerns. This fact would lead you to believe that these South American countries have a(n) ________ advantage in the production of coffee. A) comparative B) absolute C) unprotected D) progressive Answer: A Explanation: The theory of comparative advantage states that a country should produce and sell to other countries those products that it produces most efficiently. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 198) The only deposits of a rare and sought-after mineral known as ursarite are found in Russia. Since no other nation has deposits of ursarite, Russia has a(n)________ in this mineral. A) protected advantage B) diversified benefit C) absolute advantage D) relative internal benefit Answer: C Explanation: A country has an absolute advantage if it has a monopoly on the production of a specific product or natural resource, or is able to produce it more cheaply than all other countries. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

199) Engineering Chiefs, a large U.S.-based mechanical engineering firm, wants to enter the global market. Upon careful analysis of the market, they will find that global trade A) opportunities are diminishing. B) is dominated by emerging, developing countries. C) is big business today and is expected to be more important in the future. D) is likely to be severely restricted in the future by nontariff trade barriers. Answer: C Explanation: Data clearly indicate that global trade is big business today. Most U.S. companies cite global expansion as a link to future growth. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 200) Shortly after graduating college, Roberto took his place in his family's company in Miami. Roberto's father and uncle started a company that buys bauxite, copper, and other minerals from Chile, and brings them into the U.S. Roberto brokers trades with mines in Chile. Roberto is a(n) A) exporter. B) quota manager. C) importer. D) domestic trader. Answer: C Explanation: Imports are products and services coming into the country. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

201) Fred Bergsten of the Institute for International Economics estimates that every $1 billion of U.S. exports A) replaces 250 service sector jobs with 25 manufacturing jobs in the U.S. B) causes lost revenues for the U.S. federal government. C) results in reduced profits for U.S. businesses. D) generates over 7,000 jobs in the U.S. Answer: D Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 202) A favorable balance of trade occurs when the value of A) imports equals the value of exports. B) the cash inflows equals the value of the cash outflows. C) imports is less than the value of exports. D) the dollar is greater than the value of the euro. Answer: C Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 203) An unfavorable balance of trade occurs when the value of A) imports equals the value of exports. B) imports exceeds the value of exports. C) cash inflows is equal to the value of cash outflows. D) exports exceeds the value of imports. Answer: B Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Trade Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

204) The ________ is the total value of a nation's exports compared to its imports measured over a specific period of time. A) balance of payments B) balance of trade surplus C) balance of trade deficit D) balance of trade Answer: D Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 205) The ________ is the difference between money flowing into a country from exports, and money leaving the country for imports, plus money flows coming from other factors such as tourism, foreign aid, military expenditures, and foreign investment. A) balance of payments B) balance of trade surplus C) balance of cash flows D) balance of trade Answer: A Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

206) Which of the following is included when calculating a country's balance of payments? A) Foreign aid B) Domestic unemployment C) Domestic inflation rates D) Foreign inflation rates Answer: A Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 207) Which of the following is considered when calculating a country's balance of payments? A) Military expenditures B) State unemployment C) Domestic inflation rates D) Foreign inflation rates Answer: A Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 208) Since 1975, the U.S. has had a(n) ________. A) export surplus B) import surplus C) trade surplus D) trade deficit Answer: D Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

209) ________ is the practice of selling a product in foreign countries for a lower price than the good is sold in the producing country. A) Deflating B) Countertrading C) Inflating D) Dumping Answer: D Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 210) When Anhueser Busch InBev sells Budweiser beer made in St. Louis, MO, to Germany, the sales of its product would be classified as a U.S. ________. A) countertrade arrangement B) export C) import D) foreign aid shipment Answer: B Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

211) Even though the U.S. exports a large ________ of goods and services, it exports a much lower ________ of its products than many other countries do. A) percentage; amount B) amount; percentage C) amount; value D) percentage; percentage Answer: B Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 212) An important principle for firms desiring to export is A) sell to countries with high standards of living. B) keep in mind that American methods are probably always best. C) find a need in the global market and fill it. D) if your product sells well in the U.S. it will sell well globally. Answer: C Explanation: Getting started in global markets is often a matter of observing an unfulfilled need and researching how best to meet that need. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

213) As a business strategy, the strategy behind dumping is to A) gain a foothold in a new market. B) better utilize e-commerce opportunities. C) avoid trade protectionist laws. D) achieve eligibility for foreign aid. Answer: A Explanation: Dumping is sometimes used to unload surplus products in foreign markets or gain a foothold in a new market by offering products for lower prices than domestic competitors do. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 214) Reviewing the recent experience of the United States in global markets reveals that the U.S has A) a merchandise trade surplus with the rest of the world. B) a large trade deficit with China. C) avoided becoming a debtor nation. D) attracted very little foreign direct investment. Answer: B Explanation: Recently, the U.S. ran its highest trade deficit with China. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

215) The value of goods imported into Spain exceeds the value of Spanish exports. This indicates that Spain A) has an exchange rate decrease. B) utilizes high tariffs. C) has a budget deficit. D) has a trade deficit. Answer: D Explanation: The balance of trade is the relationship of a country's exports to its imports. A trade deficit occurs when the value of a country's imports exceeds the value of their exports. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 216) Current trade data shows that the country of Hasalot exports far more to other nations than it imports. Hasalot has A) an unfavorable balance of trade. B) a trade surplus. C) a trade deficit. D) a low balance of trade. Answer: B Explanation: A favorable balance of trade, or trade surplus, occurs when the value of the country's exports exceeds that of its imports. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

217) Japanese automobile producers sold more of their Japanese production overseas than they sold in Japan. Their business strategy emphasizes: A) importing. B) licensing. C) dumping. D) exporting. Answer: D Explanation: Exporting is selling products to another country. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 218) Monique's Unique Boutique sells clothing from around the world in the U.S. Monique regularly travels overseas to find the best and most unusual shirts, dresses, and pants that foreign producers have to offer. Monique is a(n) A) importer. B) licensee. C) dumper. D) exporter. Answer: A Explanation: Importing is buying products from other countries. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

219) Last year, the island nation of Winstone imported goods totaling $300 million and exported products totaling $86 million. Tigerland experienced a(n) A) unfavorable balance of trade. B) favorable balance of trade. C) trade surplus. D) benefit from membership in a free trade zone. Answer: A Explanation: An unfavorable balance of trade occurs when a country's imports exceed its exports. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 220) Last year, the nation Hasalot reported that it had a favorable balance of trade even though it imported $9 billion worth of goods. This indicates that Winstone A) exported $9 billion worth of goods. B) exported more than $9 billion worth of goods. C) overpriced the value of its exports. D) exported less than $9 billion worth of goods. Answer: B Explanation: A favorable balance of trade means exports exceed imports. If Hasalot had a favorable balance of trade and imported $9 billion worth of goods, it exported more than $9 billion worth of goods. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

221) The nation of Mainland recently reported that its imports for the previous year were $7 billion greater than its exports. During the same period, the country reported a favorable balance of payments. This information suggests A) Mainland has misstated information in its report. The nation must have had a balance of payments deficit since more money flowed out of Redland for imports than flowed into the country for its exports. B) Mainland's gold and other precious metal reserves increased in value. C) money inflows from tourism, foreign aid, foreign investment, and other sources more than offset Mainland's trade deficit. D) Mainland devalued their currency to obtain a more favorable exchange rate. Answer: C Explanation: The balance of payments is the difference between money flows into and out of a country from all sources (not just exports and imports). Inflows from other sources (such as tourism or foreign investment) can sometimes offset a balance of trade deficit and result in a favorable balance of payments. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 222) The president of Car Parts Kings, Inc. just testified before Congress. He urged them to limit the flow of imported automobile parts into the country. He stated that these imports were priced lower than foreign producers were charging for them in their own countries. He believes foreign producers are A) dumping. B) exercising trade deficits. C) promoting free trade. D) exhibiting ethnocentricity. Answer: A Explanation: Dumping is the practice of selling products in foreign countries for less than you charge for the same products in your own country. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

223) Jitensha Bike Parts was called to testify before the U.S. Congress. The CEO of Jitensha defended the company against an accusation that it was dumping parts on the U.S. market. In her testimony, the CEO claimed ________. Using traditional guidelines, Congress determined that Jitensha was not dumping. A) Jitensha includes 10% overhead costs and an 8% profit margin in the price of all the parts they export to the U.S. B) Japan runs a trade deficit with the U.S. in bike parts. C) Jitensha is a staunch supporter of free trade. D) Jitensha sells more bike parts in Europe than it does in the U.S. Answer: A Explanation: Dumping is the practice of selling products in foreign countries for less than you charge for the same products in your own country. U.S. laws against dumping are specific and require foreign firms to price their products to include 10% overhead costs plus an 8% profit margin. Since Jitensha priced its parts using this formula it was not practicing dumping. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-02 Explain the importance of importing and exporting, and understand key terms used in global business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 224) Granting a foreign company the right to manufacture your product or to use your firm's trademark in return for a fee is called A) a joint venture. B) a foreign subsidiary. C) licensing. D) outsourcing. Answer: C Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

225) The fee paid to a firm in a licensing agreement that gives another firm the right to manufacture their product or use its trademark is called A) a joint venture. B) a royalty. C) a licensee. D) an outsource agreement. Answer: B Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 226) A major advantage of licensing is A) these arrangements almost always lead to a joint venture. B) the bulk of the revenues gained by the licensee come back to the licensor. C) your company name does not need to be associated with the product in a foreign country. D) very little cost to the licensor. Answer: D Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

227) A disadvantage of licensing is A) it's very costly for the licensor. B) the licensee can decide to end the contract at a moment's notice. C) your company's image is never permitted to be associated with the product, even though you are the developer. D) the licensee may decide to use the expertise you have developed, break the agreement, and begin producing the product on his/her own. Answer: D Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 228) The federal government created ________ to help small and medium-sized businesses get involved in exporting. A) the World Trade Organization B) Federal Export Loan Banks C) Export Assistance Centers D) the Federal Trade Promotion Commission Answer: C Difficulty: 1 Easy Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

229) ________ are specialists that match buyers and sellers from different countries and provide services to ease the process of entering global markets. A) Export trading companies B) Licensees C) Strategic alliances D) Keiretsus Answer: A Difficulty: 1 Easy Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 230) Export trading companies A) enter into joint ventures with firms wanting to export goods and services. B) are government-owned businesses that help companies go global. C) connect sellers in the U.S. with buyers in other nations, and help with customs, documentation, and payments. D) are similar to a corporation that sells franchises. Answer: C Difficulty: 1 Easy Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

231) ________ is an arrangement whereby someone with a good idea for a business sells the rights to use the business name and sell the parent company's product or service to others in a given territory in a specified manner. A) Franchising B) Contract manufacturing C) Import trading D) Export trading Answer: A Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 232) When a company's strategy is ________, the firm makes arrangements for a foreign manufacturer to produce the product. The domestic company's label and/or trademark are attached to the completed product. A) franchising B) contract manufacturing C) import sourcing D) export trading Answer: B Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

233) A ________ is a partnership in which two or more companies (often from different countries) join together and share the risk and costs in order to undertake a major project. A) multinational cooperative B) joint venture C) franchisee transfer D) recruit affiliation Answer: B Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 234) A ________ represents a long-term partnership between two or more companies established to help each firm build competitive market advantages, without sharing the cost of risk. A) multinational cooperative B) shared venture C) global franchise D) strategic alliance Answer: D Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

235) An advantage of forming a joint venture is A) no shared costs or risk. B) a perpetual arrangement. C) it's a good strategy for entering new markets where you have never had a presence. D) it's a great way to enter new markets without divulging any marketing or management strategy to the other member of the joint venture. Answer: C Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 236) A form of foreign direct investment, where a domestic company purchases a company in a foreign country to produce a similar product or service, is a A) licensor. B) joint venture. C) foreign subsidiary. D) host company. Answer: C Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 237) When foreign firms build production facilities in the United States, they are engaging in A) exporting. B) foreign direct investment. C) importing. D) countertrading. Answer: B Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 82 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

238) A risk unique to firms with direct investment in a foreign country is the potential takeover of the firm's assets by the government of that country. This takeover is called a(n) A) hostile takeover. B) political bias. C) appropriation. D) expropriation. Answer: D Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 239) A(n) ________ is a firm that has made sizeable investments and has a physical presence in several foreign countries as a manufacturer and marketer of products and services. A) trade cartel B) multinational corporation C) host company D) import trading company Answer: B Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

240) A fast-growing form of foreign direct investment is ________, which are governmentcontrolled investments in foreign companies. A) sovereign wealth funds B) multinational wealth funds C) government mutual funds D) government wealth management derivatives Answer: A Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 241) A specialized organization that assists businesses in creating relationships with foreign customers and suppliers is known as a(n) A) export trading company. B) international brokerage house. C) keiretsu. D) global trade bank. Answer: A Explanation: Export trading companies specialize in matching buyers and sellers from different countries. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

242) What is a benefit of contracting with export trading companies? A) They are the experts in establishing trading partners abroad, and negotiating all the details in retaining customers. B) They are experts in staying out of the financial transactions of establishing new markets. C) They will always assume the risk if your product does not sell to the foreign customer. D) They keep you legal because they serve as the franchisor and make certain that your products meet ISO requirements. Answer: A Explanation: Export-trading companies are the experts in matching buyers and sellers. They deal with foreign customs offices, manage banking documentation, ease the selling process, and help exporters get paid. Difficulty: 2 Medium Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 243) One of the purposes of Export Assistance Centers is to A) help multinational corporations reach agreements with foreign governments. B) provide subsidies to domestic firms hurt by dumping by foreign firms. C) provide trade-finance support for small and medium-sized firms involved in direct exporting. D) encourage domestic firms to become more competitive by forming keiretsu-like organizations, much like those found in Japan. Answer: C Explanation: The federal government created Export Assistance Centers to provide hands-on exporting assistance and trade-finance support for small and medium-sized businesses desiring to directly export their products. Difficulty: 2 Medium Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

244) Licensing is a popular strategy because A) it boosts domestic market revenues. B) the licensee has incentive to work hard and succeed because he/she has borne the cost. C) licensees spend little or no money to produce and market their products. D) there are seldom any long-term contractual requirements. Answer: B Explanation: Global licensing agreements have several advantages. Through licensing, an organization can gain additional revenues it normally would not have generated in its home market. Foreign licensees often must purchase start-up supplies, component materials, and consulting services from the licensing firm. Licensors spend little or no money to produce and market their products. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 245) Using contract manufacturing as a strategy to reach global markets gives firms the advantage of A) expert and experienced laborers. B) reduced financial risks. C) increased volatility. D) currency stability. Answer: B Explanation: Through contract manufacturing a company can often experiment in a new market without heavy start-up costs. If the brand name becomes a success, the company has penetrated a new market with relatively low risk. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

246) Companies may have several reasons for creating joint ventures. Which of the following statements is one reason why firms may decide to form a joint venture? A) They may wish to contract manufacture with each other. B) They will save time to market if they pool their technological know-how. C) These arrangements are always less risky than strategic alliances. D) These arrangements avoid the temptation to tap into marketing and management expertise of the parent companies. Answer: B Explanation: Benefits of international joint ventures are shared technology and shared risk. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 247) For a firm to be considered a multinational corporation, which of the following conditions must be true? A) It must have manufacturing facilities and a physical presence in several countries. B) Its marketing arm must be based at the company's world corporate headquarters. C) Stock ownership must be domestic. D) All transactions must be financed by the International Monetary Fund. Answer: A Explanation: A multinational corporation is an organization that does manufacturing and marketing in many different countries; it has multinational stock ownership and multinational management. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

248) A fast-growing form of foreign direct investment is sovereign wealth funds (SWFs). Why do these investments by governments with surplus cash flows worry trade experts? A) SWFs invest in high-risk start-ups with no proven history of producing goods and services that developing or developed countries need. They may likely undermine the years of development of growing economies. B) SWFs have a greater risk of going bankrupt than other investments because governments are not good at running businesses. C) Some fear that governments investing their SWFs in large firms may gain control of natural resources, sensitive technologies, and the decision making of management. D) Some trading experts believe that SWFs are supported by terrorist organizations, and their strategy is an indirect way to undermine the creation of U.S. jobs. Answer: C Explanation: As a fast-growing form of foreign direct investment, sovereign wealth funds (government-owned funds) have invested in several multinational corporations. Some international trade experts fear that the substantial size of these investments may place undue pressure on companies to make management decisions that may undermine U.S. political efforts and individual freedoms. These economic strongholds could gain control of important natural resources and sensitive technologies that could threaten the security of nations. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 249) In the box, "Many Flags Fly Over the Golden Arches," the textbook describes one of the reasons McDonald's has become a global powerhouse. Which statement best describes what led to McDonald's success? A) McDonald's was careful to include regional tastes along with its traditional burgers and fries. B) McDonald's kept to what it did best and only served its American menu overseas. C) McDonald's licensed all of its overseas restaurants. D) McDonald's participates in contract manufacturing. Answer: A Explanation: When opening restaurants abroad, McDonald's is careful to include menu items to please the regional tastes of its customers while also keeping staples like the Big Mac on its menu. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 88 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

250) When entering a foreign market, Mountain Stream Brewery entered into an agreement with a local firm to brew and market Mountain Stream's beer. This is an example of A) licensing. B) franchising. C) foreign direct investment. D) foreign subsidiaries. Answer: A Explanation: Licensing reduces the risk of entering foreign markets. In this case, Mountain Stream spends little money to produce and market its product in foreign markets. The foreignbased licensee incurs these costs. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 251) The Dabble Corporation wants to begin exporting its products. The company needs advice about how to get started, as well as trade-finance support. The federal government has established ________ to help companies like Dabble Corporation. A) the World Trade Commission B) Export Assistance Centers C) export trading companies D) Federal Reserve Banks Answer: B Explanation: The federal government established Export Assistance Centers to provide handson exporting assistance and trade-finance support to small and medium-sized businesses. Difficulty: 3 Hard Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

252) The quinoa seed is in high demand in wealthy countries but is not farmed in those countries. Approximately 97% of all quinoa production comes from small farmers in Taubestan who farm at high elevations. The seed is now considered an important ________ for Taubestan. A) foreign direct investment B) quota C) export D) import Answer: C Explanation: Bolivian and Peruvian farmers cultivate and harvest the quinoa seed in their respective countries, and then sell it abroad to other markets. Exporting is the simplest form of international trade. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 253) PepsiCo entered into a long-term contract with a South African beverage company. The contract calls for the South African firm to produce and market Pepsi products in the country. PepsiCo will receive royalties on each case of sodas sold. This is an example of A) licensing. B) a joint venture. C) a foreign subsidiary. D) foreign direct investment. Answer: A Explanation: Soft drink companies, like Pepsi and Coke, often enter foreign markets by licensing the right to manufacture their product or use their trademark to a foreign company for a fee (royalty). Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

254) Tebeau Partners of France and Morimoto Management based in Japan recently produced a new electric car with rechargeable batteries that can be driven at high speeds for long distances. They shared the investment, each contributing important technological expertise to the effort. These firms entered into a(n) ________ to build this car. A) joint venture B) multinational cartel C) industrial countertrade agreement D) multinational limited partnership Answer: A Explanation: A joint venture is a partnership in which two or more companies (often from different countries) join to undertake a major project. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 255) EBL Industries ________ its products in foreign countries, where labor is less expensive and production sites are owned by other companies. This strategy allows EBL Industries to experiment in new markets without incurring the large start-up costs involved with building its own production facilities. A) contract franchises B) pays governments to market C) globally licenses D) contract manufactures Answer: D Explanation: Contract manufacturing involves the production of private-label goods by a foreign company to which a domestic company then attaches its own brand name or trademark. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

256) If a Swiss chocolate firm purchases an American ice cream manufacturer, the American ice cream manufacturer becomes a A) global franchise. B) global joint venture. C) foreign subsidiary. D) contract manufacturer. Answer: C Explanation: A foreign subsidiary is a company that is owned and operated in a foreign nation by another company called the parent company. The Swiss firm Nestlé's purchase of U.S.-based Dreyer's Ice Cream is an example a Swiss-owned foreign subsidiary operating in the United States. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 257) Which of the following statements is the most accurate observation regarding multinational corporations? A) Rather than manage manufacturing and marketing facilities overseas, most multinational corporations attempt to enter global markets by exporting domestically produced goods. B) Most multinational corporations are small- to medium-sized firms. C) Because of political and economic concerns, most multinational corporations choose to ignore investment opportunities in China and Russia. D) Only those firms with a physical presence in different nations qualify as multinational corporations. Answer: D Explanation: Multinational corporations have multinational stock ownership, and management, as well as a physical presence in different nations. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

258) Jamieson Brothers, Inc. reported that it owns and operates 189 companies worldwide with 13% of its sales coming from Europe, 38% from Asia, 36% from the U.S., and 13% from other parts of the world. Clearly, Jamieson Brothers is A) a sovereign wealth fund. B) a multinational corporation. C) a foreign subsidiary. D) an expropriated organization. Answer: B Explanation: Foreign direct investment is the buying of permanent property and businesses in foreign nations. A multinational corporation has a physical presence and investments in several countries. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 259) Johnny Appleseed and Company ships all of the apples from its orchards in the Pacific Northwest to a single buyer in Japan. The firm's entire profits are derived from this international transaction. Johnny Appleseed and Company is A) an example of a multinational corporation. B) not a multinational corporation. C) contributing to the U.S. balance of trade deficit. D) benefitting greatly from the establishment of NAFTA. Answer: B Explanation: A company may be exporting its entire product and deriving 100 percent of its sales and profits overseas, but that alone would not make it a multinational. A multinational corporation is an organization that has manufacturing and marketing operations in many different countries. It also has multinational stock ownership and multinational management. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

260) Oilers, Inc. refines and markets its energy products in different nations around the world. In addition, Oilers' stockholders and managers come from many different nations. If some of the nations where it operates decided to take over the assets of the company, this act would constitute A) patent infringement. B) expropriation. C) illegal activity. D) hostile takeover. Answer: B Explanation: A multinational corporation is an organization that does manufacturing and marketing in many different countries. It also has multinational stock ownership and multinational management. If relationships with host nations should falter, the firm's assets could be expropriated, a term used to describe a foreign government's takeover of a multinational company's assets. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 261) Which of the following terms describes the set of values, beliefs, rules, language, and institutions held by a specific group of people? A) Culture B) Ethnocentricity C) Institutional society D) Social myopia Answer: A Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

262) ________ describes an attitude held by some American businesspeople that American culture is superior to all others. A) Primary culture B) Ethnocentricity C) Cultural institutionalism D) Social myopia Answer: B Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 263) Ethnocentricity means A) "when in Rome, do as the Romans!" B) you believe your culture is superior to others. C) cultural awareness. D) a trend toward accepting other cultures and trying various foods and religions to see if they fit your lifestyle. Answer: B Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 264) Which of the following sociocultural forces can have a significant impact on global business operations? A) Religion B) Universal sales standards C) Single-phase marketing D) Global marketing Answer: A Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

265) Which of the following represents the value of one nation's currency relative to the currencies of another country? A) Euro rate B) Currency rate C) Exchange rate D) Standard of living Answer: C Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 266) Global financial markets operate under a system of ________, where the supply and demand for various currencies will determine their value at any moment in time. A) living rates B) foreign good rates C) floating exchange rates D) live trading rates Answer: C Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 267) ________ is the exchange of merchandise or services for other merchandise or services without the exchange of money. A) Exporting B) Bartering C) Importing D) Factoring Answer: B Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

268) If a nation's currency is weak, people may have to fall back on A) exporting. B) bartering. C) importing. D) factoring. Answer: B Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 269) ________ is lowering the value of a nation's currency relative to other currencies. A) Revaluation B) Deflation C) Devaluation D) Negative valuation Answer: C Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 270) _______ is a complex form of bartering in which several countries may be involved, each trading products and services for the products and services of another country. A) Venture bartering B) Global monetarism C) Countertrading D) Global counter-exchange Answer: C Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

271) Under the floating exchange rate system, the value of a country's currency is determined by A) the monetary authorities of that country. B) the United Nations Committee on Floating Currencies. C) the currency's supply and demand in the global market. D) countertrading. Answer: C Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 272) The legislation that prohibits U.S. businesses from making "questionable" or "dubious" payments to foreign officials, to secure business contracts is the A) Foreign Corrupt Practices Act. B) Foreign Anti-trust Act. C) Multinational Collusion law. D) Global Good Conduct law. Answer: A Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 273) Which of the following statements describes laws and regulations in global markets? A) There is not a central system of law in existence. B) The World Trade Organization reigns supreme and dictates global law for all markets. C) Most trading partners will default to the laws that govern the seller's home country. D) With the exception of labor relations, most laws are pretty standard across global markets. Answer: A Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

274) To understand legal and regulatory conditions and be successful in global markets it's often useful to contact A) the local Better Business Bureau. B) local businesspeople in the host countries. C) the Regional Economic Development Trading Desk (REDTD). D) the Organization for Economic Cooperation and Development (OECD). Answer: B Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 275) People from other nations sometimes comment on the ethnocentric attitudes of U.S. businesspeople. This indicates that American businesspeople A) follow the philosophy of "when in Rome, do as the Romans." B) quickly accept the suggestions and ideas of others. C) believe that American culture is superior to all others. D) celebrate the many ethnic groups that make up American life. Answer: C Explanation: Ethnocentricity is the view that one's culture is superior to all others. Difficulty: 2 Medium Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

276) A sociological challenge that must be overcome in order to be successful in the global market is A) a lack of cultural understanding. B) an overly anxious desire to please at all cost. C) inequality of global natural resources. D) wealth management. Answer: A Explanation: The understanding of cultural differences is essential to succeed in global trade. Americans have often been accused of ethnocentricity, which is an attitude that one's own culture is superior to all others. This type of attitude is a hurdle to be overcome in the global marketplace. Difficulty: 2 Medium Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 277) ________ differences such as insufficient electrical power and transportation systems can present special problems for U.S. firms when attempting to enter global markets. A) Physical and environmental B) Legal and regulatory C) Economic D) Governmental Answer: A Explanation: Technological and infrastructure differences and other physical environmental challenges impact the type of products that can be successfully exported to various regions of the world. Many less developed countries do not have adequate electricity, while other countries do not use the U.S. standard of 110 volts. Inadequate transportation systems can cause distribution problems for perishable food items. Difficulty: 2 Medium Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

278) In some countries it is customary to pay government officials to secure necessary business contracts and permits. American businesses must follow U.S. law and cannot make these payments according to the A) Foreign Antitrust Act. B) Foreign Corrupt Practices Act. C) Multinational Collusion Law. D) Global Good Conduct Law. Answer: B Explanation: The Foreign Corrupt Practices Act of 1978 prohibits American businesses from making "questionable" or "dubious" payments to foreign officials to secure business contracts. Difficulty: 2 Medium Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 279) Under a system of floating exchange rates, changes in the value of the U.S. dollar relative to other currencies are the result of A) negotiated rate adjustments between the U.S. government and the World Trade Organization. B) decisions made by the Federal Reserve Board of Governors in order to implement monetary policy. C) fluctuations in the world price of gold. D) changes in the supply of and/or demand for dollars in the global currency market. Answer: D Explanation: Under a system of floating exchange rates, the value of a currency "floats" according to supply and demand conditions in the market for that currency. Difficulty: 2 Medium Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

280) If global trade experts predict that the value of the dollar will soon fall, it will result in A) both the prices of imported goods rising and prices of U.S. goods sold overseas rising, as well. B) prices of imported goods rising, but prices of U.S. goods sold overseas falling. C) prices of imported goods falling and prices of U.S. goods sold overseas falling, as well. D) prices of imported goods falling, but prices of U.S. goods sold overseas rising. Answer: B Explanation: A fall in the value of the dollar means that American consumers will need more dollars to buy foreign goods, so imports would become more expensive. However, a falling dollar would mean U.S. goods would appear less expensive to foreign purchasers since it would take less foreign currency to purchase them. Difficulty: 2 Medium Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 281) Laura is typical of many U.S. businesspeople. She feels the U.S. culture defines the model for the rest of the world, and that the "American way" of doing things is the best. Laura is guilty of A) ethnic plagiarism. B) ethnocentricity. C) culture shock. D) counter culture. Answer: B Explanation: Ethnocentricity is the feeling that one's own culture is superior to all others. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

282) In order to level the playing field in trade between the U.S. and China, U.S. policymakers have called upon China's government to allow the yuan to float freely, as other world currencies. Through government regulation, China maintains an undervalued currency, which results in A) more buying power for Chinese consumers who want to purchase U.S. goods and goods from other countries. B) maintaining robust Chinese exports and a favorable balance of trade for China. C) developing better relations with industrialized countries who want to increase the value of their exports. D) stability and strength of the Chinese yuan against the U.S. dollar and the euro. Answer: B Explanation: A favorable balance of trade exists when a country exports a greater value of goods than it imports. By keeping the yuan undervalued compared to other currencies, China makes it more appealing for other countries to purchase its products, and less appealing for its markets to purchase imported goods. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 283) Workers in the nation of Brotherton expect managers to forcefully tell employees what to do, how to do it, and when. On the other hand, American employees prefer to take part in workplace decision making. This ________ difference between Brotherton workers and American workers represents a management challenge for firms trading in the global market. A) geo-political B) economic C) sociocultural D) regulatory Answer: C Explanation: Sociocultural differences can also have an impact on all functions of business, including human resource management. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

284) A company in Mexico recently agreed to trade coal to an American importer in return for American-made cars. This arrangement is an example of A) a letter of credit arrangement. B) a nontariff trade. C) arbitrage. D) barter. Answer: D Explanation: Barter is the exchange of merchandise for other merchandise without an exchange of money. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 285) Game Guys, Inc. needed a special silicon substrate. The company executives knew a new start-up in India, Silicon Sisters, Inc., was the best in the world at efficiently mass-producing the product. The Indian company needed MSG (metallurgical grade silicon) in order to make the substrate, which it knew it could get from a Chinese firm. The Chinese firm (mostly owned by the Chinese government) agreed to supply the silicon to Silicon Sisters if it could get a certain quantity of gaming hardware from Game Guys. This beneficial exchange is described as A) beneficial contracting. B) contract manufacturing. C) third-party purchasing. D) countertrading. Answer: D Explanation: Countertrading is a complex form of bartering in which several countries each trade goods or services for other goods or services. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

286) A highly powerful foreign government official approaches your company and requests a large sum of money. In return for this bribe, he promises your company will receive preferential treatment in all future government contracts. You quickly refuse his request, explaining that the ________ Act of the United States prohibits you from making such payments. A) Federal Trade Commission B) Sherman Anti-trust C) Foreign Corrupt Practices D) Celler-Kefauver Answer: C Explanation: The Foreign Corrupt Practices Act prohibits "questionable or dubious payments" to foreign officials to secure business contracts. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 287) U.S. recording studios are feeling the pinch in profits due to the fact that artists' music is copied and sold overseas within 24 hours of the music selling in the U.S. market. As a student who is now aware of the challenges businesses face in global trade, which of the following statements do you think is an accurate representation of this situation? A) The copying and selling of the artist's original music is illegal and enforceable by international copyright law. B) The copying and selling of the artist's music is legal due to the fact that are no online copyright laws. C) United States copyright laws do not necessarily apply globally. D) Copyright laws only protect the artist, but not the recording studios. Answer: C Explanation: As many global trade experts confirm, U.S. law does not apply everywhere. The laws in many countries are inconsistent with the laws of other countries. What may be considered a grievous business act in China may be acceptable in Korea. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation

288) An American company recently won a huge contract with a company in Indonesia, by gifting the Indonesian government officials with American cars and an assurance of monetary gifts. Clearly, this procedure A) violates the Foreign Corrupt Practices Act. B) violates the Fair and Balanced Competitive Practices Act. C) defines the common business practices of the foreign nation and should be respected. D) defines the terms of the business contract, and as long as both parties sign, the agreement is binding. Answer: A Explanation: The Foreign Corrupt Practices Act prohibits U.S. companies from accepting bribes or providing bribes to other firms in order to win business. This law also prohibits questionable payments to foreign officials in order to secure business contracts. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 289) When studying abroad last year, Thomas found that his U.S. dollars didn't stretch as far as he had expected. Each time he exchanged his dollars for euros, he had to give up more dollars in exchange for fewer euros. The exchange rate indicates A) the dollar has gained strength against the euro. B) the euro is weak against the dollar. C) the euro has gained strength against the dollar. D) the demand for dollars is stronger than the demand for euros. Answer: C Explanation: A low value of the dollar means a dollar is traded for less foreign currency. This is the case here. A high value of the dollar means a dollar is trading for more foreign currency. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

290) The Ozark Bike Company recently entered into an agreement with a large Japanese retailer to distribute its bicycles in Japan. Ozark Bike Company sees itself in a favorable position because A) the yen is gaining strength compared to the U.S. dollar, making it cheaper for Japanese customers to buy American products. B) the yen is down against the U.S. dollar, making it cheaper for Japanese customers to buy American products. C) it was traditionally against Japanese culture to ride bicycles, so the U.S. bike company would be dealing with a niche market. D) the Japanese do not permit foreign direct investment. American companies will make all the bikes in the U.S., which creates more jobs on American soil. Answer: A Explanation: A low value of the dollar means a dollar is traded for less foreign currency. A high value of the dollar means a dollar is trading for more foreign currency. When the U.S. dollar is losing strength against the foreign currency, it is cheaper for foreign customers to buy U.S. products. In this case, the customer will trade fewer yen for the value of the U.S. bicycles. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 291) Maria's aunt, Juanita, is cruising in South America. Juanita told Maria she would be glad to buy her some jewelry while in one of the ports. She said she will shop in Santiago, Chile, because the exchange rate would be to her benefit. This means A) the currency in the U.S. is weak against the Chilean currency. B) the currency in the U.S. will be almost equal to the Chilean currency; otherwise it would not be a good exchange. C) the currency in the U.S. is devalued. D) the currency in the U.S. has strength against the Chilean currency. Answer: D Explanation: The value of the currency in the U.S. had strength compared to the value of the Chilean currency. She will be able to get more for her money because she will receive more Chilean currency for each dollar. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

292) Halpert Hardware Pros, an American retail store, buys most of its inventory from Asian countries. Halpert Hardware Pros would benefit if the value of the dollar ________ relative to the currencies of the countries from which Halpert imports. A) rose B) fell C) remained constant D) floated unpredictably Answer: A Explanation: A higher value of the dollar means that a dollar would buy more foreign goods. Inventory costs, therefore, would be reduced for the U.S.-based firm. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 293) James's family business, J&J Interiors, sells and installs tile in bathrooms and kitchens. More and more of J&J's customers are asking for heater coils under bathroom floors, and James thinks there is a greater opportunity in heated tiles. In his effort to avoid domestic competition, he sets his sights on the vast Hasalot market. Much to his surprise, most of Hasalot's citizens do not yet have indoor plumbing and are accustomed to government-run communal baths. James realizes that his global marketing effort is hampered by A) legal and regulatory constraints. B) cultural constraints. C) physical and environmental constraints. D) the floating exchange rate. Answer: C Explanation: Physical and environmental challenges can restrict global trade. Some developing nations have primitive transportation and storage systems. People in developing nations lack the common conveniences that U.S. citizens take for granted. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

294) ________ is the use of government regulations to limit the import of goods and services. A) Trade protectionism B) Fiscal policy C) Countertrade policy D) Monetary policy Answer: A Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 295) Trade protectionism A) always leads to a favorable balance of trade. B) is the use of government regulations to limit the import of goods and services. C) is not a barrier to global trade. D) encourages dumping by foreign industries in the home country. Answer: B Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 296) ________ was a seventeenth- and eighteenth-century belief that a nation should try to sell more goods to other nations than it buys from them. A) Capitalism B) Comparative advantage C) Mercantilism D) Inflation Answer: C Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

297) The two basic types of tariffs are A) goods and services. B) general and limited. C) comparative and absolute. D) revenue and protective. Answer: D Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 298) A ________ tariff is designed to raise the price of imported products so that domestic goods are more competitively priced. A) protective B) restrictive C) progressive D) revenue Answer: A Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 299) ________ tariffs are designed to raise money for the government. A) Regulatory B) Revenue C) Price D) Profit Answer: B Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

300) In an effort to protect domestic jobs, some countries will place a limit on the number of certain types of products that can be imported. These limits are called A) revenue tariffs. B) protective tariffs. C) import quotas. D) tariffs. Answer: C Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 301) A(n) ________ refers to a complete ban on importing or exporting of products from a specific country. A) absolute tariff B) health quarantine C) quota D) embargo Answer: D Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 302) Some governments initiate restrictive standards that detail exactly how a product must be sold in a country. Trade experts call these restrictions A) monetary tariffs. B) countertrade policies. C) nontariff barriers. D) export constraint policies. Answer: C Difficulty: 1 Easy Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

303) The purpose of the General Agreement on Tariffs and Trade (GATT) is to A) facilitate global trade. B) create common market arrangements in specific geographical regions. C) negotiate an end to civil wars. D) establish a set of international property right laws. Answer: A Difficulty: 1 Easy Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 304) The ________ represents the first attempt to establish a truly global mediation center to resolve international trade disputes. A) International Trade Court B) World Trade Organization C) Global Trade Commission D) United Nations Arbitration Center Answer: B Difficulty: 1 Easy Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 305) With GDP of over $658 billion, the common market known as COMESCA is A) a subset of the Mercosur trading bloc. B) a subset of the European Union. C) composed of Southern African and Eastern African nations. D) composed of Ecuador, San Simeon, Chile, and Argentina. Answer: C Difficulty: 1 Easy Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

306) The European Union created a single monetary unit to replace the national currencies of 12 member nations. This common currency is known as the A) e-dollar. B) pound. C) mercosur. D) euro. Answer: D Difficulty: 1 Easy Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 307) The three countries participating in NAFTA are A) Canada, Panama, and the United States. B) Mexico, Panama, and the United States. C) Canada, Nicaragua, and Mexico. D) Canada, Mexico, and the United States. Answer: D Difficulty: 1 Easy Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 308) The common market arrangement that groups Brazil, Argentina, Paraguay, Uruguay, Bolivia, Chile, Colombia, Ecuador, Peru, and Suriname is called A) the South American Trade Organization. B) the World Trade Organization (WTO). C) the Latin Free Trade Zone. D) Mercosur. Answer: D Difficulty: 1 Easy Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

309) Another name for a common market is A) FTA. B) trading bloc. C) continental community. D) economic cooperative. Answer: B Difficulty: 1 Easy Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 310) Traders in the seventeenth and eighteenth century were encouraged to focus on selling their nation's goods in the global market to create a favorable balance of trade. Nations attempted to sell more goods to other nations than they bought from other nations. This approach to global trading is called A) ethnocentrism. B) mercantilism. C) protectionism. D) isolationism. Answer: B Explanation: The goal of mercantilism was to sell more to other nations than a country bought from other nations in order to bring about a favorable balance of trade. Difficulty: 2 Medium Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

311) The motivation behind trade protectionism is A) to limit accelerated growth of GDP that would cause inflation to escalate. B) to facilitate the belief that it will keep one's nation disease free. C) to increase the positive economic consequences of one's trade position. D) solely for the protection of nuclear attack. Answer: C Explanation: Trade protectionism is the use of government regulations to limit the import of goods and services. Those in favor of trade protectionism believe that it helps domestic companies survive (including job survival at these firms) and grow. Difficulty: 2 Medium Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 312) Although embargos are enacted upon both imports and exports, this form of trade protectionism is often the result of A) physical and environmental limitations on trade. B) nontariff barriers. C) currency fluctuations. D) political disagreements between nations. Answer: D Explanation: An embargo is a complete ban on the import or export of certain products or the stopping of all trade with a specific country. This action is often caused by geo-political disagreements between nations. The two parties in question disagree on fundamental political, sociological, and/or philosophical beliefs and values. Students are usually familiar with the U.S. embargo against Cuba, in effect since 1962. Though some trade restrictions were lifted in 2016, it is unclear what the future holds for the embargo. Difficulty: 2 Medium Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

313) The benefits of protective tariffs are A) they increase the revenues of the government that has implemented them. B) they decrease the cost of the product to the consumer (end user). C) they help develop friendlier trade relations with loyal trading partners. Both parties are protected. D) they protect domestic jobs by encouraging cost-sensitive consumers to purchase domestic products. Answer: D Explanation: Protective tariffs raise the retail price of imported goods. This provides domestic companies an opportunity to price their products competitively. The domestic companies have more opportunity to keep costs down and grow, prosper, and eventually hire more people. Difficulty: 2 Medium Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 314) A major concern voiced by U.S. critics of the North American Free Trade Agreement (NAFTA) was that it would result in A) higher prices for consumer goods. B) loss of jobs in the U.S. economy. C) national security problems. D) increased illegal immigration from Mexico. Answer: B Explanation: Critics of NAFTA warned that it would have serious economic consequences such as the loss of U.S. jobs and loss of capital leaving the U.S. Difficulty: 2 Medium Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

315) One objective of NAFTA is to A) increase trade barriers between the countries involved. B) decrease investment opportunities in the countries involved. C) promote conditions of fair competition for the three trading partners. D) improve working conditions in Central America. Answer: C Explanation: NAFTA aims to promote conditions of fair competition in this free-trade area. Difficulty: 2 Medium Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 316) American companies that produce sophisticated military weaponry are prohibited from exporting that equipment to unfriendly governments, such as Iran. This complete ban on exporting sensitive technology to specific countries is an example of a(n) A) import quota. B) boycott. C) tariff. D) embargo. Answer: D Explanation: An embargo is a complete ban on the import or export of certain products. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

317) The U.S. and China continue to spar over sociocultural issues, such as human rights, and economic and financial issues, such as the value of the Chinese yuan against the U.S. dollar. U.S. diplomats assert that these differences continue to bolster China's favorable balance of trade and increase the U.S. trade deficit. The trade protectionist policy exhibited by the Chinese is similar to an economic policy known as ________ that was followed during the seventeenth and eighteenth centuries. This policy resulted in a flow of money to the country that sold the most globally. A) trade embargoing B) countertrading C) profiteering D) mercantilism Answer: D Explanation: Mercantilism is a trade policy first practiced in the seventeenth century that increased trade protectionism and encouraged nations to import fewer goods than they exported. Nations focused on strategies to this end. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 318) The U.S. government announced a 13-million-pound annual limit on Diamontite imported from Taubestan. This type of trade restriction is called a(n) A) embargo. B) revenue tariff. C) import quota. D) export cap. Answer: C Explanation: Import quotas limit the number of products in certain categories that can be imported. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

319) Denmark requires foreign companies that sell butter in Denmark to sell it in cubes, not tubs. This type of requirement is known as a A) protective tariff. B) revenue tariff. C) quota. D) nontariff barrier. Answer: D Explanation: Nontariff barriers are not as specific or formal as tariffs, import quotas, and embargos but can be as detrimental to free trade—such as requiring butter to be sold only in cubes. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 320) The U.S. government, responding to pressure from political lobbyists representing the U.S. steel industry, will impose a tax on steel products imported from South America. This is an example of a(n) A) protective tariff. B) revenue tariff. C) quota. D) embargo. Answer: A Explanation: A protective tariff is designed to raise the retail price of imported products so that domestic products will be more competitive. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

321) Having recently found sources of oil on their own land, the newly established nation of Brotherton enacted a tariff on imported petroleum in order to raise money for their new government. This trade restriction is an example of a ________ tariff. A) revenue B) protective C) percentage D) fixed Answer: A Explanation: Revenue tariffs are designed to raise money for the domestic government. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 322) Hasalot is a small nation that has followed protectionist policies for many years. Which of the following would be an example of a nontariff barrier established by Hasalot? A) Establishment of a tax levied on imported goods so that foreign products are more expensive than competing domestic goods. B) Establishment of a tax levied on imported goods designed primarily to raise money for the government. C) Establishment of restrictive quality standards requiring foreign firms to make expensive modifications to their products before they can be exported to Hasalot. D) Participation in the Uruguay Round of GATT negotiations. Answer: C Explanation: A common nontariff barrier is the establishment of special requirements that foreign producers must meet before they can sell their products in a protectionist country. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

323) A small wine and cheese store in Milwaukee sells dozens of different type of cheese: Bulgarian, French, Danish, Greek, and a domestic from its home state of Wisconsin. The domestic Wisconsin cheese sells for $1.99/pound, while all the others sell for more than $2.99/pound, and the Greek variety is priced at $6.99/pound. The domestic variety is much cheaper because A) customers always perceive the domestic varieties to be of lower quality than the imported varieties. B) the value of the dollar never favors imported goods. C) imported cheese producers often pay protective tariffs on these goods, which ultimately raises the price at the grocery store. D) the distributors of these imports refuse to buy the cheese in large enough quantities to enjoy economies of scale. Answer: C Explanation: Protective tariffs (import taxes) are assessed on imports to protect and grow domestic industries. The protective tariffs raise the price of imported products so domestic goods are more competitively priced. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

324) Belgium, Hungary, Sweden, and Germany are all members of the EU. Which of the following statements is an accurate description of trade between these nations? A) Belgium and Germany are permitted to engage in free trade due to their proximity to each other, however, Sweden only has free trade with Finland, and Hungary only has free trade with Switzerland, Austria, and Croatia. B) The EU has abolished customs duties at internal borders for these and other member nations and put in place a uniform system for taxing imports. Internal border controls subsequently disappeared. C) Customs officers that collect tariffs are now found at the internal borders of all EU member nations. D) Belgium, Hungary, Sweden, and Germany are four nations strongly considering abandoning the EU common market. The global trading bloc has proved inefficient in these nations' attracting global business. Answer: B Explanation: The EU is the European common market. Member nations have a common external tariff, no internal tariffs, and coordinated laws to facilitate exchange among members. Other common markets include Mercosur and the ASEAN. The EU has realized success in continued economic integration as the major way to compete for global business. Difficulty: 3 Hard Topic: International Trade Agreements and the Organizations that Facilitate Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 325) The outlook for growth in global trade appears to be A) less optimistic than in the past. B) more interesting yet more challenging every day. C) unclear and lacking focus. D) nonexistent. Answer: B Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

326) Global trade with China is A) too risky and not worth the effort. B) illegal based on World Trade Organization (WTO) rulings. C) an emerging business opportunity for several companies. D) dependent upon the success of multinational corporations. Answer: C Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 327) Many business experts contend that ________ will likely be the growth market of the future. A) Asia B) Africa C) South America D) the Middle East Answer: A Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 328) The "second wave" of offshore outsourcing refers to A) moving jobs to South America in addition to China. B) moving skilled service jobs such as those in accounting offshore. C) moving jobs to India in addition to China. D) moving manufacturing jobs offshore. Answer: B Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

329) When U.S. firms choose to hire skilled and unskilled workers in other countries to produce goods and services, rather than producing them in the United States, we refer to this as A) offshore procurement. B) domestic outsourcing. C) foreign distribution. D) offshore outsourcing. Answer: D Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 330) As students think about a career in the business world today, which of the following is a good strategic suggestion? A) Study a foreign language. B) Secure a job with a large multinational corporation. C) Stay away from franchising due to the saturation of this form of business globally. D) Avoid spending a lot of time studying fluctuations in currencies because a global currency is imminent. Answer: A Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

331) Which of the following nations has joined the U.S., Japan, and the EU as a key driver of the world economy? A) Thailand B) Brazil C) Russia D) China Answer: D Difficulty: 1 Easy Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 332) Trade experts' concerns about trading with China include its A) small population size compared to other nations, which puts doubt in businesspeople's minds about the worthiness of the investment. B) one-party political system, counterfeiting activities, and human rights abuses. C) ties with organized labor unions. D) economic philosophy that has changed from free market to command economy. Answer: B Explanation: Trade experts and other advocacy groups remain concerned about China's oneparty political system, documented human rights abuses in China, an increasing Chinese urban population, and China's underground economy that promotes product piracy. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

333) Which of the following is an advantage of offshore outsourcing? A) Companies can create efficiencies by hiring low-wage employees. B) Wages increase in the home country. C) Product quality improves permitting firms to charge more for their products. D) Communication between the company and its customers improves. Answer: A Explanation: One advantage of offshore outsourcing is that outsourced work allows companies to create efficiencies that in fact allows them to hire more workers. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 334) Which of the following statements is a good prediction of future occurrences in global markets? A) Fortunately, safety issues will become less of a concern as developing nations begin to participate in global trade at a faster pace. B) It is doubtful that service and technical jobs such as accounting, legal representation, or financial management will become part of offshore outsourcing. C) China will continue to be the only viable global trader in Asia for several years to come. D) With the strong growth in technical talent globally, offshore outsourcing should continue to increase. Answer: D Explanation: As technical talent grows around the globe, offshore outsourcing will increase. India is providing more sophisticated services with its deep pool of well-educated scientists, engineers, chemists, accountants, lawyers, and physicians. Difficulty: 2 Medium Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

335) Candace is a flight attendant for a large, international airline. While in China, Candace often finds look-alikes in famous designer brands of watches, handbags, clothing, and golf clubs. In fact, she'll do her Christmas shopping there and will even buy good-quality items for auctioning at her son's preschool events back in the U.S. Candace's actions demonstrate A) a continual problem with product piracy in China. B) how expensive it is to trade with China. People who travel there are really the only ones who can benefit from China trade. C) the low level of economic development in China, and the fact that only tourists can afford to purchase name-brand goods in that nation. D) the World Trade Organization's encouragement of China to increase its production of counterfeit goods because there is a high demand for these globally. Answer: A Explanation: Concerns remain about China's significant product piracy and counterfeiting activities. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 336) Compare and contrast comparative and absolute advantage in global markets. Provide examples. Answer: Comparative advantage theory states that a country should produce and sell to other countries those products that it produces most efficiently and effectively and should buy from other countries those products it cannot produce as effectively or efficiently. An example of this is the U.S. comparative advantage in the production of wheat. This theory suggests we concentrate our efforts on products such as wheat where we have a comparative advantage and then trade for the purchase of products such as coffee where we lack specific advantages. Absolute advantage occurs when a country has a monopoly on producing a product or is able to produce it at a cost below that of all other countries. Absolute advantage often occurs with such things as mineral deposits. For example, South Africa once had an absolute advantage in diamond production. Today there are very few instances of absolute advantage in global markets. Examples will vary. Students will usually refer to nations that come close to having an absolute advantage in a natural resource. Comparative advantages can span several industries. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-01 Discuss the importance of the global market and the roles of comparative advantage and absolute advantage in global trade. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

337) Describe and provide examples of four different strategies for reaching global markets. Answer: There are several strategies a firm can use to reach global markets. Students can choose among the following: Exporting can be accomplished through the use of an export trading company to assist in facilitating the transfer of goods from a domestic market to an international destination. This is generally considered to be the simplest method of international involvement. Licensing involves an agreement in which a producer (licensor) allows a foreign company (licensee) to produce its products in exchange for a fee (royalties). Disney is an example of a company that is involved in a licensing agreement. The company agrees to permit a foreign company, Oriental Land Company, to open Disneyland in Tokyo and Disney is paid a royalty. Licensing can be a dangerous strategy because the company is transferring technology and possibly creating a future competitor. Franchising is also a method of establishing a presence in a foreign market. Franchising is an arrangement whereby someone with a good idea for a business sells the rights to use the business name and sell a product or service to others in a given territory in a specified manner. McDonald's and Dunkin' Donuts are two excellent examples of multinational franchising. Joint ventures involve a partnership in which two or more companies (often from different countries) join to undertake a major project. Joint ventures allow for shared technology, shared marketing expertise, entry into otherwise closed markets, and shared risks. A strategic alliance is a long-term partnership between two or more companies established to help each company build competitive market advantages. Such alliances can provide firms with access to new markets, capital, and technical expertise. Unlike joint ventures, strategic alliances do not typically involve sharing costs, risks, management, or even profits. Contract manufacturing involves a foreign company producing private-label goods to which a domestic company then attaches its own brand name or trademark. Foreign direct investment is the buying of permanent property and businesses in foreign nations. The most common form of foreign direct investment is a foreign subsidiary, a company that is owned in a foreign country by another company called the parent. Creating foreign subsidiaries is an expanded level of international involvement whereby a company that is owned by another company operates in a foreign market. Pillsbury was actually a foreign subsidiary of a major British firm at one time. Examples of strategies for reaching global markets may vary. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

338) Explain and provide at least one example of how sociocultural differences can create trade difficulties in world markets. Answer: Examples will vary. Cultural differences clearly exist among nations. Americans have often been guilty of not recognizing these differences by being ethnocentric. In other words, we believe our culture is superior to all others. Religion is a part of culture and can have important impact on a firm's business operations. Work behaviors and attendance on the job can be specifically affected by religion. Cultural differences can also have an impact on such important business functions as human resource management. Workers' attitudes toward work and managers can be a reflection of culture. Marketing strategies also have to carefully take culture into consideration. Attitudes toward factors such as time, change, competition, natural resources, achievement, even work itself can be definitively influenced by a person's culture. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation 339) Explain and provide at least one example of how legal and regulatory forces impede global trade. Answer: Examples will vary. In global markets, there is no central system of government that writes and enforces international trade laws. Laws and regulations are inconsistent from one nation to the next. For example, bribery between buyers and sellers is acceptable business behavior in many countries, but U.S. law (under the Foreign Corrupt Practices Act of 1978) prohibits U.S. companies from offering or accepting bribes in doing business. Besides bribery, nontariff barriers and counterfeiting tactics make it difficult to do business abroad. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

340) Define offshore outsourcing and explain its pros and cons. Answer: Offshore outsourcing is the purchase of goods and services from foreign sources outside a firm rather than providing them within the company. Goods and services are usually outsourced to low-wage markets in the world. The pros of offshore outsourcing include: (1) lessstrategic tasks can be outsourced globally so that companies can focus on areas in which they can excel and grow; (2) outsourced work allows companies to create efficiencies that in fact let them hire more low-wage employees; (3) consumers benefit from lower prices generated by effective use of global resources and developing nations grow, thus fueling global economic growth. The cons of offshore outsourcing include: (1) jobs are lost permanently and domestic wages fall due to low-cost competition offshore; (2) offshore outsourcing reduces product quality and can therefore cause permanent damage to a company's reputation; (3) communication among company members, with suppliers, and with customers becomes much more difficult. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-06 Discuss the changing landscape of the global market and the issue of offshore outsourcing. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

Mini-Case Ever since he was five years old, Rhett Tenna has had poor eyesight and as an eyeglass wearer he suffered through all the names that went along with it. Rhett eventually switched from glasses to contacts, but he always wondered why his glasses were not fashionable. After graduation from college, Rhett set out on a lifelong goal: to make eyewear synonymous with fashion. He opened a specialty store called "The Eyes Have It." His marketing plan was to remove the social stigma of wearing glasses, and replace it with a sense of flair and high fashion. From the day he opened his first store, Rhett's plan met with resounding success. Today, "The Eyes Have It" has grown from that single outlet to a medium-sized company with dozens of stores located in six states, and a manufacturing plant that turns out designer frames. A recent internal audit, however, suggested a problem that Rhett had not anticipated. The study indicated that the U.S. market is just about saturated and growth of "The Eyes Have It" stores will be very limited. The audit concerned Rhett until he recognized an untapped market existed overseas. If people all over the world have the same problem, the global market opportunities are fantastic! All in favor of going global say: "The Eyes Have It"! 341) At first, Rhett believed he should maintain all of his manufacturing within the United States and simply export his designer frames to foreign sellers. However, he lacked expertise in exporting. Rhett decided to see if the federal government could provide any help by contacting a(n) A) World Trade Center. B) Export Assistance Center. C) Federal Reserve Bank. D) U.S. Export Savings Bank. Answer: B Explanation: Export Assistance Centers were established by the federal government to provide hands-on exporting assistance and trade-finance support to small and medium-sized businesses. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

342) Although he is confident of success, Rhett is concerned that social, cultural, and economic differences in other nations may create some problems. He believes he should adapt his approach to these differences rather than trying to force the "American way" on foreign consumers. Rhett's attitude suggests that he wants to avoid a(n) ________ approach to business. A) ethnocentric B) flexible C) ethical D) countercultural Answer: A Explanation: Ethnocentricity is the belief that the American way of doing things is superior to everyone else's. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 343) Rhett heard predictions that the value of the U.S. dollar is likely to increase substantially over the next six months. This should A) hurt his overseas efforts since his prices will be very high. B) stop overseas efforts because dollars will not be negotiable. C) help his overseas efforts since his prices will be lower. D) force him into accepting no other currency except the dollar. Answer: A Explanation: An increase in the value of the dollar will make American goods more expensive because it takes more foreign currency to buy U.S. goods. Foreign customers will exchange more of their currency for U.S. dollars. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-04 Evaluate the forces that affect trading in global markets. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

344) Rhett spoke with a Korean company that said it might be interested in producing his products in their market. They would pay him a royalty for what they sold and would bear all the start-up expenses of this effort. This Korean company is proposing a(n) A) subsidiary agreement. B) joint venture. C) export trading company. D) licensing agreement. Answer: D Explanation: Licensing is an agreement in which a producer allows a foreign company to produce its products in exchange for royalties. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 345) The company was informed by the Taiwanese Ministry of Trade that they could only export 1.1 million pairs of eyeglasses to the Taiwanese market during a given year. The Taiwanese have imposed a(n) A) revenue tariff. B) embargo. C) import quota. D) limit order. Answer: C Explanation: The term that describes the limiting of the number of products in certain categories that can be imported is an import quota. Difficulty: 3 Hard Topic: Barriers to International Trade Learning Objective: 03-05 Debate the advantages and disadvantages of trade protectionism. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

346) Next year, in order to cut both time and cost in getting new styles to global markets, Rhett plans to ________ a few of his designer lines. Rhett will send his designs to manufacturers in India, Bangladesh, and Turkey who will produce the eyeglasses in facilities in their respective countries. This will not only reduce the cost of labor, it will help Rhett reach regional markets in a timely manner. A) license B) contract manufacture C) franchise D) subsidize Answer: B Explanation: Contract manufacturing is when a foreign manufacturer produces and privatelabels goods for a domestic company. Contract manufacturing enables a company to experiment in a new market without heavy start-up costs. It also can significantly reduce the cost of labor. Difficulty: 3 Hard Topic: Trade Strategies Used in Reaching Global Markets Learning Objective: 03-03 Illustrate the strategies used in reaching global markets and explain the role of multinational corporations. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

Understanding Business, 12e (Nickels) Chapter 04 Demanding Ethical and Socially Responsible Behavior 1) The Enron scandal illustrates the difference between unethical behavior and illegal behavior. Answer: FALSE Difficulty: 1 Easy Topic: The Ethical Concerns that Affect Business Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 2) Ethical behavior requires more than following the law. Answer: TRUE Difficulty: 1 Easy Topic: The Ethical Concerns that Affect Business Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 3) Legal behavior and ethical behavior are basically the same. Answer: FALSE Difficulty: 1 Easy Topic: The Ethical Concerns that Affect Business Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Ethics AACSB: Reflective Thinking Accessibility: Keyboard Navigation

4) A society gets into trouble when people consider only what is illegal and not also what is ethical or unethical. Answer: TRUE Difficulty: 1 Easy Topic: Ethics for the Individual Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 5) Ethical behavior refers to the standards that are accepted by society as true or false. Answer: FALSE Difficulty: 1 Easy Topic: Ethics for the Individual Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 6) People should look at each situation individually and decide for themselves if it is right or wrong. Answer: FALSE Difficulty: 1 Easy Topic: Ethics for the Individual Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 7) Given the level of diversity within the United States, agreement on common standards of ethical behavior is unachievable. Answer: FALSE Difficulty: 1 Easy Topic: Ethics for the Individual Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 2 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

8) An accurate statement regarding this chapter is: "Business law establishes ethical behavior." Answer: FALSE Explanation: The most basic step in ethical behavior is the law, but ethics go far beyond legality. Difficulty: 2 Medium Topic: The Ethical Concerns that Affect Business Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 9) Legal behavior is directly related to our relationships with others, while ethical behavior is not. Answer: FALSE Explanation: Legal behavior and ethical behavior are directly related to our relationships with others. Difficulty: 2 Medium Topic: The Ethical Concerns that Affect Business Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 10) Legal behavior is a first step toward ethical behavior. Answer: TRUE Explanation: Ethical behavior requires more than following the law, but following the law is an important first step. Difficulty: 2 Medium Topic: The Ethical Concerns that Affect Business Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

11) Laws that protect us from fraud, theft, and violence determine ethical behavior. Answer: FALSE Explanation: Ethical behavior requires more than following the law, but following the law is an important first step. Legality is narrower. Difficulty: 2 Medium Topic: The Ethical Concerns that Affect Business Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 12) Moral behavior refers to behavior that is accepted by society as right versus wrong. Answer: TRUE Explanation: Ethics defines the standards of moral behavior, or the attempt to live by certain values and standards of conduct accepted by society as right rather than wrong. Difficulty: 2 Medium Topic: Ethics for the Individual Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 13) Ethical behavior focuses on treating others fairly. Answer: TRUE Explanation: Ethical behavior focuses on proper relations with other people. An ethical person will treat others with honesty and sincerity. Perhaps the essence of this behavior is the Golden Rule, "Do unto to others as you would have them do unto you." Difficulty: 2 Medium Topic: Ethics for the Individual Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

14) Making accounting records more transparent may help restore trust in the free-market system and leaders in general. Answer: TRUE Explanation: Given the ethical lapses that are so prevalent today, several things can be done to restore trust in the free-market system and leaders in general: (1) those who have broken the law need to be punished accordingly, including religious people, government people, and businesspeople; (2) new laws making accounting records more transparent should be passed; and (3) making businesspeople and others more accountable may help. Difficulty: 2 Medium Topic: The Ethical Concerns that Affect Business Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 15) Punishing business leaders who have broken the law may help restore trust in the free-market system and leaders in general. Answer: TRUE Explanation: Given the ethical lapses that are so prevalent today, several things can be done to restore trust in the free-market system and leaders in general: (1) those who have broken the law need to be punished accordingly, including religious people, government people, and businesspeople; (2) new laws making accounting records more transparent should be passed; and (3) making businesspeople and others more accountable may help. Difficulty: 2 Medium Topic: The Ethical Concerns that Affect Business Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

16) Making businesspeople more accountable for company actions may help restore trust in the free-market system and leaders in general. Answer: TRUE Explanation: Given the ethical lapses that are so prevalent today, several things can be done to restore trust in the free-market system and leaders in general: (1) those who have broken the law need to be punished accordingly, including religious people, government people, and businesspeople; (2) new laws making accounting records more transparent should be passed; and (3) making businesspeople and others more accountable may help. Difficulty: 2 Medium Topic: The Ethical Concerns that Affect Business Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 17) People involved in business may be tempted to do something unethical in order to increase sales and profits, but rarely do because if they are caught, our legal system will deal harshly with them. Answer: FALSE Explanation: Many immoral and unethical acts fall well within our laws. Difficulty: 2 Medium Topic: The Ethical Concerns that Affect Business Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

18) Gary and his college friends often spend weekends hanging out at a small pub. Last weekend, after a few beers, one of his friends took the salt and pepper shakers from the table because they needed a set at their apartment. In this situation, this was not an unethical action because it was a restaurant and potential loss is figured into the prices. Answer: FALSE Explanation: Ethical behavior should not be situationally based. If the act is appropriate behavior, then it is probably appropriate all of the time. This behavior in this situation, however, is clearly inappropriate behavior. Difficulty: 3 Hard Topic: The Ethical Concerns that Affect Business Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 19) Ethical behavior involves the clear and easy choice of right and wrong actions toward others. Answer: FALSE Difficulty: 1 Easy Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) Both managers and workers cite low managerial ethics as a major cause of American businesses' competitive woes. Answer: TRUE Difficulty: 1 Easy Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

21) A common form of cheating in schools today is plagiarizing online material. Answer: TRUE Difficulty: 1 Easy Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 22) Making ethical choices is always easy. Answer: FALSE Difficulty: 1 Easy Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 23) Two recent studies found no correlation between academic dishonesty among undergraduates and dishonesty at work. Answer: FALSE Difficulty: 1 Easy Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 24) The question "Is it legal?" establishes ethical behavior. Answer: FALSE Difficulty: 1 Easy Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

25) It can be very difficult to maintain a balance between ethics and goals such as pleasing stakeholders. Answer: TRUE Difficulty: 1 Easy Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 26) Trying to make decisions that will benefit all parties involved is consistent with the question "How will it make me feel about myself?" Answer: FALSE Difficulty: 1 Easy Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 27) While telling an abusive joke about an ethnic group may not be unlawful, it is unethical. Answer: TRUE Explanation: Humor at someone else's expense is an example of unfair treatment of others. Difficulty: 2 Medium Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

28) An ethical manager's decisions are based only on the following questions: "Is it legal?" and "Is it profitable?" Answer: FALSE Explanation: Ethics-based managers ask themselves the following questions when faced with a potentially ethical dilemma: "Is it legal?" "Is it balanced?" and "How will it make me feel about myself?" Difficulty: 2 Medium Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 29) Behavior that is in conflict with your values and sense of right and wrong can damage your self-esteem. Answer: TRUE Explanation: Ethics-based managers do what is proper as well as what is profitable. Decisions that go against their sense of right and wrong corrode their self-esteem. Difficulty: 2 Medium Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 30) Business behavior determines the ethics of society. We can improve society's moral and ethical behavior by first making a commitment to improving business's moral and ethical behavior. Answer: FALSE Explanation: Ethical behavior begins with you and me. We cannot expect society to become more moral and ethical unless we as individuals commit to becoming more moral and ethical ourselves. Difficulty: 2 Medium Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

31) Utilizing the phrase "the ends justify the means" as a corporate value system can negatively impact company morale and competitiveness. Answer: TRUE Explanation: Both managers and workers cited low managerial ethics as a major cause of our competitive woes. Employees reported that they often violate safety standards and goof off as much as seven hours a week. Difficulty: 2 Medium Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 32) Micah often takes longer lunch breaks than allowed. Melissa chooses to use her work computer to check out her personal Twitter account instead of using up her phone's data. Louis misrepresents his product to a potential customer. All of these are examples of unethical behavior. Answer: TRUE Explanation: All three situations violate the ethics-check questions of "Is it legal?" "Is it balanced?" and "How will it make me feel about myself?" Difficulty: 3 Hard Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 33) In reality, ethical behavior depends on the situation. For example, in negotiating a contract with your employees, the way they win higher wages is by your losing the fight to hold down labor costs. You realize it is a win-lose relationship. Answer: FALSE Explanation: Every situation cannot be completely balanced, but it is important to the health of our relationships that we avoid major imbalances over time. An ethics-based manager has a winwin attitude. Difficulty: 3 Hard Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 11 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

34) You are in a business meeting at work that requires your group to make an ethical decision. Your willingness to post the final decision on the bulletin board in the break room for all to see passes the test: "How will it make me feel about myself?" Answer: TRUE Explanation: By posting the decision on the company bulletin board, you are demonstrating that you stand behind the decision that was made, that you believe it is an ethical decision, and that you do not need to hide your actions from your co-workers. Difficulty: 3 Hard Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 35) You're working as a human resources director for a small company. Part of your job is to assess the company's benefits plan. There are several workers utilizing the company daycare facility. However, the daycare costs the company far more than another benefit might cost, like employing an on-site physician. The on-site physician services are supported by insurance, and the physician actually rents space from the company. Under these circumstances, eliminating the daycare is a balanced decision. Answer: FALSE Explanation: Winning at the expense of others is not a balanced decision. The health of our relationships with our co-workers is very important. We should avoid major imbalances and strive to make decisions that benefit all employees. Difficulty: 3 Hard Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Analyze AACSB: Ethics Accessibility: Keyboard Navigation

36) Andrea owns a small online retail business. On her company website, she asks customers who fill orders to mark a box if they are willing to let her share their personal information with her suppliers. By asking this question, Andrea is addressing privacy issues, and covering her actions in case someone should try to sue her for sharing private information. She is responding to the question, "Are my proposed actions legal?" Answer: TRUE Explanation: Asking the question, "Are my proposed actions legal?" is the first step toward addressing ethical concerns. By asking and answering this question, the business owner takes the first step in determining if the action is acceptable behavior. Difficulty: 3 Hard Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 37) Trust between workers and managers must be based on a foundation of fairness, honesty, openness, and moral integrity. Answer: TRUE Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 38) A growing number of people feel that an employee's ethics are a personal matter, and have nothing to do with management. Answer: FALSE Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

39) Management can create an environment in which unethical behavior can develop. Answer: TRUE Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 40) Corporate values, like personal values, are learned by observing what others do. Answer: TRUE Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 41) Effective corporate values start with employees and develop throughout the organization to include top management. Answer: FALSE Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 42) In order to maintain a good reputation, it is good strategy to manage your business ethically. Answer: TRUE Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

43) A business should be managed ethically to keep existing customers and attract new customers. Answer: TRUE Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 44) One good reason for managing a business ethically is to help reduce employee turnover. Answer: TRUE Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 45) In order to do the right thing for all stakeholders, a business should be managed ethically. Answer: TRUE Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 46) Overly ambitious business goals and employee incentives can lead to unethical behavior. Answer: TRUE Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

47) Employers should proceed cautiously when designing an employee incentive program that rewards employees strictly on increased sales. Answer: TRUE Explanation: Increased pressure on employees to meet sales quotas can create an environment where management is insensitive to ethical considerations. The text presents an example of this issue with cell phone reps. Difficulty: 2 Medium Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 48) Employees observe behavior and adopt standards of right and wrong. Answer: TRUE Explanation: People learn their standards of values from observing what others do, but not particularly from hearing what they say. Difficulty: 2 Medium Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 49) As a manager, you have a responsibility for the unethical behavior of your employees. Answer: TRUE Explanation: Individuals do not usually act alone. They need the implied, if not the direct, cooperation of others to behave unethically in a corporation. Difficulty: 2 Medium Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

50) In order to avoid the costly act of being sued in court, it makes good sense to manage your business ethically. Answer: TRUE Explanation: There are many reasons why a business should be managed ethically: (1) to maintain a good reputation; (2) to keep existing customers; (3) to attract new customers; (4) to avoid lawsuits; (5) to reduce turnover; (6) to avoid government intervention; (7) to please customers, employees, and society; and (8) because it is the right thing to do. Difficulty: 2 Medium Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 51) "Do what I say, not what I do" can be an effective code of conduct to instill corporate values. Answer: FALSE Explanation: People learn their standards and values from observing what others do. They seldom adopt values strictly from what others say. Difficulty: 3 Hard Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 52) "Actions speak louder than words!" is an old saying that refers to the fact that people's actions—how they act as opposed to what they say—are often testament to their true ethical values. Answer: TRUE Explanation: People adopt values from observing what others do, not particularly from hearing what they say, making the actions of others more important in framing ethical behavior than what people say. Difficulty: 3 Hard Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation

53) Recently, Silky Soft Inc., a clothing and soft goods company agreed to adopt higher ethical standards with respect to contract manufacturers producing their goods. Company leadership agreed this was a good approach to avoid the U.S. government's intervening and creating new laws to force the entire industry to work only with foreign manufacturers who operate with high ethical standards. This was sensible strategy on the part of the clothing and soft goods industry. Answer: TRUE Explanation: A business should manage ethically for many reasons. Managers will often evaluate the cost of ignoring poor ethical behavior in light of the fact that government will often create laws that punish companies that misbehave. Difficulty: 3 Hard Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 54) Integrity-based ethics codes are based on avoiding legal punishment. Answer: FALSE Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 55) Compliance-based ethics codes are based on preventing unlawful behavior. Answer: FALSE Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

56) Businesses with a formal code of ethics are less common now than in the past. Answer: FALSE Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 57) Compliance-based ethics codes focus on preventing unlawful behavior by increasing control and by penalizing wrongdoers. Answer: TRUE Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 58) In order to be successful, efforts to improve the ethical behavior of businesses must begin with top management's support of a corporate code of conduct. Answer: TRUE Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 59) People who report illegal or unethical behavior are called whistleblowers. Answer: TRUE Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

60) As a result of pressure from business lobbyists, Congress failed to pass legislation protecting whistleblowers. Answer: FALSE Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 61) The job of an ethics officer is to serve as a counselor for employees and as an investigator for the company. Answer: TRUE Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 62) Enforcement is perhaps the most important step in an effective code of ethics. Answer: TRUE Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

63) A code of ethics designed to avoid criminal misconduct is an example of a compliance-based ethics code. Answer: TRUE Explanation: Compliance-based ethics codes emphasize the prevention of unlawful behavior by increasing control and by penalizing wrongdoers. Difficulty: 2 Medium Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 64) An integrity-based ethics code moves beyond legal compliance in order to create a "do-theright-thing" climate. Answer: TRUE Explanation: An integrity-based ethics code emphasizes ethically sound behavior and shared accountability among employees. Difficulty: 2 Medium Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 65) To be effective, an organization's code of ethics should be kept in-house and not communicated to outsiders such as suppliers, subcontractors, and customers. Answer: FALSE Explanation: Often pressure to violate ethical standards comes from the outside. Communicating the organization's code of ethics to outsiders will help employees resist temptation. Difficulty: 2 Medium Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

66) Since most ethics violations are small and rather insignificant in nature, employees need to understand that addressing these issues is secondary to making profits. CEOs may be justified in ignoring these small problems and waiting for more convenient moments to address them. Answer: FALSE Explanation: Ethics violations should be addressed in a timely manner, and with timely action. By enforcing the ethics code with timely action, leadership impresses upon all employees that the code is serious. Difficulty: 2 Medium Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 67) America's business ethics can improve simply by requiring written contracts with employees, customers, and owners. This alone will do the job! Answer: FALSE Explanation: Six steps can help improve America's business ethics: (1) top management must adopt and unconditionally support an explicit corporate code of conduct; (2) employees must understand that expectations for ethical behavior begin at the top and that senior management expects all employees to act accordingly; (3) managers and others must be trained to consider the ethical implications of all business decisions; (4) an ethics office must be set up; (5) outsiders must be told about the ethics program; (6) the ethics code must be enforced. Written contracts alone will not improve America's business ethics. Difficulty: 2 Medium Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

68) An important step in improving U.S. business ethics is for companies to hire whistleblowers. Answer: FALSE Explanation: Whistleblowers report illegal or unethical behavior. They are not purposefully hired by firms. However, legislation now protects employees who act as whistleblowers from corporate retaliation in the event that the company is convicted of illegal or harmful activity. Difficulty: 2 Medium Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 69) Dewey Cheatsum urges his employees to find and use legal loopholes to gain a competitive advantage whenever they can. In keeping within the legal limits of the law, the employees are within their compliance-based ethics rights. Answer: TRUE Explanation: The objective of a compliance-based ethics code is to avoid criminal misconduct. Difficulty: 3 Hard Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 70) Beer brewers, both large and small, often encourage their customers to drink responsibly. This reflects a compliance-based approach to ethics. Answer: FALSE Explanation: A compliance-based approach focuses on avoiding criminal misconduct. It is an integrity-based code of ethics, on the other hand, that encourages social responsibility in the use of the firm's products. Difficulty: 3 Hard Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation

71) Tobacco companies label their products with warnings of the potential health hazards that could occur from smoking. Due to the fact that this is a government-mandated disclosure, it is part of the industry's compliance-based ethics. Answer: TRUE Explanation: Compliance-based ethics emphasize preventing unlawful behavior. Government regulations require health warnings on cigarette packages and advertisements. Difficulty: 3 Hard Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 72) A large amount of retail theft is committed by employees; therefore, Suit Up, Inc., requires that managers personally unlock fitting rooms and count the number of items taken to the fitting rooms by not just customers but sales associates too. This policy is written in the company manual and breaking with the policy is grounds for dismissal. It is correct to say that this is part of Suit Up's compliance-based ethics. Answer: TRUE Explanation: Compliance-based ethics are internal rules and policies that govern the way a company operates. Noncompliant employees are breaking the law and subject to reprimand. In some cases they can lose their jobs. Difficulty: 3 Hard Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation

73) At Fisher Financial Services, clients have a right to do business with whichever consultant they choose. It is not out of the ordinary for a financial consultant to lose a client to another consultant in the same office. If it is a high–net worth client, with the potential for high commissions on sales, the incentive to steal a fellow worker's client exists because the firm's culture has not established integrity-based ethics to deter this activity. Answer: TRUE Explanation: Integrity-based ethics refers to the organization's guiding values. These ethics create an environment of ethically sound behavior. By law, the client may do business and/or solicit the services of any consultant at the company, and overzealous consultants who want to increase their commissions may be tempted to convince others' clients that they have better ideas for making money. Difficulty: 3 Hard Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 74) Corporate social responsibility refers to the concern businesses have for the welfare of society. Answer: TRUE Difficulty: 1 Easy Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 75) Corporate philanthropy refers to the position a firm takes on issues that affect society. Answer: FALSE Difficulty: 1 Easy Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

76) A charitable donation contributed by a corporation is an example of corporate philanthropy. Answer: TRUE Difficulty: 1 Easy Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 77) Business issues such as treating employees fairly and ethically are part of corporate responsibility. Answer: TRUE Difficulty: 1 Easy Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 78) Corporate philanthropy refers to the position a firm takes on social and political issues. Answer: FALSE Difficulty: 1 Easy Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 79) When stating a firm position on various social and political issues, corporate policies often commit company profits to back these positions. Answer: TRUE Difficulty: 1 Easy Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

80) Surveys show that students are willing to agree to lower salaries if they know their employer is participating in socially responsible activities. Answer: TRUE Difficulty: 1 Easy Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 81) In the discussion of corporate social responsibility, stakeholders and stockholders refer to the same group. Answer: FALSE Difficulty: 1 Easy Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 82) One responsibility of business is to satisfy customers by offering them goods and services with real value. Answer: TRUE Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

83) Studies show that consumers are not concerned about the socially conscious behavior of the firms with which they do business. Answer: FALSE Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 84) Customers learn to trust companies that consistently demonstrate good behavior. Those same companies can lose this position with one socially irresponsible activity. Answer: TRUE Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 85) Some investors believe it makes financial as well as moral sense to invest in companies whose practices promote sensitivity toward the environment. Answer: TRUE Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

86) "Fair disclosure" refers to a Securities and Exchange Commission rule that states when a publicly traded firm discloses information, it must share it with everyone. Answer: TRUE Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 87) Insider trading occurs when employees of publicly traded companies use private company information to profit in the stock market. Answer: TRUE Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 88) Insider trading provides the information needed for the securities markets to operate fairly and efficiently. Answer: FALSE Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 89) Businesses have a social responsibility to create jobs. Answer: TRUE Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 29 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

90) Promoting social justice is a responsibility of society, but not business. Answer: FALSE Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 91) In the long run, a firm's loyalty to their employees can pay off financially. Answer: TRUE Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 92) Getting even is one of the most powerful incentives for good people to do bad things. Answer: TRUE Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 93) The green movement has turned the heads of very few firms. Answer: FALSE Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

94) A social audit is a systematic evaluation of an organization's progress toward implementing programs that are profitable. Answer: FALSE Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 95) The green movement has resulted in a positive impact on U.S. jobs. Answer: TRUE Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 96) A firm's net social contribution is a company report that measures the difference between its positive social contributions and its negative social impact. Answer: TRUE Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 97) A social audit measures a firm's progress in the area of worker-management relations. Answer: TRUE Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

98) Watchdogs (including customers, socially conscious investors, and environmentalists) monitor how well firms enforce their ethical and social responsibility policies. Answer: TRUE Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 99) A business that takes a public position on a political issue that affects the welfare of society is exercising corporate social responsibility. Answer: TRUE Explanation: Corporate policy is one dimension of social responsibility. It refers to the position a firm takes on issues that affect the firm and society, including political issues. Difficulty: 2 Medium Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 100) Defining a socially responsible company is complicated. Businesses differ from other businesses, as well as the people they serve, on what we mean by "socially responsible." Answer: TRUE Explanation: The majority of MBA students surveyed said that they would take a lower salary to work for a socially responsible company. But when asked to define a socially responsible company, things got complicated. It appears we want to be socially responsible; we just can't agree on what it involves. Difficulty: 2 Medium Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

101) Opponents of corporate social responsibility argue that when companies use their profits to promote social causes, they are not being fair to investors who provided the funds for the purpose of financial gain. Answer: TRUE Explanation: Critics, including the late Milton Friedman, believe that a firm is first and foremost responsible to its owners (investors) who provided the funds for growth and financial gain. Some go so far as to say that the act is essentially "stealing from investors." Difficulty: 2 Medium Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 102) A corporate policy should never make a value statement about the environment or other social and political issues, because it is doubtful the company can live up to the proclamation. Answer: FALSE Explanation: Corporate policies refer to the position a firm takes on social and political issues. As part of being socially responsible, firms make policy and commit to actively participating in activities that promote the welfare of society. Difficulty: 2 Medium Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 103) Corporate social responsibility covers all those social issues outside our businesses that affect customers and the environment, but not internal issues such as employee considerations and work safety. Internal issues are covered by business laws. Answer: FALSE Explanation: Corporate responsibility includes everything from hiring minority workers to making safe products, minimizing pollution, using energy wisely, and providing a safe work environment. Difficulty: 2 Medium Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 33 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

104) Some experts feel that corporate social responsibility means solely making money for stockholders. Answer: TRUE Explanation: Milton Friedman, a Nobel laureate in economics, said that corporate social responsibility means making money for your stockholders. He thought that doing anything else was moving dangerously toward socialism. Difficulty: 2 Medium Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 105) In a famous speech, former President John F. Kennedy proposed that businesses had four basic rights, and in his own words, he proclaimed that "each one of them leads us back to the right to keep the profits from one's business." Answer: FALSE Explanation: Kennedy's four basic rights proposal was directed toward the rights of consumers. They are (1) the right to safety, (2) the right to be informed, (3) the right to choose, and (4) the right to be heard. Difficulty: 2 Medium Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 106) Often it is the threat of negative publicity that pressures businesses to enforce their corporate code of ethics. Answer: TRUE Explanation: One important thing to remember is that it isn't enough for a company to be right when it comes to ethics and social responsibility. It also has to convince its customers that it's right. Difficulty: 2 Medium Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

107) Although the green movement is a social trend, it is difficult to predict its future contributions to society. Answer: FALSE Explanation: Currently renewable-energy and energy-efficiency industries account for 9 million jobs and by 2030, the prediction is that this figure will jump to 40 million more jobs in engineering, manufacturing, construction, accounting, and management. Difficulty: 2 Medium Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 108) As a response to various scandals, the federal government now requires social audits of all U.S. businesses. Answer: FALSE Explanation: A social audit is a response to an integrity-based approach to ethics, which goes beyond what is required by law. Firms voluntarily prepare a self-evaluation of the progress made in implementing socially responsible and responsive programs. Difficulty: 3 Hard Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 109) Chip's CPUs, a computer chip manufacturer, knowingly sold flawed chips and decided not to tell its customers of the possible problems. When it became public knowledge, however, the firm's stock price fell dramatically. This demonstrates the value that investors place on the ethical behavior of businesses. Answer: TRUE Explanation: The perception of unethical business practices will cause profit-seeking, socially conscious investors to react to ethically unfavorable circumstances. Difficulty: 3 Hard Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation

110) At a recent town hall meeting, citizens expressed concern regarding the impact of a proposed new casino. The owner of the proposed casino responded, "I don't know what all of this fuss is about. I'm just a businessman trying to earn a profit, provide new jobs, and pay taxes." His response reflects an overall commitment to corporate social responsibility. Answer: FALSE Explanation: Corporate social responsibility is the concern businesses have for the welfare of society. While a firm's primary orientation may be toward the interests of investors, the welfare of all stakeholders should be considered. Difficulty: 3 Hard Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 111) Make it Better, Inc. is a large insurance company in the Midwest. Make it Better made its corporate philanthropy public when it announced 3% of its profits would be donated toward the cultural and environmental concerns of Des Moines, the home of Make it Better's corporate headquarters. The CEO stated, "In honor of several hundred employees that come to work here every day, we want to give something back." Since this is only helping one metropolitan area, the donation falls outside the realm of corporate social responsibility. Answer: FALSE Explanation: This is clearly corporate philanthropy, a form of corporate social responsibility. The firm is committed toward acting responsibly within society. These acts have no physical or political boundaries. Difficulty: 3 Hard Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation

112) Fresh Coats Paint Co. promotes its products as nontoxic and made from natural, organic substances. The paints are safe for all persons, including those with asthma and other lung conditions. If consumers learn that Fresh Coats' paints do not meet their expectations, their reaction is likely to tarnish the company's image. Answer: TRUE Explanation: It's not enough for companies to brag about their social responsibility efforts. They must live up to the expectations they raise or face the consequences. Customers want to do business with companies they can trust. Difficulty: 3 Hard Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 113) It's merger mania in the banking industry. Shortly after Bank of Bux bid on The Abundance Bank, a story hit the local news about the investigation into the purchase of several thousand shares of stock of the Abundance Bank by three of its top executives, just prior to the announcement that Bank of Bux planned to buy Abundance Bank. Upon close examination by the SEC (Securities and Exchange Commission) it was determined that the stock purchases were an illegal maneuver on the part of these executives. This is an example of insider trading. The executives were "banking" on the stock price rising sharply when the purchase announcement was made public. Answer: TRUE Explanation: Insider trading uses private company information to further insiders' own fortunes or those of family and friends. Regulation FD, the fair disclosure rule, now stipulates that companies must provide the same information to everyone. Difficulty: 3 Hard Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation

114) Anna is a stockbroker for Bank of Bux. A client who works at Game Guys, Ltd., just called to purchase thousands of shares of Game Guys' company's stock. He reveals to her that the company is soon announcing the appointment of a new superstar CEO. Anna asks her client if this information is public knowledge. The reason she asks is to make certain that her client, her company, and she remain in compliance with Regulation FD, the fair disclosure rule. Answer: TRUE Explanation: The Securities and Exchange Commission, the organization that monitors all publicly traded companies, created Regulation FD, the fair disclosure rule, which says that companies that release any information must share it with everyone, and not just a few. Everyone has the same opportunity to use the information to make financial decisions. Difficulty: 3 Hard Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 115) Recently, Bob was trying to choose among three mutual fund investments for his retirement account. As a socially conscious investor, he will prefer to invest in funds that hold the stocks of oil and coal companies, as opposed to wind-turbine and renewable energy companies. Answer: FALSE Explanation: Socially conscious investors make an effort to invest in companies that show high levels of social responsibility. One aspect of social responsibility deals with being green, or environmentally conscious. Companies involved with new and renewable energy sources, including the use of wind and solar energy, are considered green companies. Difficulty: 3 Hard Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 116) U.S. businesses claim that unethical business practices are common outside the U.S. Answer: TRUE Difficulty: 1 Easy Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 38 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

117) The ethical standards by which international political leaders are judged are more lenient today than they were in years past. Answer: FALSE Difficulty: 1 Easy Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 118) Many U.S. companies are demanding socially responsible behavior from their international suppliers. Answer: TRUE Difficulty: 1 Easy Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 119) Due to the fact that American ethical standards are very clear-cut, international suppliers do not have difficulty adhering to them. Answer: FALSE Difficulty: 1 Easy Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

120) The objective of the Inter-American Convention Against Corruption document formulated and signed by the Organization of American States is to identify common global ethics. Answer: TRUE Difficulty: 1 Easy Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 121) The International Organization for Standardization (ISO) plans to publish a standard on social responsibility called ISO 26000. Answer: TRUE Difficulty: 1 Easy Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 122) U.S. businesses consider the Foreign Corrupt Practices Act as legislation that has helped increase their profits abroad. Answer: FALSE Difficulty: 1 Easy Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

123) All U.S. companies practice the same ethical standards when dealing with suppliers and contract manufacturers abroad. Answer: FALSE Difficulty: 1 Easy Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 124) Due to their significant economic power, large multinational firms can ignore the ethical standards of a society without consequences. Answer: FALSE Explanation: Nike and McDonald's are both international firms that have been criticized for actions that some view as unethical. Difficulty: 2 Medium Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 125) U.S. businesses have little influence over the behavior of businesses from other countries. Answer: FALSE Explanation: American businesses are demanding socially responsible behavior of their international suppliers. Difficulty: 2 Medium Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

126) Applying the ethical standards of the U.S. to foreign firms is a difficult process for U.S. firms. Answer: TRUE Explanation: Requiring international suppliers to adhere to American ethical standards is not as clear-cut as you might think. Is it always ethical for American companies to demand compliance with our moral standards? What about countries where child labor is an accepted part of their society? Difficulty: 2 Medium Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 127) "Hear no evil, see no evil, speak no evil" is the best policy for U.S. firms to follow in their dealings with corrupt foreign suppliers. Answer: FALSE Explanation: American businesses will be judged by the company they keep. Sears, for example, will not import products made by Chinese prison labor. To do so would tarnish the corporate image of Sears. Difficulty: 2 Medium Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 128) While "doing the right thing" is an admirable code of ethics, there are no international organizations dealing with global ethics and corruption. Answer: FALSE Explanation: Several international organizations have entered into agreements to identify common global ethics and to fight corruption. The Organization of American States, the European Union, and the Organization for Economic Cooperation and Development have entered into anti-corruption agreements. Difficulty: 2 Medium Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 42 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

129) Due to the complicated laws and ethical standards abroad, U.S. businesses are encouraged to adopt a "don't ask, don't tell" policy. Answer: FALSE Explanation: U.S. businesses are held to high ethical standards, whether they are dealing with customers in the U.S. or internationally. Large and small companies are scrutinized by watchdog groups. International bodies such as the Organization of American States, the European Union, and the Organization for Economic Cooperation and Development have adopted global ethical policies. Difficulty: 2 Medium Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 130) According to the Reaching Beyond Our Borders box, corporate ethics can clash with cultural ethics, especially in global business. Answer: TRUE Explanation: The box tells the story of Joe, a telecommunications employee. Joe used his residential reimbursement in a way the company had not intended or backed. Difficulty: 2 Medium Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

131) In the Reaching Beyond Our Borders box, the story proves that a large multinational company can ask its employees to follow, and should expect them to follow, the same ethical standards they would practice if living and working within the U.S. borders. Answer: FALSE Explanation: The story demonstrates how one company's belief that their employee policies are reasonable may not span continents and across borders. The employee wanted the same housing allowance as other employees who live and work in South America, but did not want to spend the entire housing allowance on his living quarters, as stipulated by the employer. Difficulty: 2 Medium Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Analysis AACSB: Ethics Accessibility: Keyboard Navigation 132) In the Reaching Beyond Our Borders box, the story demonstrates the many ethical similarities between North and South American businesses. This is fortunate for large firms that do business south of the U.S. border. They can depend on their subsidiary firms to have no problems when implementing U.S. company employee policies. Answer: FALSE Explanation: The story demonstrates how one company's belief that their employee policies are reasonable may not span continents and across borders. The employee wanted the same housing allowance as other employees who live and work in South America, but did not want to spend the entire housing allowance on his living quarters, as stipulated by the employer. Difficulty: 2 Medium Topic: Reaching Beyond Our Borders box Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

133) American clothing manufacturer Simple Suits was sued in New York courts by watchdog groups that discovered the poor working conditions in manufacturing plants in a U.S. territory. Customers are typically concerned with human rights abuses and other problems with supplier relationships at home and abroad. Answer: TRUE Explanation: Companies who contract manufacturing abroad are subject to watchdog groups and others who expect them to be socially responsible when partnering with low-cost labor manufacturers abroad. These organizations are watching; the companies are starting to make ethical decisions about working conditions in third-world countries before the government interferes. Difficulty: 3 Hard Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 134) Christina owns a boutique and is ordering jewelry made using semi-precious stones from a supplier in Mexico. Due to low wages in Mexico, her supplier promised an excellent wholesale price for these goods. You agree with Christina when she explains to you that international business law is very clear-cut with these dealings. As long as the supplier is not breaking any labor laws in his country, her social responsibility is covered. Answer: FALSE Explanation: The fairness of requiring international suppliers to adhere to U.S. ethical standards is not as clear-cut as we would like it to be. U.S. businesses will be held to a higher standard by their customers and watchdogs. Particularly, the issue of low wages and child-labor laws in foreign countries is of great concern to socially conscious investors and customers. Difficulty: 3 Hard Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation

135) Obeying the law is ________ ethical behavior. A) essentially the same as B) the first step toward C) the opposite of D) unlikely to lead to Answer: B Difficulty: 1 Easy Topic: The Ethical Concerns that Affect Business Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 136) ________ refers to standards of moral behavior. A) Legality B) Responsibility C) Integrity D) Ethics Answer: D Difficulty: 1 Easy Topic: Ethics for the Individual Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 137) A recent study revealed that most Americans have A) strong moral values. B) a strong desire to do what is right. C) few moral absolutes. D) a great desire to help their community. Answer: C Difficulty: 1 Easy Topic: Ethics for the Individual Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

138) Which of the following statements best describes ethical behavior in the U.S.? A) Due to the diverse cultures that make up the U.S. it is difficult to identify common standards of ethical behavior. B) The only common standards of ethical behavior in the U.S. are reflected in religious teachings. C) We can find common moral values that many Americans uphold, including respect for human life, self-control, honesty, integrity, and courage. D) Americans will generally describe the golden rule as the only statement of value that they uphold. Answer: C Difficulty: 1 Easy Topic: Ethics for the Individual Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 139) The danger in writing new laws to correct behavior is that A) people may begin to think that any behavior that is legal is ethically acceptable. B) people will see the difference between ethics and legality. C) legal behavior will reflect the totality of people's relations with one another. D) there will not be enough jails to house those who break the law. Answer: A Explanation: The danger in writing new laws to correct behavior is that people may think that any behavior that is within the law is acceptable. The measure of behavior, then, becomes "Is it legal?" Ethics and legality are two very different things. Difficulty: 2 Medium Topic: The Ethical Concerns that Affect Business Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

140) Given the ethical lapses that are prevalent today in our businesses, which of the following can be done to restore trust in the free-market system and leaders in general? A) Business leaders that have broken the law should be given another chance. B) New laws making accounting records transparent may help restore trust. C) Making the government accountable for business leader behavior will restore trust. D) It's up to the government to pass laws requiring ethical behavior of all leaders, business and otherwise. Answer: B Explanation: Those that have broken the law need to be punished accordingly. New laws making accounting records more transparent (easy to read and understand) and making businesspeople and others more accountable may help restore trust in the free-market system. But laws don't make people honest, reliable, or truthful. Difficulty: 2 Medium Topic: The Ethical Concerns that Affect Business Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 141) Laws represent the standards of ________ behavior. A) ethical B) legal C) moral D) socially responsible Answer: B Explanation: Laws are written to protect ourselves from fraud, theft, and violence. Ethics go beyond the law. Many immoral and unethical acts are well within the law. Difficulty: 2 Medium Topic: The Ethical Concerns that Affect Business Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

142) Ethical behavior covers a ________ range of conduct than legal behavior. A) broader B) more limited C) smaller D) less demanding Answer: A Explanation: Ethical behavior requires more than following the law, but following the law is an important first step. A society gets into trouble when people consider only what is illegal and not also what is unethical. Difficulty: 2 Medium Topic: The Ethical Concerns that Affect Business Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 143) Many individuals today believe that ethical behavior is determined by what is best for them at the time. This is an example of A) situational ethics. B) moral absolutes. C) the Golden Rule. D) new age realism. Answer: A Explanation: Many individuals look at each situation before deciding whether it's right to steal, lie, or text and drive. They seem to think that what is right is whatever works best for the individual and that each person has to work out for himself or herself the difference between right and wrong. That is the kind of thinking that has led to the recent scandals in government and business. Difficulty: 2 Medium Topic: Ethics for the Individual Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

144) Considering the potential impact on others prior to making a decision is consistent with ________ behavior. A) legal B) anti-social C) ethical D) self-motivated Answer: C Explanation: Ethics reflects people's proper relations with one another. Difficulty: 2 Medium Topic: Ethics for the Individual Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 145) Many Americans define ethical behavior according to the situation in which they find themselves. This way of thinking suggests that there may be situations where ________ to cheat, steal, or lie. A) it is absolutely wrong B) it might be okay C) business people are expected D) capitalism forces people Answer: B Explanation: A recent study revealed that Americans have few moral absolutes. Depending upon the situation, many individuals decide whether it is right to steal, lie, cheat, or even drink and drive. They believe that each person should work out what is right or wrong for him/herself. This kind of thinking has led to recent scandals in government and business. Difficulty: 2 Medium Topic: Ethics for the Individual Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

146) Purposefully understating your firm's income to avoid paying higher taxes is an example of A) an accepted business practice. B) tax accountants doing their job. C) illegal behavior. D) a firm's responsibility to its owners. Answer: C Explanation: The first standard in business ethics is the legality of the activity. Tax evasion is illegal. Difficulty: 3 Hard Topic: The Ethical Concerns that Affect Business Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 147) When police set up sobriety checkpoints, they aim to lessen drunk driving and save lives. While not required, the makers of apps that help users navigate around the checkpoints have complied with the public request of several legislators and have obediently stopped operating. After studying about ethics and social responsibility, which of the following statements applies to this situation? A) Laws represent the minimum guidelines that companies must follow, whereas a company's ethical stance may venture beyond the minimum level of compliance. B) App developers that keep operating are showing corporate social responsibility because they demonstrate concern for their investors, which is exactly where their focus should be. C) App developers no longer operating are acting philanthropically toward government. D) App developers that keep operating are showing their distrust for big government, and their avoidance of contributing toward philanthropic causes. Answer: A Explanation: Laws represent the minimum level of compliance required by citizens and businesses. A society may falter if businesses consider only "what is legal" when making company decisions. Behaving ethically requires more than just following the law. Difficulty: 3 Hard Topic: The Ethical Concerns that Affect Business Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation

148) GloboTech recently used intentional accounting irregularities to make the company look more profitable than it actually was. GloboTech ________. A) provided its stockholders profit through a tax loophole. B) acted in an acceptable business manner. C) engaged in illegal behavior. D) executed its responsibility to its owners. Answer: C Explanation: The first standard in business ethics is the legality of the activity. Engaging in accounting irregularities is illegal. Difficulty: 3 Hard Topic: The Ethical Concerns that Affect Business Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 149) Tobacco companies initially refused to voluntarily place health warnings on their packages. In response, the federal government passed laws requiring health warnings on all cigarette packages. With respect to ethical behavior, this sequence of events is A) the intended approach. B) the desired approach. C) not the desired approach. D) not really a concern. Answer: C Explanation: Ethical behavior by businesses is a reflection of a concern for the welfare of society as a whole. Many different sources give the following statements of basic moral values: integrity, respect for human life, self-control, honesty, courage, and self-sacrifice are right; cheating, cowardice, and cruelty are wrong. Difficulty: 3 Hard Topic: The Ethical Concerns that Affect Business Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation

150) When Kira graduated with a degree in computer science, she started her software company. On her first day of operations, she posted a sign that read, "This company will always operate within the legal limits of the law." Posted where all employees could clearly see it each day, this demonstrated A) her commitment to high ethical standards of behavior. B) her commitment to respect the law. C) her expectation that all employees follow the laws that apply to the business. D) her aversion to cheating, stealing, and dishonesty. Answer: C Explanation: Following the laws that apply to her business, and expecting employees to do the same, will protect the firm from paying the price of convictions for crimes that are clearly against the law; however, operating within a legal framework is only the first step toward behaving as an ethical company. Difficulty: 3 Hard Topic: The Ethical Concerns that Affect Business Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 151) Employees at GloboTech, a start-up software company, noticed that the owner overlooked certain questionable actions of high billing associates. Other employees, who worked hard but only brought in an average number of new clients each month, were highly scrutinized. After you read this chapter about the ethical behavior of many Americans, which of the following statements applies here? A) This story indicates that moral absolutes are very prevalent today in business settings. B) The owner will continue to operate this way until someone blows the whistle. C) We cannot expect people in the U.S. to all follow similar ethical patterns because there are too many cultures to deal with. Businesses are no different. D) As is often the case today, some leaders will look at each situation individually when making value judgments. Answer: D Explanation: Although not recommended, some leaders will evaluate each action situationally. This has dramatically decreased moral absolutes. Difficulty: 3 Hard Topic: The Ethical Concerns that Affect Business Learning Objective: 04-01 Explain why obeying the law is only the first step in behaving ethically. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation

152) Which of the following questions will help individuals and organizations when deciding if their decisions are ethical? A) Can I do this without getting caught? B) Is it balanced? C) Has it been done before? D) Is there a desirable alternative? Answer: B Difficulty: 1 Easy Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 153) When discussing moral and ethical issues, it is helpful to remember that ethical behavior begins with A) schools. B) religious institutions. C) law enforcement officers. D) each of us. Answer: D Difficulty: 1 Easy Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 154) The first step when facing an ethical dilemma is to ask A) "Is it legal?" B) "Is it balanced?" C) "How will it make me feel about myself?" D) "Is it ethical?" Answer: A Difficulty: 1 Easy Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 54 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

155) Which of the following questions can help us avoid a decision that would injure our selfesteem? A) Is it legal? B) Is it balanced? C) How will it make me feel about myself? D) How can I avoid taking the blame? Answer: C Difficulty: 1 Easy Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 156) Ethical dilemmas in business A) force us to make poor choices. B) always end up bringing out the best in us. C) often force us to choose between equally unsatisfactory alternatives. D) define us as being moral absolutists or moral situationalists. Answer: C Difficulty: 1 Easy Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

157) Ethical behavior will result in which of the following? A) Mistrust between employees and managers. B) Agreements that create benefits for only the shareholders. C) Negative publicity from the news media. D) Improved self-esteem making us feel good about our decision. Answer: D Explanation: Decisions that go against our sense of right and wrong make us feel bad—they corrode our self-esteem. Following an ethics-based approach to decision making will result in improved self-esteem. Difficulty: 2 Medium Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 158) Business relationships often present ethical dilemmas that are A) not easily resolved. B) easily resolved by following the relevant laws. C) best resolved by creating a win-lose situation. D) irrelevant and therefore require no action. Answer: A Explanation: The textbook describes an ethical dilemma as a problem without a satisfactory solution. Sometimes you must choose between equally unsatisfactory alternatives. Even for companies and individuals with a strong code of ethics, there are still no easy solutions to ethical problems. Difficulty: 2 Medium Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

159) An ethical dilemma refers to a situation where you must A) treat someone unfairly. B) choose between equally unsatisfactory alternatives. C) choose between a correct and an incorrect option. D) balance the concerns of profit and legality. Answer: B Explanation: Sometimes situations leave no desirable alternative. It can be very difficult to maintain a balance between ethics and other factors such as pleasing stakeholders. Difficulty: 2 Medium Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 160) A U.S. senator has just told you that for a generous contribution to her reelection fund, she would ignore your company's apparent violation of several antipollution laws. Which of the following "ethics check questions" would you consider first? A) Is it legal? B) Is it fair and balanced? C) How will it make me feel about myself? D) Is it a generous amount? Answer: A Explanation: Agreeing to this offer would be (1) illegal, (2) unfair to other involved parties, and (3) damaging to your self-esteem. However, the most basic ethics check question is "Is it legal?" Difficulty: 3 Hard Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation

161) Your friend, Marco, offers to share with you a paper he wrote for his Introduction to Business class last semester. When you tell him that it wouldn't be fair, he reminds you of your habit of reading an entire book at Barnes & Noble without paying for the book. Which ethicsbased question would be most helpful in evaluating these situations? A) Is it legal? B) Is it balanced? C) Who wins and who loses? D) Will I get caught? Answer: B Explanation: The question in these situations is one of fairness rather than legality. Balancing self-interests with the interests of others creates a win-win environment. Difficulty: 3 Hard Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 162) A high-level manager gathers his team of supervisors together to create a new office policy that will affect all employees at the company. After receiving a verbal okay from the supervisors, he then proceeds to pass around a written form of the new policy and asks all members of the team to initial it. He explains to the supervisors that the new policy will be posted in the break rooms on each floor of corporate headquarters. If you were a part of this work team, which question would you ultimately ask yourself before initialing your approval of this policy? A) Is it legal? B) Is it balanced? C) How will it make me feel about myself? D) Is it a lose-lose situation? Answer: C Explanation: By initialing this document, the supervisor is confident that it is the right decision and is proud to share the decision with friends and co-workers. He/she is willing to show everyone that he/she believes it is the ethical way to operate. Difficulty: 3 Hard Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation

163) The majority of CEOs blame unethical employee conduct on A) the breakdown of traditional religious institutions. B) a failure of leadership to establish ethical standards. C) the increase in lawsuits used to avoid personal responsibility. D) the nation's business schools that tolerate unethical behavior in students. Answer: B Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 164) Ethical behavior at work is learned by A) attending corporate responsibility seminars. B) tracking the failures of those who are caught in business scandals. C) reading about why others were fired from the job. D) observing the actions of others. Answer: D Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 165) Which of the following is a reason why a business should be managed ethically? A) It's the right thing to do. B) There are strict global regulations require it. C) It's the law in the U.S. D) Your employees demand it. Answer: A Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

166) Relationships between businesses and among nations A) should be based on international law, exclusively. B) should be based on fairness, honesty, openness, and moral integrity. C) should be scrutinized carefully to make some determination as to whether both sides have the same type of leader behavior when it comes to assigning work. D) will be adversarial because seldom does either side believe in win-win situations. Answer: B Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 167) Corporate values are A) a personal matter to be determined by each employee. B) taught by attending company-sponsored seminars. C) instilled by the leadership of outside consultants. D) learned by observing the actions of others in the organization. Answer: D Explanation: Ethics is caught more than it is taught. That is, people learn their standards and values from observing what others do, not what they say. Difficulty: 2 Medium Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

168) When managers disregard the company's ethical concerns, the likely result is A) a reduction in employee turnover. B) an improvement in overall manager morale. C) a reduction in lawsuits. D) a general mistrust between workers and management. Answer: D Explanation: Corporate standards demonstrated by top management impact the values of the rest of the organization. People learn their standards and values from observing others. Any trust and cooperation between workers and managers must be based on fairness, honesty, openness, and moral integrity. Difficulty: 2 Medium Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 169) Creating competition between employees within the corporation A) can encourage employees to deceive customers. B) should focus on improving corporate profit. C) must be ignored when corporate ethics are developed. D) can bring out the best in employees. Answer: A Explanation: The text refers to cell phone service representatives. Poorly designed incentive programs can lead employees to deceive their customers. Difficulty: 2 Medium Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

170) Following an ethics-based approach to decision making will normally lead to higher A) profits. B) trust and cooperation. C) prices. D) employee turnover. Answer: B Explanation: Trust and cooperation must be based on a foundation of fairness, honesty, openness, and moral integrity. These are the characteristics of an ethics-based approach to decision making. Difficulty: 2 Medium Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 171) Following an ethics-based approach to decision making will normally lead to A) higher profits. B) lower employee turnover. C) lower prices. D) more competition. Answer: B Explanation: Trust and cooperation must be based on a foundation of fairness, honesty, openness, and moral integrity. A business should be managed ethically for many reasons: to maintain a good reputation; to keep existing customers; to attract new customers; to avoid lawsuits; to reduce employee turnover; to avoid government intervention; to please customers, employees, and society; and simply to do the right thing. Difficulty: 2 Medium Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

172) The Irish Plastering Corporation recently instituted a corporate ethics code. The president of the company, Seamus McHale, realized that ethical relationships are based on A) fairness and honesty. B) strict penalties for illegal activities. C) a full-time compliance officer monitoring employee behavior. D) watchdogs and whistleblowers. Answer: A Explanation: Ethical relationships with a spirit of trust and cooperation are based on fairness, honesty, openness, and moral integrity. Difficulty: 3 Hard Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 173) Which of the following would most likely involve ethical concerns? A) Overstating an expense report B) Forecasting sales for the next year C) Developing the marketing plan for the next year D) Improving working conditions Answer: A Explanation: Ethics reflects proper relations with one another. Overstating an expense report is not honest. Difficulty: 3 Hard Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation

174) With respect to business ethics, it can be said "it takes two to tango." This indicates that A) dancing around issues should be part of a company's code of ethics. B) an individual's behavior is influenced by the behavior of others. C) teamwork eliminates a need for one's personal ethics. D) management is insensitive to ethical issues. Answer: B Explanation: Individuals do not usually act alone. They need the implied, if not the direct, cooperation of others to behave unethically in a corporation. In addition, the leadership and example of strong top managers instill positive corporate values. Difficulty: 3 Hard Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-03 Describe management's role in setting ethical standards. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 175) Establishing a formal code of ethics is A) more common with small businesses than large businesses. B) unnecessary given the level of government regulation. C) growing in popularity. D) mandated by the Corporate and Criminal Fraud Accountability Act. Answer: C Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

176) A(n) ________-based ethics code emphasizes the prevention of unlawful behavior by increasing control and penalizing wrongdoers. A) legal B) corporate responsibility C) compliance D) integrity Answer: C Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 177) Which of the following terms describes someone who reports illegal or unethical behavior? A) Whistleblower B) Hornblower C) Watch tower sentinel D) Integrity watchdog Answer: A Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 178) A(n) ________-based ethics code defines corporate values, creates a supportive environment, and stresses shared accountability among employees. A) social B) corporate responsibility C) compliance D) integrity Answer: D Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 65 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

179) Compliance-based ethics codes A) conform to U.S. laws and regulations. B) enable responsible employee conduct. C) use education, leadership, and accountability to reinforce the code. D) create a "do-it-right" climate that emphasizes core values. Answer: A Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 180) To improve America's business ethics A) Congress must pass an ethics bill. B) ethics must be taught in every business school around the globe. C) a company's suppliers must be thoroughly investigated for ethical violations. D) company leaders should adopt and support a corporate code of ethics. Answer: D Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 181) After developing a code of ethics, it should be communicated to A) everyone with whom the business has dealings. B) the Attorney General in jurisdictions where the business has operations. C) all levels of management. D) stockholders. Answer: A Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

182) A whistleblower is a person who A) monitors employees who work overtime. B) reports illegal or unethical behavior in the corporation. C) reports health or other corporate emergencies to 911. D) works in the human resource department. Answer: B Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 183) Which of the following is a characteristic of an effective ethics officer? A) A background in human resource management B) Exceptionally organized C) Has a capacity to serve as a counselor and an investigator D) Communicates primarily via e-mail Answer: C Difficulty: 1 Easy Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 184) Compliance-based ethics codes typically A) rely on laws and regulations outside the firm for guidance. B) have a strong affinity for shared accountability among employees. C) promote a "do-it-right" climate. D) enable responsible employee conduct. Answer: A Explanation: Compliance-based ethics codes prevent unlawful behavior by increasing control and by penalizing wrongdoers. Difficulty: 2 Medium Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 67 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

185) A very critical last step in the process of establishing an ethics code is A) middle management support. B) training. C) enforcement. D) identification of the organizational ethics officer. Answer: C Explanation: Enforcement of the ethics code is critical and timely. When management ignores a written code of ethics, it becomes a worthless, shelf document. Difficulty: 2 Medium Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 186) Which of the following would be a unique focus of an integrity-based ethics code? A) Increased control over employee actions B) Shared accountability among employees C) Increased penalties for code violators D) Improved awareness of the relevant laws Answer: B Explanation: Integrity-based ethics codes define the organization's core values, create an environment that supports ethical behavior, and stress a shared accountability among employees. Difficulty: 2 Medium Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

187) Whistleblowers have long been known as people with a universal moral calling. However, rarely did these individuals receive rewards for their efforts. In reality, they would often fall onto hard times. But in 2010, with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, a provision permits whistleblowers to A) remain at their jobs, after reporting a securities violation. B) receive up to 30% of the penalty funds that exceed $1 million that the courts recover from companies proven to be in violation. C) represent securities violations only in the companies where they are employed. D) automatically receive up to a $1 million dollar reward for reporting a securities violation, as well as retain his/her job. Answer: B Explanation: The Dodd-Frank Wall Street Reform and Consumer Protection Act resulted from Wall Street bailouts and other questionable government bailouts of large corporations, who many claimed were too big to fail. In the past, employees of organizations who knew their employers were committing illegal and unethical actions were afraid to speak out for fear of reprisal. This legislation provides the potential for extrinsic rewards for employees who report questionable actions committed by their employers. If the courts recover funds from illegal transactions, the employee is promised a share these funds, 30% of any amount recovered after $1 million Difficulty: 2 Medium Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

188) What is the benefit of employing an ethics officer? A) This professional serves as a law-enforcement officer, with the authority to arrest employees who do not abide by the ethics code. B) This individual writes the ethics code and keeps this document current. He has sole authority to change the document as he sees fit. C) This professional has the responsibility to make certain that the ethics code remains a private company document; however, since the position has very little authority, it becomes a token job with high turnover. D) This individual's job is dedicated to objectively investigating ethics breaches. If necessary, employees feel comfortable with communicating confidentially to this professional. Answer: D Explanation: An ethics officer is equally comfortable with serving as a counselor or an ethics investigator for the firm. It requires a person who can maintain a high level of confidentiality and carry out an objective investigation. Difficulty: 2 Medium Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 189) While speaking with your sales team, your manager explains, "Anyone caught breaking a sales law will be fired." After reading about business ethics, you quickly identify this remark as a reference to the firm's ________ ethics. A) technology-based B) personal responsibility-based C) compliance-based D) integrity-based Answer: C Explanation: A compliance-based ethics code emphasizes the prevention of unlawful behavior by penalizing wrongdoers. Difficulty: 3 Hard Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation

190) The faculty and administration staff at your local community college are trained to ask about your career preferences, instead of suggesting courses that may not benefit your future goals. Even though it would be tempting to advise students to take extra courses just to increase the college's enrollment, employees know that it is more important to serve each student well, even if it means suggesting courses and/or degrees offered at other institutions. This approach is consistent with A) an integrity-based ethics code. B) a compliance-based ethics code. C) a response to a government mandate. D) a personal responsibility commitment. Answer: A Explanation: An integrity-based ethics code defines and communicates the organization's guiding values and creates an environment supportive of ethically sound behavior. Difficulty: 3 Hard Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 191) Enrico is a CPA for a large company. Recently, he noticed that the company's accounting records significantly overstated the amount of inventory on hand. This led to an overstatement of the assets the company holds. Initially, he brought it to the attention of his supervisor, but when nothing was done to correct the mistake in a timely manner, he decided the best course of action was to report it to the appropriate government official. Although his actions took him outside the company, Enrico was counting on current law, under the ________, to protect him against company retaliation. A) Cellar-Kefauver Act B) Sarbanes-Oxley Act C) Robinson-Patman Act D) Sherman Act Answer: B Explanation: The Sarbanes-Oxley Act was passed in 2002 to protect whistleblowers from intentional company retaliation when reporting illegal and/or unethical accounting concerns to government authorities. In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act further helped whistleblowers by allowing them to collect some of the total penalty. Difficulty: 3 Hard Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 71 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

192) A phone call to a government official by an employee of the Enron Corporation disclosed the deception and dishonesty of the firm's accounting records. This employee played the role of a A) whistleblower. B) horn blower. C) ethics officer. D) moral policeman. Answer: A Explanation: People who report illegal or unethical behavior are known as whistleblowers. Difficulty: 3 Hard Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 193) After spending several months developing a good relationship with a business client, Rob's client is now purchasing substantial amounts of products from Rob's company, resulting in high commissions for him. After checking the sales records for the past six months, a colleague of Rob's started visiting the same client in the hopes of capturing some of that client's business too. Although he considers it "legal and fair game," sales reps in his firm have begun to avoid him because they consider it a violation of A) company-based ethics. B) compliance-based ethics. C) integrity-based ethics. D) whistleblowing-based ethics. Answer: C Explanation: Integrity-based ethics define the organization's guiding values and standards of conduct. These create an environment that supports sound ethical behavior. Difficulty: 3 Hard Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation

194) Colin is a recent hire at Bender's Book Stop. On his first day in his new job, his store manager handed him a small booklet consisting of company rules. He was asked to read it and sign and submit the last page, before starting his work. Among other things, the rules explicitly discussed punishments for grievous behavior and firing if the firm could prove that the employee was stealing product from the store. This booklet represented the ________ of the store. A) company-based ethics B) compliance-based ethics C) integrity-based ethics D) whistleblowing-based ethics Answer: B Explanation: Compliance-based ethics represent unlawful standards that may justify a company in reprimanding the employee or even dismissing the employee. These standards indicate that the employer has the right to punish the employee for wrongful acts. Difficulty: 3 Hard Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 195) Corporate social responsibility describes the firm's A) exclusive responsibility to its stockholders. B) ability to plan for the unexpected. C) commitment to a management training program. D) concern for the welfare of society. Answer: D Difficulty: 1 Easy Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

196) All else being equal, socially responsible firms A) are viewed more favorably by consumers. B) enjoy significantly higher profits. C) often experience customer loyalty problems. D) fail to earn sufficient profits for their owners. Answer: A Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 197) We describe charitable donations by corporations to nonprofit organizations as ________. A) corporate philanthropy B) corporate responsibility C) corporate strategy D) structural commitment Answer: A Difficulty: 1 Easy Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 198) The position a firm takes on issues that affect the corporation as well as society is known as its A) political philanthropy. B) corporate policy. C) target posturing. D) structural positioning. Answer: B Difficulty: 1 Easy Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

199) In recent years, progressive firms have embarked upon ________, where they will commit company resources and expertise toward helping out in emergency type situations. A) corporate philanthropy B) corporate social activism C) social civility D) corporate social initiatives Answer: D Difficulty: 1 Easy Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 200) Corporate ________ covers issues such as treating employees fairly and ethically. A) responsibility B) philanthropy C) diversity D) structure and strategy Answer: A Difficulty: 1 Easy Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 201) Determining what is involved for a firm to be socially responsible A) is easy. B) varies even among those who are interested in corporate responsibility. C) helps government officials develop appropriate legislation. D) varies from industry to industry due to different laws. Answer: B Difficulty: 1 Easy Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

202) A payoff for socially conscious behavior is A) new and loyal customers. B) a large pool of investors. C) a large pool of talented employees. D) longevity due to a stable external environment. Answer: A Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 203) Which of the following statements best describes a firm's commitment to its customers? A) The firm is responsible for offering domestic products to foreign customer markets. B) One's social responsibility to customers is clear-cut. C) Customers will only support companies who make a visible effort to keep prices low. D) Firms that offer real value will develop a competitive advantage and gain customer trust. Answer: D Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 204) Companies are using ________ to communicate their corporate social responsibility actions to their customers. A) sales promotion B) traditional advertising on television and radio C) social media D) their employees, word of mouth Answer: C Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

205) Investors today are realizing financial benefit by investing in A) companies that only operate in stable environments. B) firms that have abundant resources for social initiatives. C) companies that are committed to a better environment. D) companies that are leaving a sizeable carbon footprint. Answer: C Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 206) Insider trading involves A) an online activity that establishes a barter exchange system between businesses. B) investors using private company information to further their own fortunes. C) the exchange of assets between companies in the same industry. D) a payment or reward for socially conscious behavior. Answer: B Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 207) If a business fails to meet its responsibilities to its employees, which of the following is likely to occur? A) Reduced employee turnover B) Employees believe it is easier to get ahead C) More jobs are created D) Employees do the minimum needed to get by Answer: D Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

208) In order to avoid insider trading, the SEC (Securities and Exchange Commission) has adopted a new rule called ________ that requires publicly traded companies to release information to everyone in a timely manner, rather than just to a few persons. A) Insider Trading Phenomenon B) Regulation FD (Fair Disclosure) C) Red Herring Regulation D) PDI (Public Display of Information Act) Answer: B Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 209) People need to make a living. Under this circumstance, one of the best social programs a firm can offer is A) a job. B) a commitment to programs that promote green living. C) a high-end product line. D) flexible work hours. Answer: A Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

210) The difference between an organization's positive social contributions and its negative social impacts is called their A) social scorecard. B) responsibility impact report. C) net social contribution. D) community commitment level. Answer: C Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 211) The purpose of a(n) ________ is to evaluate an organization's progress toward implementing programs that are socially responsible and responsive. A) accountability review B) social audit C) federal disclosure statement D) annual report Answer: B Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 212) Going green means A) increased global warming. B) increasing one's bottom line, before any other social considerations. C) increasing one's carbon footprint. D) increasing one's initiatives toward a concern for the environment. Answer: D Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 79 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

213) The green movement A) is not a good strategic consideration for contemporary firms. B) will never benefit a firm financially. C) is benefiting all firms financially. D) has created jobs. Answer: D Difficulty: 1 Easy Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 214) Businesses are under more and more pressure from society to be socially responsible. However, even the strongest advocates for corporate responsibility can't seem to agree A) on what social responsibility involves. B) who should be policing businesses' behavior. C) if all businesses, large and small, should be held to the same standards. D) if politicians should be held to the same standards of behavior. Answer: A Explanation: Society is demanding more ethical and moral leadership from business. However, there is uncertainty as to what being socially responsible involves. Difficulty: 2 Medium Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

215) One factor causing businesses to vigorously enforce ethical standards is the A) desire to eliminate employee turnover. B) fear of negative publicity. C) focus on criminal penalties. D) evasion of social audit measurements. Answer: B Explanation: Union officials, environmentalists, and socially conscious investors put pressure on companies to comply with ethical guidelines or face negative publicity. Difficulty: 2 Medium Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 216) When it comes to social responsibility, some people feel that "before you can do good, you must do well." This reflects a firm's primary responsibility to its A) customers. B) investors. C) employees. D) community. Answer: B Explanation: Milton Friedman made a classic statement when he said that corporate social responsibility means making money for stockholders. Difficulty: 2 Medium Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

217) Some critics of corporate social responsibility view spending money on CSR as A) a necessary evil. B) stealing from investors. C) important for America. D) moving toward capitalism. Answer: B Explanation: CSR critics believe that managers who pursue CSR are doing so with other people's money—money they invested to make more money, not to improve society. They view spending money on CSR activities as stealing from their investors. Difficulty: 2 Medium Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 218) When a firm undertakes corporate social initiatives it is A) making donations that are directly related to a company's competency. B) making long-term commitments to one cause. C) hiring a diverse workerforce. D) making safe products. Answer: A Explanation: Corporate social initiatives are actions where a company offers its distinctive competencies and deploys resources to help in emergency situations. Some companies maintain emergency response teams that are ready for deployment when global crises call for quick action. Difficulty: 2 Medium Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

219) Although college graduates would prefer to work for socially responsible companies, A) they would not consider less pay to do so. B) they are not interested in companies that spend resources for corporate social initiatives. C) they are not in agreement as to what it means to be socially responsible. D) they favor Milton Friedman's philosophy on the subject. Answer: C Explanation: Recent graduates with MBA degrees were surveyed about working for socially responsible companies. While they were willing to consider lower salaries in order to associate themselves with socially responsible businesses, they were not in agreement as to a clear-cut definition of what it meant. Difficulty: 2 Medium Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 220) Environmental quality is considered to be a public good. This means that A) ultimately it is the public that pays for environmental clean-up. B) businesses have a responsibility to minimize their environmental pollution. C) everyone enjoys a cleaner environment regardless of who pays for it. D) society places a higher value on private goods and services. Answer: C Explanation: Environmental quality is a public good; that is, everyone gets to enjoy it regardless of who pays for it. The trick for companies is to find the right public good that will appeal to their customers. Difficulty: 2 Medium Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

221) Many businesses have developed internal procedures to enforce their ethical policies. Which of the following is an example of an outside group urging ethical behavior in businesses? A) Management teams B) Union officials C) Suppliers D) Foreign trade representatives Answer: B Explanation: Investors, environmentalists, customers, and union officials apply pressure to firms via a threat of negative publicity. Difficulty: 2 Medium Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 222) A firm's carbon footprint is A) the number of employees it hires in a specific community. B) its legacy in terms of how much public good it dispersed over its lifetime. C) the amount of carbon it releases in its effort to do business. D) its participation in local fund-raising events. Answer: C Explanation: A firm's carbon footprint is the amount of carbon it releases during production, distribution, consumption, and disposal, as it goes about creating products and services. Difficulty: 2 Medium Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

223) One problem with conducting a social audit is A) that most businesses are really not very concerned with these issues. B) how to determine what should be measured and how to calculate the effect on society. C) that the primary focus of management is on the interests of stakeholders. D) governmental "red-tape." Answer: B Explanation: One of the more difficult problems with social auditing is how to define and measure what is meant exactly by "socially responsible and responsive." Difficulty: 2 Medium Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 224) The social audit is A) a company report that always includes a net social contribution. B) a government-mandated report required of all firms that have a business license. C) a company evaluation that measures the firm's social contributions inside and outside of the firm. D) a recent development that creates a ratio to compare a firm's corporate philanthropy to its profits. Answer: C Explanation: A social audit is a firm's systematic evaluation of its progress toward socially responsible and responsive programs. Difficulty: 2 Medium Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

225) An important source of public scrutiny is watchdogs. These are A) the efforts of a firm's competitors, including how often the competitors attack the firm's strategies. B) taxpayer-supported government agencies that limit a firm's ability to compete in foreign markets. C) companies designated by the government to only produce products that support the government defense program. D) socially conscious groups that make it their mission to measure the social responsibility levels of businesses, and provide consumers with their opinions about the level of corporate responsibility of various companies. Answer: D Explanation: Groups serve as watchdogs to monitor how well companies enforce their ethical and social responsibility policies. Difficulty: 2 Medium Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 226) When Delish Donuts uses in-store recycling and composting, and cleans with nontoxic detergents, Delish Donuts is participating in corporate A) philanthropy. B) social initiatives. C) responsibility. D) policy. Answer: C Explanation: Corporate responsibility includes everything from hiring minority workers to making safe products, minimizing pollution, using energy wisely, and providing a safe work environment—essentially everything that has to do with acting responsibly within society. Difficulty: 3 Hard Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation

227) The management staff at Doc's Motorcycles believes the company has a social responsibility to its community. They believe that the company can have the greatest impact in this area through cash contributions to local nonprofit organizations. This is an example of A) graduated payments. B) corporate philanthropy. C) structure and strategy. D) short-run profit maximization. Answer: B Explanation: Corporate philanthropy includes charitable donations to nonprofit groups of all kinds. Difficulty: 3 Hard Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 228) Henderson HVAC Pros is a heating and cooling company in Kansas City, Kansas. Henderson allows its employees paid time off to volunteer for nonprofit organizations. Which of the following statements best explains this company's action? A) Several smaller firms do not have enough work to keep employees busy. They fear that employees will quit and go to work elsewhere during a time of low unemployment. They protect their pool of skilled labor. B) Employers are learning that millennial employees are physically stronger. They would rather permit them to work on nonprofit construction sites and other laborious projects, than build them a gym at the company site. C) Companies find it less costly to permit employees to volunteer for food pantries and other nonprofit organizations in their area of operation, rather than make large philanthropic contributions. D) Employee time is measured as going further for social causes than monetary contributions. Answer: C Explanation: As a strategy for acting socially responsibly and meeting their corporate philanthropic obligations, employers are finding it less costly to allow employees to volunteer on company time. Difficulty: 3 Hard Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation

229) Before it was publicly known that IBM was going to take over Lotus Development, an IBM secretary told her husband, who told two co-workers, who told friends, relatives, business associates, and even a pizza delivery man. A total of 25 people received the information and traded on this tip to make a profit. These people were A) acting really smart. B) participating in insider trading. C) stealing from IBM. D) acting fairly. Answer: B Explanation: Insider trading involves insiders (such as the secretary) using private company information to further their own fortunes or those of their family and friends. Difficulty: 3 Hard Topic: Responsibility to Investors Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 230) When Blake Mycoskie started TOMS, he took the concept of ________ to a new level. With its well-known "one for one" shoe giving program, TOMS social causes are directly related to the firm's expertise of selling shoes. A) social auditing B) corporate social initiative C) corporate policy D) corporate philanthropy Answer: B Explanation: Corporate social initiative differs from traditional philanthropy because it utilizes the competencies of a business to provide help in emergency situations. Difficulty: 3 Hard Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation

231) Management's philosophy at Nike has often been that a fit body contributes to more productivity at work. Nike provides exercise facilities at its headquarters in Beaverton, Oregon, and lets employees use work time each day to relieve stress through exercise. This serious position on physical fitness is part of Nike's A) corporate philanthropy. B) corporate policy. C) community mediation services. D) participative funding. Answer: B Explanation: Corporate policy is the dimension of social responsibility that refers to a firm's position on a social and/or political issue. Difficulty: 3 Hard Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 232) Game Guys, Inc., is interested in keeping employees, customers, and the general public aware of the activities and programs it has accomplished within the community this past year. The company might consider performing a A) contributory analysis. B) responsibility review. C) social audit. D) annual payment report. Answer: C Explanation: A social audit is a systematic evaluation of an organization's progress toward implementing programs that are socially responsible and responsive. Difficulty: 3 Hard Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation

233) Last week, the Citizens for a Greener America sent a formal letter to Tee Time Golf Resort requesting that the private club measure its carbon footprint and thusly publicly disclose the amount of fertilizer and other carbon-emitting substances it's using on its two award-winning golf courses. Citizens for a Greener America is an example of A) an employee organization that has emerged at the resort. B) a watchdog group. C) a disgruntled nonprofit organization that has a beef against golfers. D) a public interest group that is demonstrating social responsibility. Answer: B Explanation: Watchdog groups monitor how well businesses enforce their ethical and social responsibilities. Environmentalist groups are one type of watchdog group that is gaining in popularity. Difficulty: 3 Hard Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation

234) After years of customer feedback, Bank of Bux is finally going paperless. The bank's communications team promoted the strategy both internally and externally. Customers were strongly encouraged to utilize the bank's website and mobile system for all their banking needs. Customers unfamiliar or uncomfortable with online banking could sign up for workshops where employees show them how to navigate both the bank's new website and mobile app. The bank's initiative demonstrates A) a gimmick for cutting costs that watchdogs will soon uncover. B) an effort to not be left in the lurches by its competitors who are using state-of-the-art website technology. C) an area where the firm can contribute to the green effort, as well as cut costs. D) a costly effort because at least 50% of all customers still prefer a paper trail due to safety concerns such as identity theft, when it comes to online banking. Answer: C Explanation: Socially conscious companies realize that the green movement is a serious social initiative that merits everyone's attention. Both product-intensive and service-oriented firms are looking for ways to increase profits through green initiatives. Customers appreciate companies that demonstrate a concern for our natural resources. The bank's efforts emphasize the need to protect the growth of trees and all things green. It is also a cost-cutting measure because in the past, the cost of paper and mailings for banking institutions was a sizeable expense. Difficulty: 3 Hard Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation

235) Enrollment at Bayside College keeps going up, despite tuition and fee hikes to help cover the cost of new wind turbines installed on campus. These turbines generate enough power to serve the campus buildings and to sell to local business establishments. After reading about corporate social responsibility, you conclude A) new technology such as wind turbines is a huge capital investment for a college. The effort demonstrates the high cost of environmental programs. B) although it is a trendy social cause, this effort is not showing good long-term social responsibility toward the students who will end up with sizeable future debt. C) this is a demonstration of corporate philanthropy. D) students are willing to pay the extra tuition in the short term because they believe that the means (the use of innovative technology) will justify the end (a better environment). Answer: D Explanation: Environmental quality is a public good that everyone gets to enjoy regardless of who pays for it. The challenge is for companies and institutions to find the public good that appeals to their constituents (customers, students, patients, clients). Difficulty: 3 Hard Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation 236) Ethical problems and issues of social responsibility are A) unique to firms involved in global trade. B) unique to the United States. C) not unique to the United States. D) less important now than in the past. Answer: C Difficulty: 1 Easy Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

237) When working with international firms, U.S. businesses A) tend to ignore the ethics of their international partners. B) expect socially responsible behavior from their business partners. C) feel that their responsibility is limited to the United States. D) try to avoid judging our international business partners by U.S. standards. Answer: B Difficulty: 1 Easy Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 238) Top leaders in government and business today are A) held to higher ethical standards than in the past. B) held to less strict moral standards than in the past. C) less interested in social responsibility than in the past. D) at odds with the general public in regard to ethical issues. Answer: A Difficulty: 1 Easy Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 239) Which of the following is an unresolved ethical issue that surrounds global trade? A) Product quality B) Labor standards C) Transportation issues D) Time to market issues Answer: B Difficulty: 1 Easy Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation

240) The Foreign Corrupt Practices Act deals with A) prison labor involved in international trade. B) high seas piracy that has had a resurgence in the past five years. C) bribery to obtain business. D) product safety concerns. Answer: C Difficulty: 1 Easy Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 241) International issues of social responsibility and ethical behavior are A) the result of greed found in capitalist countries. B) found primarily in countries with a low standard of living. C) a concern only of business professors. D) difficult and not as clear-cut as U.S. firms would like them to be. Answer: D Explanation: Ethical problems and issues of social responsibility are not unique to an economic system or level of income. Although U.S. businesses demand socially responsible behavior from their international suppliers, ethical standards are not as clear-cut as they would like them to be. Some question whether U.S. businesses should expect or require international suppliers to adhere to U.S. law. Difficulty: 2 Medium Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

242) Which of the following indicates that U.S. businesses are demanding socially responsible behavior from their international suppliers? A) The establishment of the Equal Opportunity Employment Commission B) The decision of Walmart to open stores worldwide C) The decision of Nike to cancel orders from suppliers that violate its ethics code D) The creation of the North American Free Trade Zone (NAFTA) between the U.S., Canada, and Mexico Answer: C Explanation: U.S. businesses are demanding that their international suppliers not violate human rights and environmental standards. Sears, Nike, Dow Chemical, and McDonald's have all had social responsibility issues with their international suppliers. Difficulty: 2 Medium Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 243) According to the Reaching Beyond Our Borders box, which of the following is true? A) Corporate ethics are intended to be consistent with cultural ethics. B) Corporate ethics have priority over corporate profit. C) Corporate profits have priority over corporate ethics. D) Corporate ethics can clash with cultural ethics. Answer: D Explanation: Joe falsified receipts for living expenses in order to be able to provide money for his family's education. Joe felt that this was necessary to honor the memory of his late father. The company was concerned about Joe's apparent lack of integrity. Difficulty: 2 Medium Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

244) The boxed material entitled Reaching Beyond Our Borders that told the story about Joe, the telecommunication employee, suggests that U.S. firms operating overseas are A) not as flexible on social issues as local employees would like them to be. B) exploiting employees by working them long hours at low pay. C) complying with the ethical standards of the people they employ, in the countries in which they are operating. D) responding to their stockholders' desire for profits. Answer: A Explanation: The story demonstrates a culture clash between business ethics abroad and business ethics practiced in the U.S. Joe, a telecommunication employee, used the housing allowance provided by his employer for other expenses that did not fall under the area of living accommodations. If Joe worked in the U.S., it would be highly unethical to falsify expense reports in order to receive the housing stipend. Joe did not consider it an offense in South America. Difficulty: 2 Medium Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 245) As a recent college graduate, Jonah started working for an export trading company. His job has already taken him around the globe, including Asia on several occasions. He was amazed to see the difference in working conditions in the developing nations he visited, as opposed to similar operations in the United States. The expectations of workers were not the same. Jonah's experience is an example of A) corporate philanthropy differences in different countries. B) social responsibility differences between similar firms, but in different countries. C) differences in corporate social initiatives in foreign nations. D) the need for whistleblowers abroad. Answer: B Explanation: Developing nations do not have the same labor standards as well-developed nations. In order to get ahead, employees in developing nations are willing to work in what would be considered poor working conditions in the U.S. Job choices are meager. Workers are willing to work for long hours, in poor conditions, for a few cents more each hour. Difficulty: 3 Hard Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation

246) As the number of multinational corporations continues to grow, we are experiencing a greater number of international ethical dilemmas. One very real concern has been the human rights abuses in sweatshops in exchange for cheap labor. Several retailers have now banded together to set ethical standards in foreign factories. Which of the following statements summarizes the challenges of companies doing business in developing countries and the concerns of their customers? A) Multinationals must subjectively determine the local living wage, which is usually more than the local legal wage in developing countries. Customers surveyed say they are willing to pay a few dollars more to improve working conditions in sweatshops. B) Economically sensitive customers want companies to pass along cost savings to them, at all costs, even if the products are made through offshore outsourcing. Companies want to please customers, first! C) Most multinational corporations have made no attempt to improve working standards at sweatshop factories. They will turn a blind eye to the problem unless U.S. law is passed to force the issue. Customers understand that legal limits come before ethical standards. D) Multinationals cannot be expected to demand socially responsible behavior from their supplier, including foreign sweatshops. When doing business abroad, the U.S. company need not comply with U.S. law when its supplier(s) is not in the U.S. or on U.S. territory. Answer: A Explanation: Companies must act ethically and responsibly toward employees who produce their goods and services. They must make certain that foreign producers agree to a living wage— a wage that is enough for employees to provide for themselves and their families. Customers claim they will pay a higher price if they know the difference is passed on to the employees who made the goods. Difficulty: 3 Hard Topic: The Ethical Concerns that Affect Business Learning Objective: 04-06 Analyze the role of U.S. businesses in influencing ethical behavior and social responsibility in global markets. Bloom's: Apply AACSB: Ethics Accessibility: Keyboard Navigation

247) Explain the difference between a compliance-based ethics code and an integrity-based ethics code. Answer: Compliance-based ethics codes emphasize preventing unlawful behavior by increasing control and penalizing wrongdoers. The primary focus is to conform to outside standards (laws and regulations), and avoid criminal misconduct. An integrity-based code of ethics defines the organization's guiding values, creates an environment that supports ethically sound behavior, and stresses shared accountability among employees. There is still a requirement to conform to outside standards, but that is just a starting point. Integrity-based ethics codes move beyond legal compliance to create a "do-it-right" climate that emphasizes core values, such as honesty and fair play. Difficulty: 3 Hard Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Analyze AACSB: Ethics Accessibility: Keyboard Navigation 248) Identify and discuss the five types of groups that serve as watchdogs. Also discuss how well companies enforce their ethical and social responsibility policies. Answer: 1. Socially conscious investors who insist that a company extend the firm's own high standards to all its suppliers. 2. Socially conscious research organizations that analyze and report on corporate social responsibility efforts. 3. Environmentalists who apply pressure by naming names of companies that don't abide by the environmentalists' standards. 4. Union officials who hunt down violations and force companies to comply to avoid negative publicity. 5. Customers who take their business elsewhere if a company demonstrates unethical and socially irresponsible practices. Difficulty: 3 Hard Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Analyze AACSB: Ethics Accessibility: Keyboard Navigation

249) Identify the six-step approach to achieve a long-term improvement of business ethics. Answer: 1. Top management must adopt and unconditionally support an explicit corporate code of conduct. 2. Employees must understand that expectations for ethical behavior begin at the top and that senior management expects all employees to act accordingly. 3. Managers and others must be trained to consider the ethical implications of all business decisions. 4. An ethics office must be set up with phone lines to allow employees to report questionable activities. 5. Suppliers, subcontractors, distributors, and customers must be told about the ethics program. Often pressure to put aside ethical considerations comes from outsiders, and it helps employees resist such pressure when everyone knows what the ethical standards are. 6. The ethics must be strictly enforced with timely action if any rules are broken. Difficulty: 3 Hard Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Analyze AACSB: Ethics Accessibility: Keyboard Navigation 250) Identify the three questions that an ethics-based manager should ask when facing a potentially unethical action, and provide an example of a situation where you would use these questions to evaluate a decision. Answer: Is it legal? Am I violating any law or company policy? Regardless of the situation, this is the most basic step in an ethics-based management system. Is it balanced? Am I acting fairly? Would I want to be treated this way? If a situation arises where one party wins everything at the expense of another party, the future may bring retaliation from the loser. While every situation cannot be completely balanced, it is important for the health of business relationships that we avoid major imbalances over time. An ethics-based manager maintains a win-win attitude. How will it make me feel about myself? Will I feel proud when my family learns of my decision? Decisions that go against our sense of right and wrong make us feel bad and cause us to lose our self-esteem. The examples will vary but should include a discussion of the legality of the situation, for starters. Then proceed with determining if the decision is balanced. Do both sides stand to gain something, or is it a lose situation for only one side? Do you feel good about the decision? Will others believe that you did the best you could in this situation? Difficulty: 3 Hard Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Analyze AACSB: Ethics Accessibility: Keyboard Navigation

251) Identify and discuss the social responsibilities of a firm to three of the four stakeholder groups described in your textbook. Answer: Customers: Businesses are responsible for satisfying customers by offering them goods and services of real value. One of the surest ways of failing to please customers is to be less than totally honest with them. Investors: According to Milton Friedman, businesses are responsible for generating profits for their owners and investors. Some people believe that before "you can do good, you must do well"; others believe that by doing good, you can also do well. Many people believe that it makes financial as well as moral sense to invest in companies that are planning ahead to create a better environment. By choosing to put their money into companies whose goods and services benefit the community and the environment, investors can improve their own financial health while improving society's health. Employees: Firms have several responsibilities to employees. First, they have a responsibility to create jobs if they want to grow. Once a company creates jobs, it has the responsibility to see to it that hard work and talent are respected and fairly rewarded. Employees need realistic hope of a better future, which comes only through a chance for upward mobility. Companies can demonstrate commitment and caring by giving employees salaries and benefits that help them reach their personal goals. Society and the Environment: One of business's major responsibilities to society is to create new wealth. Businesses are also partly responsible for promoting social justice. Businesses are also taking responsibility for helping to make their own environment a better place. Environmental efforts may increase the company's costs, but they also may allow the company to charge higher prices, to increase market share, or both. The environmental movement is a social trend that all generations have embraced. Businesses which show a concern for the environment may increase their costs, but customers are willing to pay higher prices if they know that the business is environmentally conscious. Difficulty: 3 Hard Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Analyze AACSB: Ethics Accessibility: Keyboard Navigation

252) Provide examples that serve to explain the differences among the following terms: (1) corporate responsibility; (2) corporate social initiatives; (3) corporate philanthropy. Answer: Corporate responsibility refers to a firm's commitment toward a number of social issues that range from the hiring of minorities to making safe products. Examples will vary. Corporate social initiatives refer to a firm taking its distinct competencies and using them in a socially responsible way. For example, TNT keeps a 50-person response team on standby to be involved in emergency response activities. Corporate philanthropy is the donating of important resources to a cause, usually donations of money and time. Providing money for local youth programs and then asking employees to utilize an hour each week to work with local youth are examples of corporate philanthropy. Difficulty: 3 Hard Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Analyze AACSB: Ethics Accessibility: Keyboard Navigation

Mini-Case Megan, Erin, and Ryan are in the middle of a heated discussion. The trio are the chief operating officers of the Frozen Fun Ice Cream Corporation and are reviewing the latest financial reports. Intense competition has resulted in deceased profits. Each of the three officers has his or her own view of how to help the company turn around. Megan suggests cutting costs by firing union workers and hiring replacement employees at lower wages. She has asked the firm's attorney to find a loophole in the contract that will allow for this action. Erin protests, stating that Megan's proposal is unethical and unfair. Erin believes that every stakeholder should be treated equally, and that profiting at the expense of others is reckless. Ryan, agreeing in part with Erin, states, "We must be sensitive to all affected parties, but clearly our primary goal is to make a profit for our investors." In an attempt to resolve the conflict between Megan and Erin, Ryan offers an alternative suggestion: reduce the firm's charitable contributions until acceptable profit levels rise. Erin is outraged and reminds Ryan of the social responsibilities that Frozen Fun Ice Cream has to the community, environment, suppliers, employees, and investors. 253) Megan is concerned about the legality of her idea of firing union workers in order to hire employees willing to work for less pay. Megan values ________ ethics, but has little concern for other types. A) integrity-based B) compliance-based C) socially based D) policy-based Answer: B Explanation: A compliance-based ethics code emphasizes preventing unlawful behavior by seeking legal advice and following the letter of the law. Difficulty: 3 Hard Topic: How to Promote and Maintain an Ethical Environment Learning Objective: 04-04 Distinguish between compliance-based and integrity-based ethics codes, and list the six steps in setting up a corporate ethics code. Bloom's: Analyze AACSB: Ethics Accessibility: Keyboard Navigation

254) Erin recommends a marketing strategy aimed at increasing sales through the development of a positive corporate image. She suggests the first step toward this goal is to identify and evaluate the firm's programs for community involvement. Erin is calling for a ________ to be completed. A) strategic plan B) social audit C) socialist review D) corporate contribution index Answer: B Explanation: A social audit is a systematic evaluation of an organization's progress toward implementing programs that are socially responsible and responsive. Difficulty: 3 Hard Topic: Responsibilities to a Firm's Stakeholders Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Analyze AACSB: Ethics Accessibility: Keyboard Navigation 255) On which of the three ethics check questions would Megan primarily focus? A) Is it legal? B) Is it fair and balanced? C) How will it make me feel about myself? D) Is this a win-win situation? Answer: A Explanation: Megan's concern is compliance with the law. Difficulty: 3 Hard Topic: Ethics for the Individual Learning Objective: 04-02 Ask the three questions you need to answer when faced with a potentially unethical action. Bloom's: Analyze AACSB: Ethics Accessibility: Keyboard Navigation

256) Ryan's view tends to lean toward the concerns of investors, first and foremost. This is the view taken by A) corporate philanthropists. B) Franklin D. Roosevelt. C) the late Milton Friedman, famous economist. D) a watchdog such as an environmentalist. Answer: C Explanation: The late Milton Friedman, famous economist, proclaimed in a well-known speech that the only social responsibility of business was to make money for stockholders. Difficulty: 3 Hard Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Analyze AACSB: Ethics Accessibility: Keyboard Navigation 257) If management adopts Ryan's suggestion of reducing Frozen Fun Ice Cream's charitable donations until profits grow, the company will essentially reduce its A) corporate citizenship. B) nonprofit volunteerism. C) corporate philanthropy. D) RF factor. Answer: C Explanation: Corporate philanthropy involves charitable donations to nonprofit groups. Difficulty: 3 Hard Topic: Corporate Social Responsibility Learning Objective: 04-05 Define corporate social responsibility and compare corporations' responsibilities to various stakeholders. Bloom's: Analyze AACSB: Ethics Accessibility: Keyboard Navigation

Understanding Business, 12e (Nickels) Chapter 05 How to Form a Business 1) Partnerships are the most common form of business ownership. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) The three major forms of business ownership in the U.S. are sole proprietorships, partnerships, and corporations. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) Few people today start their own business. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 4) Once a business is established, it's almost impossible to change from one form of business ownership to another. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

5) When two or more people legally agree to become co-owners of a business, the form of business is called a partnership. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) A legal entity with authority to act and have liability separate from its owners is called a sole proprietorship. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 7) Corporations represent 20 percent of all the businesses in the U.S. and earn over 80 percent of the total U.S. business receipts. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) A comparison of the three major forms of business ownership shows that sole proprietorships are usually the most difficult type of business to establish. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

9) The first step in starting a sole proprietorship is to fill out a proprietorship charter application form and file it with the state government. Answer: FALSE Difficulty: 1 Easy Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10) It is usually easy to start and end a sole proprietorship. Answer: TRUE Difficulty: 1 Easy Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) The profits of a sole proprietorship are taxed as the personal income of the owner. Answer: TRUE Difficulty: 1 Easy Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) The sole proprietorship form of ownership tends to be attractive to people who want to invest in a company without taking an active role in management. Answer: FALSE Difficulty: 1 Easy Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

13) A major advantage of sole proprietorships is that an owner has limited liability for the debts of his or her business. Answer: FALSE Difficulty: 1 Easy Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) One of the strengths of the sole proprietorship is its ability to sustain rapid growth by raising large amounts of financial resources. Answer: FALSE Difficulty: 1 Easy Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) The debts of a business operated as a sole proprietorship are considered to be the personal debts of the owner of the business. Answer: TRUE Difficulty: 1 Easy Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 16) A drawback of sole proprietorships is that they usually have limited access to additional financial resources. Answer: TRUE Difficulty: 1 Easy Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

17) An advantage of forming a sole proprietorship is that it allows the owner to have more time for leisure activities. Answer: FALSE Difficulty: 1 Easy Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) If a sole proprietorship fails, the owner may lose whatever was invested in the business, and the owner's personal assets are also at risk. Answer: TRUE Explanation: Sole proprietors have unlimited liability for the debts of their business. This means that if their business gets into financial trouble they can lose their personal assets. Difficulty: 2 Medium Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 19) If the business is designated a sole proprietorship, profits are passed along to the owner. For tax purposes, these profits are accounted for with any other personal income the owner may have accumulated and taxed at the owner's personal income tax rate. Answer: TRUE Explanation: The profits of a sole proprietorship are passed through to the owner, and taxed at the owner's personal tax rate. However, owners do have to pay self-employment tax (for Social Security and Medicare). By law, sole proprietors are required to estimate their taxes and make quarterly payments to the government or suffer penalties for nonpayment. Difficulty: 2 Medium Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

20) Sole proprietors sometimes have trouble competing with large firms for expert talent. Large firms can usually pay better and offer fringe benefits that are unaffordable to the sole proprietor. Answer: TRUE Explanation: Sole proprietors often find it difficult to attract qualified employees to help run the business because often they cannot compete with the salary and benefits offered by larger companies. Difficulty: 2 Medium Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 21) Unlike partnerships, if sole proprietorships find themselves in bankruptcy, they don't need to worry about a court requiring them to sell off personal assets to pay for the debts of the firm. Answer: FALSE Explanation: Sole proprietorships have unlimited liability. This means that the proprietor is financially responsible for all debts incurred by the company. In a court of law, a judge could require the owner/proprietor to liquidate personal assets to pay the debts of the business. Difficulty: 2 Medium Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 22) Attracted to the idea of being his own boss, Christian wants to start a new business. He is confident in his abilities, and knows his potential market is strong, so he is not particularly worried about the financial risks. All of these factors suggest that Christian may favor starting his business as a sole proprietorship. Answer: TRUE Explanation: People who want to be their own boss often prefer to operate their business, at least initially, as a sole proprietorship. An advantage of the sole proprietorship is that it is a relatively easy and inexpensive form of business to set up. One drawback of a sole proprietorship is that the owner has unlimited liability. However, at this time, Eric is not worried about risk. The unlimited liability factor does not appear to be a problem for him. Difficulty: 3 Hard Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

23) Therese is a talented designer who wants to start her own women's swimwear and beach towel line. But first, she is trying to decide which form of business ownership is right for her. As a young mom who hopes to send her children to college some day, she does not want to jeopardize her savings in any way. In order to overcome these risks, Therese should start her business as a sole proprietorship. Answer: FALSE Explanation: Therese is concerned about the risk of losing personal assets if her business does not succeed. Although the sole proprietorship is easy to set up, it may not be the best form of business ownership for Therese due to her need to protect personal assets. She may want to consider a form of ownership that provides limited liability, like a corporation. Difficulty: 3 Hard Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 24) Rhonda is convinced she has the best idea for a new business. Unfortunately, her business would require a fairly high initial investment and Rhonda has poor credit and very little personal wealth. She would be unlikely to find success if she organized her business as a sole proprietorship. Answer: TRUE Explanation: Funds available to sole proprietorships are often limited to the amount the owner can raise. Thus, Rhonda's business would probably have a hard time raising enough money if she organized it as a sole proprietorship. Difficulty: 3 Hard Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 25) A general partner takes an active role in the management of the business. Answer: TRUE Difficulty: 1 Easy Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

26) All partners in a general partnership have limited liability for the debts of their firm. Answer: FALSE Difficulty: 1 Easy Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 27) In a general partnership, all partners share in management of the business and in the liability for the firm's debts. Answer: TRUE Difficulty: 1 Easy Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 28) In a general partnership, all partners are entitled to an equal share of the firm's profits. Answer: FALSE Difficulty: 1 Easy Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) Limited partnerships are just like general partnerships, except that they are partners for a limited time period. Answer: FALSE Difficulty: 1 Easy Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

30) A limited partner is an owner who assumes no management responsibility and has no liability for losses beyond the amount invested. Answer: TRUE Difficulty: 1 Easy Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 31) A limited partnership consists of one or more general partners and one or more limited partners. Answer: TRUE Difficulty: 1 Easy Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32) Although shares of master limited partnerships can be purchased on one of the national stock exchanges, these companies are taxed like partnerships. Answer: TRUE Difficulty: 1 Easy Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 33) The Uniform Partnership Act is law in most states, except California, Oregon, and Colorado. Answer: FALSE Difficulty: 1 Easy Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

34) According to the Uniform Partnership Act, the three key elements of any general partnership are (1) shares of stock to represent ownership, (2) limited liability, and (3) ease of ownership transfer. Answer: FALSE Difficulty: 1 Easy Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) According to the Uniform Partnership Act, the three key elements of any general partnership are (1) common ownership, (2) shared profits and losses, and (3) the right to participate in managing the operations of the business. Answer: TRUE Difficulty: 1 Easy Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) A recent study showed that partnerships are more likely to fail than sole proprietorships. Answer: FALSE Difficulty: 1 Easy Topic: Advantages of Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

37) A major objective of limited liability partnerships (LLPs) is to limit each partner's personal liability to the consequences of their own acts and those of people under their supervision. Answer: TRUE Difficulty: 1 Easy Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) One of the major disadvantages of a partnership is that profits must be divided equally. Answer: FALSE Difficulty: 1 Easy Topic: Disadvantages of Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39) A general partner has unlimited liability for the debts of the partnership only if he or she personally approved the decisions that resulted in those debts. Answer: FALSE Difficulty: 1 Easy Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 40) In order to protect all parties and minimize misunderstandings among partners, all terms of the partnership should be spelled out in writing. Answer: TRUE Difficulty: 1 Easy Topic: Disadvantages of Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

41) One advantage of a partnership is that there is a simple process for partners to terminate their business. Answer: FALSE Difficulty: 1 Easy Topic: Disadvantages of Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 42) Compared to sole proprietorships, an advantage of partnerships is their ability to obtain more financial resources. Answer: TRUE Difficulty: 1 Easy Topic: Advantages of Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 43) Setting up a partnership under the terms of a written agreement is a bad idea, because written agreements tend to be too inflexible and impersonal. Answer: FALSE Difficulty: 1 Easy Topic: Disadvantages of Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

44) Compared to sole proprietorships, partnerships offer the advantage of shared management and pooled knowledge. Answer: TRUE Difficulty: 1 Easy Topic: Advantages of Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 45) A limited partnership refers to a partnership set up for a temporary purpose, such as a real estate development project. Answer: FALSE Difficulty: 1 Easy Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 46) In a limited partnership, the general partners should encourage the limited partners to take a more active role in the operations of the business. After all, the limited partner has comparable liability in the business, even though he/she may not be a partner for as long a period of time as the general partners. Answer: FALSE Explanation: By definition, a limited partnership will consist of one or more general partners and one or more limited partners. The limited partners are passive investors. By law, they do not take an active role in the management of the business, yet they may share in the profits of the business and remain a partner for as long as the partnership exists. Difficulty: 2 Medium Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

47) If a partner in a limited partnership dies, the partnership ceases to exist. Answer: TRUE Explanation: If a partner in any partnership dies, the partnership agreement automatically ceases to exist. Good partnership agreements usually have provisions for these situations. Difficulty: 2 Medium Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 48) The authors suggest that potential partners discuss the types of skills that each brings to the business. Partners with complementary skills may enhance the business. Answer: TRUE Explanation: It is suggested that you ask yourself what types of skills you and your potential partners bring to the business, and whether those skills complement each other. Successful partners often come with varying backgrounds. Sometimes one partner will have the technical skills to get the job done, while others might have the business or accounting knowledge. Difficulty: 2 Medium Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 49) One method to avoid conflicts between partners is to solicit the services of a lawyer to create a well-written partnership agreement. Answer: TRUE Explanation: One of the most important tasks to achieve before forming a partnership is to create a partnership agreement. The partnership agreement addresses a number of rules that will govern the activities of the partnership, including but not limited to: the duties of each partner; the rules for adding partners; contributions by each partner; and, how profits will be distributed. Difficulty: 2 Medium Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

50) Attributes such as trust and integrity are not something you should get overly concerned about when selecting partners. This is a business decision, not a friendly game of golf. Answer: FALSE Explanation: Prospective partners should concern themselves with several aspects of the business relationship, including the values shared by partners who are entering into business together. Other things that you should ask yourself is whether the partners share the same goals and whether each partner's skills complement the others. Difficulty: 2 Medium Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 51) The fairest way to handle profits in any partnership arrangement is to divide things evenly. If there are two owners in the business, each gets 50%. If there are three owners (even if one is a limited partner), each gets 33.333% of any accumulated profits. Answer: FALSE Explanation: The partnership agreement should stipulate the way the business plans to share the profits. The partnership may not necessarily divide the profits equally among members. Several criteria may enter into the decision of how to share profits, including the expertise of each partner, the investment amount of each partner, and the amount of time each partner spends in the business. Difficulty: 2 Medium Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

52) For 11 years, Dennis and Tom have owned a car wash business as partners. Now they would like their younger brother Jimmy to join them. Unfortunately, partnership law states that only two partners can participate in a partnership. Answer: FALSE Explanation: A partnership consists of two or more owners. Unless explicitly written in the original partnership agreement, the partnership can add partners. Difficulty: 3 Hard Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 53) Janie is a general partner in a local bakery. All of her personal assets are legally protected from the debts of the business. Answer: FALSE Explanation: As a general partner, Janie assumes unlimited liability for the debts of her business. Difficulty: 3 Hard Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 54) When two of Mercedes's friends approached her about starting a business, Mercedes's was sure she did not want to risk any amount beyond her initial investment or be involved with the day-to-day management. However, she was willing to invest in the business. Mercedes's preferences suggest that she prefers a general partnership form of business ownership. Answer: FALSE Explanation: In a general partnership, all partners share in the management of the business, and have unlimited liability for the firm's debts. Since Mercedes's has no interest in managing a company and wants to limit her risk, she is more suited for a limited partnership, where her friends would serve as general partners and she would serve as a limited partner. Difficulty: 3 Hard Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 16 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

55) Penny Pebble and Stuart Stone formed a partnership in a landscape business. Under their arrangement, Penny actively manages the company and assumes unlimited liability for its debts. Stuart has invested several thousand dollars of his money with plans to share in the profits, but does not actively make management decisions, nor will he assume liability beyond his initial investment. Penny and Stuart are in a limited partnership. Answer: TRUE Explanation: A limited partnership consists of at least one general partner, who has unlimited liability, and at least one limited partner, who risks only what he or she has invested. By law, the limited partner cannot actively manage the partnership. Difficulty: 3 Hard Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 56) Huang has agreed to become a partner in his cousin's waste management business. Since he provided 30 percent of the money to start the company and built an air-conditioned garage, he is entitled to 30 percent of any profits the company earns during its first year of operation. Answer: FALSE Explanation: The division of profits in a partnership is negotiable and is not necessarily tied to the amount of the initial investment. Difficulty: 3 Hard Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Application AACSB: Knowledge Application Accessibility: Keyboard Navigation

57) After spending a summer "down under," two Oregon friends, Rick and Mick, created a general partnership to import emu from Australia to the U.S. After a year, Rick found himself at the mercy of Mick, who seemed to keep the books and seldom share the financial results, even though Rick was out selling the emu idea to farmers and ecologically conscious consumers and shipments were increasing. As their consultant, one of the first things that you inquire about is whether they are familiar with the UPA (Uniform Partnership Act), specifically the right to participate in managing the operations of the business. Answer: TRUE Explanation: The Uniform Partnership Act (adopted in every state except Louisiana) stipulates: (1) common ownership; (2) shared profits and losses; and (3) the right to participate in managing the operations of the business. Rick has the right to know and be provided with regular financial statements that pertain to his business. Difficulty: 3 Hard Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 58) Rafael is a limited partner in an online clothing company. As a limited partner, Rafael can be involved with the company for a maximum of five years. Answer: FALSE Explanation: A limited partner has limited liability and cannot actively manage the firm, but his involvement is not restricted as to length of time. Difficulty: 3 Hard Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

59) James and Reilly were arguing over who was the senior partner and who was the junior partner, even though they started the business at the same time. If you were brought on board as their business advisor, you would explain to them that all partnerships have at least one general partner (known as the senior partner) and one limited partner (known as the junior partner). Answer: FALSE Explanation: According to the Uniform Partnership Act adopted in every state except Louisiana, partners have the right to (1) common ownership; (2) shared profits and losses; and (3) the right to participate in managing the operations of the business. In some cases, partners may have differing skills and skill levels (or level of experience) of the other partners, but as partners they are on equal footing. A good partnership agreement will spell out the details of the partnership. Further, partnerships can be (1) general partnerships or (2) limited partnerships, but these variations do not hold the senior/junior designation. Difficulty: 3 Hard Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 60) A conventional corporation is a state-chartered legal entity, with authority to act and have liability separate from its owners. Answer: TRUE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 61) In today's economy, only large business enterprises should operate as corporations. Answer: FALSE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

62) The owners of a corporation are known as general corporate partners. Answer: FALSE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 63) A corporation can raise financial capital by selling shares of stock to interested investors. Answer: TRUE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 64) Stockholders in a corporation accept unlimited liability for the corporation's debts. Answer: FALSE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

65) A disadvantage of corporations is that their charters are only valid for 99 years, so corporations are less permanent than other types of businesses. Answer: FALSE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 66) When one of the owners of a corporation dies, the corporation legally ceases to exist. Answer: FALSE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 67) Corporations are easy to start and easy to terminate. Answer: FALSE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

68) A disadvantage of corporations is that they generally require extensive paperwork. Answer: TRUE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 69) A disadvantage of corporations is that an owner must get the approval of all other owners before selling his or her interest in the firm to another investor. Answer: FALSE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 70) Stockholders in a corporation normally exert a significant degree of control over the company's daily operations. Answer: FALSE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

71) The stockholders in a corporation elect a board of directors to oversee the company's major policy issues. Answer: TRUE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 72) Stockholders in a corporation have limited liability. Answer: TRUE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 73) Stockholders in a corporation entrust control over the company's daily operations to managers selected by the board of directors to run the company. Answer: TRUE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

74) One advantage of corporations is that the initial cost of organization is usually lower than for other forms of business ownership. Answer: FALSE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 75) States may levy special taxes on corporations that are not imposed on other businesses. Answer: TRUE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 76) Most states have legal restrictions that prevent individuals from incorporating. Answer: FALSE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

77) One reason individuals incorporate is to obtain the advantage of limited liability. Answer: TRUE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 78) An alien corporation does business abroad but is chartered in the U.S. Answer: FALSE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 79) A domestic corporation does business in the state in which it's chartered. Answer: TRUE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

80) A foreign corporation is chartered in a country outside the U.S. Answer: FALSE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 81) Delaware and Nevada are popular states in which to seek incorporation because these states' business-oriented laws make the process easier than it is in other states. Answer: TRUE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 82) A closed corporation is one whose stock is held by a few people and is not available to the general public. Answer: TRUE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

83) A nonprofit corporation does not seek personal profit for its owners. Answer: TRUE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 84) A quasi-public corporation is a corporation chartered by the government as an approved monopoly to perform services to the general public. Answer: TRUE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 85) A multinational corporation is a firm that operates in several countries. Answer: TRUE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

86) To change ownership in a corporation you simply sell your stock to someone else. Answer: TRUE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 87) Stock options are the right to purchase shares of the corporation for a fixed price. Answer: TRUE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 88) An advantage of corporations is their ability to attract good talent by offering stock options and other employee benefits. Answer: TRUE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

89) It is said that corporations have perpetual life. Answer: TRUE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 90) One advantage of an S Corporation is that the profits are distributed to the owners and taxed as each owner's personal income, thus avoiding the problem of double taxation. Answer: TRUE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 91) By filling out the correct paperwork annually, any corporation can qualify to be classified as an S corporation. Answer: FALSE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

92) A company that loses its status as an S corporation may not reelect this status for at least 5 years. Answer: TRUE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 93) An S corporation has fewer ownership rules than a limited liability company. Answer: FALSE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 94) A limited liability company is similar to an S corporation, but without the special eligibility requirements. Answer: TRUE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

95) Limited liability companies have both flexibility in tax treatment of earnings and limited liability protection for owners. Answer: TRUE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 96) One of the drawbacks of a limited liability company is that most states do not yet recognize this form of ownership. Answer: FALSE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 97) Like stockholders of a C corporation, owners of a limited liability company (LLC) are free to sell their ownership without the approval of other members. Answer: FALSE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

98) The limited liability company requires a minimum of 10 members. Answer: FALSE Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 99) The S corporation form of business would be particularly attractive to fast-growing companies that want to attract thousands of new stockholders. Answer: FALSE Explanation: S corporations can have no more than 100 shareholders. Difficulty: 2 Medium Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 100) The organization structure of a corporation allows for stockholders to exert a significant degree of control over the company's daily operations. Answer: FALSE Explanation: Stockholders elect the Board of Directors of a corporation. The Board of Directors appoints the management. The management operates separately from stockholders. Difficulty: 2 Medium Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

101) Public utilities, like electricity and water, are examples of quasi-public corporations. Answer: TRUE Explanation: Quasi-public corporations are corporations authorized by the government to serve as regional monopolies. Difficulty: 2 Medium Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 102) In order to establish a C corporation, it is a requirement that investors run the company, whereas in an S corporation, this is not the case. Answer: FALSE Explanation: In a C corporation, the investors elect the Board of Directors. The Board of Directors appoints the officers and management team. It is not a requirement that investors run the company. S corporations also have stockholders, directors, and employees, but S corporations are taxed differently from C corporations. Difficulty: 2 Medium Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 103) If you want to sell your ownership in a publicly traded corporation, you find someone willing to buy your shares. Answer: TRUE Explanation: There is ease of ownership in a corporation. If you no longer want to be an owner/stockholder, you sell your shares to another party. The corporation has perpetual life, but your ownership does not need to be for life. Difficulty: 2 Medium Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 33 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

104) The stockholders of large, publicly traded corporations have a daily pulse on the operation of the business. Answer: FALSE Explanation: The owners/stockholders elect a Board of Directors, who hire the officers of the corporation and oversee major policy issues. The owners/stockholders thus have some say in who runs the corporation but have little to no control over the daily operations. Difficulty: 2 Medium Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 105) If a corporation distributes after-tax profits to its stockholders in the form of dividends, the government considers these distributions as part of each stockholder's personal income. Stockholders pay taxes on these distributions. Answer: TRUE Explanation: A disadvantage of the corporate form of business ownership is double taxation. If corporations distribute after-tax profits to stockholders, these individuals are required to pay taxes on this income. Unfortunately, these amounts were already taxed once, when the corporation paid taxes on them. Difficulty: 2 Medium Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

106) If a corporation has after-tax profits of $360,000, and elects to distribute this amount in the form of dividends to its stockholders, these distributions are free and clear of taxes because the corporation paid taxes on this amount prior to distribution. Answer: FALSE Explanation: A disadvantage of the corporate form of business ownership is double taxation. If corporations distribute after-tax profits to stockholders, these individuals are required to pay taxes on dividend income. Unfortunately, these amounts were already taxed once, when the corporation paid taxes on them, hence the term double taxation. Difficulty: 2 Medium Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 107) Double taxation means that a corporation pays twice the amount of taxes as a sole proprietorship or partnership. Answer: FALSE Explanation: A disadvantage of the corporate form of business ownership is double taxation. If corporations distribute after-tax profits to stockholders, these individuals are required to pay taxes on dividend income. Unfortunately, these amounts were already taxed once, when the corporation paid taxes on them, hence the term double taxation. Difficulty: 2 Medium Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

108) The major differences between an S corporation and a limited liability company are limits on the number of owners and the citizenship status of individuals who are owners. Answer: TRUE Explanation: A limited liability company (LLC) is similar to an S corporation but without the special eligibility requirements. S corporations require their owners to be U.S. citizens or the estates of U.S. citizens. The LLC does not have these requirements. Difficulty: 2 Medium Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 109) The owners of a limited liability company (LLC) must pay self-employment taxes on any profits they earn, even if they did not obtain a salary from the company. Answer: TRUE Explanation: Although the LLC allows for profits to be distributed to owners and taxed at each owner's personal tax rate, the owners must also pay self-employment taxes on those earnings. Self-employment taxes include Medicare and Social Security taxes. Difficulty: 2 Medium Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 110) Dr. Limmer, Dr. Lowder, and Dr. Lynch want to incorporate their practice. There is no advantage due to the costs involved. Answer: FALSE Explanation: Many individuals choose to incorporate to obtain limited liability. In some cases, they may also receive tax savings by doing so. Difficulty: 3 Hard Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 36 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

111) Doughboys is a small chain of cookie dough shops owned and operated by eight partners. With the rise of cookie dough shops around the country, the owners think that their chain has the potential for rapid growth. However, several of the partners are concerned about the growing financial risks that will accompany this growth. One way the partners could deal with this problem would be to incorporate their business. Answer: TRUE Explanation: An advantage of corporations is that they provide their owners (stockholders) with the protection of limited liability. Difficulty: 3 Hard Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 112) Peter recently invented a new workout program that uses indoor surfboards. His equipment can simulate surfing on waves and is a new favorite core workout in his community. As the founder of a fast growing business, you think his goal of incorporating, "to remain in steadfast control of the firm's operations for an indefinite number of years," is good strategy. Answer: FALSE Explanation: One potential drawback of incorporation is the possibility of conflict between the entrepreneurs who originally start a business and the stockholders and board of directors who may eventually gain control. Difficulty: 3 Hard Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

113) Motor Masters is a conventional corporation with 516 stockholders. A number of the stockholders are citizens of Canada and others are citizens of Mexico, though most are American. Due to its size and diversity in ownership, you would recommend that Motor Masters change to an S corporation. Answer: FALSE Explanation: Motor Masters does not satisfy the requirements for an S corporation—it has more than 100 stockholders, some of whom are not U.S. citizens or permanent residents of the United States. Difficulty: 3 Hard Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 114) The owners of Game Guys are looking to become an S corporation. Unfortunately, after speaking with their lawyer, she advised them that they do not meet some of the requirements necessary to qualify as an S corporation. An alternative form of business that would give them similar advantages is a limited liability company. Answer: TRUE Explanation: Limited liability companies offer many of the same advantages as S corporations, including limited liability and the possibility of taxation like a partnership, without the special eligibility requirements required to qualify for S corporation status. Difficulty: 3 Hard Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

115) The ownership of Dogs of Denver, a small company that designs and manufactures coats, sweaters, jackets, and rainwear for dogs, wants to organize as an LLC. All the owners are under forty and two are expecting children by the end of the year. This is good strategy because each member can choose to commit to limited or unlimited liability. Answer: FALSE Explanation: All members of an LLC have limited liability. There is no choice in that matter. The purpose of organizing as an LLC is to eliminate the risk of losing personal assets in an unprofitable venture. In terms of taxes, a limited liability company offers the best of both worlds, allowing the owners to choose to be taxed as a partnership or a corporation depending on which tax rates would benefit them the most. Difficulty: 3 Hard Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 116) Two of your friends are horse fanatics. They inherited several acres of land that they turned into a retirement sanctuary for racehorses. Serenity Stables was originally incorporated as a limited liability company. The members are reevaluating this form of ownership. Unlike an S corporation, they now pay self-employment taxes on all company profits—not just on the salaries they pay themselves. Answer: TRUE Explanation: While S corporations have several restrictions, one advantage they have compared to the limited liability company is the self-employment tax requirements. Any profits earned by the LLC are considered part of the owner's wages/salary/income. These wages are subject to selfemployment taxes. The S corporation pays self-employment taxes only on those dollars designated as salary or wage expenses by the business. They do not pay self-employment taxes on the profits of the business. Difficulty: 3 Hard Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

117) After a fruitful first five years, Serenity Stables, LLC (a retirement ranch for racehorses), thinks it may be able to attract donations from animal advocate groups and even the federal government if it becomes a nonprofit corporation. As its business advisor, you explain that as a nonprofit corporation, the owner(s) may earn a salary but the business should not seek after-tax profits. Answer: TRUE Explanation: If Serenity Stables decides to change its form of business ownership to a nonprofit corporation, it will not seek personal profits for its owners. If the owner(s) works in the business, he/she can expect a salary. By law, the firm cannot distribute any additional income to owners. It must put all revenues and/or contributions back into the business. Difficulty: 3 Hard Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 118) Tee Time Golf Resort has the opportunity to buy 1,000 acres of property adjacent to its award-winning 18-hole golf course. After talking with her banker and her lawyer, the owner is encouraged to begin the paperwork to change from a limited liability company form of business ownership to a corporation. You applaud this strategy because she will eliminate the problem of double taxation. Answer: FALSE Explanation: C corporations (not LLCs) face the disadvantage of double taxation. A C corporation's income is taxed twice. First the corporation pays tax on all income before it can distribute any, as dividends, to stockholders. The stockholders pay income tax on the dividends they receive. Difficulty: 3 Hard Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

119) When two firms join together to form one company, it is called a merger. Answer: TRUE Difficulty: 1 Easy Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 120) The three major types of mergers are acquisition, joint, and connective. Answer: FALSE Difficulty: 1 Easy Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 121) An acquisition is when one company buys the property and obligations of another company. Answer: TRUE Difficulty: 1 Easy Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 122) Taking a firm private involves converting a firm from a corporation to a general partnership. Answer: FALSE Difficulty: 1 Easy Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

123) If firms wish to gain market share in their current market, they would consider a conglomerate merger. Answer: FALSE Difficulty: 1 Easy Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 124) The purpose of a conglomerate merger is to diversify operations and investments. Answer: TRUE Difficulty: 1 Easy Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 125) A merger between two businesses in different stages of related businesses is known as a vertical merger. Answer: TRUE Difficulty: 1 Easy Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 126) A horizontal merger refers to a merger between two companies that serve entirely different markets. Answer: FALSE Difficulty: 1 Easy Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 42 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

127) A horizontal merger refers to a merger between two companies in the same industry, and serving the same markets. Answer: TRUE Difficulty: 1 Easy Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 128) A leveraged buyout is an attempt by top management to gain control of a company by issuing a large amount of new stock. Answer: FALSE Difficulty: 1 Easy Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 129) When a group of investors take a firm private, they purchase all the company's outstanding stock. Answer: TRUE Difficulty: 1 Easy Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

130) In recent years, foreign firms were reluctant to merge with or acquire American corporations. Answer: FALSE Difficulty: 1 Easy Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 131) A merger is a mutual agreement where companies join together, whereas an acquisition is when one firm purchases the assets and obligations of another firm. Answer: TRUE Explanation: When companies merge, there is a mutual agreement to join forces. Although the assets and obligations are combined, there is no offering of funds or stock by one company, for the other, as in an acquisition. Difficulty: 2 Medium Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 132) One reason that a firm would choose to merge or acquire another company would be to gain market share. Answer: TRUE Explanation: Firms know that the fastest way, but not always the least expensive way, to acquire market share or expand their market is to merge with or buy out a competitor. Difficulty: 2 Medium Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

133) One reason that a firm may choose to merge or acquire another company would be to diversify products or services. Answer: TRUE Explanation: When firms participate in conglomerate mergers, they purchase companies whose products and services are different or unrelated to what they currently offer. They choose to diversify the portfolio of business units and even the industries where they operate. Difficulty: 2 Medium Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 134) The strategy of a leveraged buyout is used when employee talent is at a minimum. Answer: FALSE Explanation: If employees and/or management believe they can improve performance by running the company themselves, they will seek financial backing (borrow funds) and take ownership, by buying all available stock from the current stockholders. Difficulty: 2 Medium Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 135) Taking a company private means turning a profit-seeking corporation into a nonprofit corporation in order to avoid a hostile takeover. Answer: FALSE Explanation: Taking a company private involves an effort by a group of stockholders or managers to gain control of all of a corporation's outstanding stock. Difficulty: 2 Medium Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

136) A major objective of a leveraged buyout is to enable investors to gain control of a company by issuing new shares of ownership, thus minimizing the use of debt. Answer: FALSE Explanation: Leveraged buyouts involve financing the acquisition of an organization through the use of debt financing. Difficulty: 2 Medium Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 137) Tee Time Golf Club just announced plans to purchase the property and assume the obligations of Chipper's Golf Resort, one of its major competitors. Tee Time Golf Club's plans are an example of a merger. Answer: FALSE Explanation: Tee Time Golf Club's actions are an acquisition rather than a merger. An acquisition refers to one firm's purchase of the assets and obligations of another firm. Since the firms are competing in the same market rather than at different stages, this is a horizontal move. Difficulty: 3 Hard Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 138) Two long-time competitors, Freddie's Market and Greta's Groceries, recently issued an announcement stating their decision to merge. The statement claimed that the new company would have more financial resources, which would enable it to expand services and broaden offerings to customers. This proposed merger is an example of a horizontal merger. Answer: TRUE Explanation: A merger between two firms in the same industry, such as two grocery stores, is a horizontal merger. Difficulty: 3 Hard Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

139) GloboTech, Inc., a large manufacturer of laptops, is considering a merger with ChipComm, a leading producer of microprocessors and other computer chips. GloboTech believes such a merger would give it a guaranteed source of needed components, and enable it to have better control over quality. If this merger occurs, it would be an example of a horizontal merger. Answer: FALSE Explanation: A merger between two companies at different stages of related business is known as a vertical merger. Difficulty: 3 Hard Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 140) Matthew is leading a group of stockholders who want to take the Cash Cow Corporation private. If Matthew's group succeeds, Cash Cow's stock will no longer be available to investors on the open market. Answer: TRUE Explanation: Taking a firm private involves gaining control of a firm's stock so that it is no longer available to investors on the open market. Difficulty: 3 Hard Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 141) Due to several years of poor performance, Stanley's Metal Manufacturers, Inc., is closing. Through the use of debt financing, Stanley's workers plan to purchase the company's stock from current shareholders in order to buy the company, improve performance, and save jobs. Answer: TRUE Explanation: A leveraged buyout involves the use of debt financing to buy the stock of a company. Skilled workers want to save their jobs and make their company profitable again. Difficulty: 3 Hard Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

142) A franchise agreement is an arrangement where a franchisor sells the rights to a business name and the right to sell a product or service within a given territory to a franchisee. Answer: TRUE Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 143) A franchise may be organized as a sole proprietorship, partnership, or corporation. Answer: TRUE Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 144) Franchisees are not always pleased with management regulations handed down from the franchisor. In some cases, franchisees have been known to band together to express concern over marketing and management direction. Answer: TRUE Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

145) Franchisors give franchisees the right to use their name and product, with the understanding that franchisees obtain all financing and develop all marketing strategies on their own. Answer: FALSE Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 146) The most popular businesses for franchising are restaurants. Answer: TRUE Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 147) In a franchise arrangement, ownership remains in the hands of the franchisor. Answer: FALSE Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 148) One of the major advantages for the franchisee is instant business name recognition and important management assistance from the franchisor. Answer: TRUE Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

149) Franchisees must follow more rules, regulations, and procedures than if they operated independently owned businesses. Answer: TRUE Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 150) The coattail effect refers to the burden of corporate rules and regulations on franchisees. Answer: FALSE Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 151) The coattail effect refers to inevitable repercussions on your business if a fellow franchisee should fail. Answer: TRUE Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 152) One drawback of franchises is that they have a higher failure rate than other types of business ventures. Answer: FALSE Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 50 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

153) The franchisee pays the franchisor a share of profits or a percentage commission on sales, known as a royalty. Answer: TRUE Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 154) Many franchisors have rules that prohibit franchisees from sponsoring their own websites. Answer: TRUE Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 155) Because of the growth of minority-owned businesses in the U.S., franchisors are becoming more focused on recruiting minority franchisees. Answer: TRUE Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 156) It is impossible to run a franchise completely from home. Answer: FALSE Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

157) Franchising is popular in the United States, but legal barriers have limited its popularity in foreign countries. Answer: FALSE Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 158) Global franchising is unlikely to experience major growth due to the high costs of operations in global markets. Answer: FALSE Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 159) Franchising in global markets has demonstrated that high operating costs are counterbalanced by high profit opportunities. Answer: TRUE Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

160) Franchisors sometimes pay reverse royalties to franchisees if it is evident that the franchisor's Internet sales have negatively impacted the profits of traditional bricks-and-mortar franchisee businesses. Answer: TRUE Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 161) In a typical franchise agreement, the franchisor pays the franchisee a fee to manage its company, and the two of them split the profits based on the percentages established in the agreement. Answer: FALSE Explanation: The franchisor, who owns the rights to the company's name and products, usually does not pay the franchisee. More typically, the franchisee pays the franchisor a royalty to use the company's name and sell its products or services in a given area. Difficulty: 2 Medium Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 162) Although franchise arrangements are a good source of income for the franchisee, these businesses do not contribute significantly toward job creation. Answer: FALSE Explanation: Franchised businesses contribute in a big way to job creation in the U.S. According to the International Franchising Association, the more than 733,000 franchised businesses operating in the U.S. create approximately 13.3 million jobs. Difficulty: 2 Medium Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

163) It is correct to say that if a franchisor expects an 8% royalty fee on revenue, the franchisor earns 8 cents on each dollar of revenue the franchisee generates. Answer: TRUE Explanation: Shared profits is an important aspect of most franchise arrangements. The franchise agreement will stipulate the percent of revenues that the franchisor will collect from each franchisee. In this example, 8% of each dollar of revenue = 8 cents, or $.08 that will go to the franchisor. Difficulty: 2 Medium Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 164) The financial advantage to the parent company (the franchisor) in a franchise arrangement is the upfront franchise fee and the collection of royalties if franchisees are successful. Answer: TRUE Explanation: Shared profits are an important aspect of most franchise arrangements. The franchisee will pay the franchisor an up-front fee for the opportunity to use the business name, and the right to sell the product or service. Besides this fee, the franchise agreement almost always includes royalty payments. The franchisee will pay the franchisor a percentage of revenues or profits for the entire contract period. Difficulty: 2 Medium Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

165) If a firm is advertising that it is selling franchise opportunities, the prospective franchisee can be assured that the government has performed due diligence on this company, and has deemed it a safe investment. Answer: FALSE Explanation: Most franchisors are not large systems like McDonald's and Subway. Many are small, rather obscure companies that prospective franchisees may know little about. Most are honest, but complaints to the Federal Trade Commission have increased about franchisors that delivered little or nothing of what they promised. Before you buy a franchise, make certain you check out the facts fully. Difficulty: 2 Medium Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 166) If a franchisee decides he wants out of the business, he is free to close up shop or sell the business, just as if he were a sole proprietor or partnership outside of a franchise arrangement. Answer: FALSE Explanation: Unlike owners of private businesses, who can sell their companies to whomever they choose on their own terms, many franchisees face restrictions on the resale of their franchises. Franchisors want to reserve the right to select new owners. Difficulty: 2 Medium Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

167) If an established franchisor agrees to provide you the opportunity to become a franchisee in its franchise system, the franchisor may also be willing to serve as a source of financing for your operation. Answer: TRUE Explanation: One advantage of entering into a franchise arrangement is that the franchisor will often provide financing. The financing may come in the form of a loan to get started, or an arrangement whereby you will pay the franchise fee over time. Difficulty: 2 Medium Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 168) Ravi wants to be his own boss and run his own business. His friend, Josh, suggested that an inexpensive way to get started is to buy a franchise. Therefore he can limit his risk and he will have the freedom to run it exactly as he wants. After reading this chapter, you concur with this advice. Answer: FALSE Explanation: The start-up costs of franchising can be quite high, so becoming a franchisee is not necessarily an inexpensive way to start a business. Moreover, although they have some authority to run their franchise, franchisees generally follow a set of rules and procedures and meet certain standards established by the franchisor. This would limit Ravi's freedom to run his business the way he wants. Difficulty: 3 Hard Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

169) Indira paid a substantial franchise fee to obtain a Precision Printers franchise in Columbus, Ohio. With the franchise fee behind her, Indira can use her creative talents to make her print shop different and more attractive than other Precision Printers stores in the Columbus area. Answer: FALSE Explanation: Although they have a certain amount of managerial freedom, franchisees are expected to follow rules and procedures set by the franchisor. While this limits the freedom and flexibility of the franchisee, it also helps ensure quality and a predictable level of service. Difficulty: 3 Hard Topic: Disadvantages of Franchises Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 170) Jaheem owns a Far and Wide Travel Agency franchise. As a franchisee, Jaheem is guaranteed the right to retain all of his franchise's revenues and profits. Answer: FALSE Explanation: Franchisees usually pay a royalty to the franchisor. This royalty is sometimes expressed as a share of the franchisee's revenues or a share of the franchisee's profits. Difficulty: 3 Hard Topic: Disadvantages of Franchises Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 171) Leanne, a franchisee, runs a chain of small restaurants with a well-known name. Due to her hard work and people skills, her locations are doing quite well. She has noticed that several other franchisees in the same franchise system have let their restaurants deteriorate, especially in terms of lack of upgrades. Leanne should be concerned about this trend, since it eventually could affect her own business. Answer: TRUE Explanation: The actions of less successful franchisees can hurt the success of others in the same franchise. This is known as the coattail effect. Difficulty: 3 Hard Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 57 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

172) Maria is already a successful franchisee with Nite Lite, a chain of "no frills" motels that provide clean rooms and good service at affordable rates. The motel she currently operates is located in Texas, but she is considering an opportunity to open another Nite Lite motel in Canada. Although her costs of operating in a foreign nation may be higher, she has the benefit of an expanding market and less competition. Answer: TRUE Explanation: Franchisees often find that the costs of operating franchises in foreign countries are high, but these costs are counterbalanced by expanding markets and less competition. Difficulty: 3 Hard Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 173) A well-known franchised food chain was brought to its knees when several customers got sick from tainted beef. Although the food chain recovered due to its quick and consistent action, several franchisees sued the parent company for loss of sales. The franchisees experienced the coattail effects of the bad publicity this event received. Answer: TRUE Explanation: The coattail effect occurs when bad publicity affects one or more of the businesses associated with a franchise chain. The coattail effect can negatively impact growth and profitability. Difficulty: 3 Hard Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

174) Tadashi's uncle passed away and left him a Realty Experts franchise. Tadashi is not a licensed agent or broker, nor does he know the first thing about the real estate business. He plans to sell his Realty Experts franchise to his friend Devonte, who recently got his real estate license. One of the advantages of owning a franchise is that you can decide to sell out to anyone you think is suitable for the business. Answer: FALSE Explanation: Most franchisors reserve the right to approve or disapprove the sale of new or existing franchises. A franchise owner usually cannot sell his/her business without the approval of the parent company. Difficulty: 3 Hard Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 175) Your friend Bainbridge called to tell you he attended a pitch for a new franchise in website development. Bainbridge says, "We can get in for a few thousand dollars." He wants to know if you are ready to invest too. Although both of you lack expertise in graphic design or html programming, this should be a safe investment since it is already advertised as a franchise system. It's probably too good to pass up. Answer: FALSE Explanation: Fraudulent franchises exist. These are small, obscure companies that most prospective franchisees know little about. Before buying, it is important to check out the facts, examine the franchisor's offering circular, and even consult with the Federal Trade Commission. Difficulty: 3 Hard Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 176) A cooperative is simply another name for a corporation. Answer: FALSE Difficulty: 1 Easy Topic: Cooperatives Learning Objective: 05-06 Explain the role of cooperatives. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

177) A cooperative consists of people with similar needs who pool their resources for mutual gain. Answer: TRUE Difficulty: 1 Easy Topic: Cooperatives Learning Objective: 05-06 Explain the role of cooperatives. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 178) It is not unusual for members of cooperatives to work for and help manage their cooperative. Answer: TRUE Difficulty: 1 Easy Topic: Cooperatives Learning Objective: 05-06 Explain the role of cooperatives. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 179) Farm cooperatives were originally established to help farmers increase their economic power by acting as a group rather than as individuals. Answer: TRUE Difficulty: 1 Easy Topic: Cooperatives Learning Objective: 05-06 Explain the role of cooperatives. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 180) The companies Ace Hardware, Blue Diamond, and Sunkist are well-known cooperatives. Answer: TRUE Difficulty: 1 Easy Topic: Cooperatives Learning Objective: 05-06 Explain the role of cooperatives. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

181) A disadvantage of farm cooperatives is that they are subject to higher tax rates than corporations. Answer: FALSE Difficulty: 1 Easy Topic: Cooperatives Learning Objective: 05-06 Explain the role of cooperatives. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 182) At one time there were many farm cooperatives, but more recently other forms of business ownership have replaced them. Answer: FALSE Explanation: Farm cooperatives have expanded their role over time and have become a multibillion-dollar industry. Difficulty: 2 Medium Topic: Cooperatives Learning Objective: 05-06 Explain the role of cooperatives. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 183) Originally, farm cooperatives were formed to provide better prices for farmers. These groups now cooperatively buy farm equipment and other products, and realize economies of scale by banding together for these things. Answer: TRUE Explanation: By participating in a larger group, it is more affordable for farmers and other business people to buy certain items that they would normally pay a lot more to purchase. By forming a cooperative, they enjoy economies of scale. Difficulty: 2 Medium Topic: Cooperatives Learning Objective: 05-06 Explain the role of cooperatives. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

184) Josie belongs to a food cooperative in her community. As a member, she can expect to have a vote in the election of the cooperative's board of directors. Answer: TRUE Explanation: In cooperatives the members typically have the right to elect a board of directors. Members democratically control these businesses by electing a board of directors that hires professional management. Difficulty: 3 Hard Topic: Cooperatives Learning Objective: 05-06 Explain the role of cooperatives. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 185) Harper has always disliked the concept that the customers, managers, and workers of a business are separate individuals with competing goals. She joined with many other people in her community who share this view to become a member, and part owner, of a childcare center. Harper and the other members operate the center for their own benefit, and each is expected to work at the center at least 12 hours each month. The type of organization Harper belongs to is known as a joint venture. Answer: FALSE Explanation: Harper belongs to a cooperative, which is a special form of business organization that is owned by its members/customers, who operate the business for their mutual gain. Many cooperatives expect their members/customers to work a certain number of hours per month for the organization. Difficulty: 2 Medium Topic: Cooperatives Learning Objective: 05-06 Explain the role of cooperatives. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 186) The ________ is the most common form of business ownership. A) partnership B) corporation C) joint venture D) sole proprietorship Answer: D Difficulty: 1 Easy Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 62 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

187) A ________ is a form of business that is owned, and usually managed, by one person. A) closed corporation B) subchapter S corporation C) sole proprietorship D) limited partnership Answer: C Difficulty: 1 Easy Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 188) ________ comprise about 20% of all businesses but account for about 81% of U.S. business receipts. A) Corporations B) Partnerships C) Sole proprietorships D) Limited liability companies Answer: A Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 189) To many businesspeople, one of the major attractions of a sole proprietorship is A) the ability to obtain additional financial resources. B) the protection of limited liability. C) an unlimited lifespan. D) the chance to be their own boss. Answer: D Difficulty: 1 Easy Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

190) The ________ is usually the easiest form of business to start and end. A) sole proprietorship B) limited partnership C) corporation D) cooperative Answer: A Difficulty: 1 Easy Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 191) One of the major disadvantages of a sole proprietorship is the A) possibility of disagreements between owners. B) unlimited liability the owner has for the debts of the firm. C) fact that any income earned by this type of business is taxed twice. D) high cost of starting or ending the company. Answer: B Difficulty: 1 Easy Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 192) Starting a new business as a sole proprietorship A) requires retaining the services of an attorney. B) is simple, but the proprietorship fee is very expensive in some states. C) is usually simpler and less expensive than starting other forms of ownership. D) is very similar to starting a business as a corporation. Answer: C Difficulty: 1 Easy Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

193) In a sole proprietorship, the profits earned by the business are A) taxed as income for the business, but exempt from the personal income tax paid by the owner. B) taxed at the lowest corporate rate. C) the property of the owner, except for taxes owed to the government. D) tax-free if the appropriate exemption is filed with the local government. Answer: C Difficulty: 1 Easy Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 194) With respect to taxes, the sole proprietorship A) pays taxes on the profits of the business at the same rate that corporations pay taxes. B) pays taxes on the profits of the business, at the owner's personal tax rate. C) pays taxes only if there are no expenses associated with the business. D) is permitted to determine its own tax rate and schedule of payments. Answer: B Difficulty: 1 Easy Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 195) A significant disadvantage of owning a sole proprietorship is the A) possibility of limited liability. B) heavy tax liability that must be assumed. C) overwhelming time commitment often required of the owner. D) lack of incentives to motivate the owner. Answer: C Difficulty: 1 Easy Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

196) When a sole proprietor dies A) the sole proprietor's heirs have the option of taking over the business. B) the business is sold to a larger corporation. C) the company continues to function as it always has. D) the company always closes down. Answer: A Difficulty: 1 Easy Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 197) Unlimited liability means A) when you own your own business you are responsible for all the business debts. B) you are only liable for the money you invest in the business. C) as a franchisee your franchisor is responsible for the debts of the franchise. D) you are liable for whatever advertising promises your firm makes. Answer: A Explanation: Unlimited liability means the owner is responsible for all the debts of the firm. If the firm should land in bankruptcy court, the judge could liquidate the owner's personal assets to pay the debts of the business. Difficulty: 1 Easy Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

198) Any debts or damages incurred by a firm organized as a sole proprietorship are A) the responsibility of the owner. B) limited to the amount the owner has invested in the firm. C) paid for out of a reserve contingency fund that sole proprietors are required by law to set up. D) normally covered by liability insurance. Answer: A Explanation: A sole proprietor accepts unlimited liability. This means that he/she is responsible for all debts of the business. If the firm should land in bankruptcy court, the judge could liquidate the owner's personal assets to pay the debts of the business. Difficulty: 2 Medium Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 199) An entrepreneur who wishes to start a business with little delay or hassle, and who wants to be his or her own boss, should organize the business as a A) sole proprietorship. B) cooperative. C) C corporation. D) general partnership. Answer: A Explanation: Two advantages of sole proprietorships are ease of starting (and ending) and being your own boss. Difficulty: 2 Medium Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

200) Which of the following statements is the most accurate? A) Sole proprietorships are well suited for people who want to own a business and share in its profits without taking an active role in management. B) Sole proprietorships are taxed at the owner's personal tax rate. C) Sole proprietorships are the least risky form of business ownership. D) Sole proprietorships must receive a state charter before they can legally conduct business. Answer: B Explanation: One of the major advantages of sole proprietorships is that they are easy to form and end and taxed at the owner's personal tax rate. Difficulty: 2 Medium Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 201) Although sole proprietors do not pay any special taxes, as the owner of the business you are also an employee of the business, which requires you to A) pay income tax only one time each year. B) pay self-employment taxes. C) pay for the right to get an employee identification number. D) file an income tax return for the business. Answer: B Explanation: Sole proprietors pay self-employment taxes such as Social Security and Medicare. Difficulty: 2 Medium Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

202) Being your own boss means A) reducing your working hours. B) having the freedom to set your own working hours and taking lots of vacations, particularly when just beginning the business. C) accepting accountability for the mistakes of the business. D) having limited financial resources to throw into the business. Answer: C Explanation: When you are your own boss, you must accept all mistakes as your mistakes. Difficulty: 2 Medium Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 203) Yoshi operates a shoe store as a sole proprietorship. However, he is in poor health and may be unable to continue running the business. If Yoshi becomes incapacitated, his business A) automatically continues under new management as a sole proprietorship. B) automatically converts into a public corporation with stock sold to interested investors. C) ceases to exist unless sold or taken over by Yoshi's heirs. D) becomes the property of the most senior employee who wishes to continue operating the firm. Answer: C Explanation: A sole proprietorship ceases to exist if the proprietor dies, retires, or becomes incapacitated, unless it is sold or taken over by the owner's heirs. Difficulty: 3 Hard Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

204) Amelia has a lot of business knowledge and is confident in her abilities to open a successful store. She recently opened a bakery as a sole proprietor. She is expecting a high level of profits and is looking forward to A) the lower corporate tax rate paid by sole proprietorships. B) keeping all of the money she earns except for the taxes she is required to pay. C) keeping all of the money she earns since she does not have to pay taxes as a sole proprietor. D) easily raising additional large sums of money from the capital markets since she is a sole proprietor. Answer: B Explanation: One of the advantages of a sole proprietorship is the retention of company profit. The owner can earn as much as possible and not have to share that money with anyone else except the government, in taxes. Difficulty: 3 Hard Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 205) Sung owns a dog-walking business that she started in high school. Her first goal was to earn money after school and supplement her allowance. Now that she has finished college and maintains a long client list, she's planning on running the business full time. She keeps all the profits and has kept things simple by posting fliers on the bulletin boards at local stores. Sung's business is a(n) A) sole proprietorship. B) franchise. C) S corporation. D) partnership. Answer: A Explanation: Sung's simple form of business ownership is a sole proprietorship. She, alone, keeps the profits from her service. Difficulty: 3 Hard Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

206) Oliver wants to start his own business. He should consider a sole proprietorship if he A) expects rapid growth and wants to be able to raise a large sum of money. B) wants to make it easy to attract qualified employees. C) wants to be his own boss and can accept unlimited liability. D) wants to minimize the financial risk he must accept as the owner of a business. Answer: C Explanation: A sole proprietorship is a business that is owned and managed by a single individual. This form of business ownership appeals to people who want to be their own boss. Difficulty: 3 Hard Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 207) Chipper is the sole proprietor of a golf shop. Because she is a sole proprietor, any profit Chipper's business earns is A) totally tax-free. B) taxed only as Chipper's personal income. C) taxed twice, once as business income, then again as Chipper's personal income. D) taxed only if and when it is distributed to investors. Answer: B Explanation: A tax advantage of sole proprietorships is that their earnings are only taxed once, as personal income to the owner. Difficulty: 3 Hard Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

208) Ramses owns a roofing business. He enjoys being his own boss, but it comes at a price. Often, his days are filled with organizing the activities of the employees and seeking out new customers. He often misses events with friends and family because of the obligations of running his own business. He also knows that he has unlimited personal liability for any of his firm's debts. Ramses's business is organized as a(n) A) joint venture. B) C corporation. C) S corporation. D) sole proprietorship. Answer: D Explanation: A key advantage of sole proprietors is that the owner is his or her own boss, and can run the business the way he or she likes. However, this freedom comes with a great deal of responsibility. Sole proprietors have no one else to share the burdens of ownership and often must work very long hours to keep the company on course. Another disadvantage of a sole proprietorship is that the owner has unlimited liability. Difficulty: 3 Hard Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

209) Autumn wants to start a business. She has two goals. First, she doesn't have much money but she's ready to get business up and running with the least possible hassle and expense. Second, she wants to minimize her personal risk in the event that her company experiences difficulties. If Autumn chooses a sole proprietorship, she would A) achieve both goals since this form of ownership is both the easiest to form and the least risky. B) meet her first goal since sole proprietorships are easy and inexpensive to form. However, she would expose herself to personal risk because owners of sole proprietorships have unlimited liability. C) not achieve either goal since proprietorships are both costly to set up and subject to unlimited liability. D) achieve her second goal, since the owners of sole proprietorships are legally protected from losing more than the amount they invest in their company. However, she would find that the start-up costs would be higher than if she had incorporated her business. Answer: B Explanation: One advantage of sole proprietorships is that they are relatively easy and inexpensive to start. However, a major disadvantage is that the owner has unlimited personal liability for any debts of the firm. This unlimited liability means that the owner is exposed to a high level of risk. Difficulty: 3 Hard Topic: Sole Proprietorships Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 210) In a partnership, a(n) ________ partner (owner) actively manages the company and has unlimited liability for claims against the firm. A) unlimited B) limited C) general D) associate Answer: C Difficulty: 1 Easy Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

211) A partner (owner) who invests money in a business does not take an active role in managing the operation, and is only subject to losing the funds he/she invested is known as a(n) ________ partner. A) implied B) limited C) partial D) corporate Answer: B Difficulty: 1 Easy Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 212) The limited liability provided to limited partners means that they are not responsible for the debts of the business beyond A) the firm's total assets. B) the amount they have invested in the company. C) the percentage of profits they are entitled to earn. D) their total personal assets. Answer: B Difficulty: 1 Easy Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

213) According to the Uniform Partnership Act, the three key elements of any general partnership are A) a board of directors, a written partnership agreement, and a well-defined product or service. B) two owners, an adequate financial base, and a written statement describing the manner in which profits and losses will be divided. C) common ownership, shared profits and losses, and right to participate in managing the operations. D) common stock, a board of directors, and a statement of limited liability. Answer: C Difficulty: 1 Easy Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 214) A type of partnership called a ________ acts much like a corporation and is traded on stock exchanges, but it is taxed like a partnership with profits passing through to the owners and taxed as the owner's personal income. A) limited partnership B) combined general partnership C) cooperative partnership D) master limited partnership Answer: D Difficulty: 1 Easy Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

215) Compared to a sole proprietorship, which of the following is considered an advantage of a general partnership? A) Ability to pool financial resources B) Unlimited liability for all owners C) Division of profits among owners D) Ease and flexibility in transferring shares of ownership to others Answer: A Difficulty: 1 Easy Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 216) In a limited liability partnership, each partner's risk of losing personal assets is A) unlimited. B) limited to losses that result from his/her own acts and omissions and the acts and omissions of those who work under his/her supervision. C) determined entirely by the maximum loss provision established by the articles of copartnership. D) nonexistent. Answer: B Difficulty: 1 Easy Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

217) Which of the following is an advantage of a partnership? A) Ease of starting and ending the business B) Unlimited liability C) Shared management and pooled skills D) Little time commitment Answer: C Difficulty: 1 Easy Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 218) When entering into a new partnership, a good strategy is to A) avoid putting the agreement in writing since this would limit the flexibility of the partnership. B) put the partnership agreement in writing. C) plan to incorporate as soon as possible. D) agree to put the first year's profits back into the partnership. Answer: B Difficulty: 1 Easy Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

219) One difference between partnerships and sole proprietorships is that partnerships A) take less effort to form. B) are managed by an elected board of directors. C) have the advantage of limited liability. D) have a greater chance of long-term survival due to the accountability of each partner to the other. Answer: D Explanation: Partners not only give the firm a stronger financial base and a broader range of expertise, they also watch over each other, thus providing a more disciplined environment. Difficulty: 2 Medium Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 220) Which of the following statements about partnerships is most accurate? A) A partnership is a corporation with fewer than 100 owners. B) A major advantage of a partnership is that it offers all owners limited liability. C) A major drawback of a partnership is that it is difficult to terminate. D) Partnerships are taxed at the lowest corporate tax rate. Answer: C Explanation: Once partners commit to a partnership, the arrangement is often difficult to terminate. Questions of who gets what and what happens next are usually hard to resolve when the business is closed. Difficulty: 2 Medium Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

221) When comparing general partnerships to sole proprietorships, an advantage of partnerships is that they A) are less risky, because each partner is responsible for only a specified fraction of the firm's debts. B) are easier to terminate. C) cost less to organize. D) give the firm a stronger financial foundation. Answer: D Explanation: When a partnership is formed, two or more people can pool their financial resources to provide the business with a stronger financial base. Difficulty: 2 Medium Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 222) A good reason why partners should spell out the details of their partnership arrangements in writing is A) the partnership is not a legally recognized business unless they do so. B) a written agreement will help reduce misunderstandings and disagreements among the partners. C) putting the agreement in writing will limit the liability of each partner to a specified level. D) doing so will make it easier to convert the business to a corporation at a later date. Answer: B Explanation: A major drawback of a partnership is the potential for disagreements among the partners. Spelling out the agreement in writing is a way to protect all parties and minimize misunderstandings. Difficulty: 2 Medium Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

223) A master limited partnership (MLP) is A) is not traded on the stock exchanges. B) pays corporate income taxes. C) is taxed like a partnership. D) is the corporate form of choice for small groups of individuals. Answer: C Explanation: The master limited partnership looks much like a corporation because it is traded on the stock exchanges, but it is taxed like a partnership and avoids the corporate income tax. Difficulty: 2 Medium Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 224) One way to eliminate some of the risk of your partners making costly mistakes that could jeopardize your personal assets is to set up a A) master limited partnership. B) sole proprietorship. C) limited amount of time each can actively spend in the business. D) limited liability partnership. Answer: D Explanation: A limited liability partnership (LLP) limits partners' risk of losing their personal assets to the outcomes of only their own acts and omissions and those of people under their supervision. If you are a limited partner in an LLP, you can operate without the fear that one of your partners might commit an act of malpractice resulting in a judgment that takes away the personal assets of those who did not commit the errors. Difficulty: 2 Medium Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

225) Finnegan is a limited partner in Gettout & Associates, a local financial consulting company. Heywood U. Gettout is one of the general partners in the company and is needing to temporarily leave the company to attend to some personal matters. Heywood has asked Finnegan to perform his managerial duties while he is gone. As a limited partner, Finnegan A) can fill in as a manager whenever necessary, as long as it is for only a limited time. B) can make managerial decisions as long as they do not involve the payment of money. C) cannot participate in the management of the partnership. D) can manage the firm as long as he gets approval from the company's other general partners. Answer: C Explanation: A limited partner invests money in a partnership but cannot legally take an active role in its management. Difficulty: 3 Hard Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 226) Kiersten and her four siblings are starting their own home design business. One of their primary goals is keeping the loving relationship they currently enjoy, so they are following the Model Business Corporation Act recommendations as they write their partnership agreement. Which of the following is an accurate recommendation of the Act? A) The business should be actively operating for an extended period before the partners decide who is responsible for what business functions. B) Family businesses never take on outside partners, so no discussion of this need take place. C) There should be discussion and well-understood ways that the partners will handle disagreements. D) Due to the fact that they are all under 40 years old and expect to work until they are 65, there is no need to decide what will happen to the partnership if one decides to leave the business or retire, or dies. Answer: C Explanation: The Model Business Corporation Act recommends including a number of specifics in the written partnership agreement, including how disagreements will be handled. Difficulty: 3 Hard Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

227) Huong is opening an international food store. Though her products will span the globe, she wants to focus on items from the Middle East. She wants to be the firm's only general partner, but she is trying to get several friends to participate as limited partners. It's apparent Huong wants to A) limit her personal liability to the amount she personally invests in the company. B) keep all of the firm's profits. C) obtain a strong financial base for the firm while maintaining personal control over the firm's management. D) meet the legal requirements of the Uniform Partnership Act. Answer: C Explanation: Limited partners invest money in a business and share in the profits, but are not allowed to assume any management responsibilities. Since Huong plans to be the only general partner, she will be the only owner who has a direct role in managing the company. Difficulty: 3 Hard Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 228) Mac and Charlie own a car repair shop that they operate as co-owners. Both take an active role in the management of the business, and each accepts unlimited liability. Mac and Charlie operate as a A) joint venture. B) general partnership. C) limited partnership. D) cooperative. Answer: B Explanation: Since Mac and Charlie operate the business as co-owners, they have formed a general partnership. Since both will manage the firm and accept unlimited liability, they are both general partners. Difficulty: 3 Hard Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

229) Melanie, Elliot, and Caleb agreed to partner in a small home rehab business. Initially, they were enthusiastic and eager workers. That is until their first project took more work than Melanie initially estimated, Elliot wanted morning meetings and long lunch hours, and Caleb decided to go on vacation even though the home was not complete and ready to sell. As Figure 5.2 indicates, A) it's smart to begin the partnership with honest communication of what each partner expects to give and get from the partnership. B) it's smart to organize the business as a limited liability company to reduce the financial risks that put pressure on members of the partnership. C) it's smart to designate one of the partners as the primary partner with final authority to call all the shots. D) it's smart to enter into partnerships with people who have similar educational and cultural backgrounds and similar personalities. Answer: A Explanation: This question is based on the material in Figure 5.2. This figure gives advice on questions to ask when choosing a partner. A key point made includes a question regarding each partner's vision for the company. Difficulty: 3 Hard Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 230) Angelica and Celeste invested all their savings in a small pizzeria they opened outside the University of Missouri. They operated the business as a general partnership. After 11 months, the business went broke and Angelica and Celeste were left with outstanding bills of $43,650, which was more than their initial investment in the company. Angelica and Celeste can A) lose their personal assets as the result of their company's financial problems. B) lose only the funds they originally invested in their company. C) lose only the total value of the assets actually used to operate the business. D) avoid any liability for these debts since a partnership is considered to be a business entity that is separate and distinct from the partners who own it. Answer: A Explanation: General partners have unlimited liability for the debts of their business. This means their personal assets are at risk. Difficulty: 3 Hard Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 83 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

231) Rowan and Vanessa plan to pool their money and talents to form a general partnership and start a music school. One of the first things Rowan and Vanessa should do is A) seal the deal with at least five clubs where they can book three months' worth of gigs. B) consult an attorney and put their agreement in writing. C) pay the partnership formation fee to their state's commerce commission. D) file the limited liability paperwork at the courthouse in the county in which their partnership will be formed. Answer: B Explanation: One problem with a partnership is the potential for disagreements and misunderstandings among the partners. Consulting an attorney and getting the agreement in writing helps minimize the risk of such problems. Difficulty: 3 Hard Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 232) Beau has agreed to invest $19,000 in a partnership with his brother and sister-in-law. Not being in the same line of work as them, Beau does not intend to actively work in the partnership. He also does not want to risk any of his own assets other than the $19,000 investment. The partnership has agreed to permit him to share in the profits. As an expert on forms of business ownership, you know that Beau is a ________ in this partnership. A) general partner B) preferred stockholder C) secondary partner D) limited partner Answer: D Explanation: A limited partner invests in a partnership, but has limited liability and does not take an active role in managing the business. Difficulty: 3 Hard Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

233) Sean is one of several general partners who own Pints and Cans, a small chain of bar and grills located in Illinois and Indiana. Sean is interested in converting the partnership into a master limited partnership. If he convinces other partners to go along with his idea, Pints and Cans will A) offer shares of ownership that are traded on a stock exchange much like a corporation. B) pay its taxes like a corporation. C) begin to operate much like a sole proprietorship. D) have to change its name to include the term Ltd. in its title to indicate its owners have limited liability. Answer: A Explanation: Master limited partnerships act much like corporations with shares of ownership traded on the stock exchanges, but they are taxed like partnerships, where each owner adds his/her dividends to other personal income earned and pays taxes at the owner's personal income tax rate. Difficulty: 3 Hard Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 234) Katie and her siblings created a design company called Homeward Bound LLP. Although key business functions are centralized, each sibling is a licensed architect that designs, builds, and installs residential and commercial buildings for his/her own clients. Unfortunately, a recent design of Katie's that was ultimately created and installed for one of their clients resulted in water damage to the basement of the client's new home. The limited liability partnership A) guarantees that none of the company's partners will lose more than the amount they invested in the company. B) guarantees that only those partners who were directly involved in designing and building this home face unlimited liability for claims against the firm. C) protects the partners from any suit by the client. D) will enable the firm to quickly reorganize with only minor financial losses. Answer: B Explanation: A key advantage of a limited liability partnership is that it limits the liability of individual partners to damages or debts that result from their own decisions or actions, or to those of employees under their direct supervision. Difficulty: 3 Hard Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

235) A(n) ________ is a state-chartered legal entity with authority to act and to have liability separate from its owners. A) limited partnership B) conventional corporation C) unlimited partnership D) nonprofit organization Answer: B Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 236) An owner of a corporation is known as a A) general partner. B) limited partner. C) director. D) stockholder. Answer: D Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

237) Which of the following statements about the operation of a corporation is correct? A) A corporation receives its charter from a state government. B) A corporate charter automatically expires in 99 years and must be renewed if the corporation wants to remain in business. C) Owners of a corporation have unlimited liability for any claims against their company. D) A corporation tends to be much easier to set up than a sole proprietorship or partnership. Answer: A Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 238) The form of business ownership best suited to raising large amounts of money for expansion is the A) sole proprietorship. B) partnership. C) corporation. D) cooperative. Answer: C Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

239) Which of the following is an advantage of the corporate form of business when compared to sole proprietorships and partnerships? A) Ease of formation B) Lower taxes C) Simplified paperwork D) Limited liability of owners Answer: D Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 240) Compared to partnerships and sole proprietorships, a major advantage of the conventional (C) corporation as a form of business ownership is that it A) has the ability to raise more money. B) is easier and less expensive to form. C) qualifies for simplified tax treatment. D) creates unlimited liability for its owners. Answer: A Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

241) Which of the following is normally considered a disadvantage of the corporate form of business? A) Unlimited liability of owners B) Difficult transfer of ownership C) Limited life D) Double taxation of earnings Answer: D Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 242) What entity elects the board of directors for a corporation? A) Creditors B) Stockholders C) Managers D) Employees Answer: B Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

243) A separation between ownership and management is most likely to occur in a A) sole proprietorship. B) general partnership. C) corporation. D) limited liability partnership. Answer: C Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 244) One disadvantage of ________ is the initial cost of formation. A) corporations B) general partnerships C) sole proprietorships D) limited partnerships Answer: A Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

245) The form of business ownership that usually requires the most detailed record keeping is the A) corporation. B) partnership. C) sole proprietorship. D) limited partnership. Answer: A Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 246) A major advantage of S corporations is that they A) can have more stockholders than a C corporation. B) can operate in foreign nations as if they were domestic corporations. C) require less paperwork to set up than a C corporation does. D) avoid the problem of double taxation associated with conventional corporations. Answer: D Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

247) One reason many companies do not organize themselves as an S corporation is that this form of business A) is subject to a higher tax rate than a general partnership. B) does not provide owners with limited liability. C) has a special eligibility restriction, which many businesses are unable to meet. D) is much more difficult to set up than C corporations. Answer: C Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 248) To qualify as an S corporation, a company must A) have no more than 50 shareholders. B) have shareholders who are individuals or estates and qualify as permanent residents of the United States. C) have a different class of stock for each owner. D) have not more than 5 percent of income derived from passive sources. Answer: B Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

249) The income generated by S corporations A) passes through to its owners, and each is taxed individually for this income. B) is provided to nonprofit organizations, so it is considered a tax-free source of funds. C) is taxed separately from its owners. D) must be reinvested in the business. Owners should not expect dividends. Answer: A Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 250) ________ are companies that are similar to S corporations but are not restricted with similar eligibility requirements. A) Regulated equity companies B) Corporate cooperatives C) Limited liability companies D) Private drawing companies Answer: C Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

251) One disadvantage of a limited liability company is that it A) requires all earnings of the business be taxed at the corporate rate. B) has a limited life span. C) requires the owners to divide up profits and losses in a fixed proportion. D) has a more restrictive ownership requirement than S corporations. Answer: B Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 252) One reason limited liability companies have become so popular is that they A) can be taxed either as a corporation or as a partnership, so owners can choose the tax treatment that is most advantageous for their situation. B) allow owners to sell their interests in the company without requiring approval from other owners. C) have unlimited life. D) permit owners to avoid paying self-employment taxes on the company's profits. Answer: A Difficulty: 1 Easy Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

253) Earnings of C corporations can be A) taxed twice if they are distributed as dividends to stockholders. B) taxed at twice the going rate of a partnership or sole proprietorship. C) taxed by the federal government, but they are exempt from state taxes if the corporation owns any facilities within that state. D) taxed the same as a partnership. Answer: A Explanation: Corporations must pay taxes on income before it is distributed to stockholders; then the stockholders must pay taxes on the income they receive from dividends. Dividend income ends up being taxed twice—once when it was part of the total net income of the company and then again when it is part of the owner/stockholder's personal income. Difficulty: 2 Medium Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 254) Which of the following is an attractive benefit of a corporation? A) Corporations can enjoy double taxation. B) Unlike limited partnerships, all owners of corporations are passive investors. C) Corporations can protect their owners with unlimited liability. D) Corporations can attract employees by offering stock options. Answer: D Explanation: Corporations can attract skilled employees by offering such benefits as stock options (the right to purchase shares of the corporation for a fixed price). Double taxation is a disadvantage of corporations. Owners of corporations have limited liability; and due to stock options and other benefits employees of corporations are quite often stockholders/owners of the corporations, as well. Difficulty: 2 Medium Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

255) The reason a professional such as a lawyer or doctor would incorporate his/her business is A) to be assured that another professional firm would not take over and make decisions, similar to a hostile takeover. B) to comply with the law because insurance companies require that they be corporations. C) to protect his/her other assets with limited liability. D) to protect his/her assets with unlimited liability. Answer: C Explanation: Limited liability provides corporation owners protection from loss of personal assets if the business goes bankrupt. Although costlier to set up, the corporation provides the added protection by keeping the business assets separate from the owner's personal assets. Your liability is limited to your investment in the business. Difficulty: 2 Medium Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 256) Which of the following statements about S corporations is most accurate? A) The major attraction of S corporations is that they avoid the problem of double taxation. B) S corporations are similar to C corporations, except that the majority of owners are foreign investors. C) Any corporation willing to pay the necessary fees and fill out the required paperwork can become an S corporation. D) Only large corporations with operations in more than one state can qualify to be classified as S corporations. Answer: A Explanation: The S corporation does not file an income tax return separate from its owners. The profits of S corporations are distributed to the owners. Owners account for these earnings on their personal income tax returns, thus avoiding double taxation. Difficulty: 2 Medium Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

257) The organizational structure of a corporation permits A) the company management to elect the board of directors. B) stockholders to elect the board of directors. C) stockholders to elect the officers and management team. D) employees (by committee) to elect the officers of the company. Answer: B Explanation: Stockholders elect the board of directors. The board of directors selects the officers and top management of the firm. Officers hire managers that supervise employees. Difficulty: 2 Medium Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 258) Which of the following statements is the most accurate? A) A foreign corporation does business in one or more states, but is chartered in another state. B) A foreign corporation is 50% owned by individuals or companies from another nation. C) A foreign corporation is headquartered in another nation. D) A foreign corporation is the same thing as a multinational corporation. Answer: A Explanation: A foreign corporation is one that does business in one state while being chartered in another state. Difficulty: 2 Medium Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

259) The S corporation is likely to be less popular in the future because A) Congress repealed the limited liability protection of S corporations and limited them to companies with earnings of less than $3 million per year. B) limited liability companies, which do not have the restrictive eligibility requirements of S corporations and offer greater flexibility in the choice of tax treatment, are now legal in all 50 states. C) many states significantly increased the annual fee that S corporations must pay to maintain their tax status, thus eliminating the financial advantages of this form of ownership. D) S corporations have been made illegal in several states as a reaction to widespread abuse of the special benefits available to this type of business. Answer: B Explanation: Limited liability companies allow firms great flexibility to choose the most advantageous tax treatment, and avoid the special eligibility requirements that characterize S corporations. In 1995 the National Conference of Commissioners on Uniform State Laws approved the final version of the Uniform Limited Liability Company Act. By 1996, all 50 states and the District of Columbia recognized LLCs. Today more than half of new business registrations in some states are LLCs. Difficulty: 2 Medium Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

260) Compared to the C corporation, the limited liability company is an attractive form of business ownership because A) even though it is a little more expensive to form, it has a longer life than the C corporation. B) a limited liability company permits one owner to own all the stock of the company, whereas a C corporation requires several owners. C) once formed, the limited liability company is a legal form of business ownership, worldwide, whereas the C corporation must file for corporate status in each nation it elects to do business. D) once formed, the limited liability company does not require the firm to hold annual meetings, and has the option to avoid double taxation. Answer: D Explanation: The limited liability company can choose to be taxed as a partnership or a corporation, giving it the option to avoid double taxation. This form of business ownership files articles of organization; however, it does not hold annual meetings, nor does it need to file annually. Difficulty: 2 Medium Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

261) Double taxation means A) if stockholders decide to sell their shares, they are subject to paying twice the amount of taxes on any capital gains. B) as the owner of the company, you pay twice the amount in employment taxes on yourself, as you do on your employees. C) corporations pay taxes on their profits. If they distribute after-tax profits to the stockholders, the stockholders also pay taxes on the distribution. D) if the corporation doubles its profits from the previous year, the firm's tax rate (the percentage it pays in taxes) will also double. Answer: C Explanation: A corporation files a separate tax return from its owners. It pays taxes on all profits earned after legitimate expenses are deducted. If any profits remain after taxes are paid, these are considered after-tax profits and they can be distributed to owners in the form of dividends. These earnings are subject to double taxation because the government requires the recipient (the owner/stockholder) to pay taxes on the dividends, even though they were already taxed when they were part of the corporation's earnings. Difficulty: 2 Medium Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 262) According to the box, "Kickstarting a Benefit Corporation," a benefit corporation is A) a mission-based company judged by how well it meets its own set of socially or environmentally beneficial goals. B) a nonprofit organization. C) a corporation without the possibility of double taxation because it's tax exempt. D) a special corporation type for crowdfunding sites. Answer: A Explanation: Benefit (B) corporations are mission-based companies that are judged by how well they meet their own set of socially or environmentally beneficial goals. Difficulty: 2 Medium Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

263) Lorenzo and Lila own all of the Double L Corporation's stock. The stock of this corporation is not sold to the general public. Lorenzo and Lila own a(n) A) limited liability company. B) master limited partnership. C) alien corporation. D) closed corporation. Answer: D Explanation: A closed corporation is one whose stock is all owned by only a few investors (or privately held), and isn't available to the general public. Difficulty: 3 Hard Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 264) Alani and Jeremy have considered creating their own company but are concerned about the possibility of losing all of their personal assets if the business fails. One way for Alani and Jeremy to avoid this risk would be to organize their firm as a A) general partnership. B) limited partnership. C) corporation. D) sole proprietorship. Answer: C Explanation: A corporation has the advantage of limited liability for all of its owners. Although a limited partner also has limited liability, even a limited partnership must have at least one general partner with unlimited liability. Difficulty: 3 Hard Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

265) Payton recently purchased 100 shares of stock in Game Guys, Inc. Payton is a(n)________ of this company. A) owner B) manager C) creditor D) partner Answer: A Explanation: Stock represents shares of ownership in a corporation. Difficulty: 3 Hard Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 266) Carter is a stockholder in ExtremeTrax, Inc., a C corporation that designs and manufactures amusement park roller coasters. The company recently lost a major court decision and is being forced into bankruptcy. In fact, the damages being awarded are so large that, even if all company assets are sold and the proceeds are used to pay its debts, ExtremeTrax is likely to still owe money to its creditors. If ExtremeTrax goes bankrupt, Carter and the other stockholders will A) be personally responsible for all remaining debts. B) lose their investment but nothing else. C) be entitled to full reimbursement of any investment losses. D) automatically qualify for federal reimbursement for any losses suffered by the firm. Answer: B Explanation: Owners of a corporation have limited liability. This means that the most they can lose is the amount they invest in the corporation. Difficulty: 3 Hard Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

267) Jose lives in Mexico City and is a Mexican citizen. He has several friends who are American citizens and own shares in an S corporation. Jose would like to invest in this company. Which statement is most accurate? A) Jose can invest in this company, but must pay both U.S. and Mexican taxes. B) Jose cannot become a shareholder since he is not a citizen or permanent resident of the U.S. C) Jose can become a shareholder but cannot become a manager, and his income must be paid in pesos. D) Jose needs approval from the Mexican government before he can invest. Answer: B Explanation: S corporations are required to meet several special conditions that conventional corporations do not have to satisfy. One requirement is that all of the owners of an S corporation must be U.S. citizens or permanent residents of the United States. Difficulty: 3 Hard Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 268) Although it is a small company, Zorn Enterprises owns a large number of inexpensive rental housing units in Texas and Louisiana. Currently, the company is a chartered C corporation, but the owners are interested in switching to be an S corporation. After consulting a lawyer, they learned that Zorn Enterprises does not qualify to be designated as an S corporation. Which of the following characteristics of Zorn Enterprises would prevent it from becoming an S corporation? A) The firm has fewer than 75 stockholders. B) The firm is chartered in one state, but owns property in another. C) The firm has only one class of stock, all owned by U.S. citizens. D) The firm receives more than 70 percent of its income from rents and other passive sources. Answer: D Explanation: An S corporation may earn no more than 25 percent of its income from passive sources such as rents, royalties, and interest. Difficulty: 3 Hard Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

269) Mackenzie's dream is to open a chain of salons. She hopes to attract investors to help finance growth. Having once considered forming a C corporation, Mackenzie wants to have more flexibility about how the new business will be taxed. She also wants to offer investors/owners limited liability. Mackenzie can satisfy her objectives by setting up a(n) A) limited liability company. B) S corporation. C) alien corporation. D) general partnership. Answer: A Explanation: Limited liability companies offer limited liability protection while allowing the company the choice of being taxed as a corporation or as a partnership. Although S corporations also offer limited liability, they do not offer the tax flexibility. Moreover, an S corporation has more stringent ownership rules. Difficulty: 3 Hard Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

270) Your three friends from Wyoming inherited an old dude ranch. They now plan to turn it into a pasture for retired racehorses. Serenity Stables wants to open its doors by spring of 2020. After going to several small business seminars, your friends are certain they need limited liability. The high-risk, labor-intensive business will require a sizeable investment including an air-conditioned barn, several fenced-in pastures, and loads of animal feed. You explain to them that LLC ownership requires owners to pay self-employment taxes on the entire amount of earnings. You are fairly certain this is one tax liability your friends would like to avoid. You instead recommend A) sole proprietorship. B) general partnership. C) limited liability company. D) S corporation. Answer: D Explanation: Unlike the limited liability company, the S corporation form of business ownership avoids paying self-employment taxes on total earnings and still provides limited liability to business owners who are U.S. citizens. Difficulty: 3 Hard Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

271) Double taxation is experienced by corporations that pay dividends. Which of the following scenarios is an accurate example of double taxation? A) If Game Guys, Inc. distributes 20% of its net profit after taxes to its stockholders, these funds will be taxed again, when each individual stockholder claims his/her portion as earnings. B) By law, Game Guys, Inc. is permitted to tax its executive employees twice on their earnings, and then pass those funds on to its stockholders in the form of dividends. C) Due to the fact that it is a corporation, the accountants of Game Guys, Inc. calculate 35% of the company's earnings, multiply it by 2, and then distribute that amount to the federal government each year for taxes. D) If Game Guys, Inc. fails to pay its taxes on time during any given year, it must pay the current year and the delinquent year, in order to stay in business, similar to being taxed two times. Answer: A Explanation: The corporation is a separate entity, and as such, it pays its own taxes on its earnings. If there are earnings after taxes, the corporation may distribute these after-tax funds to its stockholders (owners) in the form of dividends. However, the stockholders must then claim the dividends as income on their individual tax returns. A portion of the firm's earnings (the dividend portion) may be taxed twice. This constitutes double taxation. Difficulty: 3 Hard Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

272) Joji is a 37-year-old married business owner. He runs a dry cleaning service with three locations in Toledo, Ohio. His personal obligations are the home that he owns with his wife, who works for a large financial consulting firm; the healthcare of his family; and his commitment toward saving for his three children's college educations. Joji knows that two of his locations require a large infusion of cash to pay for new and expensive dry cleaning equipment. Although his wife's job provides the family with health insurance, it also places the family in a higher income tax bracket. Joji would certainly like to minimize his taxes. Which of the following forms of business ownership would you suggest for him? A) Joji should consider a sole proprietorship due to the fact that it pays its own taxes and it has limited liability. B) Joji should consider a sole proprietorship due to the fact that it has unlimited liability and it will protect the family's personal assets. C) Joji should consider a corporation because he can avoid the negative aspect of limited liability. Corporations are always taxed at a lower rate than individuals. D) Joji should consider a limited liability company because he will only be liable for what he has invested in the business. His personal assets will be protected, and he can be taxed like a sole proprietorship. Answer: D Explanation: LLC provides the owner(s) with limited liability, which means the owners are only liable for the funds they have invested in the business. Personal assets are protected. It also permits the owner to account for his earnings on his individual tax return. The company does not submit a tax return. Company earnings are passed through to the owner's individual return, just like a sole proprietorship or a general partnership. Difficulty: 3 Hard Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

273) One reason that companies participate in mergers and acquisitions is A) to do the same thing as the competition because it makes for a highly leveraged company. B) to convert a sole proprietorship into a partnership. C) to expand within their own field or enter new markets. D) to take the first step toward a join venture. Answer: C Difficulty: 1 Easy Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 274) A ________ is two firms combining to form one company. A) joint tenancy B) tenancy in common C) merger D) leveraged buyout Answer: C Difficulty: 1 Easy Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 275) A(n) ________ occurs when one company buys the property and obligations of another company. A) cooperative B) hostile takeover C) leveraged buyout D) acquisition Answer: D Difficulty: 1 Easy Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

276) Three types of corporate mergers are A) economic, geographic, and financial. B) vertical, horizontal, and conglomerate. C) flexible, differentiated, and conditional. D) explicit, implicit, and intrinsic. Answer: B Difficulty: 1 Easy Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 277) A ________ merger unites firms at different stages of related businesses. A) vertical B) horizontal C) diagonal D) conglomerate Answer: A Difficulty: 1 Easy Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 278) When two companies in the same industry agree to become one firm, the result is called a A) vertical merger. B) joint venture. C) monopoly. D) horizontal merger. Answer: D Difficulty: 1 Easy Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

279) When two companies in completely unrelated industries agree to become one firm, the result is called a A) vertical merger. B) joint venture. C) conglomerate merger. D) horizontal merger. Answer: C Difficulty: 1 Easy Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 280) A conglomerate merger will A) diversify business operations and investments. B) allow the firm to have a less dominant position in its market. C) enable the firm to enjoy a higher degree of specialization. D) give the firm a more secure access to needed materials and components and better control over quality. Answer: A Difficulty: 1 Easy Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 281) One result of taking a firm private is A) the firm's stock is no longer available for purchase on the open market. B) managers lose some control as the number of stockholders increases. C) the public image of the firm will suffer. D) the firm will have access to more capital. Answer: A Difficulty: 1 Easy Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 110 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

282) An attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing is called a(n) A) golden parachute. B) arbitrage agreement. C) factor transaction. D) leveraged buyout. Answer: D Difficulty: 1 Easy Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 283) If a group of stockholders or management obtain all the stock of a previously publicly traded firm for themselves, this is referred to as A) capitalizing. B) stock turning. C) turning the equity. D) taking the firm private. Answer: D Difficulty: 1 Easy Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

284) The difference between a merger and an acquisition is A) a merger does not combine the assets and liabilities of firms, whereas an acquisition combines assets and liabilities. B) a merger combines the assets of the two firms, but each company continues to assume its own liabilities, whereas an acquisition is a total buyout of one firm by another. C) a merger is the joining of resources of two companies, whereas an acquisition is a buyout of one firm by the other. The new company concerns itself with merging of resources. D) a merger is always something smaller tagging onto something larger, like a merging lane onto an interstate, whereas an acquisition is two firms that are relatively the same size agreeing to continue as one, more like two major interstates that come together and travel as one for several miles. Answer: C Explanation: A merger is the result of two firms combining their resources and forming one company. An acquisition is when one firm purchases the assets and obligations of another firm. Difficulty: 2 Medium Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 285) When two firms which do not participate in the same industries, for example, a software company and a fast food restaurant company, decide to merge, the result is called a ________ merger. A) vertical B) horizontal C) linear D) conglomerate Answer: D Explanation: A conglomerate merger involves two firms from different industries. Difficulty: 2 Medium Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

286) A merger involving a commercial bakery and a grocery retailer would be an example of a ________ merger. A) vertical B) horizontal C) linear D) conglomerate Answer: A Explanation: A vertical merger involves two firms in different stages of related businesses. The bakery would make bread and other items to be sold in the grocery. Difficulty: 2 Medium Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 287) A merger involving a software producer and a clothing manufacturer is an example of a ________ merger. A) vertical B) horizontal C) linear D) conglomerate Answer: D Explanation: A conglomerate merger is two firms from unrelated industries combining their resources. Difficulty: 2 Medium Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

288) In a leveraged buyout, the managers of a firm, its employees, or other investors A) move the company elsewhere and start over. B) obtain the assets of the company through bankruptcy proceedings. C) borrow funds to buy out the firm's stockholders. D) negotiate a merger with another firm to create a conglomerate. Answer: C Explanation: A leveraged buyout is an attempt by employees, management, or a group of investors to use borrowed funds to buy out the existing owners of a firm. Difficulty: 2 Medium Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 289) When investors successfully take a firm private, the company's stock is A) converted into bonds. B) converted into cash. C) no longer sold to investors on the open market. D) pledged as collateral to its bondholders. Answer: C Explanation: When investors take a firm private, they obtain all of the stock for themselves. The stock is no longer traded on the open market. Difficulty: 2 Medium Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

290) Silver Screen Pictures, Inc. recently bought Superstar Entertainment, Inc. for an undisclosed amount of money. It now owns all of Superstar Entertainment's properties and obligations. This is an example of a(n) A) merger. B) combination. C) expropriation. D) acquisition. Answer: D Explanation: When one company buys out another firm's property and obligations, the result is called an acquisition. Difficulty: 3 Hard Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 291) Intercontinental Provisions, a specialty grocery store, is considering a conglomerate merger with a company that makes storage solutions. A likely reason is A) to expand its market share. B) to develop spin-off companies. C) diversification. D) to meet the requirements to convert to a limited liability company. Answer: C Explanation: A conglomerate merger is between firms in unrelated markets. One of the common motivations for this type of merger is the desire to diversify business operations and investments. Difficulty: 3 Hard Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

292) Kooky Cookies Corporation purchased the Crazy Cookie Company. Although this was initially an acquisition, the merging of these two businesses was a ________ merger. Kooky Cookies went on to purchase several baking product companies. Joining forces with some of its suppliers would represent a ________ merger. A) conglomerate; horizontal B) vertical; horizontal C) horizontal; vertical D) conglomerate; conglomerate Answer: C Explanation: A merger of two companies which compete in the same industry and for the same market is a horizontal merger. A merger between two firms at different stages of related businesses is a vertical merger. Difficulty: 3 Hard Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 293) The strategy of investors who are attempting a leveraged buyout is to A) shape up the company for quick resale. B) use debt to finance the buyout of the firm's stockholders and gain control of the firm themselves. C) secure ownership of all of the existing stock in a company by issuing and selling large amounts of new stock. D) use investment tax credits from the government to acquire all of the physical assets owned by the firm. Answer: B Explanation: In a leveraged buyout, the objective of the investors is to use debt financing to gain control of the firm's stock for themselves. Difficulty: 3 Hard Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

294) Foreign investment in U.S. companies continues to be strong. When Belgian-based In-Bev purchased the largest beer company in the U.S., Anheuser-Busch, this action constituted a(n) ________ with a negotiated selling price of $52 billion. A) merger B) aggregate C) acquisition D) unequivocal buy-in Answer: C Explanation: An outright buy-out or purchase is known as an acquisition. As noted in the textbook, In-Bev bought the largest brewer of beer in the U.S., Anheuser-Busch. The purchase included all of the company's assets and all the companies it owned. This is known as an acquisition. Difficulty: 3 Hard Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 295) Kevin is a major stockholder in Professional Transmission Services (PTS), a nationwide network of transmission repair shops founded in 1975 by his father. Currently, PTS stock is sold on the open market, but Kevin has talked to several relatives about his desire to get all of the PTS stock back in his family's hands. Kevin is interested in ________. A) taking the firm private B) a hostile takeover of the firm C) converting the firm to a general partnership D) forming a master limited partnership Answer: A Explanation: When a group of stockholders, such as a family, obtains all of the stock in a company for themselves, they have taken the firm private. Difficulty: 3 Hard Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

296) Hidden Valley Communications, Inc., located in a remote area of Utah, made a special device that was used in LTE phones. After three years of local operations, the company that employed 4,000 people was planning to close its Utah operation and move the assembly offshore. Under the direction of a financial services company that financed the deal, the employees agreed to become owners of the company and continue to operate the business. The business concept that describes this arrangement is A) IPO (initial public offering). B) LBO (leveraged buyout). C) EPO (equity public offering). D) HM (horizontal merger). Answer: B Explanation: A leveraged buyout or LBO is an attempt by employees, management, or investors to buy out the stockholders in a company. This action usually requires the buyers to borrow a sizeable amount of funds. Difficulty: 3 Hard Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 297) A(n) ________ is an arrangement whereby someone with a proven idea for a business sells the rights to use the business model, to sell a product or service to others in a given territory. A) conditional grant B) franchise agreement C) trade contract D) extended ownership agreement Answer: B Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

298) A(n) ________ is a company that has a proven business model and is willing to sell the rights to use the business model to others so that they can sell the same product or service within a given territory. A) intrapreneur B) franchisee C) limited partner D) franchisor Answer: D Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 299) A person who buys the right to use a business name and sell a product within a given territory is called a A) stockholder. B) franchisee. C) limited franchisor. D) venture capitalist. Answer: B Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

300) A franchise can be formed A) only as a general partnership. B) only as a corporation. C) as either a corporation or partnership, but not as a sole proprietorship. D) as a corporation, partnership, or sole proprietorship. Answer: D Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 301) The most popular type of business for franchising is A) consumer wholesale firms. B) restaurants. C) specialty steel manufacturing. D) medical services. Answer: B Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 302) A ________ is the share of profits or percentage of sales a franchisee pays to a franchisor. A) royalty B) dividend C) premium D) co-pay Answer: A Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

303) Which of the following is an advantage of franchises? A) Shared profit B) Management regulation C) Management and marketing assistance D) Coattail effects Answer: C Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 304) One reason franchises have become so popular is that this arrangement provides the franchisee with A) a nationally recognized name and product. B) a low-cost way to start a business. C) limited liability. D) the right to retain all profits earned by their franchise. Answer: A Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 305) Global franchising offers A) few opportunities for American investors. B) opportunities for large franchise systems, but not small ones. C) opportunities for both large and small franchises. D) American firms the opportunity to market goods overseas without any need to adjust for cultural differences. Answer: C Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 121 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

306) Opening and operating a franchise in a different country A) is illegal according to the Clayton Antitrust Act. B) is no different than setting up a franchise in the domestic market. C) may require the owner to adapt to social and cultural differences. D) is much less risky than owning a domestically based franchise. Answer: C Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 307) Franchisors may send reverse royalties to franchisees who A) have not yet created their own website. B) feel their sales have been hurt by the franchisor's online sales. C) are using e-commerce to expand their sales territory. D) desire to streamline their communication with employees, customers, and vendors. Answer: B Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 308) ________ is by far the most popular target for American franchisors seeking to establish franchises in other countries. A) Canada B) Mexico C) Great Britain D) Japan Answer: A Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

309) Franchised businesses are successful (both domestically and internationally) because A) they require very little start-up revenue. B) people prefer the owners and employees of franchised businesses. C) laws require franchisors to provide the same level of service to franchisees. D) customers like the predictability of the product and/or service. Answer: D Difficulty: 1 Easy Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 310) An evaluation of franchising would conclude that this type of arrangement A) has become the dominant form of business organization in the United States because it has many advantages and almost no disadvantages. B) appeals to people who want to own a business, but are not comfortable starting a company from scratch. C) has a much higher risk of failure than independent companies. D) has little chance of success outside the United States because many foreign countries do not allow such arrangements. Answer: B Explanation: An advantage of franchising is that it allows franchisees to own their business while taking advantage of an established name and product. Difficulty: 2 Medium Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

311) Which of the following statements best summarizes the experience of American franchisors in foreign countries? A) Very few American franchisors of any size have had success in international markets. B) Large franchisors have had success in other nations, but newer and smaller franchisors have lacked the financial strength and reputation to succeed in global markets. C) The only nations in which American franchisors have achieved any success are Great Britain and Mexico. D) Both large and small franchises have found success in foreign countries by providing convenience and a predictable level of service and quality. Answer: D Explanation: U.S.-based franchisors have many outlets in foreign countries. Even new and relatively small franchisors are finding success in other countries. The key to international success in franchising is the same as the key to success in the United States: providing the customer with convenience and a predictable level of service and quality. Difficulty: 2 Medium Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 312) One important consideration when prospecting for a good franchise business is A) the saturation rate of the franchise. The more saturation the better. B) the market potential for the product or service, at the prices you need to charge. C) the population level of the area where you will operate. Large populations are too overwhelming, often needlessly increasing demand. D) a limited disclosure statement, and being mindful that any disclosure statement may limit your success. Answer: B Explanation: The market potential is very important. Your goal should be to establish yourself with a franchisor whose product or service has increasing demand in the area where you will operate. You do not want your idea to be saturated in your territory. You will want the franchisor to offer full disclosure of rules, policies, and procedures. Difficulty: 2 Medium Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

313) Which of the following statements about buying a franchise is most accurate? A) One of the advantages of buying a franchise is that franchisors are so closely regulated that there is virtually no chance for scams to succeed. B) Before purchasing a franchise, the buyer should carefully evaluate the franchise, the franchisor, his or her own situation, and the nature of the market. C) Franchise agreements are simple to evaluate, since federal law requires that all such agreements must be written in plain English with all fees and terms clearly explained. D) Buying a franchise is the simplest and least expensive way to set up a business, since the franchisor has already worked out all of the details for setting up and running the business. Answer: B Explanation: This question is based on information in Figure 5.9. The figure provides a lengthy checklist of questions for evaluating a franchise, including questions about the franchise itself, the franchisor, the franchisee, and the market. Difficulty: 2 Medium Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 314) Qiang is ready to become a franchise owner and open one of the 50 Southwest Diners, a very successful fast food chain specializing in dishes from the American Southwest. Which of the following problems is Qiang most likely to encounter if she agrees to become a franchisee? A) High initial costs and fees B) Poor name recognition and visibility C) Lack of financing D) Lack of managerial assistance Answer: A Explanation: While franchisors often provide franchisees with financial and managerial assistance, they typically demand a fee just to obtain the rights to the franchise. The fees charged by successful franchisors can be quite high. In addition, most franchisors also require franchisees to pay a fee, called a royalty, based on profits or sales. Difficulty: 3 Hard Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

315) Zach is a franchisee with Digger's Doggies, a chain of hotdog shops. He was doing well until several other Digger's Doggies franchisees got in trouble and were forced to close their shops. Soon afterward, Zach's business declined and was also forced to close. This is an example of A) an economic shakeout at work. B) the coattail effect. C) the law of diminishing returns. D) management by exception. Answer: B Explanation: Coattail effects refer to situations where the actions of other franchisees can have an impact on the success or failure of a particular franchisee's business. Difficulty: 3 Hard Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 316) The Sandwich Emporium, Inc. sells the rights to use its name and sell its signature sandwiches in a given market area to those willing to pay agreed-upon fees and meet specific contractual terms. The Sandwich Emporium is A) offering investors the opportunity to form limited partnerships. B) a franchisor. C) creating private subsidiary companies. D) offering a tax-free investment potential. Answer: B Explanation: A franchisor is someone with a good idea for a business who sells the rights to use the business name and to sell its products or services in a given territory. Difficulty: 3 Hard Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

317) Midwest Auto Experts, Inc. sells franchises to prospective businesspersons who want to use the Midwest Auto Experts name and offer its products. In a franchise arrangement, Midwest Auto Experts would be the ________, and the buyer of the franchise is the ________. A) owner; limited partner B) co-signer; co-signee C) franchisor; franchisee D) franchisee; franchisor Answer: C Explanation: In a franchising arrangement, the person or company that sells the right to use the name and product is the franchisor, and the person who buys the rights is known as the franchisee. Difficulty: 3 Hard Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 318) Ivy is investing in a home cleaning franchise called HomeKeepers. At her first interview with the franchisor's selling agent, she was told the parent company expects 5% royalties. What are royalties? A) The initial investment, also known as the franchise fee paid to the franchisor B) The cost of supplies that she will purchase one time each month from the parent company C) The milestones that the parent company expects her to reach. With each milestone, she will be rewarded with commissions D) The share of the profits or a percentage share of revenues (net sales) Answer: D Explanation: Franchisors usually require a royalty fee which can be a portion of the profits of each franchised operation, or a percentage of the revenues (net sales) of each operation. These are typically collected on a monthly basis. Difficulty: 3 Hard Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

319) Enok, a prospective franchise owner, is looking to keep his monthly costs as low as possible. The franchisor he is checking out is advertising that royalty payments of 8% of sales could be as high as $300,000 per month. The franchisor is claiming that a franchisee can expect monthly sales to be as high as A) $3,125,000. B) $3,000,000. C) $3,750,000. D) $300,000. Answer: C Explanation: Royalties are monthly fees collected by the franchisor. These fees are a percentage of the total monthly sales. If the franchisee generates $3,750,000 in sales, he/she will pay 8% of that amount to the franchisor. 8% of $3,750,000 = $300,000. The mathematical question is: 8% of what revenue amount = $300,000? 8% of X = $300,000. X = $300,000/.08. X = $3,750,000. Difficulty: 3 Hard Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 320) Lucy is preparing to invest in a new online franchise, Notable Moments. The franchisor provides the exclusive software and training for designing invitations and cards for special occasions such as weddings, graduations, and birth announcements. In return, the franchisee is required to pay a monthly fee to the franchisor. Lucy will use the Notable Moments software to create her own special designs that she will ultimately feature on her website. Order turnaround time must be fast. She can only take on as many clients as she can make good on delivery. An advantage of Lucy's online franchise is that she A) has a limited territory. B) has a narrow product offering. C) does not need name recognition or marketing assistance. D) has an unlimited territory. Answer: D Explanation: A distinct advantage of online franchising is the unlimited territory regulations. The franchisee can sell to anyone, anywhere. This makes for an instant global business. Difficulty: 3 Hard Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

321) Declan plans to open up three Pizza Pals franchises in the greater Phoenix area. He tells you that he plans to negotiate with the franchisor to get rid of the giant Preston the Pizza that sits on the roof of all Pizza Pal restaurants. Declan is likely to learn that A) the parent company will give him a start-up cost break for the same amount that it would have to pay for three of these signs. B) he is making a smart decision because it is not the sign that will bring customers to his pizza joint. It is the wide selection of toppings and six different crust offerings that keep the customers coming in. C) it is nonnegotiable due to company rules. D) his failure rate will not increase or decrease because franchises traditionally have low failure rates. Answer: C Explanation: Franchisors quite often require franchisees to adhere to strict rules when it comes to the design of their buildings, the signs that they use, and other mandates. The proven business model usually has centralized regulations that franchisees must follow. Difficulty: 3 Hard Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 322) A ________ is an organization that is owned and controlled by the people who use it— producers, consumers, and workers with similar needs pool their resources for mutual gain. A) corporation B) limited partnership C) mutual fund D) cooperative Answer: D Difficulty: 1 Easy Topic: Cooperatives Learning Objective: 05-06 Explain the role of cooperatives. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

323) In rural areas electrical power is often sold by ________ that take advantage of the government's policy to sell them electricity at wholesale rates. A) franchises B) limited partnerships C) mutual funds D) cooperatives Answer: D Difficulty: 1 Easy Topic: Cooperatives Learning Objective: 05-06 Explain the role of cooperatives. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 324) Some ________ ask members/customers to work at the organization for a number of hours a month as part of their duties. A) franchises B) limited partnerships C) mutual funds D) cooperatives Answer: D Difficulty: 1 Easy Topic: Cooperatives Learning Objective: 05-06 Explain the role of cooperatives. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 325) The purpose of a farm cooperative is to A) give members more economic power as a group than they would have as individuals. B) give each farm an equal share in the running of the cooperative. C) equalize the members' standard of living. D) allow socialism a foothold in the U.S. Answer: A Difficulty: 1 Easy Topic: Cooperatives Learning Objective: 05-06 Explain the role of cooperatives. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

326) In a cooperative, members/customers A) democratically control their businesses by electing a board of directors. B) are known as limited partners. C) each have unlimited liability for the debts of the firm. D) take turns serving on the board that manages the company. Answer: A Difficulty: 1 Easy Topic: Cooperatives Learning Objective: 05-06 Explain the role of cooperatives. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 327) People who form cooperatives A) believe the government should play a larger role in the economy. B) dislike the notion of having owners, managers, and customers as separate individuals with separate goals. C) see competitive behavior as the key to ensuring rapid economic growth. D) want to find a way to supply basic necessities free of charge to everyone. Answer: B Explanation: People who form cooperatives dislike the notion of separating owners, managers, and customers into separate groups with separate goals. They tend to favor more cooperation and a more equal distribution of wealth. Difficulty: 2 Medium Topic: Cooperatives Learning Objective: 05-06 Explain the role of cooperatives. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

328) A distinguishing feature of a cooperative is that it A) maintains a distinct separation between ownership and management. B) is only intended to operate for a limited period of time. C) is owned and operated by the people who use it. D) can have no more than 75 owners, all of whom must be citizens of the United States. Answer: C Explanation: A cooperative is an organization that is owned and operated by the people who use it—producers, consumers, and workers with similar needs who pool their resources for mutual gain. Difficulty: 2 Medium Topic: Cooperatives Learning Objective: 05-06 Explain the role of cooperatives. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 329) Which of the following statements about farm cooperatives is most accurate? A) Farm cooperatives have declined in importance in recent years. B) Farm cooperatives have become a major force in American agriculture. C) Farm cooperatives have run afoul of U.S. antitrust laws in recent years. D) Farm cooperatives have increased in number, but decreased in size in recent years. Answer: B Explanation: Statistics and examples cited in the text clearly indicate that farm cooperatives, such as Welch's, Sunkist, Land O'Lakes, Blue Diamond, and Ocean Spray, are a major force in U.S. agriculture. Difficulty: 2 Medium Topic: Cooperatives Learning Objective: 05-06 Explain the role of cooperatives. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

330) Which of the following people would be most interested in participating in a business organized as a cooperative? A) Eric is interested in the idea of combining his time and resources with others to operate a business providing a good or service that they all will use. B) Rose looks to be an owner of a business and share in its profits, but does not want to take an active role in managing the company or participating in its daily operations. C) Matteo wants to work for a government-owned business because he believes government ownership ensures a more equitable distribution of income and wealth. D) Juliana prefers to work for a charitable organization that emphasizes helping people who are less fortunate than she is. Answer: A Explanation: As its name implies, a cooperative emphasizes cooperation. A cooperative appeals to people who dislike the notion of having owners, managers, workers, and customers as separate groups with different goals. In a cooperative, the people who will use a product join together and pool resources to operate the business for their mutual gain. Difficulty: 3 Hard Topic: Cooperatives Learning Objective: 05-06 Explain the role of cooperatives. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 331) Several small vineyard owners in the Napa Valley region of California banded together to market their grapes and wine in an attempt to get better prices. Over the years they expanded the organization to include other services such as buying and selling farm supplies and equipment and providing financial and technical services. The arrangement established by these vineyard owners is an example of a A) closed corporation. B) joint venture. C) limited agricultural partnership. D) farm cooperative. Answer: D Explanation: A farm cooperative is an organization of farmers who have joined to gain more economic power than they would have as individuals. These organizations often buy and sell supplies and equipment, provide warehouses, offer insurance and financial and technical services, and even operate manufacturing facilities. Difficulty: 3 Hard Topic: Cooperatives Learning Objective: 05-06 Explain the role of cooperatives. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

332) Although most new firms start out as sole proprietorships, few large firms are organized this way. Why is the sole proprietorship such a popular form of ownership for new firms? What features of the sole proprietorship make it unattractive to growing firms? Answer: Sole proprietorships have many features that are attractive to people starting a new business, including the following: 1. They are relatively easy and inexpensive to set up. 2. The owner can be his or her own boss, which appeals to many entrepreneurs who want to do things their own way, without the need to consult others. 3. The owner can keep all of the profits (except what the government takes in taxes). 4. Proprietors can take a great deal of pride in owning their own independent business and running it as they see fit. 5. The owner's work establishes a legacy on which future generations may build.6. There are no special taxes on proprietorships.However, sole proprietorships also have some disadvantages that limit their growth potential: 1. With only one owner, sole proprietorships have limited access to the financial capital needed by rapidly growing firms. 2. As the firm grows and becomes more complex, the owner may become overwhelmed with the tasks of running the firm and need to attract qualified help. 3. Unfortunately, qualified professional workers are often reluctant to work in a sole proprietorship. 4. One of the biggest drawbacks for sole proprietorships is the unlimited liability of the owner. This means that the owner can lose much more than the amount he or she initially invested in the company (including personal property and savings) if the company gets into severe financial trouble. In this respect, a sole proprietorship is a risky form of ownership. Many growing companies decide to change their form of ownership to a corporation to overcome these drawbacks. Difficulty: 3 Hard Topic: Sole Proprietorship Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Analyze AACSB: Analytic Thinking 333) What is the difference between a general partner and a limited partner? Give an example of a situation in which a person would want to be a limited partner. Answer: A general partner is an owner who has unlimited liability and is active in managing the firm. A limited partner invests money in the business and shares in the profits, but has limited liability and cannot legally assume any management responsibility.Students should be able to offer any number of examples. Among them might be: 1. Wealthy persons who want to invest in what they think could be a successful firm, but don't want to risk their personal assets. 2. Persons who do not want the responsibility of managing a partnership. 3. Persons who are interested in a particular type of business but know nothing about the field. Difficulty: 3 Hard Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Analyze AACSB: Analytic Thinking

334) What is a C corporation? What are the major advantages and disadvantages of this form of business ownership? Answer: The C corporation is a state-chartered legal entity with authority to act and have liability separate from its owners. The text identifies many advantages of corporations. Among the major advantages are: 1. More money for investment. A corporation can sell stock (shares of ownership) to large numbers of interested investors. This enables corporations to finance growth, modernize facilities, and invest in the latest technologies. 2. Limited liability. The personal assets of the stockholders are not at risk. This is a major advantage to investors who want to invest in a company but want to limit potential losses. 3. Perpetual life. Unlike a sole proprietorship or partnership, a corporation is separate from its owners, so its existence is not threatened by the death of an owner. 4. Ease of ownership change. Unlike the other major forms of business ownership, stockholders in corporations can easily transfer ownership by simply selling their stock. 5. Ability to attract talented employees. Because of their ability to grow and offer opportunities for advancement, as well as the ability to offer fringe benefits (including stock options), corporations often can attract talented and highly qualified employees. The text also mentions disadvantages of becoming a C corporation, including: 1. High initial cost of formation. It is generally more expensive and time consuming to form a corporation than to form a sole proprietorship or partnership. 2. Increased regulation and paperwork. Corporations are subject to closer government regulation than other forms of ownership, and must keep detailed records. 3. Possible conflicts between the corporation's board of directors and management. Stockholders elect the board of directors, and may choose members who are at odds with top management. As the text points out, this can result in an entrepreneur being forced out of the very company he or she founded. 4. Double taxation. If a corporation pays dividends, its earnings are taxed both as income to the corporation and as income to the stockholders. In other forms of ownership, earnings are taxed only once. Difficulty: 3 Hard Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Analyze AACSB: Analytic Thinking

335) How does a limited liability company (LLC) compare to an S corporation? What are the major advantages and disadvantages of an LLC? Answer: A limited liability company (LLC) has some similarities to S corporations. Both of these forms of ownership have the advantage of providing limited liability for their owners while allowing the earnings of the company to be taxed as a partnership, thus avoiding the problem of double taxation that is a disadvantage of the conventional (or C) corporation. S corporations must meet certain eligibility requirements. For example, they can have no more than 100 stockholders (entire families are considered one stockholder), and all of the stockholders must be either individuals or estates and the individuals must be citizens or permanent residents of the United States. LLCs avoid these special eligibility requirements. Moreover, LLCs offer even more flexibility than S corporations in the choice of taxation methods and they provide a great deal of flexibility in the way they are operated, and in the way profits and losses are distributed. For all of these reasons, LLCs have quickly become a very popular form of ownership. However, LLCs also have some disadvantages. For example, shares of ownership in LLCs are not transferable without the approval of other owners. In addition, LLCs have a limited life, and members of LLCs must pay self-employment taxes on profits. (In contrast, owners of S corporations pay self-employment taxes only on salary, not on the entire profits of their company.) LLCs cannot deduct the cost of fringe benefits as an expense, and there is more paperwork for an LLC than there is for a sole proprietorship. Thus, though LLCs offer many attractive benefits, they are not the best choice in all situations. Difficulty: 3 Hard Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Analyze AACSB: Analytic Thinking

336) Describe and differentiate between the three types of corporate mergers. Give an example of each type. Answer: A vertical merger is the joining of two firms involved in different stages of related businesses. A horizontal merger joins two firms in the same industry and allows them to expand their product offerings and/or achieve efficiencies in production and distribution. A conglomerate merger unites completely unrelated firms for the purpose of diversifying operations and investments. Students should be able to come up with many different examples here. Probably most will draw from the examples in the chapter but other examples could include: 1. Vertical: a candy producer that merges with a sugar refiner. 2. Vertical: a swimming pool contractor that merges with a pool filter manufacturer to ensure a constant supply of filters. 3. Horizontal: a publisher of business textbooks merges with a publisher that specializes in legal and political texts. 4. Horizontal: a chain of donut shops merges with a company that operates a chain of shops selling fresh baked cookies and candy in shopping malls. 5. Conglomerate: an insurance company that merges with a magazine publisher. 6. Conglomerate: an auto parts manufacturer merges with a clothing store chain. Difficulty: 3 Hard Topic: Mergers and Acquisitions Learning Objective: 05-04 Define and give examples of three types of corporate mergers, and explain the role of leveraged buyouts and taking a firm private. Bloom's: Analyze AACSB: Analytic Thinking

337) Franchising is a key component of the U.S. economy. What are the major advantages and disadvantages of franchising? Answer: Students should be able to identify and discuss several of the following advantages: 1. Management assistance: most franchisors offer franchisees advice and managerial assistance. 2. Personal ownership: the business is still owned by the franchisee. 3. Use of a nationally recognized name: Many franchises have established a national reputation. 4. Financial advice and assistance: Franchisors often provide franchisees with expert financial advice and may even be willing to provide financing to franchisees. 5. Lower failure rate than that of other business ventures. Again, students can select from several disadvantages cited in the text. Among them are: 1. Large start-up costs to obtain the franchise. 2. Sharing profits with the franchisor, or paying a royalty based on sales to the franchisor. 3. Management regulations: franchisees have to follow rules and regulations set by the franchisor that can limit their freedom. Thus, even though the franchisees own their business, they do not have as much control as owners of independent small businesses do. 4. Negative coattail effects: the owners of a successful outlet can be adversely affected by the problems and poor performance of less successful franchisees in the same franchise. 5. Restrictions on selling: many franchisees face restrictions in the reselling of their franchises. 6. Fraudulent franchisors: many franchisors are small, rather obscure companies that prospective franchisees may know little about. There has been an increase in complaints to the Federal Trade Commission about franchisors that delivered little or nothing of what they promised. Difficulty: 3 Hard Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Analyze AACSB: Analytic Thinking

Mini-Case Genna Raiter's passion has always been cars, cars, cars! As a teen, she would spend hours with her dad fixing the family car, and he taught her how to change the oil and make minor repairs. While still in high school, Genna got a job at a local garage. After high school graduation, she completed the auto mechanics degree at a local community college and quickly decided she wanted to be her own boss. She quit her job at her first garage, borrowed some money from her dad, and created her own repair shop, the Car Keepers Garage. Genna's hard work gradually attracted a loyal clientele of satisfied customers. Her success has her thinking about expanding and opening garages in two other locations, but she lacks the financial resources needed for development. Furthermore, the success of her business is forcing Genna to spend more time managing the business and less time doing the actual technical work she still enjoys. She wants to find business partners who can help her with management and provide additional financial resources. She has approached a couple of friends she met in high school: Al Ternator and Lou Banfilter, to see if they would like to join the business. 338) Right now, Car Keepers Garage is operated as a A) limited liability company. B) cooperative. C) sole proprietorship. D) solitary subsidiary. Answer: C Explanation: A business that is owned, and usually managed, by one person (such as Genna) is a sole proprietorship. Difficulty: 3 Hard Topic: Sole Proprietorship Learning Objective: 05-01 Compare the advantages and disadvantages of sole proprietorships. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

339) Genna approached Al Ternator about joining the business as an owner. She offered to provide the technical expertise and deal directly with customers, while Al, who has a degree in finance, takes care of the financial side of running Car Keepers. In addition, Genna wants Al to contribute some much-needed money for expansion. Under Genna's proposal, she and Al would operate the business together as A) limited partners. B) general partners. C) majority shareholders. D) business consultants. Answer: B Explanation: Since both partners are taking an active role in the business, they would be considered general partners. Difficulty: 3 Hard Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 340) Although Lou Banfilter, now a young attorney, is impressed with Car Keepers and believes it could be a good investment, he told Genna that his professional position at a law firm prevents him from taking an active role in the business. He is also concerned about accepting more risk since he and his wife are expecting a child. He mentioned a preference for limited liability. If Lou joined Genna and Al, the three might consider forming a A) limited partnership. B) general partnership. C) sole proprietorship. D) master limited partnership. Answer: A Explanation: A limited partner invests in the business and shares in the profits, but has limited liability and does not take an active role in the management of the company. This type of arrangement would meet Lou's goals of investing without incurring unlimited liability. Difficulty: 3 Hard Topic: Partnerships Learning Objective: 05-02 Describe the differences between general and limited partners, and compare the advantages and disadvantages of partnerships. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

341) When Genna confided in Lou and Al that she too was concerned about adding additional risk, Lou suggested that they explore the possibility of a different type of business ownership, a(n) ________, which has very flexible ownership rules and would give them more choices in how the company's earnings are taxed while still protecting all owners from high levels of risk. A) alien corporation B) master limited partnership C) limited partnership D) limited liability company Answer: D Explanation: Limited liability companies offer the protection of limited liability, but allow the company a great deal of flexibility in how the earnings of the business are taxed. In many cases, the company will choose to have its earnings taxed as if it were a partnership, thus avoiding the problem of double taxation. However, the company can also choose to have its earnings taxed as a corporation if that is more advantageous. Difficulty: 3 Hard Topic: Corporations Learning Objective: 05-03 Compare the advantages and disadvantages of corporations, and summarize the differences between C corporations, S corporations, and limited liability companies. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

342) Al also suggested another way Genna could finance her expansion. He described setting up a chain of Car Keepers Garages by selling the rights to use the Car Keepers' name, business model, garage design, and service ideas to others who would like to own a similar shop. These individuals would pay Car Keepers an initial fee and monthly royalties based on earnings. Al is suggesting that Genna set up a A) joint venture. B) franchise arrangement. C) C corporation. D) master limited partnership. Answer: B Explanation: A franchise arrangement exists when someone with an idea for a business (the franchisor) sells the right to use the business name and to sell a product or a service (the franchise) to others (the franchisees) in a given territory. Franchisees usually pay the franchisor an initial fee and royalties. Many women have turned to franchising as a means of financing an expansion of their business. Difficulty: 3 Hard Topic: Franchising Learning Objective: 05-05 Outline the advantages and disadvantages of franchises, and discuss the opportunities for diversity in franchising and the challenges of global franchising. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

Understanding Business, 12e (Nickels) Chapter 06 Entrepreneurship and Starting a Small Business 1) Entrepreneurship involves accepting the risk of starting and running a business. Answer: TRUE Difficulty: 1 Easy Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) Entrepreneurship is another name for management. Answer: FALSE Difficulty: 1 Easy Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) Entrepreneurs are less important now than in the past to the U.S. economy. Answer: FALSE Difficulty: 1 Easy Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

4) While entrepreneurs frequently earn significant profits for themselves, their impact on society is quite small. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 5) Many businesses started by entrepreneurs have grown into major corporations employing thousands of workers. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) Entrepreneurs are motivated by the desire to earn a profit. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

7) Entrepreneurs take calculated risks. Answer: TRUE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) Most entrepreneurs prefer working for someone else. Answer: FALSE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9) Most entrepreneurs are more interested in personal achievement than in power. Answer: TRUE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

10) If you have managerial skills and leadership ability, you also possess the personality to be an entrepreneur. Answer: FALSE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) Because of the stress of being in business for yourself, it's important that entrepreneurs have people around them to help replenish their enthusiasm. Answer: FALSE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) Successful entrepreneurs rely on others for direction and support. Answer: FALSE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

13) Successful entrepreneurs accept the risk of failure. Answer: TRUE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) Entrepreneurs avoid risk and place a high priority on security. Answer: FALSE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) It is important for an entrepreneur to be highly energetic. Answer: TRUE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

16) Most entrepreneurs get the ideas for their products and services from a flash of inspiration. Answer: FALSE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 17) Potential entrepreneurs would be well advised to surround themselves with people who are smarter than they are. Answer: TRUE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) An entrepreneurial team is a group of experienced managers who share the same skills and abilities. Answer: FALSE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

19) Entrepreneurial teams combine the creative marketing and production ideas of a group of experienced people. Answer: TRUE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) Micropreneurs is a term used to describe entrepreneurs who focus on the continued growth of their businesses. Answer: FALSE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 21) The most important difference between entrepreneurs and micropreneurs is the focus placed by micropreneurs on balancing the demands of work and family. Answer: TRUE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

22) The primary concern of micropreneurs is to balance the risk of starting your own business with the desire to build a powerful organization earning significant profits. Answer: FALSE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 23) Many micropreneurs are home-based business owners. Answer: TRUE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 24) Micropreneurs are motivated by a desire to have both a satisfying family life and rewarding work. Answer: TRUE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

25) Advancements in computer technology put home-based businesses at a disadvantage. Answer: FALSE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26) Many micropreneurs operate home-based businesses in the service industry. Answer: TRUE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 27) Corporate downsizing reduces the opportunities for home-based businesses. Answer: FALSE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

28) Successful micropreneurs require self-discipline to separate work from family responsibilities. Answer: TRUE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) Micropreneurs are exempt from the local ordinances that restrict home-based businesses from operating in residential areas. Answer: FALSE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30) One advantage enjoyed by home-based businesses is the relative ease in attracting new customers. Answer: FALSE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

31) Small businesses have not significantly participated in online sales. Answer: FALSE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32) Online businesses avoid the risk of failure faced by traditional start-up businesses. Answer: FALSE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 33) An intrapreneur is the creative person who starts and manages a nonprofit organization. Answer: FALSE Difficulty: 1 Easy Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

34) Creative people working as entrepreneurs within a large organization are called intrapreneurs. Answer: TRUE Difficulty: 1 Easy Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) Entrepreneurial spirit is unique to a small business environment. Answer: FALSE Difficulty: 1 Easy Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) Large organizations encourage intrapreneurship as a strategy to improve their profitability through new products. Answer: TRUE Difficulty: 1 Easy Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

37) By passing the Immigration Act of 1990, the U.S. government acted to encourage entrepreneurs to immigrate to the United States. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) The U.S. government offers investor visas to attract more entrepreneurs. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39) The position of our government is to restrict foreign entrepreneurs from operating within the U.S. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

40) Business incubators provide assistance to established companies attempting to generate foreign sales. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 41) A National Business Incubator Association study indicates that over 85 percent of incubator graduates remain in business. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 42) Enterprise zones offer lower tax rates and government assistance to attract private business investment. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

43) Independence, challenge, and opportunity are among the key reasons given by those who assume the risks of entrepreneurship. Answer: TRUE Explanation: Many factors encourage people to accept the risks associated with entrepreneurship, including the opportunities, independence, and challenges associated with starting and operating a business. Clearly the potential of profits is also a great motivator for entrepreneurs. Difficulty: 2 Medium Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44) Successful entrepreneurs are exclusively motivated by the desire to become rich. Answer: FALSE Explanation: Entrepreneurs are often motivated by the challenges and opportunities of starting and operating a business, and by the chance to be independent. Thus, earning a profit is only one of the goals that motivate entrepreneurs. Difficulty: 2 Medium Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 45) Although corporate managers often exhibit the skills required of successful entrepreneurs, they seldom have the desire to give up the perks and fringe benefits of corporate life and start their own business. Answer: FALSE Explanation: Many corporate managers have left their jobs to become entrepreneurs. Difficulty: 2 Medium Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

46) To be successful, entrepreneurs are dependent on the support of others for encouragement. Answer: FALSE Explanation: Entrepreneurs must be self-nurturing. They must believe in their ideas when others do not. Difficulty: 2 Medium Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 47) Entrepreneurial teams increase the cooperation between marketing, production, and other functional areas of a business venture. Answer: TRUE Explanation: In entrepreneurial teams, all members work together to conceive, make, and market a new product or service. A team may be better than an individual entrepreneur because team members can combine creative skills with production and marketing skills right from the start. Difficulty: 2 Medium Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 48) State governments create new start-up business organizations called enterprise zones that are later sold to private investors. Answer: FALSE Explanation: Also known as empowerment zones or enterprise communities, enterprise zones are specific geographic areas where state governments try to attract private investment by offering lower taxes for locating your business there. Difficulty: 2 Medium Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 16 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

49) The United States government views entrepreneurship as a result of an individual's selfmotivation. The government can do very little to encourage an individual to become an entrepreneur. Answer: FALSE Explanation: The U.S. federal government passed the Immigration Act of 1990, which created a category of investors' visas intended to attract entrepreneurs to our country. Enterprise zones are specific geographic areas to which governments attract private business investment by offering lower taxes and other government support. Difficulty: 3 Hard Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 50) The Spotlight on Small Business box is testimonial to the fact that entrepreneurs are problem solvers. Answer: TRUE Explanation: Ideas for businesses are often conceived by young people. They act upon those ideas and develop successful businesses. Difficulty: 2 Medium Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

51) According to the Spotlight on Small Business box, people in college are not ready to start their own business. Answer: FALSE Explanation: Most students finish their education first, but the text cites examples of some entrepreneurs who found success during college. Difficulty: 2 Medium Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 52) Ariel wants to start and run her own business. Although she acknowledges it would be helpful to earn a healthy profit, her main motivation is the exhilaration and challenge of starting and running a business. Ariel's attitude is different from most small business owners, who usually focus solely on the earnings potential of their ventures, as well as the opportunity to acquire power and prestige. Answer: FALSE Explanation: Many factors motivate entrepreneurs, including the challenges and opportunities of starting and operating their own business. Additionally, most entrepreneurs seek a sense of achievement rather than power. Difficulty: 3 Hard Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

53) Victor is a dreamer rather than a doer. This will make him an ideal entrepreneur since their job is to be creative and develop new ideas that are then implemented by others. Answer: FALSE Explanation: Entrepreneurs must be self-directed, self-nurturing, and action-oriented. They do not depend on others to follow through on their ideas. Difficulty: 3 Hard Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 54) Luca has eliminated the risk of entrepreneurship by preparing a detailed business plan. Answer: FALSE Explanation: Entrepreneurs must be able to take calculated risk because there are no guarantees of success. Successful entrepreneurs must be willing to accept uncertainty. However, they should take only calculated risks if they can help it. Difficulty: 3 Hard Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

55) Timothy, Jude, and Eric are working in the marketing department of a multinational corporation. They each have similar backgrounds and experience and are thinking about leaving their current company to start their own business. Successful entrepreneurial teams are comprised of these types of people because similarities in knowledge and skill ensure harmony and consistency in their new business. Answer: FALSE Explanation: Entrepreneurial teams should include people with different skills and backgrounds. The idea behind an entrepreneurial team is to bring together the creative, production, and marketing skills necessary to ensure success. Difficulty: 3 Hard Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 56) Antonio works for a textbook publisher. However, his dream is to establish a home-based business providing his services to a variety of publishers. Antonio's primary goal is to escape the 9 to 5 world of corporate publishing and to enjoy the opportunity of working for himself. Antonio is an example of a micropreneur. Answer: TRUE Explanation: Micropreneur refers to a business owner who is interested in simply enjoying a better lifestyle and who wants the opportunity to make a living doing the kind of work he or she enjoys. Difficulty: 3 Hard Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

57) Alex works for Wheelie's, a large corporation that designs and manufactures accessories for scooters, bicycles, and other children's motorized toys. She is a creative force within the company and has helped create and launch several new successful products. Alex is an example of an intrapreneur. Answer: TRUE Explanation: Intrapreneurs are creative people who work within corporations to launch new products and generate new profits. Difficulty: 3 Hard Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 58) Grant received an e-mail stating that HE COULD EARN THOUSANDS!!!! just working a few hours from home. Most likely Grant's e-mail was a work-at-home scam. Answer: TRUE Explanation: Persons interested in working from home must be cautious of scam opportunities, which will often take your money upfront, or never pay you for work provided. Difficulty: 3 Hard Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

59) When Marley created the Mar's Cookie Bars Company, she took advantage of a statesupported incubator that offered her new business low-cost office space and basic services such as accounting, legal advice, and secretarial help. Joining the incubator helped her company to survive because it provided assistance in the critical stage of its early development. Answer: TRUE Explanation: According to a recent study conducted by the National Business Incubator Association (NBIA), 87 percent of incubator graduates remain in business. Approximately 32 percent of all business incubators have ties to a university. Difficulty: 3 Hard Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 60) The principles of management of a large business are similar to the principles of management of a small business. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 61) To be classified as a small business, a firm must have no more than 100 employees. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

62) According to the Small Business Administration's definition, small businesses are independently owned and operated. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 63) A business is considered small by comparing its size to others in the same industry. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 64) Small businesses create 65% of the new jobs in the United States each year. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 65) Small businesses account for over 50% of the U.S.'s gross domestic product (GDP). Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

66) About 80% of U.S. workers find their first job in small business. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 67) Of all nonfarm businesses in the United States, almost 97% are considered small by the Small Business Administration (SBA) standards. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 68) Compared to small businesses, large firms have a greater ability to provide personalized customer service. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 69) Big businesses do not serve all the needs of a market. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

70) The most common small business failures occur in businesses that are the easiest to start. Answer: TRUE Difficulty: 1 Easy Topic: The Advantages and Disadvantages of Small Business Ownership Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 71) Only about 10% of all businesses qualify as small businesses using the definition of the Small Business Administration. Answer: FALSE Difficulty: 1 Easy Topic: The Advantages and Disadvantages of Small Business Ownership Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 72) The small business sector that has the best chance of significant growth is legal services. Answer: FALSE Difficulty: 1 Easy Topic: The Advantages and Disadvantages of Small Business Ownership Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 73) Small businesses can often provide more personalized customer service than bigger rivals. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

74) Recent evidence suggests that the small business failure rate is significantly higher than previously reported. Answer: FALSE Difficulty: 1 Easy Topic: The Advantages and Disadvantages of Small Business Ownership Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 75) Bad luck is the most often reported cause for small business failure. Answer: FALSE Difficulty: 1 Easy Topic: The Advantages and Disadvantages of Small Business Ownership Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 76) The business opportunities with the greatest growth potential tend to be in the high technology industries. Answer: TRUE Difficulty: 1 Easy Topic: The Advantages and Disadvantages of Small Business Ownership Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 77) The easiest businesses to start are those that offer the greatest profit potential. Answer: FALSE Difficulty: 1 Easy Topic: The Advantages and Disadvantages of Small Business Ownership Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

78) Most business opportunities offer entrepreneurs high levels of security and profits. Answer: FALSE Difficulty: 1 Easy Topic: The Advantages and Disadvantages of Small Business Ownership Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 79) The easiest businesses to start also have the least growth potential and the greatest failure rates. Answer: TRUE Difficulty: 1 Easy Topic: The Advantages and Disadvantages of Small Business Ownership Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 80) While the first job for many people is working for a small business, larger corporations create most of the permanent new jobs. Answer: FALSE Explanation: Small businesses create 65% of the new jobs in the United States. Difficulty: 2 Medium Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

81) If you are trying to prevent failure, it is a good idea to go into the business with good recordkeeping techniques. Answer: TRUE Explanation: Lack of good record-keeping is one of the causes of small business failure. Other common causes are listed in Figure 6.3. Difficulty: 2 Medium Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 82) If you go through the exercise of preparing a business plan, only to determine that you need twice the amount of money to start the business than you have, the SBA and other expert organizations encourage you to go ahead with your plans because if you understand the market, you can use the revenues you accrue to make up the shortfall. Answer: FALSE Explanation: One of the causes of small business failure is lacking the necessary capital to start the business. Creating a business plan is a good exercise for determining capital needs. Difficulty: 2 Medium Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 83) Small businesses lack the resources to compete directly with big businesses. Answer: FALSE Explanation: Small businesses can often compete successfully against big businesses because they are more able to quickly respond to business opportunities and able to offer more personalized customer service. Difficulty: 2 Medium Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

84) Because of their greater financial resources and expert staffs, big corporations can almost always outperform small businesses. Answer: FALSE Explanation: Small businesses have some advantages over big firms. They are often more flexible, and able to offer their customers more personalized service. Difficulty: 2 Medium Topic: The Advantages and Disadvantages of Small Business Ownership Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 85) Tessa has just graduated with a business degree. Her job hunt should only focus on large corporations. Answer: FALSE Explanation: Since small businesses create 65% of the new jobs in the U.S., if Tessa focuses on job opportunities with big firms, she is likely to limit her chances of finding employment. Difficulty: 3 Hard Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 86) Kate, a manager at a small manufacturing firm, has offered to help manage a local branch of the YMCA. Unfortunately, Kate will find that the skills acquired managing a small business will not be useful in managing a nonprofit organization. Answer: FALSE Explanation: The skills needed to manage small businesses, big businesses, charities, churches, and government agencies are very similar. Difficulty: 3 Hard Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

87) Your brother is a dentist and has opened a new practice in your hometown. As a business student you know that this type of business experiences low failure rates. Answer: TRUE Explanation: Many of the businesses with the lowest failure rates require advanced degrees to start. This would include veterinary services and dentists' offices. However, while training and degrees may buy security, they do not tend to produce high growth rates. Difficulty: 3 Hard Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 88) Valerie wants to start her own small business. If her primary goal is to grow quickly and earn high profits, her best chances would be in the manufacturing sector. Answer: TRUE Explanation: Although manufacturing firms are difficult to start and keep going, they do have the greatest potential for the high rates of growth that Valerie needs to achieve her primary goal. Difficulty: 3 Hard Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 89) Jin Yang wants to start a small business. But he has not yet uncovered an opportunity that would offer him security and the possibility of high profits. Jin Yang will likely find that one must risk more in order to attain high profits. Answer: TRUE Explanation: Firms that offer security seldom offer the potential for rapid growth and high profits, while firms that offer high profits tend to be associated with high levels of risk. Difficulty: 3 Hard Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

90) The best way to learn about small business is to "bite the bullet" and start your own. Answer: FALSE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-03 Summarize ways to learn about how small businesses operate. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 91) Individuals wanting to learn about small business operations are advised to learn from other entrepreneurs. Answer: TRUE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-03 Summarize ways to learn about how small businesses operate. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 92) Many entrepreneurs got the idea for their own business from their experience of working for others. Answer: TRUE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-03 Summarize ways to learn about how small businesses operate. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 93) Since entrepreneurs are starting new businesses, experience gained from working for an established business isn't particularly helpful. Answer: FALSE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-03 Summarize ways to learn about how small businesses operate. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

94) Offering to manage an established business for a percentage of the profits plus a salary offers experience to the would-be entrepreneur and free time to the business owner. Answer: TRUE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-03 Summarize ways to learn about how small businesses operate. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 95) Entrepreneurs are well advised to avoid starting businesses in the same market in which they were previously employed. Answer: FALSE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-03 Summarize ways to learn about how small businesses operate. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 96) You can negotiate a win-win situation by offering to manage an established small business. You win from the experience; the owner wins with free time. Answer: TRUE Explanation: Often it is difficult to start your own business when you lack the capital. One way to become an owner is to offer to manage a business that is already established. You gain experience and the owner gets free time. Difficulty: 2 Medium Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-03 Summarize ways to learn about how small businesses operate. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

97) If you were to begin gathering information on a particular type of business, it is doubtful that a community college class would benefit your search because the information you would gain is too generic in nature. Answer: FALSE Explanation: Many community colleges bring together would-be entrepreneurs from diverse backgrounds. These resources will often connect students with a network of other entrepreneurs and small business owners. However, many tips for prospective small business owners are universal in nature, such as keeping accurate financial records and finding out where to go to learn how to do these things. Difficulty: 2 Medium Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-03 Summarize ways to learn about how small businesses operate. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 98) There are several ethical considerations when starting a business, but competing against current and former work relationships is always fair game. Answer: FALSE Explanation: Similar to managers who work for large organizations, small business owners/managers must consider ethics when making decisions. The Making Ethical Decisions box depicts a situation where two employees plan to quit their jobs and create a business that directly competes against their current employer. Although they have a right to create a business and compete, how they ethically compete for the same customers that their former employer serves is the question. Difficulty: 2 Medium Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-03 Summarize ways to learn about how small businesses operate. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 99) Amir hopes to start his own business someday. He should not talk to other small business owners about his plans because they might steal his ideas. Answer: FALSE Explanation: Talking to small business owners is one of the best ways to learn how to start and run a small business. Difficulty: 3 Hard Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-03 Summarize ways to learn about how small businesses operate. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 33 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

100) Riley worked as a floral designer at a floral shop in town before opening her own shop. This approach to the business is okay, but her time would be put to better use starting her own business. Answer: FALSE Explanation: Riley will gain valuable training and insights into the floral design business by working for someone else. Her experience should reduce her risks and help her operate more efficiently when she starts her own business. Difficulty: 3 Hard Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-03 Summarize ways to learn about how small businesses operate. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 101) As an employee of a small business, Dante has heard the owner is getting ready to retire. Since Dante would like to buy the business, he needs to determine how much the business is worth. In order to determine a fair price for the business, Dante should add up the market value of all of the firm's physical assets such as buildings, machinery, equipment, and inventory, and willingly pay this amount for the business. Answer: FALSE Explanation: A fair value for a business depends not only on what the firm owns, but also on what it earns and what makes it unique. Difficulty: 3 Hard Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-03 Summarize ways to learn about how small businesses operate. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 102) The two primary concerns of an entrepreneur starting a new business are planning and record keeping. Answer: FALSE Difficulty: 1 Easy Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

103) According to the Small Business Administration, poor management is the cause of the majority of small business failures. Answer: TRUE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 104) Business plans are necessarily a bit vague since these are prepared prior to the beginning of business operations. Answer: FALSE Difficulty: 1 Easy Topic: The Business Plan Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 105) A good business plan describes the nature of the proposed business, the target market, the competitive advantages, and the qualifications of the owners. Answer: TRUE Difficulty: 1 Easy Topic: The Business Plan Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 106) Bankers and investors require entrepreneurs to present a well-conceived business plan. Answer: TRUE Difficulty: 1 Easy Topic: The Business Plan Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

107) Getting a business plan into the hands of the right people is nearly as important as getting the right information in the plan. Answer: TRUE Difficulty: 1 Easy Topic: The Business Plan Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 108) The entrepreneur's integrity is not relevant to bankers when determining the creditworthiness of a business loan. Answer: FALSE Difficulty: 1 Easy Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 109) Software designed to help create business plans has proven to be of little value because it is difficult to apply it to every business situation. Answer: FALSE Difficulty: 1 Easy Topic: The Business Plan Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 110) Since creating a detailed business plan is almost impossible, entrepreneurs should focus on the other tasks needed to get their firm started. Answer: FALSE Difficulty: 1 Easy Topic: The Business Plan Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

111) Management includes attention toward financing the business, hiring employees, marketing, and record keeping. Answer: TRUE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 112) Identifying poor management as the cause of a small business failure likely covers a variety of problems. Answer: TRUE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 113) Aside from personal savings, the only other viable source of financing for an entrepreneur would be funds available from friends and family. Answer: FALSE Difficulty: 1 Easy Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 114) Potential suppliers can be an excellent source of financing for a new business since lending money to a new customer may be very much in their own interest. Answer: TRUE Difficulty: 1 Easy Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

115) Angel investors are the government agencies that invest money in new companies before they go public. Answer: FALSE Difficulty: 1 Easy Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 116) Venture capitalists provide funds for start-up businesses in exchange for part ownership in the new firm. Answer: TRUE Difficulty: 1 Easy Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 117) State and local governments often act as venture capitalists. Answer: FALSE Difficulty: 1 Easy Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 118) While the Small Business Administration provides management advice to new business owners, it is not empowered to provide financial assistance. Answer: FALSE Difficulty: 1 Easy Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

119) Venture capitalists provide funds for small businesses as part of their philanthropy programs. Answer: FALSE Difficulty: 1 Easy Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 120) Venture capitalists prefer investing in smaller start-up businesses in order to reduce their overall risk. Answer: FALSE Difficulty: 1 Easy Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 121) The Small Business Administration's microloan program offers small businesses very small loans. Answer: TRUE Difficulty: 1 Easy Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 122) Small Business Administration microloans are based on the borrowers' integrity rather than collateral and credit history. Answer: TRUE Difficulty: 1 Easy Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

123) In order to qualify for a microloan from the SBA, an entrepreneur must have adequate collateral and a proven track record of success. Answer: FALSE Difficulty: 1 Easy Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 124) Small Business Investment Companies (SBICs) are privately owned companies licensed by the Small Business Administration to lend money to small businesses. Answer: TRUE Difficulty: 1 Easy Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 125) The SBA may guarantee loans made by a financial institution and repay them if the borrowers stop making payments. Answer: TRUE Difficulty: 1 Easy Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 126) Success in running a business depends on knowing your customers, managing your employees, and keeping efficient records. Answer: TRUE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

127) In the business world, a market consists of those people who have a willingness to buy a particular product. Answer: FALSE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 128) One of the greatest advantages that small businesses have over larger ones is the ability to know their customers better and to adapt quickly to the customers' needs. Answer: TRUE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 129) Attracting qualified workers presents a problem for small businesses since they usually offer less money, fewer benefits, and less room for advancement than larger firms offer. Answer: TRUE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 130) As their firms grow and prosper, busy entrepreneurs take pleasure in delegating authority to others. Answer: FALSE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

131) Studies show that seniority is the most important criterion when selecting employees for promotion to management positions. Answer: FALSE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 132) Compared to employees of large businesses, small business employees are less satisfied with their work because they see their jobs as less challenging. Answer: FALSE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 133) Hiring family members offers the best answer to the problem of attracting qualified employees. Answer: FALSE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 134) Questions about how much authority to delegate and to whom, are easier issues for familyrun businesses since they can't fire family. Answer: FALSE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

135) With fewer employees and less revenue, small businesses have less need for detailed records than do larger business organizations. Answer: FALSE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 136) Many small business owners report that they needed assistance with accounting when they first started businesses. Answer: TRUE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 137) Commercial loan officers and insurance agents offer expert assistance that can be valuable to small business owners. Answer: TRUE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 138) One way to control the legal costs associated with operating a small business is to purchase a prepaid legal plan. Answer: TRUE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

139) Commercial loan officers serve as a resource for small business owners for information regarding risk management. Answer: FALSE Difficulty: 1 Easy Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 140) Many more new entrepreneurs are turning to crowdfunding sites, like Kickstarter, to raise funds for their endeavors. Answer: TRUE Difficulty: 1 Easy Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 141) Management includes attention toward financing the business, hiring employees, marketing, and record keeping. Answer: TRUE Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

142) Prior to creating a business plan, discussions with bankers and investors can help entrepreneurs determine the amount of financing available. Answer: FALSE Explanation: Bankers and investors will want to look at an entrepreneur's business plan in order to determine whether they are interested in providing funds. Entrepreneurs who are unable to provide bankers and potential investors with a well-developed plan will appear disorganized and unprepared. Difficulty: 2 Medium Topic: The Business Plan Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 143) An effective business plan analyzes the competition and identifies the resources required to profitably serve a target market. Answer: TRUE Explanation: An effective business plan must consider all the aspects of operating a new business in detail. Difficulty: 2 Medium Topic: The Business Plan Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 144) When writing a business plan, prospective entrepreneurs should remember to omit details regarding their experience and education since investors are only interested in the proposed business. Answer: FALSE Explanation: A business plan should include information about the resources and qualifications of the owner. Difficulty: 2 Medium Topic: The Business Plan Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

145) As opposed to venture capitalists, angel investors prefer to target their investments in new firms requiring large sums of money. Answer: FALSE Explanation: Venture capitalists often invest in businesses in need of large sums of money. Angel investors are private individuals investing their own money. The amount of money invested by angel investors tends to be less than amounts invested by venture capital firms. Difficulty: 2 Medium Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 146) A major advantage of preparing a formal business plan is that prospective entrepreneurs must identify the resources and activities required to successfully operate their proposed venture. Answer: TRUE Explanation: Developing a business plan forces an entrepreneur to think carefully about all aspects of the business he or she intends to start. Difficulty: 2 Medium Topic: The Business Plan Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 147) Prospective entrepreneurs turned down by private lenders have little hope of getting financial help from the Small Business Administration, since the SBA's standards are even tougher than those of private lenders. Answer: FALSE Explanation: The SBA offers a number of programs to help finance small businesses that have difficulty obtaining loans from private sources. Sometimes the SBA will offer direct loans, sometimes it will guarantee private loans, and other times it will combine both of these approaches. Difficulty: 2 Medium Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

148) If you plan to meet face-to-face with a banker or venture capitalist, it is not necessary to submit a business plan. Answer: FALSE Explanation: A business plan is mandatory when talking to bankers and investors. Difficulty: 2 Medium Topic: The Business Plan Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 149) In order to better serve their customers, small business owners should avoid delegating authority to their employees. Answer: FALSE Explanation: Successful small businesses often grow beyond the ability of the entrepreneur. Empowering employees produces highly motivated workers with higher job satisfaction. This helps to improve customer service and reduces the wear and tear on the owner-manager. Difficulty: 2 Medium Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 150) As a future entrepreneur, Brooke considered a variety of financing sources. Her discussions with a venture capitalist revealed that this type of investor expects to receive a large ownership interest in her firm. Answer: TRUE Explanation: Venture capitalists sometimes ask for as much as a 60% stake in a business. Difficulty: 3 Hard Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

151) Hoping to qualify for a Small Business Administration microloan, Aliana's business plan clearly pinpoints her strategy to gainfully serve her target market. Unfortunately, her lack of business experience and limited collateral greatly reduce her chances of obtaining the microloan. Answer: FALSE Explanation: Microloans are awarded on the basis of the integrity of the borrowers and the soundness of their business ideas. Difficulty: 3 Hard Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 152) Elliot's long-time interest in and knowledge of computers enabled him to design a new hard drive that is better than anything else on the market. Elliot's product and business plan will likely attract several sources of financing if he is willing to give up part ownership in his company. Answer: TRUE Explanation: Venture capitalists are individuals or companies that invest in new businesses in exchange for partial ownership of those businesses. However, as a result of the bursting dot-com bubble, many venture capitalists have reduced how much they are willing to invest in a high-tech venture and have increased their required rate of return. Difficulty: 3 Hard Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 153) Because college students realize the importance of nursing homes for our aging population, students comprise an attractive market for nursing home insurance policies. Answer: FALSE Explanation: A market consists of people who have both a willingness to buy and the financial resources needed to make the purchase. College students may lack both of these attributes. Difficulty: 3 Hard Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

154) Preston believes his family-run business is more likely to avoid many of the problems growing businesses have with managing employees. His attitude will likely hinder the growth of his company. Answer: TRUE Explanation: Attitudes such as "You can't fire family" or you must promote someone because "they're family" can be detrimental to family businesses. Difficulty: 3 Hard Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 155) Rachel hopes to start her own business soon, but is concerned about her limited financial resources. She should save money by waiting to meet with lawyers and accountants until the business has grown and has been operating successfully for a few years. Answer: FALSE Explanation: Consulting with lawyers, accountants, and loan officers may be expensive, but their advice may be invaluable. If Rachel waits for a few years before asking for legal and financial advice, the money she saves on consulting fees is likely to be more than offset by losses due to poor decisions and avoidable mistakes. Difficulty: 3 Hard Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 156) The number of small businesses that export has increased dramatically recently. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in entering global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

157) Large multinational firms dominate the international market, leaving few opportunities for small businesses. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in entering global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 158) One advantage enjoyed by small businesses in international markets is that overseas buyers like dealing with individuals rather than large corporate bureaucracies. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in entering global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 159) Due in part to government support, the majority of U.S. small businesses are involved in exporting. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in entering global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

160) Exporting offers small businesses opportunities to reduce their dependence on domestic sales and extend product lives. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in entering global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 161) Small Business Administration loans help firms finance their domestic operations. These funds, however, cannot be used to finance exports since the money is provided by U.S. taxpayers. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in entering global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 162) Small businesses can provide more personalized service than a large corporation to overseas customers. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in entering global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

163) The Internet has slowed small businesses' participation in international markets. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in entering global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 164) From a competitive standpoint, small businesses cannot expect to successfully compete with large corporations in international markets. Answer: FALSE Explanation: Small businesses have certain advantages over larger rivals in international markets. Overseas buyers often prefer to deal with individuals rather than corporate bureaucracies. Moreover, small businesses can often begin shipping faster and offer more personal service. Difficulty: 2 Medium Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in entering global markets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 165) The only real barrier preventing small businesses from exporting is insufficient knowledge of the opportunities available. Answer: FALSE Explanation: Although many small businesses could profit from going international, there are some serious barriers to small business exporting. Financing is often hard to obtain, dealing with the bureaucratic paperwork involved in international transactions can be daunting, and the need to adjust to cultural differences can complicate marketing efforts. Difficulty: 2 Medium Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in entering global markets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

166) As the owner of a small manufacturing business, Finn has an interest in exporting. However, he doesn't know how to get started. Fortunately, the government provides an abundance of information to encourage entrepreneurs like Finn. Answer: TRUE Explanation: The Department of Commerce's Bureau of Industry and Security and the Small Business Administration provide export information on the Internet. Difficulty: 3 Hard Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in entering global markets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 167) Kyle is a recent college graduate with a business degree. While still in school, he learned that as a potential small business owner, he should focus his sights on domestic business only. Answer: FALSE Explanation: The world market is much larger and more lucrative than just the U.S. market. Small and medium-sized business accounted for 99% of the growth in exporting firms in recent years. Difficulty: 2 Medium Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in entering global markets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 168) Entrepreneurship is A) managing businesses for others. B) a controlling interest in the ownership of a corporation. C) managing businesses that operate in multiple countries. D) accepting the risk of starting and running a business. Answer: D Difficulty: 1 Easy Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

169) Which of the following U.S. issues does entrepreneurship most directly affect? A) The political process B) The ability to create jobs for others C) Contributions of money to organizations that help people in need D) The ability to influence national macroeconomics polices Answer: B Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 170) Which of the following explains why individuals accept the risks of business ownership? A) The potential for learning how to be self-disciplined B) The sense of self-satisfaction and independence C) The challenge of seeking power D) The desire to work fewer hours Answer: B Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

171) Which of the following is a characteristic of successful entrepreneurs? A) Power-seeking B) Relies heavily on others who believe in the business C) Willingness and desire to follow others D) Action-oriented Answer: D Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 172) Which of the following best describes entrepreneurial personality traits? A) Tolerant of uncertainty and highly energetic B) Risk averse and self-nurturing C) Appreciative of direction from others and risk averse D) Preference for working fewer hours and letting others do the footwork Answer: A Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

173) A(n) ________ is a group of experienced professionals from different areas of business who join together to develop, make, and market a new product. A) entrepreneurial team B) joint venture C) self-directed functional team D) managerial task force Answer: A Difficulty: 1 Easy Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 174) An entrepreneurial team consists of A) managers with similar skills, abilities, and interests. B) experienced professionals from different areas of business. C) a group of wealthy investors who share a vision for a product. D) representatives from management, labor, and the government who work together to solve a company's problems in a creative way. Answer: B Difficulty: 1 Easy Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

175) Business owners who prefer to maintain their businesses at a manageable size are called A) macropreneurs. B) intrapreneurs. C) micropreneurs. D) home workers. Answer: C Difficulty: 1 Easy Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 176) One of the challenges of running a home-based business is A) an increase in business risk. B) managing the extra time on your hands. C) keeping work and family tasks separate. D) burdensome tax laws. Answer: C Difficulty: 1 Easy Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

177) A creative person working within a corporation to launch new products and generate new profits is known as a(n) A) arbitrator. B) micropreneur. C) macropreneur. D) intrapreneur. Answer: D Difficulty: 1 Easy Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 178) The goal of an intrapreneur is to A) improve quality control in a corporation's production process. B) develop new products and generate new profits for the corporation. C) implement cost control policies for existing products. D) create smaller companies within larger companies. Answer: B Difficulty: 1 Easy Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

179) The U.S. government's Immigration Act of 1990 A) encouraged entrepreneurs to come to the U.S. through "investor visas." B) established a government program to teach American workers displaced by immigration how to start their own businesses. C) established guidelines to help entrepreneurs recruit legal aliens as a source of low-cost labor. D) proposed an exchange program for American and European entrepreneurs to temporarily live internationally in order to open up foreign branches for their businesses. Answer: A Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 180) Enterprise zones are specific geographic areas that A) the government has set aside for major corporations that promise to spend at least $10 million to create new jobs. B) attract business investment by offering lower taxes and government support for development. C) the government has recognized as having the fastest growth rates in the country. D) are characterized by government ownership of small businesses. Answer: B Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

181) Business incubators are usually government-funded facilities intended to A) provide health care benefits for small business owners and their families. B) offer start-up firms low-cost office space and basic business services. C) help rebuild the nation's infrastructure. D) assist foreign investors in identifying business opportunities in the U.S. Answer: B Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 182) Historically entrepreneurs in the U.S. A) created wealth for themselves, but have had a minor impact on the economy as a whole. B) started many small firms that later became major corporations employing thousands of workers. C) experienced success only when they worked in partnership with the federal government. D) played an important role, but are less important now in creating jobs and wealth. Answer: B Explanation: The history of the U.S. economy is full of examples of entrepreneurs that started small businesses that later became major corporations. Examples from the past include Henry Ford (Ford Motor Company), George Eastman (Kodak), and William Procter and James Gamble (Procter & Gamble). More recent examples include Steve Jobs (Apple Computer), Bill Gates (Microsoft), Chad Hurley and Steven Chen (YouTube), Ted Turner (CNN), and Jack Dorsey (Twitter). Difficulty: 2 Medium Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

183) Which of the following statements explains one of the reasons that people in the U.S. take the entrepreneurial challenge? A) It's all about profits, and the chance to make a lot of money. B) It's about independence and the opportunity to share in the American dream. C) It's about power and fame. D) It's about a lot of things, but it does not include personal achievement. Answer: B Explanation: Although the opportunity to earn big profits is certainly attractive to most entrepreneurs, it is certainly not the only reason. Many entrepreneurs do not enjoy working for others and become entrepreneurs because of the opportunity for independence. Others want the opportunity to share in the American dream. Difficulty: 2 Medium Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 184) Successful entrepreneurs are self-nurturing. This means they A) look to others for strength and encouragement. B) self-finance their business with no assistance from others. C) perform all business operations by themselves. D) believe in themselves and their ideas. Answer: D Explanation: Self-nurturing individuals have the ability to believe in an idea when no one else does, and to replenish their enthusiasm. Difficulty: 2 Medium Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

185) Which of the following statements is characteristic of entrepreneurs? A) They like certainty. B) They have the ability to visualize a clear path. C) They look at problems and see opportunities. D) They prefer to be inventive rather than worry about whether the invention solves a customer need. Answer: C Explanation: A common characteristic of entrepreneurs is that they like to solve problems. They view a problem or a need as an opportunity. Difficulty: 2 Medium Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 186) Although successful entrepreneurs are more tolerant of uncertainty, A) they seldom start another business after a failure. B) they develop mental games to see themselves through the risk game, especially. C) they always protect themselves from failure by taking out lots of insurance. D) they strive to take calculated risks. Answer: D Explanation: Although tolerant of uncertainty, successful entrepreneurs prefer to take calculated risks. This means that they will explore environmental trends, and do their best to quantify opportunities before taking chances. Difficulty: 2 Medium Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

187) Effective entrepreneurial teams combine A) creativity with marketing and production experience. B) venture financing, tax benefits, and production economies. C) scientific abilities, capital investment, and marketing skills. D) risk tolerance, debt financing, and international experience. Answer: A Explanation: The purpose of an entrepreneurial team is to bring together the skills needed to create, produce, and market a new product. Difficulty: 2 Medium Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 188) Successful entrepreneurial teams A) quickly organize themselves like large corporations. B) assign only one person to new product innovation. C) bring a variety of talent to the business venture. D) outsource most of the details of innovation. Answer: C Explanation: As its name implies, members of an entrepreneurial team operate as a team. Everyone works together to conceive, develop, and market the product. Team members can combine their talents and creative skills, and bring a variety of expertise to the team. Difficulty: 2 Medium Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

189) One reason we have seen continued growth in home-based businesses is A) the location offers a more secure operational environment. B) affordable technology makes it easier to compete. C) people need something to do while they wait to return to work for a large corporation. D) it is less risky to start a home-based business than other types of entrepreneurial ventures. Answer: B Explanation: Technology has helped level the playing field between large and small businesses. Entrepreneurs can now use affordable technology right at home. Difficulty: 2 Medium Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 190) Which of the following best describes the difference between an intrapreneur and an entrepreneur? A) Intrapreneurs start nonprofit organizations while entrepreneurs start profit-seeking businesses. B) Intraprenuers are practical while entrepreneurs are creative. C) Intrapreneurs work within existing corporations while entrepreneurs assume the risks of starting their own business. D) Intrapreneurs limit their efforts to financial investments, while entrepreneurs are involved in the management of all areas of a business. Answer: C Explanation: Intrapreneurs are creative people who work within a corporation to develop new products and generate new profits for the firm. Entrepreneurs start their own businesses, without any financial tie to a larger company. Difficulty: 2 Medium Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

191) Intrapreneurs make use of ________ to develop and launch new products and generate new profits. A) their employer's existing human, financial, and physical resources B) their own personal financial resources C) government-supplied physical and financial resources D) old ideas abandoned by entrepreneurs Answer: A Explanation: The idea behind intrapreneurship is to use a company's existing financial, human, and physical resources to launch new products and generate new profits. Difficulty: 2 Medium Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 192) Enterprise zones are A) government-owned properties that are available for entrepreneurial ventures at a reduced cost. B) similar to incubator facilities but strictly run by city and state governments. C) blighted areas that contain toxic materials making them unsuitable for business operations. D) specific locations across the U.S. where entrepreneurs can set up shop and receive tax breaks for operating in these areas. Answer: D Explanation: Enterprise zones are geographic areas where the government would like to encourage business development. City and state governments will provide business owners tax concessions for developing businesses in these areas. Difficulty: 2 Medium Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

193) Enterprise zones and investor visas are examples of A) government policies that favor large corporations rather than small businesses. B) government programs that encourage economic growth through entrepreneurship. C) government policies designed to encourage intrapreneurs. D) examples of private initiatives to reduce the government's role in the economy. Answer: B Explanation: Investor visas are designed to attract entrepreneurial immigrants, while enterprise zones are low tax areas where the government offers support services to help new businesses. While these are very different strategies, the purpose of both is to encourage entrepreneurial behavior. Difficulty: 2 Medium Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 194) State and city governments have promoted facilities where new businesses can open up shop and share common services such as secretarial, accounting, and legal services. Due to their remarkable success rate, ________ continue to grow in popularity. A) enterprise zones B) incubators C) intrapreneurial development centers D) venture farms Answer: B Explanation: Incubator facilities offer new businesses low-cost office space with shared receptionist/secretarial, legal, and accounting services. Difficulty: 2 Medium Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

195) The Spotlight on Small Business box "Student Startups" features students who A) directed inheritance money they received into profitable business ventures. B) turned a passion into a business opportunity. C) realized the American dream at a very young age, and now run multimillion-dollar companies. D) convinced banks to fund their business ideas. Answer: B Explanation: The Spotlight on Small Business box features several young persons who turned a passion or a problem into a business opportunity. Difficulty: 2 Medium Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 196) Angelina recently left her job at a large corporation to start her own business. She knows that her decision comes with risk, but she is excited to be her own boss and to tackle the challenges that running her own company will bring. Angelina is an example of a(n) A) intrapreneur. B) entrepreneur. C) venture capitalist. D) raconteur. Answer: B Explanation: An entrepreneur is someone who accepts the risks of starting and running a business. Difficulty: 3 Hard Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

197) Laila created a new piece of workout gear. She's calling it the Toned Tushie. Although she couldn't initially find potential investors, she secured a personal loan and borrowed additional money from her parents. Her drive to continue believing in her idea and to remain enthusiastic shows that Laila is A) characteristically self-nurturing. B) better suited to managing a nonprofit organization. C) unaware of the risks she was taking. D) not a true entrepreneur. Answer: A Explanation: Self-nurturing individuals are able to continue believing in an idea and are able to replenish their enthusiasm even when others do not offer support. Difficulty: 3 Hard Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 198) Apple's legendary smart team is an example of a company that succeeded by A) encouraging each manager to focus on a well-defined area of the business and build his own specialized department. B) bringing together a group of talented and experienced managers to conceive, develop, and market products. C) emphasizing a low price and low-cost strategy right from the beginning. D) assembling a group of employees whose inexperience was a plus, because they did not come with the baggage and institutional ideas of larger companies. Answer: B Explanation: Apple's smart team is an example of an entrepreneurial team—a group of experienced managers who worked together to conceive, develop, and market products. Difficulty: 3 Hard Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

199) Elise recently quit her job at a well-known insurance company and started a home-based business preparing medical transcriptions for doctors. Based on recent statistics, she can expect A) a negative reaction from friends and family who wonder when she will get a real job. B) the emergence of affordable technology will make it less challenging for her to compete with larger firms offering the same service. C) the government will discourage her attempts to create a home-based business in the hopes that she will opt for locating in an enterprise zone. D) to find security, routine, and a paycheck from her new enterprise. Answer: B Explanation: Technology has leveled the competitive playing field enabling home-based businesses to look and act as big as their corporate competitors. E-based business activities allow small firms to reach new markets. Difficulty: 3 Hard Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 200) Eddie is an inventive engineering new graduate who just started working for a large company that makes medical products for both hospital and patient use. One of his primary responsibilities is to initiate and develop new products to complement the firm's current product line. Eddie's position is ________. A) intrapreneurial B) entrepreneurial C) an outside consultant for other firms D) micropreneurial Answer: A Explanation: Intrapreneurs are creative people who work as entrepreneurs within corporations to create new products that will provide returns on investment. Difficulty: 3 Hard Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

201) Northeast City College received a government grant to create a business incubator. Once completed, Northeast City College's facility will offer A) local government agencies assistance in obtaining funds for urban renewal. B) area businesses advice on employee benefits and ways to reduce taxes. C) venture capitalists an opportunity to identify new entrepreneurs. D) new businesses low-cost office space with basic business services. Answer: D Explanation: Incubators are created to reduce the start-up capital needed by new firms. Incubators offer assistance in the critical stage of early development with services such as accounting, legal advice, and secretarial help. Difficulty: 3 Hard Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 202) Tucker is an intrapreneur for a multinational wearable electronics company. Which statement best describes Tucker's duty? A) He is expected to recruit new managerial talent for his firm. B) He will use the firm's existing resources to develop new products. C) He is concerned mainly with improving the firm's public image. D) He will concentrate on creating new ventures that can be spun off to become independent firms. Answer: B Explanation: An intrapreneur uses a firm's existing financial, human, and physical resources to create new products and generate new profits. Difficulty: 3 Hard Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

203) Matteo just left the Army after 20 years of service. During his service, he managed to save a little money and is now entitled to a government pension. His wants to go back to his home state of Arizona and start manufacturing small, solar-powered panels for residential use. Although he knows he needs a storefront and an industrial site, he is not 100 percent convinced about where to locate. However, he does know for certain that one of his top priorities is to limit his tax liability associated with this new business. What would you suggest for Matteo? A) He should make certain he is deeply passionate about the product he is developing, before he explores the need. B) He should keep it small, especially in the beginning. C) He should take out a lot of insurance in case he finds out that he has not paid enough taxes. D) He should check out the enterprise zones in Arizona. Answer: D Explanation: Enterprise zones are geographic areas usually set up by state governments. In order to attract small business to these areas, the government provides tax breaks if a business decides to locate its operation in one of these zones. Difficulty: 3 Hard Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

204) Caleb inherited a successful dry cleaning business from his parents. Just as his parents did, he offered high-quality service to all the customers he served. As the surrounding towns grew, several customers recommended that Caleb expand the business to offer service in new locations. He chose to maintain only one operation, so as not to lose control and to keep his work life and home life balanced. Caleb is a good example of a(n) ________. A) small business affiliate B) intrapreneur C) micropreneur D) enterprise zone participant Answer: C Explanation: Micropreneurs are interested in a balanced lifestyle. They generally like what they are doing and do not aspire to grow the business. They know they can be content remaining small and producing quality products and services to their limited market. Difficulty: 3 Hard Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 205) Located at Monsanto's world headquarters, the Nidus Center is a unique ________ facility. The tenants are biotechnology companies who are at various stages of product development. The agricultural giant, Monsanto, the Danforth Foundation, Washington University-St. Louis, Saint Louis University, and several venture capital firms contribute seed money for these small startup ventures that receive approval to further develop their ideas at the Nidus Center. A) incubator B) intrapreneurial C) enterprise zone D) micropreneurial Answer: A Explanation: Incubator facilities offer new businesses in the critical stages of early development low-cost offices, and in this case, laboratory space and shared business services. Difficulty: 3 Hard Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

206) Small businesses A) deal with similar management issues that large companies face. B) deal with very different management issues due to the very different management challenges experienced by small businesses. C) do not seek government funding due to the fact that the federal government has made it very clear that it must support large operations before small operations. D) concern themselves with state-of-the-art information and accounting technology but not employee relations due to their challenge to financially support employee benefits programs. Answer: A Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 207) The Small Business Administration defines a small business as a firm that: A) has fewer than 100 partners. B) is independently owned but not dominant in its industry. C) is dominant in its industry, but small in the number of workers it employs. D) has annual receipts of more than a specified amount depending upon the industry. Answer: B Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

208) Small businesses create about ________ percent of the new jobs in the United States. A) 25 B) 45 C) 65 D) 85 Answer: C Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 209) A business's size is measured A) in relation to the number of competitors in its industry. B) in relation to other firms in its industry. C) in relation to the number of dominant competitors in its sector. D) as small, if it participates in the services sector. Answer: B Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 210) Some people argue that small business failures are A) lower than traditionally reported. B) understated to keep small business creation enthusiasm. C) accurate and alarming. D) inconclusive. Answer: A Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

211) When comparing small businesses to their larger competitors, it is clear that A) bigger is always better. B) small firms can always outperform big firms on a level playing field. C) small firms often can offer more personalized customer services than big firms. D) small firms are slower to respond to opportunities than are large firms. Answer: C Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 212) Small businesses are important to the U.S. economy because A) they fill in the gaps when large businesses want to let workers go on vacation or when large businesses want to temporarily cease production. B) banks and other financial services companies would not have borrowing customers, because small businesses borrow more than large businesses. C) they pay most of the tax revenue collected by the U.S. government. D) they create about 65% of new jobs each year and generate over 50% of the U.S. GDP. Answer: D Explanation: According to the textbook, small businesses contribute to a significant amount of yearly job creation and account for more than 50% of the U.S. gross domestic product. Difficulty: 2 Medium Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

213) Using the analogy of boulders vs. sand for filling a hole, the textbook points out that A) small businesses are employing a record number of employees because they have to work twice as hard at producing the same amount of output as a large competitor. B) small businesses can serve niche markets that larger firms do not serve well. C) the sand represents the small businesses that start and fail each year, while the boulders represent the large companies whose resources permit them to stay the course. D) large companies serve market niches so much better than small companies. Answer: B Explanation: There are lots of opportunities and plenty of room for small companies to serve small underserved markets. The boulders represent large firms, who leave a lot of space in the hole which smaller firms represented by grains of sand can fill. Difficulty: 2 Medium Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 214) Which of the following employment statistics about small businesses is true? A) Small businesses create about 15% of all new jobs in the U.S. B) The number of women owning small businesses has remained constant. C) A great majority of American workers find their first jobs with a small business. D) Growth of minority-owned businesses in the U.S. is declining. Answer: C Explanation: Small businesses create about 65% of all new jobs in the U.S. The number of women and minorities owning small businesses has increased rapidly. About 80 percent of Americans find their first jobs in small businesses. Difficulty: 2 Medium Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

215) According to SBA guidelines, a manufacturing firm with 1,000 employees A) would be classified as a large firm in the industrial sector. B) may be classified as a small business depending upon the size of others in the same industry. C) is too small to achieve the efficiencies of large-scale production. D) is classified as an S corporation. Answer: B Explanation: The criteria used by the SBA differ according to the type of firm. In manufacturing, a firm can have up to 1,500 workers and still be classified as a small business. However, the SBA classifies a firm as small only in relation to other businesses in its industry. Difficulty: 2 Medium Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 216) Which of the following statements accurately depicts an advantage that small business has over big business? A) If the small business owner can project his business as being big, if not very similar to big businesses that sell in the same industry, then he will realize a significant advantage. B) The size of the business (small being better in this case) is an important consideration in the management of legal, payroll, and tax concerns. C) A small business can maneuver and change quicker than most large businesses can. It can react to market conditions and customer concerns much faster. D) The slower pace of small businesses translates into better quality for its customers. Answer: C Explanation: Typically, small businesses can react to customer needs and embrace change at a faster pace. An advantage is the ability to know their customers better and to adapt to customer needs. Difficulty: 2 Medium Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

217) Entrepreneurs looking for a business that gives them the best opportunity to get rich should consider starting a business in A) the manufacturing sector. B) the food service industry. C) a low-risk industry. D) the agriculture sector. Answer: A Explanation: Businesses with the greatest potential to make the owner rich are those that are both hard to start and hard to keep going (manufacturing). Difficulty: 2 Medium Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 218) A review of small business successes and failures indicates that the A) businesses that are easiest to start offer the greatest potential for long-term growth and profits. B) restaurant industry offers the least risk for entrepreneurs. C) businesses with the potential for high profit levels tend to be difficult to start and hard to keep going. D) reason the service sector is rapidly growing is that these firms are easy to start and keep going, and offer high levels of security and growth potential. Answer: C Explanation: Firms that offer growth, and the potential for high profits, are often the same businesses that are hard to start and hard to keep going. Difficulty: 2 Medium Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

219) Manuel is focusing his attention on finding full-time employment now that he has graduated. He has decided to narrow his job search to jobs with a major corporation and ignore the possibility of working for a small business. His job search strategy A) makes sense because managerial skills are best developed by working for big firms. B) is smart because major corporations represent the most important source of employment growth in the United States. C) indicates that Manuel's passion is to fulfill his dream of owning his own business. D) will likely limit his job prospects since most new jobs are with small businesses. Answer: D Explanation: In recent years many major corporations have downsized. The text identifies statistics that small businesses create 65% of new jobs, and 80% of Americans find their first jobs in small businesses. Difficulty: 3 Hard Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 220) Quinn has landed a management position with a pioneering new small business after many years of working as a regional manager for a nationally known nonprofit. As Quinn starts her new job, she is likely to find that A) due to the significant differences in large and small firms, her previous experience will be of little value in her new position. B) the principles of management are much the same at large and small firms. C) nonprofit organizations are motivated by their desire to help people and so financial management is of little concern. D) planning is more important to a nonprofit organization and less important to a small business so she will need to adjust the time she spends on the planning function. Answer: B Explanation: The principles of managing a small business are very similar to those needed to manage a large corporation or a nonprofit organization such as a charity. Difficulty: 3 Hard Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

221) As a result of recent downsizing at his firm, Dominic lost his job as an IT manager for a large telecommunications company. A true, self-confirmed computer nerd, Dominic knew that several of his past contacts often outsourced their computer problems. He decided it was a good time to test the waters and see if he could secure enough computer clients to be in business for himself. His success demonstrated that A) starting your own business can quickly provide security and profits. B) people always tend to hire people they know from past associations. C) the service sector is not an area of significant growth. D) successful big businesses often create profitable opportunities for small businesses. Answer: D Explanation: As big businesses downsize, they often find that they do not always have the staff they need and are increasingly contracting with small companies to temporarily fill their needs through outsourcing. Big businesses don't serve all the needs of the market. There is plenty of room for small companies to make a profit filling those niches. Difficulty: 3 Hard Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

222) Ariana, a talented photography student, started her own photography business. She planned to solicit jobs from large corporations, which would need headshots and other pictures for their annual reports and websites. Although filling a unique niche, Ariana needed the security that the business would thrive and that she would earn enough to support herself and her family. She also hoped she would spend less time each day calling on potential clients and more time doing the actual shoots. As her small business consultant, which of the following suggestions would you have for Ariana? A) Ariana should either take the risk necessary to develop a small business, or go to work for someone else. B) In the beginning, it's doubtful that Ariana will realize ease of entry, security, and good profits. She needs to make plans in the event that one or more of these does not materialize quickly. C) Photographers can take pictures of a multitude of things. It's probably not good strategy to limit her business to only photographing the needs of large corporations. D) Ariana should definitely make time for herself each day so that she does not experience burnout. If she plans well, leaping into her own business will provide her with several hours of unstructured time each day where she can perfect her craft even more. Answer: B Explanation: Prospective small business owners should be aware that it is unlikely that ease of entry into a market, security, and reward will come all at once. At least in the beginning, if you need security, you may have to pursue the business idea on the side. However, the trade-off is that you will probably have to forego rapid rewards since you are spending only part of your time in developing the business. Difficulty: 3 Hard Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

223) Dr. Pearl White just graduated from dental school. She is hoping to acquire the necessary funding to start her own dental practice. One advantage of this type of business is A) above-average opportunity to borrow funds at a high interest rate. B) nearly unlimited growth potential. C) the service is individualized and not easily mass-produced. D) very low start-up costs. Answer: C Explanation: Healthcare businesses that require advanced technical degrees to get licensed generally have a good chance of success due to the individualized attention necessary to perform the service. Difficulty: 3 Hard Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 224) Maya opened a bakery in a seaside resort town. She was positive she had the perfect location as plenty of hotels and inns were within walking distance of her storefront. She planned to use her grandmother's recipes and only the finest ingredients for her upscale resort customers. During her first week of business, she was disappointed with lackluster sales. When she drove past the regular breakfast-style restaurants and even the nearby Starbucks, she noticed they were rather bustling. Maya most likely A) did not publicize in the appropriate places. B) underestimated the competition. C) should have considered weather conditions before assuming that her business would be vibrant. D) did not consider that small businesses never get the name recognition in resort towns that larger businesses and franchises realize. Answer: B Explanation: Underestimating the amount of competition in your service area is a reason some small businesses falter or fail. Difficulty: 3 Hard Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

225) Austin, Aiden, and Zara wanted to open A2Z Sports Bar that serves a unique offering of beer, weekend entertainment, and a limited menu of appetizers. In one of the preliminary meetings, Zara presented a list of reasons that small businesses fail. Although many of the ideas on this list were applicable to many types of business, one challenge pertained specifically to the restaurant and bar business. The challenge he referred to was A) underestimating how much time it will take to build a market. B) borrowing money without planning just how and when to pay it back. C) carrying habits of personal extravagance into the business. D) some of the easiest businesses to start have the least growth prospects and greatest failure rates. Answer: D Explanation: The easiest businesses to start have the least growth prospects and greatest failure rates. An example of a business that is easy to start is the restaurant or bar business. Difficulty: 3 Hard Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

226) Scarlett is graduating from culinary school soon and she often imagines opening her own comfort food restaurant. Her other passion is skiing in Colorado, where she travels to four or five times every year. As her small business advisor, you believe it necessary to provide her with information that will help her make good business decisions. Which of the following would be helpful for Scarlett to know? A) Restaurants are relatively easy businesses to start, but are labor intensive and also have the greatest failure rate. B) Restaurants are not the easiest type of business to start, but once you get it going, you will have plenty of time for skiing. C) Most restaurant owners get rich if they open their own, independent restaurant as opposed to starting a franchised operation. D) Franchised operations will take less time on the part of the owner than a regular independently owned operation. If she opens a franchise, she will have more time for creativity in the business, and more time for skiing too. Answer: A Explanation: Restaurants fall into the category of a relatively easy business to start, but with not much growth rate, and a high risk of failure. Businesses with the highest profit potential are also those that are more difficult to start. Usually the start-up funds are prohibitive for many entrepreneurs. Difficulty: 3 Hard Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 227) A small business management course at a community college may offer entrepreneurs an opportunity to A) meet with experienced entrepreneurs and learn from their advice. B) try out ideas on a computer simulation before risking real time and money. C) listen to a qualified instructor solve all of the problems of small business owners. D) be part of a group that will include angel investors. Answer: A Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-03 Summarize ways to learn about how small businesses operate. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

228) One way to get into business is to buy an existing company. The value of the business used to determine a fair purchase price is based on A) the prospects for business competition. B) the current owner's retirement plan. C) the amount of government contracts the company has. D) the value of what the business owns, what it earns, and what makes it unique. Answer: D Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-03 Summarize ways to learn about how small businesses operate. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 229) Conversations with people who start their own business often reveal that A) many small business owners got their entrepreneurial idea from a previous job. B) it is unusual for experienced corporate managers to start their own businesses. C) the most successful entrepreneurs often start their business ventures right after high school. D) most small business owners begin with significant personal wealth. Answer: A Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-03 Summarize ways to learn about how small businesses operate. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 230) For prospective entrepreneurs, enrolling in an introduction to business or small business management course offered through their community college A) is likely to be wasted time since college courses tend to be too theoretical. B) can be helpful by offering them an opportunity to meet experienced small business owners. C) serves as supplementary information, only after starting their business venture. D) seldom provides you with information to help make small business decisions. Answer: B Explanation: One of the best things about small business courses offered by community colleges is that they can bring together entrepreneurs. The advice experienced entrepreneurs can share with those just getting started can be invaluable. Difficulty: 2 Medium Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-03 Summarize ways to learn about how small businesses operate. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 85 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

231) Which of the following suggestions would an experienced business owner offer to help someone who is thinking about starting a business venture? A) Avoid the temptation of buying an existing firm. Build your own reputation and make your own mistakes. B) Gain experience by working for a successful businessperson. C) Postpone consulting with an accountant or lawyer until you can afford their services. D) Jump in quickly, before the market conditions change and opportunities are lost. Answer: B Explanation: Experienced entrepreneurs regularly state that there is no better way to learn small business management than by working for a successful businessperson. Difficulty: 2 Medium Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-03 Summarize ways to learn about how small businesses operate. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 232) Successful small business owners are A) not good sources for information on starting your own business because they generally do not understand failure. B) valuable sources for information since you can learn from their experiences. C) good sources of information but risky since their keen sense of sniffing out something with potential will tempt them to steal your ideas. D) valuable sources of information, but you should proceed with caution because talking with someone who could eventually be your competitor may cross the line due to federal trade commission laws. Answer: B Explanation: An excellent way to learn how to run a small business is to talk to others who have already done it. Difficulty: 2 Medium Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-03 Summarize ways to learn about how small businesses operate. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

233) When starting a small business, it's important to remember A) an affinity for taking large amounts of risk is the critical factor in achieving small business success. B) doing things differently from previous entrepreneurs is the real key to success. C) learning from others and gaining relevant business experience improves the odds for success. D) to avoid burnout, limit the number of hours you work each week as you adapt to the rigors of self-employment. Answer: C Explanation: Learning from others and getting some experience are two keys to achieving success in small business. Difficulty: 2 Medium Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-03 Summarize ways to learn about how small businesses operate. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 234) The Making Ethical Decisions box "Should You Stay or Should You Go?" addresses a dilemma worthy of consideration. It describes A) an unethical situation where the business owner's need for capital causes him/her to delay all payments to suppliers for 120 days, forcing several of his close business relationships out of business. B) the slow death of a business and how important it is to delay payments, sell off assets, and do everything possible to save a failing business except dismissing employees who need their jobs for survival. C) ethical decisions that need to be considered when employees leave a faltering business to start their own, eventually competing against their previous employer. D) the unethical and disloyal decision to leave your family business and start your own, taking with you all the family business's trade secrets. Answer: C Explanation: The box describes a situation where employees have ideas of how to make a failing business model successful. They choose to leave the faltering company and go out on their own. As competitors, do they seek to communicate directly with their previous employer's loyal customers, or is this strategy unethical? The box asks the student to explore the alternatives and the consequences. Difficulty: 2 Medium Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-03 Summarize ways to learn about how small businesses operate. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

235) Long-motivated by his wish to operate his own business, Andrew is considering purchasing an existing business. As he carefully weighs this option, he is likely to find that A) very few owners of small businesses have any interest in selling. B) his potential for success would greatly improve if he started his own new firm. C) the value of an existing business is determined by what the business owns, what it earns, and what makes it unique. D) any entrepreneur willing to sell his/her business is experiencing serious financial problems. Answer: C Explanation: The value of a firm is based on three things: what it owns, what it earns, and what makes it unique. Difficulty: 3 Hard Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-03 Summarize ways to learn about how small businesses operate. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 236) Lily, an upperclassman at Riverside College, hopes to start her own business after graduation. In an effort to learn as much as she can about small business management, she talked to four friends who each offered their advice. Which of these suggestions is likely to help her the most? A) The best way to learn about running a business is by getting hands-on experience. You should quit school and put your dream into action. B) Take courses related to small business management and then look for a job with a successful businessperson, preferably in your field of interest. C) Since every business is unique, don't worry about advice from others. Go to a bank, get a business loan, and live your dream. D) Starting and managing a small business requires little more than common sense. If your idea is unique, hard work will guarantee your success. Answer: B Explanation: College courses will allow Lily to interact with others interested in small businesses, including experienced entrepreneurs, whose advice can be invaluable. Perhaps the best way to learn about running a small business is to get some experience by serving as an apprentice for a successful business. Difficulty: 3 Hard Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-03 Summarize ways to learn about how small businesses operate. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

237) Isaac benefited from his experience working for an established private company that provided state-of-the-art lighting for music venues around town. Although confident that he could start his own lighting business, he had limited capital to buy the necessary equipment needed to successfully compete with established companies. Which of the following strategies would best help Isaac achieve his goal of business ownership? A) Begin by offering to take over management of his employer's business, allowing the owner to enjoy some leisure time. B) Consider working for a major corporation, live modestly, and save until he has sufficient funds to start his business. C) Enroll in the closest university and apply for student loans. D) Open his business and trust that his work experience will bring him success even with insufficient capital. Answer: A Explanation: Small business owners work long hours and rarely take vacations. After many years, they may want to enjoy some leisure time, but feel trapped by the need to always be there. This offers an opportunity for aspiring entrepreneurs to learn all about a particular business and perhaps share in the profits while at the same time help the owner realize a better work-life balance. Difficulty: 3 Hard Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-03 Summarize ways to learn about how small businesses operate. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

238) Mike remembers his grandfather telling him, "If you can find something you like to do, and somebody is willing to pay you to do it, that's the secret to a great life." The way Mike saw it, this was his chance. For the past five years, he's been splitting his time between school and working at a local tree farm. The owner recently announced he was ready to retire. As Mike began creating a business plan, he contemplated what the business might be worth. How much will he need to buy this business? For starters, Mike A) needs to find a government database that outlines what nursery businesses are worth, on average, across the country. B) should speak with the current owner and determine the total value of assets (what the business owns), its earning potential, and its unique advantage. C) will want to determine the assessed value of the acreage that the business owns, and then bid competitively. D) needs to understand that it's difficult to buy an existing business, rather than start your own. The key will be to meet with the company's accountant, and explain your interest. The accountant will have all the answers. Answer: B Explanation: When preparing to buy an existing business, a good start is to determine the total value of what the business owns; what the business earns and future potential earnings; and what makes the business unique in its industry. Difficulty: 3 Hard Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-03 Summarize ways to learn about how small businesses operate. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 239) Two key management functions that need particular attention when starting a business are A) human relations and accounting. B) planning and financing. C) marketing and public relations. D) staffing and controlling. Answer: B Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

240) A ________ is a written document that details the business idea, the target market and the business's competitive advantage, financial resources available for the business, and the qualification of the management. A) feasibility product B) marketing plan C) business plan D) statement of intent Answer: C Difficulty: 1 Easy Topic: The Business Plan Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 241) The business plan will include ________. A) an analysis of the competition B) names of banks the owner plans to visit C) import/export information D) names of employees Answer: A Difficulty: 1 Easy Topic: The Business Plan Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 242) A detailed written statement that describes the nature of the business, the target market, the firm's competitive advantages, as well as the owner's resources and qualifications is a A) business plan. B) entrepreneurial mission statement. C) profit and loss statement. D) professional action plan. Answer: A Difficulty: 1 Easy Topic: The Business Plan Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

243) Entrepreneurs seeking financial support from bankers and potential investors should A) be vague regarding their creative business plan to avoid having their idea stolen. B) seek the bankers' and investors' assistance in developing their business plan. C) create a detailed business plan to help the bankers and investors understand why this business will succeed. D) ask for a relatively small amount of capital initially, postponing a full funding request until the investors better understand the business concept. Answer: C Difficulty: 1 Easy Topic: The Business Plan Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 244) Bankers and potential investors are likely to read ________ first. A) the executive summary B) the marketing plan C) the qualifications of the management team D) the analysis of the competition Answer: A Difficulty: 1 Easy Topic: The Business Plan Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 245) After personal savings, the next largest source of capital for entrepreneurs is from A) large multinational banks. B) the Small Business Administration. C) state and local governments. D) friends and family. Answer: D Difficulty: 1 Easy Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

246) ________ are private individuals who invest their own money in potentially hot new companies before these firms become larger, publicly traded companies. A) Leveraged buyout specialists B) Angel investors C) Venture investors D) Corporate raider investors Answer: B Difficulty: 1 Easy Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 247) Due to the credit crunch that developed during the Great Recession, many small businesses found that ________ were more willing to lend money to smaller operations. A) large corporations B) credit card companies C) international banks D) smaller, community banks Answer: D Difficulty: 1 Easy Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 248) A firm or individual providing financial capital to small businesses in exchange for an ownership stake in the company is called a A) corporate raider. B) takeover specialist. C) financial capitalist. D) venture capitalist. Answer: D Difficulty: 1 Easy Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

249) Which of the following government agencies is responsible for encouraging the development of small business? A) Small Business Administration B) Federal Trade Commission C) Entrepreneur Assistance Center D) Federal Microloan Authority Answer: A Difficulty: 1 Easy Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 250) Which of the following sources of investment is the LEAST likely type available to entrepreneurs? A) Angel investors B) Small Business Administration loans C) Venture capitalists D) Family and friends Answer: C Difficulty: 1 Easy Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 251) The Small Business Administration's microloan program awards loans to entrepreneurs based primarily on their A) collateral. B) credit history. C) previous business success. D) integrity and sound business idea. Answer: D Difficulty: 1 Easy Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

252) A Small Business Investment Company (SBIC) is a(n) A) agency of the federal government that loans money to high-tech firms. B) private investment company that is licensed by the SBA to make loans to small businesses. C) private firm that offers loans to small businesses in return for a share of ownership in the firm. D) agency set up by state governments to provide managerial advice and support to small businesses. Answer: B Difficulty: 1 Easy Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 253) One of the best places for young entrepreneurs to start shopping for an SBA loan is a A) Small Business Development Center. B) financial institution specializing in business loans. C) college or university financial aid office. D) website for the Venture Capitalists Association. Answer: A Difficulty: 1 Easy Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 254) A ________ refers to people with unsatisfied wants and needs who are willing and able to buy a product or service. A) market B) consumer cooperative C) consumer collective D) buyer's cooperative Answer: A Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

255) To be considered part of a market, an individual must A) be a registered buyer. B) have made a purchase within the past 30 days. C) know the names and addresses of two or more sellers. D) have both a willingness to buy and the financial resources needed to buy. Answer: D Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 256) Small business owners often struggle in attracting qualified workers. Which of the following contributes to this problem? A) Managers in small firms tend to be disrespectful to the workers. B) Owners will not often listen to ideas suggested by the workers. C) Employee relations are especially poor in small firms. D) Many jobs in small firms have low pay and few benefits. Answer: D Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 257) Employees of small businesses often have greater job satisfaction than do employees of larger firms. One reason for this difference in job satisfaction is that employees of small businesses often A) earn higher wages. B) receive more vacation time. C) get more respect from their bosses. D) have more job security and better fringe benefits. Answer: C Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

258) A new business that sets up a(n) ________ from the start is saving itself time and grief later. A) angel investment network B) good accounting system C) detailed supplier network D) vertical marketing system Answer: B Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 259) Small businesses must seek advice from outside experts. In order to put together official documents such as leases, contracts, and partnership agreements, it is important to seek the advice of ________. A) a friend who has already started a business. B) a competitor in a similar business. C) an attorney. D) a marketing expert. Answer: C Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 260) A(n) ________ is a valuable source of information regarding techniques to reduce a firm's exposure to risk. A) insurance agent B) accountant C) liability assessor D) union business agent Answer: A Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

261) Similar to how large businesses proceed, small businesses make marketing decisions ________. A) after the product or service is developed. B) before the business is funded. C) at the same time that they hire employees, research for an accountant, and prepare the business plan. D) before a product is developed or store is opened. Answer: D Difficulty: 1 Easy Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 262) The Small Business Administration sponsors volunteers from industry, trade associations, and education who offer advice to small business owners. These volunteers are called: A) the Small Business Council of Volunteers (SBCV). B) Partners in Service and Economic Progress (PSEP). C) Small Business Counselors Incorporated (SBCI). D) the Service Corps of Retired Executives (SCORE). Answer: D Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 263) Entrepreneurs applying for a bank loan should realize that bankers will A) expect to receive a share of ownership in the business in exchange for their loan. B) expect the entrepreneur to provide a business plan. C) generally make loans only to small businesses in dot-com related industries. D) offer only short-term financing. Answer: B Explanation: A well-prepared business plan is mandatory when seeking financial assistance from a bank or other investors. Difficulty: 2 Medium Topic: The Business Plan Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 98 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

264) A good business plan will A) focus on the big picture and omit the small details of operating the business. B) describe all aspects of the business, including product, the target market, the nature of the competition, any financial resources, and the owner's qualifications. C) be purposefully vague, since specifics can restrict creativity and flexibility. D) focus on the nature of the business and the target market, omitting personal information about the owner in order to avoid personality issues. Answer: B Explanation: A business plan is a detailed written statement that describes the nature of the business, the target market, the advantages the business will have relative to competitors, and the resources and qualifications of the owner. Difficulty: 2 Medium Topic: The Business Plan Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 265) The executive summary section of the business plan contains A) computerized information that readers can access interactively. B) information that will capture the attention of bankers and other investors who receive many business plans every day. C) qualifications, experience, and education of the entrepreneur and prospective employees. D) a financial summary prepared by the business's accountant. Answer: B Explanation: The executive summary must grab the reader's attention. In some cases, it is the only part that some decision makers will read. Difficulty: 2 Medium Topic: The Business Plan Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

266) When seeking financial backing from a venture capitalist, a small business owner should realize that the venture capitalist will A) charge an interest rate that is much higher than any other lender. B) not be interested in the management of the business. C) expect an ownership stake in the company in exchange for financial backing. D) demand that the money be repaid within 90 days or less. Answer: C Explanation: Venture capitalists often ask for a hefty ownership stake in a business in exchange for the cash needed to get that business started. Difficulty: 2 Medium Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 267) A market consists of potential buyers of a good or service. However, for a market to exist A) the business requires wholesalers and retailers. B) one firm must dominate in sales and product development. C) people must have unsatisfied wants and needs as well as a willingness and ability to buy. D) the product must be laboratory tested and approved by the Food and Drug Administration (FDA). Answer: C Explanation: A market consists of people who have unsatisfied wants and both the willingness and the resources necessary to buy the good or service. Difficulty: 2 Medium Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

268) Small business employees A) usually dislike their jobs and look forward to finding employment with major corporations. B) find their jobs less challenging than a similar job in a large corporation. C) usually get paid higher wages than workers in large corporations. D) often find more job satisfaction than their counterparts in big business. Answer: D Explanation: Employees in small businesses are often more satisfied with their jobs than their counterparts in big business because their jobs are more challenging, their ideas are more accepted, and their bosses are more respectful. Difficulty: 2 Medium Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 269) Entrepreneurs learn that there are many legal and financial issues involved in starting their business. The best way for the small business owner to resolve these issues and protect the firm's resources is A) for the owner(s) to trust his/her common sense. B) hire a full-time lawyer and accountant who work exclusively for the small business. C) defer making decisions regarding these issues until the company is bigger. D) seek and pay for expert guidance and assistance. Answer: D Explanation: Legal and accounting issues are often too complex to trust to instinct and too important and immediate to defer to a later date. Unfortunately, most small businesses cannot afford to hire lawyers and accountants as employees. Thus, the best approach is to consult with professional accountants, lawyers, loan officers, and insurance agents outside the business. Difficulty: 2 Medium Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

270) In order to secure financing for Bitty Bytes, a mobile bakery business that services several large Silicon Valley firms, Betty demonstrated her unwavering aspiration to get her business started by visiting several bankers with ________. A) her insurance agent. B) her business plan. C) her venture capitalist. D) her idea. Answer: B Explanation: A business plan provides a detailed written statement of the nature of a firm, its target market, its competitive advantages, and the resources and qualifications of its owner. Difficulty: 3 Hard Topic: The Business Plan Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 271) In order to improve his chances of small business success, DeMarcus worked hard to prepare his business plan. Most often, a positive outcome of this exercise is A) the plan will meet federal reporting requirements of the Internal Revenue Service. B) the plan ensures financing will be available from the Small Business Administration. C) the plan enables DeMarcus to think carefully about all aspects of his business idea. D) the plan will protect DeMarcus from failure. Answer: C Explanation: A business plan is a detailed written statement that describes the nature of a business. Writing a plan forces the entrepreneur to look closely at all areas of the proposed business. Difficulty: 3 Hard Topic: The Business Plan Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

272) For several years, Addison has volunteered to play the piano and sing at a local nursing home. Now, Addison has decided the time was right to get into the growing eldercare market. She created Music and Memories, a nonprofit corporation that would hire local talent to perform her own music productions directed toward this market. In order to write and produce several productions each year, Addison needed start-up funds. An instructor at the local community college suggested that she begin by ________, because this effort would help introduce her idea to interested investors as well as suggest government grant applications that Addison might pursue. A) preparing her business plan B) finding talented performers C) writing themed performances such as a Thanksgiving concert and a Valentine's Day concert D) developing a list of start-up costs Answer: A Explanation: The business plan is a comprehensive document that addresses every aspect of the business. It incorporates a marketing plan and a financial plan, and introduces the management and operations of the firm to the reader. An executive summary at the beginning of the document should catch the reader's attention and interest and position the business by stating its competitive advantage. Difficulty: 3 Hard Topic: The Business Plan Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 273) As a high net worth individual, Aria searches for developing companies in need of additional funding to achieve their goals. In return for this ________, she expects to give up some percentage of ownership in the business. A) analysis B) venture capital C) corporate loan D) securities investment Answer: B Explanation: A venture capitalist is an individual or firm that provides start-up capital in exchange for a stake in the ownership of the business. Difficulty: 3 Hard Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

274) Skylar is an angel investor. This means that he A) invests his money in new businesses with potential for growth, hoping for a good return on his investment if they go public. B) creates business incubators for start-up web-based firms. C) invests in nonprofits that plan to change their status when they double in size. D) comes to the rescue of firms who default on their bank loans. Answer: A Explanation: Angel investors are private individuals who invest their own money in potentially hot new companies before they go public. Difficulty: 3 Hard Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 275) Sofia recently applied for a microloan from the Small Business Administration. Although several conditions are important, the SBA's decision to grant or deny the loan will largely depend upon A) her credit history and the collateral she can offer. B) her age, since microloans are only available to senior citizens. C) her previous record of business success. D) the soundness of her business plan, and her integrity. Answer: D Explanation: Microloans are awarded on the basis of the borrower's integrity and the soundness of their business ideas. Difficulty: 3 Hard Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

276) Francisco came to the U.S. on a swimming scholarship. After a few months of frustration with trying to find the swim goggles he prefers from home, he created a website that selling specialty goggles for swimming, skiing, and snowboarding. Before launching the website and filling orders, Francisco spent a few months going to swim meets and gathering preferences about goggles from other international swimmers. Francisco's actions A) showed that he had a ready market for this product. B) demonstrated that he had little experience with this product. C) showed that he was promoting the website before it launched. D) demonstrated his need to better understand the market. Answer: D Explanation: Francisco understands that identifying the market and its needs must occur before you begin to sell the product. To be part of a market, consumers must have both the willingness and the resources needed to make a purchase. Difficulty: 3 Hard Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 277) Ryan was called by one of his regular customers asking if he had time to repair some broken sprinkler heads on that customer's underground sprinkling system. Although it was already 6:00 p.m. and he already put in a full day of work, he turned his car around and headed for the customer's house. As a small business owner, Ryan demonstrates A) his need for additional cash flow. B) his ability to easily adapt and respond to his customer's needs. C) the fact that it is difficult to find employees willing to go the extra mile for a small business because benefits are nonexistent. D) that considering the fact that sprinkler heads are constantly breaking and need repair, his service is overpriced. Answer: B Explanation: Small businesses have the ability to know their customers better and adapt quickly to their ever-changing needs. Customers will appreciate the prompt service that a small business can provide. Difficulty: 3 Hard Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

278) Mohamed's four employees have been with him since he opened Employment Experts, Inc., nearly a decade ago. As he anticipates staffing his new branch office, he decides none of these four long-time employees are ready to manage the office. Faced with this difficult situation, what should Mohamed do? A) He should appoint one of the three anyway to show that he appreciates their loyalty and commitment. B) He should run the new branch himself and appoint one of the three to take over the original office. C) He should hire a new qualified employee to manage the office since utilizing his unready employees could be detrimental to the business. D) He should appoint all three to the new branch and let them run it using a team approach. Answer: C Explanation: Appointing unqualified people to management positions can be a serious business mistake. As difficult as it may be, entrepreneurs best serve themselves and their business if they gradually recruit and groom employees for management positions. Difficulty: 3 Hard Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 279) After Abby graduated from college last year, her uncle created an accounting position for her in his business. Her older brother is in charge of purchasing inventory for the store, yet often the store runs out of popular items or is overstocked with products that must be marked down to be sold. Abby is confident that her brother is more suited for handling accounting and finance, while she has a sense of what sells and how much sells. Although she has spoken with her uncle about it a couple of times, he seems reluctant to change. As the founder of the business, he may A) find it difficult to remove family members from positions, even if it is not good for the business. B) find it difficult to retrain Abby for the job, and even though his business is losing opportunities, he will stay the course. C) know that profit margins have declined, but he doesn't care. D) have a bigger picture of things, and not feel the need to respond to a family member's request. Answer: A Explanation: Attitudes such as "You can't fire family" or "You must hire them because they're family" can frustrate all employees, family and nonfamily. A business is best served if the best workers are recruited and groomed for management positions. Difficulty: 3 Hard Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 106 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

280) As a small business owner, Jasmine can't afford to provide her employees with the high wages and benefits offered by big corporations. One way to keep her employees and create a high level of motivation would be to A) constantly communicate with them that "at least they have a job." B) adopt a policy of promoting workers who have been employed the longest. C) empower her employees to develop their own ideas. D) hire only family members, since they are more loyal. Answer: C Explanation: Many small firms motivate workers by creating challenging jobs and treating them respectfully. Difficulty: 3 Hard Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 281) After retiring as a telecommunications executive, Bruce joined SCORE. As a SCORE counselor Bruce will A) provide venture capital funds for aspiring small businesspeople. B) visit high schools to advise students who are thinking about starting their own business. C) help in the research and development of new products for entrepreneurs to market. D) provide consulting services to small businesses for free. Answer: D Explanation: An important source of information for small businesses is the Service Corps of Retired Executives (SCORE). This SBA office has volunteers from industry, trade associations, and education who counsel small businesses at no cost (except for expenses). Difficulty: 3 Hard Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

282) The size of the world market is about A) 500 million B) 7 billion C) 7 million D) 10 trillion Answer: B Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in entering global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 283) Increased participation in small business exporting owes credit to ________. A) political constituents who have made inroads abroad. B) large events such as the Olympics that have brought attention to the potential in world markets. C) technological advances such as the Internet and PayPal for safely fulfilling orders. D) partnerships that small businesses have formed with large businesses. Answer: C Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in entering global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 284) One of the hurdles small businesses face when deciding to export is A) financing is often difficult to find. B) overseas buyers prefer dealing with large corporations. C) smaller companies must wait in line after large companies to qualify for tariffs. D) American products are perceived as inferior. Answer: A Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in entering global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

285) One reason why many U.S. small businesses are not involved in exporting is A) there is a limited market for their products. B) the government's new homeland security programs limit opportunities for small businesses. C) many of these firms do not know how to get started. D) U.S. products are perceived as inferior. Answer: C Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in entering global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 286) The SBA's ________ program provides export-financing opportunities for small businesses. A) Global Trade funding B) Homeland Security funding C) Export Express loan D) International Monetary loan Answer: C Difficulty: 1 Easy Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in entering global markets. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

287) Which of the following best describes the outlook for small businesses in international markets? A) The world is a larger, and potentially a more lucrative market than the U.S. domestic market. B) The threat of terrorist activities prevents small businesses from competing internationally. C) Most foreign buyers prefer to deal with large, well-known corporations rather than small businesses. D) Higher business costs eliminate the profit opportunities in global markets. Answer: A Explanation: The U.S. has less than 5% of the world's population, and there is a growing demand for American goods and services. Difficulty: 2 Medium Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in entering global markets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 288) Small businesses often have advantages in international markets. Which best describes one those advantages? A) They have greater expertise in managing the paperwork required to sell goods in international markets. B) They have a better understanding of the cultural differences involved. C) They can provide individualized customer service as opposed to impersonal corporate bureaucracies. D) They have the ability to obtain financing through the International Monetary Fund. Answer: C Explanation: Small companies can give more personal service and more undivided attention, because each overseas account is a major source of business to them. Difficulty: 2 Medium Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in entering global markets. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

289) Luxe Labels, LLC, exports specialty printing equipment for the custom labeling, flexible packaging, and carton industry. Thanks to increased support from ________, this company's sales to Brazilian companies and other global opportunities have significantly increased. A) its newly revised website B) Department of Commerce's Bureau of Industry and Security C) the FDA D) local politicians Answer: B Explanation: The Department of Commerce's Bureau of Industry and Security contains a wealth of information for small businesses interested in going global. Difficulty: 3 Hard Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in entering global markets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 290) Arturo is a partner in a firm that specializes in producing vitamins and health food products. While the business is considered small by U.S. standards, he is attempting to persuade his partner to expand internationally. Arturo would list which of the following as an advantage of going global? A) Exporting can help sell excess inventory. B) Marketing programs benefit from the cultural similarities in prospective markets. C) Financing can easily be obtained to expand internationally. D) Selling your products in other markets reduces their life cycle, making them more attractive. Answer: A Explanation: Small businesses that make the effort to export have the advantage of selling excess inventory abroad. Difficulty: 3 Hard Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in entering global markets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

291) Antoine is considering marketing his bicycles in Brazil. If he enters the Brazilian market, he is likely to learn that A) some cultures like dealing with individuals from smaller companies rather than large companies. B) he will not be able to keep up with demand. C) most foreign cultures prefer large company relationships to small company relationships. D) there is strong resistance of Brazilian firms with respect to American products. Answer: A Explanation: Although some foreign buyers may prefer doing business with major corporations, many actually enjoy dealing with individuals rather than with big corporate bureaucracies. Moreover, foreign buyers may appreciate the fact that the smaller firms often provide personalized service and may be able to begin shipping more quickly. The main problem he will face is adapting to the cultural differences between the U.S. and Brazil. Difficulty: 3 Hard Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in entering global markets. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

292) Not everyone dreams of owning their own business. Identify and describe at least three attributes of successful entrepreneurs. Answer: While students will likely identify managerial skills and leadership abilities, these are not unique to entrepreneurs. Entrepreneurs also need to be: • Self-directed. They should be self-disciplined and comfortable with taking responsibility for success and failure. • Self-nurturing. Entrepreneurs must be able to believe in their own ideas even when others don't. • Action-oriented. Entrepreneurs aren't just satisfied with a dream; they want to make the dream a reality. • Highly energetic. They are willing to work hard to sustain their efforts over long hours. • Tolerant of uncertainty. Entrepreneurs can accept the risks and uncertainties inherent in running a business. Difficulty: 3 Hard Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

293) What is an entrepreneurial team? What benefits does a team offer compared to an individual entrepreneur? Answer: a. Entrepreneurial teams bring experienced people from different areas of business that join together to form a managerial team with the skills needed to develop, make, and market a new product. A team may be better than an individual entrepreneur because it provides a combination of creative skills with production and marketing skills right from the start. b. Another benefit is the concept of shared planning and decision making. Everyone works together to conceive, develop, and market products. This results in better coordination and cooperation among functions. Difficulty: 3 Hard Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

294) List and discuss at least three causes of small business failure. Answer: (Answers will vary; however, the student should include the information found in Figure 6.3, "Causes of Small-Business Failure.") • Plunging in without first testing the waters on a small scale. • Underpricing or overpricing goods or services. • Underestimating how much time it will take to build a market. • Starting with too little capital. • Starting with too much capital and being careless in its use. • Going into business with little or no experience and without first learning something about the industry or market. • Borrowing money without planning just how and when to pay it back. • Attempting to do too much business with too little capital. • Not allowing for setbacks and unexpected expenses. • Buying too much on credit. • Extending credit too freely. • Expanding credit too rapidly. • Failing to keep complete, accurate records, so that the owners drift into trouble without realizing it. • Carrying habits of personal extravagance into the business. • Not understanding business cycles. • Forgetting about taxes, insurance, and other costs of doing business. • Mistaking the freedom of being in business for oneself for the liberty to work or not, according to whim.

Difficulty: 3 Hard Topic: Define Entrepreneurship Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation 295) Discuss the benefits exporting offers to small businesses. Given these benefits, why don't more small firms sell in international markets? Answer: a. The world market is potentially a much larger and more lucrative market for businesses than the United States. Moreover, selling in the world market can absorb excess inventories, soften downturns in the U.S. market, and extend product lives. It can also add variety and make managing the business more interesting (and perhaps more challenging). b. There are many barriers that discourage small businesses from exporting their products. These barriers include: • difficulties in arranging financing. • uncertainties about how to get started in foreign markets. • ignorance of cultural differences. • extensive bureaucratic paperwork that can practically bury a small business. Difficulty: 3 Hard Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in entering global markets. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

296) Discuss several ways the Small Business Administration assists entrepreneurs. Answer: a. The SBA is a valuable source of information and technical advice for small businesspeople. b. The SBA also provides financial assistance to small businesses through a variety of programs. The SBA will sometimes provide direct loans to firms that have difficulty securing conventional loans from private sources. The SBA also provides programs to help minorities and women obtain funds. c. The SBA licenses SBICs, which are private investment companies that loan money to small businesses. d. The SBA operates SCORE, the Service Corps of Retired Executives. This group provides counseling and advice to small business owners. Difficulty: 3 Hard Topic: The Importance of Small Business Ownership to the U.S. Economy Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

Mini-Case Pepe Pieman believes that pizza is a much more versatile meal than most people realize. As the national marketing manager for Pizza Pals, he has watched how consumers ate up barbecue pizza, Hawaiian pizza, Mexican pizza, and other new and unique combinations. His superiors, however, met his suggestions for other unusual pizzas with a negative response. Even some of his teammates laughed at his ideas. Pepe's confidence in his ability to understand the market has led him to focus on planning a business of his own. Pepe realizes that he will take a risk when he leaves his job with Pizza Pals and sets off on a new endeavor: Pepe's Pizzazzeria. Pepe is excited about the potential of profitably catering to the unmet desires of pizza consumers. 297) Given Pepe's willingness to accept the risks of opening and running Pepe's Pizzazzeria, he is clearly an example of a(n) A) arbitrageur. B) intrapreneur. C) gambler. D) entrepreneur. Answer: D Explanation: An entrepreneur is someone who accepts the risks of starting and managing a business. Difficulty: 3 Hard Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

298) Pepe remains confident and enthusiastic even though his colleagues have poked fun at his ideas. This shows that Pepe is A) self-disciplined. B) self-nurturing. C) self-generating. D) auto-inspirational. Answer: B Explanation: People who are self-nurturing are able to believe in their own ideas, even when others do not, and to refuel the fires of their own enthusiasm. Difficulty: 3 Hard Topic: Attributes of Successful Entrepreneurs Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 299) Pepe is confident that Pepe's Pizzazzeria will be a success, but only if he has enough money to do things right. Since Pepe has very little personal wealth, he knows he must find financial assistance. In order prepare for meetings with bankers and potential investors, Pepe should A) hire a public relations firm to develop promotional materials. B) develop a business plan. C) read a book on entrepreneurship. D) create a partnership contract. Answer: B Explanation: A business plan, which provides a detailed description of the new business, is mandatory when meeting with bankers and investors. Difficulty: 3 Hard Topic: The Business Plan Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

300) Pepe has asked about the possibility of obtaining a microloan from the SBA. This type of loan is awarded primarily on the basis of the A) borrower's integrity and the soundness of the business idea. B) amount of collateral the borrower can pledge. C) borrower's credit history and record of previous business success. D) age of the borrower, since only senior citizens qualify. Answer: A Explanation: A microloan from the SBA is awarded on the basis of the borrower's integrity and the soundness of the borrower's business idea. Difficulty: 3 Hard Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 301) Pepe is positive he knows a lot about marketing. But he is not as confident in his skills within the legal or financial aspects of starting a new business. He wants to consult with a lawyer and accountant, but his budget is tight with all of the expenses involved in getting Pepe's Pizzazzeria up and running. Pepe should A) delay talking with a lawyer and accountant until the business has established a positive cash flow for at least one year. B) trust his basic instincts and try to put it together without the advice of lawyers and accountants. C) consult with a lawyer and accountant even though the budget is tight. D) immediately hire full-time lawyers and accountants for his staff. Answer: C Explanation: Entrepreneurs starting new businesses seldom can afford to have full-time lawyers and accountants as employees, but it is critical that they obtain professional legal and accounting advice. Difficulty: 3 Hard Topic: Methods of Business Financing Learning Objective: 06-04 Analyze what it takes to start and run a small business. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

302) Since Pepe has worked in marketing for a large corporation before getting into the pizza business A) there is no need to consider an entrepreneurial team for start-up due to the fact that all other management functions are served by marketing. B) he can skip any marketing research steps that the SBA recommends. C) he knows that the type of business he wants to start may be difficult to develop, but it has a tremendous amount of security due to its promise of long-term survival. D) he plans to put together an entrepreneurial team of experts that will complement his expertise. Answer: D Explanation: An entrepreneurial team is a group of experienced professionals from various business disciplines. Team members bring different skills to the entrepreneurial venture. Their skills usually complement each other. Difficulty: 3 Hard Topic: Define Entrepreneurship Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and home- and web-based businesses. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 303) As a former classmate of Pepe's at the nearby university, you remind him what you both learned in your small business management class several years ago. What would you remind him? A) Restaurants are easy to start up, but difficult to keep going. B) Restaurants are probably the most difficult type of business to start up, due to the laborintensive aspects of the business. C) Experts believe that restaurants have a high profit potential, due the fact that there is not much direct competition. D) Restaurants are easy to start up and have great profit potential. Answer: A Explanation: The easiest businesses to start (like restaurants) have the greatest potential for failure. The easiest to keep alive are difficult to get started (like manufacturing). Difficulty: 3 Hard Topic: The Advantages and Disadvantages of Small Business Ownership Learning Objective: 06-02 Discuss the importance of small business to the American economy and summarize the major causes of small-business failure. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

Understanding Business, 12e (Nickels) Chapter 07 Management and Leadership 1) The main job of managers today is to watch over people to be sure they do what the manager asks of them. Answer: FALSE Difficulty: 1 Easy Topic: Definition of Management Learning Objective: 07-01 Describe the changes occurring today in the management function. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) The best way to get people to do what a manager wants is for the manager to reprimand those who don't do things correctly. Answer: FALSE Difficulty: 1 Easy Topic: Definition of Management Learning Objective: 07-01 Describe the changes occurring today in the management function. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) Managers in progressive firms of all kinds tend to be friendly, and treat employees as partners. Answer: TRUE Difficulty: 1 Easy Topic: Definition of Management Learning Objective: 07-01 Describe the changes occurring today in the management function. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 4) Managers must earn the trust of their employees. Answer: TRUE Difficulty: 1 Easy Topic: Definition of Management Learning Objective: 07-01 Describe the changes occurring today in the management function. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

5) A modern manager's main job is to issue orders, then follow up to make sure employees do as they were told. Answer: FALSE Difficulty: 1 Easy Topic: Definition of Management Learning Objective: 07-01 Describe the changes occurring today in the management function. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) Managers in progressive organizations tend to emphasize teamwork and cooperation rather than discipline and giving orders. Answer: TRUE Difficulty: 1 Easy Topic: Definition of Management Learning Objective: 07-01 Describe the changes occurring today in the management function. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 7) Despite all of the changes in the business environment, the basic way a manager performs his or her job has remained remarkably constant. Answer: FALSE Difficulty: 1 Easy Topic: Definition of Management Learning Objective: 07-01 Describe the changes occurring today in the management function. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) Given the lack of discipline and short attention spans of today's workers, modern managers must watch their workers closely, set strict rules, and vigorously enforce policies. Answer: FALSE Explanation: Today's managers emphasize teamwork and cooperation rather than discipline and order giving. Managers now guide, train, support, motivate, and coach employees. Difficulty: 2 Medium Topic: Definition of Management Learning Objective: 07-01 Describe the changes occurring today in the management function. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

9) In most high-tech industries, the best way to respond quickly to rapid technological changes is to keep most authority and responsibility in the hands of a few key managers who provide precise, detailed directions to the workers. Answer: FALSE Explanation: Managers of high-tech firms realize that workers often know much more about technology than they do. Thus, most progressive managers emphasize teamwork and cooperation rather than discipline and order giving. Difficulty: 2 Medium Topic: Definition of Management Learning Objective: 07-01 Describe the changes occurring today in the management function. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10) Due to the fact that employees today often know much more about technology and the technical aspects of their jobs than their managers do, progressive managers emphasize teamwork and cooperation as a strategy for getting work done. Answer: TRUE Explanation: Managers of high-tech firms realize that workers often know much more about technology than they do. Thus, most modern managers emphasize teamwork and cooperation rather than discipline and order giving. Difficulty: 2 Medium Topic: Definition of Management Learning Objective: 07-01 Describe the changes occurring today in the management function. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) Alejandro is the general manager of a retail outlet in Arizona. By emphasizing teamwork and acting in a role of coach rather than boss, Alejandro is considered to be a modern manager. Answer: TRUE Explanation: Most modern managers tend to be more progressive. They choose to guide and support their employees instead of giving orders. Difficulty: 3 Hard Topic: Definition of Management Learning Objective: 07-01 Describe the changes occurring today in the management function. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

12) Briana is an office manager and consistently has to tell her employees what to do, watch over their tasks, and reprimand those who don't listen to her orders. Briana is a modern manager. Answer: FALSE Explanation: Most modern managers tend to be more progressive. They choose to guide and support their employees instead of giving orders. Difficulty: 3 Hard Topic: Definition of Management Learning Objective: 07-01 Describe the changes occurring today in the management function. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 13) Managers make decisions about how to use organizational resources to accomplish goals. Answer: TRUE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) Financing is one of the four key functions of management. Answer: FALSE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) The four key management functions are planning, organizing, leading, and controlling. Answer: TRUE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

16) One trend of the leading management function is to empower employees, giving them as much freedom as possible to become self-directed and self-motivated. Answer: TRUE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 17) Leading is the management function of designing the structure of the organization so that everyone can function together. Answer: FALSE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) As a management function, the main focus of controlling is to keep complete and up-to-date records of the organization's financial transactions for tax and regulatory purposes. Answer: FALSE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 19) The management function that involves guiding, training, and motivating others to work toward the achievement of an organization's goals is called leading. Answer: TRUE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

20) In many smaller firms the manager's role is to direct the employees, telling them exactly what to do. Answer: TRUE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 21) Planning is the function of management that includes anticipating future trends and determining the best strategies and tactics to achieve an organization's goals and objectives. Answer: TRUE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 22) Planning is a key management function because other management functions depend on having a good plan. Answer: TRUE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

23) Managers focus on making efficient use of their organization's human resources, but leave decisions about the efficient use of other resources such as buildings, machinery, and supplies to engineers and accountants. Answer: FALSE Explanation: Managers must practice the art of getting things done through organizational resources including people, financial resources, information, and all types of equipment and assets. Difficulty: 2 Medium Topic: Functions of Management Learning Objective: 07-01 Describe the changes occurring today in the management function. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 24) Today's progressive organizations are designed around the needs of the customer. The idea is to organize systems to be responsive to customer needs. Answer: TRUE Explanation: Organizing includes designing the structure of the organization and creating conditions and systems in which everyone and everything work together to achieve the organization's goals and objectives. Difficulty: 2 Medium Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 25) Leighton has spent the last two hours going over customer surveys to see how well her company is achieving its goal of improving overall customer satisfaction. Leighton's efforts are an example of the controlling function of management. Answer: TRUE Explanation: Controlling is the function concerned with determining whether or not an organization is progressing toward achieving its goals and objectives. Difficulty: 3 Hard Topic: The Four Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

26) Drake, a manager with The Teeny Truck Toy Company, just partook in a meeting that considered the future trends of the toy industry, and identified new challenges and opportunities for Teeny Truck Toys. Drake's participation in this meeting was part of the organizing function of management. Answer: FALSE Explanation: Drake's activities are part of the planning function. Planning involves anticipating future trends and identifying business opportunities and challenges. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 27) Brock is a no-nonsense boss. He believes the best way for an organization to achieve its goals is for workers to follow their boss's direct orders. Thus, he tells workers exactly what to do and how to do it. Brock's approach is an example of directing. Answer: TRUE Explanation: Directing involves telling workers exactly what to do. This approach is still common among managers in small companies, but managers in larger firms tend to rely more on leading rather than directing. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 28) Eve is a manager of a medium-sized insurance company. She is currently involved in redesigning her department to ensure that employees and other resources can respond more quickly and efficiently to the needs of its customers. Eve's efforts are part of the organizing function of management. Answer: TRUE Explanation: Organizing involves designing the structure of the organization so that resources can efficiently achieve the organization's objectives. One of the key objectives today is to find ways to organize businesses so that they please the customer. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

29) Planning involves setting the organizational vision, goals, and objectives. Answer: TRUE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30) Progressive managers consider planning to be of little importance in today's rapidly changing business environment. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 31) Goals tend to be broad and focus on the long term while objectives tend to be specific and more short-term in their focus. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32) A vision is a detailed set of specific steps that a firm must take to achieve its short-run objectives. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

33) A statement about why an organization exists and what it is trying to achieve is called the organization's directive. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 34) A vision is the overall explanation of why an organization exists and where it is trying to head. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) A vision gives the organization a sense of purpose and a set of values that unite employees toward a common destiny. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) A mission statement outlines the fundamental purposes of an organization. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

37) Today, a mission statement should also address social responsibility. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) Goals are broad, long-term accomplishments an organization wants to achieve. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39) While goals are measurable, objectives are not. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 40) Goals are developed and agreed to by management so that the workers can follow them. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

41) Objectives should be expressed as broad, general principles rather than as specific short-term results. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 42) Continuous planning is not necessary, because plans that worked well in the past are likely to continue to work well in the future. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 43) Planning is a continuous process. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44) The SWOT analysis helps firms identify competitive threats and market opportunities. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

45) An analysis of the business environment helps managers identify threats and opportunities that face their firm. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 46) Strategic planning is now much easier than it used to be because managers have access to very reliable computerized forecasting tools. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 47) Tactical planning deals with setting long-range goals, while strategic planning develops the specific strategies needed to achieve the organization's operational goals. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 48) Strategic planning determines the major goals of the organization. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 13 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

49) Today's business environment changes so rapidly that strategic planning is becoming more difficult and subject to change. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 50) Managers or teams of managers at the lower levels of an organization normally develop strategic plans, but top managers do most of the tactical planning. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 51) Contingency planning involves developing alternative courses of action to be used if the primary plans do not achieve the desired results. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

52) Operational planning looks at the organization as a whole, while strategic planning focuses on specific departmental actions. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 53) One example of tactical planning is setting annual budgets and deciding on other details and activities necessary to meet the strategic objectives. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 54) Many cities and businesses are now developing contingency plans to respond to potential terrorist attacks. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

55) Instead of creating detailed strategic plans, the leaders of market-based companies (companies that respond quickly to environmental changes) set flexible directions so as to allow for change and seize opportunities when they come. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 56) Decision making occurs in all management functions. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 57) The first step in the rational decision-making model is to identify alternative solutions. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 58) The last step in the rational decision-making model is to determine whether the decision was a good one and follow up. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 16 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

59) One step in the rational decision-making model is to develop alternatives. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 60) Brainstorming is coming up with as many solutions as possible in a short period of time with a focus toward not censoring anyone's ideas. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 61) Problem solving is more formal than using the rational decision-making model. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 62) PMI is a problem-solving technique that involves listing pluses, minuses, and implications. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

63) A mission statement should provide a detailed explanation of how a company will achieve its objectives. Answer: FALSE Explanation: A mission statement is an outline of the organization's fundamental purposes, not a detailed explanation of what is to be done and who is to do it. Difficulty: 2 Medium Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 64) The SWOT analysis focuses only on the internal activities of the firm, while a PERT analysis is used to review the external environment in which the firm operates. Answer: FALSE Explanation: SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. While the strengths and weaknesses part of SWOT analysis focuses on internal aspects of the organization, the opportunities and threats part of SWOT looks at the external environment in which the organization operates. Difficulty: 2 Medium Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 65) Tactical planning involves making decisions about which customers to serve, what products or services to sell, and the geographic areas in which the firm will compete. Answer: FALSE Explanation: The fundamental nature of the topics described in this question would be considered in the strategic planning process. Difficulty: 2 Medium Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

66) Contingency planning is most important in markets where conditions are relatively stable and market growth is predictable. Answer: FALSE Explanation: Contingency planning is the process of preparing alternative courses of action that may be used if the primary plans don't achieve the organization's objectives. The need to implement contingency plans is more likely to arise in markets where there is a great deal of rapid change and uncertainty. Difficulty: 2 Medium Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 67) In order to ensure effective implementation, managers should make only one set of plans and carefully follow them to ensure that the organization's objectives are achieved. Answer: FALSE Explanation: Economic and competitive conditions change so rapidly that it is wise to have alternative plans available in the event the primary plan does not achieve its objectives. This is the idea behind contingency planning. Difficulty: 2 Medium Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 68) Top managers at Today's Finds department store found their employees do not really share a common sense of purpose nor do they have a common set of values. This suggests that top management has not provided a clear vision for the firm. Answer: TRUE Explanation: A vision is a broad statement of why an organization exists and what it seeks to accomplish. It is intended to give the organization a sense of purpose and provide workers with a set of values and a sense of direction. Difficulty: 3 Hard Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 19 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

69) Susan is part of the top management team at Nimbus Rain Gear, a company that produces umbrellas, raincoats, hats, and all-weather shoes. As a member of top management, Susan is more likely to be involved in strategic planning than in tactical planning. Answer: TRUE Explanation: Top management normally carries out strategic planning, while lower-level managers are usually responsible for tactical planning. Difficulty: 3 Hard Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 70) Sierra is a manager at a nationwide retail chain. Each morning she determines the order in which store projects are performed; she sets work schedules for employees and standards that must be met. These activities suggest that Sierra is involved in operational planning. Answer: TRUE Explanation: Operational planning is the process of setting work standards and schedules that are necessary to carry out tactical plans. Difficulty: 3 Hard Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 71) Margot needed to solve a problem fast! She called together her department team and asked them to list as many possible solutions as they could come up with in a short period of time. During the process she encouraged responses and avoided censoring what her workers said. Margot is utilizing a problem-solving technique known as brainstorming. Answer: TRUE Explanation: Brainstorming is a problem-solving technique that encourages a group of people to come up with as many suggestions for solving the problem as possible in a short period of time, and with no censoring of ideas. Difficulty: 3 Hard Topic: The Importance of Planning Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 20 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

72) After management has created a plan of action, the focus turns to the controlling function to recheck and often redo the plan. Answer: FALSE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 73) Organizing involves allocating resources, assigning tasks, and establishing procedures for accomplishing the organizational objectives. Answer: TRUE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 74) The visual illustration of the relationships among the people within an organization that shows who is accountable for the work and who reports to whom is called a Gantt Chart. Answer: FALSE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 75) Branch and plant managers and division heads are classified as first-line managers. Answer: FALSE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

76) A CEO is often the president of the firm and is responsible for developing the strategic plans. Answer: TRUE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 77) The recent recession eliminated many middle managers giving the remaining managers more employees to supervise. Answer: TRUE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 78) Supervisory managers are those who directly oversee the activities of workers and evaluate their daily performance. Answer: TRUE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 79) Middle managers usually are responsible for tactical planning and controlling. Answer: TRUE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

80) The CIO, COO, and CFO are classified as top management positions. Answer: TRUE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 81) In this day of rapidly changing technology, technical skills are the most important skills for all levels of management. Answer: FALSE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 82) Conceptual skills refer to the ability of a manager to perform the tasks associated with a specific discipline or department. Answer: FALSE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 83) First-line managers typically spend less time on conceptual tasks and more time on technical skills. Answer: TRUE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

84) Most of a top manager's time is devoted to conceptual and human relations activities. Answer: TRUE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 85) The ability to plan, coordinate, and delegate are among a manager's most basic technical skills. Answer: FALSE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 86) A person who is a good first-line manager is automatically likely to be a good middle or top manager. Answer: FALSE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 87) Human relations skills include those associated with leadership, coaching, morale building, and supportiveness. Answer: TRUE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

88) The question of how to implement change within an organization is the responsibility of the firm's CEO. Answer: TRUE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 89) Staffing involves recruiting, hiring, motivating, and retaining the best people available for the organization. Answer: TRUE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 90) Due to the growth of the Internet, recruiting is less important today than in the past. Answer: FALSE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 91) Staffing is a less important management function today than in the past. Answer: FALSE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

92) Organizing involves developing a structure or framework that relates all workers, tasks, and resources to each other. Answer: TRUE Explanation: Operationally, organizing means allocating resources, assigning tasks, and establishing procedures for accomplishing the organizational objectives. Difficulty: 2 Medium Topic: Functions of Management Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 93) Top management is also known as first-line management because it deals with key managerial decisions on a priority basis. Answer: FALSE Explanation: Top management consists of the president and other key company executives. On the other hand, first-line managers are immediately above an organization's workers. Difficulty: 2 Medium Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 94) Supervisory managers usually work more with ideas than with people. Answer: FALSE Explanation: Supervisory managers are responsible for assigning specific jobs to workers and evaluating their daily performance. Their jobs often bring them into direct contact with the workers they supervise. Figure 7.5 illustrates this by showing that first-line managers rely more on human relations skills than on conceptual skills. Difficulty: 2 Medium Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

95) Because of the complex nature of their jobs, top managers spend most of their time developing and using technical skills. Answer: FALSE Explanation: Top managers spend most of their time on tasks requiring conceptual and human relations skills. Difficulty: 2 Medium Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 96) The experience gained by first-line managers as they perform their jobs enables them to acquire all the skills they will need when promoted to higher levels of management. Answer: FALSE Explanation: Different skill sets are needed at different levels of management. First-line managers tend to use technical skills extensively, but spend much less time using conceptual skills. On the other hand top managers use very few technical skills, but often perform tasks requiring exceptional conceptual skills. Thus, the skills learned by a first-line manager may not be very useful at higher levels of management. Difficulty: 2 Medium Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 97) Phillip is a manager for Connect Cable. Most of his day is spent scheduling the specific service calls that each employee performs, verifying job completion, and evaluating employee performance on each call. These responsibilities suggest that Phillip is a middle manager. Answer: FALSE Explanation: First-line managers typically carry out the tasks that Phillip is performing. Middle managers generally are more involved in tactical planning and controlling. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

98) Aleah is a first-line manager at her company. At this level of management, she will use human relations and conceptual skills as well as technical skills. Answer: TRUE Explanation: Though they rely on technical skills more than managers at other levels, first-line managers must also use human and conceptual skills to a certain degree. In fact, as Figure 7.5 shows, all three levels of management, to varying degrees, must use all three types of skills. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 99) Bethany was recently promoted to first-line manager. Her company is very traditional in its approach to management. In her position, Bethany probably spends a lot of time giving employees detailed and specific instructions. Answer: TRUE Explanation: First-line managers are directly responsible for supervising workers and evaluating their performance. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 100) Marcos wants to become a manager but he is reserved and avoids conversation with strangers. However, he is very comfortable with information technology and has great technical skills in the area. Marco's personal traits make him a good candidate for a top management position. Answer: FALSE Explanation: Top managers typically use few technical skills. Instead, almost all of their time is devoted to human relations and conceptual tasks. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

101) Staffing is less important at Facebook, Google, and other high-tech firms because these firms sell technology. Answer: FALSE Explanation: At most high-tech companies, like Facebook and Google, the primary capital equipment is brainpower, so staffing is essential to obtain the best people available to accomplish these companies' objectives. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 102) People who are good leaders also are almost always good managers. Answer: FALSE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 103) Leadership is the management function of checking to determine whether or not an organization is progressing toward its objectives, and taking corrective action if it is not. Answer: FALSE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

104) One difference between managers and leaders is that managers strive to achieve stability while leaders embrace change. Answer: TRUE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 105) Management carries out of the vision created by leadership. Answer: TRUE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 106) Effective leadership includes the ability both to welcome change and to promote ethical behavior. Answer: TRUE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 107) Good leaders motivate workers and create the environment for workers to motivate themselves. Answer: TRUE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

108) Managers must lead by doing, not just by saying. Answer: TRUE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 109) A leader's most important job may be to transform the way the company does business so that it's more effective and efficient. Answer: TRUE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 110) Researchers have determined that all effective leaders have similar traits. Answer: FALSE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 111) There is no single leadership style that works best in all situations. Answer: TRUE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

112) Research has shown that the democratic style of leadership is the most effective style of leadership. Answer: FALSE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 113) Research on leadership supports the idea that the best leadership style depends on several factors, including the people being led and the situation. Answer: TRUE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 114) The autocratic style of leadership can be very effective in emergency situations. Answer: TRUE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 115) The traits used by autocratic leaders include warmth, friendliness, and understanding. Answer: FALSE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

116) The traits that characterize participative leaders include flexibility, good listening skills, and empathy. Answer: TRUE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 117) Autocratic leadership is most effective with workers who like to work independently and make their own decisions. Answer: FALSE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 118) Research has shown that employee participation in decision making improves job satisfaction. Answer: TRUE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

119) Free-rein leaders tend to carefully monitor their subordinates to make sure they are doing the job in the correct way. Answer: FALSE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 120) Managers are most effective when they consistently use the same leadership style with every employee assigned to their work group. Answer: FALSE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 121) In traditional organizations, directing includes both giving assignments to workers and providing feedback on their performance. Answer: TRUE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 122) Empowerment means that more authority and responsibility is given to top management. Answer: FALSE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 34 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

123) Enabling is the term used to describe the process by which employees recognize and respect the authority of managers to issue orders. Answer: FALSE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 124) Knowledge management involves finding the right information, keeping the information accessible, and making the information known to everyone in the firm. Answer: TRUE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 125) The focus of knowledge management is to make sure top managers have all of the information they need to run the company. Answer: FALSE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

126) The first step to developing a knowledge management system is to develop the technology to keep information secure. Answer: FALSE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 127) The amount of data gathered has grown so much that the term big data is used to describe the vast amount of information available. Answer: TRUE Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 128) A comparison of leadership and management suggests that leadership is about creating a vision, while management is about carrying out that vision. Answer: TRUE Explanation: Leadership is creating a vision, while management is the carrying out of the leadership's vision. Difficulty: 2 Medium Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

129) Millie wants to ensure she maintains and preserves order and stability in her company. She is very good at developing tactical plans to achieve her company's goals and objectives. These characteristics suggest that Millie has characteristics of an exceptional leader. Answer: FALSE Explanation: One of the characteristics of leaders is that, rather than striving for order and stability, they create and embrace change. The fact that Millie strives to produce order and stability suggests she might be a good manager, and her planning skills reinforce this conclusion. However, not all good managers make good leaders. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 130) Will is a manager for a major manufacturing corporation. He strives to maintain a free-rein approach to leadership in most situations. However, the company recently lost a major contract that it needs to continue the current level of operation. Management needs to take quick action to adjust, including slashing expenses. Under these conditions, Will should maintain his free-rein style of leadership. Answer: FALSE Explanation: No single leadership style is always effective. The best style will depend on the people being led, the organization, and the situation. Good managers often vary their leadership styles as conditions change. In crisis situations, the autocratic approach is sometimes more effective than a free-rein approach. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

131) Winston is quick and decisive. He makes most decisions by himself, issues orders, and expects his subordinates to follow them without question. Winston's behavior is an example of the free-rein style of leadership. Answer: FALSE Explanation: A free-rein manager is one who gives his or her subordinates a substantial amount of freedom. Winston's approach, with its emphasis on issuing orders without consultation, is more consistent with the autocratic style of leadership. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 132) After assessing the results from a recent customer survey, top managers at Gibraltar Corporation are convinced their firm is doing a poor job of responding quickly to customer needs. This has the managers very worried. Empowerment might be an approach that would help Gibraltar improve its responsiveness. Answer: TRUE Explanation: Empowerment means giving employees the authority and responsibility to respond quickly to consumer requests. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

133) Amari is the project manager for a team of experienced and creative programmers at Game Guys, Inc., a popular games developer. Since the team members are bright, creative, and highly motivated, Amari brainstorms basic ideas with her group, then allows the programmers a great deal of freedom to do what it takes to reach the agreed-upon objectives. Amari is using a freerein leadership style. Answer: TRUE Explanation: A free-rein leader gives subordinates a great deal of freedom to do whatever it takes to accomplish the organization's objectives. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 134) Colette has worked for Comfort Cove Hotel for a decade. Damon, however, is a new employee at the hotel. Mallory, who oversees both Colette and Damon, may find that she should use a different leadership style with each of these employees. Answer: TRUE Explanation: An effective manager may use different leadership styles for different people or situations. A new worker may require more direction, while a more experienced employee may be more responsive to empowerment and a free-rein style of leadership. More experienced workers may respond better to a more democratic style. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

135) Lennox is a department chair at a local university. He always gives department faculty members a chance to express their opinions and encourages them to participate in decision making. Employees who work with Lennox are likely to have a high level of job satisfaction. Answer: TRUE Explanation: Lennox is using the democratic leadership style. Research has found that this style usually increases the job satisfaction of employees. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 136) Zariah is a middle manager at Simple Solutions, Inc. The company's top management has just announced that they are going to initiate a policy of empowerment. In order for this policy to succeed, Zariah and other managers will need to adopt a more autocratic style of leadership. Answer: FALSE Explanation: Empowerment means giving employees more authority and responsibility to make their own decisions. Autocratic leadership, which relies on issuing orders and expecting people to follow them, is not consistent with empowerment. Managers in firms where empowerment is practiced typically give fewer detailed instructions and spend more time coaching, assisting, and counseling workers. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 137) The steps of the controlling function include assigning tasks and establishing procedures to accomplish organizational goals. Answer: FALSE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

138) Controlling provides managers and workers with feedback that helps them adjust to deviations from plans. Answer: TRUE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 139) If managers do a good job planning and organizing, there shouldn't be a need for them to be involved with controlling. Answer: FALSE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 140) Two of the key components of the control process are setting clear performance standards and communicating results and deviations to the employees involved. Answer: TRUE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 141) The first step in the controlling process is to monitor and record the actual results. Answer: FALSE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

142) Without clear standards, the control process is impossible to implement. Answer: TRUE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 143) In the control process, performance standards should be stated in general terms in order to give management as much flexibility as possible. Answer: FALSE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 144) In order to be effective, performance standards must be specific, attainable, and measurable. Answer: TRUE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 145) Accounting and finance are important for control systems because they provide the numbers management needs to evaluate progress. Answer: TRUE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

146) External customers are those individuals or units that receive services from other units within the same organization. Answer: FALSE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 147) A customer-oriented firm should focus exclusively on satisfying its internal customers. Answer: FALSE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 148) When all is said and done, financial standards such as profit and return on investment are the only relevant measures of how well a firm is meeting its goals. Answer: FALSE Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 149) When setting standards used in controlling, it is better to simply state general goals such as "better quality" or "higher levels of consumer satisfaction" than it is to spend a lot of time and effort developing more specific standards. Answer: FALSE Explanation: If standards are stated in very general terms, it becomes difficult to determine whether the goals are being met. General and vague goals do not clearly identify what the firm is trying to achieve. Difficulty: 2 Medium Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 43 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

150) Ronin is a manager for Luxe Letters, Inc., a firm that designs and manufactures greeting cards, invitations, announcements, and other event material. Ronin spends a lot of his time trying to find the right people for various positions at his company. These efforts are part of the controlling function of management. Answer: FALSE Explanation: Controlling is concerned with checking to see whether the organization is meeting its goals by setting standards, measuring actual performance, comparing actual results with the desired standards, providing feedback, and taking corrective action if necessary. Staffing, which is the process of finding the right people for various positions within an organization, is part of the organizing function of management. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 151) Cassidy is concerned about the number of customer complaints she has received regarding the poor service provided by her department. She is convinced her employees are able to provide better service and cut complaints significantly. Cassidy has set a new goal for her department to reduce customer complaints by 15% within six months. This goal is an example of the type of performance standard needed for effective controlling. Answer: TRUE Explanation: An effective standard for the controlling process should be specific, attainable, and measurable. It is also important to establish a time period for the achievement of the goal. Assuming that she is correct about the ability to reduce complaints significantly, Cassidy's standard satisfies these criteria. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

152) Perfect Fit Athletics, a popular maker of men's and women's athletic wear, has just reported a record profit. This proves that the firm is successfully achieving its goals. Answer: FALSE Explanation: Although measures of financial success (such as profit) are very important indicators of business performance, they are not the only measures. The purpose of a firm today is to satisfy a broad group of stakeholders, including employees, customers, and the people living in the local communities where the business has operations. The success of the firm at satisfying the diverse interests of these groups cannot be measured by focusing on financial criteria alone. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 153) Management is more progressive today. There is more emphasis on A) individual work that can be successfully measured. B) working in teams. C) striving to eliminate the control function of management. D) placing greater reliance on the government for financing. Answer: B Difficulty: 1 Easy Topic: Definition of Management Learning Objective: 07-01 Describe the changes occurring today in the management function. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 154) One of the challenges facing today's managers is to A) deal with a workforce that is less educated and less self-directed than in the past. B) find ways to encourage conformity instead of diversity. C) guide a more educated workforce. D) cope with the sudden and unexpected slowdown in the pace of innovation and change. Answer: C Difficulty: 1 Easy Topic: Definition of Management Learning Objective: 07-01 Describe the changes occurring today in the management function. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

155) Today's progressive managers A) prefer to use the autocratic style of leadership. B) emphasize teamwork and cooperation rather than discipline and order giving. C) face fewer challenges and problems than managers in the past. D) can rely on a much higher level of worker loyalty to the organization than in the past. Answer: B Difficulty: 1 Easy Topic: Definition of Management Learning Objective: 07-01 Describe the changes occurring today in the management function. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 156) The revolution in management that is currently under way suggests that the most effective managers of the future will A) be very strict in their treatment of workers. B) emphasize individual initiative rather than teamwork. C) specialize in performing one of the four management functions. D) emphasize teamwork. Answer: D Explanation: Management is experiencing a revolution. The manager of the future will likely be working in teams and assuming completely new roles in the firm. Difficulty: 2 Medium Topic: Definition of Management Learning Objective: 07-01 Describe the changes occurring today in the management function. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

157) How are managers today different from managers in the past? A) Managers today are more likely to reprimand workers. B) Managers in the past would use praise and gentle suggestions. C) Managers in the past were less loyal to their employer. D) Managers today emphasize teamwork. Answer: D Explanation: Employees today are more educated and demand more self-direction. As a result, today's managers are educated to guide, train, support, motivate, and coach employees rather than to tell them what to do. These managers are likely to emphasize teamwork and communication rather than discipline and order giving. Difficulty: 2 Medium Topic: Definition of Management Learning Objective: 07-01 Describe the changes occurring today in the management function. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 158) Which of the following statements has resulted in changes in the role of management? A) Most workers today show little initiative or creativity, so managers must spend more time directing their efforts. B) The marketplace is becoming global, which increases both competition and opportunities for cooperation and integration. C) Firms are recognizing that their workforces are too diverse, so managers must find ways to reduce diversity without violating federal laws against discrimination. D) The desire to encourage teamwork has resulted in larger, more cumbersome organizations with too many workers. Answer: B Explanation: The marketplace is now global, and the advent of the Internet means that competition from global competitors is only a mouse click away. Difficulty: 3 Hard Topic: Definition of Management Learning Objective: 07-01 Describe the changes occurring today in the management function. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

159) ________ is the art of utilizing organizational resources to accomplish goals at work. A) Socialization B) Justification C) Preparation D) Management Answer: D Difficulty: 1 Easy Topic: Definition of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 160) One of the four primary functions of management is A) controlling. B) marketing. C) financing. D) designing. Answer: A Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 161) The management function concerned with anticipating future trends and determining the best strategies to achieve an organization's goals and objectives is known as A) directing. B) leadership. C) planning. D) forecasting. Answer: C Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

162) When managers work on creating conditions and systems to ensure that everything and everyone works together to achieve the organization's goals, they are involved in the ________ function of management. A) controlling B) leading C) planning D) organizing Answer: D Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 163) ________ is the management function that involves determining whether an organization is progressing toward its goals, rewarding employees for doing a good job, and taking corrective action when they are not. A) Organizing B) Controlling C) Leading D) Officiating Answer: B Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 164) ________ is the management function that involves setting goals, strategies, and tactics for achieving the organization's goals and objectives. A) Forecasting B) Planning C) Conceptualizing D) Controlling Answer: B Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 49 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

165) ________ is the management function of creating a vision for the organization and guiding, training, coaching, and motivating employees to help achieve the goals and objectives of the organization. A) Organizing B) Controlling C) Leading D) Officiating Answer: C Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 166) Which of the following goals best describes today's view of the organizing function? Organizing today focuses on A) achieving unified opinions from a diversified workforce. B) designing the organization around the customer. C) simplifying the process of measuring outcomes related to performance standards. D) developing the most efficient strategic plans for the firm. Answer: B Explanation: Today's organizations are being designed to focus on customer needs. Managers want to organize the firm so that everybody in the organization is working to please the customer, while keeping in mind that the firm must be profitable. Difficulty: 2 Medium Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

167) When managers determine that an organization is not making sufficient progress toward achieving its goals and objectives and they develop corrective measures, they are involved in A) controlling. B) planning. C) directing. D) accounting. Answer: A Explanation: Controlling is the management function that involves checking to see whether or not an organization is progressing toward its goals and objectives, and taking corrective action if it is not. Difficulty: 2 Medium Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 168) When managers identify a market trend that suggests a new opportunity and then devise a strategy to go after this new opportunity, they are involved in the function of A) controlling. B) planning. C) leading. D) organizing. Answer: B Explanation: Planning is the management function that includes anticipating trends and determining the best strategies and tactics to achieve organizational goals and objectives. Difficulty: 2 Medium Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

169) Which of the following activities would be a part of the leading function of management? A) Devising a new strategic plan to enter a new foreign market currently dominated by a competing firm B) Recruiting qualified workers to join the organization and assigning them to their proper position C) Examining a financial report to see whether the firm's profits are improving and taking corrective action if they are not D) Training and coaching workers to help them understand their job and perform it effectively Answer: D Explanation: Leading involves creating a vision for an organization and guiding, training, coaching and motivating workers so that they can work effectively within the organization. Difficulty: 2 Medium Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 170) Which of the following activities is part of the planning function of management? A) Assigning a particular worker to do a specific task B) Looking at market forecasts to identify future business opportunities and challenges C) Praising a sales representative who has far exceeded her monthly sales objectives D) Conducting a job interview with a potential new employee Answer: B Explanation: Planning involves anticipating trends, identifying opportunities and challenges, and devising strategies and tactics that will help the firm achieve its goals and objectives. Difficulty: 2 Medium Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

171) Which of the following activities is part of the organizing function of management? A) Going over a spreadsheet to analyze some financial data B) Teaching a new employee how to use a piece of office equipment C) Giving front-line workers additional resources needed to provide faster and better service to customers D) Developing a broad general strategy to help the organization meet its long-term growth objectives Answer: C Explanation: Organizing includes creating the conditions and systems in which everyone and everything works together to achieve an organization's objectives. Many of today's organizations attempt to organize in ways that enable them to please their customers at a profit. Difficulty: 2 Medium Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 172) As a manager, two of Summer's greatest strengths are her ability to clearly communicate goals and her ability to guide, coach, and motivate her employees. Based on these strengths, ________ is a management function that Summer is likely to be good at performing. A) controlling B) planning C) leading D) organizing Answer: C Explanation: Leading involves communicating, guiding, training, coaching, and motivating others to work effectively toward achieving an organization's goals. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

173) Autumn, a manager for Shine Cosmetics, has just been given a report showing sales in her region are lower than anticipated for the third quarter. Her next task is to determine the reason for the disappointing results and find a way to get sales up to their desired level. Autumn's efforts are part of the ________ function of management. A) controlling B) directing C) organizing D) planning Answer: A Explanation: Controlling involves checking to determine whether goals and objectives are being met, and taking corrective action if they are not. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 174) A ________ is an overall explanation of why an organization exists and where it is trying to head. A) tactical plan B) prime directive C) corporate charter D) vision Answer: D Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

175) A vision for a company is A) an explanation of why the company exists and where it wants to go. B) the same thing as an objective. C) a detailed plan that outlines the major organizational structure of the firm. D) very relevant for the short term, but less useful for the long term. Answer: A Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 176) A meaningful mission statement should address topics such as the organization's A) form of ownership and methods of financing. B) self-concept and company philosophy. C) advertising strategy and distribution plan. D) tactical plans and contingency plans. Answer: B Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 177) Employees often work with managers to develop a(n) ________ that outlines the fundamental purposes of their organization. A) organization chart B) value statement C) mission statement D) PERT diagram Answer: C Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

178) ________ involves setting the organization's vision, goals, and objectives. A) Organizing B) Planning C) Controlling D) Directing Answer: B Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 179) ________ are broad, long-term accomplishments an organization wants to achieve. A) Goals B) Objectives C) Directives D) Agendas Answer: A Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 180) ________ are specific, short-term, measurable results an organization wants to achieve in order to fulfill its long-term goals. A) Directives B) Opportunity targets C) Objectives D) Mission complements Answer: C Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

181) A ________ analysis is used to help companies evaluate their internal strengths and weaknesses, and develop an awareness of external threats and opportunities. A) WISH B) SWAMP C) ASSET D) SWOT Answer: D Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 182) ________ planning determines the major goals of an organization and lays the foundation for obtaining and using resources to achieve those goals. A) Strategic B) Contingency C) Central D) Tactical Answer: A Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

183) The type of planning that is concerned with developing detailed short-term actions about what is to be done, who is to do it, and how it is to be done is known as ________ planning. A) strategic B) contingency C) first-line D) tactical Answer: D Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 184) ________ planning prepares alternative courses of action that may be used if the primary plans are not achieving objectives. A) Strategic B) Contingency C) Tactical D) Alternative Answer: B Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

185) Tactical planning is concerned with A) determining the best way to cope with an emergency situation. B) developing detailed strategies about what is to be done, who is to do it, and how it is to be done. C) devising temporary courses of action to be used if the primary plans do not achieve the desired results. D) setting long-run goals that will govern the general course of the organization for years. Answer: B Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 186) Which of the following is involved in setting work standards and schedules needed to implement the firm's tactical objectives? A) mission statement B) tactical planning C) operational planning D) contingency planning Answer: C Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

187) A(n) ________ would be used by a department manager as a tool for making daily and weekly assignments. A) operational plan B) vision statement C) mission statement D) tactical plan Answer: A Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 188) Strategic planning looks at the organization as a whole, while ________ planning focuses on daily tasks and decisions. A) tactical B) strategic C) mission D) operational Answer: D Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

189) ________ planning is a part of contingency planning that is used to deal with sudden and unexpected changes in the business environment. A) Crisis B) Tactical C) Operational D) SWOT Answer: A Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 190) ________ is choosing among two or more alternatives. A) Contingency planning B) Decision making C) Organizational selection D) Utility analysis Answer: B Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 191) The first step in the rational decision-making model is to: A) recruit team members to work on the problem. B) gather data. C) develop alternative responses. D) define the situation. Answer: D Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

192) ________ is a problem solving technique that attempts to come up with as many solutions as possible in a short time without censoring the ideas. A) Brainstorming B) Game theory C) CAD/CAM D) PMI Answer: A Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 193) PMI is a A) computer program used to help managers write mission statements. B) statistical technique used in the controlling process. C) problem-solving technique used to evaluate possible solutions to a problem. D) rule of thumb used to determine how many employees should be managed by any single manager. Answer: C Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

194) In a company in which an effective vision has been provided A) there is no need for tactical planning. B) the economic and competitive environments tend to be much more predictable. C) employees are likely to have a sense of purpose and a common set of values. D) goals and objectives are no longer needed. Answer: C Explanation: A vision communicates why an organization exists and where it is going. A clear vision gives employees a sense of purpose and a set of values. Difficulty: 2 Medium Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 195) A basic difference between goals and objectives is that goals are A) precise, while objectives are vague. B) set by tactical plans, while objectives are set by strategic plans. C) set by middle management, while objectives are set by first-line managers. D) concerned with broad, long-term accomplishments, while objectives focus on specific shortterm details. Answer: D Explanation: Goals are broad, long-term accomplishments an organization wishes to attain. Objectives are specific, short-term statements detailing how to achieve the goals. Difficulty: 2 Medium Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

196) Which of the following would be a concern addressed in a strategic plan? A) Should the firm make a long-term commitment to expand into new markets? B) Which specific jobs should be assigned to each employee? C) How much output should be produced this week in a given production facility? D) Which computer software package should the firm's human resources office use to manage the payroll? Answer: A Explanation: In strategic planning, an organization answers basic questions such as which customers to serve, what products to produce, and which geographic areas to select as markets. Difficulty: 2 Medium Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 197) Because economic and competitive environments frequently change, organizations should A) set a long-term plan and stick to it. B) develop contingency plans. C) save time and money by cutting back on planning. D) eliminate any long-term strategic plans, but devise short-term tactical plans and update them once a year. Answer: B Explanation: Contingency planning identifies alternative courses of action for use if the primary plans do not achieve the objectives of the organization. This type of planning is necessary in today's environment where economic and competitive conditions change frequently. Difficulty: 2 Medium Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

198) Which of the following techniques would a team of workers be most likely to use if they wanted to evaluate several possible solutions to a specific problem their company needs to solve? A) PERT B) Regression analysis C) PMI D) MBO Answer: C Explanation: PMI is a problem solving technique that evaluates possible solutions by identifying their pluses, minuses, and implications. Difficulty: 2 Medium Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 199) Setting contingency plans in an organization is considered very important today mainly because A) managers have historically been poor tactical planners. B) the government can charge firms with unfair business practices if they do not have such plans. C) conditions change rapidly in today's economic and competitive environments. D) most employees and staff don't understand strategic planning, so they tend to rely more on contingency plans. Answer: C Explanation: Contingency planning involves developing alternative plans that can be used if the primary plan proves unsatisfactory. This type of planning helps firms cope with changes in the economic and competitive environment that might render the primary plan ineffective. Difficulty: 2 Medium Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

200) When a firm makes use of SWOT analysis, one of its objectives is to A) identify the best employees to fill each position within the organization. B) set specific short-term performance standards for each department. C) evaluate the desirability of issuing stocks or bonds in the current financial climate. D) identify the things it does well as an organization and the things it needs to improve. Answer: D Explanation: SWOT analysis identifies an organization's strengths, weaknesses, opportunities, and threats. In the context of SWOT, strengths and weaknesses are internal to the firm. In other words, strengths refer to what the firm currently does well, and weaknesses refer to the areas where the company needs to improve. Difficulty: 2 Medium Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 201) According to the box, "Will Strategy Robots Replace Managers?", with robots having the capabilities to do a multitude of business tasks, why have machines not replaced most human jobs? A) Companies do not want to eliminate all jobs at once. B) Machines cannot do the jobs of humans, like recommend cancer cures or make banking decisions. C) There is a level of reasoning and strategy that only humans have the ability to do. D) Machines are only useful in manufacturing duties. Answer: C Explanation: Though machines are growing in their abilities to perform human strategic thinking tasks, there is still a level of reasoning that only humans can do. Difficulty: 2 Medium Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

202) Genna Raiter, the president and CEO of Car Keepers Garage, has asked several of her managers and employees to help establish a statement to outline the fundamental purposes of their company. The result of this effort is likely to be a document known as a(n) A) payoff matrix. B) mission statement. C) tactical plan. D) organization chart. Answer: B Explanation: Employees and managers often work together to design a mission statement that reflects the organization's fundamental purposes. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 203) Kobe is part of a group of managers at Earthbound Engineering examining whether the company should offer some significant new services that would increase business by appealing to a different group of potential clients. Kobe's group is involved with A) contingency planning. B) operational planning. C) strategic planning. D) tactical planning. Answer: C Explanation: Strategic planning involves setting the major goals of the organization and the policies and strategies for obtaining and using resources to achieve those goals. This type of planning looks at which customers to serve, what products or services to offer, and the geographic areas where the firm will operate. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

204) Karina was hired by the Mountain Mist Corporation to take over as the new CEO. Her initial impression is that the company is disorderly, primarily because the employees do not have a sense of purpose or a common set of values. Karina's remarks suggest that she needs to provide a(n) ________ for Mountain Mist. A) vision B) contingency plan C) objective function D) corporate logo Answer: A Explanation: A vision explains why an organization exists and where it is trying to go. The purpose of a vision is to provide a sense of purpose and a common set of values to unite the workers and give them a sense of direction. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 205) Customers at any RefurbRite Repair Center see a framed statement prominently displayed near the front door. The plaque describes the company's fundamental purposes. In part, it states that "All RefurbRite Repair Centers operate under the belief that every customer deserves good quality parts, fast and dependable service, and a fair price." The words on this plaque reflect the ________ of RefurbRite. A) strategic plan B) mission statement C) corporate agenda D) corporate charter Answer: B Explanation: A mission statement is an attempt to reflect the organization's fundamental values. It identifies the guiding principles of the organization. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

206) As a manager with D-Lighting Industries, part of Darius' job is to make specific short-term decisions about what his department must do to achieve D-Lighting's long-term success. Darius is involved in A) strategic planning. B) contingency planning. C) tactical planning. D) complimentary planning. Answer: C Explanation: Tactical planning is concerned with developing specific short-run decisions about what is to be done, who is to do it, and how it is to be done. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 207) Blair is a production line supervisor. She spends several hours each week creating specific employee work assignments and production schedules for the coming week so that the production department can meet its short-term production objectives. This suggests that a significant component of Blair's job involves A) strategic planning. B) contingency planning. C) tactical planning. D) operational planning. Answer: D Explanation: Operational planning is the process of setting work standards and schedules necessary to implement tactical objectives. Lower-level managers such as supervisors and department managers usually carry out this type of planning. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

208) Moises has dreamed of setting up a graphic design company since he was in college. He always knew he wanted to work from home and he now had several leads for prospective customers. He also knew how much money he needed to make to cover his expenses. He had several ways to approach his new business including working by himself or taking on a partner. Both ways needed more thought to determine what each would involve. In terms of the rational decision-making model, Moises is in which of the following steps? A) defining the situation B) describing and collecting needed information C) developing alternatives D) determining if the decision was a good one Answer: C Explanation: Moises has already defined the situation—that of opening a graphic design service business. He has described that he would like to locate the business in his home and who some of the customers might be. Further, he has collected information about how much money he must earn. He is just beginning to consider whether he should work alone or with a partner, so he is in the develop alternatives step. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 209) ________ is the management function that involves allocating resources, assigning tasks, and establishing procedures for accomplishing the organizational objectives. A) Controlling B) Outsourcing C) Organizing D) Coordinating Answer: C Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

210) The level of management that is directly responsible for assigning specific jobs to workers and evaluating their daily performance is called A) primary management. B) middle management. C) supervisory management. D) secondary management. Answer: C Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 211) Middle managers are responsible for A) establishing the vision for the organization. B) assigning specific jobs and evaluating the daily performance of workers. C) devising the organization's strategic plan. D) developing tactical plans and controlling. Answer: D Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 212) General and divisional managers, plant managers, and deans and department heads at colleges are classified as A) middle management. B) supervisory management. C) top management. D) nominal management. Answer: A Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

213) Supervisory managers spend most of their time on A) conceptual and financial skills. B) technical and human relations skills. C) strategic planning. D) external efforts such as meeting with stockholders and other stakeholders. Answer: B Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 214) ________ skills involve a manager's ability to picture the organization as a whole and the relationships among its various parts. A) Creative B) Technical C) Conceptual D) Autonomic Answer: C Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 215) ________ skills include the ability to perform tasks of a specific department or job, such as selling (marketing) or bookkeeping (accounting). A) Conceptual B) Departmental C) Technical D) Tactical Answer: C Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

216) Leadership, coaching, and morale building are all part of a manager's ________ skills. A) technical B) theoretical C) empirical D) human relations Answer: D Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 217) Although top managers most often possess these skills, they usually make less use of ________ skills than supervisory managers. A) technical B) conceptual C) human relations D) empirical Answer: A Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 218) The downsizing that has occurred in recent years has ________ middle managers in many organizations. A) increased the number of B) eliminated the jobs of some C) strengthened the control of D) increased the importance of Answer: B Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

219) Which of the following management positions is responsible for getting the right information to other managers to enable them to make better decisions? A) Chief Executive Officer (CEO) B) Chief Financial Officer (CFO) C) Chief Planning Officer (CPO) D) Chief Information Officer (CIO) Answer: D Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 220) The further up the managerial ladder a person moves, the ________ his or her original job skills become. A) more important B) less important C) stronger D) more tactical Answer: B Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 221) A chief operating officer (COO) would be classified as part of a firm's A) primary management. B) middle management. C) top management. D) first-line management. Answer: C Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

222) ________ involves recruiting, hiring, motivating, and retaining the best people available to accomplish the company's objectives. A) Directing B) Planning C) Leading D) Staffing Answer: D Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 223) By comparing the types of skills used by managers at different levels within an organization, which of the following is true? A) Top managers use mainly technical skills and middle and first-line managers use mostly conceptual skills. B) First-line managers use mainly technical and human relations skills, while top managers devote most of their time to activities involving human relations and conceptual skills. C) The types of skills used by managers do not change much from one level of management to another. D) The specific skills used at different levels of management do vary, but conceptual skills are the most important at all levels. Answer: B Explanation: First-line managers spend most of their time explaining procedures, assigning jobs, and evaluating the performance of employees within their own areas. These activities require human relations and technical skills. Top managers are more concerned with creating a vision, strategic planning, and overseeing the operations of the organization as a whole. This requires them to use conceptual and human relations skills. Difficulty: 2 Medium Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

224) By completing the courses needed to obtain a college major in accounting, marketing, or some other field, a student can go a long way toward acquiring the ________ skills managers need to rise through the ranks of their area of specialization. A) autocratic B) technical C) human relations D) secondary Answer: B Explanation: Technical skills involve the knowledge and ability to perform a specific task. A portion of the course work in these technical areas is intended to enable the student to perform specific activities. Difficulty: 2 Medium Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 225) Which of the following persons is most likely to be involved in strategic planning? A) chief executive officer B) electrical shop supervisor C) budget analyst D) advertising manager Answer: A Explanation: Top managers, such as the chief executive officer of a firm normally develop strategic plans. Difficulty: 2 Medium Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

226) Sylvia is responsible for hiring, motivating, and retaining the best employees for her organization. Sylvia is in charge of A) staffing. B) orienting. C) directing. D) facilitating. Answer: A Explanation: Staffing is the function of hiring, motivating, and retaining the best people available to accomplish the company's objectives. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 227) Rodrigo has worked for Three Brothers Construction for over 10 years and was recently was promoted to the position of foreman. He is directly responsible for assigning various jobs to his work crew and evaluating their performance on a daily basis. Rodrigo is now a member of A) top management. B) middle management. C) supervisory management. D) forward management. Answer: C Explanation: Supervisory (or first-line) managers are concerned with assigning workers to specific jobs and evaluating the daily performance of those workers. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

228) Dax has been promoted to a first-line manager. Dax's new position will require him to spend a lot of time A) developing strategic plans. B) evaluating the daily performance of workers. C) creating a vision for the company. D) providing information to stakeholders. Answer: B Explanation: First-line managers are responsible for assigning specific jobs to workers and evaluating the performance of employees on a daily basis. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 229) Kelley is a plant manager for O'Donnell Industries, Inc. Though she spends time performing all management functions, she is mostly tasked with tactical planning and controlling. Kelley's position would be classified as part of O'Donnell's A) top management. B) lateral management. C) supervisory management. D) middle management. Answer: D Explanation: Tactical planning and controlling are primarily the responsibility of middle managers. Examples of middle managers include plant managers, branch managers, and in colleges—deans and department heads. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

230) A long time employee of Brightside Electrical, Braden, has been promoted to foreman. In his new position, Braden will rely on A) conceptual skills more than human relations skills. B) technical skills and human relations skills more than conceptual skills. C) technical skills and conceptual skills, but he won't really need any human relations skills. D) accounting and financial skills. Answer: B Explanation: As a first-line manager, Braden will work with employees in ways that will require him to use technical and human relations skills extensively. First-line managers spend little time on activities requiring conceptual skills. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 231) Ahmed is a department head at Southwest City Hospital. He spends most of his time training and coaching employees to perform their jobs more effectively and teaching other managers to be better leaders. Ahmed's job requires him to make full use of his A) technical skills. B) conceptual skills. C) orientation skills. D) human relations skills. Answer: D Explanation: Human relations skills include the ability to train, coach, and motivate employees so that they become more productive. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

232) Duke plans on majoring in accounting because he is confident that an ability to read and interpret financial and accounting data is the way to get to the top in business. Duke seems to be concerned with developing his A) technical skills. B) verbal skills. C) qualitative skills. D) conceptual skills. Answer: A Explanation: Technical skills are the skills that provide a manager proficiency in a particular area, such as accounting, finance, or marketing. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 233) ________ involves creating a vision for others to follow, establishing corporate values and ethics, and transforming the way an organization does business so that it is more effective and efficient. A) Organizing B) Production management C) Tactical planning D) Leadership Answer: D Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

234) Leaders A) embrace change. B) are mainly concerned with tactical issues as opposed to change issues. C) tend to do the work themselves rather than delegate it to others. D) strive to maintain order and stability. Answer: A Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 235) The ________ style of leadership is characterized by making managerial decisions without consulting others. A) autocratic B) bureaucratic C) free rein D) democratic Answer: A Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 236) Managers who listen to their subordinates and allow them to participate in decision making are using the ________ style of leadership. A) autocratic B) free-rein C) participative D) bureaucratic Answer: C Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 81 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

237) A(n) ________ leader would set objectives and give employees a great deal of freedom to decide for themselves how to accomplish those objectives. A) free-rein B) autocratic C) Type A D) aristocratic Answer: A Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 238) A key to effective leadership is the ability to A) maintain order, stability, and control. B) communicate a vision and rally others around that vision. C) master the technical details of the jobs performed by subordinates. D) maintain an autocratic approach to dealing with others. Answer: B Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 239) ________ is the term used to describe giving workers the education and tools they need to assume additional decision-making powers. A) Energizing B) Provisioning C) Upgrading D) Enabling Answer: D Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 82 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

240) ________ means giving employees the authority and responsibility to respond quickly to customer requests. A) Restructuring B) Delineating C) Empowerment D) Intrapreneuring Answer: C Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 241) In traditional organizations, ________ involves giving explicit instructions to workers, telling them what to do to meet the goals and objectives of the organization. A) directing B) organizing C) budgeting D) controlling Answer: A Difficulty: 1 Easy Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

242) ________ is concerned with finding the right information and making that information accessible and understood by everyone in an organization. A) Mission management B) Data management C) Knowledge management D) Auditing Answer: C Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 243) The first step in developing a knowledge management system is to A) empower employees to make their own decisions and accept the consequences. B) obtain the necessary information system technologies. C) recognize that perfect information is readily available in all organizations. D) determine what knowledge is most important to the organization. Answer: D Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

244) One difference between managers and leaders is that A) managers are found in businesses while leaders operate in nonprofit organizations. B) managers work to achieve stability while leaders embrace change. C) managers use an autocratic approach while leaders embrace a democratic style. D) all employees can manage, but only top managers can lead. Answer: B Explanation: Business literature often notes that leaders and managers do not always share the same traits. For example, although managers typically strive for order and stability, leaders frequently embrace change. Difficulty: 2 Medium Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 245) Which of the following statements about effective leadership is the most accurate? A) Effective leaders have the same personality traits. B) The most effective leadership style depends on who is being led and in what situation. C) The democratic style of leadership will almost always improve the effectiveness of the organization. D) One trait of effective managers is that they consistently maintain the same style of leadership. Answer: B Explanation: No single style of leadership always works best. The style that is most effective depends on the situation and the people who are being led. Difficulty: 2 Medium Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

246) Autocratic leadership is likely to be effective when A) subordinates are highly trained professionals. B) the organization faces an emergency situation. C) workers enjoy expressing their opinions and having a say in what is done. D) the manager is uncertain about the best strategy to pursue. Answer: B Explanation: Autocratic leadership consists of making decisions without consulting others, issuing orders, and expecting subordinates to follow orders without question. This style of leadership may be effective, and even necessary, when an organization faces a crisis in which someone must take charge and make decisions quickly. Difficulty: 2 Medium Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 247) Which of the following statements about leadership styles is most accurate? A) A manager should choose one style and use it consistently. B) Managers have no control over the leadership style they use. C) Effective managers often use a variety of leadership styles. D) Managers should always start with an autocratic style, but can gradually switch to a more democratic approach if workers earn their trust. Answer: C Explanation: Since the most effective leadership style depends on who is being led and the situation, managers may find that they need to use different styles when they deal with different employees, or when conditions change. Difficulty: 2 Medium Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

248) Which of the following best summarizes the type of leader future organizations are likely to need? In the future, organizations will need leaders who: A) supply a vision, establish corporate values, and promote corporate ethics. B) provide the sense of stability and orderliness the organization needs to withstand the challenges posed by a changing environment. C) maintain a strong track record of focusing on the accomplishment of financial objectives. D) effectively use autocratic techniques to grow the company. Answer: A Explanation: Leaders provide vision. In the future, they will also be called upon to provide the organization with its moral compass by stressing corporate values and corporate ethics. Difficulty: 2 Medium Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 249) As firms make greater use of empowerment and teams, managers will find that they A) should use the same techniques for directing employees that were used in the past. B) will need to closely supervise the teams to make sure they remain focused on the goals of the organization. C) will need to provide the teams with detailed instructions to give them a clear sense of direction. D) must become more like coaches and counselors than bosses. Answer: D Explanation: Empowerment means giving workers the authority and responsibility to respond quickly to customer requests. For empowerment to work, employees must be given the knowledge, tools, and freedom to make decisions without waiting for approval from their manager. Thus, a manager in an organization that relies on empowerment must be more like a coach and counselor than a boss or director who tells the workers exactly what to do. Difficulty: 2 Medium Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

250) When we think of successful music entertainment groups of the past 60 years, the Beatles almost always appear in the top 5! In the early days, the entertainment group's life cycle could have ended as so many other rock groups do—here today, gone tomorrow. The four musicians were definitely creative and passionate about their craft and genre of music. As the informal leader of the group, John Lennon ________ the others to make important compositional contributions. All four members had the opportunity to create musical compositions and receive copyright credit for their contributions. A) transformed B) enabled C) empowered D) commanded Answer: C Explanation: Progressive leaders today give employees the authority and responsibility to make decisions on their own. This is the essence of empowerment. The management coaches and advises employees, rather than directing their work. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

251) Savannah, CEO of SmartServe, encourages employees to discuss management issues with the her and to work together to resolve those issues in a democratic manner. Which of the following statements would the Savannah most likely make? A) The key to SmartServe staying on top in a high-tech industry is not wasting time checking out what other firms do, but to act immediately on my directives. B) In a high-tech business, it is more important to invest in technology than to invest in people. C) The key to keeping talented employees loyal to SmartServe is to use a participative management style and treat them with respect, value their ideas, give them the resources they need, and expect great things from them. D) Spending a lot of money to buy out competitors for their technology is likely to backfire, because SmartServe is a leader in technology development. Answer: C Explanation: Savannah uses a participative management style, one that consists of managers and employees working together to make decisions. At meetings employees discuss management issues and resolve those issues together in a democratic manner, another attribute of the participative leadership style. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 252) Well-known retired basketball coach Bob Knight was known for his emotional antics at Indiana University and Texas Tech. If you talk with Bob, he believes in total dedication from his team and total compliance to his style of coaching. It's "his way or the highway." Bob typifies the ________ style of leader. A) bureaucratic B) free-rein C) remanded D) autocratic Answer: D Explanation: Autocratic leaders make decisions without consulting others. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

253) Department heads at Ironside Chemical usually make decisions after meeting with employees and seeking their ideas and suggestions. These department heads are making use of the ________ style of leadership. A) autocratic B) diplomatic C) participative D) open shop Answer: C Explanation: Participative, or democratic, managers seek out the opinions and ideas of their subordinates and allow them to participate in decision making. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 254) At PharmaPros, the highly regarded research team relies on top management to provide its strategic direction. After that, researchers work on their own to develop new medications to satisfy customer needs and company profit objectives. Middle management at PharmaPros practice ________. A) free-rein leadership B) consultative leadership C) projectory leadership D) autocratic leadership Answer: A Explanation: Free-rein leadership consists of managers setting objectives, and then giving subordinates a significant degree of freedom to do what it takes to accomplish those objectives. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

255) Recently, a senior software engineer complained that his boss was always in the command and control mode: "He doesn't trust us to make the right decision!" The boss rarely took the advice of his employees. There were occasions when productivity was hampered because he chose to do things only his way. Referring to leadership styles, this would best be described as A) free reign. B) democratic. C) alternative. D) autocratic. Answer: D Explanation: Autocratic leadership means making managerial decisions without consulting others. This style is effective in emergencies, or with new, rather unskilled employees. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 256) Last year, Game Guys, Inc., had its most successful rollout of one of its first person games in the company's history. The CEO announced sales and profits had far exceeded company projections. He attributed the success to a flexible plan, which included good design, accurate product testing, and innovative marketing and sales tactics. In order to have good recall of the procedures that were put in place for this successful introduction, he has charged a team of managers to develop a(n) ________ system, so the company can avoid "reinventing the wheel." For future introductions, he wants to be able to recall what worked and what didn't work. A) information technology B) human relations management C) enablement management D) knowledge management Answer: D Explanation: Knowledge management is a system of finding the right information, keeping the information in a readily accessible place, and making the information available to all employees. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

257) The first step in controlling consists of A) issuing orders and explaining routines. B) setting clear performance standards. C) establishing a clear chain of command. D) assigning workers to perform specific tasks. Answer: B Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 258) In order for standards to be useful in the controlling process, they must have certain characteristics. One of these characteristics is that they must be A) nonspecific. B) redundant. C) included in the mission statement. D) attainable. Answer: D Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 259) Which of the following should form the foundation of a firm's control system? A) accounting and finance B) marketing and production C) human resources and finance D) computing and production Answer: A Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

260) ________ are units within an organization that receive services from other units within the organization. A) End-users B) Internal customers C) Third-party distribution centers D) Profit centers Answer: B Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 261) ________ include dealers, who buy products to sell to others, and ultimate customers who buy products for their own personal use. A) End users B) External customers C) Internal customers D) Distribution centers Answer: B Difficulty: 1 Easy Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

262) Which of the following is a clear performance standard? A) Bring about a significant improvement in the morale of all workers. B) Decrease the number of products rejected due to manufacturing defects by 10% over the next 6 months. C) Completely eliminate all customer complaints. D) Make assistants more efficient. Answer: B Explanation: A good standard must be specific, measurable, and attainable. The terms "significant improvement" and "more efficient" are too vague and a complete elimination of all complaints in one month is unlikely to be an attainable standard. Difficulty: 2 Medium Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 263) When establishing criteria to measure the success of a customer-oriented business, managers should A) limit their attention to financial measures such as profit and return on investment since these are the only objective and quantifiable measures available. B) focus most of their attention on measures of employee satisfaction, since without good employees the firm will not be competitive. C) focus primarily on financial measures, but pay some attention to nonfinancial concerns. D) recognize that, while financial measures are important and should be considered, the purpose of the firm is to satisfy both internal and external customers. Answer: D Explanation: Financial measures of success, such as profit and return on investment, are important and should not be ignored. In fact, these measures have traditionally been the measures most frequently used to judge success. Today, however, the purpose of a customer-oriented firm is to please all of its stakeholders. Thus, nonfinancial criteria also play an important role in measuring the success of a firm. Difficulty: 2 Medium Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

264) Quiang spent two hours going over quality reports to figure out if his team is meeting quality standards he set for the current month. Quiang's efforts are part of the ________ function of management. A) planning B) organizing C) directing D) controlling Answer: D Explanation: The controlling function of management involves checking to see whether the firm is making progress toward meeting its goals and objectives, and taking corrective action if necessary. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 265) Poppy is a sales manager for Shimmer Sisters Cosmetics. She told her team she expects each of them to increase their customer interactions by at least 5% in the next month. Poppy has set a(n) A) procedural policy. B) functional objective. C) policy guide. D) performance standard. Answer: D Explanation: In order to determine whether a firm is making progress toward its goals and objectives, managers must establish specific, attainable, and measurable standards. This is what Poppy has done. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

266) Curtis created his own restaurant equipment company, supplying the greater Denver area, five years ago. Until now, he has never worried about instituting a formal control system. Now, after the Great Recession, he is facing more cost-conscious restaurant owners. He has decided that a formal control system is needed. The first step Curtis should take is A) draw up a formal organization chart. B) talk to his banker to set financial goals. C) devise a set of clear performance standards. D) design an accident report form so that he can keep accurate records of all accidents that occur. Answer: C Explanation: The first step in the controlling process is to set clear performance standards. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 267) Game Guys, Inc., has established clear standards of performance for its next virtual reality mobile game that will require the player's ability to react quickly. After a substantial testing process, the results are compared to the previously established development standards. If necessary, the engineering team will fix the bugs before customers beta test the game. These activities are part of the ________ of management. A) organizing function B) control function C) leading function D) planning function Answer: B Explanation: The control function of management measures performance relative to the planned objectives and standards. The process includes establishing clear standards, as well as comparing results against standards. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

268) Kyra is a middle manager for her firm and just finished comparing the results of a promotional campaign with the company's outcome expectations. The next step in the control process is A) monitor and record actual performance. B) set up contingency plans. C) communicate results and deviations with management and employees involved. D) establish discipline committees to decide on dismissals. Answer: C Explanation: After comparing results to standards, the next step in the control process is to communicate results and deviations to the employees involved. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 269) As a sales rep for an eyewear company, Gemma, frequently relies on the marketing department for information and materials. When using customer satisfaction to judge the success of their company, Gemma's managers should A) ignore Gemma's satisfaction, since she is an employee rather than a customer. B) take Gemma's satisfaction into account, because customers can be internal as well as external. C) consider Gemma's satisfaction, but place less emphasis on it than on the satisfaction of a stockholder, since she is an external customer. D) consider Gemma's satisfaction only if she has worked in the same job for at least two years. Answer: B Explanation: The criterion for measuring success in a customer-oriented firm is customer satisfaction. However, customers are now defined broadly to include internal customers (people within the organization that receive services from others within the organization) as well as external (dealers and end users). Gemma would be an example of an internal customer. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

270) Amazon customers often find it helpful to read reviews for products they're considering purchasing. After ultimately making the purchase, the customer can go to Amazon and post his or her opinion of the recently purchased product. This strategy not only assists other customers with their decision making, it helps Amazon assess the products it sells. Which of the following statements attests to the value of this service? A) This action provides for complete transparency of company financial performance. B) This action supports a key criterion of the control function: the measurement of customer satisfaction. C) This action provides for better tactical planning, particularly the budgeting process. D) This action supports the premise of recruiting, hiring, and motivating the employees who believe in social media and other ways to reach customers. Answer: B Explanation: Companies measure their performance in a number of areas, including their financial performance, their areas of operation, their ability to perform learning for their employees, and customer satisfaction. The use of social media and interactive online communication provides the company with current customer perception of products and services. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

271) Identify and define the four key functions of management. Answer: The four functions of management are planning, organizing, leading, and controlling. Planning includes anticipating future trends and determining the best strategies and tactics to achieve organizational goals and objectives. Organizing includes designing the structure of the organization and creating conditions and systems in which everyone and everything work together to achieve the organization's goals and objectives. Leading is the function concerned with creating a vision for the organization and communicating, guiding, training, coaching, and motivating others to achieve the goals and objectives of the organization. Leading today often involves empowering workers and giving them the freedom to become self-directed and self-motivated. Controlling refers to establishing clear standards to determine whether an organization is progressing toward its goals and objectives, rewarding people for doing a good job, and taking corrective action if they are not. Basically, it means measuring whether what actually occurs meets the organization's goals. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-02 Describe the four functions of management. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

272) Explain the differences between strategic, tactical, operational, and contingency planning. Answer: Strategic planning is long-range planning that determines major goals of the organization. It provides the foundation for the policies, procedures, and strategies for obtaining and using resources to achieve those goals. Strategic planning deals with such fundamental questions as which customers to serve, what products and services to sell, and the geographic areas in which the firm will compete. Students may note that top managers are very involved in strategic planning. Tactical planning is short-range planning that involves the process of developing detailed, shortterm statements about what is to be done, who is to do it, and how it is to be done. Tactical planning involves setting annual budgets and deciding on other details which contribute to reaching strategic objectives. Students may point out that lower-level managers are more heavily involved in tactical planning. Operational planning involves setting the work standards and schedules necessary to implement the company's tactical objectives. Whereas strategic planning looks at the organization as a whole, operational planning focuses on specific supervisors, department managers, and individual employees. Contingency planning is the preparation of alternative courses of action that may be used if the primary plans do not achieve the objectives of the organization. Due to rapid changes that can occur in economic and competitive environments, it is wise to have alternative plans ready to be implemented. Crisis planning is a part of contingency planning that involves reacting to sudden changes in the environment. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

273) What is the purpose of the SWOT analysis? What types of information does this analysis provide? Answer: SWOT analysis is an analysis of an organization's strengths, weaknesses, opportunities, and threats. It is used to help managers answer several fundamental questions related to the planning function. These questions include: What is the current situation facing the organization? What is the state of the business environment? What opportunities currently exist for meeting people's needs? What products and customers are most profitable? Why do people buy (or not buy) our products? Who are our major competitors, and what threats do they pose for our business? SWOT begins with an analysis of the general business environment. It then identifies the strengths and weaknesses of the firm. This part of SWOT involves internal analysis, which can normally be done fairly easily. Then the analysis attempts to identify opportunities and competitive and environmental threats. Since these are based on factors that are external to the firm, they are more difficult to assess. Figure 7.2 lists several issues that SWOT analysis may examine. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

274) What is empowerment? How has the movement toward empowerment changed the role of the manager? Answer: Empowerment means giving employees the authority and responsibility to respond quickly to consumer requests. In the past, managers often were bosses who issued orders and expected workers to carry them out. With the trend toward empowered workers, the manager's role is changing. The role of managers of empowered workers will be less that of boss and more that of coach, assistant, counselor and team member. They will work to enable workers to perform their tasks by giving them the education, training, and resources they need to assume their self-directed responsibilities. Difficulty: 3 Hard Topic: Empowering Workers Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

275) Describe the three basic types of management skills, and relate these skills to the tasks performed by different levels of management. Answer: The three basic types of management skills are technical skills, human relations skills, and conceptual skills. Technical skills are the skills needed to perform tasks in a specific discipline (such as selling a product or developing software) or department (such as marketing or information systems). Human relations skills involve communication and motivation; they enable managers to work through and with people. Such skills also include those associated with leadership, coaching, morale building, delegating, training and development, and help and supportiveness. Conceptual skills refer to the ability to picture the organization as a whole and the relationships among its various parts. Conceptual skills are needed in planning, organizing, controlling, systems development, problem analysis, decision making, coordinating, and delegating. First-line managers, who often must explain procedures and specific techniques to employees, and evaluate the performance of those employees, make extensive use of technical skills. Firstline managers seldom perform tasks requiring conceptual skills. At higher levels of management, managers tend to rely more on conceptual skills to carry out their controlling and planning functions but seldom need technical skills. Managers at all levels make use of human relations skills. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

276) Describe three different leadership styles and give an example of a situation in which each style could be most used effectively. Answer: Students should identify the following leadership styles: Autocratic leadership involves making managerial decisions without consulting others. Such a style is effective in emergencies and when absolute followership is needed—for example, when fighting fires. Autocratic leadership is also effective sometimes with new, relatively unskilled workers who need clear direction and guidance. Democratic (or participative) leadership encourages managers and employees to work together to make decisions. Research has found that employee participation in decisions may not always increase effectiveness, but it usually increases job satisfaction. Many progressive organizations are highly successful at using a democratic style of leadership that values traits such as flexibility, good listening skills, and empathy. Companies such as Google, Cisco, and Apple have used this style successfully. Free-rein leadership involves setting objectives and giving employees a significant amount of freedom to do whatever it takes to accomplish those objectives. Doctors often have this flexibility in hospitals, as do other professionals such as engineers and lawyers, who often work on special projects or cases. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

Mini-Case Lauzy Fare left his position as senior vice president at Blue Skies Electronics a few weeks ago to become the new CEO of Idle Time Gaming. Before joining the new company, Lauzy spent time studying Idle Time's competitive position and talking to employees in all divisions and at all levels of the organization. Based on his findings, Lauzy believes that Idle Time has potential, but also faces some serious challenges if it expects to grow. Lauzy found that when confronted by him, most of Idle Time's professional employees seemed almost afraid to express their opinions. He learned that Otto Craddick, the previous CEO and founder of the company, viewed himself as the boss, and, as such, micromanaged every aspect of the business. This discouraged employees from using their own initiative and ideas to solve problems. For example, Otto required sales and service representatives to get his approval before they made any major commitments to customers. Otto's policy prevented the organization from responding quickly to customer requests, so sales were lost. Unlike his predecessor, Lauzy believes it is important for sales and service personnel to be able to deal with many types of customer requests without needing approval from top management. He is confident that giving employees the authority and flexibility to deal with customers, and providing them with the training and resources to help them do so, will improve morale within the company, create customer satisfaction, and grow revenues. Lauzy also wants to make workers throughout the organization feel more appreciated. He plans to continue meeting with them on a regular basis to seek their advice. He hopes his work colleagues will eventually respond to his leadership style. He has already encouraged middle managers to get employees more involved in decision making, and has suggested some problemsolving techniques the managers could try. Although he thought that changing the rigidity of the company culture would be his first challenge at the new firm, Lauzy quickly realized that there were no standards in place to measure the progress of changes in internal morale, customer satisfaction, and profitability. He has asked managers in those departments to spend more time setting performance standards and then monitoring actual performance. Lauzy is confident that in a relatively short period of time internal changes will lead to good company performance. As a member of top management, Lauzy performs a variety of important tasks. 277) Otto, the previous CEO at Idle Time Gaming, relied on a(n) ________ style of management. A) autocratic B) iconoclastic C) democratic D) free-rein

Answer: A Explanation: Otto made decisions without consulting others, and expected subordinates to follow orders without question. These are characteristics of the autocratic style of management. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 278) Lauzy seems to prefer a(n) ________ style of leadership. A) autocratic B) participative C) PMI D) altruistic Answer: B Explanation: Lauzy likes to listen to the opinions and ideas of subordinates and get them involved in decision making. This indicates a participative, or democratic, style of leadership. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-05 Explain the differences between leaders and managers, and describe the various leadership styles. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

279) Lauzy favors problem-solving techniques that allow teams of workers to freely identify and discuss possible solutions to a problem without having their ideas censored. Which of the following is a problem-solving technique that Lauzy is likely to suggest to his managers? A) SWOT analysis B) PERT analysis C) brainstorming D) controlling Answer: C Explanation: Brainstorming is a problem-solving technique that encourages workers to come up with as many potential solutions to the problem as possible in a short time period without censoring the ideas. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-03 Relate the planning process and decision making to the accomplishment of company goals. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 280) Lauzy's decision to establish well-defined standards for monitoring performance means that he expects management to seriously engage in the ________ function of management. A) research and development B) verbalizing C) organizing D) controlling Answer: D Explanation: Controlling is the process of measuring performance relative to objectives and standards and taking corrective action when necessary. Difficulty: 3 Hard Topic: Functions of Management Learning Objective: 07-06 Summarize the five steps of the control function of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

281) Which of the following statements best describes the relative importance of the various types of skills Lauzy will use to perform these tasks? The tasks Lauzy performs will require: A) only technical skills. B) mainly conceptual skills and human relations skills. C) only human relations skills. D) mainly technical skills and human relations skills. Answer: B Explanation: As a top manager, Lauzy may have good technical skills, but will more often use conceptual and human relations skills in day-to-day activities. The strategic planning, leadership, and other activities required of a CEO, however, will require him to use conceptual and human relations skills extensively. Difficulty: 3 Hard Topic: Types of Managers and Leadership Styles Learning Objective: 07-04 Describe the organizing function of management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

Understanding Business, 12e (Nickels) Chapter 08 Structuring Organizations for Today's Challenges 1) Organizing the structure of the company means deciding what jobs need to be done and who is responsible for doing them. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) In a capitalist economy, organizations seldom reorganize due to changing markets. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) One key to organizational success is to go back to basic principles and build the business on a sound foundation. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 4) Small business organizations lack the size required to reap the benefits of labor specialization. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

5) The purpose of a division of labor and specialization is to improve an employee's job performance. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) Managing a growing business often requires managers to create departments to accomplish various tasks. Answer: TRUE Difficulty: 1 Easy Topic: Building an Organization from the Bottom Up Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 7) The process of creating individual departments to do specialized tasks is called departmentalization. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) Division of labor refers to deciding how many jobs must be accomplished and then dividing them up amongst the labor force. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

9) The success of the firm often depends on assigning the right tasks to the right person. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10) The process of setting up individual departments to do specialized tasks is called job specialization. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) Correctly structuring a business organization allows managers to avoid delegating responsibility and authority to employees. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) Division of labor is difficult to achieve in small businesses. Answer: FALSE Explanation: Division of labor is a basic organizational principle in all organizations. All businesses (both large and small) should contemplate the division of labor in their organizations. The textbook gives an example of three friends starting a lawn care business. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

13) Departments are functional units within the business such as sales, accounting, finance, and marketing. Answer: TRUE Explanation: The basic principles of organization do not differ significantly from firm to firm. As firms grow, they usually develop a system with division of labor and specialization and then proceed to departmentalize, to create departments that produce specialized tasks for the business. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) As indicated in the Making Ethical Decisions box, "Would You Sacrifice Safety for Profit?" organizational decisions that affect profits in a negative way should be avoided at all cost. Answer: FALSE Explanation: As indicated in the box, how your organization performs the job is very important. Setting the tone of and maintaining an organization's culture is as important as setting up an organization's structure. Adhering to safety precautions when doing the job demonstrates management's commitment to their employees. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 15) Corner Booksellers needs to reorganize its floor space. Management decided to reduce seating space in its stores in order to create room for new shelves to display the growing interest in books on clean eating. This company's effort is an example of how a firm may reduce its emphasis in one product line in order to serve customer preferences and trends. Answer: TRUE Explanation: If a firm wants to remain competitive, it may reevaluate which product lines are more profitable than others and organize its floor space and marketing emphasis to capture consumer attention. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

16) To better organize his landscaping business, Scott started to divide each job into several parts. One is excavation and removal of old landscaping, the next is design, followed by purchasing, and finally installation of new plants. If he assigns a different employee to each part, this action would be an example of departmentalization. Answer: FALSE Explanation: Departmentalization is the creation of functional units of a business. The jobs described in this question would all fall under the production department. Other departments in Scott's business may include marketing, sales, and accounting. By asking different employees to perform different tasks relating to a particular job, Scott is creating division of labor within his company, and/or specialization. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 17) Serena has long dreamed of opening her own restaurant. She, of course, knows that she will need to organize her business. Organizing begins with determining the work to be done. Answer: TRUE Explanation: Organizing, also known as adding structure to the business, begins with determining what work needs to be done and then dividing up tasks among the employees. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 18) When Eric Schmidt joined Google he tackled the organization function head-on. In speaking at a large conference with its founders, Sergey Brin and Larry Page, he commented that Google was running pretty well but "it just needed a little structure." Schmidt was referring to basic organization principles such as division of labor, specialization, and getting the departments running smoothly. Answer: TRUE Explanation: Basic organization principles include division of labor, specialization of tasks, and departmentalization. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 5 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

19) The driving force behind the change in business organizations is the change in consumer expectations. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) Henri Fayol and Max Weber are best known for their contributions to accounting theory. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 21) Fayol's principle of the division of labor says that functions should be divided into areas of specialization such as production, marketing, and finance. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 22) One of Fayol's principles suggests that managers should have the right to give orders and expect others to follow. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

23) Fayol's principle of esprit de corps says that employees should be divided into small groups that can be directed efficiently by a single manager. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 24) Fayol's principles suggest that the goals of the firm are less important than the goals of individual workers. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 25) According to Fayol's principle of authority, if you have authority you also have responsibility. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26) Fayol believed that the amount of decision-making power vested in top management should be the same in all situations. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

27) Fayol believed that managers should treat employees and peers with respect and justice. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 28) Clear communication among workers and keeping order in materials and people are included in Fayol's principles. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) Max Weber's principles of organization were similar to those of Henri Fayol. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30) Weber believed that large organizations required everyone to follow the established rules and guidelines precisely. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

31) Weber was critical of bureaucrats because he felt they undermined the efficiency of the organization. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32) Weber had a great deal of faith in managers. He was confident that a firm would do well if employees simply did as they were told. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 33) Weber promoted the idea of the pyramid-shaped organization structure for large businesses. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 34) Max Weber's organizational theories require an educated workforce to operate efficiently. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

35) Weber was a strong proponent of bureaucracy. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) Some business organizations still follow the 1940s organizational theory of Max Weber. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 37) Weber believed that employees should be empowered to make their own decisions. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) Job descriptions are an important part of Max Weber's organizational theory. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

39) Max Weber believed that promotion should be based solely on seniority. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 40) The design of a bureaucratic organization assumes a well-educated workforce. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 41) An organizational hierarchy establishes one person at the top of an organization. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 42) A chain of command is a line of authority that moves from the lowest level of the hierarchy to the top. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

43) A hierarchy requires many top managers, but only a few middle managers. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44) According to Weber, a bureaucrat is a middle manager whose job is to implement top management's orders. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 45) A bureaucracy empowers employees to quickly respond to customers' wants and desires. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 46) A bureaucracy is an organization with many layers of managers who set rules and regulations and oversee all decisions. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

47) Bureaucratic organizations establish rules and regulations that everyone is expected to follow. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 48) Bureaucratic organizations are not very responsive to customers. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 49) A bureaucracy is designed to be customer focused. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 50) Bureaucratic organizations are structured to empower employees and please customers. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

51) A bureaucratic style of organization is slow when responding to change. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 52) Empowerment works only when employees are given the proper training and resources to respond. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 53) The basic idea behind the organization design of Fayol and Weber was that management wanted to control workers. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 54) An organization chart shows who is accountable for the completion of specific work and who reports to whom. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

55) Looking at a traditional organization chart, you will view who reports to whom; you will have a sense of each person's authority and responsibility, and the type of work that they perform for the organization. Answer: TRUE Explanation: An organization chart shows you who reports to whom, and who is accountable for the completion of what jobs. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 56) As organizations grew, the use of Fayol's principles led to rigid organizations that didn't always respond quickly to consumer requests. Answer: TRUE Explanation: Organizations were designed according to Fayol's principles so that no person had more than one boss. These principles tended to be written down as rules, policies, and regulations as organizations grew larger. The process of rule making often led to rather rigid organizations that didn't always respond quickly to consumer requests. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 57) In today's fast-paced business environment, Weber's bureaucratic ideas work well. These principles permit business to respond quickly to customer changes. Answer: FALSE Explanation: Max Weber's ideas worked well with a less educated workforce that did not make decisions. The bureaucratic model did not allow for immediate response to changing market conditions and changing customer needs. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

58) When we experience economies of scale, this means that as production levels rise (we make more of something), the cost of supplies and the cost of labor that go into the production go down. Answer: TRUE Explanation: Economies of scale implies that the costs of production go down as the level of production rises. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 59) The purpose of Weber's and Fayol's principles was for the benefit of management, as opposed to pleasing customers. Answer: TRUE Explanation: Fayol's and Weber's ideas made management's life easier. Their organization principles facilitated management's needs, but did little for employees or customers. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 60) Weber put great trust in the creativity, skills, and pride of employees and believed that managers should act more as coaches than as bosses. Answer: FALSE Explanation: Weber put great trust in managers and believed that workers should simply do as they were told. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

61) Most businesses adopt a bureaucratic organization in order to speed up their decision-making process. Answer: FALSE Explanation: In a bureaucratic organization there are typically many layers of management with rigid rules and regulations. A strict chain of command is followed, which can slow down the decision-making process. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 62) Troy is a manager at a manufacturing company that creates commercial lighting fixtures. He thinks it is very important and less confusing if each worker has only one boss. Troy's view is consistent with Fayol's unity of command principle. Answer: TRUE Explanation: The unity of command principle says that each worker should report to one, and only one, boss. Difficulty: 3 Hard Topic: The Development of Organization Design Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 63) Angelo, a middle manager at a nonprofit, spends much of his time developing ways to implement the ideas from top management. Max Weber would have considered Angelo a bureaucrat. Answer: TRUE Explanation: Max Weber used the term bureaucrat to describe middle managers whose main function was to implement top management's orders. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

64) Daniela thinks all workers should receive the same pay regardless of their position within a company. Daniela views on wages illustrate Fayol's principle of equity. Answer: FALSE Explanation: Fayol's principle of equity says that managers should treat employees with respect and justice. It does not, however, suggest that all workers should be paid the same wage. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 65) Ainsley is a middle manager at a large, multinational corporation. She prefers to involve her subordinates in decision making and gives her workers a reasonable amount of flexibility in how they do their jobs. Ainsley's management approach illustrates the principles first popularized by Max Weber. Answer: FALSE Explanation: Weber believed that the firm would do well if workers simply did as they were told. He also believed that large organizations could only function efficiently if rules and guidelines were established, and everyone followed these rules precisely. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 66) Cruz works in the marketing department of a large firm. This is an example of Fayol's division of labor concept. Answer: TRUE Explanation: Henri Fayol's division of labor suggests that efficiency can be improved if employees are assigned into an area of specialization, such as production, marketing, and finance. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

67) As a new employee in a bureaucratic organization, Madison can expect a great deal of independence and authority. Answer: FALSE Explanation: In a bureaucratic organization, everyone is expected to follow specific rules. One of the problems with this type of organization is that employees have little flexibility to respond to customer wants and needs. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 68) Corleone Industries' chain of command moves from the top of the hierarchy down to lowerlevel managers. The company is organized by department with specific rules and regulations that everyone is expected to follow. These characteristics suggest that Corleone Industries is an example of a bureaucratic organization. Answer: TRUE Explanation: Bureaucratic organizations are characterized by top-down authority, division of labor, and the presence of many rules and regulations. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 69) A manager needs to be called to sign off on every return that a cashier performs at Sun and Fun Sportswear. The CEO continues this policy because he wants every manager to "look those customers right in the eye" and "stake their job on taking those items back." Clearly, Sun and Fun empowers its employees to make decisions at their jobs. Answer: FALSE Explanation: Bureaucratic organizations are characterized by top-down authority, division of labor, and the presence of many rules and regulations. Empowerment is often missing from an organization where decisions are made top-down. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

70) Dan was a team supervisor in a very large organization when the refrigerator in their lunchroom stopped functioning. He started the paperwork on the day it died, then the refrigerator request went out for bid. After that, two middle managers needed to approve acceptance of the bid and document their decision, and the purchasing director had final approval. The refrigerator arrived six months later. Max Weber would have approved of the decision process and its documentation at Dan's company to back up such a refrigerator purchase. Answer: TRUE Explanation: Max Weber is known as the originator of the concept of bureaucracy, where decisions are followed up with lots of paperwork and documentation. There are several layers of management, and decisions must be approved by several people, creating a significant lag time from the first recognition of a problem until the problem is finally solved. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 71) The degree to which an organization allows lower-level managers to make decisions reflects the degree of decentralization. Answer: TRUE Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 72) An advantage of decentralized authority is that those individuals closest to the customers and more familiar with local conditions make decisions. Answer: TRUE Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

73) Centralized authority provides for the delegation of authority to employees who are then better able to respond to customers' needs. Answer: FALSE Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 74) As a result of rapidly changing markets and global differences in consumer tastes, more firms are considering centralized authority. Answer: FALSE Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 75) A weakened corporate image is one of the disadvantages of a decentralized business organization. Answer: TRUE Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 76) In firms with centralized authority, each business unit is treated as if it is a completely separate and independent organization. Answer: FALSE Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

77) Span of control refers to the number of different markets a business can serve efficiently. Answer: FALSE Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 78) The optimum number of subordinates a manager should supervise is referred to as the span of control. Answer: TRUE Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 79) In today's business environment, the trend is to decrease the span of control. Answer: FALSE Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 80) The more standardized the work, the wider the span of control. Answer: TRUE Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

81) Managers near the top of an organization have the broadest span of control. Answer: FALSE Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 82) The more complex the job, the narrower the span of control. Answer: TRUE Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 83) When employees are self-managed, a company can implement a wider span of control. Answer: TRUE Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 84) Improvements in information technology have permitted companies to increase their span of control. Answer: TRUE Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

85) A tall organization structure consists of multiple levels of management. Answer: TRUE Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 86) A flat organizational structure is designed to be more responsive to the needs of management. Answer: FALSE Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 87) Flat organizations have fewer managers. Answer: TRUE Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 88) An advantage of a tall organization is that it ensures fast and efficient communications throughout the organization. Answer: FALSE Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

89) A recent business trend is the elimination of layers of management, creating flatter organizations and subsequently, a wider span of control. Answer: TRUE Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 90) Departmentalization is the dividing of organizational functions into separate units. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 91) The traditional way to departmentalize an organization is by geographical area served. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 92) Departmentalization by function allows employees opportunity to further develop their skills. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

93) Departmentalization by function typically increases the cost of doing business. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 94) Departmentalization by function groups employees based on similar skills, expertise, or resource use. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 95) An advantage of departmentalization is groupthink. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 96) Organizations that utilize functional departmentalization benefit from improved communication between departments. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

97) Departmentalization creates an environment in which people are trained in a variety of managerial responsibilities. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 98) Economies of scale can be achieved through departmentalization. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 99) Some firms use a combination of departmentalization techniques. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 100) The decision on how to departmentalize should depend on the customer and the product or service the firm is offering. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

101) Departmentalizing by customer group has proven ineffective. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 102) If there are several steps in getting the product to its final state, the company may choose to departmentalize by process. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 103) Some companies have created hybrid versions of departmentalization, where they combine two or more traditional ways of departmentalizing. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

104) When management structures the organization, it clarifies who gets to make decisions, how many people report to one manager, and how many different departments the company needs in order to operate effectively. Answer: TRUE Explanation: Structuring the organization involves deciding on a centralization versus decentralization decision-making policy; it involves decisions with regard to span of control, meaning how many employees will report to one manager; and it involves how to departmentalize. Difficulty: 2 Medium Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 105) When management structures the organization, it makes decisions about which products and services it will offer and how it is going to finance the company. Answer: FALSE Explanation: Structuring the organization involves deciding on a centralization versus decentralization decision-making policy; it involves decisions with regard to span of control, meaning how many employees will report to one manager; and it involves how to departmentalize. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 106) Because top managers supervise the firm's most talented workers, they generally have a broader span of control than middle or first-line managers. Answer: FALSE Explanation: At higher levels of management, the work becomes less standardized and there is a greater need for face-to-face communication. These factors tend to result in a narrow span of control for top managers. Difficulty: 2 Medium Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

107) As the span of control widens, there is usually a reduction of middle management and an emphasis on empowerment. Answer: TRUE Explanation: A wider span of control lends itself to empowering lower-level employees to make customer decisions. Difficulty: 2 Medium Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 108) A flat organization is less likely to respond quickly to customer needs. Answer: FALSE Explanation: Flat organizations have wider spans of control. A wider span of control lends itself to empowering lower-level employees to respond more quickly to customer needs, without the need to get permission from managers. Difficulty: 2 Medium Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 109) To avoid losing that small-company-feel, fast growing companies try to maintain a flat organization structure. Answer: TRUE Explanation: Large companies use flat structures to try to match the friendliness of small companies. Difficulty: 2 Medium Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

110) Although a firm may experience better cost controls through departmentalization, it may not increase its responsiveness to customer needs. Answer: TRUE Explanation: An advantage of departmentalization is economies of scale. A disadvantage is less responsiveness to customers. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 111) Businesses seldom create separate departments to serve customers with different needs. Answer: FALSE Explanation: Some organizations departmentalize by customer group. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 112) Yolklore Breakfast Cafes is a nationwide chain with locations all around the United States. Top management at Yolklore believes that customers in different regions have different tastes and that its cafes may face more intense competition in some regions than in others. Therefore, Yolklore's top management gives local managers the freedom to offer local flavors in addition to its traditional entrees, and the ability to decide on a reasonable pricing strategy for its meals. Yolklore typifies a decentralized organization. Answer: TRUE Explanation: A decentralized organization gives decision-making authority to managers at lower levels of the hierarchy. Difficulty: 3 Hard Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

113) Management at Leaves of Green, a nationwide vegetarian restaurant chain, believes that its customers value a predictable and consistent level of service and quality. When customers stop at one of its restaurants anywhere in the U.S., they should know what to expect in terms of menu, price and quality. In order to maintain this consistency, Leaves of Green should adopt a decentralized organization. Answer: FALSE Explanation: By giving individual managers and employees more flexibility, a decentralized organization would result in less standardization and uniformity. Difficulty: 3 Hard Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 114) After a report identified low employee morale, managers for Night and Day Inn, Inc. were concerned. Employee responses showed frustration with their inability to deal directly with customers' concerns and complaints. Employees feel that if they were empowered with the authority to make decisions, customer satisfaction would dramatically increase. This illustrates one of the disadvantages of decentralized authority. Answer: FALSE Explanation: This organization is an example of centralized authority with decision-making authority maintained at the top level of management at the company's headquarters. This usually results in less responsiveness to customers, the cause of the poor employee morale. Difficulty: 3 Hard Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

115) In the Rock Solid manufacturing plant of the Stone Works Granite Company, a foreman closely supervises her workers. She reports to the shift supervisor who reports to the head of the production department, who then reports to the assistant plant manager, who reports to the plant manager. The plant manager, in turn, reports to a district manager, who then reports to a product group manager, who reports to an assistant vice president of operations, who keeps in close touch with an executive vice president. The layers of management indicate that Stone Works Granite Company is a tall organization. Answer: TRUE Explanation: A tall organization is characterized by many layers of management. Difficulty: 3 Hard Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 116) Sage is an experienced manager with excellent communications skills. The workers in her team are highly skilled and capable of doing their work with very little direct supervision. Sage's span of control is likely to be quite broad. Answer: TRUE Explanation: The less direct supervision required by workers, the broader the span of control. Difficulty: 3 Hard Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 117) The Cairo Company is organized into departments such as finance, production, marketing, data processing, and accounting. Cairo has chosen to departmentalize by function. Answer: TRUE Explanation: Departmentalization by function means to group workers into departments based on similar skills, expertise, and resource use. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

118) Top management at Upper Limits, Inc. looks to encourage communication between different departments to stop employees from becoming narrow specialists. The best way to reach these goals is to departmentalize Upper Limit's organization by function. Answer: FALSE Explanation: Two disadvantages of functional departmentalization are that it tends to reduce communication among departments, and employees often end up becoming narrow specialists. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 119) Greener Grass, a business specializing outdoor sprinkler systems, serves several commercial customers, as well as residential customers. As the business expands, Greener Grass's management may want to consider departmentalizing by customer group and then by process. Answer: TRUE Explanation: Companies that serve customers with varying needs may be able to respond quicker if their employees specialize in one customer group. Beyond that, a company like the one in this example that goes through several steps in serving each customer may specialize by process. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

120) Years ago, Johnny created a successful sportswear company that continues to provide uniforms for clients in the Midwest. As his business started to grow, Johnny added functional departments including a marketing department and an accounting department. But now, he sees that employees who specialized in these areas no longer share knowledge with each other in the same way they did when the business was smaller. As one of Johnny's consultants, you explain that as the company grows taller, it cannot avoid this pitfall, and he should focus on continued functional departmentalization, especially if he supports innovation and learning. Answer: FALSE Explanation: A disadvantage of functional departmentalization is a lack of communication between and among departments. Employees may identify with their own department's goals, as opposed to the goals of the company. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 121) Genevieve works in the finance department at the headquarters of a large home improvement retailer. Her main responsibility is to keep an eye on department expenditures and figure out how to cut costs whenever possible. Tyson, the marketing director for the same company, shares information with Genevieve only when he absolutely has to. He finds her inflexible, and not understanding of what it takes to roll out a new product line. Genevieve and Tyson typify a disadvantage of departmentalization. Answer: TRUE Explanation: A disadvantage of departmentalization is that department members begin to think like each other in their own department and do not understand the points of view of members of other departments. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

122) Traditional organizational models such as a line model or a line-and-staff model provide the flexibility demanded in a changing business environment. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 123) In a line organization, there are many specialists who serve as advisors and assistants to the managers who make decisions. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 124) Small businesses often use a line organization model. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 125) Line organizations follow Fayol's traditional management rules. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

126) Line managers issue orders, enforce discipline, and adjust the organization as conditions change. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 127) In large businesses, a line organization provides firms the ability to respond quickly to a changing environment. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 128) Line organizations clearly define the lines of authority and responsibility. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 129) Line organizations often experience the problem of employees reporting to more than one boss. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

130) A line organization in a large business often suffers from excessively slow lines of communication. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 131) Staff personnel perform functions such as production and sales that contribute directly to the primary goals of the organization. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 132) In a line-and-staff organization, staff positions are temporary jobs to train new line managers. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 133) While staff personnel have the authority to make policy decisions, line personnel have the authority to advise and make suggestions. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

134) An advantage of a line-and-staff organization is that it provides people that advise and assist line managers as they perform their jobs. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 135) The matrix organization model brings together experts from different functional units of the firm to work on specific projects. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 136) The team experts in a matrix organization remain part of the traditional line-and-staff structure. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 137) A matrix organization produces an environment that discourages cooperation and teamwork. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

138) Team participants in a matrix organization model may report to two managers at one time. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 139) A disadvantage of the matrix organization is the temporary nature of the teams. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 140) Matrix organizations give managers flexibility in assigning people to projects. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 141) Matrix organization structures provide for more efficient use of organizational resources. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

142) A recent trend in organization models is the development of cross-functional, self-managed teams of employees who work together on a long-term basis. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 143) Cross-functional self-managed teams are groups of employees empowered to work with suppliers and customers to develop new products and give great service. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 144) Cross-functional teams serve as advisory committees offering their expertise to line decision makers. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 145) Cross-functional teams defy the trend toward customer-driven organizations. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

146) Cross-functional teams consist of employees from different departments who work together on a long-term basis. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 147) Cross-functional teams avoid involving groups outside of the firm to ensure their plans are not leaked to their competitors. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 148) Cross-functional teams work best when the voice of the customer is brought into organizations. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 149) Cross-functional teams work well when leadership of the team is shared. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

150) Including customers and suppliers on cross-functional teams violates the interests of stockholders. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 151) By structuring the company with cross-functional teams, there is a greater chance that a business is more responsive to social trends affecting customer preferences. Answer: TRUE Explanation: By going beyond company borders and including others on a cross-functional self-managed team, a firm can learn first-hand from suppliers and customers about market trends that affect its business. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 152) A matrix team for an aerospace company may consist of a project manager, a finance expert, a marketing specialist, a member of production, and two design engineers. Answer: TRUE Explanation: Matrix teams consist of individual experts from various functional units of a company joining together to solve a problem or work on a project. These are temporary teams that disband when the assignment is completed. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

153) It is strategically not sensible for a firm to consider asking suppliers and customers to join a cross-functional self-managed team that is testing iterations of future products. Answer: FALSE Explanation: By going beyond company borders and including others on a cross-functional self-managed team, a firm can learn first-hand from suppliers and customers about market trends that affect its business. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 154) One disadvantage of the matrix style of organization is that it is more difficult to keep development projects on schedule. The model slows down the time from design to production, and then to market. Answer: FALSE Explanation: Matrix style organization was purposely designed to expedite projects from conception to market. The model eliminates the communication problems that line and line-andstaff models experience when trying to develop a product and get it to market. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 155) Due to the competitive nature among companies competing for the same customers, crossfunctional teams never consist of individuals from more than one firm. Answer: FALSE Explanation: Cross-functional teams often include employees who work for firms that have teamed up together to produce a product or service. Sometimes teams are interfirm, meaning from two or more companies. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

156) Cross-functional teams that go beyond company boundaries share production information but seldom market information. Answer: FALSE Explanation: Cross-functional teams are transparent. They share as much information as necessary to succeed in building a product that is needed by the marketplace. These teams go outside of the boundaries of one company. Sometimes the team will share information with government employees and/or employees from around the globe. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 157) Top Dog Company is a medium-sized organization with well-defined lines of authority and every employee reports to only one boss. However, the managers at Top Dog complain about not having expert support staff to offer advice. Because of the inefficient long lines of communication, opportunities are slipping through the cracks. These characteristics suggest that Top Dog employs a matrix organization. Answer: FALSE Explanation: A line organization is characterized by well-defined lines of authority and responsibility and provides one supervisor for each person. Line organizations also have few experts and assistants to help line managers, and are frequently plagued by long lines of communication. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 158) Erin is an attorney working for Food Innovations, Incorporated. She provides legal advice and assistance to Food Innovations managers. Erin's job would be classified as a staff position. Answer: TRUE Explanation: Staff personnel provide advice and assistance to line managers. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

159) McNulty Manufacturing builds small consumer kitchen products like mixers and toaster ovens. The industry is relatively stable, having few new advances in product development. McNulty should use a line or line-and-staff organizational structure to ensure efficient operations. Answer: TRUE Explanation: Both line and line-and-staff organization structures work well in organizations with a relatively unchanging environment and slow product development, such as firms selling consumer products like toasters and mixers. In such firms, clear lines of authority and relatively fixed organization structures are assets that ensure efficient operations. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 160) Jacob was temporarily assigned to work with a team of specialists from various departments to develop a new product, though his usual home is in the engineering department. After the project is completed, Joel will return to his regular position in the engineering department. This arrangement illustrates the use of a cross-functional team. Answer: FALSE Explanation: In a cross-functional team, the members work together on a long-term basis. They may work together on more than one project, and over an extended period of time. The fact that Jacob's work on the team was temporary and he returned to his old position when the project was completed suggests that the firm is using a matrix organization. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 161) Paper Trail Publishing Company is deliberating the use of cross-functional teams. In order to be most effective, Paper Trail should include customers as members of the teams. Answer: TRUE Explanation: Cross-functional teams work best when the ideas of customers are brought into the organization. The best way to do this is to actually include customers on the teams. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 46 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

162) Brady developed two VR games. However, he didn't do it all on his own. He hired two programmers, a marketing specialist, and created a small company. He considers himself a pioneer and wants to position his company the same way. He solicits your advice as to how he should structure his organization as he moves forward, and you suggest that he hire a few potential customers to join his team of employees as beta testers. And, you suggest, maybe he should solicit globally. The structure you have described would simulate a line-and-staff organization. Answer: FALSE Explanation: Including potential customers on a work team simulates a cross-functional selfmanaged team. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 163) Julio is the owner of Party Time, Inc., a small party supply company. The company provides tents, tables, chairs, and related paraphernalia for weddings, Bar and Bat Mitzvahs, graduations, birthdays, and many other celebratory events. As sales have grown, the organization has hired more employees and has departmentalized to more efficiently handle purchasing, sales, service, and accounting. Everyone is still responsible for achieving company goals. Upon seeing Party Time's organization chart, you agree it uses a line organization model.

Answer: TRUE Explanation: Many small businesses begin as line organizations. In a line organization model everyone in the organization is responsible for achieving the company goals. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

164) Networking uses communication technology to link organizations, allowing them to work together on common objectives. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 165) The Internet makes real-time availability of data possible. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 166) Transparency describes the relationship between a firm and its stockholders. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 167) Transparency allows two companies to work more efficiently together. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

168) Most companies are no longer self-sufficient or self-contained. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 169) Networking requires transparency to work most effectively. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 170) A virtual corporation refers to a permanent network of firms linked by high-tech communication systems. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 171) A virtual corporation is a networked organization made up of replaceable firms that join the network and leave it as needed. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

172) Benchmarking requires organizations to compare each organizational function against the best in the world. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 173) Competitive benchmarking rates an organization's products and operations against the industry average. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 174) Competitive benchmarking compares a company's practices, processes, and products against others in its industry, with the goal of doing it better than the competition. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 175) The functions that a company can perform as well as or better than anyone else in the world are known as that firm's optimized capabilities. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

176) An organization's core competencies are those functions that the firm performs as well as or better than anyone else in the world. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 177) If a particular function is one of a firm's core competencies, it typically performs this function itself rather than outsourcing it to another organization. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 178) Assigning various functions that a firm might do for itself to outside organizations is known as competitive allocation. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 179) Outsourcing involves assigning various functions to outside organizations. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

180) Baby Boomers are often referenced as digital natives. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 181) Restructuring involves the redesign of an organization to be more responsive to customers. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 182) To better serve customers, many firms are restructuring to empower front-line employees. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 183) Technology, like the Internet, has opened up opportunities for firms to sell to new markets. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

184) Digital natives, those who grew up with the Internet and other devices, are an important customer group that most businesses want to reach. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 185) Introducing change into an organization is an easy task for a manager. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 186) Inverted organizations define the role of front-line employees as those workers who follow the orders of top and middle management. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 187) Inverted organizations empower employees by adding multiple layers of management and long lines of communication. Answer: FALSE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

188) In an inverted organization, the purpose of management is to assist and support the decisions of employees who work directly with customers. Answer: TRUE Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 189) Companies have learned that working transparently through real-time networks has provided competitive advantages in the marketplace. Answer: TRUE Explanation: The Internet has allowed companies to send to each other real-time data, which expedites the process of getting products and services to customers, many of which are digital natives, having grown up with the Internet and who expect fast and exceptional service. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 190) Outsourcing has become commonplace, particularly when organizations want to focus on their core competencies. Answer: TRUE Explanation: Outsourcing is assigning one or more functions to another organization. Often companies will look outside the firm for accounting services, transportation services, and legal services, to name a few. They prefer to utilize their resources on core competencies, those functions that they do better than most. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

191) Once a company has restructured a firm to be more competitive in today's market, it alleviates the need to scan the external environment. Answer: FALSE Explanation: Adapting to change is difficult but necessary in today's business world. Companies must be careful to avoid complacency. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 192) The virtual corporation does all its business online with partners considered a permanent part of the network. Answer: FALSE Explanation: Although it is possible for firms that are connected virtually to interact online, the term refers to the fact that the functional units of this type of corporation do not have permanent ties to any one corporation. The core firm hires other companies to partner with it on an asneeded basis. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 193) Farm to Table Foods is a wholesaler serving grocery stores nationwide. Communications technology allows Farm to Table to work closely with its suppliers and customers in real time. Networking allows these organizations to operate more efficiently. Answer: TRUE Explanation: Networking is using communications technology to link organizations and allow them to work together on common objectives. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

194) Regional monopoly, Southeastern Electric, wants to improve services to customers. Management recently rated the company's processes and products against the results achieved by the world's best at similar processes and products. Southeastern Electric has adopted a policy of international standardization. Answer: FALSE Explanation: Rating an organization's practices, processes, and products against the world's best is known as competitive benchmarking. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 195) Superstars Soccer Camp recently outsourced its marketing work. This suggests that management at Superstars does not believe that marketing is one of the firm's core competencies. Answer: TRUE Explanation: Core competencies are those functions a firm can perform as well as, or better than, anyone else. A firm should continue carrying out its core competencies, and should outsource only functions that others can perform more efficiently. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 196) Last week at Bigbux Financial Services, all advisors assisting over 150 clients each received an email from the VP of Operations. The email stated that every client's investment portfolio should consist of 50% individual stock purchases, 25% bonds, and 25% property. Advisors were ordered to review all client portfolios for compliance to this directive. Clearly, Bigbux is an inverted organization because management directives such as the one described are very common. Answer: FALSE Explanation: In an inverted organization first-line employees are empowered to respond quickly to the wants and needs of customers, and to provide customers with the types of products and services that benefit them individually. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 56 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

197) School Days Centers specialize in helping students with difficulties. With locations around the country, each center consists of a manager and several tutors and counselors. The counselors and tutors have a great deal of flexibility to design programs specifically for individual students. In fact, these first-line employees are considered to be the key people in the organization, and the manager's main function is to assist these employees in matters such as scheduling and securing necessary materials. This type of arrangement suggests that School Days is an inverted organization. Answer: TRUE Explanation: In an inverted organization, the key people are the first-line employees who deal directly with customers. These employees are empowered to respond to the wants and needs of customers. There are few layers of management, and the job of managers is to assist first-line employees rather than boss them around. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 198) Javier is a self-employed patent attorney and it seems like he is always working! Large corporations hire him on an as-needed basis to review prospective ideas and help with securing patents for a variety of inventions including surgical instruments, medicines, and high-tech gadgets. Once he secures a contract, Javier knows approximately how many weeks or months he will work. Javier works for virtual corporations. Answer: TRUE Explanation: A virtual corporation has no legal ties to the companies or individuals that perform a variety of jobs for the core firm, such as distribution, legal work, accounting, manufacturing, and production. The virtual corporation hires other companies or persons on an as-needed basis. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

199) Milo was confident that baseball fans would fill the seats in his brewhouse if they just knew about the place. After all, he offered convenience, easy walking distance to the local MLB stadium, great local talent for entertainment and several fresh premium craft beers. He uses Twitter and Facebook to connect with potential customers, and offers free wifi for customers. These are worthy strategies for reaching digital natives. Answer: TRUE Explanation: Introducing change is difficult for any manager. In order to attract digital natives (younger generations who grew up with the Internet), businesses are trying to reach them on social networking sites. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 200) Organizations with positive images for performing exceptional service to customers are usually friendly places to work, as well. Answer: TRUE Difficulty: 1 Easy Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 201) Organizational culture can produce either a positive or negative impact on an organization. Answer: TRUE Difficulty: 1 Easy Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

202) The very best organizations have cultures that emphasize service to others, especially customers. Answer: TRUE Difficulty: 1 Easy Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 203) Organizational culture refers to the widely shared values within a corporation that foster unity and cooperation. Answer: TRUE Difficulty: 1 Easy Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 204) The informal organization is created by the decisions of top management. Answer: FALSE Difficulty: 1 Easy Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 205) While most organizations have a formal organization structure, only poorly managed firms also have an informal organization. Answer: FALSE Difficulty: 1 Easy Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 59 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

206) A firm's informal organization refers to the structure that identifies the authority, responsibility, and position of people within the organization. Answer: FALSE Difficulty: 1 Easy Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 207) The informal organization of a business can help generate creative solutions and inspire teamwork and camaraderie. Answer: TRUE Difficulty: 1 Easy Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 208) The formal organization of a firm provides the lines of authority to follow in routine situations. Answer: TRUE Difficulty: 1 Easy Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

209) The grapevine refers to the formal channel used for confidential communications between members of top management. Answer: FALSE Difficulty: 1 Easy Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 210) An informal organization can be a valuable asset to managers attempting to create an environment of harmony among workers and establish the corporate culture. Answer: TRUE Difficulty: 1 Easy Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 211) The informal organization appears as dashed lines on a firm's organizational chart. Answer: FALSE Difficulty: 1 Easy Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 212) The informal organization is best suited for decision making on big issues. Answer: FALSE Difficulty: 1 Easy Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

213) The key people in a company's grapevine typically have considerable influence in the organization. Answer: TRUE Explanation: The grapevine is the informal organization's nerve center. Unofficial information flows through this system. Difficulty: 2 Medium Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 214) Successful managers will find the balance between promoting the informal organization and maintaining a formalized structure, as well. Answer: TRUE Explanation: As appealing as the informal organization may be due to its ability to create camaraderie and a spirit of cooperation, informality also can be very powerful in resisting managerial directives. These resistance movements can result in union strikes and other disruptive occurrences. Management must find the right balance between the formal and informal organization. Difficulty: 2 Medium Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 215) Mohammed just started a managerial position at Abundance Bank. In order to be more effective in his new position, he should try to learn who the important people are in Abundance's informal organization. Answer: TRUE Explanation: Important people within a firm's informal organization can be very helpful in teaching new employees the ins and outs of how to operate effectively within the organization. Difficulty: 3 Hard Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

216) During an afternoon coffee break, Evangeline, a production-line employee at Lilypad Linens, was told by a friend that one of the managers in finance is about to be fired. She is eager to learn if other friends at Lilypad know any more about the situation. This flow of information is an example of Lilypad's grapevine. Answer: TRUE Explanation: The grapevine is the flow of unofficial (and sometimes inaccurate) information between and among managers and employees within an organization. Difficulty: 3 Hard Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 217) Rapid Response Security Firm, a company that provides on-site security services for malls and other retail environments, needs to review current procedures used by its professional officers to make certain they are in compliance with new laws. On crucial issues such as this, it is more important to gather information through the informal organization, as opposed to the formal organization. Answer: FALSE Explanation: The informal organization is not well suited to making critical decisions of longterm significance. It is too unstructured and emotional to allow for careful, reasoned decision making on such important topics. Difficulty: 3 Hard Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

218) Holden just learned that several people in New Hampshire needed to be treated for food poisoning after eating peanut butter that was produced and jarred in his plant. As he walks the back stairs at the plant, he thinks to himself, "It's time to get the informal organization in on this. We've got to stop this in its tracks!" Holden is taking the right approach to solving this serious problem. Answer: FALSE Explanation: The informal organization is too unstructured and emotional to deal with serious emergency situations. Critical matters need reasoned and rational decision making in a formal and official context. Difficulty: 3 Hard Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 219) Organizing a business begins with A) acquiring the necessary resources. B) choosing the best qualified employees. C) developing an efficient plan of action. D) determining the work to be done. Answer: D Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 220) Dividing the required work among a group of employees is called A) departmentalization. B) delegation of responsibility. C) division of labor. D) separation of control. Answer: C Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

221) Dividing tasks into smaller jobs is called A) job enrichment. B) job specialization. C) departmentalization. D) division of authority. Answer: B Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 222) The process of setting up individual functional units of the business to do specialized tasks is called A) departmentalization. B) division of labor. C) job specialization. D) delegation of authority. Answer: A Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 223) Job specialization is known to A) minimize delegated authority and responsibility. B) improve job performance. C) create work teams and improve resource allocation. D) establish procedures. Answer: B Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

224) Which of the following is an example of a move to reorganize? A) reducing the labor force within your business B) revising plans by creating contingency plans C) managing by objectives and clearing pathways for success D) developing a way to monitor financial success Answer: A Explanation: Reorganizations usually involve increasing or reducing the workforce within the business; adding or decreasing departments; opening or closing business units; and/or reallocating resources differently within the business. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 225) The proven success of job specialization lies in the fact that A) it leads to groupthink. B) it avoids the pitfalls of division of labor, where workers become removed from thinking conceptually about the business. C) it is a detractor to others who are thinking about entering your industry because it successfully creates barriers to entry. D) it adds efficiency to the business's operation by identifying tasks that some do better than others. Answer: D Explanation: Specialization will usually result in jobs being performed more quickly and better. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

226) In the Making Ethical Decisions box titled "Would You Sacrifice Safety for Profit?" which of the following statements best expresses the theme of the discussion? A) In the beginning, company procedures that require value judgments are often too costly. As the business grows, the owner can add ethical procedures to each job. B) The principles of organization state that the only company objective is to gain profits for the owner(s) or stockholders. If your competitors are cutting corners with safety regulations, you should consider the same. C) The only way to be profitable is to avoid risk. If new safety equipment becomes available that is applicable to your business, even if it slows productivity, you should adopt it. D) The corporate culture you create as you begin your service will last a long time. Your workers will adopt your values. Answer: D Explanation: The corporate culture you create as you begin your service will last a long time. If you want your employees to adopt your business values, it is important to emphasize safety and environmental concern from the start. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 227) As Elisa gets ready to open her new business, she has identified the tasks that need to be accomplished and has assigned employees to each task. This illustrates A) management departmentalization. B) division of labor. C) specialization of priorities. D) mass production economies. Answer: B Explanation: Division of labor refers to the process of identifying what work needs to be done and then dividing up the tasks among the employees. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

228) To better organize his lawncare business, Steven is dividing each job into several parts. Mark is the fastest on the riding mower, Manny can rake up every tiny piece left on the lawn, and Steven is a master edger. If he assigns employees to their best strength, what would this action exemplify? A) job specialization B) departmentalization C) delegation of authority D) economies of scale Answer: A Explanation: By asking different employees to perform different tasks relating to a particular job, Steven is dividing tasks in to smaller jobs, or job specialization. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-01 Outline the basic principles of organizational management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 229) The concept of ________ suggests that as a firm produces more, the average cost of goods produced goes down. A) natural growth B) survival of the fittest C) cost enhancement D) economies of scale Answer: D Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

230) Henri Fayol and Max Weber are best known for their contributions to A) production theory. B) marketing theory. C) organization theory. D) finance theory. Answer: C Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 231) Organization theorists emerged during the era of mass production, meaning A) the development of ways to produce a large quantity of product efficiently. B) the development of ways to purchase raw materials in bulk. C) the decline in the cost of production due to an increase in the cottage industry. D) the era when most companies adopted very similar methods of producing goods and services, which led to standardization of organizational design. Answer: A Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 232) Fayol's ________ principle states that each worker should report to one, and only one, boss. A) division of labor B) unity of command C) esprit de corps D) comparative advantage Answer: B Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

233) Fayol's ________ principle says that tasks should be divided into areas of specialization. A) departmentalization B) comparative advantage C) division of labor D) centralization Answer: C Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 234) Fayol's ________ principle says that workers' attitudes can create an environment of pride and loyalty within an organization. A) esprit de corps B) hierarchy of loyalty C) unity of command D) equity Answer: A Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 235) ________ believed that managers were trustworthy and companies would do well if employees simply did what they were told. A) John Keynes B) Adam Smith C) Peter Drucker D) Max Weber Answer: D Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

236) Max Weber used the term ________ to describe middle managers whose job was to implement the orders of top management. A) management B) autocrats C) staff personnel D) bureaucrats Answer: D Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 237) A(n) ________ is a visual device that shows relationships among people and divides the organization's work. A) organization chart B) Venn diagram C) corporate tree D) Gantt chart Answer: A Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 238) In Weber's view of a bureaucratic organization, the role of top management is to A) empower workers and enable them to quickly respond to customer wants. B) make decisions. C) develop the rules and procedures needed to carry out the plans of bureaucrats. D) directly supervise front-line employees to better control operations. Answer: B Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

239) In Weber's view of a bureaucratic organization, the organization demands A) a spirit of pride and loyalty among the workers. B) cross-functional teams. C) clearly established rules and guidelines that are to be precisely followed. D) self-managed teams. Answer: C Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 240) The line of authority that moves from the top of a hierarchy to the lowest level is called the A) chain of logic. B) chain of command. C) organizational design. D) delegation of contingent authority. Answer: B Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 241) A(n) ________ consists of one person at the top of the organization and many levels of managers who are responsible to that person. A) hierarchy B) oligarchy C) inverted organization D) informal organization Answer: A Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

242) A(n) ________ is used by an organization to show who is accountable for the completion of specific work and who reports to whom. A) balance sheet B) Venn diagram C) stakeholder outline D) organization chart Answer: D Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 243) In a bureaucratic organization A) departments communicate with each other on a regular basis. B) employees follow strict rules and regulations. C) customer satisfaction is the number one priority. D) first-line workers are empowered to respond to the needs of customers. Answer: B Explanation: Max Weber believed that as organizations grow, it is necessary to define strict rules and guidelines for workers. These rules are created for the purpose of making management's job easier. The organization will realize more efficiency. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

244) One advantage of a bureaucratic organization is that A) it is very responsive to the wants and needs of customers. B) there are very few layers of management. C) it encourages cooperation among different departments within the organization. D) employees know they are expected to follow the rules and regulations. Answer: D Explanation: Max Weber believed that as organizations grow, it is necessary to define strict rules and guidelines for workers. These rules are created for the purpose of making management's job easier. The organization will realize more efficiency. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 245) ________ organizations are characterized by many layers of management and function with well-defined rules and procedures. A) Matrix B) Inverted C) Ordered D) Bureaucratic Answer: D Explanation: Weber believed that organizations need bureaucracy in order to operate efficiently and effectively. Bureaucrats are middle managers who create written rules and regulations in order to carry out the decisions of top management. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

246) Economies of scale A) are available to small firms but not to large firms due to management inefficiencies. B) are achieved when a firm reduces its average cost of production as it produces more. C) can be avoided by purchasing supplies and raw materials in large quantities. D) help explain the success of small businesses. Answer: B Explanation: Mass production can allow a firm to increase its efficiency. As production volume increases, the per-unit cost of production decreases. This is explained, in part, by the purchase of supplies and raw materials in large quantities and by labor efficiencies. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 247) Max Weber favored which of the following? A) inverted organizations B) worker participation in decision making C) staffing and promotions based on qualifications D) flat organizations Answer: C Explanation: Weber emphasized job descriptions, written rules, decision guidelines, detailed records, consistent procedures, regulations and policies, and staffing and promotion based on qualifications. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

248) Fayol believed that decision-making authority should remain in the hands of top management A) in small organizations, but should be delegated to middle and first-line managers in large organizations. B) in large organizations, but could be delegated to middle and first-line managers in small organizations. C) in all types and sizes of organizations. D) only in organizations subjected to significant government regulation. Answer: A Explanation: One of Fayol's principles of organization states that the amount of decisionmaking power vested in top management should vary according to circumstances. Fayol believed that top management could assume all decision-making power in small organizations, but that decision-making power could be delegated to lower levels of management in large organizations. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 249) Which of the following statements explains the unity of command principle of management? A) All workers must share the same goal. B) Every firm has one strong leader, and everyone should support that individual. C) Workers can become frustrated and confused if they have more than one boss. D) All authority should rest with top management, since only top managers carry the responsibility of bad decisions. Answer: C Explanation: The unity of command principle says that each worker should report to one, and only one, boss. The purpose of this principle is to avoid confusing and frustrating workers. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

250) If companies follow the theories of Fayol and Weber, which of the following scenarios is likely to result? A) Organization design will benefit by the emergence of quick decision making. B) Organization design will eliminate systems of hierarchy and chains of command due to their hindrance of esprit de corps. C) Organizations that grow will develop several layers of management and the time that it takes to make and carry out a decision will increase. D) There will be a significant reduction of workforce due to specialization and departmentalization. Answer: C Explanation: The adoption of Fayol's and Weber's principles will result in increased layers of management and a lengthening of the time from when an idea for change is introduced and when that change will or will not be implemented. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 251) Which of the following statements most closely identifies the problem with adopting Fayol's principles of organization design for contemporary businesses? A) Leaving some decision-making power to middle management has the effect of minimizing the effort and results that management would put into the other historical principles of organization. B) These principles create organizations that don't respond quickly to customer needs. C) The principles of Fayol and Weber hamper a firm's ability to determine if it is profitable. D) Authority and responsibility quickly become unrelated. Answer: B Explanation: The process of rule making designed by Fayol and Weber leads to rather rigid organizations that don't always respond quickly to consumer requests. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

252) Which of the following statements would best summarize Max Weber's views on the role of workers in an organization? A) Workers should be empowered to do whatever it takes to satisfy the needs of customers. B) Workers will be promoted within the organization depending upon "who they know," rather than "what they know." C) Workers should simply follow well-defined procedures. D) Although top managers must ultimately make the decisions, workers are an important creative resource for a firm, and top management should listen to their ideas. Answer: C Explanation: Weber put a great deal of trust in management, and felt that the firm would do well if employees simply did what they were told. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 253) According to Max Weber's views on bureaucratic organizations, Sean's function, as a middle manager at a bureaucratic company, would be to A) make key operating decisions. B) evaluate the daily performance of first-line employees. C) ensure the organization achieves esprit de corps. D) implement the decisions of top management. Answer: D Explanation: Max Weber used the word bureaucrat to describe a middle manager whose function is to implement top management's orders. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

254) At Better Neighbors Fencing, ten employees perform various aspects of the company's work. Two people are in sales; four perform installation; one purchases materials; one does billing; two perform after-sales inspections. This type of organization reflects Fayol's principle of A) division of labor. B) equity. C) unity of command. D) hierarchy of authority. Answer: A Explanation: Fayol's principle of division of labor emphasizes that jobs should be divided into areas of specialization. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 255) Joelle, a designer for a business that installs underground sprinkler systems for residential and commercial customers, is experiencing some frustration. She has two bosses, Reid and Bryan, who both share the ownership responsibilities of the business. While Reid is in charge of commercial accounts, Bryan is in charge of residential accounts. Sometimes, however, Reid and Bryan double book Joelle's time, creating irritations and animosity. Since they share managerial responsibility, there is no clear way to decide whose accounts are most important. This type of situation represents a violation of Fayol's principle. A) division of labor B) clarity of objective C) priority of assignment D) unity of command Answer: D Explanation: Fayol's unity of command principle says that each worker should report to one, and only one, boss. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

256) Cameron, a financial manager at Southeastern Bank, always attempts to treat each subordinate with respect and fairness. Cameron's treatment of employees is an example of Fayol's principle of A) unity of command. B) equity. C) empowerment. D) order. Answer: B Explanation: Fayol's principle of equity says that employees and peers should be treated with respect and justice. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 257) Josie recently took a job in the marketing department for Beachside Bagels and Bakery. After just a few days on the job, Josie learned that the company has many layers of management, and seems to have a rule to cover almost every situation. These conditions suggest that Beachside Bagels and Bakery is a(n) A) cross-functional organization. B) decentralized organization. C) oligopolistic organization. D) bureaucratic organization. Answer: D Explanation: The presence of many layers of management and extensive reliance on formal rules and regulations are all characteristics of bureaucratic organizations. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

258) When Barrett opened his auto body shop, his business plan included a(n) ________ that showed the relationships among employees in his organization and the lines of authority and responsibility. A) business view map B) department categorization C) organization chart D) operating matrix grid Answer: C Explanation: An organization chart shows relationships among people who work for the business, including who is accountable for the completion of specific work and who reports to whom. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 259) Mountain Top Community College is a multi-district college in the Denver area with four campuses. Each campus has one president, two vice presidents, five deans, 12 department chairs, over 100 faculty members, and several persons in support roles. The presidents from each campus report to four vice chancellors and the vice chancellors report to the chancellor. It is clear that Mountain Top has a well-defined ________. A) channel of academic culture B) chain of command C) responsibility environment D) bureaucratic reallocation Answer: B Explanation: The chain of command is the line of authority that moves from the top of the hierarchy to the lowest level. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

260) Melissa's company is a bureaucratic organization. Melissa is likely to encounter which of the following conditions? A) real time decisions B) cross-functional teams C) empowerment of first-line employees to better serve customers D) many layers of management Answer: D Explanation: In a bureaucratic organization, employees are not empowered to make decisions, but rather they follow the rules and policies of top management. There are many layers of management so it often takes weeks or months to make decisions. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 261) Mason Mills management works hard to ensure that nobody in its organization has more than one boss and all workers are treated with fairness and respect. Additionally, work is divided into areas of specialization so that everyone knows to whom they should report. The management of Mason Mills reflects the ideas and principles of A) John M. Keynes. B) Peter Drucker. C) Karl Marx. D) Henri Fayol. Answer: D Explanation: The practices of Mason Mills reflect Henri Fayol's principles of unity of command, division of labor, hierarchy of authority, and equity. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

262) As a manager of a small clothing store, Archer favors detailed job descriptions, formal rules and regulations, thorough records, and standardized procedures. He also believes that staffing and promotion decisions should be based strictly on the qualifications of the people under consideration. Archer's attitudes suggest that he is strongly influenced by the ideas of A) Thomas Piketty. B) Max Weber. C) Karl Marx. D) Adam Smith. Answer: B Explanation: Max Weber emphasized detailed job descriptions, written rules and guidelines, detailed records, consistent procedures, and staffing and promotions based on qualifications. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 263) Which of the following determines the degree of decentralization of a firm? A) the degree to which lower-level management is empowered to make decisions B) the chain of command used to follow the flow of authority from top of the hierarchy to the lowest levels C) the geographical area served by the firm's operations D) the degree of product standardization desired by the marketplace Answer: A Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

264) In a(n) ________ organization, decision-making authority is concentrated at the top level of management. A) bottom-up B) decentralized C) inverted D) centralized Answer: D Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 265) ________ means that decision-making authority is delegated to lower-level managers and employees. A) Uniformity of authority B) Decentralized authority C) Specification of authority D) Standardized authority Answer: B Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 266) The optimum number of subordinates a manager can supervise is referred to as the A) manager-subordinate ratio. B) chain of command. C) employee quota. D) span of control. Answer: D Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

267) The span of control for a manager A) should never exceed 7 subordinates. B) is no longer a relevant issue in today's computerized offices. C) depends on a number of factors, and can vary from one manager to another. D) varies somewhat from manager to manager, but most managers operate best with a span of control of about 9 employees. Answer: C Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 268) Due to more emphasis on empowerment and more talented and better-educated lower-level management, span of control in organizations has ________. A) increased B) decreased C) become an obsolete term in organization design D) led to tall organizations Answer: A Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 269) An organization that consists of many layers of management is referred to as a(n) ________ organization. A) flat B) wide C) tall D) deep Answer: C Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

270) The ________ an organization's structure, the ________ the span of control. A) flatter; wider B) flatter; narrower C) taller; wider D) taller; flatter Answer: A Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 271) An organization with only a few layers of management is known as a(n) A) tall organization. B) flat organization. C) leveraged organization. D) coordinated organization. Answer: B Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 272) The trend today is for large organizations to improve their efficiency in communication and decision making by A) creating specific rules for everyone to follow. B) eliminating several layers of management. C) restructuring into a bureaucratic organization. D) reducing the span of control for managers. Answer: B Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

273) ________ refers to the process of dividing organizational functions (sales, production, accounting/bookkeeping) into separate units. A) Coordination B) A chain of command C) Empowerment D) Departmentalization Answer: D Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 274) The traditional technique used to departmentalize an organization is by A) function. B) customer group. C) geographic area. D) production process. Answer: A Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 275) Which of the following is considered to be a disadvantage of functional departmentalization? A) There may be a lack of communication among the different departments. B) Employees must develop skills in depth. C) The company must achieve economies of scale. D) Top management has to direct and control department activities. Answer: A Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

276) Which of the following is considered to be an advantage of functional departmentalization? A) Employees begin to identify with their department and its goals rather than with the goals of the entire organization. B) People in the same department tend to think very differently. C) Departments are isolated from one another. D) Employee skills can be developed in depth. Answer: D Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 277) Which of the following factors help determine a manager's span of control? A) the number of global competitors B) the level of standardization of the work to be done C) method of accounting for production D) form of business ownership Answer: B Explanation: At lower levels, where work is standardized, it's possible to implement a broad span of control. The number gradually narrows at higher levels as the work is less standardized. Difficulty: 2 Medium Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

278) Organizations that require consistent production standards to help create a high-quality public image would tend to favor A) centralized authority. B) an inverted organization. C) a high level of employee empowerment. D) flat organizational structures. Answer: A Explanation: Centralized authority allows top management to have more control over operations and thus results in more standardized and uniform operations. Difficulty: 2 Medium Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 279) Today's preference for flat rather than tall organization structures is mainly due to a flat organization's ability to A) encourage esprit de corps among employees in various departments. B) increase the cost of labor through economies of scale. C) respond quickly to customer demands. D) increase sales through multiple customer contacts by several layers of management. Answer: C Explanation: Flat structures respond readily to customer demands because lower-level employees have authority and responsibility for making decisions that affect customers. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

280) Within its production department, Sooner Manufacturing has shift leaders, supervisors, assistant plant managers, plant managers, product group managers, assistant division managers, division managers, an assistant vice president for production, and a vice president in charge of production. Given its multiple-layer management structure, Sooner Manufacturing is an example of a(n) ________ organization. A) tall B) wide C) cross-functional D) decentralized Answer: A Explanation: An organization with many layers of management is called a tall organization. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 281) Leaf Lovers Garden Centers is a chain of discount gardening stores throughout the United States. Top management realizes that among the different regions of the U.S., there are vastly different climates and soil conditions. Therefore, regional managers are given a great deal of freedom to decide exactly what types of plants, fertilizers, and other items to stock and how to best market these products. Leaf Lovers is an example of a ________ organization. A) bureaucratic B) top down C) free form D) decentralized Answer: D Explanation: Decentralized authority occurs when decision-making authority is delegated to lower-level managers and employees who are more familiar with local conditions than headquarters' management could be. Difficulty: 3 Hard Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

282) Bass Clef Music Company assigns workers to departments based on similar skills. Currently, the company has a marketing department, a production department, a finance department, and a human resources department. This suggests that Bass Clef departmentalizes by A) process. B) function. C) user group. D) tradition. Answer: B Explanation: Grouping workers into departments based on similar skills is known as functional departmentalization. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 283) Watchful Eyes Industries manufactures a multitude of safety products like burglar alarms, smoke detectors, surveillance cameras, and specialty locks. Watchful Eyes doesn't just stick to households, they outfit businesses and government agencies as well. They have found that each market requires a different marketing strategy. Watchful Eyes would probably benefit from departmentalization by A) function. B) process. C) customer type. D) market opportunities. Answer: C Explanation: Since each type of customer requires a different approach, Watchful Eyes should establish a different department to serve the needs of each customer group. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

284) As the head of the engineering department for her company, Jody works with her team on complex and challenging projects. The level of detail in this work requires Jody to spend a significant amount of time with each team member, providing advice and support. Due to the complexity and time involvement of each project, Jody has a(n) ________ span of control. A) wide B) narrow C) unlimited D) functional Answer: B Explanation: Challenging and complex work, and the need to meet with subordinates on a frequent basis, both put limits on how many subordinates a manager can effectively supervise, thus contributing to a narrow span of control. Difficulty: 3 Hard Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 285) On Air Studios organizes its jobs by activity, such as production, marketing, accounting, and finance. On Air Studios applies ________ departmentalization in order to maximize their efficiency. A) product B) customer C) functional D) standardized Answer: C Explanation: Functional departmentalization is the division of the organization into departments based on similar skills, expertise, or resource use. Typical departments would include accounting, marketing, production, and finance. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

286) Southeastern Bank organizes its loan operations based on the market served—consumer, small business, or nonprofit organizations. Departmentalization based on ________ allows Southeastern to better serve borrowers with different needs. A) function B) geography C) process D) customer group Answer: D Explanation: Nonprofit organizations, consumers, and small businesses are different types of customer groups seeking loans for different reasons. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 287) Clean Sweep Corporation has seen rapid growth during its first five years. While still relatively small, Clean Sweep is now big enough that Sawyer, the firm's CEO, has decided to organize the firm into functional departments. Sawyer can likely expect which of the following to occur? A) quick company response to a change in the business environment B) excellent communications between different departments C) increase in scope of the performance of functions D) opportunities for employees to develop their skills in depth Answer: D Explanation: Functional departmentalization tends to create opportunities for employees to develop skills in depth. Employees can progress within a department as they master those skills. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

288) International Inns and Conference Centers (IICC), a national chain of professional event centers, utilizes a centralized authority structure. Which of the following provides the most likely explanation for why management at IICC would favor centralized authority? A) Top management at IICC intends to empower its first-line employees. B) Top management at IICC wants to improve customer service response time. C) Top management desires to maintain a uniform image and high-quality service. D) IICC wants to utilize a cross-functional organization. Answer: C Explanation: Centralized authority gives top management more direct control over all of the firm's operations. This enables management to establish standards throughout the organization. However, centralized authority can make the firm less responsive to the needs of customers, since it limits the decision-making authority of lower-level managers and employees who interact directly with customers and are most familiar with local conditions. Difficulty: 3 Hard Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 289) Bright Electronics has found it needs to reorganize, including a significant trim of its middle management. This action will likely result in A) acquiring additional firms. B) flattening the organization and empowering employees, allowing them to get closer to the customer. C) increasing the size of its traditional departments to handle 24/7 operations. D) centralizing its decision making to better control its total quality management program. Answer: B Explanation: A reorganization that results in a downsizing of the firm's workforce will most often affect middle management jobs. When middle management is eliminated, organizations tend to get flatter, span of control gets wider, and the remaining middle management usually empowers employees to make customer decisions. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

290) The marketing department manager at Creative Counselors International made a strong push to hire professionals with superior performance records in prior jobs. It didn't take long for these enthusiastic marketers to recognize the many talents within their department. They admired at how alike they were and how they seemed to agree with each other's work styles and ideas. After a while, it became difficult for others in the organization to present to this group. If the idea did not originate within the marketing team, marketers did not give it much credence. This phenomenon is called A) departmentalization clique. B) interoffice competition. C) forward thinking friction. D) groupthink. Answer: D Explanation: A disadvantage of departmentalization is that department members may engage in groupthink (they think alike) and may need input from outside to become more creative. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 291) Management at Leaves of Green, a nationwide vegetarian restaurant chain, believes that its customers value a predictable and consistent level of service and quality. When customers stop at one of its restaurants anywhere in the United States, they should know what to expect in terms of menu, price and quality. In order to maintain this consistency, Leaves of Green adopted a(n) ________ structure. A) centralized authority B) decentralized authority C) hybrid authority D) origination authority Answer: A Explanation: Centralized authority may be advantageous when the corporation is trying to achieve consistency in its operation and image. Difficulty: 3 Hard Topic: Delegation and Authority Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

292) A ________ organization is characterized by direct two-way lines of responsibility, authority, and communication running from the top to the bottom of the organization, with all people reporting to only one supervisor. A) matrix B) cross-functional C) line D) line-and-staff Answer: C Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 293) ________ are responsible for directly achieving organizational goals. A) Organizational specialists B) Line personnel C) Chain of command managers D) Staff personnel Answer: B Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 294) Employees who perform functions that advise and assist line personnel are known as A) middle managers. B) empowered workers. C) secondary employees. D) staff personnel. Answer: D Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

295) Which of the organization models follows all of Fayol's traditional management rules? A) line organization B) line-and-staff organization C) cross-functional team D) matrix Answer: A Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 296) Staff positions in an organization A) support and assist the line positions. B) are superior to line positions. C) are less well-paid than line positions. D) are ways to employ past CEOs until they retire. Answer: A Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 297) In a ________ organization, specialists from different parts of the organization are brought together on a temporary basis to work on specific projects. A) matrix B) line C) line-and-staff D) centralized Answer: A Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

298) Line-and-staff organizations work well in organizations with A) operations in high-growth industries. B) stiff competition. C) short product life cycles. D) a relatively unchanging environment. Answer: D Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 299) Matrix organizational structures were first developed in A) Japan. B) the aerospace industry. C) the dot-com Internet industry. D) the chemicals industry. Answer: B Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 300) Which of the following was created as a solution to the temporary nature of the matrix structure? A) line organizations B) cross-functional self-managed teams C) line-and-staff organizations D) network organizations Answer: B Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

301) Which of the following describes a group of employees from different departments working together on a long-term basis? A) focus group B) mixed function groups C) cross-functional self-managed teams D) intrapraneurial teams Answer: C Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 302) Cross-functional self-managed teams work best when ________. A) leadership is shared B) there are at least two line and staff managers on the team C) the teams consist of members of only two functional units D) the academic levels of all members are comparable Answer: A Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 303) Which of the following is an advantage of a line organization in a large business? A) It does not require specialists to advise people along the line. B) Responsibility and authority are clearly defined. C) Each worker has several supervisors. D) It is very flexible. Answer: B Explanation: A line organization has direct two-way lines of responsibility, authority, and communication running from the top to the bottom of the organization, with all people reporting to only one supervisor. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

304) Which of the following positions would be classified as a staff position? A) an assembly-line worker for a major auto manufacturer B) the chief executive officer of a small corporation C) a sales manager for a chain of clothing stores D) an attorney in the legal department of a manufacturing corporation Answer: D Explanation: The function of staff personnel is to provide advice and assistance to line personnel. Since a lawyer for a manufacturing company would provide legal advice and assistance, he or she would be serving in a staff position. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 305) Which of the following is an advantage of a matrix organization structure? A) It is much cheaper to staff than other organization models. B) It provides for efficient use of organizational resources. C) The project teams are permanent. D) It is a complex organization structure. Answer: B Explanation: Matrix organizations provide for efficient use of organizational resources. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

306) Which of the following is true of cross-functional teams? A) Cross-functional teams are required not to share information across national boundaries. B) Employees on the teams are frustrated by organizational rules and regulations. C) Cross-functional teams work best when the voice of the customer is brought into the organization. D) Cross-functional teams are disbanded once the current project is complete. Answer: C Explanation: Cross-functional teams work best when the voice of the customer is brought into organizations. Customer input is especially valuable to product development teams. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 307) What is the main difference between a matrix-style organization model and a crossfunctional team? A) The matrix model has a limit on the number of functional units who send an expert to join the team, whereas the cross-functional team does not. B) The matrix model is a temporary arrangement, whereas the cross-functional team is a more long-term arrangement. C) The matrix model shares leadership responsibilities within the group, whereas the crossfunctional team does not. D) The matrix model is a more long-term arrangement, whereas the cross-functional team is a temporary arrangement. Answer: B Explanation: The matrix model is a temporary arrangement where participants report back to their functional unit once the project is complete. The cross-functional team is a more long-lived arrangement where the same team works on several projects. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

308) The organizational structure of the U.S. Army's 1st Infantry Division provides for direct two-way lines of responsibility, authority, and communication running from the top to the bottom. Additionally, each person in the division reports to only one superior. The 1st Infantry Division is clearly an example of a(n) A) matrix organization. B) functional organization. C) line organization. D) service organization. Answer: C Explanation: A line organization is characterized by direct two-way lines of authority, responsibility, and communication running from the top to the bottom of the organization. In such an organization, each person reports to only one supervisor. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 309) Corinne, part of the human resources department at a multinational corporation, works with several hundred employees. Her main function is to advise and assist managers in other departments, such as marketing and production, when they make staffing decisions. Corinne's position would be classified as a(n) ________ position. A) staff B) line C) first-line D) secondary Answer: A Explanation: Staff personnel advise and assist others within the organization in achieving their goals. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

310) Jarvis is a production engineer at Rubber Ring Tires. He recently joined a team of specialists from other departments in the business, such as marketing and finance. This long-term team assignment has developed several new products. Jarvis enjoys working in this environment, partly because Rubber Ring's management has given the team the freedom and flexibility to make decisions. Recently, outsiders from Freestone's major distributors and suppliers have been included on the team. It appears that Jarvis's team is a(n) A) interfunctional matrix organization. B) multidivisional group think-tank. C) multi-modal product development team. D) cross-functional self-managed team. Answer: D Explanation: A cross-functional team consists of specialists from different areas who work together on a long-term basis (as opposed to the temporary nature of teams in a matrix organization). These teams can include customers, suppliers, and distributors. When they are empowered to make decisions on their own, they are called self-managed teams. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

311) Julio is the owner of Party Pros, Inc., a party supply company. The company provides tents, tables, chairs, and related products for weddings, Bar and Bat Mitzvahs, graduations, birthdays, and other celebrations. As sales have increased, the organization has brought on more personnel and departmentalized to more efficiently handle purchasing, sales, service, and accounting. Everyone is still responsible for achieving company goals. Upon seeing Celebration's organization chart, you agree it uses a

A) line organization model. B) line-and-staff organization model. C) matrix organization model. D) cross-functional team organization model. Answer: A Explanation: Many small businesses begin as line organizations. In a line organization model everyone in the organization is responsible for achieving the company goals. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

312) Brady developed two VR games. However, he didn't do it all on his own. He hired two programmers, a marketing specialist, and created a small company. He considers himself a pioneer and wants to position his company the same way. He solicits your advice as to how he should structure his organization as he moves forward, and you suggest that he hire a few potential customers to join his team of employees as beta testers. You also suggest that maybe he should solicit globally. You are suggesting to Brady that he put together a A) line organization model. B) line-and-staff organization model. C) matrix organization model. D) cross-functional team. Answer: D Explanation: Including potential customers on a work team simulates a cross-functional selfmanaged team. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 313) Qiang is a project manager at Enigma Industries and is able to borrow specialists from the organization on a regular basis to assist in major projects. After the project ends, the specialists return to their functional units to await new assignments. Enigma Industries utilizes a A) line organization model. B) bi-functional organization model. C) lateral transfer organization model. D) matrix organization model. Answer: D Explanation: In a matrix organization, specialists from various departments are brought together to work on specific projects, but they remain part of the line-and-staff structure and return to their permanent positions when the project ends. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

314) ________ is using communications technology and other means to link organizations and allow them to work together on common objectives. A) Networking B) Structural linking C) Functional sharing D) Strategic planning Answer: A Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 315) Which of the following describes an environment in which data is instantly available via the Internet to organizational partners? A) networking B) real time C) virtual business D) e-commerce Answer: B Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 316) Which term describes a company being so open to other companies working with it that electronic information is shared as if the companies were one? A) online corporations B) webworking C) transparency D) interconnected Answer: C Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

317) Which of the following describes a temporary networked organization made up of replaceable firms that join and leave as needed? A) online corporation B) benchmark outsourcing system C) network system D) virtual corporation Answer: D Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 318) The process of rating an organization's practices, processes, and products against the best of the world is known as A) webworking. B) outsourcing. C) benchmarking. D) core competencies. Answer: C Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 319) Which of the following describes the activity of a firm that assigns specific functions, such as accounting or legal work, to other organizations rather than performing these functions themselves? A) functional sharing B) outsourcing C) benchmarking D) virtual distribution Answer: B Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

320) ________ refers to companies headquartered abroad who elect to bring production and manufacturing to domestic subsidiaries. A) Outsourcing B) Insourcing C) Production transition D) Production transformation Answer: B Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 321) ________ refer to those functions that an organization does as well as, or better than, any other organization in the world. A) Primary functions B) Comparative strengths C) Residual functions D) Core competencies Answer: D Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 322) Younger people today are often called ________ because they have never known life without the Internet and cell phones. A) the high-tech heroes B) social networkers C) digital natives D) electronic eggheads Answer: C Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

323) Which of the following are common responses of employees when faced with change? A) "That's the way we've always done things." B) "Perhaps I'll be able to get a promotion now." C) "I'm excited to learn something new." D) "This should be easy to accept." Answer: A Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 324) Which of the following describes the redesigning of an organization so that it can more effectively and efficiently serve its customers? A) reinventing B) restructuring C) radical reorganizing D) extroverted reorganizing Answer: B Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 325) An organization that has contact people at the top and the chief executive officer at the bottom is known as a(n) A) bureaucracy. B) oligarchy. C) improvised organization. D) inverted organization. Answer: D Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

326) Empowering employees to better serve customers requires ________ front-line employees. A) fewer B) less training for C) more support for D) uniforms for Answer: C Difficulty: 1 Easy Topic: Delegation and Authority Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 327) ________ is the term used to describe those functions that a firm can do as well or better than others. It performs these functions in-house, rather than outsourcing. A) Benchmarks B) Standard responsibilities C) Operational requirements D) Core competencies Answer: D Difficulty: 1 Easy Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 328) In today's competitive environment, cost containment is extremely important to survival. Which of the following increases efficiency in the production and distribution of goods? A) tablets B) real-time data C) assembly lines D) self-managed teams Answer: B Explanation: Real time simply means the present moment or the actual time in which an event takes place. Online data is readily available between firms to help create efficiencies in production and distribution. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 110 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

329) Which of the following statements best describes the evolution of organization design? A) Companies have evolved to cross-functional teams because line models and line-and-staff models have become too costly to maintain. B) Most companies are finding that the stages of product development are much slower than in the past because new products are much more complicated than products of several years ago. Matrix models work much better in the current environment. C) The development of new technology allows for companies to be much more self-contained and able to maintain their competitive advantage due to more privacy. D) Companies are now part of a vast network of global businesses, and part of a larger system. Answer: D Explanation: Companies are no longer self-sufficient or self-contained. Networking and other technological advances have permitted firms to link together in a transparent manner. Organization charts today may depict the network among firms. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 330) Companies benefit today from interfirm cooperation. One of the ways they cooperate is through networking. Another way is by seeking technological knowledge and new processes from exemplary firms sometimes outside their own industries. This is called A) competency capturing. B) technology swapping. C) benchmarking. D) broadening the knowledge base. Answer: C Explanation: Companies today are sharing their best practices through from each other. Benchmarking compares an organization's practices, processes, and products against the world's best. Management of one company seeks out another company whose technology or process in doing a particular function rivals all others. The goal is to replicate that process. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

331) One of the most difficult management challenges today is managing change. Why is this? A) Change requires cooperation and an awareness of a need for change. B) Change requires a lot of bailout money from the government. C) Change requires decentralization of decision making. D) Change will invariably result in an inverted organization and management does not want to relinquish its position power in order to make that happen. Answer: A Explanation: Change requires recognition by employees and management that it is necessary in order to stay competitive. It often requires management to pursue unpleasant actions such as layoffs. In some cases, change requires extensive retraining of employees who have worked in a comfort zones for several years. Difficulty: 2 Medium Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 332) In an inverted organization, the job of management is to A) closely monitor employee performance. B) establish rules and regulations to guide worker behavior. C) make all of the basic decisions. D) assist and support front-line people. Answer: D Explanation: In an inverted organization, the most important people are the front-line personnel who are in direct contact with the customers. These employees are given the flexibility and decision-making authority to meet the needs of the customers. The job of management is to assist and support these contact people, not boss them around. Difficulty: 2 Medium Topic: Delegation and Authority Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

333) For an inverted organization to be effective, it requires A) managers with strong position power. B) managers who are both technologically savvy and conceptually savvy. C) better educated, better trained, and better paid employees. D) a focus on what is best for production. Answer: C Explanation: Due to the fact that the inverted organization empowers front-line employees to make important customer decisions, the workforce of such an organization is typically better educated, better trained, and better paid. Difficulty: 2 Medium Topic: Delegation and Authority Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 334) The management of Entertainment Electronics sees itself as a topnotch producer of components used in DVD and Blu-ray players. The outstanding performance of the production department indicates that this activity is one of the firm's A) fiscal responsibilities. B) core competencies. C) benchmark assets. D) target competitive advantages. Answer: B Explanation: A company's core competencies are those functions that it performs as well as or better than anyone else in the world. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

335) Excite Enterprises, a corporation of amusement parks, uses an accounting firm to handle the payroll and tax functions for the company. Using the services of another firm in this manner is an example of A) outsourcing. B) functional reassignment. C) core competencies. D) benchmarking. Answer: A Explanation: Outsourcing is assigning various functions, such as accounting and legal work, to outside organizations that excel in those areas. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 336) Cash Now Industries just hired 500 new workers to build ATMs and self-service check-out systems at its manufacturing plant in Tennessee. The company also plans to hire several hundred more employees by 2021. In the past, these machines were built primarily in Asia. Both shipping costs and quality control were cited as the reasons these companies have elected to change production strategy to A) competency control. B) benchmarking. C) insourcing. D) outsourcing. Answer: C Explanation: U.S. headquartered companies are slowly bringing production back closer to the U.S. consumer. Insourcing refers to the idea to re-think where goods are currently produced. When firms decide to eliminate the production of goods abroad, and start producing goods domestically, or when foreign firms operating in the U.S. decide to produce goods that are sold in the U.S., this is considered insourcing. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

337) Last Stop Shop, a regional discount retailer, carefully watches and compares its operations with the operations of its closest rivals. Last Stop Shop does A) outsourcing. B) functional positioning. C) core competency ranking. D) competitive benchmarking. Answer: D Explanation: Competitive benchmarking is rating an organization's practices, processes, and products against the world's best. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 338) OnTrend, a cosmetology trade publication, utilizes the resources of other organizations as needed and business relationships are temporary as well as flexible. OnTrend is a networked organization made up of replaceable firms that join the network and leave it as needed. This unique organization is an example of A) competitive benchmarking. B) a virtual corporation. C) core competency ranking. D) real-time transparency. Answer: B Explanation: A virtual corporation is a temporary networked organization, made up of replaceable firms that join the network and leave it as needed. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

339) Electrolush manufactures a variety of home appliances and has historically produced the components for their products in-house. However, the company now contracts with other firms to produce these components. This strategy of ________ is a current trend among U.S. manufacturers. A) outsourcing B) core positioning C) foreign competency D) competitive benchmarking Answer: A Explanation: Outsourcing is the assigning of various functions, such as accounting, production, security, maintenance, and legal work, to outside organizations. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 340) Donna is a sales representative for the Eastern Essentials Company. She really enjoys working for Eastern Essentials, because she and others are treated as highly valued employees. Sales reps are given freedom and flexibility in their relationships with customers. While there are only a few layers of management at Eastern Essentials, Donna has found that these managers try their best to support and assist her efforts. Based on Donna's experience, it appears that Eastern Essentials is a(n) A) bureaucratic organization. B) inverted organization. C) tall organization. D) casual organization. Answer: B Explanation: An inverted organization is one with few layers of management, and in which the most important employees are front-line employees who deal directly with customers. In this type of organization, the job of managers is to assist and support front-line employees, not boss them around. Difficulty: 3 Hard Topic: Delegation and Authority Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

341) The widely shared values within an organization that provide unity and cooperation to achieve common goals are together known as the A) normative matrix. B) predefined group values. C) ethical system. D) organizational culture. Answer: D Difficulty: 1 Easy Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 342) The ________ of a business firm is the system that details lines of authority, responsibility, and position, similar to the structure on organization charts. A) matrix reloaded structure B) formal organization C) informal organization D) normative design Answer: B Difficulty: 1 Easy Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 343) All organizations have two organizational systems, A) the command system and the control system. B) the formal organization and the informal organization. C) the functioning system and backup system. D) the primary organization and secondary organization. Answer: B Difficulty: 1 Easy Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 117 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

344) The ________ is the system of relationships that develop spontaneously as employees meet and form power centers. A) informal organization B) bureaucratic structure C) secondary organization D) formal organization Answer: A Difficulty: 1 Easy Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 345) In open organizations the informal organization can be A) a hindrance to effective management. B) an asset that promotes harmony among workers. C) a roadblock to the corporate culture. D) part of the formal organization. Answer: B Difficulty: 1 Easy Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 346) The ________ is the nerve center of the informal organization. A) organizational database B) intranet C) grapevine D) company newsletter Answer: C Difficulty: 1 Easy Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

347) The informal organization of a business is probably best suited to A) give workers a clear idea of where they stand in the organization. B) provide helpful guidelines about how to handle routine problems. C) provide a mechanism that generates careful reasoned decisions about critical issues. D) create a feeling of camaraderie among employees and encourage teamwork. Answer: D Explanation: The friendships and relationships that develop in a business firm's informal organization can generate a feeling of camaraderie and can encourage people within the firm to work together. Difficulty: 2 Medium Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 348) A firm's formal organization would be better suited than its informal organization to A) create an atmosphere of friendship and camaraderie among workers. B) find answers to critical problems that require logical analysis. C) find creative solutions to short-term problems. D) find a way around bureaucratic rules and regulations in order to get things done quickly. Answer: B Explanation: Informal organizations are good at creating camaraderie, finding creative solutions to short-term problems, and finding ways around the rules and regulations that slow down the implementation of decisions. However, informal organizations are too unstructured and emotional to allow for careful, reasoned decisions dealing with critical issues. A firm's formal organization is better suited for this type of decision making. Difficulty: 2 Medium Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

349) Mario recently earned his Ph.D. in biochemistry and has been asked to join a lab at a prestigious university. After a month on the job, he remarked to a graduate student at his former university that the spirit of help and cooperation at the lab was remarkable. He enjoyed going to work each day and sometimes exchanged calls with other lab partners in the evening with ideas to improve each other's experiments. Mario mentioned, "Now I understand why this lab is considered one of the best in the nation!" Mario is referring to A) the formal organization. B) the inverted organization. C) the balanced organization. D) the organizational culture. Answer: D Explanation: Organizational culture is the widely shared values within an organization that foster unity and cooperation to achieve common goals. Difficulty: 3 Hard Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 350) Realizing that it was time to invest in an updated information system, the CEO made an announcement in his weekly email to his team: "We are going to shake things up around here. We need to break apart our information system, and start over." Unfortunately, the message translated poorly in the minds of employees. A total shake-up such as this could impact employee morale. Progressive companies today incorporate strategies that continuously embrace A) formal, symbolic walls that prevent one person from driving change to the detriment of others. B) a stay the course environment. It is always best to play your game than try to embark on someone else's game. C) a change-oriented culture. D) a formal and information organization that assists with change. Answer: C Explanation: Organizational change can cause stress and resistance within certain employee groups. Firms are better off when their culture is already change-oriented. Difficulty: 3 Hard Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

351) Devin had worked for his company for several years and was considered to be a politically savvy employee. After earning several promotions, he became the new president of the company. Nina, a longtime colleague of Devin's, had reported to him back when he was a first-line supervisor. She understood how the human side of the organization worked and made certain that she maintained a direct line of communication with Devin. On the company's organization chart, Nina maintained a lower-level position; but, due to her open line of communication with Devin, she was able to successfully push her agenda. The human side of the organization is synonymous with the A) inverted organization. B) formal organization. C) informal organization. D) benchmark. Answer: C Explanation: The human side of the organization is similar to the informal organization. This is the system that develops spontaneously as employees meet and form cliques, relationships, and lines of authority outside of the formal organization. Difficulty: 3 Hard Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

352) Raven experienced frustration with her new job at Watchful Eyes Security Systems—that is, until she befriended an assistant, Alyssa, who works in another department. Over lunch in the break room, Alyssa shared with Raven the way things really work at Watchful Eyes. Raven quickly learned that A) what she learned in her business classes didn't really help her in the real world. B) an unofficial informal organization exists that she can utilize to help her do her job. C) organizational culture can be negative. D) not all businesses have a formal organization. Answer: B Explanation: All organizations have two organizational systems. One is the formal organization that details each person's responsibility, authority, and position. The informal organization is the human relationship side of the organization. The informal organization will identify for Raven the unofficial power brokers. These are the influential individuals who can help her get things done. Difficulty: 3 Hard Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 353) If you are a new employee at Reinhold Industries, Javier is the man to see in the welding department. Though he may not be a manager, he is the person that most of the others in the department look to for advice and assistance. Javier is an important member of the firm's A) supervisory management. B) participatory control. C) informal organization. D) closet cabinet. Answer: C Explanation: Although Javier may have little authority in the formal organization, the respect others in the department have for him makes him an important part of the informal organization. The informal organization is the system of relationships that evolve spontaneously as employees meet and form power centers. Difficulty: 3 Hard Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

354) One of Carlos's coworkers was recently promoted to a middle management position at their company. He seems to have quickly distanced himself from Carlos and their other coworker, Donovan. In fact, yesterday Donovan described the situation by saying, "He's gone to the dark side." Carlos understands what Donovan means because managers keep themselves removed from other employees, and seldom seriously solicit ideas for improvements or change from those in the trenches. The disadvantage in continuing this type of organizational culture is A) nobody takes management seriously. B) the company will have to look outside the firm for new managers. C) small, incremental improvements rather than radical change will become the norm. D) the informal organization can hinder effective management. Answer: D Explanation: The informal organization can be powerful in resisting management directives. Employees may form unions, go on strike, and may generally disrupt operations. Difficulty: 3 Hard Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 355) Discuss Max Weber's views on organization theory. Answer: a. Max Weber's bureaucratic structure is pyramid-shaped, a structure that became very popular with large firms. b. Weber had great faith in managers, and believed that the organization would do well if workers simply followed orders. This view was reasonable at the time of Weber's writing, since many of the workers were unskilled and uneducated. Such a view is less plausible today. c. Many of Weber's contributions to organization theory were similar to those of Henri Fayol, but in addition, he emphasized the need for job descriptions, written rules and guidelines, consistent procedures and policies, and staffing based on qualifications. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

356) What is a matrix organization? What advantages and disadvantages are associated with this type of organization? Answer: a. A matrix organization is an organization in which specialists from different parts of the organization are brought together to work on specific projects but still remain part of the lineand-staff structure. b. The advantages of a matrix organization are: (1) it gives managers flexibility in assigning people to projects; (2) it encourages interorganizational cooperation and teamwork; (3) it can result in creative solutions to problems such as those associated with product development; and (4) it provides for more efficient use of organizational resources. c. The disadvantages of a matrix organization are: (1) it is complex and costly to set up; (2) it can cause confusion among employees as to where their loyalty belongs; (3) it requires a high level of interpersonal skills and cooperative employees and managers; and (4) it is a temporary solution to a long-term problem. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 357) What is a cross-functional, self-managed team? Who would serve on such teams? Why do cross-functional, self-managed teams often lead to networking? Answer: a. A cross-functional team is a group of employees from different departments (and possibly people from outside the organization) who work together on a long-term basis (as opposed to the temporary nature of teams employed in a matrix organization). These teams are often empowered to make decisions on their own, without seeking approval of management, which is why they are called self-managed teams. b. Cross-functional teams may consist of employees from different departments. For such a team to work best, however, customers, suppliers, and distributors should also be represented. c. Because cross-functional teams may include people from other organizations and even from other countries, they serve to link those organizations into a network in which the organizations can communicate and interact in a way that enables them to work together on common objectives. These teams may share market information across national boundaries. The government may encourage the networking of teams, and government coordinators may assist such projects. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

358) Describe two major issues that are important in organizational design. Answer: There are four issues from which the student can choose: (1) tall versus flat organizations, (2) span of control, (3) departmentalization, and (4) centralization versus decentralization. a. A tall organization is one with many levels of management and a smaller span of control. The many levels result in a tall pyramidal organizational chart. A flat organization, on the other hand, has fewer levels of management and a broad span of control. Many organizations are moving to a flatter organizational structure by eliminating levels of middle management. b. Span of control refers to the optimum number of people a manager can supervise. There are many factors to consider when determining span of control. At lower levels, where work is standardized, it's possible to implement a broad span of control. The number gradually narrows at higher levels of the organization because work is less standardized and there's more need for face-to-face communication. It's possible to increase the span of control as employees become more professional, as information technology makes it possible for managers to handle more information, and as employees take on more responsibility for self-management. c. Departmentalization is the dividing of organizational functions into separate units. This can be done in a number of ways. The traditional way to departmentalize organizations is by function. Functional structure is the grouping of workers into departments based on similar skills, expertise, or resource use. Thus, a functional organization divides the organization into departments such as accounting, finance, personnel, production, and marketing. Such an approach has several advantages: (1) employees can develop skills in depth and can progress within a department as they master those skills; (2) the company can achieve economies of scale in that it can centralize all the resources it needs and locate various experts in that area; (3) there is good coordination within the function, and top management can easily direct and control various departments' activities. However, the functional approach also has its drawbacks. For example, it can result in a lack of communication and coordination among functions; result in individuals identifying more with their departments than with the overall organization; make the organization less responsive to change; result in an organization of narrow specialists; and encourage people in the same department to engage in groupthink. Thus, firms have found that other approaches to departmentalization may be better. These alternative approaches include departmentalization by customer group, by geographic region, by product, or by process. d. Centralized authority occurs when decision-making authority is maintained at the top level of management at the company's headquarters. Decentralized authority means that decision making is delegated to lower-level managers and employees who are more familiar with local conditions than headquarters' management could be. The centralized approach may enable a firm to achieve more consistency and project a uniform image, but the decentralized approach gives a firm more flexibility to respond to customers. The trend today is toward more decentralized organizations. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

359) Explain the difference between a firm's formal organization and its informal organization. Why are both types of organization important to managers? Answer: a. A firm's formal organization is the structure that details lines of responsibility, authority, and position. It is the structure illustrated by the firm's organization chart. b. A firm's informal organization is the system of relationships that develop spontaneously as employees meet and form power centers. This is the human side of the organization that does not show up on an organization chart. c. Effective managers use both types of organization, but in different ways. The formal organization provides useful guidelines for routine decision making and the framework needed for careful, reasoned decision making on critical matters. The informal organization creates camaraderie, encourages teamwork among employees, and can be used to generate creative solutions to short-term problems. Effective managers make an effort to identify employees who are important members of the informal organization because their status and influence with other employees can help managers cut through red tape and get things done more quickly. Difficulty: 3 Hard Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

Mini-Case Angelica Canizales is the CEO of Mucho Dinero Enterprises. Sales have dropped for four consecutive years and accountants have reported net losses in each of the last two years. Employees appear discouraged and frustrated. Recently, Angelica met with managers from marketing, production, and finance to listen to their views regarding the company's problems. The managers unanimously agreed that the main problem was a lack of communication among the several functional areas of the business. Each manager felt that the firm could increase quality and customer satisfaction with better interdepartmental communication. Angelica also met with marketing and production employees to get their respective opinions on the problems of the firm. One employee from the production department observed, "We have so many layers of management that it takes forever to make decisions." An employee from marketing complained, "This place is so bogged down with rules and regulations that there is no opportunity to be creative." Several employees shared their opinions regarding their bosses. Specifically, one employee said, "My boss never pays attention to my ideas. He just issues orders and expects me to obey them." Angelica decided, after listening to many comments from managers and employees and also suppliers and customers, that the only way to end Mucho Dinero's slide was to completely rethink the firm's structure and to make radical changes in its organization. She presented her ideas to the board of directors, promising to voluntarily resign if her efforts to reorganize did not return the firm to profitability. 360) Employee complaints that there are too many layers of management and too many rules and regulations suggest that Mucho Dinero is a(n) A) flat organization. B) bureaucratic organization. C) inverted organization. D) wide organization. Answer: B Explanation: A bureaucratic organization is characterized by many layers of management and reliance on rules and regulations to guide behavior. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-02 Compare the organizational theories of Fayol and Weber. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

361) Angelica's decision to completely redesign Mucho Dinero's organization indicates that she believes the best approach to her firm's problems is A) competitive benchmarking. B) flexible departmentalization. C) restructuring. D) organizational therapy. Answer: C Explanation: Restructuring is redesigning an organization so that it can more effectively and efficiently serve its customers. Difficulty: 3 Hard Topic: Delegation and Authority Learning Objective: 08-05 Identify the benefits of interfirm cooperation and coordination. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 362) Currently, Mucho Dinero is organized into specialized departments such as marketing, finance, production, and personnel. These departments are designed to allow people with similar skills and expertise to work together. This approach is known as ________ departmentalization. A) functional B) process C) interest group D) task-oriented Answer: A Explanation: Functional departmentalization groups workers into departments based on similar skills, expertise, or resource use. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-03 Evaluate the choices managers make in structuring organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

363) In order to encourage more interdepartmental communication and cooperation, Angelica is thinking about setting up groups of workers from different departments to work together on a long-term basis. She is even thinking about asking people from some of Mucho Dinero's suppliers, customers, and distributors to join these groups. The type of group that Angelica is considering is known as a(n) A) focus group. B) dynamic group. C) matrix team. D) cross-functional team. Answer: D Explanation: A cross-functional team consists of workers from different departments within an organization who work together on a semi-permanent basis. These teams can also include people representing the organization's suppliers, distributors, and customers. Difficulty: 3 Hard Topic: Organizational Structure Learning Objective: 08-04 Contrast the various organizational models. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 364) From her discussions with employees, Angelica learned quickly that production workers put their trust in 20-year veteran Willie McClaren. Many people told her that if you wanted something done, Willie was the person to see. Willie appears to be an important part of the A) decentralized authority. B) span of control. C) informal organization. D) functional structure. Answer: C Explanation: The informal organization arises from the system of relationships that develop spontaneously within an organization. Willie may not have much clout in the formal organization, but the respect people in the production department have for him means that he may be very important in the informal organization. Difficulty: 3 Hard Topic: Culture in Organizations Learning Objective: 08-06 Explain how organizational culture can help businesses adapt to change. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

Understanding Business, 12e (Nickels) Chapter 09 Production and Operations Management 1) Currently, manufacturing accounts for only around 70% of U.S. GDP. Answer: FALSE Difficulty: 1 Easy Topic: The State of U.S. Manufacturing Today Learning Objective: 09-01 Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) Today, due to technological advancements, manufacturers in the U.S. have become so efficient, they require fewer workers to produce the same amount of output. Answer: TRUE Difficulty: 1 Easy Topic: The State of U.S. Manufacturing Today Learning Objective: 09-01 Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) One key to the resurgence of U.S. firms as world-class competitors has been the implementation of a focus on quality. Answer: TRUE Difficulty: 1 Easy Topic: The State of U.S. Manufacturing Today Learning Objective: 09-01 Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

4) Evidence suggests that U.S. manufacturing firms can no longer compete against the best firms in the rest of the world. Answer: FALSE Difficulty: 1 Easy Topic: The State of U.S. Manufacturing Today Learning Objective: 09-01 Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 5) American manufacturers have emphasized continuous improvement as one strategy for regaining a competitive advantage in the manufacturing sector. Answer: TRUE Difficulty: 1 Easy Topic: The State of U.S. Manufacturing Today Learning Objective: 09-01 Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) To strengthen its manufacturing base, the U.S. will need to continue to innovate. Answer: TRUE Difficulty: 1 Easy Topic: The State of U.S. Manufacturing Today Learning Objective: 09-01 Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 7) The U.S. is still manufacturing intensive. Only 55% of U.S. jobs come from the service sector. Answer: FALSE Difficulty: 1 Easy Topic: The State of U.S. Manufacturing Today Learning Objective: 09-01 Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

8) Since U.S. manufacturing competes on price throughout the world, innovation plays a very small part in the U.S. economy. Answer: FALSE Explanation: The U.S. continues to be a world leader in innovation, though plenty of innovation happens overseas as well. American manufacturers must keep up with the latest production techniques. Difficulty: 2 Medium Topic: The State of U.S. Manufacturing Today Learning Objective: 09-01 Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9) U.S. businesses are known for their technological advances and their ability to implement change. Answer: TRUE Explanation: U.S. businesses are operating more efficiently than ever. Many factory employees work side by side with robots that can learn from and collaborate with their human colleagues. Difficulty: 2 Medium Topic: The State of U.S. Manufacturing Today Learning Objective: 09-01 Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10) As the service industries became a larger part of U.S. GDP, companies have become more concerned about measuring productivity in the service sector. Answer: TRUE Explanation: The services industries, together, comprise over 70% of U.S. GDP. Increasing productivity in these industries will make U.S. business more competitive abroad. Difficulty: 2 Medium Topic: The State of U.S. Manufacturing Today Learning Objective: 09-01 Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

11) U.S. manufacturers are focusing on quality as a way to become more competitive globally. Answer: TRUE Explanation: U.S. manufacturers are more productive than ever, yet face increased competition worldwide. These countries, however, depend on U.S. technology to increase effectiveness and efficiency. Difficulty: 2 Medium Topic: The State of U.S. Manufacturing Today Learning Objective: 09-01 Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) The box, "Creating Skilled Workers with German-Style Apprenticeships," asserts that Germany is working to combat the growing skills gap by providing on-the-job education for young workers. Answer: TRUE Explanation: In Germany, manufacturers have turned to apprenticeships to provide on-the-job education for young workers. Apprentices usually spend three to four days a week training on site and other days at a vocational school. Difficulty: 2 Medium Topic: The State of U.S. Manufacturing Today Learning Objective: 09-01 Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 13) American companies, like IBM, prefer to stay the course and continue to compete by selling products instead of services. Answer: FALSE Explanation: IBM is an example of a company that transitioned from a product-based firm to a service-based firm. It has successfully found business in services and software, and become a cutting-edge information technology company domestically and in foreign markets. Difficulty: 3 Hard Topic: The State of U.S. Manufacturing Today Learning Objective: 09-01 Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

14) In the past, production management was about using the factors of production to create finished goods. Answer: FALSE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) Operations management converts resources into goods and services. Answer: TRUE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 16) In the process of operations management, a firm transforms resources such as raw materials, supplies, and even human resources into goods and services. Answer: TRUE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 17) Operations management involves inventory management, quality control, and production scheduling. Answer: TRUE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

18) Manufacturing firms focus exclusively on the production of goods and allow other firms to provide services. Answer: FALSE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 19) In recent years, operations management has become more focused on providing services, because that is where the growth and profit potential is greatest. Answer: TRUE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) Operations management in service industries is about creating a good experience for the customer. Answer: TRUE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 21) Operations management moves from knowing the needs of consumers to actually satisfying those needs. Answer: TRUE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

22) Education and training are less important to workers in the service sector than to workers who have jobs in the manufacturing sector. Answer: FALSE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 23) The quality standard for service industries such as luxury hotels is meeting the customers' requests. Answer: FALSE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 24) Service businesses know that in order to delight customers they must be able to anticipate their needs. Answer: TRUE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

25) One important issue with respect to managing the operation of a business is to make certain that customers leave feeling as though they had a good experience with your service and with your company in general. Answer: TRUE Explanation: Operations management transforms resources of all kinds into finished products and services. Due to the fact that services dominate the U.S. landscape, it is vital to a firm's survival that customers perceive that they had a good experience. The quality at every step of the service must be measured and evaluated. Difficulty: 2 Medium Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26) Manufacturing companies are concerned with production management, while service companies are concerned with operations management. Answer: FALSE Explanation: Manufacturing companies are as concerned with operations management as are service-based companies. In reality, most companies today blend a component of product and service. Difficulty: 2 Medium Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 27) Firms that specialize in accounting, finance, and management consulting are all part of the service sector. Answer: TRUE Explanation: Organizations like, hospitals, schools, universities, and government agencies produce services; while some, such as factories and farms, produce goods. Financial consulting would be a service organization. Difficulty: 2 Medium Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

28) An important strategy in operations management is using technology to anticipate customer needs. Answer: TRUE Explanation: Hilton, for example, is using IBM's Watson technology to power a robot named Connie. Hilton's hope for the future is for Connie to learn new information and tasks to ultimately become the center of operations at every Hilton hotel. Difficulty: 2 Medium Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) Operations management transforms resources into goods and services. Green Grass Landscaping utilizes equipment, labor, and materials to develop a top notch landscape for its customers. Managing this operation may also involve maintenance services. Answer: TRUE Explanation: Operations management transforms resources of all kinds into finished products and services. They utilize raw materials, equipment, and labor, but they are also concerned with anticipating customer needs and managing the entire operation including the customer's needs beyond the point of sale. Difficulty: 3 Hard Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 30) Apollo just graduated with a degree in operations management. While earning his degree, the knowledge he gained and skills he developed could make him an attractive employee for both a manufacturing firm and a service firm. Answer: TRUE Explanation: Operations management is a broad term that encompasses the tasks involved in creating both intangible products (services) and tangible goods. Thus, firms in both the service sector and the manufacturing sector may be interested in hiring Apollo. Difficulty: 3 Hard Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

31) Trey is a manager at Plastics Plus, a manufacturing firm in Arkansas. His responsibilities include production scheduling as well as keeping tabs on the company's inventory. These duties suggest that Trey is involved in promotions management. Answer: FALSE Explanation: Trey's responsibilities suggest he is involved in operations management. Operations management is a specialized area of management that converts resources into goods and services. It includes inventory management and production scheduling, as well as several other functions. Difficulty: 3 Hard Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 32) As you're loading your groceries on the conveyor belt, the clerk asks you if you found everything you needed. As she continues to scan your purchases, coupons for future purchases print near the cashier's terminal. In reviewing the key concepts from this chapter, you would consider this action to be the store's management of its labor. Answer: FALSE Explanation: This is part of the management of the operation—the operation of serving you. The store is rewarding (delighting) you with a coupon that has value on your next purchase. The grocer is anticipating that if you purchased it once, you may purchase it again, particularly if it is a name brand. Difficulty: 3 Hard Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

33) Kimber Cross is majoring in operations management at a local university. Unfortunately, the evolution of the U.S. from a manufacturing-oriented to a service-oriented economy means that Kimber will not likely find job openings in her field of study. Answer: FALSE Explanation: The U.S. economy is becoming more service oriented. However, this is not bad news for students who major in operations management, because the tasks involved in operations management are just as relevant to the production of services as they are to the production of goods. Difficulty: 3 Hard Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 34) When firms successfully produce products, they create form utility. Answer: TRUE Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) Only firms in the manufacturing sector can create true form utility. Answer: FALSE Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

36) The three basic requirements of production are: (1) creating a finished good, (2) making sure you created it at the lowest cost possible, and (3) selling it. Answer: FALSE Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 37) The value added by the creation of finished goods and services from inputs is called ownership utility. Answer: FALSE Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) Process manufacturing refers to combining components and raw materials to make a product. Answer: FALSE Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

39) Process manufacturing physically or chemically alters materials to create finished goods. Answer: TRUE Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 40) A continuous production process involves physically or chemically manipulating raw materials to create a product. Answer: FALSE Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 41) An assembly production process is characterized by long production runs that turn out finished goods over time. Answer: FALSE Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

42) Intermittent production processes are characterized by short production runs and frequent changes of machinery in order to produce different products like customized furniture. Answer: TRUE Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 43) Contemporary manufacturers in the U.S. lack the flexibility to use intermittent production processes. Answer: FALSE Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44) One drawback of intermittent production processes is that they tend to be much slower than continuous processes. Answer: FALSE Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

45) The production process requires inputs, controls, and outputs. Answer: TRUE Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 46) Mass production techniques allowed firms to respond quickly to the individual needs of consumers. Answer: FALSE Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 47) One of the reasons mass production techniques lost favor is that, despite their ability to keep costs relatively low, mass production lacks flexibility. Answer: TRUE Difficulty: 1 Easy Topic: The Need to Improve Production Techniques and Cut Costs Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

48) The ability to integrate computers into the design and manufacture of products has had the greatest impact on production techniques in recent years. Answer: TRUE Difficulty: 1 Easy Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 49) CAD/CAM has made it possible to custom-design products to meet the tastes of small markets with very little increase in costs. Answer: TRUE Difficulty: 1 Easy Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 50) CAD systems allow designers to use 3D modeling software. Answer: TRUE Difficulty: 1 Easy Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

51) Despite its early promise, computer-aided design has not met with much success in increasing productivity. Answer: FALSE Difficulty: 1 Easy Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 52) The purpose of computer-integrated manufacturing (CIM) is to unite computer-aided design with computer-aided manufacturing. Answer: TRUE Difficulty: 1 Easy Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 53) The advantage of computer-integrated manufacturing software is that it allows computeraided design machines to communicate directly with computer-aided manufacturing machines. Answer: TRUE Difficulty: 1 Easy Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

54) So far, the high cost of CAD/CAM techniques has limited their use to large, expensive manufactured goods such as automobiles. Answer: FALSE Difficulty: 1 Easy Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 55) Flexible manufacturing systems use machines that are designed to do a multitude of tasks so that they can produce a variety of goods. Answer: TRUE Difficulty: 1 Easy Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 56) A disadvantage of flexible manufacturing systems is that they usually require a great deal of labor because machines are rarely capable of handling a wide variety of tasks. Answer: FALSE Difficulty: 1 Easy Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

57) One way to compete with cheap labor is to use robots. Answer: TRUE Difficulty: 1 Easy Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 58) Lean manufacturing is a strategy of producing standardized products that have no frills or extra features in order to keep prices low. Answer: FALSE Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 59) Companies that achieve lean manufacturing use less of everything (raw materials, labor, etc.) to produce the same amount of products. Answer: TRUE Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

60) Technological improvements are largely responsible for the increase in productivity and efficiency of U.S. plants. Answer: TRUE Difficulty: 1 Easy Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 61) The higher productivity of U.S. plants is due to technological improvements. Answer: TRUE Difficulty: 1 Easy Topic: The State of U.S. Manufacturing Today Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 62) Mass customization is tailoring products to meet the needs of a large number of individual customers. Answer: TRUE Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

63) Mass customization is a strategy of convincing customers to choose from a relatively small number of alternatives in order to achieve the efficiencies of mass production. Answer: FALSE Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 64) While mass customization works well for producers it is not used in the service sector. Answer: FALSE Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 65) Actually, it is much easier to custom-design service programs than it is to custom-make goods. Answer: TRUE Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

66) Nanomanufacturing is when materials can be manipulated on a molecular or even atomic level. Answer: TRUE Difficulty: 1 Easy Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 67) Companies that employ lean manufacturing and flexible manufacturing produce better quality products, but have costlier production lines. Answer: FALSE Explanation: The purpose in lean manufacturing and flexible manufacturing is to produce products and services more efficiently and for less cost. Difficulty: 2 Medium Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 68) When a company has the ability to produce the same amount of goods with only half the floor space and half the labor that it used in the past, the firm is practicing flexible manufacturing. Answer: FALSE Explanation: Using half the floor space and half the labor are characteristic of lean manufacturing. Flexible manufacturing refers to the ability to design machines with interchangeable parts so that the same machine can perform multiple tasks and/or produce a variety of products. Difficulty: 2 Medium Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

69) Improvements in technology have significantly increased the quality of products, as well as helped reduce costs. Answer: TRUE Explanation: The introduction of computer-aided design (CAD), computer-aided manufacturing (CAM), and computer integrated manufacturing (CIM) has increased the quality of the product (output) and the time it takes to produce custom-designed products. It has reduced the cost of labor, and decreased waste in the production process. Difficulty: 2 Medium Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 70) Manufacturers use computer-aided manufacturing (CAM) to create three-dimensional designs of products before they are built. Answer: FALSE Explanation: Computer-aided design (CAD) is used to create three-dimensional designs of products before they are built. Computer-aided manufacturing (CAM) is used to build the product. Difficulty: 2 Medium Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

71) Mass customization is not exclusive to product-intensive businesses. Service businesses have learned how to use mass customization to serve their customers. Answer: TRUE Explanation: Service businesses use sophisticated programs to tailor insurance plans, travel plans, nutrition programs, and healthcare plans to individual customers. Difficulty: 2 Medium Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 72) Businesses that provide services typically cannot use mass customization because services are not tangible products that can be customized. Answer: FALSE Explanation: Many service firms practice mass customization. The fact that a service is intangible can actually make mass customization easier, because no tangible good has to be adapted. Difficulty: 2 Medium Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

73) Process manufacturing involves taking raw materials and physically or chemically changing them into another form, while the assembly process takes the newly changed form and turns it back into the original form. Answer: FALSE Explanation: While process manufacturing involves physically or chemically changing materials into a new state, the assembly process involves putting together components to make a finished product. Difficulty: 2 Medium Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 74) The main difference between process manufacturing and an assembly process is that process manufacturing uses sophisticated robots and automated machinery to produce a good or service, while an assembly process uses labor and simple tools to make a product. Answer: FALSE Explanation: Process manufacturing involves physically or chemically changing materials. An assembly process combines components to make a product. Difficulty: 2 Medium Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 75) Land, labor, capital, and knowledge are inputs into the production process. Answer: TRUE Explanation: The production process requires inputs (land, labor, capital, entrepreneurship, and knowledge), and production controls in order to develop outputs. Difficulty: 2 Medium Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 25 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

76) Although lean manufacturing attempts to reduce the amount of labor used in the manufacturing process, it typically does so by increasing the amount of most of the other resources used in the production process. Answer: FALSE Explanation: Lean manufacturing is the production of goods using less of everything compared to mass production: less human effort, but also less investment in tools, less manufacturing space, and even less engineering time. Difficulty: 2 Medium Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 77) Chinese companies use so many robots in its manufacturing sector that it may soon become the world's largest robot market. Answer: TRUE Explanation: Robots are making manufacturing, especially mass customization, far easier for companies. Many people believe China is so successful due to cheap labor; but it is also because of China's use of robotics. Difficulty: 2 Medium Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

78) Computers and robots are only useful in continuous production processes where the same type of product is produced many times. Answer: FALSE Explanation: Computers and robots are very useful in intermittent production processes. In fact, combining computers and robots with flexible manufacturing processes enables intermittent processes to produce custom-made goods almost as fast as mass-produced goods once were made. Difficulty: 2 Medium Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 79) To make its dry ice, Polar Caps Ice Company compresses carbon dioxide and cools it to an extremely low temperature. Polar Caps Ice Caps' method is an example of process manufacturing. Answer: TRUE Explanation: Process manufacturing physically or chemically changes materials. This is what Cooldaze does when it makes dry ice. Difficulty: 3 Hard Topic: Production Processes Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

80) Comfort Corners Home Furnishings specializes in producing custom-made residential furniture. The most efficient process for Comfort Corners to utilize would be a continuous production process. Answer: FALSE Explanation: Since its products are made to order rather than mass produced, Comfort Corners Home Furnishings would be more likely to use an intermittent process that would allow it to respond more flexibly to specific customer preferences. Difficulty: 3 Hard Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 81) B&B Brothers Manufacturing typically creates large batches of standardized products used by plumbers, such as pipefittings and valves that must be produced in standard sizes. A continuous production process would work well for B&B. Answer: TRUE Explanation: A continuous process is used to produce large batches of a particular product in a long production run. Difficulty: 3 Hard Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

82) Fuzzy Fabrics, Inc. is a specialty manufacturer that produces custom blankets according to customer specifications. Fuzzy Fabrics should probably use an intermittent process in production. Answer: TRUE Explanation: An intermittent process is characterized by short production runs and frequent adjustments to machinery in order to produce different products. This type of system works well for firms producing customized products in small batches. Difficulty: 3 Hard Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 83) Tim and Eric recently started a company focused on rehabbing old houses. Before they buy a house, they use software to create and design the renovation of each room. The program provides them with an estimate of how much of each kind of material is needed, and the orderly progression of tasks that need to be completed. Tim and Eric use computer-aided design. Answer: TRUE Explanation: CAD/CAM techniques are revolutionizing the design and production of both industrial and consumer goods. Computer-aided design software assists with the design of finished products. Difficulty: 3 Hard Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

84) BeltIn, Inc., is a seat belt manufacturer about 8 miles from two major auto assembly plants. Every two hours, BeltIn delivers seatbelts to each of the plants. The assembly plants only accept the number of seatbelts that they will use in cars during the next two hours after delivery. The auto plants embrace lean manufacturing. Answer: TRUE Explanation: Firms that practice lean manufacturing typically carry very limited amounts of inventory. They only accept delivery and add to their inventory the amount of raw materials or parts that they can use in the immediate future. Difficulty: 3 Hard Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 85) Tina's Tiny Treats bakes an assortment of cookies and candies for corporate accounts and restaurants. On a good day, Tina's receives orders for from 600 to 800 custom cookies, with a variety of uniqueness, although the company is famous for delicate shortbread and butter cookies. Some cookies have round shapes, but others are elongated rectangles, and yet others are triangles. The bakers can quickly change the cookie cutting machine to reflect the orders for the day, while computers program the ovens bake each cookie to perfection. Refrigeration is also computer controlled. Tina's Tiny Treats embraces flexible manufacturing and mass customization. Answer: TRUE Explanation: Flexible manufacturing means the company is using machines that can multitask. They can be quickly retrofitted to create a variety of products. The manufacturer can design and create customized orders, by changing the shape, color, and size depending upon the customer's preference. Difficulty: 3 Hard Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

86) Facility location is the process of selecting a geographic location for a company's operations. Answer: TRUE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 87) When considering the issue of facility location, it is important to find an isolated location so that work can get done without interruption from customers. Answer: FALSE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 88) Operations management planning is concerned with finding the ideal location for a business and also with materials requirement planning. It leaves decisions about purchasing and inventory control to marketing. Answer: FALSE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

89) When it comes to location decisions, labor costs are no longer an important consideration for most manufacturing firms. Answer: FALSE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 90) Today, e-commerce uses social media to make online transactions even easier. Answer: TRUE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 91) Manufacturing firms that want to minimize time-to-market are likely to choose facility sites that give them easy access to their preferred modes of transportation. Answer: TRUE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

92) Some companies will locate their production facilities near their suppliers. Answer: TRUE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 93) Many state and local governments offer tax incentives and government services to attract businesses. Answer: TRUE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 94) In making a location decision, businesses seldom consider "quality of life" in various locations, because factors that influence quality of life have little or no impact on profits. Answer: FALSE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

95) Online-focused strategies don't affect operations managers since it is not essential for operations managers to negotiate in an interfirm environment. Answer: FALSE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 96) For many firms, operations management has become an interfirm process. Answer: TRUE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 97) Facility layout is the function of operations management that considers the physical arrangement of resources (including people) in the production process. Answer: TRUE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

98) For service-intensive businesses, facility layout is usually designed to centralize the decisionmaking process. Answer: FALSE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 99) Telecommuting has diminished in popularity as a strategy for linking employees with work. Answer: FALSE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 100) The production of a bridge, ship, or large airplane usually involves a variable-position facility layout. Answer: FALSE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

101) The process layout simplifies production by using the same sequence of processes regardless of the design of the item being produced. Answer: FALSE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 102) In an assembly-line manufacturing layout workers do only a few tasks at a time. Answer: TRUE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 103) In a modular manufacturing layout teams of workers combine to produce more complex units. Answer: TRUE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

104) A process manufacturing layout is frequently used in operations that serve different customers' different needs. Answer: TRUE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 105) Facilities layout will depend upon the processes that are to be accomplished in the firm's operation. Answer: TRUE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 106) Materials requirement planning (MRP) enables a firm to make sure that the right amount of each material or component is available at the right time to satisfy its production needs. Answer: TRUE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

107) Materials requirement planning relies on the firm's balance sheet to make sure that the right quantities of finished goods are produced. Answer: FALSE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 108) One limitation of materials requirement planning (MRP) is that it is not a computer-based approach. Answer: FALSE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 109) Enterprise resource planning (ERP) is simpler and less sophisticated than manufacturing resource planning (MRP). Answer: FALSE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

110) Enterprise resource planning (ERP) combines all functional units of a firm into the production of goods and services, and may even include subsidiaries and other firms. Answer: TRUE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 111) ERP software enables multiple firms to manage all of their operations on the basis of a single, integrated set of corporate data. Answer: FALSE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 112) The purchasing function involves searching for quality resources and finding the best suppliers as well as negotiating the best price for the needed items. Answer: TRUE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

113) Online companies have helped businesses find the best supplies at the best prices. Answer: TRUE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 114) Modern companies deal with many different suppliers in order to avoid problems that can arise when one supplier is unable to provide needed parts or materials. Answer: FALSE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 115) Today, rather than purchase goods and services from a large number of firms, manufacturers often try to develop a close relationship with one or two key suppliers. Answer: TRUE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

116) The purchasing function of operations management seldom uses the Internet to make purchasing decisions. Answer: FALSE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 117) The primary characteristic of a just-in-time inventory system is that suppliers deliver parts and materials right at the time that the buyer is going to use them in the production process. Answer: TRUE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 118) The concept just-in-time (JIT) works well if a company works with lots of suppliers. It also helps avoid the breakdowns that occur when operating with an enterprise resource planning system. Answer: FALSE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

119) In a just-in-time inventory system, the producer holds large quantities of the materials and components used in the production process in its inventory to ensure that it always has enough on hand. Answer: FALSE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 120) Overall, American firms that have tried to use just-in-time inventory systems generally report disappointment with the results. Answer: FALSE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 121) In JIT inventory systems a manufacturer normally communicates its production plans to suppliers so that they can deliver needed parts and materials just in time for the manufacturer to use them. Answer: TRUE Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

122) Quality control is a continual process of checking to make certain that there is consistency in the quality of products being produced. Answer: TRUE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 123) Six Sigma is a benchmark of quality standards that many product and service industries try to achieve. Answer: TRUE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 124) Under the Six Sigma quality standard the idea is to detect potential problems, in order to prevent their occurrence. Answer: TRUE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

125) Six Sigma is a quality measure that allows only 3.4 defects per million opportunities. Answer: TRUE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 126) A key element of the statistical quality control (SQC) process is the reliance on quality control experts to inspect at the end of the production line to make sure that no defective products are shipped to final customers. Answer: FALSE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 127) Statistical quality control (SQC) is the process some managers use to continually monitor all phases of the production process to assure that quality is being built into the product from the beginning of the production process. Answer: TRUE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

128) Statistical process control (SPC) is the process of taking statistical samples of product components at each stage of the production process and plotting those results on a graph. Any variances from quality standards are recognized and can be corrected if beyond the set standards. Answer: TRUE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 129) The Deming Cycle is designed to catch errors before they happen. Answer: TRUE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 130) The Deming Cycle approach to quality control consists of: Plan, Do, Check, Act. Answer: TRUE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

131) Service organizations find it difficult to provide outstanding service every time because the process is so labor intensive. Answer: TRUE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 132) If a company achieves Six Sigma quality standards, they automatically win the Malcolm Baldrige award. Answer: FALSE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 133) The Baldrige standards measure a firm's quality in several key areas including planning, leadership, and customer and market focus. Answer: TRUE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

134) ISO is a worldwide, nongovernmental federation that sets global measures of quality. Answer: TRUE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 135) The International Organization for Standardization continually updates acceptable international requirements in the areas of process control, product testing, storage, and delivery. Answer: TRUE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 136) ISO 9001 refers to a set of international standards for quality management and assurance. Answer: TRUE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

137) ISO 14001 is a new set of product quality standards that has replaced the old ISO 9001 standards. Answer: FALSE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 138) The European Union demands that all firms that want to do business with its member nations must satisfy ISO 9001 standards. Answer: TRUE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 139) ISO 14001 is a collection of the best practices for managing an organization's impact on the environment. Answer: TRUE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

140) Firms that satisfy the ISO 9001 and ISO 14001 standards have demonstrated a world-class management system in both quality and environmental standards. Answer: TRUE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 141) One valid criticism of modern production planning methods such as ERP and MRP is that there is no way to use recent advances in information technology (IT) with these systems. Answer: FALSE Explanation: Both ERP and MRP are involved with computer advances that have occurred in information technology that are used in production planning methods. Difficulty: 2 Medium Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 142) Recent developments in information technology will discourage companies from allowing employees to telecommute. Answer: FALSE Explanation: Recent developments in information technology are actually giving firms more flexibility in choosing locations. With increasing numbers of workers able to telecommute, for many firms the need to locate near population centers has diminished. Difficulty: 2 Medium Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

143) Areas with higher than average labor costs are almost always at a major disadvantage when trying to attract new businesses. Answer: FALSE Explanation: Although the cost of labor is an important consideration in the location decision of some firms, it is far from the only factor that firms must consider. Other considerations might include the availability of cheap resources (such as water, coal, or electricity), proximity to customers or to preferred modes of transportation, low taxes or special government incentives, and quality of life considerations (such as climate, recreational opportunities, education systems, and crime rates). High wage areas that have some or all of these advantages might be attractive to many firms despite the high labor costs. Difficulty: 2 Medium Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 144) Retailing is one area where technology is unlikely to make a big difference in how services are provided. Answer: FALSE Explanation: Technology has made a big difference in retailing. For brick-and-mortar businesses to beat online competition, they have to choose good locations and offer outstanding service to those who do come to shop. Difficulty: 2 Medium Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

145) The decreased use of enterprise resource planning (ERP) reflects the fact that firms are not interested in combining the computerized functions of all divisions and subsidiaries of a firm. Answer: FALSE Explanation: ERP (enterprise resource planning system) enables firms to manage all of their operations on the basis of a single, integrated set of corporate data. Difficulty: 2 Medium Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 146) A major advantage of a just-in-time inventory system is that it reduces costs and the effort for both the producer and its suppliers. Answer: FALSE Explanation: A just-in-time inventory system requires more effort from suppliers to coordinate with producers and deliver goods on a frequent basis. Difficulty: 2 Medium Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

147) One of the best ways to maintain consistently high quality in the production process is to give a group of specialists in a separate quality control department the authority to inspect each product at the end of the production process. Answer: FALSE Explanation: Today, quality control tries to catch errors before they happen. Standards and methods such as Six Sigma, statistical quality control, and statistical process control focus on what is happening at each stage of the production process. These techniques eliminate (or at least greatly reduce) the need for a quality control inspection at the end of the production process. Difficulty: 2 Medium Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 148) Operations managers have learned that quality control is not a never-ending process. Just before you add packaging to the finished product, official company inspectors do a random spotcheck. All inspections have to occur at the end of a production run because only then can the inspector see the total finished product in order to determine if quality is jeopardized. Answer: FALSE Explanation: Today, quality control tries to catch errors before they happen. Standards and methods such as six sigma, statistical quality control, and statistical process control focus on what is happening at each stage of the production process. Difficulty: 2 Medium Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

149) According to the box titled "Should We Stay or Should We Go?," federal law states, a firm must give employees 60 days' notice of a facility or plant closing. Answer: TRUE Difficulty: 2 Medium Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 150) Ahmed, an operations manager for a smartphone manufacturer, just accepted a new operations position with a service company. Ahmed will find that operations management at the new job will differ significantly from operations management at the manufacturer. Answer: FALSE Explanation: Operations management in the service sector involves many of the same functions as in the manufacturing sector, including concerns about facility location, facility layout, quality control, and MRP and ERP. Difficulty: 3 Hard Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

151) Bryant is an outdoorsman. Inspired by his love of hunting and fishing, he started an online company specializing in his favorite hunting and fishing gear. He decided to locate his business near Kentucky Lake, partly because of low labor costs, but mainly because the area offered excellent fishing and hunting opportunities, a low crime rate, and a pleasant climate. Bryant's location decision was strongly influenced by quality of life considerations. Answer: TRUE Explanation: Quality of life includes weather and climate, crime rates, and recreational opportunities. Difficulty: 3 Hard Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 152) Marie is an operations manager at a local housekeeping service. She is recommending that her firm make better use of the Internet so its services are more readily available to its customers. Marie's recommendation reflects a growing trend in service-sector firms. Answer: TRUE Explanation: The ultimate in convenience is never having to leave home at all to get services. That's why there is so much interest in online banking, education, and other services. Difficulty: 3 Hard Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

153) Skyway Aeronautics was recently awarded a contract to build a large lab module that will be attached to a new space station. The module is approximately 48 feet long, 17 feet in diameter, and weighs over 60 tons. Skyway should use an assembly-line plant layout to produce this module. Answer: FALSE Explanation: Firms are moving away from assembly-line layouts. Moreover, a product as large as this module would be awkward and difficult to move along an assembly line. When producing a large, bulky, one-of-a-kind item such as a bridge or ship (or a large space station module), firms normally use a fixed-position layout. Difficulty: 3 Hard Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 154) McGowan Brothers Manufacturing recently redesigned its facility layout to group similar equipment and functions together. This allows flexibility in the sequence in which products are produced using these functions. McGowan Brothers' new layout is an example of the fixedposition layout. Answer: FALSE Explanation: This is an example of a process layout. A process layout is a flexible layout in which similar equipment and functions are grouped together and the sequence in which the functions are performed depends on the design of the product. Difficulty: 3 Hard Topic: Operations Management Planning Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

155) KTG Computers is looking to set up a planning system that will integrate its production and operations system with those of its suppliers. As its operations management consultant, you explain that it needs a material requirement planning (MRP) system. Answer: FALSE Explanation: MRP is a computer application that is used within a single company, not multiple firms. Difficulty: 3 Hard Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 156) General Automotive currently uses an ERP system to manage all of its production operations and coordinate them with the other operations of the company. The company also wants to implement a just-in-time (JIT) inventory system. Unfortunately for General Automotive, ERP is incompatible with JIT, so if it adopts the new inventory system it will have to abandon ERP. Answer: FALSE Explanation: The first step in a just-in-time inventory system requires the firm to determine what parts and materials will be needed and when they will be needed. An enterprise requirement planning (ERP) system can help the firm accomplish this step efficiently. The firm then informs suppliers of its needs. Suppliers are expected to deliver the parts and materials just in time to go on the assembly line. Difficulty: 3 Hard Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

157) Pieces and Parts, Inc., is a major supplier of components used by Game Guys, Inc.. Game Guys is looking to implement a just-in-time inventory system. Pieces and Parts should benefit from this approach, since JIT systems greatly simplify the task of suppliers. Answer: FALSE Explanation: In just-in-time systems, suppliers deliver only the amount needed to meet production requirements. Thus, Pieces and Parts will be required to coordinate its shipments with the production needs of Game Guys. This will mean it must make smaller and much more frequent shipments, thus increasing its costs. Difficulty: 3 Hard Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 158) In an effort to improve the quality control process at the Southern Peanut Corporation, management is introducing the importance of the Deming Cycle to employees. This suggests that managers are aware of the need to find potential problems before they occur. Answer: TRUE Explanation: The Deming Cycle (named after the father of the quality control movement) consists of four stages: plan, do, check, and act. Modern quality control techniques such as SQC and SPC provide ways to implement this cycle. The idea behind these approaches is to find problems before they occur. Difficulty: 3 Hard Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

159) Bolt's Electric is in the process of trying to achieve ISO 14001 certification. Although the criteria for certification involve several milestones, we can be assured they will be evaluated on the regularity and thoroughness of their environmental audits, and how well top management reviews the firm's adherence to policies that are environmentally friendly. Answer: TRUE Explanation: ISO 14001 is not a measure of environmental performance. Instead it is a measure of how well a firm puts in place best practices for measuring its environmental impact. It does not specify the level of performance in any environmental category. Difficulty: 3 Hard Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 160) Star Performance, Inc., a sporting good company, and Fairview Community College are interested in following the lead of other companies and implementing criteria that will lead toward receiving the Baldrige Award. As their advisor, you emphasize that focusing on the measurement of customer satisfaction is one important area where both will need to excel. Answer: TRUE Explanation: To qualify for the Baldrige Award, firms must show exceptional quality in seven key areas: strategic planning, customer and market focus, leadership, information and analysis, human resources focus, process management, and business results. Difficulty: 3 Hard Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

161) Gianni's Gelato, a large ice cream producer on the east coast, wants to license firms in Europe to produce and sell its products. We can conclude that this is good strategy if it wants to save the money it would cost to be ISO 9001 certified because the EU (European Union), unlike U.S. firms, has not yet adopted these standards. Answer: FALSE Explanation: ISO 9001 deals with the quality of individual products. The EU has adopted ISO 9001 quality standards and expects any company doing business with companies who do business within the European Union to adopt similar standards. Some U.S. firms are also demanding ISO 9001 certification of their business partners. Difficulty: 3 Hard Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 162) Picture Pieces corporation produces jigsaw puzzles. The quality of its materials and the calibration of machines that cut and fit pieces of a puzzle are extremely important if it is to eliminate defects and meet customer specifications. If the company meets or exceeds Six Sigma criteria, it will have no more than 60 defects per million puzzles. Answer: FALSE Explanation: Six Sigma standards require that a firm have no more than 3.4 defects per 1 million opportunities. Six Sigma is a set of practices designed to eliminate defects in the production of products. Difficulty: 3 Hard Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

163) A major purpose of the program evaluation and review technique (PERT) is to identify the minimum time needed to complete a project. Answer: TRUE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 164) The end result of PERT analysis is an estimate of the total cost of completing a project. Answer: FALSE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 165) The critical path identified by PERT analysis is the sequence of tasks that can be completed in the shortest amount of time. Answer: FALSE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

166) PERT is a popular technique for analyzing the tasks involved to complete a given project, estimating the time required to complete each task, and identifying the minimum time needed to complete the project. Answer: TRUE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 167) An advantage of PERT diagrams is that they are usually so simple to draw that a computer is not needed. Answer: FALSE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 168) In a PERT network, a critical path is the sequence of tasks that takes the longest time to complete. Answer: TRUE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

169) Compared to PERT networks, Gantt charts provide a more basic way to track progress on a given project. Answer: TRUE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 170) A Gantt chart is a bar graph showing production managers what projects are being worked on and the stage of development at any given time. Answer: TRUE Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 171) The significance of the critical path on a PERT chart is that it identifies the least costly method of producing a given product. Answer: FALSE Explanation: The critical path on a PERT chart identifies the sequence of events in a project that takes the longest time to complete. Difficulty: 2 Medium Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

172) The first step in the PERT method is to assign a cost to each activity. Answer: FALSE Explanation: The first step in a PERT network is to identify, analyze, and determine the sequence of tasks that must be completed in order to complete the overall project. Difficulty: 2 Medium Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 173) The PERT network provides a project manager with a plan that puts all the activities of a project in the correct order that they must be accomplished, shows which activities can be accomplished simultaneously, and, also gives the manager a good estimate of how long each activity will take to complete. Answer: TRUE Explanation: A PERT Chart shows the sequence of activities or events that must occur in order for a project to be successfully completed. It also provides an indication of which activities can be accomplished simultaneously and provides an estimate of the time it will take to accomplish each activity. Difficulty: 2 Medium Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 174) Gantt charts will show the production manager if certain activities in the production process are lagging behind their acceptable time of completion. Answer: TRUE Explanation: Using a Gantt Chart or a Gantt-like computer program, a manager can trace the production process minute by minute to determine which tasks are on time and which are behind, so that adjustments can be made to allow the company to stay on schedule. Difficulty: 2 Medium Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

175) Casper is a construction manager who needs to determine how long a project will take to complete and which tasks in the project have the greatest potential for delaying his project. The PERT chart will help Casper answer these questions. Answer: TRUE Explanation: PERT refers to program evaluation and review technique, which is a method of determining the tasks, the sequence of tasks, the time it takes to complete each task, and minimum time required to complete a project. The PERT method also identifies the critical path, which is the sequence of tasks that takes the longest to complete. If a task on the critical path is delayed, it can delay the completion of the project as a whole. Difficulty: 3 Hard Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 176) Brian is in charge of a complex project. He wants to see how all the different activities involved in completing the project are related to each other. One way to illustrate these relationships would be to construct a PERT chart. Answer: TRUE Explanation: As Figure 9.3 illustrates, a PERT chart identifies all of the activities that must be performed in order to complete a project and the minimum time it will take to complete each task. The arrows in a PERT chart indicate the sequence in which activities must be performed. For example, if an arrow goes from activity "A" to activity "B," this means that "A" must be completed before "B" can begin. Difficulty: 3 Hard Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

177) Lacey is a production manager and often refers to a bar graph that shows what activities are being worked on, and how much of each task has been completed on a daily basis. Lacey is using a Gantt chart. Answer: TRUE Explanation: A Gantt chart is a bar graph that shows what projects are being worked on and how much of each project has been completed on a daily basis. Difficulty: 3 Hard Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 178) Review the PERT Network below: If it takes 2 weeks for each activity (represented by a box) to be completed, it can be determined that the boxes labeled with No. 1 create the critical path because this path of activities takes the shortest time to complete.

Answer: FALSE Explanation: The critical path in a PERT Network is the project activity path that takes the longest time to complete. In this diagram, if each box = 2 weeks completion time, the path of boxes labeled [2, 3, 3, 3, 3, Finish] is the critical path. Difficulty: 3 Hard Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

179) In recent years, the service sector of the U.S. economy has A) grown much more rapidly than the manufacturing sector. B) become the low-wage sector of the U.S. economy. C) achieved extremely high productivity gains according to government reports. D) focused less on quality and more on reducing costs of production. Answer: A Difficulty: 1 Easy Topic: The State of U.S. Manufacturing Today Learning Objective: 09-01 Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 180) Manufacturing output in the U.S. continues to increase. The high unemployment of skilled workers who previously worked in the manufacturing sector A) is the result of untrained laborers. B) is strictly a factor of U.S. manufacturing companies outsourcing the majority of their work. C) can be reconciled by the fact that manufacturing is very efficient and requires fewer workers to produce the same amount, or even more output. D) can be attributed to manufacturing going green. Answer: C Difficulty: 1 Easy Topic: The State of U.S. Manufacturing Today Learning Objective: 09-01 Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

181) One strategy U.S. manufacturers have employed in order to become more competitive is A) focusing on providing the lowest-priced products. B) creating technology foreign manufacturers depend on to increase effectiveness and efficiency. C) maintaining a distance relationship with suppliers in an effort to guard trade secrets. D) increasing advertising budgets. Answer: B Explanation: U.S. manufacturers have emphasized a number of actions including relying on technology to unite companies who have a stake in each other's success. Difficulty: 2 Medium Topic: The State of U.S. Manufacturing Today Learning Objective: 09-01 Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 182) To strengthen its manufacturing base in the future, U.S. will have to A) uncover lower wage workers in the U.S. to compete with China. B) continue to innovate. C) support students in high school and college interested in studying the arts. D) cut the amount of benefits offered to workers. Answer: B Explanation: According to many analysts the U.S. will have to innovate to be able to strengthen its manufacturing base. Difficulty: 2 Medium Topic: The State of U.S. Manufacturing Today Learning Objective: 09-01 Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

183) According to the Reaching Beyond Our Borders box, one way Germany is remaining competitive in industrial jobs is A) they implement apprenticeships to provide on-the-job education for young workers. B) they encourage students to leave school to take manufacturing jobs. C) they rely solely on robotic technology and no longer use a human workforce. D) they send all of their manufacturing work to China. Answer: A Explanation: For centuries, German companies have relied on apprenticeships to train their young workforce. After an intense program of vocational school and on-the-job education, apprentices must pass an exam to earn certification. Difficulty: 2 Medium Topic: The State of U.S. Manufacturing Today Learning Objective: 09-01 Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 184) At Skilled Specialties, Inc., production line employees often work side by side with their robotic counterparts. This practice is also common among many of Skilled Specialties' other American competitors. The resurgence of U.S. manufacturing firms in recent years can be credited to A) the government's willingness to implement policies designed to protect U.S. firms from lowcost foreign competition. B) a decision by many U.S. manufacturers to drastically reduce costs by making more extensive use of mass-production techniques. C) a number of significant changes in production techniques. D) a relaxation of government laws that has allowed manufacturing firms to merge more easily, thus achieving stronger market positions. Answer: C Explanation: Pressures from foreign competition forced U.S. manufacturing firms to make several major changes in production processes. This forced American factories to adapt and make changes to operate efficiently without large amounts of human labor. Now, many factory employees work side by side with robots. Difficulty: 3 Hard Topic: The State of U.S. Manufacturing Today Learning Objective: 09-01 Describe the current state of U.S. manufacturing and what manufacturers have done to become more competitive. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

185) Production management is the traditional term used to describe all the activities managers do to help their firms create A) resources. B) goods. C) services. D) equities. Answer: B Difficulty: 1 Easy Topic: Production Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 186) Operations management is a specialized area in management that converts resources into A) services, rather than goods. B) goods, rather than services. C) both goods and services. D) financial data. Answer: C Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 187) ________ is the specialized area of management that converts or transforms resources into goods and services. A) Logistics management B) Resource engineering C) Intrapreneuring D) Operations management Answer: D Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

188) ________ is the creation of goods and services using land, labor, capital, entrepreneurship, and knowledge. A) Resource recombination B) Supply chain management C) Production D) Purchasing Answer: C Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 189) The U.S. economy is now driven by A) farming. B) manufacturing. C) services. D) trade. Answer: C Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 190) Operations management in the service sector is focused on creating A) good experiences for those who use the service. B) jobs for the local community. C) additional customer expectations. D) inexpensive ways to get things done. Answer: A Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

191) Experts in operations management for service industry businesses stress A) using records from accounting to determine what business to go after. B) relying on one's individual operation as opposed to developing partnerships. C) training employees to please customers by anticipating their needs. D) training employees to always adhere to only one way of doing things. Answer: C Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 192) The basic reason the term operations management is favored over the term production management is that A) the U.S. economy has moved toward a more socialist approach with government controlling a greater share of the production process. B) a much larger share of total output is being produced by nonprofit organizations. C) the United States is now largely driven by services rather than manufacturing. D) the United States now exports more than it imports. Answer: C Explanation: Production management has been the term used to refer to the creation of goods (tangible products). In recent years, the service sector has become the dominant area of the economy. This has led to the use of the term operations management in order to reflect the production of both goods and services. Difficulty: 2 Medium Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

193) Which of the following statements best describes the distinction between production management and operations management? A) Production management involves activities managers perform to help create services while operations management involves the activities managers perform to produce goods. B) Production management involves activities managers perform to obtain physical resources while operations management involves the activities managers perform to obtain the financial resources. C) Production management involves activities managers perform to help create goods while operations management is a term that involves the activities involved in producing services as well as goods. D) Production management involves activities managers perform to help create intangible products while operations management involves the activities managers perform to produce tangible products. Answer: C Explanation: In the past, the term production management was used to describe all the activities managers do to help their firms create goods (tangible products). However, now that the service sector has become dominant in the U.S. economy, a newer term, operations management, is used to reflect the fact that managers perform these activities to help firms create services (intangible products) as well as goods. Difficulty: 2 Medium Topic: Production Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

194) Which of the following statements about operations management in the service sector is most accurate? A) Operations management in the service sector is all about providing the service at the lowest cost. B) Operations management in the service sector should focus on providing customers with a good experience. C) Operations management in the service sector has less flexibility than operations management in the manufacturing sector, because services are not technology driven. D) Operations management in the service sector has done a good job of increasing output, but a poor job of improving quality. Answer: B Explanation: The text discussion of operations management in the hotel industry shows how service companies succeed by providing a good experience for their customers. Difficulty: 2 Medium Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 195) For most service businesses the quality standard has become A) providing prompt and predictable service. B) providing a competitive level of service at the lowest cost. C) pleasing customers by anticipating their needs. D) less important than it is for manufacturing businesses. Answer: C Explanation: Pleasing customers by anticipating their needs has become the quality standard for most service businesses. Difficulty: 2 Medium Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

196) Oakley, a freshman just starting college, hasn't decided on his major. He is looking into operations management and is also exploring job opportunities in this field. Which of the following statements about jobs for operations management majors is most accurate? If he majors in operations management, Oakley will A) have limited job opportunities because operations management positions are only available in the slowly growing manufacturing sector. B) acquire skills and knowledge that are valuable to firms in both the manufacturing and service sectors. C) have plenty of job offers, but they will mainly be in low-wage positions in the service sector. D) find plenty of employment opportunities in the government and education, but not very many in the private sector. Answer: B Explanation: Operations management is a specialized area in management that involves converting or transforming resources into goods and services. Operations managers provide knowledge and skills that can be used in either the manufacturing or services sector. Difficulty: 3 Hard Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 197) The Four Seasons hotel chain offers restaurants with the finest service, elevators that run smoothly, and a front desk that checks people in quickly. Many times fresh-cut flowers are in the lobbies and dishes of fruit are in each room. ________ is responsible for implementing these customer benefits. A) Human resources management B) The management staff C) Operations management D) Production management Answer: C Explanation: Operations management is the implementation phase of management. Difficulty: 3 Hard Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

198) Everyday, the Local Harvest Grocery Store general manager reviews employee work schedules. This includes the late night stock crew, the cashiers, the deli, produce, and meat department crews, and the management office personnel. He coordinates work schedules with shipments, as well as the information he collects from point-of-sale terminals that indicates the busiest hours at the store, and then he communicates any exceptions to his department managers. These daily tasks are part of A) operations management. B) promotions management. C) distributive management. D) marketing management. Answer: A Explanation: Operations management is the process of converting resources, including human resources into valuable products and services. Difficulty: 3 Hard Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 199) Rita Marie and Lynn just returned from a scuba diving and snorkeling trip in the Caymans. Both travelers highly recommended the resort where they stayed. Guest services were extremely prompt in assisting with diving excursions. All resort employees were trained to greet every guest each time they encountered them, whether it was on a pathway to the pools and beaches, or in the restaurants. Many times, the employees even referred to each guest by name. ________ in the service industry is about creating a good experience for customers. A) Enterprise resource planning B) Intermittent planning C) Operations management D) Production management Answer: C Explanation: Operations management is a specialized area in management that converts or transforms resources into goods and services. Managing the operations in the service sector, which includes entertainment venues, hotels, universities, and libraries, is about creating a memorable experience for guests, clients, customers, and students. Difficulty: 3 Hard Topic: Operations Management Learning Objective: 09-02 Describe the evolution from production to operations management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

200) Production creates A) time utility. B) possession utility. C) form utility. D) marginal utility. Answer: C Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 201) ________ utility is the value added by the creation of finished goods and services using raw materials, components, and other inputs. A) Manufacturing B) Marginal C) Consumption D) Form Answer: D Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

202) In ________, materials are physically or chemically changed to produce a product. A) process manufacturing B) assembly processes C) utilitarian production D) diffusive manufacturing Answer: A Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 203) A(n) ________ puts together components to make a product. A) modular process B) compression process C) assembly process D) econometric process Answer: C Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

204) A production process characterized by long production runs to turn out finished goods over time is known as a(n) A) assembly process. B) continuous process. C) extended process. D) unrestricted process. Answer: B Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 205) A production process characterized by a short production run and frequent adjustments to machines so that different products can be produced is known as a(n) A) just-in-time process. B) lean manufacturing system. C) analytic process. D) intermittent process. Answer: D Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

206) Most new manufacturing facilities use: A) continuous processes. B) intermittent processes. C) traditional processes. D) synthetic processes. Answer: B Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 207) In the past, the idea behind mass production was to A) produce goods of the highest possible quality. B) give producers the maximum flexibility to respond to customer preferences. C) make large quantities of a limited variety of products at very low cost. D) give workers more control over their work environment. Answer: C Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

208) ________ uses computers to help design products. A) PERT B) QPC C) DPA D) CAD Answer: D Difficulty: 1 Easy Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 209) ________ involves computers directly in the production process. A) CAD B) CAM C) AMDA D) AMCAP Answer: B Difficulty: 1 Easy Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

210) CAD/CAM makes it possible to custom-design products to meet the needs of ________ with ________. A) small markets; a decrease in cost B) very large markets; no increase in cost C) small markets; very little increase in cost D) international markets; products that are complex Answer: C Difficulty: 1 Easy Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 211) CAD has ________ productivity in many firms. A) unfortunately had no effect on B) actually decreased C) increased D) splintered Answer: C Difficulty: 1 Easy Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

212) Expensive software that enables computer-aided design machines to communicate with computer-aided manufacturing machines is called A) a flexible system. B) a computer-based feedback control system. C) computer-integrated manufacturing. D) heuristic manufacturing integration. Answer: C Difficulty: 1 Easy Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 213) In ________, machines are designed to do multiple tasks so that they can produce a variety of products. A) systems engineering B) microdesign C) modular construction D) flexible manufacturing Answer: D Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

214) In manufacturing, one way to compete with cheap labor is to A) use robots. B) hire experienced people. C) make the production line longer. D) increase inputs to the system. Answer: A Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 215) The goal of lean manufacturing is to A) keep inventories of finished goods as high as possible. B) produce goods and services with less of everything that goes into the process. C) produce a very limited variety of goods. D) become more self-sufficient by producing major components rather than buying them. Answer: B Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

216) ________ means tailoring products to meet the needs of a large number of individual customers. A) Mass customization B) Mass production C) Competing in time D) Feedback response production Answer: A Difficulty: 1 Easy Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 217) Which of the following statements describes past processes that existed in manufacturing that negatively affected a firm's competitive advantage? A) Companies tended to produce a large quantity of the same product at a very low cost. B) Companies required their suppliers to only deliver the amount of good needed for a shortterm production run. C) Companies changed their equipment too often, which created lost time on the job. D) Companies refused to train employees in technology and on machinery. Answer: A Explanation: In order for manufacturing to increase its competitiveness and meet the demands of the marketplace, it needed to restructure processes to improve quality and flexibility. In the past, manufacturers relied on continuous process systems that produced large quantities of the same good. The emphasis was on creating efficiencies and keeping costs down, as opposed to taking the pulse of the customer's needs. Difficulty: 2 Medium Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

218) Which of the following statements about the impact of CAD/CAM on manufacturing is most accurate? A) CAD/CAM is most useful to firms producing durable goods such as automobiles. B) CAD/CAM has replaced ERP as the most sophisticated resource planning technique. C) CAD/CAM allows firms to save money by replacing skilled labor with computers to perform all of the high-skill tasks. D) CAD/CAM has made it possible to produce custom-designed products with little increase in costs. Answer: D Explanation: CAD/CAM allows a producer to program design changes that can be incorporated right into the production line. This makes it easy to customize products with little increase in costs. Difficulty: 2 Medium Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 219) A big advantage of computer-integrated manufacturing software is that it A) makes it possible to custom-design products to meet the needs of small markets while cutting the time needed to program machines. B) replaces "dumb" robots with "smart" computers. C) allows personal computers to communicate directly with the firm's server. D) controls all of the actions of the assembly line from a central location. Answer: A Explanation: Computer-integrated manufacturing utilizes software that unites CAD with CAM and makes it possible to custom-design products to meet the needs of small markets with very little increase in cost. Difficulty: 2 Medium Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

220) A basic characteristic of flexible manufacturing is that it A) relies heavily on labor, since humans are more adaptable than machines. B) uses machines designed to perform multiple tasks so they can be used to produce a variety of products. C) achieves its flexibility at the cost of much slower rates of production than mass production techniques. D) is only possible when using mass-production processes. Answer: B Explanation: Flexible manufacturing uses machines designed to perform multiple tasks so that they can produce a variety of products. Difficulty: 2 Medium Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 221) A company becomes lean by ________ its capacity to produce high-quality goods, while ________ its need for resources. A) investigating; planning B) increasing; decreasing C) decreasing; increasing D) planning; investigating Answer: B Explanation: A company becomes lean by continuously increasing its capacity to produce highquality goods while decreasing its need for resources. Difficulty: 2 Medium Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

222) Lean manufacturing ________ productivity. A) increases B) decreases C) has no effect on D) removes the need for added Answer: A Explanation: A company becomes lean by continuously increasing its capacity to produce highquality goods while decreasing its need for resources. Difficulty: 2 Medium Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 223) The main objective of lean manufacturing is to A) keep labor costs as low as possible by expanding the use of other resources. B) produce products that have fewer frills and options in order to simplify the production process and keep costs as low as possible. C) produce goods using less of all types of resources. D) get state and local governments to handle many of the tasks currently performed by the firm. Answer: C Explanation: Lean manufacturing refers to efforts to produce goods by using less of everything, including materials, labor, and production. Difficulty: 2 Medium Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

224) A benefit of CAD is A) it basically eliminates the need for human intervention. B) it saves on materials costs. C) it permits customization without a significant increase in price. D) it produces a higher quality product, which allows the manufacturer to charge more. Answer: C Explanation: Computer-aided design permits customization due to the ease of changing a design to satisfy individual tastes. Difficulty: 2 Medium Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 225) The use of ________ has increased productivity along the assembly line and within servicebased businesses while simultaneously causing a reduction in jobs for people. A) robots B) generic products C) lean manufacturing D) 3D printers Answer: A Explanation: Robots have completely changed manufacturing by improving productivity, including mass customization, in both the factory and in service organizations, like hotels. Difficulty: 2 Medium Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

226) Someday, ________ could revolutionize the production of many items. For now, however, it is mostly used to create prototypes and molds. A) CID B) 3D printing C) CAD D) CAM Answer: B Explanation: Manufacturers have largely used 3D printing to create prototype models and molds for industrial products. But in the future, we could see 3D printing used in the production of all sorts of items. Difficulty: 2 Medium Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 227) In the Adapting to Change box, we read that 3D printing can prove to be revolutionary for the medical industry because A) it basically eliminates the need for human (doctor) intervention. B) it saves on insurance costs. C) it can produce models to help with organ transplants and improved medical imaging. D) it creates images for a doctor without the need for the patient to show up to the examination. Answer: C Explanation: 3D printing could be revolutionary for the medial industry by producing models to help with organ transplants and additive manufacturing could be used to design better medicines or improve medical imaging. Difficulty: 2 Medium Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

228) Comfort Corners Home Furnishings uses labor and machinery to transform wood, plastic, metal, and cloth into comfortable chairs, sofas, and love seats for the home. This process creates A) form utility. B) place utility. C) use facility. D) intangible productivity. Answer: A Explanation: Production is the creation of finished goods and services from inputs such as land, labor, capital, entrepreneurship, and knowledge. Production creates form utility, which is the value added by the creation of finished goods and services. Difficulty: 3 Hard Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 229) Tops and Lids Hat Company produces its hats and caps according to customers' requests. What process does Tops and Lids most likely use? A) analytic B) just-in-time C) intermittent D) continuous Answer: C Explanation: Custom-made items produced in small quantities would require an intermittent process rather than a continuous process. Difficulty: 3 Hard Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

230) Spokes Bikes has 18 different bicycle models that can be created in over 2 million combinations. Each combination is designed to fit the needs of a specific customer. Therefore, the customer chooses the model, size, color, and design they want. An analysis of this company's operation would indicate that it uses A) lean manufacturing. B) flexible production. C) mass customization. D) continuous production. Answer: C Explanation: Mass customization means tailoring products to meet the needs of a large number of individual customers. Because this firm makes bicycles in more than 2 million combinations and each customer can choose the model, size, color, and design that they want, Spokes is using mass customization. Difficulty: 3 Hard Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 231) Sunnyside Travel, Inc. is a travel agency that specializes in destination wedding vacation packages. It has packages ranging from cruises to beach resorts all around the world. The customer chooses what they would like to pay, where they would like to visit, and what they would like to do. Based on this information, Sunnyside uses ________ to please the customers. A) excellent human resources management B) the Internet C) mass customization D) lean manufacturing Answer: C Explanation: Mass customization means tailoring products and services to meet and exceed the needs of a large number of individual customers. Difficulty: 3 Hard Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

232) To make their famous Daddy's Deluxe Italian Sandwiches, Santino's Sandwich Emporium finely slices prime meats, stacks them on Italian bread, adds special seasonings, cheeses, and veggies. The value added by Santinos's when it combines these ingredients to make a sandwich is known as A) consumer surplus. B) the analytic function. C) marginal utility. D) form utility. Answer: D Explanation: Form utility is the value added by the creation of finished goods and services. Difficulty: 3 Hard Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 233) Operations managers at Alumax Corporation have found that they can achieve efficient production only by producing very large quantities of aluminum without shutting down the production process. This indicates that Alumax should use a(n) ________ production process. A) intermittent B) assembly C) continuous D) systematic Answer: C Explanation: A continuous production process is characterized by long production runs over a period of time. Difficulty: 3 Hard Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

234) Ices Creamery combines sugar, cream, and the best natural flavorings, then churns and freezes the resulting mixture at a very low temperature, creating ice cream. The method Ices uses is an example of A) an analytic production system. B) process manufacturing. C) an assembly process. D) a symbiotic process. Answer: B Explanation: Process manufacturing physically or chemically changes materials. The process of mixing, churning, and cooling ingredients to create ice cream is an example of this type of production method. Difficulty: 3 Hard Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 235) Extel, Inc., acquires components to create its computers from an assortment of suppliers. The company then puts them together according to customer specifications to create custommade computers. This is an example of A) the assembly process. B) process manufacturing. C) synthetic production. D) continuous production. Answer: A Explanation: The assembly process puts together components to create a finished product. Difficulty: 3 Hard Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

236) MachineX, Inc. manufactures machinery and robots that can assemble an assortment of cars and trucks including heavy duty pickup trucks, sports cars, luxury sedans, minivans, and multiple sizes of SUVs. MachineX sells products to companies that require A) micro-engineering. B) flexible manufacturing. C) continuous production. D) multiple output processing. Answer: B Explanation: Flexible manufacturing is the design of machines to do multiple tasks so that they can produce a variety of products. Difficulty: 3 Hard Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 237) Aiden wants to find a way to cut back on labor and reduce his company's investment in tools and space, because he believes his firm uses more of all types of resources than is necessary. It seems that Aiden would like to adopt A) mass production. B) marginal cost management. C) lean manufacturing. D) the maximum production method. Answer: C Explanation: Lean manufacturing is the production of goods using less of everything compared to mass production. Difficulty: 3 Hard Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

238) The Corporate Comfort Furniture Company mass manufactures first-rate desks and chairs for executive offices. But now, the company is about to make a radical change in its production process. Customers will be able to provide specific measurements, select from a variety of fabric patterns, and answer some basic questions about the furniture styles they like, then design a chair and desk that is ergonomically designed for maximum comfort for its users. The new method Corporate Comfort will use is an example of A) just-in-time manufacturing. B) analytic production. C) mass customization. D) individualized production. Answer: C Explanation: Mass customization means tailoring products and services to meet the needs of individual customers. Difficulty: 3 Hard Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 239) Your favorite photo can now be printed on your favorite credit card. You can design your own dresses online and have them sent to you in a few days. You can even create your own orthotics to fit inside your shoes. These are examples of the trend toward A) continuous processes. B) intermittent processes. C) mass customization. D) lean manufacturing. Answer: C Explanation: Mass customization is the tailoring of products to meet the needs of a large number of individual customers. More and more manufacturers and retailers are learning to customize their products. Difficulty: 3 Hard Topic: Production Processes and Techniques Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

240) Milan is a production and operations manager for a fashion company. Lately, he has been researching a system that will allow his company to take precise measurements from a customer and program machines to design and produce custom-cut clothes at little additional cost. This type of system is an example of the benefits of A) mass production. B) just-in-time production systems. C) the PERT method. D) CAD/CAM. Answer: D Explanation: CAD/CAM has made it possible to custom-design products to meet the tastes of small markets with very little increase in cost. Difficulty: 3 Hard Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 241) Digit Designs manufactures high-quality gloves and other accessories. It already uses both computer-aided design and computer-aided manufacturing. Unfortunately, the two systems cannot communicate with each other. William Warmdigit, a production manager at Digit Designs, has heard about software that allows CAD and CAM to work together, and wants to learn more about it. William is interested in A) linear programming software. B) holistic internalization of operations. C) computer-integrated manufacturing. D) complex systems integration. Answer: C Explanation: Computer-integrated manufacturing uses sophisticated software to unite CAD with CAM. Difficulty: 3 Hard Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

242) Susie works for an architectural firm and the partners have always drawn the plans for projects by hand. Though Susie learned how to draw by hand in college, she is also highly skilled on computer programs that allow her to create designs in 3D. She plans to demonstrate the effectiveness of such programs to the firm's partners. The computer program she will recommend to the partners is A) CAD. B) CAM. C) CIM. D) SCM. Answer: A Explanation: Computer-aided design systems allow designers like Sarah to work in three dimensions and to make design changes quickly with very little increase in cost. Difficulty: 3 Hard Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 243) ________ is the process of selecting a geographic location for a company's operations. A) Facility location B) Facility layout C) FRP D) Geographic requirements planning Answer: A Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

244) Which of the following is a likely reason that a company would move its facility from one location to another? A) availability of expensive labor B) higher quotas on competing goods C) access to various modes of transportation D) availability of a retired workforce Answer: C Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 245) Firms that have a goal of ________ tend to locate facilities with access to major highways, ports, railways, and airports. A) reducing time to market B) using ERP techniques C) replacing labor with machinery D) switching to a more service-oriented product mix Answer: A Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

246) Contemporary producers and their suppliers A) locate in areas where they can share the same labor. B) know that it is not necessary to locate close to international customers due to technology such as the Internet. C) locate close together to decrease the cost of distribution. D) have advanced beyond ERP to more sophisticated systems. Answer: C Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 247) A major trend in business is ________, where employees work at least part time at home using a computer. A) outsourcing B) riveting C) outbounding D) telecommuting Answer: D Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

248) Operations management becomes a(n) ________ when companies work closely together to design, produce, and ship products to customers. A) open operation B) closed operation C) interfirm process D) conjoined process Answer: C Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 249) ________ is the physical arrangement of resources in the production process. A) Facility location B) Facility layout C) ERP D) RRL Answer: B Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

250) Modular facilities layouts consist of A) teams of workers who work together on a complex assembly. B) lines of workers who do a small series of tasks and then pass along the product through the line to the next worker. C) virtual companies and their supplier relationships. D) workers who have a model in front of them that they try to replicate several times. Answer: A Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 251) Firms often use a(n) ________ when working on a major project involving the production of a large item such as an airplane, ship, or bridge. A) assembly line layout B) continuous production process C) fixed-position layout D) process manufacturing technique Answer: C Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

252) Unlike an assembly line where workers perform only a few tasks, in a ________ layout, teams of workers combine to perform a variety of tasks needed to produce more complex units of a final product. A) modular B) spoke and wheel C) network D) cluster Answer: A Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 253) In manufacturing, a(n) ________ is used to produce large quantities of a few types of products. A) assembly-line layout B) process layout C) modular layout D) fixed-position layout Answer: A Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

254) In manufacturing, a(n) ________ is frequently used in operations that serve different customers' different needs. A) product layout B) process layout C) modular layout D) fixed-position layout Answer: B Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 255) An example of a(n) ________ is building a new home on a lot. A) product layout B) process layout C) modular layout D) fixed-position layout Answer: D Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

256) The operations planning practice of using sales forecasts created by a computer to accurately predict the amount and timing of materials needed to complete products and projects is A) enterprise resource planning. B) materials requirement planning. C) virtual accuracy tool. D) computer-based materials model. Answer: B Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 257) MRP is a technique that helps managers A) develop a reliable sales forecast. B) schedule the sequence of tasks workers must perform in order to complete a project. C) determine how many workers are needed to staff various departments. D) make sure that the right parts and materials are available at the right time. Answer: D Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

258) MRP is the acronym for A) minimum resource payments. B) maximized revenue potential. C) managed resource priorities. D) materials requirement planning. Answer: D Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 259) ERP is the acronym for A) educated rights planning. B) extensive research planning. C) enterprise resource planning. D) emphatic requirements planning. Answer: C Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

260) ________ is a computer application that enables a firm to combine computerized functions of all divisions and subsidiaries of the firm into a single, integrated software program that uses a single database. A) Materials requirement planning (MRP) B) PERT analysis C) Manufacturing resource planning (MRP II) D) Enterprise resource planning (ERP) Answer: D Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 261) ________ is the operations management planning function that searches for quality material resources, finds the best suppliers, and negotiates the best price. A) Marketing B) Collective bargaining C) Bartering D) Purchasing Answer: D Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

262) ________ has transformed the purchasing function in recent years by helping firms find the best suppliers and the best prices. A) PERT B) The Internet C) CAD/CAM D) QFD Answer: B Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 263) Today manufacturers are relying more heavily on A) developing close relationships with just a few suppliers to secure affordable prices. B) the bidding process to obtain the lowest price. C) many suppliers to keep their leverage. D) developing an MRP system for purchasing. Answer: A Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

264) With the ________ inventory control system, producers hold only the amount of materials and parts that they need for a short period of time, sometimes just a few hours. A) ABC B) first-in, first-out (FIFO) C) just-in-time (JIT) D) maximum Answer: C Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 265) To reduce the cost of holding too much inventory, many companies have implemented A) ABC inventory management. B) first-in, last-out inventory control. C) just-in-time inventory control. D) maximum inventory management. Answer: C Difficulty: 1 Easy Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

266) Maintaining ________ involves producing what the customer wants while reducing errors before and after delivery to the customer. A) manufacturing control B) allocative efficiency C) CAD/CAM D) quality Answer: D Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 267) In today's quality control programs, emphasis is placed on A) producing goods at the lowest possible cost. B) keeping labor costs as low as possible. C) achieving customer satisfaction. D) detecting errors at the end of the production process before the goods are shipped to customers. Answer: C Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

268) The Six Sigma approach to quality control A) relies on a special team of experts to examine every unit of output at the end of the production process. B) detects potential problems early to prevent their occurrence. C) views quality control as a function of the marketing department. D) allows only 600 defective units per one thousand units produced. Answer: B Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 269) ________ examines statistical samples of product components at each stage of the production process and plots the results on a graph in order to spot and correct any variances from desired quality levels. A) CAD/CAM B) Econometrics C) Analysis of variance D) Statistical process control Answer: D Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

270) The Deming Cycle is A) a checklist that enables managers to evaluate employee performance more systematically. B) a systematic method of evaluating potential facility locations. C) a process for finding potential quality errors before they occur. D) a process for using identical production steps in the creation of different types of products. Answer: C Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 271) The ________ National Quality Award is given to firms that achieve an outstanding level of overall quality based on performance in seven key areas. A) Association of Operations Managers B) Excellence in Production Committee C) National Association of Manufacturers D) Malcolm Baldrige Answer: D Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

272) ________ is a set of international standards for quality management and quality assurance. A) EPA 2001 B) ISO 14001 C) ISO 9001 D) TQM 2013/2014 Answer: C Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 273) ________ standards are concerned with the best practices for managing an organization's environmental impacts. A) EPA 2001 B) ISO 14001 C) Eurogreen 701 D) Enviro 2001 Answer: B Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

274) Which of the following is an important part of operations management? A) determining the best means of financing the firm's operations B) developing the best advertising strategy to promote a firm's products C) deciding whether to pay a dividend to the firm's stockholders D) choosing the best location for a firm's facilities Answer: D Explanation: Operations management includes such responsibilities as facilities location, facilities layout, and quality control. Difficulty: 2 Medium Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 275) Which of the following statements best describes the impact of recent advances in information technology on business location decisions? A) Advances in information technology give firms a greater incentive to locate near big cities, because that is where they can take full advantage of these advances. B) Western states tend to benefit the most from improvements in information technology, because most states in this region have invested heavily in Internet technology. C) Advances in information technology will have no real effect on location decisions. D) Advances in information technology will give firms more flexibility in their location decisions by reducing the need to locate close to sources of labor. Answer: D Explanation: Developments in information technology make it possible for many workers to telecommute, so a firm can locate almost anywhere and still attract good workers. Difficulty: 2 Medium Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

276) Which of the following statements about facility location is most accurate? A) No firms are influenced by labor costs when making decisions about where to locate. B) Recent changes in information technology have led firms to favor locations near major urban areas. C) Manufacturers often seek to reduce time-to-market by locating facilities in areas with access to key modes of transportation. D) No matter how large they become, most companies ultimately choose to locate major facilities within a few miles of the area in which they started business. Answer: C Explanation: In order to compete globally, manufacturers need sites that allow products to pass through the system quickly and at low cost, and to be delivered rapidly and inexpensively to customers. This leads many manufacturers to locate in areas with access to major highways, rail lines, and airports. Difficulty: 2 Medium Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

277) Which of the following statements best reflects the approach state and local governments take to influence the location decisions of businesses? A) State and local governments often engage in fierce competition to attract businesses, including the offer of tax breaks, zoning changes, and financial aid. B) State and local governments try to avoid competition with other areas, because such competition usually backfires and creates ill will. C) State and local governments no longer pursue new businesses, because they have found that attempts to attract businesses are usually too expensive to justify the results. D) State and local governments work primarily through the federal government and the Small Business Administration to obtain financial assistance for firms seeking to locate in their area. Answer: A Explanation: Today, a big factor influencing where businesses locate is the tax situation and the degree of government support for the business. State and local governments often engage in fierce competition by offering firms tax reductions, subsidized loans, zoning changes, and other incentives to induce firms to locate in their area. Difficulty: 2 Medium Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 278) Which of the following statements is most accurate? A) Most manufacturing firms are turning to an assembly line layout to produce output as efficiently as possible. B) For service firms, the main objective in facility layout usually is to centralize the control of operations. C) Facility layout is important for manufacturing plants because facilities layout decisions can have a huge impact on the firm's costs. D) In a modular layout, workers are assigned a specific station along an assembly line and specialize in performing a specific task. Answer: C Explanation: For manufacturing plants, facility layout has become critical because potential cost savings are enormous. Difficulty: 2 Medium Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 115 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

279) New developments in information technology have A) had little effect on business location decisions. B) given firms even greater flexibility in their location decisions. C) caused a movement of firms back to urban areas where access to this technology is greatest. D) reduced the impact government policies have on location decisions. Answer: B Explanation: E-mail, voicemail, and teleconferencing enable workers to telecommute. Thus, firms no longer have to locate near a large supply of labor. They can now locate in areas where land is cheaper and the quality of life is more appealing. Difficulty: 2 Medium Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 280) Contemporary operations management planning is an interfirm process. An interfirm process is A) a process that must integrate all of the functional units of a firm's operation, including production, marketing, finance, and logistics. B) a process that uses a confidential plan, not shared with suppliers or customers, which stays within the firm. C) a process where several firms work closely together to design, produce, and ship products to customers. D) a process that seeks stability by adhering to top-down management. Answer: C Explanation: Interfirm means that several firms will work together via the Internet and through the use of other sophisticated technology to produce products and services that customers need and want. The interfirm process recognizes that today's successful businesses must operate in dynamic environments. Difficulty: 2 Medium Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

281) Enterprise resource planning (ERP) goes beyond the capabilities of materials requirement planning (MRP) because it A) gives much more precise cost estimates. B) finds the critical path and computes its length. C) monitors the computerized functions of all the divisions and subsidiaries of the firm in a single software program. D) handles research data about more than one product at the same time. Answer: C Explanation: Enterprise resource planning is a computer application that enables a firm to combine all of the computerized functions of all the divisions and subsidiaries of the firm (such as finance, human resources, and order fulfillment) into a single, integrated software program that uses a single database. MRP is used within one firm to plan production requirements. Difficulty: 2 Medium Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 282) A just-in-time inventory system usually reduces costs for A) both the producer and its suppliers. B) suppliers. C) the producer. D) neither the supplier nor the producer, though it does lead to more flexibility for both. Answer: C Explanation: Just-in-time inventory systems allow producers to reduce the amount of inventory they hold, thus keeping their inventory costs down. However, the supplier must deliver the needed materials and parts just in time to be used in the production process. This calls for more effort on the supplier's part, and more costs. Difficulty: 2 Medium Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

283) In a just-in-time inventory system, suppliers A) deliver materials and parts in large quantities only a few times a year. B) enjoy much lower delivery costs. C) have a great deal of flexibility in determining when to make deliveries. D) are usually connected electronically so they know what will be needed and when. Answer: D Explanation: To work effectively, however, the process requires an accurate production schedule (using ERP) and excellent coordination with carefully selected suppliers, who are usually connected electronically so they know what will be needed and when. Sometimes the suppliers build new facilities close to the main producer to minimize distribution time. Difficulty: 2 Medium Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 284) A firm would be most likely to employ statistical process control (SPC) if it wanted to A) simplify the quality control process by taking samples at the end of the production process rather than examining every unit of output produced. B) eliminate the expenses incurred by the Deming Cycle. C) redefine quality control on the basis of customer needs. D) make sure products meet quality standards all along the production process. Answer: D Explanation: Statistical process control involves examining samples at each stage of the production process and plotting the results to identify and correct undesirable variances in quality. Difficulty: 2 Medium Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

285) A firm that is certified as meeting both ISO 9001 and ISO 14001 standards has demonstrated A) world-class management of both quality and environmental standards. B) sound financial and marketing practices. C) ethical treatment of both customers and employees. D) that its recruitment and training programs for employees protect and promote basic human rights. Answer: A Explanation: ISO 9001 refers to quality management and assurance standards and ISO 14001 refers to standards for managing a firm's environmental impact. Difficulty: 2 Medium Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 286) According to the Making Ethical Decisions box "Should We Stay or Should We Go?" a firm must give its employees ________ before closing and/or moving to another location. A) bonuses equal to 1½ times their regular monthly pay B) 2 weeks notice C) a golden handshake D) 60 days' notice Answer: D Explanation: Federal law states companies must inform employees at least 60 days before closing a manufacturing plant. Difficulty: 2 Medium Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

287) The main idea in the Making Ethical Decisions box "Do We Stay or Do We Go?" indicates A) a need for firms to place a higher level of importance on time-to-market when choosing facilities locations. B) that the goal of finding the lowest cost location should never be overshadowed by other concerns if the firm is to remain loyal to its stockholders. C) that many locations do not meet ISO 14001 standards. D) a need for firms to consider the economic impact of their existence and/or departure from a particular location. Answer: D Explanation: One firm can have a significant economic impact in a location where it is a single employer of a large percentage of the population and impacts the livelihood of surrounding businesses, as well. While the departure from such a location may present a cost savings for the company, its negative impact on the stakeholders at this location is a strong ethical consideration. Difficulty: 2 Medium Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation

288) As businesses strive for market expansion, companies add to their sales force, but opt to eliminate sales offices across the nation and internationally. How are these firms able to remotely operate a sales force that contributes toward increasing the bottom line? A) A sensible strategy is to transport sales professionals to the world headquarters on a biweekly basis. B) The business strategically moves manufacturing facilities to low-cost areas and allocates more funds toward the sales professionals to meet face-to-face with management. C) The operation is maintained with an advanced MRP system. D) The operation is managed with teleconferencing information technology, and telecommuting. Answer: D Explanation: With advanced information technology (voicemail, e-mail, cell phones, text messaging, and teleconferencing), businesses are able to communicate in real time with sales professionals, technicians, and other employees whose jobs take them out into the field. Telecommuting—working from home via a computer and modem—is a popular alternative working arrangement for sales professionals and others who do not work close to their company's office. Difficulty: 3 Hard Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

289) Green Goddess, Inc., is a leading producer of environmentally friendly cleaning agents. As they've outgrown their current facility, Green Goddess is looking for a new site. The company is mainly focusing on sites that are close to major highways and railways and are not too far from the majority of the area's population. This suggests that an important location consideration for Green Goddess is A) quality of life. B) access to cheap land. C) reducing time-to-market. D) access to low-cost labor. Answer: C Explanation: Firms that want to get their goods to the market quickly want to have access to good transportation. Thus they frequently locate near highways, rail lines, or airports. Difficulty: 3 Hard Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 290) Outdoor Adventure Industries is a U.S.-based manufacturer of sporting goods. It has recently decided to make a major push to sell its products in the EU. In order to succeed in this new market Outdoor Adventure will need to A) become certified in ISO 9001 standards. B) convert its financial assets into euros. C) avoid reliance on the Deming cycle. D) reduce the wages of its production workers. Answer: A Explanation: The European Union is demanding that firms doing business within their borders meet the ISO 9001 standards. Difficulty: 3 Hard Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

291) At Stevens Manufacturing, workers are organized in teams that combine their efforts to produce complex units of a final product. Stevens is using a facility layout known as a(n): A) consolidated process layout. B) continuous flow layout. C) modular layout. D) assembly team layout. Answer: C Explanation: Many manufacturing companies are moving away from an assembly line layout to a modular layout in which teams of workers combine to produce complex units of a final product. Difficulty: 3 Hard Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 292) For the past two years, Mountain High Bike Company used suppliers from India, Japan, and Malaysia to provide precision parts for its custom bikes. There was only one problem: the quality of the parts from all locations lacked precision and consistency. Skilled technicians complained that as many as three out of five parts had to be discarded due to imperfections. The quality control manager convinced the owners to partner with a slightly higher-priced company in Omaha, Nebraska, which utilized ________ to test samples of product components for deviations in quality and precision, prior to sending them to Mountain High Bike Company. The bike company realized savings in both time and money. A) statistical process control B) just-in-time inventory control C) lean manufacturing D) flexible manufacturing Answer: A Explanation: Statistical process control is the process of testing statistical samples of product components at each stage of production. This assures that the product meets the set standards and reduces the need for quality control inspections at the end because mistakes are caught ahead of time. Difficulty: 3 Hard Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 123 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

293) Production manager Ryan McNealy wants to link all the divisions and subsidiaries of his firm's computerized functions into a single, integrated software program that uses a single database. In order to achieve this goal, Ryan could make use of: A) enterprise resource planning. B) manufacturing resource planning. C) program evaluation and review techniques. D) Gantt charts. Answer: A Explanation: Enterprise resource planning is a sophisticated computer application that links all the computerized functions of divisions and subsidiaries of a firm into a single, integrated software program that uses a single database. Difficulty: 3 Hard Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 294) Superior Supplies' largest customer recently implemented a just-in-time inventory system. As a supplier of materials to this customer, Superior Supplies will: A) realize significant freedom in scheduling deliveries. B) likely increase its effort and likely experience higher transportation costs. C) place less emphasis on quality and greater emphasis on quantity. D) need to deliver large quantities at regularly scheduled intervals. Answer: B Explanation: Just-in-time inventory systems reduce inventory costs for producers, but they mean suppliers must make smaller, more frequent deliveries. This can result in more effort and higher costs for suppliers. Difficulty: 3 Hard Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

295) One of Justin's largest international customers is Alpine Airwaves in Switzerland. He got a call from his contact at Alpine Airwaves, Edvard. Edvard quickly tells Justin, "This is a headsup! Top management is asking operations to review our vendors for ISO 14001 compliance." Justin's company should prepare to demonstrate A) an acceptable level of quality standards of the products and services it provides. B) a level of quality in its products and services that exceeds its competitors. C) a world-class management system in information technology and lean manufacturing. D) best practices for managing its impact on the environment. Answer: D Explanation: ISO 14001 is a collection of best practices for managing a firm's impact on its environment. These include having an environmental policy; having specific improvement targets; conducting audits on the operation; and having top management review the process. Difficulty: 3 Hard Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 296) ________ is a technique to analyze and sequence tasks involved in completing a project, to estimate the time needed to complete each task, and to determine the minimum amount of time needed to complete each project. A) PERT B) ECON C) LIFO D) GANTT Answer: A Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

297) In a PERT network, the sequence of tasks that takes the longest to complete is called the A) optimal path. B) maximum path. C) straight path. D) critical path. Answer: D Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 298) The purpose of a PERT network is A) to monitor the quality of a product for compliance with ISO 9001 standards. B) to monitor the progress of a multi-step project during its development. C) to connect all firms that are ISO 9001 certified so that they can partner with each other on future projects. D) to be used as a decision-making tool when evaluating the best facility locations and layouts. Answer: B Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 299) A bar graph that shows what projects or tasks are in process and how much of each is completed is called a A) grid chart. B) Gantt chart. C) priority chart. D) stem chart. Answer: B Difficulty: 1 Easy Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 126 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

300) Which of the following would be most helpful to a production manager who wanted to determine the minimum time required to complete a proposed project? A) TQM B) CAD/CAM C) ERP D) PERT Answer: D Explanation: PERT, which stands for program evaluation and review technique, is a method of analyzing the tasks involved in completing a given project, estimating the time needed to complete each task, and identifying the minimum time needed to complete the total project. Difficulty: 2 Medium Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 301) The first step in the development of a PERT chart is A) assigning an estimated cost to each task. B) analyzing the tasks and determining the sequence in which they must be performed. C) estimating the time needed to complete each task. D) identifying the probabilities that each step in the project can be successfully completed without exceeding the estimated cost. Answer: B Explanation: PERT consists of four steps: (1) analyzing and sequencing the tasks that need to be done, (2) estimating the time needed to complete each task, (3) drawing a PERT network to illustrate the information from the first 2 steps, and (4) identifying the critical path. Difficulty: 2 Medium Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

302) The purpose of determining the critical path on a PERT network is to A) identify the sequence of tasks that takes the longest to complete. B) estimate a payment schedule so that a budget can be established. C) find the sequence of events that is the most expensive to complete. D) establish a delivery schedule for a just-in-time inventory control program. Answer: A Explanation: The critical path is the sequence of tasks in a project that takes the longest to complete. Difficulty: 2 Medium Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 303) Both PERT diagrams and Gantt charts are useful to managers concerned with A) calculating the rate of profit earned in a particular market. B) making sure that projects are completed on time. C) estimating the cost of completing a project. D) establishing formal lines of authority and responsibility within an organization. Answer: B Explanation: PERT diagrams and Gantt charts are tools used by managers to help ensure that projects are carried out in a timely manner. PERT diagrams help managers sequence the various tasks needed to complete a project, and identify the critical path, which is the sequence of tasks that takes the longest to complete. This information helps the manager focus on completing the tasks that have the greatest potential for delaying the overall project. A Gantt chart is simpler, but this bar graph provides a visual way for managers to track progress on a project and identify which tasks are on time and which are behind schedule. Difficulty: 2 Medium Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

304) Corie is a development engineer for a company that manufactures solar panels for both residential and commercial purposes. Her company uses PERT network software for all development projects. As she nears the final month of her timeline for completing a new panel, Corie will focus on those activities that are A) most costly to complete. B) on the priority bar of the PERT chart. C) near the end of the PERT network. D) on the critical path of the PERT network. Answer: D Explanation: The critical path is the sequence of tasks that takes the longest to complete. Delays in activities on this path are likely to result in delays in the completion of the project. Difficulty: 3 Hard Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 305) A PERT network consists of activities linked by arrows. Suppose two of the activities on the network are labeled "A" and "B." An arrow from "A" to "B" indicates that A) the same resources used to complete "A" are also used to complete "B." B) "A" and "B" can be completed at the same time. C) "A" takes longer to complete than "B." D) "A" must be completed before "B" can begin. Answer: D Explanation: The arrows in a PERT network indicate the sequence in which activities must be performed. An arrow from "A" to "B" means "A" must be completed before "B" can begin. Difficulty: 3 Hard Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

306) While planning a new product launch, Cassandra knew that the art department was ready to work on the promotional pieces right away. But they are not able to start until the strategy group established the price point and the purchasing group obtained the paper needed to make the promotional piece. Establishing price points would take about a week and was dependent on manufacturing getting the costs to the strategy group. This was expected a week from today. The purchasing group indicated the paper could be obtained locally the same day it was requested. Based on this information and assuming things go according to plan, when will the art department be able to begin work on the promotional pieces? A) 1 day B) 1 week C) 2 weeks D) 1 month Answer: C Explanation: A PERT chart could be used to determine the critical path. The art department is dependent on the strategy group for information that will take 1 week to obtain. The strategy group is dependent on manufacturing for cost information that will take an additional week. The purchasing department is not part of the critical path as the paper can be obtained on the same day. The art department will be able to begin in 2 weeks. Difficulty: 3 Hard Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

307) Cassandra was planning a new product launch. She knew that the art department was ready to work on the promotional pieces now, but they couldn't start until the marketing strategy group established the price point and the purchasing department obtained the paper needed to design the promotional piece. Establishing price points would take about a week and was dependent on manufacturing getting the costs to the marketing strategy group. This was expected a week from today. The purchasing group indicated the paper could be obtained locally the same day it was requested. Assuming things go as planned and based on this information, which of the following tasks could be as much as a week late without jeopardizing the deadline for the entire project? A) marketing strategy's determination of the price point B) manufacturing's determination of the costs C) obtaining the paper D) the art department taking a month-long vacation Answer: C Explanation: A PERT chart could be used to determine the critical path. The art department is dependent on the strategy group for information that will take 1 week to obtain. The strategy group is dependent on manufacturing for cost information that will take an additional week. The purchasing task is not on the critical path of the project and thus is the only one that would not jeopardize the deadline for the entire project. Difficulty: 3 Hard Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

308) Review the PERT Network below: If it takes 1, 2, or 3 weeks for each activity (represented by a box) to be completed, the critical path is represented by:

A) the path that begins with "Start" and continues with all boxes labeled with No. 1. B) the path that begins with "Start," continues with all boxes labeled with No. 2, and concludes with "Finish." C) the path that begins with "Start," continues with one box labeled with No. 2, proceeds with all boxes labeled with No. 3, and concludes with "Finish." D) the path that begins with "Start," continues with all boxes labeled with No. 1, and concludes with "Finish." Answer: C Explanation: The critical path in a PERT Network is the project activity path that takes the longest time to complete. In this diagram, the path of boxes labeled [Start, 2, 3, 3, 3, 3, Finish] make up the critical path. Difficulty: 2 Medium Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation

309) Arturo is a production and operations manager and he loves details. He likes to keep track of how his projects are moving along. One of Arturo's favorite tools is a bar graph that shows how much work has been completed on the projects that are currently under way and which processes are behind schedule. Arturo likes to use a(n) A) CAD/CAM diagram. B) input-output graph. C) Gantt chart. D) Targeted Completion Date (TCD) graph. Answer: C Explanation: A Gantt chart is a bar graph that shows what projects are being worked on and how much work has been completed on each project. Difficulty: 3 Hard Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

310) The selection of a proper site for a business facility is important in the production and operations management processes. Identify and discuss three factors that influence the selection of a site. Answer: Students can select from the following: (A) Firms often choose to locate in an area because it has inexpensive labor, or labor with the right kinds of skills. Even though labor costs are becoming a smaller percentage of total costs in highly automated industries, they are a key reason why a company may choose to move their plants. (B) Availability of nonlabor resources can also be a major reason cited for a move. Most companies need access to inputs such as water, electricity, wood, coal, and other basic resources. Some industries can cut their costs significantly by moving to areas where such resources are abundant and inexpensive. (C) Companies often choose to locate near good transportation facilities, such as highways, rail lines, or airports in order to reduce time-to-market. They may also remain in certain areas or locate to specific areas where their customers primarily reside for the same reason. (D) Government support and tax situations can sway the decision to locate or relocate to different areas. Some states have higher taxes than others, some give tax incentives or subsidies to businesses, and others provide zoning privileges or other forms of assistance. (E) Climate, educational facilities, recreational opportunities, and other factors that influence the quality of life can also influence the decision to locate or relocate a particular enterprise. Difficulty: 3 Hard Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

311) How are MRP and ERP similar? How do they differ? Answer: Materials requirement planning (MRP) and enterprise resource planning (ERP) are computer applications that help managers schedule and use the resources needed to produce goods and services. These techniques differ in the following ways: MRP is a computer application that uses sales forecasts to make sure that needed parts and materials are available at the right time and place in a specific company. ERP is a computer application that enables firms to combine the computerized functions of all the divisions and subsidiaries of the firm—such as finance, human resources, order fulfillment, etc.—into a single integrated software program that uses a single database. By entering customer and sales information in an ERP system, a manufacturer can generate the next period's demand forecast, which in turn generates orders for raw materials, production scheduling, and financial projections. Difficulty: 3 Hard Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

312) How has the emphasis of quality control changed in recent years? Describe some of the modern quality control techniques that illustrate this change in emphasis. Answer: In the past, quality control primarily consisted of testing products at the end of the production line. However, this approach proved to have several drawbacks. It led to having to use more workers and other resources than necessary and to higher costs to correct problems. It sometimes also resulted in dissatisfied customers. These drawbacks led to the realization that quality control should not be viewed as an outcome, but rather as a never-ending process of continually improving what the company produces. Thus modern operations managers believe that quality control should be part of the operations management planning process rather than an inspection tacked on at the end of the production line. This new perception of quality control has resulted in a variety of new quality control standards and techniques. One of the most famous standards is Six Sigma quality, which translates into achieving a standard of only 3.4 defects per million units. Statistical quality control (SQC) and statistical process control (SPC) are two modern quality control techniques. In SQC, managers continually monitor all processes within production to ensure quality is built into the product from the very beginning. SPC is the process of examining statistical samples at each stage of the production process to identify and correct any undesirable deviations from quality standards. Difficulty: 3 Hard Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

313) PERT is a popular control method used by organizations. Explain the purpose of PERT analysis, and describe the steps involved in constructing a PERT network. Your explanation should include a discussion of the significance of the critical path in a PERT network. Answer: PERT (Program Evaluation and Review Technique) is a method for analyzing the tasks involved in completing a given project, estimating the time needed to complete each task, and identifying the minimum time needed to complete the total project. PERT network steps are: (1) Analyze and sequence the tasks that need to be done. (2) Estimate the time needed to complete each task. (3) Draw a PERT network illustrating the information from steps 1 & 2. (4) Identify the critical path, which is the sequence of tasks that takes the longest time to complete. The significance of the critical path is that, since it represents the sequence of tasks taking the longest time to complete, the length of this path represents the earliest a project can be completed. Moreover, a delay in the activities along the critical path is likely to delay the completion of the project as a whole. Difficulty: 3 Hard Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

314) What are the ISO 9001 and ISO 14001 standards? Why are they important? Answer: The International Organization for Standardization (ISO) is a worldwide federation of national standards bodies from more than 170 countries that set the global measures for the quality of individual products. ISO 9001 is the common name given to quality management and assurance standards. The standards require that a company must determine what customer needs are, including regulatory and legal requirements. The company must also make communication arrangements to handle issues such as complaints. Other standards involve process control, product testing, storage, and delivery. Improving quality is an investment that can pay off in better customer relations and higher sales. What makes ISO 9001 so important is that the nations of the European Union are demanding that firms that want to do business with them must be ISO 9001 certified. Some major U.S. companies are also demanding that suppliers meet such standards. There are several accreditation agencies in Europe and in the U.S. whose function is to certify that a company meets the standards for all phases of its operations, from product development through production and testing to installation. ISO 14001 is a collection of the best practices for managing an organization's impact on the environment. It does not prescribe a performance level. ISO 14001 is really an environmental management system that requires having an environmental policy, establishing specific improvement targets, conducting audits of environmental programs, and maintaining top management review of the processes. Certification in both ISO 9001 and ISO 14001 means that a firm has a world-class management system for both quality and environmental standards. Today, the ISO 9001 and 14001 standards have been blended so that firms can work on both at once. ISO has also compiled social responsibility guidelines to go with the other standards. Difficulty: 3 Hard Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

Mini-Case Sparky Weyer, president and CEO of Minimotors, Inc., a growing manufacturer of small (some of them downright tiny) electric motors used in a variety of power tools and appliances told potential investors, "These are exciting times for our company. We've made a lot of changes over the past two years that have really improved our operations and lowered our costs. Now we are ready to expand into new markets. Minimotors is on its way to becoming a global player." Sparky was meeting with potential financial backers in an effort to obtain funding for some expensive new machinery he wanted to purchase. "You may have heard about some of the ways we've cut costs," Sparky continued. "We've developed a new arrangement with several of our biggest suppliers. They've agreed to make more frequent deliveries tied directly to our production schedules. This will help us reduce our inventory costs dramatically. We've also greatly reduced the number of defective motors we produce by carefully keeping tabs on all of our manufacturing processes. In fact, we have set a goal of reducing our defects to 3.4 parts per million. The main purpose of my meeting with you today is because we want to install some sophisticated new machinery and software that will allow us to quickly design and produce motors to the exact specifications of our customers. The machinery is computer-controlled and can produce custom-designed products at very little increase in cost compared to our massproduced motors. We feel this flexibility and quick response time will give us a tremendous competitive advantage and help us attract new customers. Installing the new equipment and training our workers to use it properly will be a complex project, but I'm confident that once we get everything up and running we'll be able to strengthen our position as the leading maker of high-quality electric motors." 315) One of Sparky's goals is to expand globally. He is most interested in doing business with the nations of the EU. In order to do business with the European Union, Sparky's company should A) gain ISO 9001 certification. B) make sure his production workers all belong to an international union. C) put more emphasis on low cost rather than product quality. D) buy at least 50 percent of its supplies from countries belonging to the European Union. Answer: A Explanation: ISO 9001 refers to quality management and assurance standards. These standards provide a common denominator of business quality that is accepted around the world. The EU is demanding that firms wanting to do business with it must be certified as meeting the ISO 9001 standards. Difficulty: 3 Hard Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 139 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

316) The arrangements Minimotors has worked out with its suppliers to reduce the amount of inventory the company holds at any one time show that it is committed to a(n) A) priority inventory scheduling system. B) first in, first out inventory processing system. C) just-in-time inventory control system. D) ABC inventory system. Answer: C Explanation: In a just-in-time inventory control system, suppliers deliver just enough supplies just in time for their use in a production process. While this requires frequent deliveries, it also allows the producer to greatly reduce the amount of parts and materials held in inventory. Difficulty: 3 Hard Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 317) The equipment and software Sparky wants to purchase will allow the computers used to design motors to be linked directly to the computer-aided equipment on the factory floor. Sparky is proposing to set up a(n) A) modular manufacturing system. B) computer-integrated manufacturing system. C) E-hub that relies on network software to control the production process. D) first-in, first-out production system. Answer: B Explanation: Computer-integrated manufacturing unites CAD (computer-aided design) with CAM (computer-aided manufacturing). Difficulty: 3 Hard Topic: Technology in the Production Process Learning Objective: 09-03 Identify various production processes and describe techniques that improve productivity, including computer-aided design and manufacturing, flexible manufacturing, lean manufacturing, mass customization, robotics, and 3D printing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

318) In order to schedule deliveries, Minimotors's suppliers need detailed information about when parts are needed. Minimotors will purchase a computer application that will link its operation to sales forecasts to make sure needed parts and supplies are available at the right time to meet customer demands. This planning system is known as A) materials requirement planning (MRP). B) program evaluation and review technique (PERT). C) minimum daily requirements scheduling (MDRS). D) sales-based requirements forecasting (SBRF). Answer: A Explanation: MRP is a computer-based planning system that uses sales forecasts to make sure needed parts and materials are available at the right time and place. Difficulty: 3 Hard Topic: Operations Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 319) Sparky sees quality control in terms of detecting potential problems to prevent their occurrence and thus save Minimotors money. The quality control process that is most closely linked to Sparky's goal is known as A) Six Sigma. B) Quality function deployment. C) ERP. D) PERT analysis. Answer: A Explanation: Quality control concepts such as Six Sigma tend to focus on detecting potential problems to prevent their occurrence. Difficulty: 3 Hard Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

320) Sparky knows that installing the new equipment and training workers to use it efficiently will be a long and complex process consisting of many different tasks. Which of the following methods would help him determine how long this project is likely to take? A) TPSM (task priority scheduling method) B) DA (dependency analysis) C) TRSS (task and resource scheduling system) D) PERT (program evaluation and review technique) Answer: D Explanation: PERT enables managers to estimate how long it will take to complete a project by identifying the project's critical path, which is the sequence of tasks in a project that takes the longest to complete. Difficulty: 3 Hard Topic: Total Quality Management Learning Objective: 09-05 Explain the use of PERT and Gantt charts to control manufacturing processes. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 321) While Minimotors has focused on improving production efficiencies, global customers are inquiring about its environmental policies. In light of its strategy to serve customers in the EU, Sparky has requested two of its lead engineers to investigate what it would take to meet the environmental standards of its socially responsible customers. The engineers should investigate ________ as best practices for managing a firm's impact on its environment. A) the EPA's minimum pollution standards B) ISO 14001 C) RG3 Regulations D) WTO environmental policy Answer: B Explanation: ISO 14001 is a collection of best practices for managing an organization's impact on the environment. Companies that are ISO 14001 certified show that they have an environmental management system in place and are able to demonstrate that they maintain an environmental policy; they have improvement targets; they conduct regular environmental audits; and top management reviews the process. Difficulty: 3 Hard Topic: Total Quality Management Learning Objective: 09-04 Describe operations management planning issues including facility location, facility layout, materials requirement planning, purchasing, just-in-time inventory control, and quality control. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

Understanding Business, 12e (Nickels) Chapter 10 Motivating Employees 1) The sense of satisfaction you get when you achieve an important goal is an intrinsic reward. Answer: TRUE Difficulty: 1 Easy Topic: Motivating Employees Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) Extrinsic rewards are those that are given to a person by someone else. Answer: TRUE Difficulty: 1 Easy Topic: Motivating Employees Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) Since motivation comes from within an individual, there is little that managers can do to help motivate employees. Answer: FALSE Difficulty: 1 Easy Topic: Motivating Employees Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 4) When unhappy employees leave a company, the firm normally ends up benefiting financially. Answer: FALSE Difficulty: 1 Easy Topic: Motivating Employees Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

5) Frederick Taylor's goal was to find ways to improve worker motivation by making work more interesting and challenging. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) A key element of Frederick Taylor's approach was the time-motion study, which examined the tasks performed to complete a job and the time needed to complete each task. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 7) Frederick Taylor based his approach on the belief that each worker was an individual who should be treated as a unique asset to the firm. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) Scientific management became the dominant strategy for improving productivity during the early 1900s. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

9) Elton Mayo became known as the father of scientific management. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10) Frederick Taylor believed that employees would be more productive if they were allowed to decide for themselves which methods at work to use. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) Three elements were basic to Taylor's approach: time, methods, and rules of work. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) Frank and Lillian Gilbreth developed the principle of motion economy, which said that every job could be broken down into a series of elementary motions. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

13) Frederick Taylor's ideas about improving worker productivity attracted a lot of attention at the time, but had little lasting significance. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) The concept engagement is used to describe the level of passion and motivation that a person has about their work. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) Frederick Taylor encouraged managers to make use of psychological techniques to improve worker motivation. Answer: FALSE Explanation: Taylor was the founder of scientific management, a school of thought that paid little attention to the human side of work. Scientific management viewed employees almost as if they were machines that could be programmed to work in the most efficient way. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

16) Frederick Taylor believed that workers existed to make management's job easier and more efficient. He believed that workers were interested in one thing: good pay. If a business provided good pay, workers would provide the grueling labor necessary to get the job done. Answer: TRUE Explanation: Due to the fact that Taylor believed that good pay was the only thing that motivated employees, many firms today still operate with Taylor's rigid rules and expectations of conformity. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 17) Selena works in the kitchen at a large hotel and ballroom. Early in her career, she dreamed of becoming head pastry chef, but now she is not sure that this is how she would like to spend her working career. Her current supervisor, James, does not believe in breaks. And he stands next to her while he tells her exactly how to roll out the bread dough and ice cakes. It's as if she never learned these basic skills in culinary school! Just this morning, he barked loudly from the other side of the room, "You should be able to ice five cupcakes in a minute! Time yourself!" Frederick Taylor would have approved of James' philosophy. Answer: TRUE Explanation: Frederick Taylor's research involved time-motion studies; he believed that if you studied the motions of workers performing tasks, you could improve their performance at each task and increase productivity. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

18) Colin successfully finished a challenging assignment given to him by his supervisor. This feeling of accomplishment and satisfaction Colin experienced is an example of an extrinsic reward. Answer: FALSE Explanation: This is an intrinsic reward. An intrinsic reward is the personal satisfaction you feel when you perform well and complete goals. Difficulty: 3 Hard Topic: Motivating Employees Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 19) Green Goddess Lawncare shows all of its employees its own specific methods for fertilizing and seeding lawns. The methods are designed to ensure adequate lawn coverage with a minimum of time and effort. All employees are expected to follow these methods precisely. Green Goddess's approach to lawn care is consistent with the ideas of scientific management. Answer: TRUE Explanation: Scientific management focused on finding the most efficient way to perform tasks and teaching these methods to employees. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 20) Louis, a supervisor at a web design company, has seen that most of his employees are more productive if he lets them have some freedom and flexibility in how they go about their work. Louis's experience is consistent with the teachings of scientific management. Answer: FALSE Explanation: Scientific management emphasized that all employees should use the most efficient methods for performing tasks, as determined by time-motion studies. In this sense, scientific management viewed employees as if they were machines that could be programmed to complete a job as efficiently as possible. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

21) One of the original objectives of the Hawthorne studies was to determine the degree of lighting needed in the workplace to enable employees to achieve optimum productivity. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-02 Describe the Hawthorne studies and their significance to management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 22) The original results of the Hawthorne studies proved that employees were much more productive when they worked in well-lit areas than when they worked in poorly lit areas. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-02 Describe the Hawthorne studies and their significance to management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 23) A major conclusion of the Hawthorne studies was that the best way to motivate employees is with monetary incentives such as pay raises and bonuses. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-02 Describe the Hawthorne studies and their significance to management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

24) The tendency of employees to behave differently when they know they are being studied is known as the Taylor effect. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-02 Describe the Hawthorne studies and their significance to management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 25) The results of the Hawthorne studies encouraged researchers to begin studying human motivation and managerial styles that lead to higher productivity. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-02 Describe the Hawthorne studies and their significance to management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26) Elton Mayo's researchers concluded that worker motivation improved when managers listened to worker's ideas and suggestions. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-02 Describe the Hawthorne studies and their significance to management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

27) The Hawthorne studies proved that the methods of scientific management were the best way to achieve maximum productivity among employees. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-02 Describe the Hawthorne studies and their significance to management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 28) The Hawthorne studies determined that intrinsic rewards are always better than extrinsic rewards. Answer: FALSE Explanation: The Hawthorne studies did not conclude that one type of reward was more important than another. It did conclude that human and/or psychological factors may play into a worker's productivity level and that pay is not the only motivator. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-02 Describe the Hawthorne studies and their significance to management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) The Hawthorne studies established that productivity at work seldom changed, but an employee's attitude could show significant improvement if he/she were given the opportunity to think critically at work. Answer: FALSE Explanation: The Hawthorne studies indicated that there were special motivators besides higher wages that motivated employees to be more productive. Mayo concluded that workers who perceived that they were a special, elite group who were specifically chosen for an experiment and permitted to provide input into the experiment became motivated to perform better. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-02 Describe the Hawthorne studies and their significance to management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

30) Although Elton Mayo originally intended to collect data for a traditional scientific management study, his breakthrough research led to further research on the kinds of things that drive employees to successfully meet and exceed productivity goals at work. Answer: TRUE Explanation: Mayo concluded that workers who perceived that they were a special, elite group who were specifically chosen for an experiment and permitted to provide input into the experiment became motivated to perform better. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-02 Describe the Hawthorne studies and their significance to management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 31) Raymond, the manager at the local post office, wants to figure out how to improve worker motivation. Recently, Raymond read about the Hawthorne studies conducted by Elton Mayo and colleagues. He believes these studies offer important insights into what motivates employees. Raymond is likely to support the methods and ideas associated with scientific management. Answer: FALSE Explanation: Scientific management had little concern for how "human factors" could motivate employees. In the Hawthorne studies, however, Mayo and his colleagues showed that human factors could have a major influence on worker productivity. They concluded that the reason productivity increased no matter how physical working conditions were changed was that the employees who participated in the experiment felt special, and developed a sense of camaraderie that made their work more enjoyable. This improved their job satisfaction, leading to higher productivity. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-02 Describe the Hawthorne studies and their significance to management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

32) Jordan is conducting an experiment with her employees. She wants to see how temperatures affect the productivity of the team. Jordan just completed the first phase of her experiment, in which she had a group of employees perform job-related tasks in a special area where the temperature was 10 degrees cooler than on the factory floor. No matter the temperature, employees in the experimental group consistently outperformed employees in the factory. The Hawthorne effect suggests that the most likely reason for this improvement in performance is that the cooler working conditions allowed the employees in the experiment to work harder without getting tired. Answer: FALSE Explanation: The Hawthorne effect refers to the tendency of people to behave differently when they know they are being studied. Thus, the improvement in productivity may have resulted from psychological factors associated with participating in the experiment rather than the change in temperature. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-02 Describe the Hawthorne studies and their significance to management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 33) Having just finished a book on worker motivation, Kyle, a small business owner, looks to find a way to increase the productivity of his employees. He found the book's discussion of the Hawthorne studies particularly relevant. Based on his reading, Kyle is likely to view pay increases as the best way to improve employee motivation. Answer: FALSE Explanation: The Hawthorne studies showed that motivation improved when employees felt special and believed their work was interesting and important. These results suggest that pay raises are not necessarily the best way to motivate employees. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-02 Describe the Hawthorne studies and their significance to management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

34) Mariana works for a large pharmaceutical company. Last week she visited with an advisor at the nearby university because her employer encourages workers to continue their education. The company even gives employees time off to go to academic-related appointments during regularly scheduled work hours. One would assume that management at Mariana's company values the results of the Hawthorne studies, more so than traditional scientific management principles. Answer: TRUE Explanation: The Hawthorne studies changed the current thought of the day that employees were motivated by higher pay and physical climate and conditions at work. Employees who viewed themselves as belonging to an elite group of human subjects did their best to develop ways to increase their productivity. Scientific management focused on satisfying the needs of management, often at the expense of employee needs. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-02 Describe the Hawthorne studies and their significance to management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 35) Abraham Maslow believed that motivation arises from the desire to satisfy unmet needs. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) According to Maslow, it is impossible to rank human needs in any logical order. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

37) According to Maslow, people will try to satisfy lower-order needs before they turn their attention to higher-order needs. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) Safety needs are placed at the lowest level in Maslow's hierarchy of needs. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39) Maslow referred to the needs people had for recognition and acknowledgement from others as esteem needs. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 40) According to Maslow, a satisfied need is no longer a motivator. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

41) In Maslow's hierarchy, self-actualization needs are associated with basic survival, such as the need for food and shelter. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 42) In Maslow's view, social needs include the need to feel loved and accepted. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 43) Maslow believed that lower-level needs may emerge at any time when they are not met and take our attention away from higher-level needs. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

44) Referring to Maslow's Hierarchy of Needs Theory, one would agree that U.S. workers are more often interested in satisfying their physiological and safety needs, as opposed to their selfesteem needs. Answer: FALSE Explanation: Physiological needs refer to the need for food, clothing, shelter, and other needs associated with basic survival. Safety needs refer to the need for security and safety at home and at work. These are the two lowest levels of needs in Maslow's hierarchy. In developed countries such as the United States, most employees have already satisfied these lower-level needs. According to Maslow, when needs are satisfied, they are no longer sources of motivation. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 45) According to Maslow, if you have a self-esteem problem, you probably will not be able to concern yourself with developing to your fullest potential. Answer: TRUE Explanation: According to Maslow's hierarchy of needs, one must satisfy lower-order needs first, before satisfying a higher-order need. Satisfying esteem needs must be met before satisfying self-actualization needs. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

46) Often we hear that teenagers have unmet social needs. According to Maslow, their desire to become socially accepted will consume them, at the expense of reaching for higher goals, such as developing to their fullest potential. Answer: TRUE Explanation: According to Maslow, lower-order needs must be satisfied first, before turning one's attention to higher-order needs. If relying on Maslow's Hierarchy of Needs Pyramid, social needs will be satisfied before self-actualization needs. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 47) Robert is a talented guitarist and has won a number of awards. However, he still practices at least two hours a day to reach his highest potential. Robert is motivated by self-actualization needs. Answer: TRUE Explanation: Self-actualization needs include the need to reach one's fullest potential. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

48) Blakely just took a job with higher pay and better job security. She now lives in a nicer apartment and maintains a fairly comfortable lifestyle. However, she is still new at the company and feels like an outsider. She does not feel as though her fellow employees have accepted her into their group yet. According to Maslow's theory, Blakely is driven by a desire to satisfy her social needs. Answer: TRUE Explanation: Maslow classified the need to feel accepted and part of a group as a social need. He felt that people who have met their physiological and safety needs, as Blakely apparently has done, would be motivated by the desire to meet social needs. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 49) Lately, Seth is frustrated at work because he feels he isn't recognized for his on-the-job accomplishments. He earns a decent salary and is on friendly terms with the other employees in his department. According to Maslow's hierarchy of needs theory, Seth will have a desire to satisfy his self-esteem needs before his self-actualization needs. Answer: TRUE Explanation: Because Seth earns a decent salary, he should be able to meet physiological and safety needs, which are basic survival needs, and he is accepted at work by others in his department, satisfying social needs. However, since he is frustrated by a lack of recognition and appreciation, he appears to be motivated by the desire to meet his esteem needs, which reflect the desire to be acknowledged and respected by others. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

50) The late famous broadcast journalist Walter Cronkite said that one of his regrets in life was not actively participating in the space program as an astronaut. Back in the 1980s, he was selected as a candidate to be the first journalist to fly into space, but NASA decided to take a teacher instead. In some ways, this may appear as though Cronkite was pursuing a self-esteem need; however, having already achieved celebrity status, for Cronkite, this was the pursuit of a self-actualization need. Answer: TRUE Explanation: According to Maslow's hierarchy of needs, the next level of higher-order needs (after self-esteem needs) is self-actualization needs. According to Maslow, a self-actualization need involves the need to develop to your fullest potential. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 51) Herzberg's research focused on determining which management style achieved the highest level of worker motivation. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 52) Herzberg's research examined how conditions related to the job itself affected the motivation of employees. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

53) Herzberg's study showed that pay was the job characteristic that ranked highest as a motivator. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 54) Herzberg found that the factors associated with job content ranked high as employee motivators. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 55) Herzberg found that the sense of achievement employees experienced when they performed their jobs was an important motivator. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

56) Herzberg used the term hygiene factor to refer to an element of job content that was most important as a source of worker motivation. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 57) According to Herzberg, when a hygiene factor is not fulfilled, employees will become dissatisfied. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 58) Herzberg's research found that improvements in the work environment were a more effective way to motivate employees than improvements in job content. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

59) Maslow identified and categorized basic needs that most persons would like to satisfy, while Herzberg's research identified motivators and hygiene factors that inspire employees to fulfill their needs. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 60) Herzberg's research identified the key factors that motivate workers, including company policies and administration, wage rates, interpersonal relations with co-workers, and physical environment at work. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 61) Herzberg's findings suggest that the best way for firms to increase worker motivation is to focus on improving pay and making working conditions more pleasant. Answer: FALSE Explanation: Herzberg found that pay, working conditions, and other aspects of the job environment were hygiene factors, not motivators. The best motivators all involve job content. Thus, to improve motivation, firms should focus their efforts on making the work itself more interesting and rewarding. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

62) Since hygiene factors do not motivate workers toward high achievement at work, managers can safely ignore these factors when trying to develop an effective work environment. Answer: FALSE Explanation: Although hygiene factors (which include working conditions, job security, and pay) do not increase motivation, they can be responsible for dissatisfaction among employees if they are not maintained at an adequate level. To avoid dissatisfaction, managers must make sure that these hygiene factors are maintained at acceptable levels. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 63) Herzberg's findings suggest that Green Goddess, a small lawncare chain, can help workers satisfy higher-order needs by identifying those things that motivate (inspire) them to work at their fullest potential. Answer: TRUE Explanation: Herzberg's findings suggest that worker motivation can be triggered by giving employees more interesting and challenging work, by recognizing worker contributions to the success of the firm, and by giving employees the chance for growth and advancement within the firm. All of these job characteristics would help employees achieve their higher-order needs as Maslow identified them. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 64) Douglas McGregor observed that all managers tend to share common assumptions about employees. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

65) According to McGregor, Theory X managers assume that employees dislike work, and will avoid it if possible. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 66) According to McGregor, Theory X managers motivate employees by giving them a great deal of freedom and responsibility. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 67) Managers who make Theory X assumptions about employees tend to watch their subordinates very closely and provide detailed instructions to employees about how they should do their jobs. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 68) Theory X management has essentially disappeared from the real-world workplace. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

69) Theory Y managers assume that most people are capable of using a relatively high degree of imagination and creativity to solve problems. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 70) Theory Y managers assume that the main factor that motivates most employees is the desire to earn more money. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 71) Theory Y managers are likely to use empowerment to motivate employees. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 72) Theory Y managers adhere to the principle that most people do not work to their fullest intellectual potential. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

73) According to William Ouchi, two of the main features of the Japanese approach to management are individual decision making and rapid promotions. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 74) William Ouchi concluded that culture should not be a factor in one's management style. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 75) Ouchi's Theory Z is a blend of Type A and Type J business cultures. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 76) Theory Z calls for the creation of a sense of participation and cooperation within an organization. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

77) Theory Z emphasizes reliance on individual creativity and initiative rather than collective decision making. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 78) Recent economic problems as well as demographic and social changes in Japan have led some Japanese firms to seek new approaches to management. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 79) In the view of William Ouchi, managers of U.S. firms would have a smooth transition when implementing the management styles employed by Type J managers. Answer: FALSE Explanation: Ouchi felt that the Japanese style was effective, but also was aware of the fact that the Japanese culture was very different from the U.S. culture. He felt it was not practical to expect American managers to accept an approach based on the culture of another country. Therefore, he proposed a hybrid system that combined some elements of the Japanese approach with some elements of the American approach. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

80) The best way for U.S. firms to become more competitive is to adopt the Type J approach to management. Answer: FALSE Explanation: Type J is the Japanese approach to management. The cultures of Japan and the United States are quite different, and it is unlikely that the Type J approach would work as well in the United States because of these cultural differences. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 81) The goal of William Ouchi was to develop a modified business culture that blends the best of Type J with the best of Type A. Answer: TRUE Explanation: Knowing that American culture would not operate with the Type J philosophy, where the employees act like a family and make decisions by consensus, where you have employment for life, and where employees assume collective responsibility, Ouchi's attempt to improve Type A work environments was to integrate some of Type J and some of Type A into a new work environment he called Theory Z. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

82) Rafael thinks he makes life easy on his employees. He tells them exactly what to do, how to do it, and when. He believes that most of his employees are lazy, and will go straight to their phones if he doesn't keep an eye on them. Therefore, he spends much of his time monitoring their work. When he finds an employee who is not performing up to his or her expectations, Rafael uses threats and punishment to increase the worker's motivation. Rafael is a Theory X manager. Answer: TRUE Explanation: A Theory X manager assumes that employees are lazy and will avoid work if possible. He or she also assumes that employees have very little ambition and prefer to be told what to do. A Theory X manager tries to motivate employees by using threats and punishment. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 83) Sergio has a great deal of faith in the abilities of his subordinates. He thinks most employees want to be productive, and will work hard if given the right incentives. He also believes that most firms do not take full advantage of the intelligence and creativity of their employees. Because of this, Sergio favors a managerial style that allows employees to be flexible and creative in how they do their jobs, and empowers them to make and implement decisions. Sergio is a Theory X manager. Answer: FALSE Explanation: A Theory X manager assumes that employees are lazy and will avoid work if possible. He or she also assumes that employees have very little ambition and prefer to be told what to do. A Theory X manager tries to motivate employees by using threats and punishment. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

84) Jackie is creative and intelligent. She prefers to work on her own and on challenging projects. Jackie would be most effective when working for a Theory X manager. Answer: FALSE Explanation: Theory X managers expect employees to follow orders and give them little freedom and flexibility to be creative. Jenny probably would become very frustrated under the direction of a Theory X manager. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 85) Sean is very talented and ambitious. He likes to work independently and wants to move up in his company as quickly as possible. Sean might become frustrated if he worked in a firm that took a Theory Z approach to management. Answer: TRUE Explanation: Theory Z calls for collective decision making and a relatively slow evaluation and promotion of employees. This approach would frustrate employees who like to work independently and who expect (and think they deserve) quick promotions. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 86) Kylie wants to work with others to solve problems and make decisions. But, she is also able to assume individual responsibility. She prefers working for a company that takes a holistic view of its employees. These preferences suggest that Kylie might enjoy working at a company that uses a Theory Z approach to management. Answer: TRUE Explanation: Collective decision making and a holistic view of employees are two of the characteristics of Theory Z. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

87) After a 3-year probationary period, career positions at Bayside Community College are fairly secure, even though the opportunity for promotion runs pretty slowly. These jobs would probably appeal to people who currently work for Type A companies, similar to the way many companies operate in Silicon Valley. Answer: FALSE Explanation: Type A personalities prefer individual responsibility and decision making, and the opportunity for rapid promotion. They also prefer specialized career paths and exist in a culture where the concern for employee welfare is segmented. The culture at the community college, where jobs are fairly secure but promotions do not happen very often, is more like a Theory Z approach. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 88) Peter Drucker made an important distinction when he stated that managers do not motivate employees, but employees motivate themselves. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 89) Management by objectives (MBO) is a goal-setting theory model that sets goals by getting all employees active in the goal formulation process, committing employees to meeting the goals, and then monitoring performance. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

90) The central idea behind management by objectives (MBO) is that employees motivate themselves through the process toward goal achievement. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 91) The management by objectives model devised by Peter Drucker works best in a dynamic, rapidly changing business environment, where management makes short-term plans. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 92) It may be difficult to utilize the management by objectives (MBO) model when employees have not agreed upon the goals set by top management. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

93) According to Victor Vroom, the effort employees exert on a specific task depends on their expectations of the outcome. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 94) According to Victor Vroom's expectancy theory, expectations of employees can affect their motivation. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 95) Vroom's expectancy theory contends that prior to committing maximum effort to a task, employees want to know if they can accomplish the task and if it will equally reward everyone at work, even if others were not involved in the accomplishment of the task. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

96) According to expectancy theory, one of the things employees want to know before they commit to making a maximum effort on a task is whether the reward for accomplishing the task is worth the effort. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 97) Expectancy theory says that employees will be motivated if (1) they can actually accomplish the task; (2) they will be rewarded for their achievement; and (3) the reward will be worthy of their effort. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 98) According to researchers David Nadler and Edward Lawler, managers should set performance standards that are attainable only by the most talented and dedicated employees. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

99) According to expectancy theory, employees in a given organization tend to have very similar expectations. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 100) The basic principle of equity theory is that employees try to maintain fairness between their efforts and their compensation compared to others in similar positions. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 101) Equity theory tells us that when employees perceive inequitable treatment they will respond in a manner that will attempt to reestablish fairness. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

102) According to equity theory, if employees perceive that their level of effort is greater than their compensation, they will work to increase their productivity. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 103) Equity theory suggests that if employees perceive inequity in the workplace, they might respond with reduced productivity, higher absenteeism, or even voluntary resignation. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 104) Equity judgments are precise, objective measurements of the fairness between an employee's effort and their compensation. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

105) The best strategy to deal with a perceived inequity in the compensation of different employees is to require that salaries and other forms of compensation are kept secret. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 106) For management by objectives to be successful, employees must be willing to accept the objectives set by top management without question and without hesitation. Answer: FALSE Explanation: Management by objectives calls for goals to be set through a process involving employees as well as managers. Employees do not simply accept goals, they participate in setting them. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 107) A major problem with the MBO approach is that it provides no way for employees to provide input into the goal-setting process. Answer: FALSE Explanation: MBO consists of a cycle of discussion, review, and evaluation that gets everyone from top and middle manager to nonmanagerial employees involved in goal setting. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

108) According to expectancy theory, worker motivation almost always increases when employees are assigned a very challenging task. Answer: FALSE Explanation: Expectancy theory maintains that employees will want to know about the rewards they will receive and will only be highly motivated if they think the rewards are worth the effort. Thus, according to expectancy theory, if a task is perceived as being very difficult, employees are unlikely to put forth their maximum effort unless they believe the rewards are substantial. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 109) American employees put great value in being treated fairly. According to equity theory, if things seem unfair, they will do their best to make them equitable by withholding effort, increasing effort, or by rationalizing that they are undeserving of the same as others. Answer: TRUE Explanation: Equity judgments are based on perceptions and are subject to errors and disagreements. It is not unusual for employees to overestimate their own contributions and to disagree with the evaluations of managers. When this happens, the employees may perceive the pay and recognition they receive as inequitable even if the manager was actually accurate in evaluating performance. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

110) Peyton is disappointed with the effort his employees are putting forth. According to expectancy theory, Peyton could improve employee performance by setting more ambitious performance standards that exceed the ability of most employees to attain them. Answer: FALSE Explanation: Victor Vroom's expectancy theory contends that unattainable goals will not motivate employees, but rather convince them that committing maximum effort to a task is not worthwhile. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 111) Nash works for a landscaping business. His employer asked if he could work overtime this weekend to finish a job for a significant client. According to expectancy theory, Nash will want to compare the compensation or other rewards offered by his employer to the extra effort involved before he decides whether to agree to the job. Answer: TRUE Explanation: According to Victor Vroom's expectancy theory, prior to committing effort to a task, employees want to know (1) Can I accomplish the task? (2) If I do accomplish it, what's my reward? (3) Is the reward worth the effort? Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

112) You get a lower grade in a course than your friend did even though you studied more during the semester and attended class more often. As a result, equity theory predicts that you might convince yourself that "Grades aren't all that important. After all, lots of people who succeed in the real world didn't make good grades in school." Answer: TRUE Explanation: According to equity theory, if people perceive what they believe is an unfair result, they may: (1) reduce their effort, or (2) rationalize. A student could rationalize receiving a lower grade than someone else by downplaying the importance of good grades. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 113) Megan owns her own business and is a strong advocate of equity theory. Because of her acceptance of this theory, she is likely to assure employees that they are compensated in a way that reflects their efforts and contributions relative to those of other employees. Answer: TRUE Explanation: Equity theory suggests that employees attempt to maintain a balance between inputs and outputs of others in similar positions. If employees perceive that they are being unfairly compensated they are likely to reduce their effort and be less productive. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

114) As a human resources manager for your company, you are looking for ways to motivate employees to favor your company over competitors. The company cannot afford to offer a wide array of benefits, but you are confident that if you survey employees and provide them the opportunity to vote on the benefits that are most important to them, they will see this as a fair and equitable way to operate. Answer: FALSE Explanation: Analyzing the situation using equity theory, we note that employees quite often want different things. As an example, one or two good employees may have the need for on-site day care, whereas a majority of employees who are either too young to have small children or whose children are already grown may not see this as a necessary benefit. They may prefer to be able to work out in an on-site gymnasium or get time away from work to do volunteer work. Equity treatment is a matter of perception. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 115) WellTech, a biotechnology firm, has four locations throughout Colorado. Marcy is a marketing specialist at the oldest and most rural location. Her colleagues at the three other sites get an hour off each day to work out because there are gym facilities at those locations. While Marcy knows that she makes a little more money than they do, she measured the cost of stopping off at the gym on her way home each evening. She realized that the extra compensation does not cover the cost of the membership. Because of this, Marcy is keeping tabs on marketing positions that may open at the company's other sites. Equity theory suggests that she is motivated to bring a sense of fairness to what she perceives as an inequity. Answer: TRUE Explanation: Equity theory states that if workers perceive a sense of unfairness, they will collect comparative information. They will somehow strive to bring a sense of equity to the situation by making a change, or they will rationalize that the inequity is not that important. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

116) You are a graduate student in the chemistry department at Equity University. Several of your graduate student friends have positions in the business and English departments. While everyone's compensation and employee benefits are exactly the same, your department requires you to always show up and tutor students at least 4 hours each day and to serve on one university committee each semester. Your friends in the other departments are not required to follow these rules. Lately, you are doing your best to limit your daily obligation to 2 to 3 hours each day. Relating your situation to one of the theories we have studied, your goal of limiting inputs is explained by expectancy theory. Answer: FALSE Explanation: Equity theory states that if a person perceives that there is an inequity at work, he or she will increase or reduce inputs (in this case the number of hours tutoring each day) in order to bring a sense of equity to what is believed to be an inequitable situation. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 117) Chipper, the marketing director for Tee Time Golf Resort, is making plans for the annual tournament and is trying to determine the prize money for the top golfer. In past years, the resort successfully raised $25,000 through registration fees and sponsorship. This year, Chipper knows he could easily attract some great local talent if he made the top prize $10,000. However, Chipper also knows he cannot afford to announce a $10,000 top prize at the expense of losing out on a portion of the fees of less talented players who may decide not to register. Using expectancy theory rationale, he explains to the general manager that if they set the prize too high, several better-than-average golfers in the area will feel "out of their league" when the top players join in and therefore will be unmotivated to spend their money to participate. Chipper's analysis of the situation sounds reasonable to the general manager Answer: TRUE Explanation: According to expectancy theory, the participants will ask themselves if it is possible to win the tournament given the other talent that will be competing, and, further, will the experience and reward be worth the expense that they are paying for a round of golf? Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

118) Based on Herzberg's theory of motivators, job enrichment will motivate employees to satisfy higher-order needs. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 119) Job enrichment is based on Herzberg's higher motivators, such as responsibility, achievement, and recognition. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 120) Job enlargement is about breaking down a sizeable job into smaller parts so that the employee is not overwhelmed by a large task. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

121) Skill variety is one of the characteristics of work that lead to improved motivation and performance. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 122) Using job enrichment strategy, management can contribute to improved motivation and worker performance primarily by increasing employee pay. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 123) Feedback enhances worker motivation by giving employees a feeling of achievement and recognition. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

124) Task identity refers to the degree to which a job has a substantial impact on the lives or work of others in the company. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 125) Job simplification attempts to increase task efficiency by breaking the job into simple steps and assigning people to perform each of those steps. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 126) Job simplification is an effective strategy for managers who want to achieve job enrichment. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

127) Job enlargement is the strategy of assigning employees to different jobs within the organization on a regular basis. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 128) Job enlargement attempts to enrich jobs by combining a series of tasks into one challenging and interesting assignment, as opposed to simplifying the job. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 129) Job rotation attempts to make a job more interesting and motivating by moving employees from one job to another. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

130) As part of their open communication strategy, management should reward upward communication, even if it is negative. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 131) Open communication is a verbal strategy. It does not involve listening. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 132) Open communication strategies include the removal of physical barriers such as separate offices. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 133) As a motivational technique, open communication is enhanced when management provides several opportunities for employees to congregate and share ideas. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 46 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

134) Special parking areas, dining rooms, and restrooms set aside for executives are barriers to open two-way communication within an organization. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 135) By the time they graduate from high school, most people have received ample training to develop good listening skills. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 136) To implement self-managed teams, managers at most companies must reinvent work. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 137) The first step in any motivational program is to establish open communication among employees in order to encourage teamwork and cooperation. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 47 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

138) In order to encourage teamwork among managers and employees, top management must create an organizational culture that allows autonomy, decentralizes authority, and rewards good work. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 139) As a motivational technique, letting employees know they've done a good job is not as powerful as providing them with a bonus. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 140) Progressive managers are rewarding good work in all kinds of ways including more vacation days, thank-you events, and just letting everyone know when someone does a good job. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

141) When asked why they left their jobs, over half of those surveyed said they felt a lack of appreciation. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 142) Managers who believe job enrichment can effectively improve motivation would try to give employees a significant degree of freedom and flexibility in scheduling their work and in determining the procedures they use. Answer: TRUE Explanation: Advocates of job enrichment identify five characteristics of work that are important in affecting the motivation and performance of employees. One of these is autonomy, which refers to the degree of freedom, independence, and discretion employees have in scheduling work and determining procedures. Difficulty: 2 Medium Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 143) The key to achieving task identity is to design jobs that demand the use of many different skills. Answer: FALSE Explanation: Designing jobs that demand the use of different skills contributes to skill variety. Task identity refers to the degree to which the job requires doing a task with a visible outcome from beginning to end. Having employees use a variety of different skills does not guarantee that they will see a visible outcome, so skill variety does not guarantee task identity. Difficulty: 2 Medium Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

144) Job simplification is an extension of the ideas of Frederick Herzberg. Answer: FALSE Explanation: Job simplification breaks down jobs into simple repetitive tasks and assigns each task to an employee. This method of improving efficiency is more consistent with the scientific management approach of Frederick Taylor and Frank and Lillian Gilbreth than the ideas of Herzberg. Difficulty: 2 Medium Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 145) Feedback helps enrich a job by satisfying an employee's esteem needs. Answer: TRUE Explanation: Job enrichment is based on the ideas of Abraham Maslow and Frederick Herzberg. Maslow's hierarchy of needs identifies esteem needs as the need for recognition and acknowledgment as well as the need for self-respect and a sense of status and importance. Feedback helps employees satisfy esteem needs by contributing to a feeling of achievement and recognition. Difficulty: 2 Medium Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 146) One way for a firm to improve motivation of employees is to establish special rest rooms, dining areas, and parking areas for top executives. Answer: FALSE Explanation: Modern motivational techniques emphasize the need for open two-way communication among employees and managers. Special facilities for executives are barriers to effective two-way communication within an organization, and create an "us versus them" attitude among employees. Difficulty: 2 Medium Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 50 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

147) If managers want to retain their employees, a good strategy may involve mentoring them for more senior roles in the organization and provide opportunities for job advancement. Answer: TRUE Explanation: Providing opportunities for job advancement is a good strategy for retaining good employees. Difficulty: 2 Medium Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 148) According to the Adapting to Change box, companies have taken to using mobile apps to track employee engagement. Answer: TRUE Explanation: Managers don't always know what is motivating an employee unless they ask. Mobile apps like, Culture Amp and Talmetrix, allow managers to communicate quickly with employees and make the right changes to workplace motivators. Difficulty: 2 Medium Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 149) Upper Hand Industries regularly moves employees from one job to another in order to improve motivation. Upper Hand's strategy is job enlargement. Answer: FALSE Explanation: Job enlargement refers to combining tasks into one assignment that is more challenging and interesting. Upper Hand's movement of employees from one job to another is known as job rotation. Difficulty: 3 Hard Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

150) Management at the local Leaves of Green restaurant is trying to improve task efficiency by breaking down jobs into simple steps and assigning each step to a different worker. The key benefit of this approach is that it is one of the most effective ways to achieve job enrichment. Answer: FALSE Explanation: Leaves of Green is using job simplification. This procedure may increase task efficiency, but it also results in boring and repetitive jobs. This approach is inconsistent with job enrichment theory. In fact, job enrichment calls for both skill variety and task significance, which would be better accomplished if employees were given complex and challenging tasks. Difficulty: 3 Hard Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 151) In the accounting department of a large corporation, Robin supervises several employees. She makes it a priority to give her subordinates direct and clear information about their job performance. Robin's efforts are likely to improve worker motivation. Answer: TRUE Explanation: One of the elements of job enrichment is feedback, which is direct and clear information provided to employees about their performance. Feedback contributes to high worker motivation by giving employees a feeling of achievement and recognition. Difficulty: 3 Hard Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

152) Ari is president and CEO of Bigbux Bank. Recently, he has sought to encourage more open two-way communication among the bank's employees and managers. One of the most important things Ari can do to achieve this goal is to become a good listener. Answer: TRUE Explanation: The first step in encouraging open two-way communication within an organization is for top management to create an organizational culture that rewards listening. Top managers can help establish this culture by becoming good listeners themselves. Difficulty: 3 Hard Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 153) During their first years at the Epic Industries, management trainees spend a mandatory two months in each of six different departments. In this time, they have the opportunity to learn skills in each functional area, and also to decide where they have the best match. Job rotation is a motivational strategy used by contemporary organizations. Answer: TRUE Explanation: Although it requires employees to train and retrain in a number of areas, job rotation makes jobs interesting and motivates employees to find their niche and cross-train in a number of functional areas. Difficulty: 3 Hard Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

154) At Sorenson Staples, employees working at the company's headquarters do not expect to necessarily sit at the same desk every day. They may decide to situate in a projection room, in a temporary soundproof room, or in one of several lounge areas in the building. They may locate next to someone outside of their functional area. Sorenson management believes that breaking down barriers fosters more communication and innovation, and makes jobs more interesting. Answer: TRUE Explanation: Removing physical barriers is a contemporary strategy for developing open communication within a firm. Difficulty: 3 Hard Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 155) Derek's manager often tells the employees "there isn't a lot of time for idle talk on the job. If you want to give us your opinion, as a believer in open communication, I'll gladly give you your chance to speak your mind, on your way out!" This manager is up to date on the purpose of the exit interview, as an important source of feedback for companies. Open communication always begins at this juncture. Answer: FALSE Explanation: Not hardly! Managers should never wait until an employee decides to leave to generate open communication. If you wait until the exit interview, it's too late. Difficulty: 3 Hard Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 156) Regardless of cultural background, most employees respond the same way to motivational approaches. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

157) High-context cultures tend to jump right in and get work done without worrying about developing close work relationships. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 158) In a high-context culture, relationship building is motivational. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 159) In a low-context culture, employees are less likely to place emphasis on relationship building. They want to jump right in and get the job done. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 160) Even if there are cultural differences across the globe, reward preferences do not vary across cultures. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 55 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

161) If rewards are an important part of an international firm's motivational strategy, consideration should be given to adjusting rewards for cultural preferences. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 162) Most Gen X managers are likely to be flexible and good at collaboration. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 163) Members of Generation X tend to be more independent and need less feedback than members of older generations. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 164) As a group, Millennials tend to be impatient, skeptical, and image driven. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

165) Millennials tend to be adaptable, tech savvy, and tolerant. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 166) Gen Xers are difficult to motivate because they lack ambition. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 167) Gen Xers and Millennials will be more tolerant of change than Baby Boomers. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 168) Motivation is largely the result of external rewards and punishments. Answer: FALSE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

169) Gen Zers grew up post-9/11, in the wake of the Great Recession, and amid countless reports of school violence. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 170) Gen Xers, Millennials, and Gen Zers often expect change and may find the lack of change questionable. Answer: TRUE Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 171) It is important when dealing with today's culturally diverse workforce that managers maintain a consistent motivational approach for everyone. Answer: FALSE Explanation: Different cultures experience and respond to motivational approaches differently. What works for employees of one nationality or age group may be less successful for some other group. Difficulty: 2 Medium Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

172) If you want to understand what motivates Gen X workers, it might be a good idea to study the personal experiences that this group shared, such as stay-at-home moms and dads that worked very steady nine-to-five jobs, with hardly any fear of layoffs. Answer: FALSE Explanation: Although it is very important to understand the personal development and experiences that Gen Xers shared, many lived in two-career families and experienced the tensions when one or more of their parents lost their jobs. They come to work with perceptions that jobs are not that secure to begin with Difficulty: 2 Medium Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 173) When studying the differences in generations, it is fair to say that many ideas that each group shares result from common experiences during the first 10 years of life. Answer: TRUE Explanation: Groups that are designated as generations are linked together by experiences they shared during their formative years (up to around 10 years of age). Difficulty: 2 Medium Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 174) As Gen Zers are starting to enter the workforce, they are likely to be less cautious and unmotivated to make improvements in the world around them. Answer: FALSE Explanation: Gen Zers have witnessed and are more aware of troubling times since they've seen the effects firsthand. They will likely be more cautious and security minded, ready to improve the world. Difficulty: 2 Medium Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

175) As indicated in the Connecting Through Social Media box, though Millennials seek and expect feedback, today's workplace does not accommodate a culture focused on shared appreciation among coworkers. Feedback is only given from employees' direct superiors. Answer: FALSE Explanation: As Millennials entered the workforce, it was evident they expected lots of feedback from not just their superiors, but their fellow team members too. Apps, like TINYpulse, help coworkers "cheer" on others employee-to-employee. Difficulty: 2 Medium Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 176) Casey, a Gen Xer, has just been promoted to an upper management position. If she is like many of her generation, one of Casey's biggest problems will likely be her inflexibility and difficulty at working collaboratively with other employees. Answer: FALSE Explanation: Members of Gen X tend to flexible and usually have the ability to work collaboratively. Difficulty: 3 Hard Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

177) Brendan is putting together an employee group to help add new technology to his company's existing products. He is looking for employees that are comfortable with new technologies, and who are flexible, adaptable, and have a strong sense of commitment to their work. Many of his company's Millennial employees probably would meet these criteria. Answer: TRUE Explanation: Millennials (also known as Gen Y) tend to be tech savvy, flexible, adaptable, and able to multitask. Perhaps the most surprising characteristic of many Millennials is their sense of commitment. Difficulty: 3 Hard Topic: Motivating Employees Across Generations Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 178) Michael was asked by his team leader to explore and evaluate the best ways to communicate with customers through social media. Although Michael is relatively new to the company, and is not well versed on the entire product line, he is a Millennial, which makes him overall well suited to knowing how people find things in common with others in an online environment. Answer: TRUE Explanation: Millennials (also known as Gen Y) are often perceived as tech savvy because they have never experienced life without computers and the Internet. Difficulty: 3 Hard Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

179) The personal satisfaction people feel when they have done a job well is a(n) ________ reward. A) cognitive B) extrinsic C) physiological D) intrinsic Answer: D Difficulty: 1 Easy Topic: Motivating Employees Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 180) Rewards that come from someone else in recognition of good work are ________ rewards. A) conditional B) self-actualized C) extrinsic D) secondary Answer: C Difficulty: 1 Easy Topic: Motivating Employees Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 181) ________ was the father of scientific management. A) Elton Mayo B) Frank Gilbreth C) Henry Gantt D) Frederick Taylor Answer: D Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

182) One of the elements essential to Frederick Taylor's approach to improving worker productivity was A) teamwork. B) a hierarchy of needs. C) rules of work. D) open communication. Answer: C Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 183) Frank and Lillian Gilbreth developed the principle of ________, which said that every job could be broken down into a series of elementary motions. A) motion economy B) marginal productivity C) division of labor D) micro-motion analysis Answer: A Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 184) ________ was the dominant strategy for improving worker productivity during the early 1900s. A) Management by objective B) Scientific management C) Social Darwinism D) Job enrichment Answer: B Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

185) A basic idea of ________ was to conduct time-motion studies to find the best way to perform each task, then teach people to use these methods. A) management by design B) Theory Z management C) scientific management D) expectancy theory Answer: C Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 186) Frank and Lillian Gilbreth thought that every job could be broken down into a series of elementary motions that they called A) therbligs. B) elementary steps. C) micromotions. D) lillifranks. Answer: A Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

187) According to the principles of scientific management, the best way to improve productivity is to A) give employees greater recognition for their efforts. B) establish open two-way communications among all of the organization's employees and managers. C) use time-motion studies to find the best method of doing each job, then teach those methods to employees. D) use job rotation and job enlargement to make work more interesting and challenging. Answer: C Explanation: Taylor was the father of scientific management. He thought that the best way to improve productivity was to use scientific studies to determine the most efficient way to do each job, then teach employees how to use these methods. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 188) Which of the following statements is the best description of how scientific management viewed employees? A) Employees are like machines that must be properly programmed. B) Most employees are creative and intelligent individuals who should be given a great deal of freedom and flexibility in how they perform their jobs. C) Employees will only exert their maximum effort if they believe that their goals are attainable. D) Employees are individuals who do not respond in the same way to a particular management style. Answer: A Explanation: Scientific management had little concern for the psychological or human aspects of work. Instead, it viewed people as if they were machines that needed to be properly programmed. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

189) Sheldon has just successfully negotiated a new long-term sales agreement with a major client. The personal satisfaction Sheldon has about his efforts is his ________ reward. A) external B) extrinsic C) intrinsic D) reciprocal Answer: C Explanation: An intrinsic reward is the personal satisfaction someone feels from doing a job well and completing goals. Difficulty: 3 Hard Topic: Motivating Employees Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 190) Alyssa's supervisor was so impressed by her work that he named her the employee of the month. This praise from her supervisor is an example of a(n) ________ reward. A) extrinsic B) intrinsic C) secondary D) extraneous Answer: A Explanation: An extrinsic reward is given to a person by someone else in recognition of good work. Difficulty: 3 Hard Topic: Motivating Employees Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

191) SmartTech's CEO, Gary, often honors employees who have demonstrated the company's core values. SmartTech holds a conference each year, where one employee is honored in several values categories that include (1) challenge; (2) move fast; (3) be open and straightforward; (4) teamwork for results; and (5) take responsibility. Rather than posting core values someplace everyone passes by each day, Gary finds that providing ________ rewards once each year provides the message to all employees that these are important values. A) equality B) valued C) intrinsic D) extrinsic Answer: D Explanation: An extrinsic reward is given to a recipient in recognition of good work or superior performance. This may be a tangible reward such as a pay raise, or an intangible reward such as praise. The key factor is that it is recognition passed along by another party, usually a supervisor. Difficulty: 3 Hard Topic: Motivating Employees Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 192) All new employees at Madison Lane Manufacturing are specifically trained to use the most efficient production methods. After extensive training, they are placed on an assembly line and expected to perform the same task day after day, using the methods they were taught. The work is boring, but the pay is good. Madison Lane's approach is consistent with the principles of A) management by objectives. B) expectancy theory. C) scientific management. D) human engineering. Answer: C Explanation: According to scientific management, the best way to improve worker productivity is to determine the best method of performing each task and then teach all employees to use these methods. Frederick Taylor, the father of scientific management, believed that firms could motivate employees by offering high wages. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

193) Lou is a professional house painter. During busy periods, he hires high school and college students to help complete his jobs. Lou explains that he knows the most efficient way to paint a house and he expects them to follow his instructions exactly. Lou's approach is consistent with the ideas of A) Peter Drucker. B) Frederick Herzberg. C) William Ouchi. D) Frederick Taylor. Answer: D Explanation: Frederick Taylor was the father of scientific management. Taylor believed that the best method of performing each task should be determined, and that employees should be taught these most efficient methods and expected to use them. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 194) The Hawthorne studies concluded that worker motivation A) increased when managers applied the scientific management approach. B) was most affected by monetary incentives. C) improved when employees felt like their ideas were respected. D) was mainly determined by physical working conditions such as lighting, temperature, and humidity. Answer: C Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-02 Describe the Hawthorne studies and their significance to management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

195) The Hawthorne studies were conducted by ________ and his colleagues from Harvard University. A) Henry Gantt B) Elton Mayo C) Peter Drucker D) John Hawthorne Answer: B Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-02 Describe the Hawthorne studies and their significance to management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 196) The original goal of the Hawthorne studies was to determine A) the average IQ of production employees. B) whether employees could work effectively in unsupervised teams. C) the level of illumination that was associated with optimum productivity. D) how to stimulate employees to be more creative. Answer: C Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-02 Describe the Hawthorne studies and their significance to management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 197) The tendency for people to behave differently when they know they are being studied is known as the A) Hawthorne effect. B) Taylor effect. C) Type II effect. D) induced motivation effect. Answer: A Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-02 Describe the Hawthorne studies and their significance to management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 69 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

198) The Hawthorne studies found that employees in the experimental group A) performed much better under bright lighting than they did when lighting was dim. B) were more productive than other employees regardless of the level of lighting. C) were more creative when working individually than they were when working in teams. D) performed poorly because they were distracted by all of the attention they received. Answer: B Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-02 Describe the Hawthorne studies and their significance to management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 199) The findings of the Hawthorne studies led researchers to look more closely at how ________ could lead to better productivity. A) changes in salary and benefits B) disciplinary factors and punishment C) changes in physical working conditions D) the human side of motivation Answer: D Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-02 Describe the Hawthorne studies and their significance to management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

200) What was the most important impact of the Hawthorne studies? A) It helped managers find the level of lighting associated with optimum productivity. B) It showed that employees could be programmed like machines to perform simple repetitive tasks, and thus led to the development of assembly lines. C) It changed the direction of research away from Taylor's scientific management toward the study of human-based management. D) It showed that physical working conditions have no impact on worker productivity. Answer: C Explanation: As the result of the Hawthorne studies, the emphasis in research shifted away from time-motion studies and other aspects of scientific management toward an investigation of how psychological and human factors affected motivation. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-02 Describe the Hawthorne studies and their significance to management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 201) In the Hawthorne studies, employees were involved in the planning of the experiments. What did this cause employees to do? A) set rather simple, easily attainable goals B) become distracted and thus reduced productivity C) believe that management respected their ideas, which motivated them D) have high levels of productivity, but show disrespect for the managers in their test area Answer: C Explanation: The results of the Hawthorne studies led researchers to conclude that several factors associated with the experiments increased worker motivation. One of these factors was that the employees were allowed to participate in the designing of the experiment, and this caused them to believe that management respected their ideas. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-02 Describe the Hawthorne studies and their significance to management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

202) Which of the following statements about worker motivation is most consistent with the findings of the Hawthorne studies? A) Worker motivation will fall significantly if lighting conditions, temperature, and other elements of the physical environment are not at kept at their optimal levels. B) Employees are more motivated if they feel they are part of a special group or project. C) The best way to motivate employees is to offer pay raises, bonuses, and other financial incentives to employees who meet or exceed clearly specified goals. D) Worker motivation is unimportant in determining the level of worker productivity, because productivity is primarily determined by external factors such as the speed of the machinery the employees operate. Answer: B Explanation: The Hawthorne studies concluded that one reason the productivity of employees in the experimental group increased was that the employees who participated in the experiments felt they were in a special group and were doing important work. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-02 Describe the Hawthorne studies and their significance to management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 203) Dr. Nielsen, a Fairview University psychology professor, is planning a study of the factors that affect the motivation of employees. Dr. Nielsen is concerned that the results of his experiments may be misleading because employees in an experimental group tend to behave differently when they know they are being studied. This concern shows that Dr. Nielsen is aware of the A) Hawthorne effect. B) Taylor effect. C) potential confusion between Theory X and Theory Y. D) Heisenberg principle. Answer: A Explanation: The Hawthorne effect refers to the tendency of people to behave differently when they know that they are being studied. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-02 Describe the Hawthorne studies and their significance to management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

204) Which of the following statements would Elton Mayo have most likely made soon after concluding his Hawthorne studies? A) Employees at Superior Technologies are not lazy, but they normally lack direction and respond best to an autocratic style of management. B) The key to increasing productivity at Superior Technologies is to provide employees with the best possible physical working conditions. C) When Superior Technologies' employees are put into an isolated group, their natural tendency is to compete against each other and establish a "pecking order." D) At Superior Technologies, employees who enjoy their work environment and believe they are respected are likely to be more productive employees. Answer: D Explanation: Mayo and his colleagues concluded that the employees in the experimental group were highly motivated for several reasons. First, the fact that they were participating in an important experiment made them feel special. Second, the employees thought of themselves as a social group. They enjoyed the interaction with each other and with supervisors and researchers, so they worked hard to stay in the group. Third, the fact that they were allowed to participate in planning the experiments increased their motivation by convincing them that management respected their ideas and opinions. However, the researchers did not conclude that competition among employees was a major reason that productivity was high. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-02 Describe the Hawthorne studies and their significance to management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 205) The concept that a hierarchy of human needs could be used to explain motivation was developed by A) Abraham Maslow. B) Frederick Taylor. C) Douglas McGregor. D) Frederick Herzberg. Answer: A Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

206) Maslow was mainly concerned with explaining how A) jobs could be broken down into very simple tasks that could be performed by unskilled employees. B) human motivation was related to a hierarchy of needs. C) managerial assumptions about employees affected their style of management. D) to achieve open two-way communication within an organization. Answer: B Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 207) According to Maslow, a higher-order need A) always provides greater motivation than a lower-order need. B) never provides as much motivation as a lower-order need. C) becomes a source of motivation after lower-order needs are satisfied. D) contributes directly to the physical survival of the individual. Answer: C Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 208) Maslow classified the needs for basic items such as food, water, and shelter as A) safety needs. B) sustenance needs. C) physiological needs. D) self-actualization needs. Answer: C Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

209) Maslow called the needs people have for security at work and at home A) physiological needs. B) stability needs. C) insurance needs. D) safety needs. Answer: D Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 210) In Maslow's hierarchy of needs, the desire for love and acceptance would fall into the category of A) social needs. B) esteem needs. C) primal needs. D) self-actualization needs. Answer: A Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 211) Maslow would classify the need for recognition from others and for self-respect as ________ needs. A) social B) esteem C) security D) physiological Answer: B Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 75 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

212) In Maslow's hierarchy, ________ needs refer to the desire to reach one's fullest potential. A) social B) esteem C) egoistic D) self-actualization Answer: D Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 213) The need ________ would be classified as a social need. A) to reach one's full potential B) to feel safe and secure from unexpected threats C) for recognition and self-respect D) to feel accepted and loved Answer: D Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 214) Maslow placed ________ needs at the highest level of his hierarchy. A) self-actualization B) esteem C) deferred D) social Answer: A Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

215) Abraham Maslow thought that once needs at one level of his hierarchy were met: A) motivation would diminish. B) another, higher-order need would emerge to motivate that person. C) that type of need would never again be an effective motivator. D) he or she would become more interested in lower-level needs. Answer: B Explanation: Maslow believed that motivation was based on the drive to satisfy unmet needs. He felt that people focused on satisfying their lower-level needs first, but that once a particular need was met, a higher-level need would emerge and become a source of motivation. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 216) According to Maslow's Hierarchy of Needs theory, which of the following would be an issue that requires the fulfillment of a lower-order need? A) The need for a challenging project at work. B) The need for a promotion at work. C) The need for a mentor to help you ascend within the company. D) The need to locate your business in an area with a low crime rate. Answer: D Explanation: According to Maslow's Hierarchy of Needs theory, the needs that fall at or near the bottom of the pyramid are lower-order needs. These are physiological needs and safety needs. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

217) Serenity accepted a position with Creative Concepts in Houston, Texas. Before her first day, she felt uneasy as she was new to the area and company. However, she was delighted to hear she had the opportunity to play on the company softball team. She quickly made new friends and, through her new friends, learned about her new city. Apparently, her new job satisfies Serenity's ________ needs. A) social B) esteem C) self-actualization D) physiological Answer: A Explanation: Social needs refer to the need to feel loved, accepted, and part of a group. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 218) Until a recent incident, Elizabeth had always been very pleased with her part-time job at a local convenience store. During one of her shifts, the store was burglarized. Although no one was hurt, Elizabeth now feels anxious and fearful during her late-night shift. She is so nervous and worried that she is having a hard time concentrating on her work and is thinking about quitting. Management needs to be aware of Elizabeth's unmet ________ needs. A) esteem B) self-actualization C) physiological D) safety Answer: D Explanation: Safety needs refer to the need to feel secure at work and at home. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

219) Seamus dropped out of school as a 16-year-old and needs to support himself, though he has few skills. He is a part-time employee at a department store earning minimum wage. Seamus wants to earn more, but hasn't been able to find a better job since he is without the right qualifications. He is having a hard time paying his rent and his mounting bills. He even started to skip breakfast to save on food costs. Seamus is having trouble meeting his A) esteem needs. B) self-actualization needs. C) social needs. D) physiological needs. Answer: D Explanation: Physiological needs refer to the basic survival needs including the need to drink, eat, and be sheltered from the heat and cold. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 220) Anna has worked for the Nutty Boys Nut Butter Company for several years now and was recently recognized as one of the company's best employees. Her coworkers respect and admire her, and she feels good about herself. According to Maslow, the type of needs that are likely to motivate Anna in the future are A) social needs. B) self-actualization needs. C) physiological needs. D) safety needs. Answer: B Explanation: According to Maslow, once a need is satisfied, a higher-level need emerges and serves as a motivator. The recognition and respect Anna has earned, and the fact that she feels good about herself, indicate that she already has gone a long way toward satisfying her esteem needs. Self-actualization needs are the next level above esteem needs in Maslow's hierarchy, so the desire to satisfy these needs is likely to motivate Anna in the future. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

221) Elsa's manager is relieved when he sees her coming through the front door each morning. He knows that the day's tasks will not need to be adjusted. Elsa's work productivity and performance on the job are very good. Recently, however, her ability to get to work on time has affected her job performance. He has documented a number of unrelated health issues that have prevented Elsa from being at work on time. Which of the following views would Maslow likely share with Elsa's supervisor? A) A lack of socialization on the job may increase an employee's health-related issues. B) Self-actualization needs are not being met by this employer. C) Hygiene factors such as good pay are obviously not present through this employer. D) Lower-order needs such as physiological needs must be met before higher-order needs. Answer: D Explanation: Maslow believed that when lower-order needs were satisfied, then a person would seek to fulfill higher-level needs. Elsa's basic health concerns are at issue here. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 222) Cyrus has a good job and can afford an apartment with comfortable furniture and plenty of food. But because of political unrest and street violence in his town, he is considering uprooting himself and applying for a visa to move to another country. According to Maslow, Cyrus' concern reflects a desire to satisfy his A) physiological needs. B) safety needs. C) social needs. D) self-actualization needs. Answer: B Explanation: Safety needs are the needs people have for security both at work and at home. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

223) Ahmed emigrated from his war-torn country to the United States three years ago. Recently, he found a job working on an assembly line at an electronics manufacturer. When he came to the U.S., Ahmed left his friends and family behind. Now he is lonely and hopes that his fellow employees will accept him so that he can build some lasting friendships. According to Maslow, Ahmed is looking to satisfy his A) physiological needs. B) safety needs. C) social needs. D) self-actualization needs. Answer: C Explanation: Social needs include the need to feel accepted and become part of a group. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 224) Leighton has been an assistant at Security Financial for more than 14 years. She earns a good salary and has made friends at work, but she has been passed over for promotion twice and feels that no one appreciates her abilities and skills. Leighton is concerned with satisfying her A) physiological needs. B) social needs. C) safety needs. D) esteem needs. Answer: D Explanation: Esteem needs are the needs for recognition and acknowledgment from others, as well as the need for self-respect. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

225) Margot finally finished her Ph.D. program. Although she has a great and secure teaching job at an urban college, she does not hold a faculty position at a prestigious university. It is obvious to her colleagues that Margot is unsatisfied with her position at work. She constantly gives coworkers subtle reminders of her superior academic credentials and only participates in work activities where she will assume a leadership role. Looking at Margot's situation using Maslow's hierarchy of needs, which of the following needs are unmet? A) self-actualization B) esteem C) social D) physiological Answer: B Explanation: Although Margot has achieved great things academically, she is lacking in selfesteem. She needs to be recognized for her achievements, and does not feel as though she receives acknowledgement from others for her achievements. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 226) Several advocacy groups in the U.S. monitor firms that do business with sweatshops in developing nations. These watchdog groups are concerned about human rights abuses in foreign factories, often citing unsafe and unclean working conditions. Recently, business experts have shed new light on this issue, stating that these factories that do not meet the standards of developed nations are still perceived by their workers as a better way of life than what they had before because these employers offer steady wages. According to Maslow, these workers are motivated to satisfy which of his hierarchy of needs? A) self-actualization needs B) social needs C) safety needs D) physiological needs Answer: D Explanation: According to Maslow, people will satisfy lower-order needs first. These workers are at the lowest level on Maslow's hierarchy of needs. They need to satisfy their physiological needs first, before focusing their attention to satisfying the next order of needs: safety needs. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 82 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

227) ________ studied how the characteristics of the job itself affected worker motivation. A) William Ouchi B) Frederick Taylor C) Douglas McGregor D) Frederick Herzberg Answer: D Difficulty: 1 Easy Topic: Herzberg's Motivating Factors Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 228) Herzberg's research identified several ________ factors that did not necessarily motivate employees if they were increased, but could cause employees to become dissatisfied if they were missing or inadequate. A) retroactive B) inferior C) hygiene D) negative Answer: C Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

229) Herzberg found that factors that provided the highest level of motivation were mostly associated with A) job content. B) level of pay. C) general working conditions. D) the style of management. Answer: A Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 230) Herzberg found that good pay A) was the strongest motivator. B) was a significant motivator, but not as important as job security. C) was a hygiene factor rather than a motivator. D) had no effect on worker attitudes. Answer: C Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 231) According to Herzberg, a sense of achievement, earned recognition, and interest in the work itself were all A) important motivators. B) hygiene factors. C) ways for employees to meet their social needs. D) consistent with his Theory X approach to motivation. Answer: A Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 84 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

232) Herzberg's research found that the factor that ranked highest as a motivator was A) the friendliness of supervisors. B) a sense of achievement. C) a compensation system that included bonuses and regular pay raises. D) the presence of clear and consistent company rules and policies. Answer: B Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 233) According to Herzberg, job-related factors that motivated workers to work harder and more productively had one thing in common: A) they were easy to explain and easy to measure. B) they focused on making the jobs performed by employees simpler to accomplish. C) they were related to job content. D) they allowed more productive employees to receive higher compensation. Answer: C Explanation: Herzberg found that the factors that motivated employees the most were things like a sense of achievement, the chance to be recognized, and interesting work. These factors all centered on the content of the job. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

234) Herzberg's research found that safe working conditions and good pay A) are important motivators for most employees. B) helped maintain worker satisfaction, but did little to increase motivation. C) had no impact on worker morale. D) were very important motivators for professional employees and managers, but were poor motivators for unskilled employees. Answer: B Explanation: Herzberg found that decent pay and safe working conditions were needed to maintain worker satisfaction, but that an improvement in these factors did not increase worker motivation. Thus, he classified pay and working conditions as hygiene factors. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 235) According to Herzberg's views, which of the following strategies would be most likely to result in a higher level of worker motivation? A) improving the physical working conditions B) providing clear and fair work rules and policies C) making the work itself more interesting and challenging D) using time-motion studies to find the most efficient techniques for employees to use Answer: C Explanation: Herzberg found that the strongest motivators were tied to job content. Employees tend to be more motivated when they are interested in the work they are doing. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

236) While Maslow's research categorized a person's needs in terms of higher-order and lowerorder needs, Herzberg's research recognized that A) employees aspire to satisfy lower-order needs at work and higher-order needs through other life activities. B) certain work-related factors satisfied higher-order needs, while other work-related factors satisfied lower-order needs. C) the physical environment and general working conditions were of no consequence to employees. These factors did not affect higher- or lower-order needs. D) hygiene factors satisfied higher-order needs and motivating factors satisfied lower-order needs. Answer: B Explanation: Figure 10.3 compares the theories of Herzberg and Maslow. Maslow categorized a person's needs from lower order to higher order. Herzberg showed that certain work-related factors such as "interesting work" satisfied higher-order needs such as esteem and selfactualization needs, while other work-related factors such as "safety" satisfied lower-order needs. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 237) According to Herzberg, the difference between motivators and hygiene factors is A) motivators cause persons to work smarter, while hygiene factors cause people to work harder. B) hygiene factors make employees more enthusiastic about the work itself, whereas motivators make employees enthusiastic about how many hours they have to work and their next day off. C) hygiene factors develop more loyalty from workers, while motivators make workers enthusiastic about moving on to a different company. D) overall, motivators relate to greater job satisfaction, while hygiene factors make the work place a satisfying place to thrive. Answer: D Explanation: Motivators make workers more enthusiastic about the job and also more productive at the job. Hygiene factors may cause dissatisfaction if missing, but do not necessarily motivate employees to do a better job. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

238) According to Herzberg, which of the following groups of motivational factors would give employees the most satisfaction?

A) A B) B C) C D) D Answer: D Explanation: In reviewing Herzberg's ranking of motivational factors, interesting work, earned recognition, and growth opportunity rank closer to the top of all motivational factors, as compared to the others groups in this question. Job security, status, pay, friendly boss, and safe conditions are considered hygiene factors that may cause some dissatisfaction if missing, but do not necessarily motivate employees to work to their full potential. Difficulty: 2 Medium Topic: Herzberg's Motivating Factors Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

239) Kevin, a recent graduate with a degree in construction management, just landed his first job as a field engineer with a company that provides maintenance and repair for oil and chemical companies. During his first week on the job, his enthusiasm grew after talking to other employees. Although he would be traveling to many job sites during the first five years, many of his new colleagues remarked on the opportunities for growth and promotion and added responsibilities if he persevered with this company. If Herzberg were ranking the job factors that provide satisfaction for this young graduate, he would refer to these as A) hygiene factors. B) needs factors. C) motivators. D) Theory X factors. Answer: C Explanation: Motivators give employees satisfaction. These include a sense of achievement and earned recognition, as well as interest in the job itself and opportunities for growth and promotion. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 240) Ray, the CEO of McNealy Metals, often brags that his company offers the highest salaries in the industry, has excellent working conditions, and has clear and consistent company policies. At the same time, though, he admits his workforce is not highly motivated. Herzberg's research suggests that McNealy Metals is having difficulty motivating its employees because it focuses on A) interactive factors. B) motivating factors. C) altruistic factors. D) hygiene factors. Answer: D Explanation: Herzberg classified pay, working conditions, and company policies as hygiene factors. He noted that while the presence of these factors prevents employees from becoming dissatisfied, they are not motivators. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

241) Collier Chemicals has redesigned many jobs to make the work more interesting and challenging for its employees. The company encourages its employees to further their education by reimbursing them up to $7,500 per year for tuition and related expenses. Collier also recognizes employee achievements at an annual company picnic each June and a company holiday party each December. Talented employees are given promotions and added responsibilities. These policies suggest that management at Collier Chemicals is using the findings of A) Frederick Herzberg to increase worker motivation. B) William Ouchi to implement a Theory Z approach to management. C) Frederick Taylor to improve worker productivity through the principles of scientific management. D) Abraham Maslow to satisfy lower-order needs of employees. Answer: A Explanation: Frederick Herzberg's research determined that a sense of achievement, recognition, and opportunities for growth and advancement were all important motivators. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-04 Distinguish between the motivators and hygiene factors identified by Herzberg. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 242) ________ used the terms Theory X and Theory Y to describe different attitudes managers have about employees. A) Robert Colby B) Elton Mayo C) Douglas McGregor D) Victor Vroom Answer: C Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

243) Douglas McGregor described two very different sets of managerial attitudes about employees, which he called A) the positive view and the negative view. B) the macro perspective and the micro perspective. C) Theory X and Theory Y. D) individualism and collectivism. Answer: C Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 244) Theory ________ managers see employees as having a general dislike for work and an unwillingness to accept responsibility. A) A B) X C) Y D) Z Answer: B Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 245) Theory ________ assumes that the average person likes work, and has a relatively high degree of imagination and creativity. A) A B) Alpha C) X D) Y Answer: D Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

246) Theory Y managers prefer A) to closely supervise their employees. B) micro-management and a strong degree of control over subordinates. C) empowerment and letting employees design solutions. D) limited authority, but a significant amount of responsibility given to employees. Answer: C Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 247) William Ouchi called the management approach typically used by Japanese firms A) Type X. B) Type J. C) Type Q. D) scientific management. Answer: B Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 248) ________ is the term William Ouchi used to refer to the management approach typically used by firms in the United States. A) Type A B) Type Z C) Theory Q D) Theory J Answer: A Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

249) To be competitive, ________ recommended that American firms adopt a new management style that was a hybrid of the approaches used by Japanese firms and those used by American firms called ________. A) Mi Yurchishin, Theory X B) Akiko Animoto, Theory Z C) William Ouchi, Theory Z D) Sam Hyakowa, Theory Y Answer: C Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 250) ________ blends Japanese and American management practices into a hybrid approach which calls for long-term employment, collective decision making, and individual responsibility for the outcome of decisions. A) Theory A B) Theory X C) Theory Y D) Theory Z Answer: D Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

251) Theory X managers are likely to believe that A) the average person dislikes work and will seek to avoid it when possible. B) most employees know more about their job than the boss. C) employees are motivated mainly by the chance for advancement and recognition. D) job satisfaction is primarily related to higher-order needs. Answer: A Explanation: Theory X assumes that employees do not like their jobs and will try to find ways to avoid work when possible. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 252) Theory Y managers would A) rely on monetary rewards to motivate employees. B) assume that most employees dislike their jobs. C) have confidence in the ability of employees to solve problems that arise during work. D) believe that job enrichment would be an ineffective way to improve motivation because it focuses too much on job content and not enough on working conditions. Answer: C Explanation: Theory Y assumes that most employees are capable of a relatively high degree of imagination, creativity, and cleverness at solving problems. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

253) Which of the following is a characteristic of Type J management? A) lifetime employment B) individual decision making C) rapid evaluation and promotion of employees D) individual responsibility Answer: A Explanation: Type J is the term used by William Ouchi to describe the management approach typically taken by Japanese firms. One characteristic of this approach is a commitment to lifetime employment. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 254) Which of the following is a characteristic of Type A management? A) lifetime employment B) slow evaluation and promotion C) nonspecialized career path D) individual decision making Answer: D Explanation: Type A is the term William Ouchi used to describe the management approach that is common among American firms. One characteristic of this approach is individual decision making. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

255) An important criterion that helps to determine the type of management style (Type A, J, or Z) that works best for firms is A) the education level of the workforce. B) the marital and family status of the workforce. C) the general culture of the firm. D) the number of managers vs. the number of employees in the firm. Answer: C Explanation: William Ouchi found that the overall culture of a firm is an important criterion when adopting Type A, Type J, or Type Z management styles. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 256) William Ouchi's Theory Z embraced which of the following management ideals? A) Once hired, the employee would be assured of lifetime employment. B) Employees would cooperatively solve problems and decisions would always be consensual. C) Management would cautiously only concern themselves with an employee's work life. D) An employee could be promoted, but both evaluation and promotion would not happen quickly. Answer: D Explanation: Theory Z management embraced slow evaluation and promotion. Type J embraced lifetime employment and consensual decision making. Type A management embraced "segmented concern for employees." Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

257) In analyzing the differences among Theories X, Y, and Z managers, it is appropriate to assess that A) Theory Z managers believe that employees prefer to be directed. B) Theory Z managers understand that workers prefer to work by themselves, and will do their best work individually rather than with a team. C) Theory Z managers believe that getting employees more involved in work-related decisions will generally increase productivity. D) Theory Z managers believe that decision making is not part of an employee's responsibilities. Answer: C Explanation: Theory Z managers assume that employee involvement is the key to increased productivity. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 258) Reflecting upon the differences in Type J and Type A work environments, which of the following statements is fundamental to Type J? A) Type J environments fiercely protect the individual rights of workers. B) Type J environments are only concerned about the employee functions at work. C) Type J, unlike Type A, environments believe in more prompt and expeditious promotion for employees. D) Type J, unlike Type A, environments embrace consensual decision making and have a concern for the employee's life at work and outside of work. Answer: D Explanation: Among the characteristics of Type J (Japanese) work environments, this work culture believes in consensual decision making and holistic concern for employees (a concern for a work-life balance). Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

259) William Ouchi believed that a pure Type J approach to management would not work in the United States because it A) failed to encourage open communication. B) could lead to violations of U.S. antitrust laws. C) is based on the values and attitudes of Japanese culture. D) is too dependent on the assumptions of scientific management. Answer: C Explanation: Ouchi believed that the Type J approach to management worked well in Japan, but that it would be unreasonable to expect Americans to accept a system based on another country's culture. He therefore proposed a hybrid system, called Theory Z, which blended elements of both the Japanese approach to management (Type J) and the American approach (Type A). Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 260) Evan, a manager at a department store, believes most of his subordinates dislike work and would avoid it if possible. He also believes that his employees have little, if any, ambition, and that the only way to motivate them is by using threats and punishment. Evan's views are consistent with ________ management. A) Theory B B) Theory X C) Theory Y D) Theory Z Answer: B Explanation: A Theory X manager believes that employees are lazy, lack ambition, and seek to avoid responsibility. Theory X managers view fear and punishment as the primary motivators. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

261) Marina imagines that if she leaves her employees unsupervised for even a few minutes, they will do nothing but slack off. She is known as the "Dragon Lady" (well, not to her face) for the harsh criticism and punishment she disburses whenever an employee makes an error. Marina is a ________ manager. A) Theory X B) Theory Y C) Theory Z D) Theory plus Answer: A Explanation: A Theory X manager believes that employees are lazy and avoid work if given the opportunity, so they tend to supervise employees very closely. Theory X managers also believe that threats and punishment are effective motivators, so they tend to treat employees very harshly. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 262) At Upper Limits International, management's expectation for employee creativity is high and employees tend to work with little direct supervision since employees are considered trustworthy and committed. The management at Upper Limits reflects ________ attitudes about employees. A) Theory C B) Theory D C) Theory X D) Theory Y Answer: D Explanation: Theory Y assumes that most people like work, and will naturally work toward achieving goals to which they are committed. Theory Y also assumes that employees are capable of finding creative solutions to problems. For these reasons, Theory Y managers tend to trust their employees and give them a significant amount of freedom and flexibility in how they do their jobs. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

263) At the Sunny Solutions Company, employees are involved in decision making and promised long-term employment. The employees follow a somewhat specialized career path and have individual responsibility for results. Sunny Solutions' approach is an example of A) Theory R management. B) Theory X management. C) Theory Y management. D) Theory Z management. Answer: D Explanation: Like the Japanese approach to management, Theory Z emphasizes long-term employment, collective decision making, a sense of involvement and cooperation, and relatively slow employee evaluations and promotions. However, it blends these Type J characteristics with some Type A characteristics such as a moderately specialized career path and individual responsibility. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 264) In Silicon Valley, California, it is not unusual for highly skilled employees to stay at one company for about three years. These specialized employees have a mind-set for rapid promotion. They believe that they have only themselves to blame if these high goals are not met. William Ouchi would categorize the management style that these employees operate under as A) Type A. B) Type B. C) Type J. D) Type Z. Answer: A Explanation: Viewing Figure 10.4, Type A management approach includes: (1) short-term employment; (2) individualized decision making; (3) individual responsibility; (4) rapid evaluation and promotion; (5) specialized career paths; (6) explicit control; and (7) segmented concern for employees. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

265) At Ragtime Resale Shop, manager Lucinda doesn't waste any time thinking about whether the employees on her shift get breaks at reasonable times. In fact, she claims she is hard pressed to determine which one has "worked hard enough" to even deserve a break. Earlier today, Lucinda remarked, "I've never met anyone who likes this job! They're only biding their time and here for the money." Lucinda's managerial style would be classified as A) Theory X. B) Theory Y. C) Theory Z. D) Type J. Answer: A Explanation: Theory X managers assume that the average person dislikes work and will avoid it. Due to their dislike of work, they must be threatened, directed, and controlled. They have little ambition and are motivated by fear and punishment. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 266) While Cindy, a current psychology major, worked frantically at her part-time job at Ragtime Resale preparing for the regional manager's visit in a few days, her department manager, Lucinda, had an interesting word with her: "Don't worry Cindy, when I first started, I made $9.25 an hour too. It gets better!" Cindy shook her head as she reflected on how little Lucinda knew about what motivated her to seek perfection at this job. As she continued to neatly stack those pocket tees, she thought, "If the regional manager has the same attitude as Lucinda, I'm looking for another job." Cindy would prefer to work with a ________ manager. A) Theory X B) Theory Y C) Type J D) Type A Answer: B Explanation: Theory Y managers assume that people like work and they naturally work toward goals. They also assume that under certain conditions, workers will seek and accept responsibility, and they are motivated by a variety of rewards. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

267) ________ is based on the notion that setting ambitious but attainable goals will improve motivation and performance if the goals are accepted, accompanied by feedback, and facilitated by organizational conditions. A) Theory J B) Goal-setting theory C) Scientific management D) The principle of performance feedback Answer: B Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 268) Management by objectives was developed by A) Thomas Piketty. B) Henry Gantt. C) Frank and Lillian Gilbreth. D) Peter Drucker. Answer: D Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

269) The purpose of management by objectives is to A) enable top management to set goals for the entire organization. B) simplify the jobs of middle management by providing them with predetermined goals and objectives. C) help employees motivate themselves with a goal-setting model that involves discussion, review, and evaluation by management and employees. D) allow employees to set their own goals without consulting with management. Answer: C Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 270) ________ is a system of goal setting and implementation that involves a cycle of discussion, review, and evaluation of objectives among top and middle managers, supervisors, and employees. A) Objective planning B) Management by objectives C) The three-step planning system D) Cyclical objective analysis Answer: B Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

271) Management by objectives is most effective in organizations that A) are relatively stable. B) are faced with rapidly changing conditions. C) rely heavily on the principles of scientific management. D) are subject to extensive government regulation. Answer: A Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 272) ________ means to work with a subordinate, doing part of the work if necessary. A) Coaching B) Guiding C) Helping D) Teaching Answer: C Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 273) ________ means acting as a resource to a subordinate by teaching, guiding, and making recommendations, without actively doing any of the subordinate's work. A) Coaching B) Augmenting C) Helping D) Facilitating Answer: A Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

274) According to ________ the amount of effort employees devote to a task depends on their expectations of the outcome. A) scientific management theory B) the feedback principle C) the linkage effect D) expectancy theory Answer: D Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 275) According to Victor Vroom, which of the following questions is an employee likely to ask before deciding to exert his or her maximum effort toward completing a task? A) Is the reward for completing the task worth the effort involved? B) Are other employees working on the same type of task? C) Is this task more difficult than my previous work? D) How often will I be expected to do this task? Answer: A Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

276) Researchers David Nadler and Edward Lawler suggest that in order to use expectancy theory to improve worker motivation, the first thing managers should do is A) identify the critical path for the project. B) determine what rewards are valued by employees. C) ensure that the rewards are tied to the employee's performance. D) decide on a way to monitor employee performance. Answer: B Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 277) According to expectancy theory, the amount of effort employees exert on a specific task depends on their A) expectations of the outcome. B) manager's expectations of their performance. C) perception of the importance of the task. D) level of needs that are not yet satisfied. Answer: A Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

278) Equity theory states that employees will perform well if they A) understand the nature of their responsibilities. B) have an opportunity to impress others in the organization. C) believe the reward they receive fairly compensates them for their efforts when compared to others in similar positions. D) know that their supervisor has set reasonable performance goals and communicated them clearly. Answer: C Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 279) According to equity theory, what are employees most likely to ask? A) How hard is the task? B) If I accomplish the task, what's my reward? C) If I do a good job, will it be worth it? What is fair? D) Is my boss too autocratic? Answer: C Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 280) The basic principle of equity theory is that employees try to A) maintain equity between inputs and outputs compared to people in similar positions. B) ensure that performance standards are fair and attainable. C) earn as much as possible with as little work as possible. D) achieve the mutually agreed upon goals of management and employees. Answer: A Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 107 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

281) Inequity in the workplace is likely to result in A) arguments between managers and employees. B) higher morale. C) lower productivity and reduced quality. D) greater worker empowerment. Answer: C Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 282) Equity judgments are based on A) quantifiable evidence. B) deductive reasoning. C) statistical extrapolation. D) people's perceptions. Answer: D Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 283) A problem with equity judgments is that employees often ________ their own contributions to the success of a business. A) overestimate B) refuse to consider C) do not care about D) are unaware of Answer: A Difficulty: 1 Easy Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

284) According to goal-setting theory, in order for goals to enhance motivation and performance they must be A) accompanied by monetary rewards. B) accompanied by feedback. C) tied directly to the principles of scientific management. D) put into the labor contract. Answer: B Explanation: Goal-setting theory says that setting ambitious but attainable goals can improve motivation and performance if the goals are accepted by members of the organization, accompanied by feedback, and facilitated by conditions within the organization. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 285) One implication of goal-setting theory is that goals should be A) set by top management. B) relatively easy to achieve. C) set at a level that slightly exceeds the ability of employees to achieve them. D) set through a process that involves all persons responsible for formulating and implementing the goals. Answer: D Explanation: Goal-setting theory maintains that all members of the organization should have some basic agreement about the overall goals for the organization and the specific objectives to be met by departments and individuals. This can be accomplished by setting up a system that involves everyone in the organization in goal setting and implementation. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

286) A central characteristic of management by objectives is that A) goals are set by top management and followed without question by others within the organization. B) employees are given complete freedom to set their own goals as long as they are consistent with broad guidelines established by top management. C) goals are set through a process involving all members of the organization. D) it assumes that management must motivate employees, since employees are incapable of motivating themselves. Answer: C Explanation: Management by objectives is a strategy for involving all members of an organization in goal setting and implementation. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 287) One of the reasons management by objectives is an effective way to implement the ideas of goal-setting theory is that it A) makes it easier for managers to explain the reason for the goals they set for their employees. B) turns managers into helpers rather than coaches. C) allows employees to set their own goals without the need to consult with managers. D) provides a method to get everyone involved in the process of setting goals. Answer: D Explanation: Goal-setting theory requires that everyone within an organization should have some basic agreement about the overall goals for the organization as a whole and the specific objectives to be met by each department and individual. Management by objectives is a system of goal setting that helps accomplish this philosophy by getting everyone involved in setting and implementing the organization's goals through a series of discussions, reviews, and evaluations. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

288) Which of the following statements would a proponent of management by objectives likely make? A) Top management is best qualified to set the organization's overall goals. B) When all is said and done, employees must motivate themselves. C) Most employees are motivated more by pay than by recognition. D) In order to achieve important goals, managers must rely more on helping employees rather than coaching them. Answer: B Explanation: Peter Drucker first developed management by objectives in the 1960s. Drucker's view was that "Managers cannot motivate people; they can only thwart people's motivation because people motivate themselves." Thus, Drucker developed MBO in an attempt to help employees motivate themselves by getting them more involved in setting goals and objectives. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 289) Which of the following would be most closely tied to the idea that employee motivation requires that the rewards for completing a task are sufficient to justify the effort? A) Theory Z B) Theory X C) equity theory D) expectancy theory Answer: D Explanation: Expectancy theory maintains that employees consider whether or not the effort needed to complete a task is properly rewarded. If the employee values the reward and considers it adequate, the employee will be motivated to complete the task. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

290) Expectancy theory suggests that managers attempting to improve employee performance would be well advised to A) make sure that all employees are expected to meet the same standards. B) focus on setting monetary rewards for meeting the standards. C) set attainable performance goals. D) keep salaries earned by employees confidential. Answer: C Explanation: Expectancy theory states that if employees believe a task is unattainable, they are unlikely to commit their maximum effort to completing that task. Thus, employees must believe that a goal is attainable before they will exert their best effort. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 291) According to equity theory, which of the following statements is most accurate? A) The best way to motivate employees is to offer everyone the same reward. B) Employees' perceptions of fairness will affect their level of motivation. C) Employees generally do a good job of estimating their contributions to a firm. D) In the United States, employees tend to focus on their own situation and pay little attention to the efforts and rewards of other employees. Answer: B Explanation: Equity theory deals with perceptions of fairness. A central idea of equity theory is that employees are concerned with their treatment relative to others in the organization. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

292) The best remedy for staving off perceptions of inequity is A) keeping employees' pay rates as a guarded secret between HR department and the supervisor. B) hiring at least one person fewer than you believe the work situation requires. C) advocating frequent and open communication among all employees and managers. D) reminding employees regularly that they are very fortunate to have jobs. Answer: C Explanation: Generally speaking, the best remedy for staving off the perception of inequity is clear and frequent communication among all parties. Managers must communicate their expectations and outcomes for achieving goals. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 293) Which of the following problems would indicate that a manager failed to apply the basic concepts of expectancy theory? A) Employees are frustrated because they have no say in their organization's goals and objectives. B) Some of the organization's employees reduce their effort because they feel that they are being treated unfairly compared to other employees. C) Employees are unwilling to work toward achieving an important goal because they believe the reward offered is not sufficient to justify the effort. D) Employees are confused and frustrated because managers do not provide them with adequate feedback about their job performance. Answer: C Explanation: Expectancy theory is based on the idea that the amount of effort employees will exert to complete a task depends on their expectations about the outcome. Specifically, employees will only commit maximum effort if they believe the reward they will receive is worth the effort they must exert. Difficulty: 2 Medium Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

294) Lyell is a sales representative for the Nutty Boys Nut Butter Company. He is about to meet with his manager to review his progress toward meeting the sales objectives they agreed to at the beginning of the year. Lyell likes the fact that managers at Nutty Boys listen to their subordinates' ideas and get everyone involved in setting goals and objectives. Lyell's experience suggests that Nutty Boys is utilizing A) scientific management. B) management by objectives (MBO). C) the program evaluation and review technique (PERT). D) programmed management. Answer: B Explanation: Management by objectives is a system of goal setting that involves a cycle of discussion, review, and evaluation among managers and subordinates within an organization. The process is designed to improve motivation by getting employees involved in setting goals and objectives. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 295) Felicia is a credit department manager for Five Star Vehicles. Hugo is a new employee in her department. While he has been learning his job, Felicia has given him guidance by offering advice, encouragement, and instructions. However, she is careful to let Hugo do the actual work, even if he struggles a bit. Felicia's approach to getting Hugo up to speed indicates that she is A) both coaching and helping Hugo. B) helping Hugo rather than coaching him. C) familiar with the leading principles of scientific management. D) coaching Hugo rather than helping him. Answer: D Explanation: Coaching means acting as a resource by teaching, guiding, and recommending. Helping means working with the subordinate and doing part of the work if necessary. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

296) Paul Blocker is the offensive line coach for a university football team. He wants his players to report to fall practice in good shape. Coach has set challenging fitness standards that the linemen should have no problem achieving if they work hard during the summer. He knows his players hate running wind sprints so to encourage them to work out during the summer he announced that any player who passes the fitness test at the beginning of fall practice will be allowed to skip sprints for the first two weeks of practice. Coach Blocker's approach to motivation is consistent with A) expectancy theory. B) assessment theory. C) scientific management. D) the autonomous feedback principle. Answer: A Explanation: Proponents of expectancy theory suggest that motivation will be greatest if participants believe the rewards they receive are adequate for the effort they expend; however, they must first believe that the goal set is achievable. Thus it is important to set goals that are attainable and establish rewards that are valued by employees and considered adequate for the effort expended. This is what Coach Blocker is trying to do. The goals are challenging but attainable, and the reward (no wind sprints) is very attractive to the players. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

297) Mary Kay is in charge of a nursing shift at a hospital. She wants to improve the motivation and performance level of the nurses under her direction. According to expectancy theory, one element of an effective motivational strategy is to A) simplify the job. B) determine what types of rewards are valued by the nurses. C) set performance standards that are beyond the ability of most nurses to challenge them to achieve. D) rotate the nurses so that they perform different jobs each day. Answer: B Explanation: According to researchers David Nadler and Edward Lawler, the first task in applying expectancy theory to improve employee performance is to determine what rewards employees most value. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 298) Brad, an employee for a sports marketing firm, feels he has been treated unfairly by the organization. He helped three other employees organize a series of successful street soccer tournaments all around the country. While the other employees were given a bonus and corporate recognition, his efforts were ignored. According to equity theory, Brad is likely to respond by A) ignoring the perceived inequity. B) reaching the conclusion that his treatment is not related to the treatment of others. C) reducing his efforts on future projects. D) threatening the boss. Answer: C Explanation: Equity theory states that if employees perceive inequity, they will try to reestablish equitable exchanges of their efforts and their rewards. A common reaction is to reduce efforts on future projects. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

299) As a manager, Avery works hard to ensure all of her employees are treated fairly. She still, however, gets feedback that implies that some employees don't believe she is fair. This problem most likely results from the fact that A) Avery doesn't understand that employees are not concerned with equity, only with getting the biggest possible reward for the least possible effort. B) fair treatment is a hygiene factor rather than a motivator. C) attempts to treat employees fairly only work in an Asian or European culture. American employees tend to be individualists who believe that rewarding results is more important than perceptions of fairness. D) equity judgments are based on perceptions, and the perceptions of employees are not always accurate. Answer: D Explanation: Equity judgments are based on people's perceptions, and sometimes those perceptions are in error. For example, employees may overestimate the value of their contributions to the firm. When this is the case, they may feel slighted by their rewards even if the rewards are actually reasonable. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

300) Brett manages a sales force that sells laboratory supplies to companies and university science labs. He wants to implement a reward program for high performance. Any rep whose territory bills over $500,000 in sales will win a trip for two to a Caribbean island. Last year the high billing territory made $400,000 in sales. As his outside consultant on the rewards program project, you suggest that he ask around to make certain that this is something the reps would enjoy. Your other advice is A) to make certain the payout threshold is sufficiently high so that very few reps will be able to reach the sales goal. B) if after several months into the sales contest it appears that several reps are over halfway to meeting this goal, there may be a need to increase the payout threshold. C) that monetary rewards are never motivators. D) to consider whether the sales reps believe that this reward is attainable. Answer: D Explanation: Brett wants to use expectancy theory to motivate his sales force to increase company revenues. Nadler and Lawler suggest five things that managers should consider when using expectancy theory to motivate employees: (1) Determine what rewards employees value. (2) Determine each employee's desired performance standard. (3) Ensure that performance standards are attainable. (4) Guarantee rewards are tied to performance standards. (5) Be certain that employees consider the rewards adequate. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

301) Chipper, the marketing director for Tee Time Golf Resort, is making plans for the annual tournament and is trying to determine the prize money for the top golfer. In past years, the resort successfully raised $25,000 through registration fees and sponsorship. This year, Chipper's general manager wants to attract some great local talent and announce the top prize at $10,000. However, Chipper thinks the resort cannot afford to announce a $10,000 top prize at the expense of losing out on a portion of the fees of less talented players who may decide not to register. He explains to the general manager that if they set the prize too high, several better-than-average golfers in the area will feel "out of their league" when the top players join in and therefore will be unmotivated to spend their money to participate. Chipper's analysis of the situation is reasonable according to A) goal-setting theory. B) equity theory. C) expectancy theory. D) reinforcement theory. Answer: C Explanation: According to expectancy theory, the participant will ask three questions: (1) If I decide to compete in this tournament, do I have a chance to win the tournament? (2) If I win the tournament, will I receive a reward for my effort? (3) Will the reward be sufficient for the effort and expense? Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 302) Herzberg's research indicated that employees are motivated by job content. Modern managers focus on ________ by increasing the significance of the job, and even providing the employee with important feedback. A) rotating the job B) enriching the job C) simplifying the job D) reducing the responsibilities in the job Answer: B Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

303) Managers who advocate job enrichment focus on creating jobs with A) repetitive motions. B) simplified tasks so that the worker can achieve high levels of production. C) very specialized and difficult tasks. D) skill variety and autonomy. Answer: D Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 304) ________ emphasizes motivating the worker through the characteristics of the job itself. A) Automation B) Job engineering C) Scientific management D) Job enrichment Answer: D Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 305) ________ is the characteristic of work concerned with the degree of freedom, independence and discretion an employee has in scheduling work and determining procedures. A) Autonomy B) Interdependence C) Feedback D) Task significance Answer: A Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

306) The characteristic of work that is concerned with the amount of direct and clear information employees receive about performance is called A) linkage. B) feedback. C) autonomy. D) task significance. Answer: B Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 307) The degree to which a job has a substantial impact on the lives or work of others in the organization is referred to as A) task significance. B) task redundancy. C) the multiplier effect. D) mutual interdependence. Answer: A Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

308) ________ is the degree to which a job requires doing a task with a visible outcome from beginning to end. A) Task significance B) Autonomous responsibility C) Job specification D) Task identity Answer: D Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 309) The practice of moving employees from one job to another to make work more interesting is called A) task mobility. B) job rotation. C) job incrementation. D) worker alternation. Answer: B Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

310) ________ attempts to increase task efficiency by breaking down jobs into simple steps and assigning people to each of those steps. A) Job simplification B) Job segmentation C) Task restriction D) Roundabout production Answer: A Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 311) Job ________ combines a series of tasks into one assignment that is more challenging, interesting, and motivating. A) optimization B) enhancement C) enlargement D) maximization Answer: C Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 312) The first step toward establishing open communication within an organization is to A) create a clear chain of command much like the one found in military organizations. B) set up a computer network. C) place suggestion boxes in every department. D) create an organizational culture that rewards listening. Answer: D Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 123 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

313) As companies restructure to create greater efficiencies in their operations, there is a greater opportunity for ________ where management combines specialized tasks in one job, asking employees to broaden their scope of responsibilities. A) job enlargement B) job simplification C) job specialization D) job confrontation Answer: A Explanation: Job enlargement involves combining a series of tasks into one larger and more interesting assignment. Difficulty: 2 Medium Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 314) One way employees can be motivated on the job is if A) they're provided closed-end surveys on a monthly basis. B) they're given daily, companywide passive emails. C) a respectful rank and file politeness plan, where middle and higher-level managers are addressed as "Mr.," "Ms.," or "Dr." is instituted. D) there are procedures for encouraging open communication. Answer: D Explanation: Communication and information must flow freely throughout the organization when employees are empowered to make decisions—they can't make them in a vacuum. Among some of the procedures for encouraging open communication are: train management to listen, remove barriers to communication, and ask employees what is important to them. Difficulty: 2 Medium Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

315) Employees will perceive that their opinions are more valued if A) they're given personalized, closed-end question-type employee opinion surveys. B) they're provided settings where employees have the opportunity to converse with all levels of management. C) they're given emails from the CEO on a regular basis. D) the company emphasizes job simplification. Answer: B Explanation: Open communication is enhanced by removing barriers to communication. One way to achieve this is to provide settings where employees and management can enter into verbal exchanges. Communication is also enhanced with the removal of special titles/designations such as Dr., Ms., Mr., and President. Difficulty: 2 Medium Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 316) The major benefit of open communication in a company setting is A) a more directed flow of information. B) motivated employees. C) the ability to utilize the technique known as extinction. D) activation vs. passification. Answer: B Explanation: Open communication is one way that contemporary firms motivate employees to achieve at work. Difficulty: 2 Medium Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

317) Which of the following practices would fail to result in more open communication? A) provide opportunities such as company picnics and open lunch rooms that promote active communication among employees and management B) develop opportunities for employees to offer open-ended responses to internal surveys C) provide the opportunity for exit interviews when employees leave or are discharged D) provide training for improving listening skills Answer: C Explanation: If management waits until the exit interview to receive important feedback from employees, it is too late. At this point, the employees are not motivated to provide solutions for your company problems. Difficulty: 2 Medium Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 318) Which of the following practices would be most consistent with the views of scientific management? A) job enlargement B) job simplification C) job enrichment D) job rotation Answer: B Explanation: The goal of job simplification is to increase task efficiency by breaking down jobs into simple steps, then assigning a person to each of those steps. This practice is consistent with the scientific management views of Frederick Taylor. Difficulty: 2 Medium Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

319) Porter, an employee at Oklahoma Medical Instruments, recently had his job redefined. He now has more flexibility in the hours he works and more say in the procedures used on the job. This suggests that Oklahoma Medical Instruments is trying to change Porter's job so that it has more A) feedback. B) autonomy. C) task identity. D) task significance. Answer: B Explanation: One of the five characteristics of job enrichment is autonomy, which means giving employees more freedom and discretion in scheduling work and determining procedures. Difficulty: 3 Hard Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 320) Carolina works for a large New Mexico ski equipment warehouse. In the past, her only chance to learn how she was doing on the job came during performance reviews with her boss twice a year. The company recently implemented a policy designed to give her and other employees detailed information about their job performance on a monthly basis. This suggests that the company now provides Carolina and her co-workers with more A) autonomy. B) task identity. C) task significance. D) feedback. Answer: D Explanation: One of the five characteristics of job enrichment is feedback, which means giving employees direct and clear information about their job performance. Difficulty: 3 Hard Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

321) Damon is assigned a different job at Simons' Securities every month. Damon enjoys the task variety and finds that switching jobs on a regular basis keeps the work from becoming boring. Simons' is using a technique known as job A) branching. B) sharing. C) shopping. D) rotation. Answer: D Explanation: Job rotation is the strategy of moving employees from one job to another to make the work more interesting and challenging, thus increasing worker motivation. Difficulty: 3 Hard Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 322) At Five Star Vehicles, employees are grouped into teams. Each team is responsible for assembling an entire automobile. Five Star gives each team freedom and flexibility to decide how to divide up the work. The company keeps the employees informed about how their cars are selling, and even shows them the comments customers make about quality and performance on customer satisfaction questionnaires. Five Star Vehicles is using a strategy of A) job enrichment. B) holistic assembly. C) unitary motivation. D) supportive analysis. Answer: A Explanation: Job enrichment is a motivational strategy that emphasizes motivating employees by making the work itself more interesting, meaningful, and rewarding. By allowing the employees to assemble entire cars, Five Star Vehicles is providing skill variety, task identity, and task significance, all of which contribute to the meaningfulness of the job. By giving the teams the freedom and flexibility to decide how to divide up the work, Boss is providing autonomy, which gives employees a feeling of responsibility. And, by providing employees with clear information about customer reactions, Five Star Vehicles is providing feedback, which gives employees a feeling of achievement and recognition. Difficulty: 3 Hard Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

323) Until recently, Visual Electronics manufactured Blu-ray players on an assembly line with each worker performing only one simple task. Three months ago, the company began allowing individual employees to assemble entire systems, test the components, and even install the software that Visual Electronics includes with each of its players. Visual Electronics's new production method is an example of A) job enlargement. B) roundabout production. C) job rotation. D) flexible manufacturing. Answer: A Explanation: Job enlargement is a method of increasing motivation by combining a series of tasks into one job that is more challenging and interesting. Difficulty: 3 Hard Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 324) At one of the new Mountain View Community College campuses, administrative staff members are trained on a number of jobs including general student registration procedures, advising, counseling, computer support, and faculty assistance. Although Ashley usually registers students and Phillip usually advises students, they can easily switch roles and help each other out during busy times. They can also be called into a classroom to assist an instructor troubleshoot a computer issue. Unlike other colleges where lines are long and students must come back several times in order to be served, at Mountain View, you never hear someone say, "It's not my job!" This campus has successfully implemented A) job simplification. B) job rotation. C) job enlargement. D) a self-managed team. Answer: B Explanation: Job rotation is the practice of training several employees to perform several different jobs. Employees are moved from one job to another, depending on the firm's needs. Difficulty: 3 Hard Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

325) After several years of higher education, Tom and Zoe Dash were awarded their Ph.D. degrees and found jobs at a university, where they plan to work in research labs. Tom's lab is very large with at least 15 research faculty like himself and 25 graduate students whose benches are all together on one side of the laboratory. Zoe's lab is similar in size, but graduate student benches are interspersed with faculty. From the very beginning, Tom was referred to as Dr. Dash by the graduate students. Zoe and the graduate students in her lab are on first-name basis. As a student of management, which of the following statements would you consider good advice to the managers (also known as the principal investigators) of these labs? A) Graduate students will easily lose respect for the principal investigator and other faculty if they are not encouraged to use the title "Dr." when referring to the researchers who have attained the Ph.D. degree. B) There is a lot of sensitive information and highly classified techniques in the research process that should not be shared with graduate students. C) Job enrichment is an important part of the learning process, and it will only happen if students have their own space, separate from the faculty/researchers. D) Open communication occurs when barriers such as work titles and ranks are eliminated, and work spaces are conducive to learning. Answer: D Explanation: Open communication occurs more easily when barriers to communication such as the use of titles rather than first names are removed. Also, physical space can be created such that management and employees can more easily converse and share ideas. Difficulty: 3 Hard Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

326) Ronald, the CEO of Extel Micro—a technology provider with 17,000 employees—answers his own phone and takes calls from employees of all levels. He actually loves to hear about what employees think the company is doing right and what they could be doing better. Ronald is building teamwork by A) creating an organizational culture that rewards listening. B) rewarding employees with cash bonuses for good ideas. C) giving high performers separate perks they value. D) bolstering employee fairness. Answer: A Explanation: To create an organizational culture that rewards listening, employees must feel free to say anything they deem appropriate. Difficulty: 3 Hard Topic: Motivation Strategies Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 327) Motivational formulas are A) tailored to the individual. B) tailored to the team of employees. C) developed by using one theory at a time. D) developed by collecting historical information on the types of factors that motivated the majority of employees in the past. Answer: A Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

328) In a high-context culture A) workers get right to the task, without the need to socialize during the first 30 minutes at work. B) workers get right to the task, after they ease into the work day. C) relationship building is considered a waste of time. D) relationship building and group trust are considered very important and occur before performing business tasks. Answer: D Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 329) In a low-context culture A) workers get right to the task, without the need to socialize during the first ½ hour of work. B) workers get right to the task, after they take care of their social needs. C) relationship building is considered a waste of time. D) relationship building is considered very important and occurs before performing business tasks. Answer: C Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 330) Generation X employees are likely to A) be more concerned with career security than with job security. B) be less willing to move and change jobs. C) lack the drive and ambition of earlier generations. D) be poor at providing feedback to others. Answer: A Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 132 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

331) A strength of Generation X managers is likely to be their A) loyalty to the firm. B) individualistic approach to problem solving. C) ability to provide feedback to employees. D) willingness to sacrifice other aspects of their lives to achieve success in the workplace. Answer: C Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 332) The generation born between 1980 and 1995 is known as A) Generation X. B) Generation Alpha. C) Generation Y. D) Generation Z. Answer: C Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 333) As a group, Millennials tend to be A) older and more mature than Gen Xers. B) less interested in technology than Baby Boomers. C) inefficient, easily bored, and uncommitted. D) adaptable, tolerant, and tech savvy. Answer: D Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

334) Even across generations, motivation is likely to A) remain a mystery because researchers cannot quite pinpoint where it comes from. B) come from the job itself. C) develop within employees over time. D) diminish among employees who achieve at high levels. Answer: B Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 335) Baby Boomers as managers need to understand that A) Gen X and Gen Y employees will be motivated by flexibility in the workplace. B) Gen X and Gen Y employees will be motivated by a good deal of structure in the workplace. C) Millennials are motivated from within, while Gen Xers need rewards. D) Gen Xers are motivated by knowing that they can keep their jobs for a lifetime. Answer: A Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 336) When reflecting upon the newer generation, each older generation says the same thing: A) their generation had it better. B) the newer generation "breaks the rules." C) their generation had a more difficult time of it. D) newer generations are smarter. Answer: B Difficulty: 1 Easy Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

337) In order to understand how to motivate the various generations, we need to understand each generation's preferred mode of communication. Look at the following chart and fill in the blank cell. Generation Traditionalists Baby Boomers Gen Xers Millennials

Preferred Communication Style at Work Face to face Email Technology such as social media

A) By cell phone B) By text C) Meetings and teleconferences D) Online and social media Answer: C Explanation: Baby boomers prefer meetings and teleconferencing. Difficulty: 2 Medium Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

338) Which of the following statements about cultural differences in the workplace is most accurate? A) The best way to deal with cultural differences in the workplace is to treat everyone the same way. B) Cultural differences were once a major problem, but television, telecommunications, e-mail, and the Internet have brought people closer together and greatly reduced cultural differences. C) Managers must be very aware of cultural differences and recognize that different employees may respond best to different management and motivational styles. D) Only firms that hire a lot of foreign-born employees are likely to have problems dealing with cultural differences. Employees born in the United States tend to have a common set of values and attitudes, regardless of age or social background. Answer: C Explanation: In the future, effective managers will find that they must get to know each worker personally and tailor the motivational effort to the individual. This is particularly true because of cultural differences that arise due to the globalization of business and due to differences among employees from different generations. Difficulty: 2 Medium Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 339) When it comes to motivating Millennials and Gen Xers, it is important for managers to know that they have a few things in common. One important likeness is A) they don't like large families. B) they expect change. C) neither group was raised by baby boomers. D) neither group has advanced to management positions. Answer: B Explanation: Due to unprecedented changes in the past twenty years, in almost every external environment (economic, political, social, etc.), these generations were raised to expect change. Difficulty: 2 Medium Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

340) If "fun and stimulation" are rated as important job criteria by Millennials, which of the following might be a way to motivate this generation? A) Simplify jobs so that they have time for fun between tasks. B) Simplify jobs so that they do not have to work longer than six-hour days. C) Provide opportunity for innovation and job rotation. D) Separate the work spaces of Millennials from Gen X and Baby Boomers. Answer: C Explanation: Most employees who have the opportunity to innovate at work will find their jobs more fun and stimulating. Job rotation may also help to create a stimulating environment. Difficulty: 2 Medium Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 341) Which of the following statements about high-context cultures reflects how managers in this type of culture might operate? A) Your personal life would not be of concern to a manager that operates in a high-context culture. B) If you are selling your company's product to another business that has a high-context culture, it is almost guaranteed that the product or service will sell itself. C) As a manager in a high-context culture, you will always stress that employees compartmentalize their work life and home life, so that each does not interfere with the other. D) As a sales professional trying to sell your product to a business that operates within a highcontext culture, you may have to visit the decision makers several times and get to know them on a personal level. Answer: D Explanation: High-context cultures spend more time developing relationships and prefer to develop group trust prior to making business decisions. Low-context cultures believe it is a waste of time to build relationships on the job. Difficulty: 2 Medium Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

342) Which of the following descriptions more appropriately reflects the way that Gen Xers prefer to communicate at work? A) face to face B) through meetings C) through e-mail D) through social media Answer: C Explanation: Gen Xers are known to prefer e-mail and will succumb to meetings only after they have exhausted their attempt to make decisions through e-mail. Difficulty: 2 Medium Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 343) According to the box, "Three Cheers for Peers!" which generation has changed communication in the modern workplace with their need for public recognition? A) Baby Boomers B) Generation Alpha C) Generation X D) Millennials Answer: D Explanation: Millennials, with their knack for technology and social media, strongly seek out public recognition for a job well done. This has led companies, like TINYpulse, to create social kudos programs for use in the workplace. Difficulty: 2 Medium Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

344) A college graduate with a degree in psychology, Diana is in no hurry to find a job. In fact, she has elected to continue her education until she decides on the type of career she would like to pursue. Although she really likes some aspects of marketing, social work and social causes also appeal to her. Having worked part-time in a small business during college, she also thinks that working in her own business, independent of the control of others, may also be the way to go. Diana is typical of A) Baby Boomers. B) Gen X. C) Gen Y. D) Gen Z. Answer: C Explanation: Gen Y, also known as Millennials, aren't rushing to find careers right after college graduation. They are "job surfing" and place a lot of value on having a good work-life balance. Difficulty: 3 Hard Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 345) McKinley, an employee at Green Goddess Lawncare, is pleased that his old supervisor Russell retired. Russell seemed like a pretty nice guy, but rarely told McKinley if his work was acceptable until something went wrong. The new supervisor starts each day with reviewing yesterday's successes and challenges, and gives everyone opportunity to voice their concerns. One of the best assets of ________ managers is their ability to provide timely feedback and to understand that employees want regular performance reviews. A) Baby boomers B) Gen X C) Gen Y D) Gen Z Answer: B Explanation: Gen X managers usually are more apt to provide timely feedback, and positive feedback, if the situation calls for it. Difficulty: 3 Hard Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

346) On the long flight back from South Korea, Mike had plenty of time to reflect upon the challenges of his business trip that took him all around Asia. His goal to sell his company's stateof-the-art bicycle pump to several foreign firms certainly could have gone better. Although none of the companies he visited turned him down, only one agreed to place an order. Representatives from one Indonesian firm and two Chinese firms asked him when he planned to come again! As Mike reviewed his memories and notes, he wondered, "Didn't they realize the expense of these international trips?" Mike is experiencing A) the fact that he is from a West Context Culture and the prospective buyers were from an East Context Culture. B) the fact that he is from a highly developed culture and the prospective buyers are from thirdworld countries. C) the differences between high-context and low-context cultures. D) brain drain. Answer: C Explanation: High-context cultures spend more time developing relationships and prefer to develop group trust prior to making business decisions. Low-context cultures believe it is a waste of time to build relationships on the job. Difficulty: 3 Hard Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

347) Describe the contributions of scientific management to improving worker productivity. What are some of the limitations of this approach? Answer: The keys to the scientific management approach were time, methods, and rules of work. Time-motion studies were used to identify the most efficient way of doing each task. Employees were then taught these methods and expected to use them. There was little room for individuality or creativity. In fact, scientific management viewed employees almost as if they were robots that could be programmed to perform their tasks. Very little attention was paid to the human side of management. According to Frederick Taylor, the father of the scientific management approach, the best way to motivate employees was to offer them a satisfactory level of pay. Scientific management did result in impressive improvements in productivity and became the dominant approach to management during the early 1900s. In fact, some successful companies still make use of this approach. However, modern managers recognize this approach ignores the complexity of human motivation. Employees are not robots. They tend to be more productive and more highly motivated when they are treated as human beings rather than machines. They are capable of being creative, loyal, and hard-working when conditions within an organization encourage and support their efforts. Thus, modern managers have moved beyond the scientific management approach to incorporate the findings of a host of researchers and theorists in the field of human motivation. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-01 Explain Taylor's theory of scientific management. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

348) Why did the results of the studies conducted at the Hawthorne plant surprise Elton Mayo and his fellow researchers? How did these results change the direction of management research? Answer: The Hawthorne studies began as typical scientific management studies concerned with how physical working conditions, such as lighting, temperature, and humidity, affected productivity. The goal was to find the working conditions that would result in optimum productivity. The results surprised Mayo and his colleagues because, regardless of how the researchers varied lighting and other factors, the employees in the experimental group were always more productive than other employees. The unexpected results led Mayo to suspect that some human or psychological factor was influencing the productivity of the employees in the experimental group. After interviewing these employees, researchers concluded that they were highly motivated because they felt special, enjoyed the social interaction with each other and with managers and the researchers, and felt that management respected their ideas and opinions. These findings encouraged researchers to shift their emphasis away from Taylor's scientific management approach toward a study of the human and psychological factors that affected motivation. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-02 Describe the Hawthorne studies and their significance to management. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

349) Describe and compare the basic contributions of Maslow and Herzberg to the understanding of worker motivation. Answer: Abraham Maslow's main contribution to the understanding of worker motivation was his idea that people were motivated by the desire to satisfy unmet needs. He believed that these needs could be arranged in a hierarchy from the most basic to the highest level. The hierarchy included the following categories of needs: ● Physiological needs: basic survival needs for things like food and shelter. (This is the most basic type of need.) ● Safety needs: the need to feel secure at work and at home. ● Social needs: the desire to be loved and accepted as part of a group. ● Esteem needs: the need for recognition and respect from others as well as self-respect. ● Self-actualization needs: the desire to reach one's fullest potential. (This is the highest-order need in Maslow's hierarchy.) According to Maslow, people first attempted to satisfy the lowest-order needs that had not been met. For example, someone who was very hungry (and thus had unmet physiological needs) would not be motivated by higher-order needs until the hunger was satisfied. However, once a lower-order need had been met, higher-order needs would become a source of motivation. For business organizations, Maslow's theory suggests that employees would be motivated to perform well at work if they could satisfy their unmet needs by achieving the organization's goals. Since most American employees have a standard of living and enough security to meet their basic physiological need and security needs, Maslow's theory suggests that they would be motivated primarily by the opportunity to meet higher-order needs for social acceptance, esteem, and self-actualization. Herzberg investigated how aspects of the job itself could affect worker motivation. He asked employees what conditions made them want to work to their full potential. He found that most of the factors that created a high level of motivation were concerned with job content. These included a feeling of personal achievement, the chance for recognition, interesting work, and the opportunity for growth and personal advancement. Herzberg called these types of factors motivators. Interestingly, employees ranked factors such as pay, job security, and general working conditions much lower as motivators. However, Herzberg found that, even though improvements in these factors did not necessarily increase motivation very much, employees could become dissatisfied if they were missing or inadequate. He called these conditions hygiene factors. Herzberg's findings suggested that firms must maintain adequate levels of hygiene factors to prevent worker dissatisfaction, but that the key to improving motivation would be to provide jobs that were interesting, challenging, and offered chances for recognition, advancement, and growth.

There is a link between Herzberg's findings and the ideas developed by Maslow. All of Herzberg's motivators are factors that would help employees achieve the higher-order needs in Maslow's hierarchy. Similarly, Herzberg's hygiene factors generally help satisfy the lower-order needs in Maslow's hierarchy. This link is illustrated in Figure 10.3 of the text. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-03 Identify the levels of Maslow's hierarchy of needs and apply them to employee motivation. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation 350) Compare the assumptions Theory X makes about employees with those of Theory Y. How do these different assumptions influence management styles? Answer: Theory X assumes that most employees are lazy, have little ambition, wish to avoid responsibility, prefer to be directed, and are primarily motivated by fear and punishment. Theory Y assumes that the average person likes work and will naturally work toward goals to which he or she is committed. Theory Y also assumes that most employees are capable of using a relatively high degree of imagination and creativity to solve problems, and that the average worker's potential is only partially realized. Theory X managers are likely to take an autocratic approach to management. They tend to supervise employees closely to make sure they don't loaf, and tell subordinates exactly what to do and how to do it, giving them little authority, responsibility, or flexibility. Theory X managers often use threats and punishment to motivate employees. Theory Y managers use a more open and participative management style. They allow employees to participate in setting objectives and give them the freedom to be creative and flexible in how they do their jobs. Theory Y managers have confidence in their subordinates, and are comfortable with the idea of empowerment. They usually rely on rewards rather than threats and punishment as the primary means of motivating employees, and recognize that different employees are motivated by different types of rewards. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

351) What is the key idea behind goal-setting theory? How does management by objectives help implement this idea? Answer: Goal-setting theory is based on the idea that setting ambitious but attainable goals is a key to achieving a high level of motivation and performance. The theory also points out that to be effective, the goals must be accepted by everyone in the organization, must be accompanied by feedback, and must be facilitated by organizational conditions. Management by objectives (MBO) is a strategy for involving all members of an organization in goal setting and implementation. It involves a cycle of discussion, review, and evaluation. MBO helps achieve the acceptance of goals by getting everyone involved in the process. The cycle of discussion, review, and evaluation provides plenty of opportunities for feedback and reinforces the organizational conditions that are required by goal-setting theory. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation 352) Explain how managers could motivate employees by using expectancy theory. Create a story/example of expectancy theory at work, incorporating the three questions that according to expectancy theory employees will ask. Answer: Expectancy theory states that employees' expectations about how something will turn out can affect their motivation. If they expect that their effort will not lead to success, they are less likely to be motivated to perform a task or achieve a goal that is requested by management. Victor Vroom says that employees will ask three questions before committing effort toward goal completion: (1) Can I accomplish the task? (2) If I do accomplish it, what's my reward? (3) Is the reward worth the effort? Story examples will vary, but should incorporate each of the three questions that Victor Vroom developed. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

353) List the generations in the workplace today, and provide at least two characteristics of each generation that affect their motivation. Answer: Baby Boomers: - are the idealistic generation that were raised during a time of prosperity - are very focused on work - do not embrace work-life balance as much as more recent generations Generation X: - were raised by parents who placed a lot of focus on work - may have spent a lot of time in daycare situations; their parents' layoffs added to their insecurity - are better than former generations at providing employee feedback - believe in work-life balance - are advocates of career security more than job security, as a result of their experiences - are good at collaboration and consensus building - are more free-reign or democratic managers Millennials: - were raised by indulgent parents - are very tech savvy - are not rushing to find a job; are more focused on choosing a career - want employers who can adapt to them - place importance on work-life balance and want managers who understand this - are blunt, expressive, and image-driven - seem to multitask better than previous generations Generation Z: - more cautious and security-minded - inspired to improve the world - resilient and pragmatic - confront their problems - interested in practical benefits Difficulty: 3 Hard Topic: Motivation Strategies Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

Mini-Case The first meeting between the new CEO of Game Guys, Inc., John Noble, and Howie Spradlin, the production manager, did not go smoothly. The purpose of the meeting was to discuss the problem of declining productivity and to develop a strategy to turn the situation around. Howie started the conversation by handing Mr. Noble the most recent production report. "I've always thought that most of our employees were lazy, and now I've got proof," Howie stated. "We pay these guys the highest wages in the industry, provide them with a safe place to work, and make the job as simple as possible. We aren't asking these guys to do brain surgery, but productivity still lags and our production costs increase. I've told all the supervisors to watch these lazy bums every second to make sure they put in a full day's work. If those guys think I'm going to let them get away with goofing off, they're in for a rude awakening." CEO Noble responded in a way that surprised Howie. "Maybe these employees aren't lazy, Howie, maybe they are just bored and resent the way we've treated them," he said. "The employees are experienced and well trained. They might work harder and smarter if the work were more interesting and rewarding. Their attitudes might even improve if we treated them with more respect. Maybe one of the best ways for you and me to understand where they're coming from is to spend some time alongside them." For the next hour, the two discussed ways to improve worker motivation and performance. Howie left the meeting with an unsettled feeling. Many of Mr. Noble's suggestions seemed naïve to Howie. "Mr. Noble is the boss, but I think he is too optimistic regarding human nature," Howie mused. Reluctantly, Howie had to admit that his own approach had not succeeded in improving the plant's performance. He decided to take a hard look at some of Mr. Noble's ideas. 354) According to McGregor, Howie's views of his employees suggest he is a ________ manager. A) Theory A B) Theory J C) Theory X D) Theory Y Answer: C Explanation: Theory X assumes that most employees dislike work and will avoid it if possible, so they must be forced, controlled, and threatened with punishment to make them put forth an honest effort. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-05 Differentiate among Theory X, Theory Y, and Theory Z. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

355) Currently, jobs at Game Guys are broken into small individual steps, and each employee is assigned to perform a different step in an effort to achieve task efficiency. This technique is known as job A) segmentation. B) refinement. C) specialization. D) simplification. Answer: D Explanation: Job simplification attempts to achieve task efficiency by breaking down jobs into simple steps and assigning an employee to each of those steps. Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-07 Show how managers put motivation theories into action through such strategies as job enrichment, open communication, and job recognition. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 356) John Noble speculated that Howie really didn't know much about his employees, including the types of rewards that they found meaningful and whether they personally felt that if they worked hard, they could achieve a reward. Noble's thoughts referred to A) reinforcement theory. B) equity theory. C) expectancy theory. D) Theory J. Answer: C Explanation: Expectancy theory has three aspects. The employee asks himself: (1) If I work hard, will I be able to achieve the goal? (2) If I achieve the goal, will I get a reward? (3) Is the reward something that I want? Difficulty: 3 Hard Topic: Motivation Theories Learning Objective: 10-06 Explain the key principles of goal-setting, expectancy, reinforcement, and equity theories. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

357) Before ending the meeting, John Noble informed Howie that he would be sending out an email to all employees asking for suggestions as to how the jobs could be restructured to improve productivity. As Howie walked back to the production site, he shook his head, "Is Noble from a different planet? Does he really think our workers have a clue?" Unlike Noble, Howie does not realize that A) employees can be motivated by open communication. B) employees seek equity. C) employee perceptions of equity are usually underestimations. D) employees will offer ways to simplify job tasks. Answer: A Explanation: Employees are motivated to contribute ideas when they are given the opportunity to provide open-ended feedback. Difficulty: 3 Hard Topic: Motivating through Open Communication Learning Objective: 10-08 Show how managers personalize motivation strategies to appeal to employees across the globe and across generations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

Understanding Business, 12e (Nickels) Chapter 11 Human Resource Management: Finding and Keeping the Best Employees 1) Human resource management is the process of deciding the number and types of employees your business needs, and then recruiting, selecting, developing, motivating, evaluating, compensating, and scheduling employees to achieve organizational goals. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) One reason human resource management has grown is that the shift from traditional manufacturing industries to service and high-tech manufacturing industries requires workers to have highly technical job skills. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) Recruiting is relatively easy today because qualified labor is so plentiful. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

4) Today, human resource management is viewed as a clerical function of keeping personnel records and processing payroll. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 5) The human resource function has become so critical that it is now a concern of all managers. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) The human resource manager's job is easier today than it was in the past because a growing percentage of the workforce is highly educated and well-prepared for jobs in the contemporary business environment. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

7) The reason industries such as robotics and biotechnology have grown rapidly in recent years is that the United States has a surplus of highly educated and experienced workers available for employment in these fields. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) One of the challenges facing today's human resource managers is a shift in the age distribution of the labor force, including aging baby boomers, many of whom are delaying retirement. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9) Today's workers have an increased demand for benefits tailored to their individual needs. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10) Today's workers place a lower priority on leisure time than they did in the past. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

11) One challenge faced by today's human resource managers is the fact that workers overseas often work for lower wages and are subject to fewer laws and regulations. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) Today's workers tend to be very loyal, as evidenced by declining turnover rates in most industries. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 13) Underemployed workers present a challenge for human resources managers. These are people who are working beyond their capabilities. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

14) The appropriate term for employees whose skills and knowledge go beyond their current work environment and work responsibilities is underemployed workers. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) Very few experienced employees have skills and knowledge that are considered to be at a higher level than what they use at their jobs. Answer: FALSE Explanation: Managers are challenged to utilize workers whose skills and knowledge are superior to what they actually use at work. The term that we use to describe this group of employees is underemployed workers. Difficulty: 2 Medium Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 16) It is challenging for HR managers to deal with a declining economy that results in a shortterm preference for part-time and/or temporary employees and a trend to outsource jobs, even though there are skilled employees who are willing to work. Answer: TRUE Explanation: Today's HR managers are faced with a declining economy where cost-saving measures such as hiring part-time and/or temporary employees have become a short-term solution. Due to the fact that employees in developing nations are willing to work for lower wages, companies have elected to outsource many jobs. Difficulty: 2 Medium Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

17) The growing importance of human resource issues has led most firms to expect only their human resource specialists to tackle HR issues. Answer: FALSE Explanation: Human resource management has become so important that it is now a function of all managers. Most human resource functions are shared by professional human resource managers and other managers. Difficulty: 2 Medium Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) HR is focused on issues directly related to a person's job and with things that happen at work, as opposed to concerns that may affect one's work such as eldercare and childcare, but are not directly related to work. Answer: FALSE Explanation: HR is very involved with issues that affect employees whether they are directly work related or whether they are outside of one's work area but affect the ability for employees to work effectively and productively. Difficulty: 2 Medium Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 19) Epic Electronics International is a rapidly growing firm specializing in the production of sophisticated robots. One of the major problems Epic Electronics is likely to face is a shortage of qualified workers. Answer: TRUE Explanation: One of the major problems faced by firms in growth industries such as robotics, computers, and biotechnology is a shortage of workers with the necessary skills to work in these areas. Difficulty: 3 Hard Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 6 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

20) A decade ago Simon had planned to retire by the time he was sixty. But he's now in his mid60s and has decided to continue working. In fact, not only is Simon still working, he has no intention of retiring or setting a time when retirement might occur. Simon's decision to keep working into his sixties is unusual in today's labor market. Answer: FALSE Explanation: One of the trends affecting human resource management has been a shift in the age composition of the labor force, part of which is due to the increasing number of aging baby boomers that have decided to defer retirement. Difficulty: 3 Hard Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 21) Sandra works as a manager in the accounting department for a service company. If her company is like most contemporary firms, Sandra will leave almost all aspects of human resource functions to specialists in the human resource department. Answer: FALSE Explanation: Human resource management has become so important that it is no longer the responsibility of just one department. Most human resource management functions are now shared by professional human resource managers and the other managers within the organization. Difficulty: 3 Hard Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

22) Jonas was a skilled welder at an auto plant. He lost his job and has been looking for work for several months. Jonas finally accepted a job as an unskilled laborer at a local nursery. Although happy to be back to work, he feels that his new job doesn't use his skills to their full potential. Jonas is an example of an underemployed worker. Answer: TRUE Explanation: Underemployed workers have higher-level skills than their current job requires. Difficulty: 3 Hard Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 23) In just one year, Cheryl developed gall bladder problems and needed surgery; she became a single parent; she willingly moved her older mom in to live with her in order to avoid placing her in a nursing home; and she unexpectedly tore her rotator cuff playing softball. Generally, these are not considered circumstances that impact job performance because they fall outside of the workplace. HR managers need only be concerned with how Cheryl performs when she is at work. Answer: FALSE Explanation: Health issues and social issues affect job performance. HR managers must create strategies for addressing these challenges. HR managers cannot compartmentalize these as issues that fall outside of the work environment, because they directly impact workers' abilities to perform well at work. Difficulty: 3 Hard Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 24) The federal government has minimized its role in human resource management. Answer: FALSE Difficulty: 1 Easy Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

25) Title VII of the Civil Rights Act of 1964 prohibits discrimination in hiring, firing, or compensation, based on race, religion, creed, sex, or national origin. Answer: TRUE Difficulty: 1 Easy Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26) Congress has given the Equal Employment Opportunity Commission broad powers to issue guidelines for acceptable employer behavior concerning employment opportunities. Answer: TRUE Difficulty: 1 Easy Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 27) The effectiveness of the EEOC has been limited because Congress never gave it any authority to enforce its mandates. Answer: FALSE Difficulty: 1 Easy Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 28) Affirmative action programs are the least controversial method of correcting job inequities created by past discrimination. Answer: FALSE Difficulty: 1 Easy Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

29) Reverse discrimination is the term the EEOC uses to refer to activities designed to "right past wrongs" that resulted from discrimination against women and minorities. Answer: FALSE Difficulty: 1 Easy Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30) The Civil Rights Act of 1991 gave victims of discrimination the right to seek punitive damages from the firms that discriminated against them. Answer: TRUE Difficulty: 1 Easy Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 31) Recent federal law clearly and strongly supports the notion that companies must use strict employment quotas to correct for past discriminatory actions. Answer: FALSE Difficulty: 1 Easy Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32) The concept of "reasonable accommodations" means that all workers should be treated in the same manner. Answer: FALSE Difficulty: 1 Easy Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

33) Most firms have trouble implementing the structural changes required by the Americans with Disabilities Act. Answer: FALSE Difficulty: 1 Easy Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 34) In their efforts to accommodate disabled workers, most firms experience difficulties with cultural changes, more so than with structural changes. Answer: TRUE Difficulty: 1 Easy Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) The Age Discrimination in Employment Act only prevents discrimination against employees who are over the age of 65. Answer: FALSE Difficulty: 1 Easy Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) The Age Discrimination in Employment Act permits age limits in professions where it can be established that ability to perform the job declines significantly with age. Answer: TRUE Difficulty: 1 Easy Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

37) One way human resource managers can keep current on human resource legislation and rulings is to read current business literature such as The Wall Street Journal and Bloomberg Business Week. Answer: TRUE Difficulty: 1 Easy Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) When it comes to human resource management issues, the federal government generally has taken a "hands off" approach since the early 1960s. Answer: FALSE Explanation: Title VII of the Civil Rights Act of 1964 brought the federal government directly into the operations of human resource management. Additional legislation such as the Equal Employment Opportunity Act of 1972, the Americans with Disabilities Act of 1990, and the Civil Rights Act of 1991 extended the government's influence into human resource management even further. Difficulty: 2 Medium Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39) The Americans with Disabilities Act protects people who are born with physical disabilities, exclusively, but not those who acquire disabilities later in life. Answer: FALSE Explanation: As recently as 2011, the American Disabilities Act has been amended to include protection for persons with epilepsy, autism, and cancer. Difficulty: 2 Medium Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

40) The Americans with Disabilities Act protects qualified persons from discriminatory hiring practices, but does not require employers to provide suitable accommodations in the workplace, or opportunities for promotion. This is left to occupational safety laws. Answer: FALSE Explanation: In 1990, the American with Disabilities Act was amended to include provisions for hiring and promoting, and also provisions for adapting the work environment to provide for persons with disabilities. Difficulty: 2 Medium Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 41) Audrey is a manager who takes great pride in her ability to be fair and impartial. She ensures she treats all workers the same way, and evaluates them all using the same standards. Audrey is likely to adjust easily to accommodate disabled workers. Answer: FALSE Explanation: Accommodation of disabled workers requires managers to treat people in accordance with each person's needs. Managers who feel that fairness means treating everyone the same way often have a difficult time adapting to the need for accommodation. Difficulty: 3 Hard Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

42) Archer, in his late fifties, loves his work as a pilot for a major airline and wants to continue working for many more years. The Age Discrimination in Employment Act provides Archer with the right to keep his job as long as his company is financially sound and he does not commit a felony. Answer: FALSE Explanation: Although the Age Discrimination in Employment Act makes it unlawful to discriminate against a person because of age with respect to hiring, firing, promotion, layoff, compensation, and job assignments, it makes certain exceptions. In particular, it allows age limits to be set for certain professions where it has been shown that the ability to perform the job declines significantly with age. One profession where age limits are allowed is airline pilot. Difficulty: 3 Hard Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 43) Michael is a worker at a large discount retailer and his wife works at a national bank with several branches. They recently adopted a child and agreed that each would take six weeks of leave from work in order to care for the child. According to the Family and Medical Leave Act, one, but not both, are eligible for leave. Answer: FALSE Explanation: According to the Family and Medical Leave Act, each employee is eligible to take 12 weeks of unpaid leave to care for their newly adopted child. Difficulty: 3 Hard Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

44) As soldiers returned from Afghanistan, International Enterprises hired several qualified soldiers with hearing impairment to work at its headquarters in Detroit. As a growing business, it is abiding by the law as currently stated. It is not required to adapt the work site to help these soldiers hear and communicate better with each other. Answer: FALSE Explanation: According to the American with Disabilities Act of 1990, businesses must provide equal consideration to qualified persons with disabilities in the hiring process. Businesses should not discriminate against hiring persons with physical or mental disabilities who are qualified to do the job, and the businesses must also adapt the work environment to accommodate employees with disabilities. Difficulty: 3 Hard Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 45) Marco and Maria work at a prevalent high-tech company. Marco sustained injuries while serving in the Army Reserves. Upon his return, the company provided him and other returning soldiers with ergonomic desks and chairs that accommodate wheelchairs and bad backs. Although Maria is hearing impaired, the company does not need to consider providing her with a headset that magnifies sound because she is the only employee out of 200 requiring this accommodation. Answer: FALSE Explanation: The Americans with Disabilities Act of 1990 (1992 implementation) prohibits employers from discriminating against qualified individuals with disabilities in hiring, advancement, or compensation and requires employers to adapt the work environment to accommodate a variety of employee needs. Difficulty: 3 Hard Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

46) Serena is a recent HR hire for a security firm that hires retired law enforcement officers to provide security for malls across the nation. Her supervisor was impressed with Serena's knowledge of current laws with respect to hiring practices but asked her to quickly get up to speed on compensation and training laws. This is a reasonable request if Serena plans to stay in the HR field. Answer: TRUE Explanation: HR management requires experts to stay current in all laws that apply to human resource management. This includes hiring, firing, compensation practices, and training practices. Difficulty: 3 Hard Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 47) Like all management, human resource management begins with planning. Answer: TRUE Difficulty: 1 Easy Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 48) The first step in the human resource planning process is to prepare a job analysis for each available position within the firm. Answer: FALSE Difficulty: 1 Easy Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

49) One purpose of a human resource inventory is to determine whether the labor force is technically up-to-date and well trained. Answer: TRUE Difficulty: 1 Easy Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 50) The result of a job analysis is a written document called a human resource inventory. Answer: FALSE Difficulty: 1 Easy Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 51) When you collect information about a particular job title, including how the job is performed and what it takes to perform the job, you are conducting a job analysis. Answer: TRUE Difficulty: 1 Easy Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 52) A job analysis consists of creating two documents called a job inventory and a performance appraisal. Answer: FALSE Difficulty: 1 Easy Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

53) A job specification is a statement of the job itself, while a job description is a statement about the person who does the job. Answer: FALSE Difficulty: 1 Easy Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 54) A job specification identifies the minimum qualifications a person must have to fill a particular job. Answer: TRUE Difficulty: 1 Easy Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 55) A job description identifies and describes the type of person who should perform the job, including important qualifications such as deduction, skills, and experience. Answer: FALSE Difficulty: 1 Easy Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 56) Human resource planning involves the assessment of both the future demand and the future supply of the various types of labor needed by the organization. Answer: TRUE Difficulty: 1 Easy Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

57) The first four steps in human resource planning all lead to the final step, which is the development of a strategic human resource plan. Answer: TRUE Difficulty: 1 Easy Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 58) The second step in human resource planning consists of conducting job analyses. Through observation and research, the manager will collect information on the kinds of things that each job title performs and how they are performed, as well as the skill and knowledge requirements for doing the job. Answer: TRUE Explanation: A job analysis is a study of the types of things that each job title does and how they are done, as well as what it takes to perform the job. Through this information, the manager can proceed with writing the job description and the job specifications. Difficulty: 2 Medium Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 59) Job analysis helps a manager answer the question: "How many workers in my organization have this particular skill?" Answer: FALSE Explanation: Job analysis is a study of what is done by workers who fill a particular job title. A human resource inventory would be more likely to answer a question about how many workers in the organization have a particular skill. Difficulty: 2 Medium Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

60) Essentially, the steps of the human resource plan require the HR professional to (1) take inventory of the type of workers (including the skills of the workers) that the business already has, in order to determine if it has the most up-to-date workforce for its needs; he/she then proceeds with (2) analyzing each job; (3) forecasting the firm's requirements for various job titles; and (4) making a determination of the future supply of skilled labor available to meet the demands of the business. Lastly, the HR professional (5) develops a human resource strategic plan. Answer: TRUE Explanation: The five steps of the human resource plan include: (1) preparing a human resource inventory; (2) performing job analyses, including writing job descriptions and job specifications; (3) forecasting the demand for these jobs within the company; (4) assessing the future supply of labor; (5) preparing a human resource strategic plan. Difficulty: 2 Medium Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 61) Harmon, a human resource manager with the Bookman's Publishing, just finished creating a document that describes what editors do at their jobs. The study Harmon has completed is known as a human resource inventory. Answer: FALSE Explanation: A document that describes what editors do at their jobs would be a job description. Difficulty: 3 Hard Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

62) Lorelai wants to know how many workers in her company have certain specialized skills and have received training to update their qualifications within the past year. She could use a human resource inventory to help her find this type of information. Answer: TRUE Explanation: A human resource inventory includes the names, ages, education, training, specialized skills and other capabilities and relevant characteristics of a firm's employees. Difficulty: 3 Hard Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 63) Elisa, an HR manager for a medium-sized company, is assigned to update all job descriptions and job specifications for her company. Elisa will begin by collecting information about each job title, as well as about the kinds of activities and responsibilities that go with each job. After she thoroughly analyzes a job, she will write the job description and job specifications for that job. Answer: TRUE Explanation: The results of job analysis are two written statements: job descriptions and job specifications. Difficulty: 3 Hard Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 64) Antonia is interested in transferring to a new position recently opened in her company. But first, she wants to find out more about the type of work and responsibilities involved in the job. A document that would have the information she wants is the job specification. Answer: FALSE Explanation: A job specification is concerned with the person who fills the job rather than the nature of the job itself. The information Antonia wants is more likely to be in a job description than in a job specification. Difficulty: 3 Hard Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

65) CareerBuilder.com has posted a variety of sales management positions. Some require the manager to have five to ten years of experience and preferably a master's degree in a field of science. These requirements are part of the job specification. Answer: TRUE Explanation: The job specification provides details on the minimum educational requirements and years of experience required for the position. Difficulty: 3 Hard Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 66) The Administrative Assistant II position at Game Guys, Inc., performs word processing and spreadsheet development for two vice presidents, and other clerical duties as needed. Other job responsibilities include maintaining the office operations budget, receiving guests, and supervising two Administrative Assistant I positions. These tasks are part of the job description for this position. Answer: TRUE Explanation: A job description outlines the specific tasks and responsibilities of each job title. It describes the objectives of the position and how it relates to other functions at the business. Difficulty: 3 Hard Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 67) Anna is an HR manager for a firm that is planning to switch to a more sophisticated production method. One of Anna's duties will be to forecast the demand for the type of labor needed to implement the new method. Answer: TRUE Explanation: Assessing the future demand for various types of labor is one of the functions of a human resource manager. A proactive human resource manager anticipates the future needs of the organization and takes action to make sure that qualified workers are available when they are needed. Difficulty: 3 Hard Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

68) Recruitment is a set of activities undertaken for attracting qualified people, at the right time. Answer: TRUE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 69) Because of the continuous flow of potential employees into the labor market, recruiting usually is the easiest task for a human resource manager to accomplish. Answer: FALSE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 70) Union rules and company policies can make the recruitment process more difficult. Answer: TRUE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 71) When recruiting, human resource managers must attract people who not only have the right skills, but also fit in with the corporate culture, and work well under the company's leadership style. Answer: TRUE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 23 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

72) Small businesses usually find recruitment easier than large firms. Answer: FALSE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 73) An advantage of hiring from within is that it improves employee morale. Answer: TRUE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 74) External recruitment sources are usually cheaper to use than internal sources. Answer: FALSE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 75) Transfers and promotions are internal sources used by human resource managers to fill recruiting needs. Answer: TRUE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

76) Public and private employment agencies and college placement offices are internal sources used by human resource managers when they are recruiting employees. Answer: FALSE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 77) When recruiting employees, human resource managers focus primarily on the skills and training of the people they are recruiting, and work on determining "fit" after the hiring process has occurred. Answer: FALSE Explanation: With the current emphasis on teamwork, empowerment, and participative management, it is important to find workers who not only have the desired skills, but who also fit in with the culture and leadership style of the organization. Difficulty: 2 Medium Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 78) Advertisements in trade journals, private and public employment agencies, college placement offices, and trade associations are internal sources for recruitment. Answer: FALSE Explanation: According to Figure 11.4, posting advertisements, going through private and/or public employment agencies, using college placement offices and trade associations are external sources for recruitment. Difficulty: 2 Medium Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

79) Temporary help services, job fairs, and social media are external sources for recruitment. Answer: TRUE Explanation: According to Figure 11.4, temporary help services, job fairs, and social media serve as external sources for recruitment. Difficulty: 2 Medium Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 80) According to the Need a Job? box in the text, one way to recruit employees is through social media. Answer: TRUE Explanation: Social media plays a crucial role in today's hiring process. Over 94% of recruiters say they use LinkedIn to find new candidates. Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 81) Brad, the HR manager at a medium-sized corporation, understands the value of hiring from within to fill positions whenever possible. This means that he relies extensively on promotions, transfers, and recommendations from current employees to find qualified employees. Answer: TRUE Explanation: When a human resource manager uses internal sources, he or she relies on transfers, promotions, and employee recommendations to fill positions. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

82) As the HR manager at a small business, Thomas handles most of his firm's recruiting efforts. Because Thomas recruits for a small business he has a distinct advantage over larger competitor firms when it comes to finding the right people to fill his firm's needs. Answer: FALSE Explanation: Recruiting qualified workers may be very difficult for small businesses because they don't have the staff to recruit internally, and often offer wages and benefits that are less attractive than those offered by larger firms. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 83) The Nutty Boys Nut Butter Company is about to diversify into an entirely new market— jellies and jams. This move will create the need for several new positions in the production and marketing departments. However, the production technologies and the marketing environment in this new market are very different than in Nutty Boys' traditional market. The company is likely to rely on external sources to fill many of the positions created by its diversification. Answer: TRUE Explanation: Given the differences in technologies and marketing environments, it is unlikely that Nutty Boys Nut Butter will be able to find enough qualified applicants within the organization to fill the new positions. Thus, it will have to look outside the organization. This is known as external recruitment. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 84) Selection is the process of gathering information and deciding who should be hired, under legal guidelines, for the best interests of the individual and the organization. Answer: TRUE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

85) The cost of recruiting, processing, and training a new entry-level employee is significant, and sometimes exceeds the annual salary earned by the employee. Answer: FALSE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 86) The amount most businesses spend on selecting and training workers is relatively low. Answer: FALSE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 87) Because current legal guidelines limit the types of questions that can be asked, completed job application forms contain very little useful information about job candidates. Answer: FALSE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 88) Job applications can ask about educational background and past job experience. Answer: TRUE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

89) Staff members from the human resource department seldom take part in initial screening interviews, but often participate in the follow-up interviews of top job candidates. Answer: FALSE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 90) During an interview, a manager should be careful not to ask the applicant about his or her family or other non-job-related questions, like child care plans. Answer: TRUE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 91) Trial periods are an effective method of determining whether or not a candidate is of value to the company. Answer: TRUE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 92) Most firms today are checking the backgrounds of job applicants more carefully than they did in the past. Answer: TRUE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

93) Services now exist that allow firms to perform quick background checks of potential employees. Answer: TRUE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 94) Employment tests should focus on general job skills rather than skills that are related directly to the job. Answer: FALSE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 95) Though controversial, it is not uncommon for companies today to test their employees and job applicants for drug use. Answer: TRUE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 96) Part-time workers, seasonal workers, and independent contractors are all examples of contingent workers. Answer: TRUE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

97) The most common reason for hiring contingent workers is that they improve worker morale. Answer: FALSE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 98) Though temporary workers are employed in most sectors of the economy, almost none have been hired to fill manufacturing jobs. Answer: FALSE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 99) It is not unusual to find persons with a variety of skills and skill levels serving as contingent workers. Contingent workers in the U.S. are usually under 25 years of age and may include independent contractors, interns, and even college students who only want to work during the summer months. Answer: TRUE Explanation: Contingent workers span a number of occupations from unskilled laborers to skilled managers and seasonal employees. Most contingent workers in the U.S. are currently under 25 years of age. Difficulty: 2 Medium Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

100) All states in the U.S. require pre-employment physical exams for select groups of applicants. Answer: FALSE Explanation: While some states require pre-employment physical exams, the law requires that any firm requiring pre-employment exams will request the same of all applicants. Preemployment exams should not be used as a screening mechanism. Difficulty: 2 Medium Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 101) The Adapting to Change box explains that your online profile on sites like Twitter, Facebook, and LinkedIn will have little to do with whether or not you are selected for a job. Answer: FALSE Explanation: Sixty percent of employers say they use social media to screen potential employees. It's not uncommon for candidates to be eliminated from consideration because of inappropriate photos, videos, or information. What you post could cost you a job! Difficulty: 2 Medium Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 102) Jared is working in the HR department at a small company. Lately he has been designing a new job application form for his firm. The questions Jared includes on the new form should avoid broad questions about the applicant's beliefs, culture and family background. Instead, it should focus on factors such as the applicant's work experience, education, and career objectives. Answer: TRUE Explanation: Legal requirements severely limit the types of questions firms are allowed to ask on application forms. To avoid legal complications, the form should focus on education, work experience, career objectives and other qualifications directly related to job requirements, not personal family issues. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

103) Bryan is a HR manager and is very concerned about the high cost of labor turnover. A good way for his firm to eliminate high turnover costs is to establish a policy of hiring contingent workers. Answer: FALSE Explanation: Contingent workers are rarely offered benefits packages and this saves costs for a company. However, they do not eliminate high turnover costs. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 104) An HR manager at a large company interviewed several candidates for a position opening soon. Based on her interviews, she believes one candidate looks particularly promising. She will recommend a second interview between this candidate and the manager who will supervise the new employee. Answer: TRUE Explanation: A human resource specialist often conducts the initial screening interview for a job applicant, but, if the initial interview goes well, the manager who will supervise the new employee is often involved in a follow-up interview. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 105) Precise Printers wants to expand its services into new markets, but to remain competitive it needs to keep its costs low. If it is like most firms, one way Precise can save a lot of money is by reducing the time and effort it devotes to the selection of employees. Answer: FALSE Explanation: The selection process is often long and costly. However, this process is worth the effort, because of the high cost of replacing workers. A firm that has an effective selection process is more likely to hire workers who meet all requirements and are a good fit for the company. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

106) Apples and Oranges Produce Company found it needs more workers during harvest times than at other times of the year. Hiring contingent workers could be an efficient way for Apples and Oranges to meet its temporary employment needs. Answer: TRUE Explanation: Seasonal workers are one type of contingent worker. These workers can give firms more flexibility to meet a varying need for employees, and their use is often more costeffective than hiring permanent employees. Contingent workers typically receive few benefits and are paid less than permanent workers. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 107) Employee training focuses on short-term skills, while employee development focuses on long-term abilities. Answer: TRUE Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 108) Besides increasing productivity, a good training program can increase a firm's retention rates. Answer: TRUE Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

109) A recent study has shown that the most effective way for most firms to improve worker productivity is to increase expenditures on machinery and equipment. Answer: FALSE Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 110) One purpose of employee orientation programs is to initiate new workers to the organization's policies, practices, and objectives. Answer: TRUE Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 111) Vestibule training is the most fundamental type of training available. Answer: FALSE Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 112) New technologies are assisting on-the-job training and creating more cost-effective methods, when the job requires more intricate skills. Answer: TRUE Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

113) On-the-job training is best suited for jobs that are easily learned or require the employee to perform repetitive physical tasks. Answer: TRUE Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 114) Over the next ten to fifteen years, most firms will discontinue apprenticeship programs as changes in technology make this type of training obsolete. Answer: FALSE Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 115) In recent years, firms have expanded off-the-job training to include personal development subjects such as time management, health and nutrition, and language. Answer: TRUE Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 116) Online training gives employers the ability to provide consistent content that is tailored to specific employee training needs. Answer: TRUE Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

117) Vestibule training attempts to precisely duplicate both the methods and conditions of a real world job. Answer: FALSE Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 118) Job simulation is used to train astronauts, airline pilots, and ship captains. Answer: TRUE Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 119) The strategy of giving managers assignments in a variety of departments in order to expose them to different functions is called apprenticeship training. Answer: FALSE Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 120) The process of training and educating employees to become good managers, and then monitoring the progress of their managerial skills over time, is called management simulation. Answer: FALSE Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

121) Most management training programs include methods such as on-the-job coaching, understudy positions, job rotation, and off-the-job courses and training. Answer: TRUE Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 122) Networking is the process of establishing and maintaining contacts and using those contacts to develop strong relationships that serve as informal development systems. Answer: TRUE Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 123) A mentor is a manager who supervises, coaches, and guides selected lower-level employees, and generally acts as their organizational sponsor. Answer: TRUE Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 124) Students can benefit from networking in college even before they take their first full-time job. Answer: TRUE Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

125) Women usually find it easier than men to obtain mentors and engage in networking. Answer: FALSE Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 126) Minority groups have made great strides in creating networking associations. For example, Black Enterprise Magazine sponsors networking forums. Answer: TRUE Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 127) The U.S. Supreme Court has ruled that women cannot be barred from "men only" clubs, where business contacts are often made and business activity occurs. Answer: TRUE Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 128) Grooming women and minorities for management positions creates fewer hiring opportunities for white men. Answer: FALSE Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

129) Firms spend time and money to train new employees so that they will work productively over the short term. Development activities such as assigning mentors and creating networks have long-term implications for employees and firms. Answer: TRUE Explanation: While training programs focus on improving the short-term skills of employees, development programs focus on long-term abilities. Difficulty: 2 Medium Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 130) Distance training is gaining in popularity among all firms because employees can log-on to company tutorials at a time convenient to them and acquire the same training information as everyone else. Answer: TRUE Explanation: Online training, also known as distance training, is an efficient and cost-effective way for a firm to distribute consistent training to a large number of employees. Difficulty: 2 Medium Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 131) While efforts to train and develop women and minority managers appeal to many firms on the basis of legal and moral considerations, from an economic standpoint, they are rarely cost effective. Answer: FALSE Explanation: Firms that take the initiative to develop female and minority managers recognize three important principles: (1) Grooming women and minorities for management positions broadens the base of talent coming into the firm, which is a key to long-term profitability; (2) a company that starts attracting and developing women and minority managers now will have an edge recruiting the most talented women and minority managers later; and (3) more women and minorities at all levels help the firm serve its increasingly female and minority customers better. Difficulty: 2 Medium Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

132) Road Rovers School for Truck Drivers takes great pride in its training methods. Before its students are able to get on the road with a big rig, they are taught safe driving techniques with the help of sophisticated, computerized equipment that comes as close as possible to duplicating real driving conditions, right down to the sights, sounds, bumps and vibrations experienced on the road. Road Rovers is using a training method known as job replication. Answer: FALSE Explanation: Job simulation is the use of sophisticated equipment to duplicate job conditions and tasks so that trainees can learn skills before using them on the job. Difficulty: 3 Hard Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 133) Samuel is training to be an electrician by working alongside experienced electricians. After one more year of successful training, his union will classify Samuel as a journeyman. Samuel is participating in an apprenticeship program. Answer: TRUE Explanation: In an apprenticeship program a worker learns a skill by working alongside experienced workers for an extended period of time. Unions frequently require new members to serve as apprentices to assure excellence, and to limit entry into their profession. A worker who successfully completes an apprenticeship program is classified as a journeyman. Difficulty: 3 Hard Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 134) Troy is receiving training in maintaining and repairing assembly line robots at a school that uses equipment very similar to that used on his new job at Blast Off Technologies. His classroom training is called vestibule training. Answer: TRUE Explanation: Vestibule training is done in schools where employees are taught using equipment that is very similar to what they will use on the actual job. Difficulty: 3 Hard Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

135) Daisy just accepted a management position at the Ecologic Plant Life Corporation. In order to give her an appreciation of the different functional areas of her new company, she is required to spend six weeks in each of five different functional areas of the company, including production, research and development, accounting, marketing, and the HR management department. This type of training is known as contingency employment. Answer: FALSE Explanation: Giving managers assignments in a variety of departments is known as job rotation. Difficulty: 3 Hard Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 136) Colin is an assistant manager in his firm's credit department. He works closely with a more experienced manager to learn how to perform all of the functions involved in credit management. Colin believes he will soon be experienced enough to take over a senior position in his department. Colin has the benefit of serving as an understudy. Answer: TRUE Explanation: An understudy position allows a junior manager to work as an assistant to a higher-level manager and to learn the management functions needed to assume the higher-level position. Understudy positions frequently have the term assistant or undersecretary in their job title. Difficulty: 3 Hard Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 137) Tracy was brought on as a lower-level manager at Higdon and Associates. Shortly after starting, she was introduced to Clara and told that Clara would be her mentor. As a mentor, Clara will coach and guide Tracy, introduce her to the right people, and be her organizational sponsor. Answer: TRUE Explanation: A mentor supervises, guides, and coaches selected lower-level employees, introduces them to the right people, and acts as their sponsor within the organization. Difficulty: 3 Hard Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 138) Marcus's company sent him to Washington University for an intensive program of 42 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

leadership and business communication training. Although expensive, the firm was committed to investing in the development of key employees for the purpose of retention and promotion. This type of managerial development is known as off-the-job courses and training. Answer: TRUE Explanation: Prestigious universities offer intensive managerial training courses. This is offthe-job training that firms are willing to invest in for employees with good potential to advance within the company. Difficulty: 3 Hard Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 139) A performance appraisal is an evaluation in which the performance level of employees is measured against established standards to make decisions about promotions, compensation, additional training, or firing. Answer: TRUE Difficulty: 1 Easy Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 140) The primary reason that companies do performance appraisals is to improve worker performance. Answer: TRUE Difficulty: 1 Easy Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

141) Establishing performance standards is a crucial step in the performance evaluation process. Answer: TRUE Difficulty: 1 Easy Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 142) Most experienced workers have a clear idea of what is expected of them even if managers do not communicate their expectations explicitly. Answer: FALSE Difficulty: 1 Easy Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 143) Because of legal implications, managers should not use the results of performance appraisals to make decisions about promotions and compensation. Answer: FALSE Difficulty: 1 Easy Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 144) Performance standards should be understandable, measurable, and reasonable. Answer: TRUE Difficulty: 1 Easy Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

145) A performance appraisal provides an opportunity for employees to make suggestions about how a particular task could be better performed. Answer: TRUE Difficulty: 1 Easy Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 146) The last step in the performance appraisal process is to discuss the results with the employee. Answer: FALSE Difficulty: 1 Easy Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 147) Performance appraisals are very useful for new, inexperienced workers and first-line managers, but have little value for top management. Answer: FALSE Difficulty: 1 Easy Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 148) Top-level managers can benefit from having their performance evaluated by subordinates. Answer: TRUE Difficulty: 1 Easy Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

149) An employment appraisal may include a 360-degree review, which is an appraisal that includes job-related and non-job-related comments from a range of employees. Answer: FALSE Difficulty: 1 Easy Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 150) A 360-degree review will include the opinions of an employee's subordinates, as well as those above him/her in the organization structure, and those who work alongside the employee in comparable positions. Answer: TRUE Difficulty: 1 Easy Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 151) The main reason firms conduct performance appraisals is to establish a formal record of job performance that will protect them from lawsuits filed by unhappy workers. Answer: FALSE Explanation: The key word here is performance. The main purpose of a performance appraisal is to improve employee performance. Difficulty: 2 Medium Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

152) One drawback of performance appraisals is that they cannot be completed for top management because there is no one above this level of management to carry out and evaluate the results. Answer: FALSE Explanation: Today, performance appraisals rely on feedback from all levels, including subordinates. Even top managers benefit from 360-degree reviews by peers and subordinates. Difficulty: 2 Medium Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 153) Even employees who work on a busy production floor need performance appraisals. If the manager cannot conduct a closed-door appraisal session, the supervisor should conduct these wherever he/she can find room. Answer: FALSE Explanation: Performance appraisals should always be performed one on one and in a closeddoor session; and never with other employees present. Difficulty: 2 Medium Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 154) Due to the secret nature of performance standards, employees are only permitted to review these standards at the time when they receive their appraisal. Answer: FALSE Explanation: When the manager sets the standards that will be the basis for employee performance appraisals, those standards should be communicated with the employee, and the employee should have the opportunity to offer feedback on any job-related responsibilities that may not be clear. Difficulty: 2 Medium Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

155) After manager Donald set reasonable, understandable, and measurable performance standards, he communicated these standards clearly to all team members. Because of these efforts, he should be prepared for the next step in the appraisal process. Answer: TRUE Explanation: The first two steps in performance appraisal are establishing performance standards and communicating them to subordinates. The third step is to evaluate performance, and if the first two steps are done correctly, this step is relatively easy. Difficulty: 3 Hard Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 156) When she met with Rafi to discuss his performance appraisal, Cady noted that Rafi had difficulty with managing his time on certain projects. One drawback of a performance appraisal is that it does not allow for feedback during the evaluation process. Answer: FALSE Explanation: The fourth step of the appraisal process is to discuss results with the employee and the fifth step of the performance evaluation process is to take corrective action. These steps provide managers with an excellent opportunity to offer constructive criticism and corrective feedback to their employees, and also receive feedback from the employees. Difficulty: 3 Hard Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

157) Eliza is an office manager at Bookman's Legal Services. The company's top management recently announced it was adopting a 360-degree review process as part of the performance appraisals of its office managers. Once this policy goes into effect, Eliza can expect her evaluations to include feedback from both the managers above her and the employees she supervises. Answer: TRUE Explanation: A 360-degree review is so named because it calls for feedback from all directions: up, down, and all around. In other words, opinions are gathered from workers above, below, and at the same level as the worker being evaluated. Difficulty: 3 Hard Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 158) Companies compete with other firms for good employees. Answer: TRUE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 159) Compensation is one of the main tools a firm uses in its efforts to attract qualified employees. Answer: TRUE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

160) Airlines, hotels, hospitals, and many other service organizations are so labor intensive that the cost of labor is their primary cost of operations. Answer: TRUE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 161) The long-term success of a firm often depends on its ability to control employee costs and optimize employee efficiency. Answer: TRUE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 162) One objective of a carefully managed compensation and benefit program is to retain valued employees. Answer: TRUE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

163) The Hay compensation method gives managers the flexibility to adjust pay for workers to reflect the value of their contribution to the firm. Answer: FALSE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 164) Blue collar and clerical workers are normally paid a salary. Answer: FALSE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 165) In an ongoing study, Jay Schuster concluded that the best way to compensate members of a team is to base each member's pay on her or his individual performance. Answer: FALSE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Working in Teams Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 166) Skill-based pay is a method of compensating teams in which base pay is raised when team members learn and apply new skills. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Working in Teams Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 51 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

167) An advantage of a skill-based system of pay for compensating teams is that such a system is easy to apply and manage. Answer: FALSE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Working in Teams Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 168) Expenditures on fringe benefits have declined as a percentage of total payroll costs over the past several decades. Answer: FALSE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 169) Fringe benefit payments account for more than 30 percent of payroll costs today. Answer: TRUE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 170) Employees sometimes prefer increases in fringe benefits rather than increases in wages or salaries, because many fringe benefits are not subject to taxes. Answer: TRUE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 52 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

171) On-site haircuts and free breakfasts are examples of soft benefits some firms provide for employees. Answer: TRUE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 172) A fringe benefits plan that allows employees to choose the benefits they want up to a certain dollar amount is known as a soft benefit plan. Answer: FALSE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 173) Many firms are now contracting with outside companies to administer their employee benefits plans. Answer: TRUE Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

174) One objective of a carefully managed compensation plan is to keep labor costs low. In order to achieve this objective, a firm should strive to keep wages, salaries, and benefits at or below the compensation levels of its competitors. Answer: FALSE Explanation: A well-managed compensation plan does strive to keep labor costs low. However, this does not necessarily mean that a firm should strive to pay wages and salaries that are at or below the level offered by competitors. Compensation is one of the main marketing tools that companies use to attract employees. Offering low wages may make it difficult to compete for the best employees. A carefully managed compensation and benefit program can help a firm accomplish a variety of objectives: attracting the kinds of people the organization needs, providing incentives for employees to work productively, keeping valued employees from leaving for better-paying positions with competitors (or even starting their own business), and maintaining morale by providing workers with some sense of financial security. These objectives are not necessarily accomplished by paying low wages. Instead, they may enable the firm to keep labor costs low by ensuring high productivity from a loyal workforce. Difficulty: 2 Medium Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 175) Recent trends suggest that the best way for firms to control labor costs is to focus on limiting the growth of wages and salaries rather than controlling fringe benefits. Answer: FALSE Explanation: Fringe benefits have grown faster than wages in recent years. Moreover, fringe benefit packages are very complex. Difficulty: 2 Medium Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

176) The reason that companies use the gain-sharing pay system and the skill-based pay system to compensate teams of employees is that both are closely tied to profit performance. Answer: FALSE Explanation: The skill-based pay system is tied to the team's achievement of new skills that do not necessarily translate into increased sales or profits. The gain-sharing system is tied to quality improvements in operations, customer satisfaction ratings, and production improvements, which we hope will translate into increased profits. There is a better chance that increased profits can be attributed to quality improvements. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Working in Teams Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 177) Highly compensated executives sometimes prefer fringe benefits such as club memberships, company cars, and more vacation time, as opposed to higher salaries because most often these benefits are not taxable income. Answer: TRUE Explanation: Highly compensated executives that pay a higher percentage of their salary in taxes sometimes prefer to receive added fringe benefits rather than higher pay. Difficulty: 2 Medium Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 178) Some firms have found that employees prefer cafeteria-style benefit plans. For these plans, the employees vote on the benefits that they prefer, and only those benefits receiving the highest votes are offered to employees. Answer: FALSE Explanation: Cafeteria-style plans permit employees to choose from a variety of benefits, up to a maximum dollar amount. Difficulty: 2 Medium Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 55 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

179) Examples of soft benefits that a firm might offer are: onsite medical services and fitness centers. Answer: TRUE Explanation: Soft benefits are the types of services that help employees achieve those types of activities that take them away from work and family. In addition to the ones mentioned above, some businesses offer dry cleaning services, day care services, shoe repair, haircuts, and concierge services that will run errands for employees. Difficulty: 2 Medium Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 180) According to the Reaching Beyond Our Borders box, human resource managers will be able to count on the superiority of American business practices as they help manage a global workforce. Answer: FALSE Explanation: As mentioned in the box, global HR begins with an understanding of the customs, laws, and local business needs of every country in which the company operates. Functions should be country-specific, not based solely on American practices. Difficulty: 2 Medium Topic: Cultural Diversity in the Workplace Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

181) According to the Reaching Beyond Our Borders box, companies must consider a number of compensation-related issues for employees who work abroad. These may include currency conversion issues, special concessions such as travel and housing allowances, differences in health care standards in different countries, and even vacation benefits. Answer: TRUE Explanation: As mentioned in the box, compensation-related issues include currency conversion issues, special concessions, health care standards, vacation benefits, taxation issues, and overall business cultures abroad. Difficulty: 2 Medium Topic: Cultural Diversity in the Workplace Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 182) As a salesman, Bryan's pay is based on a percentage of his total sales. This type of pay arrangement is known as a commission. Answer: TRUE Explanation: A commission is a pay system that is based on a percentage of sales. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 183) Pete joined Texas Technologies as a sales manager. Upon starting, part of his sign-on bonus included the opportunity to buy up to 500 shares of the company's publicly traded stock at $10 per share, during the first three months of employment. The stock was trading on the NASDAQ exchange for $22 per share. Pete's new company was offering a dividend reinvestment plan. Answer: FALSE Explanation: The right for employees to purchase shares of their firm's stock at a specified price for a specified period of time is called a stock option plan. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

184) Employees at The Eastern Eagle newspaper are paid according to the Hay system. Ralph and Steve do the same type of work and report to the same supervisor. Ralph has worked at the newspaper for 14 years while this is Steve's third year. The supervisor believes Steve is the more enthusiastic and hard-working of the two. Under the Hay system, Steve will probably earn more than Ralph. Answer: FALSE Explanation: The Hay system is based on job tiers, each having a strict pay range. One disadvantage of this type of system is that a worker who is performing well may be paid less than a worker who is less productive but has been on the job longer. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 185) The Galloway Corporation is reorganizing to make more extensive use of teams. The company plans to continue paying its workers based on their individual performance. This approach is likely to maximize the success of the team by encouraging all team members to exert their best effort. Answer: FALSE Explanation: A study co-authored by Jay Schuster found that when pay to team members is based strictly on individual performance it erodes team cohesiveness and makes it less likely the team will meet its goals as a collaborative effort. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Working in Teams Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

186) Employees at American Earners Credit Cards are criticizing the company's fringe benefits package because it forces all employees to accept the same benefits regardless of differences in their personal needs. In fact, they even offer some soft benefits such as an on-site day care that over 80% of the employees are too young or too old to use. American Earners should consider a cafeteria-style benefits plan. Answer: TRUE Explanation: A cafeteria-style benefits plan allows employees to choose their own package of benefits up to a specified dollar amount. For example, older employees might be allowed to take most of their benefits in the form of increased pension payments, while employees with young children could choose a benefits package that focused on day care. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 187) Flextime plans are popular with employees because they allow them to work fewer hours while still earning the same income. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 188) A common feature of flextime plans is the establishment of core times when all employees are expected to be at their job stations. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

189) Flextime plans are particularly well suited for workers on an assembly line. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 190) In a compressed workweek, employees work more hours each day, but work fewer days each week. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 191) Almost 25 percent of U.S. workers now work from home at least one day a week. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 192) Allowing employees to work from home can actually save employers money. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

193) Job sharing has received a great deal of attention in recent years as more parents with small children prefer not to work full time. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 194) Job sharing tends to increase absenteeism and tardiness, because part-time workers are not as dedicated and loyal as full-time workers. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 195) A disadvantage of job sharing is that it requires a firm to hire, train, motivate, and supervise more employees. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

196) Most companies that have tried job sharing have concluded that the extra cost of hiring and training additional workers outweigh its benefits. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 197) Hot desking means sharing a desk with another employee. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 198) Most employees who use flextime prefer to work independently of others. In order to accommodate this preference, businesses permit them to clock in and out as they wish, as long as they put in the necessary 40-hour work week. On some days, they may arrive at 6:00 a.m., while on other days they may decide to come in at noon. Answer: FALSE Explanation: While there may be independent contractors who come and go independently of other employees, most companies that offer flextime scheduling require their employees to commit to a scheduled arrival and departure time, and also build core time into the day. Difficulty: 2 Medium Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

199) Jules works for a company that allows her to choose when she begins and ends her workday, as long as she works a required number of hours and is at her desk at certain specified core times. Jules's company is using a compressed workweek plan. Answer: FALSE Explanation: A system that gives employees some flexibility in when they begin and end their workdays, as long as they work a required number of hours, is called a flextime plan. Such systems usually specify core times when all employees are expected to be at their workstations. Difficulty: 3 Hard Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 200) Vanessa's company announced that it is going to implement a compressed workweek schedule. If Vanessa takes part in this plan, she will be allowed to work fewer hours each week, as long as she completes all assignments. Answer: FALSE Explanation: Compressed workweeks allow employees to work fewer days per week by working more hours each day. Total hours worked per week are not reduced. Difficulty: 3 Hard Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 201) Bigbux Bank is preparing to introduce a job-sharing plan. Bigbux is likely to find that scheduling workers for peak periods will become easier as the result of this policy. Answer: TRUE Explanation: In most cases, job sharing gives firms more flexibility to schedule employees into peak demand periods. Difficulty: 3 Hard Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

202) Managers at a local bank are discussing the absentee problems they are experiencing at their west-side location. Although the workers do a good job and serve customers well when they are on the job, they tend to report to work late at least two days each week, and often want to leave early. Job sharing might be a good staffing arrangement for the managers to consider. Answer: TRUE Explanation: People involved in job sharing work fewer hours than full-time employees. This gives them more time away from the job to handle personal chores and problems, so they miss less work and are less stressed out about the need to take care of personal business while at work. Difficulty: 3 Hard Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 203) The Leaves of Green restaurant chain does not permit employees at corporate headquarters to work flextime schedules. The CEO spoke with employees and explained that shift workers at the corporate-owned restaurants cannot reasonably work that way and in order to keep things fair, he prefers that the corporate employees work regular hours from 8:00 a.m. until 5:00 p.m. or from 1:00 p.m. to 11:00 p.m., which is the other regular shift where they need staff. Workers at fast food operations do not have the opportunity for flextime schedules because they must be at work prior to the store's serving hours and usually after the store closes. They cannot plan their own schedule, but must comply with the hours that management needs help. Answer: TRUE Explanation: Flextime does not meet the needs of all businesses. Particularly shift work, fastfood operations, and assembly line work are not conducive to flextime scheduling. Difficulty: 3 Hard Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation

204) Morgner Communications, a company that provides phone, Internet, and cable services for residential customers, experienced poor customer service ratings with its overseas call center. After reading this chapter, you would suggest that Morgner implement U.S.-based call agents. This will cost them a little more in office space and benefits, but it will certainly increase its customers' perception of their service. Answer: FALSE Explanation: Many companies are turning to home-based call agents because it not only improves the communication and service, but it saves operational costs because the company does not provide office space, nor does it provide benefits for these employees. Difficulty: 2 Medium Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 205) Internal promotions are a cost-effective way of filling positions within a firm because the employees filling the position are already familiar with the organization's culture and procedures. Answer: TRUE Difficulty: 1 Easy Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 206) Transferring an experienced worker to a new position at the same level within an organization can be an effective way to motivate the worker to remain with the company. Answer: TRUE Difficulty: 1 Easy Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

207) The employment at will doctrine maintained that a firm could only fire a worker if it could demonstrate just cause. Answer: FALSE Difficulty: 1 Easy Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 208) In recent years, many companies have avoided hiring permanent workers during periods of growth by using temporary employees and outsourcing some of their functions. Answer: TRUE Difficulty: 1 Easy Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 209) A golden handshake refers to the severance pay that is offered to a worker that is laid off when the firm downsizes. Answer: FALSE Difficulty: 1 Easy Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

210) Exit interviews by a third party can be an effective way for a firm to prevent future losses of valuable employees. Answer: TRUE Difficulty: 1 Easy Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 211) Recent court cases include drug-addicted employees who claim their addiction is an illness and, therefore, they are protected from wrongful discharge under the American with Disabilities Act. Answer: TRUE Difficulty: 1 Easy Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 212) The prevalence of flatter corporate structures in recent years has increased the number of workers that firms promote. Answer: FALSE Explanation: In a flat organization there are fewer levels of management and thus fewer positions available for promotions. Therefore, it is more common to transfer workers to new positions at the same level than it is to promote them to a higher level. Difficulty: 2 Medium Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

213) Management is turning to a strategy of offering more lateral transfers due to the fact that many companies are operating under a flatter organization structure. Answer: TRUE Explanation: A flatter structure (as mentioned in Chapter 8) means that there are fewer managers, who usually have a wider span of control. This fact reduces the opportunity of internal promotions. Managers motivate employees to stay with the company by providing lateral transfer opportunities where employees can learn new skills. Difficulty: 2 Medium Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 214) The doctrine of employment at will means that employees must be allowed to keep their jobs as long as they are willing and able to perform their required duties. Under this doctrine, employers can only fire or lay off an employee if the firm is in serious financial difficulty or the employee is grossly incompetent or has committed a felony. Answer: FALSE Explanation: Employment at will is a doctrine that says firms should have as much freedom to fire or lay off workers as the workers have to voluntarily leave. Difficulty: 2 Medium Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 215) The golden handshake is a popular method of firing or dismissing senior members of your workforce. Answer: FALSE Explanation: The golden handshake is a cash payout offered to employees close to retirement. The company is not firing or dismissing the employee. Difficulty: 2 Medium Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

216) Marketing manager Rob Ryan has worked for MedTech Pharmaceuticals for 39 years. He fondly remembers the "good old days" when he could fire a worker for just about any reason. He feels that today's laws and regulations limiting his ability to fire workers undermines his authority and forces him to keep employees that don't measure up to his standards. Rob's views suggest he would favor working in a state that implements the policy of employment at will. Answer: TRUE Explanation: The employment at will doctrine said that managers had as much freedom to fire workers as the workers had to leave voluntarily. Difficulty: 3 Hard Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 217) Top managers at Unifaze Corporation have decided that the company must downsize, but are concerned about the effect the reduction in employment will have on the morale of the remaining employees. One way top management could keep morale from suffering would be to establish an early retirement program. Answer: TRUE Explanation: An advantage of early retirement programs is that they tend to increase the morale of remaining employees. The retirement of older workers also increases promotion opportunities for younger employees. Difficulty: 3 Hard Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

218) Meghan hired Trent right out of college. Trent had brought a lot to the position at the Outdoor Adventure Sporting Goods firm where Meghan served as Marketing Director over the baseball, basketball, and hockey lines. Yesterday, Trent submitted his resignation after only one year on the job, and disclosed that he is leaving sporting goods and taking a job in Canada where he will be marketing a hockey arena. Meghan is beside herself and has decided to personally conduct an exit interview. In evaluating this situation, you agree that Meghan is probably the best person to conduct this interview. Answer: FALSE Explanation: It is best to use an outside agency to conduct exit interviews. Outsiders provide anonymity and usually gain honest feedback from those who are leaving the organization. Difficulty: 3 Hard Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 219) Barney's company creates promotional campaigns for other businesses. He just learned that the firm lost the Lisle Account, a long-standing customer. In the short term, this will significantly reduce the need for several creative writers and web content developers the company has on staff. As he prepares to call each employee in for dismissal, Barney reviews the best way to approach this inevitable task. He decides that it is best not to tarnish the image of the company so rather than tell each that they lost an important account, he will blame the need to reduce the workforce on new technology the firm is implementing and his personal evaluation of their work. He also plans to offer a two-month severance payment, as long as each signs a no-compete agreement good for one year. In that way, he may be able to call them back if new accounts emerge. All of these strategies are considered good procedures that would surely avoid "wrongful discharge lawsuits." Answer: FALSE Explanation: According to Figure 11.8, Barney should be honest about the business reason that the employees are being dismissed. Employees should be given the true reasons they are being fired. Difficulty: 3 Hard Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

220) ________ is the process of evaluating human resource needs and then recruiting, selecting, developing, motivating, evaluating, compensating, and scheduling employees to achieve organizational goals. A) Staffing B) Performance evaluation and response C) Human resource management D) Job analysis Answer: C Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 221) The ultimate resource of a firm is its A) business plan. B) marketing mix. C) capital budget. D) employees. Answer: D Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 222) One of the key functions of human resource management is A) departmentalizing. B) recruiting. C) budgeting. D) auditing. Answer: B Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 71 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

223) Today, human resource management has become so important that in many firms it has become A) a function performed by managers in all areas of the organization. B) the sole responsibility of the firm's legal staff. C) a function handled only by specialists in the human resource department. D) a function handled only by the firm's top management. Answer: A Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 224) ________ workers have a higher skill level than their current job requires. A) Structurally unemployed B) Frictionally unemployed C) Contingent D) Underemployed Answer: D Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 225) The changes in the American business system that have had the most dramatic impact on the workings of the free enterprise system are the changes in A) the labor force. B) technology. C) financial regulations. D) consumer behavior. Answer: A Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 72 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

226) In coming years, high-tech growth areas such as computer technology, biotechnology, and robotics are likely to experience a A) surplus of labor. B) significant decline in market demand, leading to a stagnant labor market. C) shortage of skilled labor. D) stable equilibrium in the labor market. Answer: C Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 227) Which of the following statements best describes the current view of the role of human resource management within a firm? A) Human resource management is largely a clerical function that involves keeping records, processing payroll, and making sure that federal regulations are met. B) Human resource management has become so complex that only highly trained specialists should make human resource decisions. C) Human resource management functions have become so important that in many firms all managers now perform them. D) Changes in technology have largely done away with the need for a separate human resource department. Answer: C Explanation: Human resource management has become so critical that it is no longer the responsibility of a single department. Most human resource functions are now shared by professional human resource managers and other managers within the organization. Difficulty: 2 Medium Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

228) Which of the following is a challenge that is facing the human resource managers of today? A) too many unemployed scientists and computer engineers B) an increasing number of Gen Yers in the workforce C) a shift in employee attitudes toward work D) an increased demand for uniformity in benefits offered to employees Answer: C Explanation: The text lists several challenges and opportunities affecting human resource management. One challenge is that employee attitudes are shifting toward work. Leisure time has become a much higher priority, as have concepts such as flextime and a shorter workweek. Difficulty: 2 Medium Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 229) Which of the following statements about human resource management opportunities and challenges is most accurate? A) The age composition of the labor force is becoming younger. B) Workers are becoming less loyal to their firms, resulting in higher turnover. C) Workers are now demanding that more of their compensation be in wages and salaries and less in fringe benefits. D) The number of workers who have received training in high-tech fields far exceeds the number of job openings in these areas. Answer: B Explanation: The text lists several challenges and opportunities affecting human resource management. One challenge is that employee loyalty is declining, resulting in increased turnover. Difficulty: 2 Medium Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

230) Which of the following statements about human resource management opportunities and challenges is most accurate? A) Shifts in the economy have led to a huge pool of skilled and unskilled workers from declining industries that are either unemployed or are underemployed. B) Workers now would rather have more income rather than more leisure. Therefore, many employees now want to work more than 40 hours per week. C) So many people have sought training in high-tech areas such as robotics and computers that there is likely to be a huge surplus of labor in high-tech industries. D) Workers now desire more stability and predictability in their careers, so they now give their employers more loyalty and expect more loyalty from their employers in return. Answer: A Explanation: The text lists several challenges and opportunities affecting human resource management. One challenge is that structural factors, such as declining industries and undereducated new workers, in the economy have given rise to a large number of workers who are either underemployed or unemployed. Difficulty: 2 Medium Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 231) Six years ago, Archie lost his job as a highly skilled craftsman at a metal working shop. Before accepting a job as a maintenance worker at a local community college, he searched for a job similar to his old trade for several months. While he is happy to have employment, he is frustrated that he had to settle for a job that did not take full advantage of his skills. Archie is a(n) A) structurally unemployed worker. B) semi-employed worker. C) underemployed worker. D) quasi-employed worker. Answer: C Explanation: An underemployed worker is a worker who has higher-level skills than his or her current job requires. Difficulty: 3 Hard Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

232) Rick is a human resource manager at a nonprofit. If Rick's organization is like most companies today, which of the following statements about his job is likely to be the most accurate? A) Most of Rick's time will be devoted to clerical duties such as processing payroll checks and keeping employee files updated. B) Rick's job will be simpler in the future than it was in the past, because the percentage of new workers entering the labor force who are poorly educated and unprepared for work is slowly but steadily declining. C) Government laws and regulations concerning hiring, worker safety, pay, and unionization will make Rick's work complex and challenging. D) Rick and his fellow human resource managers will be given complete responsibility for performing all human resource functions within the organization. Answer: C Explanation: Human resource management is facing several challenges and opportunities. One challenge mentioned in the text is that human resource managers must deal with a complex set of laws and regulations governing a wide variety of the functions they perform. Difficulty: 3 Hard Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 233) Title VII of the Civil Rights Act of 1964 A) gives all citizens over the age of 18 the right to vote regardless of race, religion, sex, or creed. B) prohibits firms from using employment testing as a means of selecting employees and determining which employees should be promoted. C) requires all firms with over 100 employees to have an affirmative action plan. D) prohibits discrimination based on race, religion, sex, creed, or national origin in matters such as hiring, firing, training, and compensation. Answer: D Difficulty: 1 Easy Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

234) The ________ was created by the Civil Rights Act of 1964, and has since become a formidable regulatory force in the administration of human resource management. A) National Labor Relations Board (NLRB) B) AFL-CIO C) Equal Employment Opportunity Commission (EEOC) D) Affirmative Action Transition Commission (AATC) Answer: C Difficulty: 1 Easy Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 235) Probably the most controversial program enforced by the Equal Employment Opportunity Commission concerns A) mandatory retirement. B) affirmative action. C) equal pay reporting. D) green card requirements for illegal aliens. Answer: B Difficulty: 1 Easy Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 236) The Civil Rights Act of 1991 A) declared affirmative action plans unconstitutional. B) requires any firm with over 600 employees to file an annual report with the Department of Labor identifying the steps it has taken to eliminate discriminatory practices. C) allows victims of discrimination to seek punitive damages. D) is the first law to declare reverse discrimination illegal. Answer: C Difficulty: 1 Easy Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

237) The ________ protects individuals over the age of 40 from discrimination based on age with respect to issues such as hiring, promotions, job benefits, and assignments. A) Age Discrimination in Employment Act of 1967 B) Equal Employment Opportunity Act of 1998 C) Fair Labor Standards Act of 1938 D) Employee Rights and Responsibilities Act of 1983 Answer: A Difficulty: 1 Easy Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 238) Employers must verify that employment candidates are eligible to work in the U.S. as mandated by the A) Manpower Development and Training Act. B) Civil Rights Act of 1991. C) Immigration Reform and Control Act. D) Occupational Safety and Health Act. Answer: C Difficulty: 1 Easy Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 239) The Family and Medical Leave Act A) provides paid leave for women who choose to stay home with newborn infants. B) provides unpaid leave of up to 12 weeks for men and women for the birth or adoption of infants, or in the case where it is necessary to care for an immediate family member who may be ill. C) provides unpaid leave of up to 6 weeks for couples (male or female) who have a new baby. D) was recently eliminated by the Supreme Court due to an employment shortage. Answer: B Difficulty: 1 Easy Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

240) An important U.S. government organization charged with setting human resource management guidelines is A) the EEOC (Equal Employment Opportunity Commission). B) the OSHA (Occupational Safety and Health Administration). C) the WPA (Works Progress Administration). D) the MPDA (Manpower Development Administration). Answer: A Difficulty: 1 Easy Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 241) According to U.S. business law, accommodation means A) treating all employees fairly. B) making certain that if one employee gets medical leave during a fiscal year, that all other employees get an equal amount of leave during the year. C) careful consideration before firing someone and hiring two younger persons to replace him/her. D) providing services for employees according to their specific needs. Answer: D Difficulty: 1 Easy Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

242) Recently, businesses have experienced debate over ________, the practice of discriminating against a dominant or majority group of persons. This situation occurs when businesses must adhere to employment laws that were designed to correct previous discrimination against minority groups. A) affirmative control B) affirmative action C) forward discrimination D) reverse discrimination Answer: D Explanation: Reverse discrimination occurs when a dominant group such as white males are not hired due to the fact that there is a qualified minority. Sometimes a member of the dominant group is better qualified, but is not hired due to the need to fill a minority quota. Difficulty: 2 Medium Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 243) The Equal Employment Opportunity Act gave the Equal Employment Opportunity Commission the authority to A) prevent firms from firing workers based on union affiliation. B) issue guidelines for employer conduct in administering equal employment opportunity programs. C) set salary schedules for protected groups. D) require firms to pay women and minority workers more than white males for the same work. Answer: B Explanation: The Equal Employment Opportunity Act of 1972 gave the EEOC the power to establish guidelines for acceptable employer conduct in administering equal employment opportunity, to establish specific record-keeping procedures, and to enforce its mandates. Difficulty: 2 Medium Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

244) If your company is selling its products or services to the U.S. government, you should study human resource law that pertains to A) the Better Business Bureau in your local area of operation. B) the limits that the EPA (Environmental Protection Agency) places on the pollutants you can emit in your foreign factories. C) the total number of employees you can hire. D) nondiscrimination and affirmative action laws when doing business with the federal government. Answer: D Explanation: The Office of Federal Contract Compliance Programs (OFCCP) ensures that employers comply with nondiscrimination and affirmative action laws and regulations when doing business with the federal government. Difficulty: 2 Medium Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 245) Which of the following statements about how current HR law views disabilities is accurate? A) The law varies depending upon how the employee acquired the disability. B) Disabilities include diseases such as epilepsy, autism, and diabetes. C) Disabilities refer to physical but not mental disorders. D) Any disorder does not require the employee to adapt the work environment to accommodate the employee. Answer: B Explanation: In 2008, Congress passed the Americans with Disabilities Amendments Act, which overturned Supreme Court decisions that had reduced protections for certain people with disabilities such as diabetes, epilepsy, heart disease, autism, and cancer. Difficulty: 2 Medium Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

246) One of the most important responsibilities for professionals in the HR field is A) understanding the ethical perspective of each employee. B) filing employee medical claims. C) to always "right past wrongs." D) staying current with employment-related legislation. Answer: D Explanation: New court cases and legislation change human resources management almost daily. The only way to keep current is to read about new legislation and stay current with emerging issues. Difficulty: 2 Medium Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 247) Which of the following statements is the most accurate description of the impact the Americans with Disabilities Act of 1990 (ADA) has had on businesses? A) ADA has had no real impact, since most businesses have always been sensitive to the needs of disabled workers. B) Most firms have found that the structural changes needed to comply with ADA requirements have been very difficult and expensive to implement. C) Most firms are finding that some accommodations required by ADA are more difficult to implement than the structural changes. D) Businesses have found that even with the changes required by ADA, disabled workers are simply not capable of handling most types of jobs. Answer: C Explanation: Many of the structural changes required by ADA are relatively simple and inexpensive. Most firms have little trouble with these structural changes. However, other changes required to accommodate disabled employees often are more difficult. For example, many managers used to think that fairness required them to treat all employees the same way. HR law specifies that accommodation means: treating employees according to their specific needs. Difficulty: 2 Medium Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

248) Dan just lost his job. At 44-years-old, he worked as a middle manager at a well-known advertising firm for 14 years. Due to a significant loss of clients, the company had to downsize despite Dan being an exemplary employee and winning several awards. The company decided to let Dan go instead of another middle manager who was in a minority group. In a business setting, this occurrence is referred to as ________. A) reverse discrimination. B) forward discrimination. C) affirmative action. D) affirmative control. Answer: A Explanation: Reverse discrimination may occur when a majority group such as whites or males are overlooked for jobs, promotions, or other opportunities, solely to give preference to a minority group, such as women. Difficulty: 3 Hard Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

249) Edie is coming up on her thirtieth year as a bus driver. Recently her company told her that she would be required to retire within the next two years because she had reached the age limit for mandatory retirement. Edie wants to fight this ruling based on a claim of age discrimination. Which of the following statements about this case is most accurate? A) According to the Employment Rights and Responsibilities Act, Edie has every right to keep her job as long as she has not been convicted of a moving traffic violation while performing her job. B) According to the Affirmative Action Enforcement Act, Edie has no right to keep her job, because she is not one of the groups that qualify for special protection. C) According to the Fair Labor Standards Act, Edie may be able to keep her job, but the company can require her to pass an annual vision and hearing exam as a condition of continued employment. D) According to the Age Discrimination in Employment Act, Edie can be required to retire at a certain age, because she is in an occupation where evidence exists that ability to perform the job diminishes significantly with age. Answer: D Explanation: The Age Discrimination in Employment Act normally outlaws mandatory retirement in most organizations. However, it does allow age limits to be set for professions such as airline pilots and bus drivers because evidence exists that the ability to perform these jobs declines significantly with age and poor performance imposes a significant danger to society. Difficulty: 3 Hard Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

250) Laura Benitez was hired as a management trainee by Simulex Corporation through a special program designed to "right past wrongs" by giving females and minorities greater opportunities for employment and advancement. The program is enforced by the Equal Employment Opportunity Commission. Laura was hired through a(n) ________ program. A) discrimination alleviation B) cultural diversity C) positive response D) affirmative action Answer: D Explanation: Affirmative action programs are designed to increase opportunities for employment and advancement for women and minorities. The purpose of affirmative action is to "right past wrongs" endured by women and minorities as the result of discrimination. Difficulty: 3 Hard Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 251) During her annual review, Susan admitted to her supervisor that she is more productive in a quieter environment. The openness of her office setting and the recent increase in staff that came to her for training made it difficult for her to process as many insurance claims in one day as she had accomplished in the past. The supervisor agreed to move Susan's desk to the back of the office, and create a barrier with plants. The supervisor would take a more active role in training new employees, so they would not be coming to Susan with questions. In HR, we refer to this action as creating A) accommodations. B) barriers to entry. C) job enlargement. D) consideration. Answer: A Explanation: Accommodation means treating people according to their specific need. This can include putting up barriers to isolate people from distractions, reassigning workers to different tasks, and minimizing noise, among others. Difficulty: 3 Hard Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

252) In 2011, Congress passed the Americans with Disabilities Amendments Act. What was the scope of the changes? A) This law placed added emphasis on the hiring of employees with "visible" disabilities. B) This law decreased the fine for businesses that do not employ disabled persons but followed through with a tax break for businesses who hire disabled citizens. C) The amendment widened the scope of what disabilities are covered under the act. D) In light of so many soldiers coming back from the war, the amendment re-focused disabilities to include only physical disabilities. Answer: C Explanation: In 2008 and 2011, the EEOC issued new regulations that widen the range of disabilities covered by the ADA and shifted the burden of proof of disability in labor disputes from employees to business owners. Difficulty: 3 Hard Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 253) As new parents, Sean and Molly applied for family medical leave to care for their new infant son. According to U.S. law, Sean and Molly A) are not paid during the 12-week period that each elects to take. B) are each paid as a half-time employee during the 12-week leave period. C) must each take the full amount of family medical leave time. D) must both be employed in order to qualify for any family medical leave time. Answer: A Explanation: Family Medical Leave Law stipulates that each parent has the right to apply for and take 12 weeks of unpaid leave in order to care for a newborn or adopted child, or to care of an immediate family member (parent, child, or spouse) with a serious illness. Difficulty: 3 Hard Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

254) The first step in the human resources planning process is to A) prepare a forecast of human resource needs. B) assess future labor demand. C) prepare job specifications for each position within the organization. D) prepare a human resource inventory. Answer: D Difficulty: 1 Easy Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 255) The last step of the human resource planning system is to A) publish a human resource inventory listing the names, ages, job titles, skills, and other pertinent information for all employees in the organization. B) develop an affirmative action statement to explain how the company will meet federal government guidelines on hiring and promotions. C) hold a general meeting to explain the impact of the plan to employees. D) establish a strategic plan for recruiting, selecting, training, appraising, compensating, and scheduling the labor force. Answer: D Difficulty: 1 Easy Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 256) A(n) ________ is prepared as part of the human resource planning process, and indicates the characteristics and qualifications of the organization's labor force, thus helping the firm determine whether its employees are technically up-to-date and adequately trained. A) job analysis B) performance appraisal C) human resource inventory D) organization chart Answer: C Difficulty: 1 Easy Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 87 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

257) A ________ is a two-part process. One part explains what an employee would actually do at various jobs. A) job analysis B) performance appraisal C) job assessment D) job title review Answer: A Difficulty: 1 Easy Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 258) A job analysis results in two written statements. They are A) the human resource inventories and the affirmative action statement. B) the labor supply assessment and the labor demand assessment. C) the job description and the job specification. D) the job title review and the performance appraisal. Answer: C Difficulty: 1 Easy Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 259) A ________ is a statement that identifies the minimum qualifications required of a worker in order to perform a specific job. A) job description B) performance criteria review C) human resource inventory D) job specification Answer: D Difficulty: 1 Easy Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

260) A job ________ is a statement that identifies the objectives of a job, the type of work to be done, the responsibilities and duties that are associated with the job, the working conditions, and the relationship of the job to other functions. A) specification B) description C) evaluation D) analysis Answer: B Difficulty: 1 Easy Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 261) After preparing a job analysis, the next step in the human resource planning process is to A) develop a human resource inventory. B) assess future human resource demand. C) develop a human resources budget. D) establish a strategic plan. Answer: B Difficulty: 1 Easy Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 262) The ________, which is developed from the previous four steps of the human resource planning process, addresses how the firm will accomplish a wide array of human resource functions such as recruiting, selecting, training and developing, appraising, compensating, and scheduling its employees. A) strategic plan B) tactical plan C) job specification D) Gantt chart Answer: A Difficulty: 1 Easy Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 89 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

263) A human resource inventory is designed to reveal whether A) all workers are paid a fair wage. B) the firm has enough land and capital to use with its labor. C) the firm's labor force is technically up-to-date and well trained. D) worker morale is high or low. Answer: C Explanation: A human resource inventory includes the names, ages, education, training, and specialized skills of employees. This information helps a firm determine the capabilities of its labor force. Difficulty: 2 Medium Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 264) As part of the HR planning process, the manager begins by assessing the current labor situation at the company. Essentially, this means A) preparing job analyses. B) preparing job descriptions. C) preparing job specifications. D) taking an inventory of current employees and their capabilities. Answer: D Explanation: A human resource inventory includes the names, ages, education, training, and specialized skills of employees. This information helps a firm determine the capabilities of its labor force. Difficulty: 2 Medium Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

265) Which of the following is an essential element of a job description? A) the minimum educational qualifications workers must have to fill the position B) the responsibilities and working conditions C) the skills required to hold the position D) the age of the person that should hold the job Answer: B Explanation: A job description specifies the objectives of the job, the type of work to be done, the responsibilities and duties, the working conditions, and the relationship of the job to other functions. Difficulty: 2 Medium Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 266) Which of the following statements identifies a key difference between a job description and a job specification? A) A job description is concerned with the short-run objectives of a job, but a job specification is concerned with the job's long-run objectives. B) A job description is based on a human resource inventory, while a job specification is the result of a performance appraisal. C) A job description is a statement about the job, while a job specification is a statement about the person who does the job. D) A job description is a brief summary of what a job involves, while a job specification is a detailed and technically complete statement of what a job involves. Answer: C Explanation: A job description is a statement that indicates the objectives of the job, the type of work to be done, the working conditions, and other factors associated with the job itself. A job specification is a statement that specifies the minimum qualifications required of the worker who will perform the job. Difficulty: 2 Medium Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

267) When creating a job description, the HR manager may include A) the minimum qualifications for the position. B) the number of unpaid leave days the employee can take while at this position. C) the specific responsibilities of the job. D) a prediction of the number of similar positions that the company will need during the next two to five years. Answer: C Explanation: The job description is a part of the job analysis that specifies the job objectives, the tasks and responsibilities to be performed at this job, working conditions, and the relationship of the job to other functions. Difficulty: 2 Medium Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 268) The overall purpose of the five-step human resource planning process is to A) protect the company from lawsuits from employees who claim discrimination. B) develop a workforce that is better educated than the workforce of competitor firms. C) eliminate needless job specifications. D) determine the number and types of employees needed by the firm. Answer: D Explanation: Human resource managers plan in order to get the right number of employees and the right mix of employee skills, knowledge, and abilities needed by their company. Difficulty: 2 Medium Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

269) As Eddie scanned the employment opportunities on LinkedIn, he speculated that he might not qualify for some of the jobs. Eddie was concerned that his educational credentials and skills might not be compatible with the ________ for many of today's available jobs. A) job analyses B) job descriptions C) job specifications D) job data base Answer: C Explanation: Job specifications are a written summary of the minimal education and skills required to do a particular job. Difficulty: 2 Medium Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 270) Matt is gathering information about the names, ages, education, specialized skills, and capabilities of all of his firm's employees. The information Matt is acquiring suggests he is working on a A) performance evaluation. B) human resource inventory. C) job description. D) Gantt chart. Answer: B Explanation: A human resource inventory includes information about the names, ages, education, training, special skills, and capabilities of a firm's labor force. Difficulty: 3 Hard Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

271) Ernesto's business is growing at a steady rate, but he knew he can always do better! In order to capture more business, he would have to hire a few more sales professionals to sell into new markets. As he contemplated his staffing needs, his sister who worked in HR informed him that he needed to do a job analysis before hiring. Which of the following would be a logical part of a job analysis for a sales position? A) asking the current sales reps to create a log of their daily and weekly activities B) asking the HR specialist to create an online application for the position(s) C) training new recruits D) determining how many sales reps other companies typically have on staff Answer: A Explanation: The job analysis is a study of what employees in a particular position do at their jobs. It also includes a job description and job specifications. Difficulty: 3 Hard Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 272) Daphne, an HR manager at Superior Senior Services, needs to know how many current employees have certain types of skills and training to perform new services the company wants to offer. A document that would help Daphne answer this question is the firm's A) strategic plan. B) human resource inventory. C) organization chart. D) social audit. Answer: B Explanation: A human resource inventory includes the names, ages, education, capabilities, training, and specialized skills of employees within an organization. This type of information should help Daphne determine how many existing employees have the characteristics she is seeking. Difficulty: 3 Hard Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

273) Epic Electronics requires all employees who work as research specialists in its electrical engineering department to have a minimum of a bachelor's degree in electrical engineering (BSEE). This educational requirement would most likely be stated in the job ________ for this position. A) analysis B) description C) designation D) specification Answer: D Explanation: A job specification indicates the minimum qualifications required for workers to fill a specific job. Difficulty: 3 Hard Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 274) Eric is an HR manager at Communication Connections. Which of the following tasks would he perform as a part of the human resource planning process? A) forecast future human resource requirements for his company B) appraise the performance of individual workers at his company C) establish the budget for the human resource department D) interview potential workers Answer: A Explanation: The human resource planning process involves 5 steps: (1) preparing a human resource inventory, (2) preparing a job analysis, (3) assessing future labor demand, (4) assessing future labor supply, and (5) establishing a strategic plan for recruiting, selecting, training and developing, appraising, and scheduling the labor force. Difficulty: 3 Hard Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

275) Paul believes that due to changing technology the minimum skill level that his company is requiring for technology-intensive jobs should be increased to include knowledge and experience in higher-level programming applications. These new requirements would be reflected in ________ for various jobs at his company. A) the job description B) the job specification C) the human resource inventory D) the job application Answer: B Explanation: A job specification (as one part of the job analysis) states the minimum qualifications required of each job. Difficulty: 3 Hard Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 276) Davis is a project manager for a large construction company. Each day his job requires him to prepare detailed reports of the progress of current projects assigned to him. Since this responsibility is something that he does on a regular basis, the HR professional for his company would list it as part of the ________ for Davis's project management position. A) job description B) job specification C) human resource inventory D) job application Answer: A Explanation: The job description (as part of the job analysis) will describe the tasks and responsibilities of the position, as well as working conditions and the job's relationship to other functions. Difficulty: 3 Hard Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

277) By doing a quick, one-minute search, an HR specialist determined who in her company knew programming language C++. The specialist used the company's database to retrieve the information; however, this information should also be part of the HR planning process, as found in A) specific job descriptions. B) the future labor supply assessment. C) the human resource inventory. D) the company training portfolio. Answer: C Explanation: As part of the HR planning process, the human resource inventory will include a list of all employees and detailed information about each such as name, age, special skills, education attainment, and other capabilities. Difficulty: 3 Hard Topic: Steps Involved in Human Resource Planning Learning Objective: 11-03 Summarize the five steps in human resource planning. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 278) ________ is the set of activities for obtaining the right number of people at the right time in order to select those who best meet the needs of the organization. A) Pre-selection B) Recruitment C) Networking D) Preemptive hiring Answer: B Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

279) GlassDoor and Indeed are examples of A) web browsers. B) career interest surveys. C) online sites that firms can use to recruit employees. D) magazines that list job opportunities by skills requirements and geographic location. Answer: C Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 280) Promotions and transfers are ________ sources available to human resource managers in their recruiting efforts. A) internal B) external C) passive D) redundant Answer: A Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 281) Advertisements, public and private employment agencies, and college placement bureaus are all ________ sources that human resource managers can use in the recruiting efforts. A) secondary B) passive C) back-up D) external Answer: D Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 98 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

282) Which of the following strategies is used by a human resource manager to fill an open position from within the company? A) advertise the opportunity for a promotion to current employees B) seek the assistance of a public employment agencies C) send the job opening to Monster.com D) utilize the services of a private employment agency Answer: A Explanation: Internal sources for positions are sources that make use of a firm's existing employees either to fill the position or to find the right candidate. The major internal sources are transfers, promotions, and employee recommendations. Difficulty: 2 Medium Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 283) Which of the following is an external recruitment source? A) college placement bureaus B) promotion of a current employee to a new position C) transfer of an employee in from a different office D) recommendations of employees Answer: A Explanation: External sources used for recruiting are advertisements, public and private employment agencies, college placement bureaus, and Internet sites. Transfers, promotions, and employee recommendations are considered internal recruitment sources. Difficulty: 2 Medium Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

284) Which of the following reasons makes the recruiting job more challenging? A) The current emphasis on scientific management requires very specific job specification. B) Some organizations have policies that demand promotions from within that limit the pool of candidates. C) Reverse discrimination is essential to be sure that the workforce is balanced. D) There are far too many qualified candidates for each position, increasing the required paperwork. Answer: B Explanation: Recruiting has become very difficult for several reasons. (1) Some organizations have policies that demand promotions from within, operate under union regulations, or offer low wages. (2) People need to be hired who fit in with the culture and leadership style of the organization. (3) Sometimes people with the necessary skills are not available. Difficulty: 2 Medium Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 285) It is sometimes advantageous to hire from within because it ________. A) eliminates the need to meet affirmative action regulations. B) ensures that the best qualified person gets the job. C) is less costly, and helps maintain employee morale. D) allows the firm to effectively use the "employment at will" strategy. Answer: C Explanation: Hiring from within helps maintain employee morale because it gives workers a chance to move up within the organization and rewards them for good work. Difficulty: 2 Medium Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

286) Which of the following statements about recruiting is most accurate? A) It is important for a firm to recruit and hire people who are not only skilled but also fit in with the firm's culture and leadership style. B) Recruiting internally will almost always result in better-qualified applicants than recruiting externally. C) Small firms generally have a strong advantage when it comes to recruiting. D) One advantage of using external sources when recruiting is that this approach tends to result in higher morale among the firm's existing employees. Answer: A Explanation: With the current emphasis on corporate culture, teamwork, and participative management, firms must seek employees who not only have the right skills, but also are a good "fit" with the firm's culture and leadership style. Difficulty: 2 Medium Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 287) According to the Need a Job? box, which of the following strategies can be used to get a new job? A) Search social media. B) Post your resume on a bulletin board at Panera. C) Send your resume to various companies. D) Cold call companies to check for employment opportunities. Answer: A Explanation: Social media is playing a crucial role in the hiring process today. More than 94 percent of recruiters and 70 percent of candidates use sites like LinkedIn. Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

288) Janie is an HR manager with Creative Kitchen Cooking Supplies. She needs to recruit sales professionals to fill several positions within her company. Janie is likely to rely on external recruiting sources if she A) wants to eliminate the need to meet affirmative action regulations. B) believes that Creative Kitchen current employees do not have the qualifications necessary to successfully fill the positions. C) places a great deal of importance on maintaining high morale for current workers. D) needs to keep the cost of her recruiting efforts to a minimum. Answer: B Explanation: Internal recruiting sources, which consist primarily of promotions and transfers of people within the organization, are typically less expensive than external sources. They also have the advantage of keeping the morale of existing employees high. However, it is not always possible to find people with the right qualifications internally. External sources, such as help wanted ads and placement agencies, enable a firm to broaden its recruitment efforts and consider people who are not currently in the organization. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 289) As a human resources professional for a large company, Tommy is involved with the ________ process. His goal is to find the right number of qualified people at the right time. He will screen a qualified pool of candidates and send these individuals forward to others in the firm who will make the final selection decision. A) recruiting B) human resource allocating C) organizing D) job orienteering Answer: A Explanation: Recruitment is the set of activities used to obtain a sufficient number of the right people at the right time to select those who best meet the needs of the organization. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

290) Marlon took a job with a company that strives to market several new consumer products each year. Prior to this position, he worked in a university research lab where he studied chemistry. He accepted the new position because the salary was significantly above what he previously made. Within a month at the new job, his manager began to have reservations about bringing him on board. Marlon seemed to prefer to work independently of others, and when he did interact with his new colleagues, he passed along subtle reminders of his extensive and superior academic credentials. From a recruitment standpoint, this situation serves as an indication of A) the benefits of shaking things up a little at work. B) the challenges of trying to convince long-term employees that they need to retrain and continue their education. C) the benefit of external recruitment over internal recruitment, even though in the short run, it may be the more costly approach for the company. D) the importance of finding talent that also fits well with the corporate culture. Answer: D Explanation: Recruitment is challenging for several reasons including finding new employees that fit with the firm's corporate culture and the leadership style of the organization. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

291) When determining the human resources needs for a well-known engineering firm, the HR director realized that the company lacked engineers under the age of 30. The company could not afford to get caught short in this competitive business climate. An important recruitment strategy for the HR director's department was to start attending college fairs as well as considering hiring interns. We define his recruitment efforts as developing relationships with A) external sources. B) internal sources. C) median sources. D) civilian sources. Answer: A Explanation: External sources of recruitment include advertisements, public and private employment agencies, college placement bureaus, management consultants, Internet sites, and referrals. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-04 Describe methods that companies use to recruit new employees, and explain some of the issues that make recruitment challenging. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 292) When managing your human resources, ________ is the process of deciding who should be hired, under legal guidelines, to serve the best interests of the individual and the organization. A) interviewing B) applicant analysis C) performance appraisal D) selection Answer: D Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

293) The first step in the selection process is A) obtaining complete application forms. B) placing a help wanted ad. C) the initial interview. D) aptitude testing. Answer: A Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 294) During the employee selection process, the screening interview is often conducted by A) the current workers in the applicant's department. B) a member of the human resources department staff. C) a selection committee consisting of managers from all departments within the organization. D) the company's affirmative action officer. Answer: B Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 295) One of the main complaints made by critics of employment tests is that these tests A) fail to take the interests and personalities of the test takers into account. B) cannot measure basic competencies. C) may discriminate against certain groups. D) take so long to conduct and evaluate that they slow down the selection process. Answer: C Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

296) A ________ is a check of a potential employee's work record, academic record, credit history, and recommendations. A) personality profile B) background investigation C) fidelity appraisal D) character review Answer: B Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 297) As an important step in the human resource selection process, which of the following will expedite the process of conducting background investigations and promises to get suitable results? A) Use hiring services such as GoodHire to conduct criminal checks and driving records. B) Dedicate one human resource expert to making personal calls and doing all the background checks. C) Minimize the types of questions the company asks at this juncture. D) If there is a need to skip one of the selection process steps, most companies eliminate this one. Answer: A Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

298) According to the American with Disabilities Act, which of the following is not an appropriate screening tool? A) job related knowledge tests B) personality tests C) background investigations D) medical exams Answer: D Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 299) ________ workers do not have the expectation of regular, full-time employment. A) Contingent B) Apprenticed C) Indentured D) Underemployed Answer: A Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 300) The selection process may include a(n) ________, where employment is only guaranteed for a specified period of time, until either a permanent offer is extended or the employee is discharged. A) intern period B) probationary period C) contingent period D) action pending period Answer: B Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

301) Employment testing A) was declared illegal by the EEOC in 1989, because it was often used to discriminate against women and minorities. B) is legal, but is a very poor predictor of worker performance. C) should be directly related to the job. D) should focus on the most basic and general skills rather than on skills directly related to the job. Answer: C Explanation: Using employment tests that are directly related to the job will make the selection process more efficient and will usually satisfy legal requirements designed to protect applicants against discrimination. Difficulty: 2 Medium Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 302) Pre-employment physical examinations are A) an excellent way to screen out employees. B) legal in some states, but only if given to everyone applying for the position. C) illegal under current employment legislation in all 50 states. D) legal in all states, but seldom used. Answer: B Explanation: Physical exams are a good way to ensure that the firm is hiring individuals who are healthy enough to handle the requirements of the job, but they can't be used just to screen out unwanted individuals. In some states, a physical exam cannot be given until an offer of employment has been accepted. In states where pre-employment physical exams are legal, firms that use them must give the exam to all people applying for the position. Difficulty: 2 Medium Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

303) Which of the following statements about contingent workers is most accurate? A) More than 75 percent of contingent workers are employed in office-clerical work. B) The number of contingent workers in the U.S. has steadily declined over the past decade. C) U.S. labor laws require firms to offer contingent employees the same wages and benefits as other employees performing similar work. D) Companies will rely on contingent workers in an uncertain economy. Answer: D Explanation: Contingent workers are workers who do not have an expectation of regular fulltime work. These workers help firms whose need for workers varies significantly over time, or when hiring needs are uncertain due to an uncertain economy. Difficulty: 2 Medium Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 304) Which of the following is a valid statement about contingent workers? A) Contingent workers are seldom skilled professionals. B) By law, employers must provide contingent workers the same salary and benefits as permanent employees. C) An increasing number of companies are hiring skilled professionals, such as accountants, as part of their contingent workforce. D) By law, companies cannot hire contingent workers as part of the management team. Answer: C Explanation: An increasing number of contingent workers are skilled professionals such as accountants, attorneys, and engineers. Difficulty: 2 Medium Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

305) What is an advantage of hiring contingent workers? A) These people are primarily over 45 years of age. They are more dependable. B) When a company's work is very stable and steady, it is best to use contingent workers. C) When the tasks are very narrow in scope and specialized, it is best to use contingent workers. D) It is good strategy if the economic climate is uncertain. Answer: D Explanation: Using contingent workers is sensible strategy during uncertain economic times. College students also make good contingent workers. Often a firm will employ contingent workers to weed out the poor performing employees and permanently hire the good employees. Difficulty: 2 Medium Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 306) Christy is a human resource manager currently involved in selecting employees. Which of the following activities is Christy most likely to be working on in her present assignment? A) performing a job analysis B) writing a help wanted ad C) conducting an orientation program D) completing a background investigation Answer: D Explanation: The text lists six steps in the selection process, the fourth of which is conducting background investigations. Many firms investigate the backgrounds of potential employees much more carefully now than they did in the past. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

307) Once the job description and job specifications were written for a new marketing assistant position in his department, Eric called his HR specialist to proceed with the next step in the process of making a successful hire. After providing a timeframe for qualified persons to apply for the job, the next step in the selection process is best described as A) conducting background investigations. B) obtaining results from physical exams. C) conducting initial and follow-up interviews. D) establishing trial and probationary periods. Answer: C Explanation: The second step in the selection process is conducting initial and follow-up interviews. Often the HR specialists will screen applicants in a first interview. Companies are now using software to assist with the screening process. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 308) Sarah is a human resource manager with Innovative Industries. Her current assignment is to revise and update Innovative's employment testing procedures. Sarah should A) design tests that are directly related to an applicant's ability to perform the job. B) write tests sufficiently difficult that only a small fraction of qualified workers can pass them. C) design tests that measure general aptitudes rather than ability to do the job. D) inform her superiors that such tests are now illegal. Answer: A Explanation: Designing tests that are directly related to the job will make the selection process more efficient and will often satisfy legal requirements designed to ensure that the tests are not used to discriminate against women, minorities, or other groups. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

309) Early Bird Enterprises conducts thorough background investigations of its prospective employees. The purpose of such investigations is to A) meet federal reporting guidelines that require up-to-date work history for each candidate. B) identify those applicants that are most likely to succeed. C) implement the "employment at will" doctrine. D) discover whether the employee has ever worked for a competitor. Answer: B Explanation: Background investigations look at candidates' work and academic records, their credit histories, and their recommendations. A detailed background check can help the firm weed out the candidates that are least likely to succeed and identify those candidates that are most likely to succeed. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 310) Jefferson's Department Store typically sells over a third of all its merchandise in November and December. Management has found that it must hire ________ workers during this period of increased business to supplement its permanent employees. A) nontenured B) apprentice C) contingent D) journeymen Answer: C Explanation: Workers who do not expect regular full-time employment are known as contingent workers. Firms whose employment needs vary from season to season (like department stores and farms) can adjust to these variations by hiring contingent workers. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

311) Which of the following workers would be the best example of a contingent worker? A) an assembly-line worker who belongs to a union and has 17 years of seniority B) an accountant hired to help during the busy tax season C) an elementary school teacher who just received tenure D) an electrical engineer who frequently travels out of the country to the various manufacturing facilities owned and operated by his firm Answer: B Explanation: Contingent workers do not expect regular, full-time employment. A worker hired to work for a few weeks to help a firm that temporarily needs extra workers is an example of a contingent worker. In fact, the most common reason firms give for hiring contingent workers is a varying need for employees. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 312) Karen relies on her summer income to pay for her next year of college. When she tried to get her old high school summer job back at local Contemporary Clothiers, she learned that the manager no longer hires college students during the summer months. Which of the following strategies do you recommend that Karen pursue? A) Contact temporary staffing companies. B) Realize that Contemporary Clothiers always needs more sales associates in the summer, and stay in contact with the management just in case. C) Look for a permanent position, and quit as it gets closer to the time when you will return to school. D) Seek the services of a resume consultant, and pay to access a variety of employment tests so that you are prepared when the next job opportunity arises. Answer: A Explanation: Many companies include college students in their contingent workforce plan. A good strategy for accessing these job opportunities is to meet with a temporary staffing agency and ask to be placed in their computer system. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

313) In just a few short weeks, Jon would arrive back in the states after a semester abroad. He was already in a temp agency's database from the previous summer, when he spent 8 weeks working for an accounting firm. Jon will again try to hire on as a ________ during the summer months. The company that hired him last summer typically hires several college students each year, mainly because they have good computer skills, and the company does not need to offer college students benefits. A) contingent worker B) intermediate worker C) primary worker D) apprentice Answer: A Explanation: Many companies consider college students as part of their contingent workforce. College students are technologically savvy. Once they are appropriately screened by the temp agencies, they are included in a database of available temporary workers. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 314) The purpose of ________ is to increase an employee's ability to perform productively. A) training and development B) employment tests C) contingency planning D) job enrichment Answer: A Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

315) Online training courses are sometimes also called A) contingency training. B) synchronized training. C) distance training. D) vestibule training. Answer: C Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 316) The first step in establishing training and development programs is to A) establish appropriate simulation parameters. B) assess the needs of the organization and the skills of the employees. C) conduct pre-employment tests. D) start designing programs. Answer: B Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 317) ________ introduces new employees to the organization, their fellow workers, their supervisors, and to the policies, practices, and objectives of the firm. A) Vestibule training B) Employee initiation C) Employee orientation D) Job specification Answer: C Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

318) In a(n) ________ an inexperienced worker learns by working alongside an experienced employee to master the skills and procedures of a craft. A) orientation period B) simulation period C) indentureship program D) apprenticeship program Answer: D Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 319) A worker who successfully completes an apprenticeship program earns the title A) master craftsman. B) journeyman. C) senior artisan. D) probationary craftsman. Answer: B Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 320) ________ is the easiest kind of training to implement, when the job requires simple tasks and/or is repetitive. A) Vestibule training B) Job simulation C) On-the-job training D) An employee boot camp Answer: C Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

321) Shadowing is another term used to refer to A) job rotation. B) vestibule training. C) role playing. D) on-the-job training. Answer: D Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 322) Computer and robotics training is sometimes performed in a nearby classroom-type setting. We refer to this near-the-job-training as A) vestibule training. B) orienteering. C) apprenticeship training. D) mentoring. Answer: A Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 323) ________ is a type of training that duplicates the exact combination of conditions that occur on the job. A) Modular training B) Job simulation C) Dress rehearsal training D) Performance feedback Answer: B Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

324) Off-the-job training A) is further development that occurs at the workplace, but after scheduled work hours. B) focuses only on the skills needed to perform the job. C) may include higher education. D) is training that all employees should take, on their own, in order to stay competitive in their career field. Answer: C Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 325) ________ is the process of training and educating employees to become good managers and then developing their managerial skills over time. A) Management development B) Vestibule training C) Pre-mentoring D) Self-actualization training Answer: A Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 326) Corporate managers who supervise, coach, and guide lower-level employees and serve as their organizational sponsors are called A) networkers. B) role models. C) mentors. D) corporate guides. Answer: C Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

327) ________ is the process of establishing and maintaining contacts with key managers in one's own organization and in other organizations, and using those contacts to establish strong relationships that serve as informal development systems. A) Training and development B) Social integration C) Orienteering D) Networking Answer: D Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 328) A management training program that gives managers assignments in a variety of departments in order to expose them to different functions within the organization is called A) job enlargement. B) vestibule training. C) job rotation. D) an apprenticeship program. Answer: C Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 329) Selected employees who work as assistants to higher-level managers and participate in managerial functions are given such titles as A) second in command. B) benefactor. C) underwriter in process. D) understudy. Answer: D Difficulty: 1 Easy Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

330) Which of the following statements describes the relationship between employee training and employee development? A) They are just two names for the same thing. B) Training is short-term skills oriented while development is long-term career oriented. C) Development is provided by the company and is designed to meet the specific needs of the organization, whereas training focuses on more general skills and normally is provided by schools, colleges, and institutions other than the employer. D) Training focuses on conceptual skills while development seeks to improve technical skills. Answer: B Explanation: Training and development include all attempts to improve performance by increasing an employee's ability to perform. However, training focuses on short-term skills while development focuses on long-term abilities. Difficulty: 2 Medium Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 331) A major purpose of employee orientation programs is to A) initiate new employees to the organization, their fellow employees, and their immediate supervisors. B) give experienced employees a chance to learn new skills. C) test new employees to determine where they should be assigned. D) help workers who have been laid off to find new jobs. Answer: A Explanation: Employee orientation introduces new employees to the organization, its people, and its policies, practices, and objectives. Difficulty: 2 Medium Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

332) Job rotation helps lower-level managers prepare for higher-level positions by A) letting them assume upper management positions for a limited time period. B) exposing them to different functions within the organization, thus giving them the broad perspective needed by top managers. C) helping them hone their highly specialized technical skills. D) giving them the opportunity to learn about every aspect of work performed in their department by spending a day doing the job of each person within the department. Answer: B Explanation: Job rotation exposes managers to different functions by giving them assignments in different departments. This gives the managers the broad picture of the organization needed by top managers. Difficulty: 2 Medium Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 333) Women often have more trouble finding mentors than men because A) women are less aware of the way to look for a mentor. B) most successful women who could serve as mentors are so committed to family responsibilities that they do not have time to mentor other women. C) most senior managers who could serve as mentors are male. D) clubs and organizations where most mentoring takes place either exclude women or make it difficult for them to join. Answer: C Explanation: Women often have difficulty finding mentors and entering into networking arrangements because most older managers who could serve as mentors are male. Difficulty: 2 Medium Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

334) With the advent of more sophisticated technology, employers who operate locally and globally and want all employees to receive the same training may opt for A) apprenticeship programs. B) mentorship programs. C) job rotation programs. D) online training programs. Answer: D Explanation: Online training, also called distance training, has the ability to provide a large number of employees with consistent content tailored to specific training needs, at convenient times. Difficulty: 2 Medium Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 335) Which of the following statements about networking is the most accurate? A) White males are much more aware of the importance of networking than women and minorities. B) Although African American and Hispanic managers are becoming aware of the importance of networking, there are no organizations available to help them make networking connections. C) Women have more difficulty forming networks than men because they can be barred from male-only clubs and social organizations where much of the networking occurs. D) Students can begin building network connections in college, even before they take on their first, full-time professional jobs. Answer: D Explanation: Networking is the process of establishing and maintaining contacts with key people and using those contacts to weave strong relationships that serve as informal development systems. Students can begin networking in college by nurturing good relationships with professors, local businesspeople, and classmates. Difficulty: 2 Medium Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

336) As companies continue to develop women and minorities for management positions, they A) increase the available talent pool of skilled employees. B) decrease chances for men to compete for professional positions. C) increase the morale of all employees. D) decrease the birthrate. Answer: A Explanation: Companies who take the initiative to develop female and minority managers understand that doing so will increase the available talent pool of all skilled workers. Difficulty: 2 Medium Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 337) It's good strategy to develop women and minorities for management positions because A) it's a sure thing that the U.S. government will continue to pass laws that penalize companies even more for passing up women and minorities when it comes to promotion. B) women and minorities in management positions attract and serve other women and minorities better. C) it's less expensive to train these diverse groups. They do not demand as much in terms of travel and training time. D) it is considered immoral to pass up women and minority groups seeking jobs. Answer: B Explanation: Companies that have more women and minorities at all levels lets businesses serve their increasingly female and minority customers better. Difficulty: 2 Medium Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

338) Keith, a member of the electrician's union, recently achieved the classification of journeyman. This means that Keith A) is a contingent worker. B) passed a written exam, but is still working to learn the basic skills needed to be a carpenter. C) has successfully completed his apprenticeship program. D) is an apprentice and still on the journey of becoming a certified professional carpenter. Answer: C Explanation: Workers who successfully complete an apprenticeship program earn the classification of journeyman. Difficulty: 3 Hard Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 339) When Casey began her Ph.D. program, she was immediately assigned to a female ________ who would serve as a coach and guide to shorten the curve and help Casey meet the right people who could enhance her career. Her program also required ________, where she would spend four to six weeks in different labs, gaining experience and exposure to a variety of research in her field of study. A) mentor; off-the-job training B) journeyman; network C) understudy; vestibule training D) mentor; job rotation Answer: D Explanation: A mentor is a corporate manger or seasoned professional who supervises, guides, and coaches selected lower-level employees by introducing them to the right people and generally acting as their organizational sponsor. Job rotation occurs when employees are given assignments in a variety of departments and settings in order to acquire a broad picture of the organization and the types of career paths available. Difficulty: 3 Hard Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

340) Corporate HR for Corner Bookstores knows that sexual harassment in the workplace is a serious issue. In order to provide consistency in its effort to train employees about sexual harassment, HR management created a(n) ________ program. Employees have a flexible time period when they can log on and receive exactly the same training as employees in all of the Corner Bookstores. A) online training B) off-the-job training C) vestibule training D) simulation training Answer: A Explanation: The advantage of online training is that it has the ability to provide a large number of employees with consistent content tailored to specific training needs, at times convenient for each employee. Difficulty: 3 Hard Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 341) Ted says he's working in his dream job. As an engineer for a major defense systems company, he is responsible for using sophisticated airplane and weaponry equipment that creates the exact conditions that one may experience if he or she uses the equipment in a real-life situation. Ted spends several hours each day performing A) vestibule training exercises. B) apprenticeship training exercises. C) distance training exercises. D) simulation training exercises. Answer: D Explanation: The difference between vestibule training and job simulation is that the latter duplicates the exact combination of conditions that occur on the job. These types of exercises are very important for high-risk jobs such as airline pilots, astronauts, and military personnel. Difficulty: 3 Hard Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

342) At Safety First Seat Belts, new workers are immediately assigned to jobs. They learn by doing the actual work and by watching longer-term employees. This company uses a policy of A) vertical assimilation. B) on-the-job training. C) operational apprenticeships. D) vestibule training. Answer: B Explanation: On-the-job training means that a new employee immediately begins his or her tasks and learns by doing or by watching more experienced workers and imitating them. Difficulty: 3 Hard Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 343) Jamie recently became a member of the Plumbers Union. She has been told she will work with Mac, a skilled and experienced plumber, for at least three years in order to learn all of the skills and techniques of her craft. This type of training is referred to as A) skill replication. B) applied supervision. C) apprenticeship training. D) vestibule training. Answer: C Explanation: An apprenticeship is a period of time when a new learner works alongside a skilled worker to learn the skills and procedures of a craft. Difficulty: 3 Hard Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

344) Before Street Runner Road Builders allows new employees to operate the heavy machinery it uses to build roads, employees are sent to a nearby classroom where they learn the safe and proper way to work with all of the tools and equipment they will use when they perform their jobs. Street Runner Road Builders is using a training technique known as A) vestibule training. B) offline training. C) job replication. D) modular training. Answer: A Explanation: Vestibule training is done in classrooms where employees are taught on equipment that is similar to that used on the job. This approach allows workers to learn proper methods and safety procedures before assuming a specific job within the organization. Difficulty: 3 Hard Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 345) Carl, a control room engineer at Electron Power, Inc.'s power plant regularly practices handling emergency situations in a computerized mockup that duplicates the sights, sounds, and experiences of a real control room under emergency conditions. Electron uses ________ to train its engineers. A) time intensive training B) job replication C) vestibule training D) job simulation Answer: D Explanation: Job simulation uses equipment that duplicates the conditions and tasks associated with a given job so that trainees can learn skills before attempting them in the real workplace. Difficulty: 3 Hard Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

346) Joseph accepted a management trainee position at Rested Resorts. Corporate management believes Joseph has potential to move into a top management position within the organization. They have begun assigning Joseph to a different department every few months so he can obtain the broad perspective needed by top managers. This company is using ________ to develop Joseph's management skills. A) job rotation B) multitasking C) understudying D) cross-functional management Answer: A Explanation: Job rotation is a management development technique, which gives managers assignments in a variety of departments in order to expose them to the different functions of the organization. One goal of this method is to give managers the broad view of the organization that top managers need. Difficulty: 3 Hard Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 347) Patty recently began working in an entry-level management position. She has already shown great promise, so the company has decided to groom her for an upper-level position. Constance, one of the more senior women managers in the company, has agreed to help Patty by introducing her to the right people, and by providing her with the guidance and advice she needs to be successful within the firm. Constance is acting as Patty's A) mentor. B) assimilation assistant. C) transfer agent. D) network captain. Answer: A Explanation: A mentor is a corporate manager who supervises, coaches, and guides a lowerlevel employee through introductions to the right people and groups and personal sponsorship within the organization. Difficulty: 3 Hard Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

348) If you aspire to become a sous chef, you will pursue several types of training and development. Your ________ will include how to perform as a line chef, as you work your way through pastry, grill, pantry, and sauté. The only way you will learn the variations in the line jobs is to experience them! As a(n) ________, you will work alongside another sous chef for a few years in order to learn how to juggle all the middle-management type of activities expected of this professional. Your ________ training will be extensive, as you go to culinary school, attend a community college, and/or take management classes to help you learn to minimize conflict in the kitchen as well as improve the productivity of those you manage. A) apprenticeship; journeyman; online B) apprenticeship; simulator; off-the-job C) job rotation; apprentice; off-the-job D) on-the-job training; journeyman; vestibule Answer: C Explanation: Job rotation will provide you with a broad picture of how each line chef must operate in his/her respective area. You will experience the technical variations of each line. As an apprentice, you work alongside an experienced professional that is performing the duties of the position you want to achieve. Even though you will learn a lot of things on the job, a career as a chef requires you to do extensive off-the-job training at a community college and/or a culinary school. Difficulty: 3 Hard Topic: Training and Evaluation Learning Objective: 11-06 Illustrate employee training and development methods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 349) The ________ is an evaluation of the performance level of employees against established standards to make decisions about promotions, compensation, additional training, or firing. A) job analysis B) performance appraisal C) MBO assessment D) objective analysis Answer: B Difficulty: 1 Easy Topic: Appraising Employee Performance to get Optimum Results Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

350) The first step in the performance appraisal process is to A) perform a human resource inventory. B) establish performance standards. C) analyze the jobs to see what tasks must be performed. D) meet with employees and discuss the overall objectives of the firm. Answer: B Difficulty: 1 Easy Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 351) The last step in performance appraisal is to A) talk to the employee being appraised. B) evaluate the employee's performance. C) take any corrective action that the appraisal indicates is necessary. D) use the results to make decisions about compensation, promotions, and additional training. Answer: D Difficulty: 1 Easy Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 352) A newer form of performance appraisal is called the ________ because it encourages feedback from all around the employee including those who report to him/her. A) 360-degree review B) roundabout assessment C) environmental review D) multilevel assessment Answer: A Difficulty: 1 Easy Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

353) The purpose of a performance appraisal is to A) protect the firm from lawsuits by disgruntled employees. B) improve employee performance. C) obtain information for the firm's financial performance that must be provided in the annual report to stockholders. D) give managers the information they need to determine the firm's strengths and weaknesses relative to its most serious competitors. Answer: B Explanation: The primary purpose of a performance appraisal is to improve employee performance. Difficulty: 2 Medium Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 354) The information contained in performance appraisals helps managers A) write job descriptions. B) compute the firm's overall performance in terms of a rate of return on investment. C) evaluate job applicants. D) make decisions about promotions, compensation, training, and firing. Answer: D Explanation: Performance appraisals evaluate the performance level of employees by comparing their results against established standards. The results of a performance appraisal help managers decide whom to promote, who should receive raises and bonuses, who needs additional training, and who should be fired. Difficulty: 2 Medium Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

355) Unlike a traditional performance appraisal, a 360-degree review A) is performed by experts from outside the organization. B) provides feedback from all around the employee, including subordinates. C) uses only objective measures of performance. D) compares the performance of each worker to every other worker. Answer: B Explanation: A 360-degree review is a newer form of performance appraisal. This type of evaluation includes feedback on performance from employees above, under, and at the same level as the employee being evaluated. Managers gather the opinions of all persons the employee works with. Difficulty: 2 Medium Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 356) Which of the following statements about performance appraisals is the most accurate? A) The most difficult step of a performance appraisal is almost always the actual evaluation of the employee's performance. B) Performance standards do not have to be measurable in order to be effective. C) The discussion of the results of a performance evaluation with an employee should allow the employee an opportunity to make suggestions about how to improve on current procedures. D) Most employees have a good understanding of the standards they are expected to meet, even if their managers do not explicitly communicate these standards. Answer: C Explanation: The discussion phase of a performance appraisal should allow two-way communication. One of the advantages of a performance evaluation is that it not only gives a manager a chance to help an employee improve his or her performance; it also gives the employee an opportunity to make suggestions on how a particular task could be better performed. Difficulty: 2 Medium Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

357) A department manager evaluated the performance of her subordinates as part of a performance appraisal process. If she follows the six-step appraisal process, the next step is A) meet with employees to discuss the results. B) write up a performance review report and submit it to top management. C) adjust the standards based on how well the employees did. D) make decisions about training, promotions, and pay raises. Answer: A Explanation: Evaluating the performance of subordinates is the third step in the performance appraisal process. The fourth step is to discuss the results with the employees. Difficulty: 3 Hard Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 358) The management team at McGowan Brothers want to make sure their decisions about compensation, promotions, and firings are based on sound information that meet legal requirements. One way for the company to achieve this objective would be to A) outsource all such decisions to an outside expert. B) establish an effective performance appraisal system. C) make sure that these decisions are not influenced by the employee's immediate supervisor. D) base all pay, promotion, and firing decisions on the Hay system. Answer: B Explanation: A performance appraisal is an evaluation in which the performance level of employees is measured against established standards to make decisions about promotions, compensation, additional training, or firing. Difficulty: 3 Hard Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

359) Arturo hates conducting performance appraisals with his subordinates because he always finds it to be a struggle. In order to make the actual performance evaluations a better experience for all, Arturo should A) base his evaluation on a written test. B) use a democratic approach and let the employees evaluate each other. C) set performance standards that are reasonable, understandable, and measurable, then clearly communicate these standards to his subordinates. D) use the principle of motion economy to break down each subordinate's job into a series of steps that can be easily evaluated and compared to ideal performance standards. Answer: C Explanation: The first two steps of performance appraisal are to set measurable, reasonable, and understandable performance standards, and to clearly communicate these standards to employees. If these two steps are done correctly, the actual evaluation of employee performance should be relatively easy. The manager simply compares actual performance with the established standards. Difficulty: 3 Hard Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 360) Managers at Bigbux Bank get a performance appraisal once a year. Bigbux uses an evaluation process that provides feedback about performance not only from superiors but also from subordinates and other managers at the same level. This type of evaluation is known as a(n) A) organization-wide appraisal. B) 360-degree review. C) circular analysis. D) multilevel assessment. Answer: B Explanation: The 360-degree review is a relatively new approach to performance appraisals that provides employees with feedback on their performance from all directions. Difficulty: 3 Hard Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

361) As a project manager for a large construction company, Shaun decided to make the performance appraisal process as painless as possible for his crew. He spent a considerable amount of time creating performance standards he felt were reasonable, and after six months' time, he scheduled individual appointments with each worker to discuss strengths and weaknesses and areas that needed improvement according to the standards he privately set. Some employees were sent to vestibule training, and one even got a promotion with additional compensation. What did he fail to do correctly? A) Provide a pleasant environment for the appraisal such as a restaurant setting. B) Dismiss at least 10% of the work crew. C) Copy the HR department on all the results, within 24 hours of each appraisal. D) Communicate the performance standards to the employees so they know what is expected. Answer: D Explanation: The first step in the performance appraisal process is to establish the performance standards. As a manager, you will use these standards to evaluate employee performance. The second step in the performance appraisal process is to communicate those standards with the employees you will be evaluating. Difficulty: 3 Hard Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 362) For many types of service organizations such as hospitals, hotels, and airlines, the primary cost of operations is A) establishing and maintaining a presence on the Internet. B) insurance and legal expenses. C) coping with obsolescence that results from the rapid pace of technological change. D) compensation of labor. Answer: D Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

363) Workers who are paid a ________ receive a fixed compensation weekly, biweekly, or monthly. A) commission B) salary C) piece rate D) royalty Answer: B Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 364) Salespeople often are paid a ________ based on a percentage of their sales. A) commission B) salary C) royalty D) piece rate Answer: A Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 365) Blue-collar and clerical workers who punch a time clock typically are paid a(n) A) commission. B) salary. C) hourly wage. D) piecework rate. Answer: C Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

366) The ________ method is a pay system that is based on job tiers, with each tier having a strict pay range. A) Steiner B) Gantt C) Hay D) Gilbreth Answer: C Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 367) The two most common compensation methods for teams are A) cash bonuses and cashless bonuses. B) skill-based pay and gain-sharing. C) piecework pay and commissions. D) salaries and capital gains. Answer: B Difficulty: 1 Easy Topic: Advantages and Disadvantages of Working in Teams Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 368) Although the skills learned do not always translate into profits for the company, ________ pay rewards the growth of both the individual and team participation. A) skill-based B) gain-sharing C) commission D) stock option Answer: A Difficulty: 1 Easy Topic: Advantages and Disadvantages of Working in Teams Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 137 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

369) A common way of compensating teams is a ________ system, in which bonuses are based on improvements over a previous performance baseline. A) commission B) stock option C) gain-sharing D) skill-based Answer: C Difficulty: 1 Easy Topic: Advantages and Disadvantages of Working in Teams Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 370) Sick-leave pay, vacation pay, pension plans, and health plans that provide additional compensation to employees are called A) fringe benefits. B) off-schedule salary. C) bonus sharing. D) nonmonetary salaries. Answer: A Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 371) Today, fringe benefits account for more than ________ percent of total payroll costs. A) 6 B) 18 C) 24 D) 30 Answer: D Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 138 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

372) Many firms now offer their employees ________ benefits, such as on-site haircuts and free breakfasts, which help employees maintain a balance between work and family life. A) real-time B) situational C) break time D) soft Answer: D Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 373) A fringe benefit plan where employees choose the package of benefits they want up to a certain dollar amount is called a ________ plan. A) cafeteria-style B) variable lifestyle C) 401K D) flexible spending Answer: A Difficulty: 1 Easy Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

374) A major advantage of a piecework pay system is that it A) creates a powerful incentive to work efficiently. B) requires a minimum of paperwork and record keeping. C) encourages cooperation and teamwork among employees. D) is a system that is strongly supported by both unions and management. Answer: A Explanation: Piecework pay systems pay workers according to how much they produce rather than by the hour or day. The more a worker produces, the more the worker earns. Thus, workers have a strong incentive to work efficiently and productively. Difficulty: 2 Medium Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 375) Which of the following statements about team pay is the most accurate? A) Most managers are very satisfied with the team-based pay programs that are currently in place. B) Most managers have concluded that team pay methods are so complex and difficult to administer that they have gone back to pay plans based on rewarding workers for their individual achievements. C) Although individuals who make an outstanding contribution should be recognized and rewarded, a pay system based strictly on individual performance can undermine the cohesiveness teams need to meet their goals. D) Team pay plans should emphasize individual rewards since the team can succeed only if all individuals are highly motivated to work as hard as possible. Answer: C Explanation: Measuring and rewarding individual performance on teams while at the same time rewarding team performance can be tricky. Nonetheless, it can (and should) be done. A study by Jay Schuster suggests that pay plans based only on individual performance can undermine the cohesiveness needed for the team to achieve its goals. Thus, team pay should reflect team performance. However, it is also important to reward individual team players for outstanding efforts. This reward may take the form of recognition or some other cashless reward as well as cash. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Working in Teams Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

376) When workers are a part of a team their compensation should be A) based strictly on their individual performance in order to encourage each worker to exert his or her maximum effort. B) based strictly on the achievements of their team in order to encourage teamwork and cooperation. C) a stated wage or salary that is not based on either team or individual performance, because it is very difficult to measure individual performance in a team environment. D) based on team performance, with additional rewards for those workers who make outstanding individual contributions. Answer: D Explanation: When team pay is based strictly on individual effort, it may erode team cohesiveness and make it less likely that workers will collaborate to achieve team goals. Thus, team pay should reflect the accomplishments of the team. However, outstanding workers who go beyond what is expected and make exceptional contributions should be separately recognized for their additional contributions. One way to avoid alienating others on the team is to let the team members themselves decide which members get what type of individual reward. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Working in Teams Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 377) Companies place a considerable amount of attention on compensation plans because A) firms are likely to face stiff penalties from the government if they do not offer competitive wages and salaries. B) attracting the right employees with good compensation packages can translate into a competitive advantage. C) it is a hygiene factor. D) a good compensation plan will be less costly than other parts of the operation. Answer: B Explanation: Today, companies compete for customers, and also for good employees. The right employees can place the company at a competitive advantage. Good compensation plans will attract high-level employees. Difficulty: 2 Medium Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

378) The most likely reason a firm would pay its sales representatives a commission rather than a salary is that it wants to A) provide sales representatives with a strong incentive to generate more sales for the company. B) keep the pay system as simple as possible. C) be able to deduct the cost of compensating the sales representatives from its taxable income. D) give the sales representatives a stronger incentive to collaborate with each other and act as a team. Answer: A Explanation: Commissions base pay on a percentage of sales. Thus, the greater the sales the more income the sales representative will earn. This should give the representatives a strong incentive to push for additional sales. Difficulty: 2 Medium Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 379) According to the material in the box Managing a Global Workforce, which of the following statements about working with employees from different countries is most accurate? A) The increasingly global nature of markets and the impact of television, movies, and the Internet on people's attitudes and perceptions have largely eliminated cultural differences between foreign and domestic workers. B) Currency rate differences and different laws with respect to fringe benefits, such as health insurance and time off, offer challenges for HR management. C) U.S. laws require American firms to hire, train, and pay employees in other countries the same way their U.S. employees are hired, trained, and paid. D) More often than not, American firms have found that cultural differences in other nations are so great that it is more efficient to staff key positions in foreign facilities with American workers rather than hire foreign workers. Answer: B Explanation: The material in the Managing a Global Workforce box points out that American human resource managers must be aware of significant differences in culture, law, and business practices when they deal with foreign employees. Difficulty: 2 Medium Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

380) Human resource managers at Vandelay Industries want to encourage teamwork and are looking for a better way to compensate members of teams. One approach they are considering is a skill-based system. Which of the following statements about this type of pay system is most accurate? A) Skill-based systems are unlikely to work with teams because they are designed to encourage individual initiative rather than teamwork. B) A skill-based system is a very effective way to pay teams because this approach makes it easy to correlate skill acquisition with the bottom-line gains of the company. C) A skill-based pay system works well in many cases, but employees tend to resist this approach since it affects only bonuses, which are not guaranteed, rather than base pay. D) Team members have base salaries, but they are additionally compensated according to the number of new skills they acquire as a team. Answer: D Explanation: Skill-based pay is one of the two most common ways to compensate teams (the other being gain-sharing). In skill-based pay systems, base pay is raised when team members acquire additional skills. There are two problems with skill-based pay: it is complex, and it is difficult to correlate skill acquisition to bottom-line gains for the firm. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 381) Brad recently earned a real estate license in Missouri and has interviewed with several groups to find a job. All have told him that his income will be based on a percentage of his real estate sales for the month. Brad will be paid A) a monthly salary. B) a piece rate. C) on a commission basis. D) through a profit-sharing plan. Answer: C Explanation: Sales professionals are often paid on commission, that is, a percentage of their sales. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

382) Wayne is a supervisor at a small manufacturing plant. His pay starts at $635 per week. Wayne is paid on a(n) A) salary pay system. B) commission pay plan. C) rolling rate system. D) income averaging plan. Answer: A Explanation: A salary system pays workers a fixed amount weekly, biweekly, or monthly. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 383) Martin works for Epic Electronics, a sophisticated electronic equipment company. Martin is happy to see that the value of company stock has reached $53 per share, because certain employees (including himself) have the opportunity to buy a given number of shares of its stock for $25 per share for the next year regardless of how high the market price goes. Epic Electronics is offering some employees a A) stock annuity plan. B) stock reinvestment plan. C) stock dividend. D) stock option plan. Answer: D Explanation: A stock option plan allows employees to buy their firm's stock at a specific price for a specific period of time. If the value of the stock rises, this can allow employees to acquire the stock at huge savings. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

384) This year, International Accountants, Inc., implemented a new benefits system that gives employees the flexibility to choose among different benefit options, as long as the total cost of the benefits does not exceed a certain dollar amount. The type of benefits package offered to International Accountants employees is a(n) A) flexiplan. B) cafeteria-style fringe benefits plan. C) democratic benefits package. D) open options benefits plan. Answer: B Explanation: A cafeteria-style fringe benefits plan allows workers to choose the benefits they want up to a certain dollar amount. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 385) This is Anne's year! She finally broke through the "glass ceiling"—meaning she has reached an executive-level position with her company, with a salary upward of $200,000. Recently a competitor firm has approached her offering her $15,000 less in salary, but the job would come with an upgraded car, memberships in two country clubs of her choice, an additional two weeks paid vacation with use of the company's villa in Jamaica, and paid financial counseling. With respect to compensation, Anne A) will not consider this offer because it is not worth $15k less in salary, and it would impact her ability for future offers. B) may consider this offer because it is not just about compensation, it is about the job content. C) will not consider this offer because it lacks soft benefits. D) may consider this offer because accepting fringe benefits instead of a higher salary may positively impact her tax consequences. Answer: D Explanation: Highly paid employees often prefer more fringe benefits instead of a higher salary, in order to avoid paying a higher percentage of their salary in taxes. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

386) A ________ plan gives employees some ability to adjust hours when they work, as long as they work the required number of hours. A) cafeteria-style plan B) flextime C) varitime D) Gantt scheduling Answer: B Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 387) The time when all employees must be present in a flextime plan is referred to as A) compressed time. B) shared time. C) core time. D) company time. Answer: C Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 388) A ________ allows workers to work the full number of hours per week in fewer days. A) flextime plan B) compressed workweek C) maximum plan D) double shift plan Answer: B Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

389) A disadvantage of flextime plans is that they often A) confuse workers. B) lead to a higher level of absenteeism. C) cause worker morale to decline. D) require supervisors and managers to work longer hours. Answer: D Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 390) In a ________ arrangement two part-time employees fill one full-time job. A) job enlargement B) multitasking C) job sharing D) split shift Answer: C Difficulty: 1 Easy Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

391) A major characteristic of a compressed workweek is that A) workers receive the same pay for fewer hours of work. B) the pace of work is increased so that workers perform the same amount of work in fewer hours. C) employees work fewer days each week, but work more hours each workday. D) two or more part-time workers are hired to fill each full-time position. Answer: C Explanation: In a compressed workweek employees work the same number of hours in fewer days. Difficulty: 2 Medium Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 392) A firm that wants to reduce its office costs, broaden its base of available talent, and improve job satisfaction could achieve all of these goals by A) recruiting only from internal sources. B) making greater use of scientific management techniques. C) implementing the Hay system of compensation. D) allowing more workers to work from home. Answer: D Explanation: Figure 11.7 lists the advantages and disadvantages of home-based work to organizations, individuals, and society as a whole. Among the main advantages listed for the organization are that it increases job satisfaction and reduces problems with absenteeism, broadens the available talent pool, and reduces the cost of providing on-site office space. Difficulty: 2 Medium Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

393) Which of the following statements about home-based work is most accurate? A) Although home-based work may become very popular in the future, only a small percentage of workers currently work at home on a regular basis. B) Home-based work offers big advantages for many workers, but is likely to increase costs for employers significantly. C) Home-based work tends to increase the productivity of almost all workers, since people tend to be more productive when they are comfortable and can work flexible hours. D) Home-based work allows workers to choose their own hours and interrupt work for child care and other tasks, but this freedom and flexibility can create problems for some workers. Answer: D Explanation: Home-based work is not for everyone. The flexibility and freedom it gives to workers can create problems for people who are undisciplined or who are easily sidetracked. Workers with these characteristics need a more structured work environment. Difficulty: 2 Medium Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 394) At a large law firm, Therese works daily as an administrative assistant from 9:00 a.m. until 1:00 p.m., when she is replaced by Elita who works from 1:00 until 5:00 p.m. The arrangement Therese and Elita have at the law firm is known as A) job enlargement. B) job sharing. C) job rotation. D) job allocation. Answer: B Explanation: Job sharing is an arrangement which allows two part-time employees to share a single full-time position. Difficulty: 3 Hard Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

395) At Securitas Financial Consulting, employees are allowed to choose what time they start each work day, as long as they arrive between the hours of 7:00 a.m. and 10:00 a.m. They must be on the job from 10:00 a.m. until noon and from 1:00 p.m. until 3:00 p.m. They are required to work a total of 8 hours each day, so the earlier they arrive, the earlier they can leave. This is a ________ system. A) job sharing B) job enlargement C) flextime D) compressed work week Answer: C Explanation: Flextime gives employees some flexibility to adjust when they start and end their work day, as long as they work a required number of hours and are available during core time. Difficulty: 3 Hard Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 396) Newport Communications uses a flextime plan; however, all employees must be on the job from 10:00 a.m. until 2:00 p.m. What are these hours called? A) core time. B) mandatory attendance time. C) shared facilities time. D) compressed time. Answer: A Explanation: Core time refers to the particular hours of the day when all workers are expected to be at their job stations. Difficulty: 3 Hard Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

397) Megamart stores in northern Indiana have gone to a ________, where management works four 10-hour days, and has four days off. A) flextime system B) compressed work week C) job rotation system D) constrained work week Answer: B Explanation: A compressed workweek allows employees to work a standard 40-hour work week in fewer than the normal five days. Difficulty: 3 Hard Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 398) BangBang Percussion Company tried to implement a flextime system. However, after only a few months, they abandoned the new system. Which of the following is the most likely reason BangBang would drop its flextime plan? A) It caused an increase in traffic congestion. B) It often made communication among employees more difficult. C) The employees resented being required to come to work early or stay late. D) Workers tend to be less productive when they have to work longer hours in a single day. Answer: B Explanation: One of the problems with a flextime system is that it can complicate communications among employees. When workers arrive and leave at different times, situations can arise where certain employees are not available when others need to talk to them. Difficulty: 3 Hard Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

399) Steve is an office manager with a financial company. His company recently announced that it will soon implement a flextime plan. Under this new system, Steve is likely to find that A) he will have to work longer hours. B) workers tend to forget their work schedules. C) almost all of his workers decide to change to an earlier schedule. D) he will have to work harder to maintain high morale among the employees in his office. Answer: A Explanation: A problem with flextime systems is that managers often have to work longer days to be able to supervise and direct workers. Difficulty: 3 Hard Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 400) Tony works in purchasing for the Epic Electronics on the East Coast. He arrives at work at 6:00 a.m. and leaves by 3:00 p.m. He enjoys this schedule because he is an early riser. A disadvantage to the company in allowing Tony to use flextime is A) morning workers are never as productive as afternoon workers. B) there is a one-hour window of opportunity to talk with employees on the West Coast, who work 8:00 a.m. to 5:00 p.m. C) this system will increase absenteeism. D) the company is required to hire twice as many people and spend additional funds training these individuals. Answer: B Explanation: Communication can be a challenge for persons working on flextime. Certain employees may not be available when others need to talk with them. Difficulty: 3 Hard Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

401) Regina spends three hours each day working as an online customer service representative for a retailer. She can choose her own hours, within reason. The job works out well for her since she has a new baby that she cares for much of the day. The retailer does not provide her or the other 200 customer service reps with workspace, which constitutes a sizeable cost savings for the company. Regina participates in A) home-based work. B) time-in work. C) job sharing. D) compressed work. Answer: A Explanation: Home-based work is defined as work that is performed at one's home rather than at an established place of work where the employee is provided workspace. Often, home-based workers can plan their own hours. Difficulty: 3 Hard Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 402) Two advantages of using ________ to fill open positions are: (1) it improves the morale of current employees, and (2) the person filling the position is already familiar with the organization's culture and procedures. A) unskilled workers B) apprenticed workers C) promotions from within D) external sources Answer: C Difficulty: 1 Easy Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

403) One implication of today's flatter corporate structures is that A) employees are more likely to get a lateral transfer, before a promotion. B) firms are becoming less interested in hiring contingent workers. C) a greater number of workers are now classified as middle managers. D) workers are expecting more of their pay in the form of stock options. Answer: A Difficulty: 1 Easy Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 404) If a firm wants to know why valuable employees are leaving the company, it will conduct A) performance appraisals. B) job inventories. C) job simulations. D) exit interviews. Answer: D Difficulty: 1 Easy Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 405) The ________ doctrine states that employers have as much right to fire workers as the workers have to leave the company voluntarily. A) first-in, first-out B) employment at will C) reciprocal employment D) mutual consent Answer: B Difficulty: 1 Easy Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

406) A(n) ________ is a financial incentive a firm offers to encourage employees to accept an early retirement offer. A) ESOP B) green fair-way C) golden handshake D) silver lining Answer: C Difficulty: 1 Easy Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 407) A reason workers tend to receive fewer promotions than in the past is that A) most firms now believe hiring people outside the organization is a better way to fill management positions because it brings in new blood. B) the movement toward flatter organizational structures provides fewer opportunities to move upward. C) firms have found that promoting employees can create jealousy and resentment among the workers who are not promoted. D) very few of today's supervisors and lower-level managers have the qualifications needed to move into higher management positions. Answer: B Explanation: As companies downsize and become flatter, they have fewer levels of management. This means that fewer higher-level management positions are available for employees to reach. Difficulty: 2 Medium Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

408) Which of the following statements about early retirement is most accurate? A) Traditional early retirement plans are no longer legal because they represent age discrimination. B) An advantage of early retirement as a method of downsizing is that early retirement provides opportunities for younger employees to be promoted. C) Federal law requires firms to offer early retirement benefits to any worker who voluntarily offers to retire before the age of 60. D) Workers who receive an offer for early retirement are likely to gain by refusing the firm's first offer and holding out for a better deal. Answer: B Explanation: Early retirements have an advantage over layoffs as a means of downsizing because having workers voluntarily retire is better for the morale of remaining workers than seeing workers being laid off. Difficulty: 2 Medium Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 409) One of the reasons many firms have chosen to use temporary employees rather than rehire full-time employees is that A) the government provides strong tax incentives to hire temporary workers. B) such workers usually are more loyal to the firm. C) most labor laws only apply to full-time workers, so there are fewer legal hassles associated with hiring temporary workers. D) it enables them to avoid the prohibitively high costs associated with terminating employees. Answer: D Explanation: Firms have found the cost of terminating full-time workers to be prohibitively high. The cost of termination is the result of both lost training costs and damages and legal fees that result from wrongful discharge lawsuits. Thus, many firms are reluctant to hire full-time employees, opting instead to either use temporary employees or to outsource certain functions. Difficulty: 2 Medium Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

410) A firm would implement a policy of holding exit interviews if it wanted to A) find out why so many of its good employees were quitting. B) implement a golden handshake policy. C) allow immediate supervisors one more chance to convince retiring workers to stay on the job. D) make sure workers who agreed to work from home understood their new responsibilities. Answer: A Explanation: Firms need to know why good employees are leaving a company in order to prevent further losses of valuable human resources. One way to obtain this information is to conduct an exit interview. However, this type of interview should be conducted by a third party rather than by the departing employee's immediate supervisor. Difficulty: 2 Medium Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 411) Frank has thirty years of service as a manager for his company. He remembers when managers had almost complete freedom to fire workers. Frank thinks this is only fair. "After all," Frank points out, "workers quit whenever they get a better offer. Shouldn't managers have as much freedom to fire workers as the workers have to quit?" Frank's comments suggest that he believes in the doctrine of A) bonded employment. B) reciprocated employment. C) employment by mutual consent. D) employment at will. Answer: D Explanation: The "employment at will" doctrine says that managers have as much right to fire workers as the workers have to leave voluntarily. Difficulty: 3 Hard Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

412) The Greeley Corporation wants to downsize, but is concerned about the impact it will have on its remaining employees. One policy that might allow Greeley to reduce its labor force without adversely affecting morale is to A) develop an affirmative action plan. B) offer early retirement benefits. C) implement a job sharing program. D) make more extensive use of job rotation. Answer: B Explanation: Early retirement incentives are often a more expensive method of downsizing than layoffs, but such incentives have the advantage of improving the morale of remaining employees. Difficulty: 3 Hard Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 413) While talking with a group of family and friends, Caitlin mentions that she was offered an impressive golden handshake by her employer. Which of the following statements is she most likely to make next? A) "That will teach those guys to discriminate against me." B) "It's great to work for a company that encourages employees to further their education." C) "I've already looked into using some of the money to go on a trip to Europe when I retire." D) "Of course, I would have really preferred to receive money, but just knowing that top executives will take the time to recognize my accomplishments, makes me feel better about my work." Answer: C Explanation: A golden handshake is a financial incentive (such as a one-time cash payment) used to entice older workers to retire early. Difficulty: 3 Hard Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

414) Sally worked in the student bookstore at her college. Although she liked the retail atmosphere, there was little opportunity for advancement because the three persons in management positions were doing well in their jobs and not planning to retire very soon. When the college opened a new branch, Sally seized the opportunity to be reassigned to the new location and manage the smaller operation. Her change was not a promotion, it was considered a(n) ________; however, it served to improve her morale because she was performing more tasks and had greater responsibility than at the previous bookstore. A) advancement B) vertical move C) forward shift D) lateral transfer Answer: D Explanation: A lateral transfer is a horizontal move within a firm. With companies assuming flatter organization structures, there are fewer opportunities for good employees to make vertical moves within the firm. Lateral moves provide employees opportunities to learn new skills and assume different responsibilities, which usually improve their morale. Difficulty: 3 Hard Topic: How Employees Move Through a Company Learning Objective: 11-10 Describe how employees can move through a company: promotion, reassignment, termination, and retirement. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

415) Dramatic changes in the U.S. labor force will make the work of human resource managers more interesting, and more difficult, in the future. Identify and describe three trends that will challenge future human resource managers. Answer: Students can choose from several trends mentioned in the text, including: Uncertainty in global politics and increased attention on hiring immigrants; Technology, like talent networks, crowdsourcing, and internal social networks; Multigenerational workforces, while older Millennials and Gen Xers hold management positions, Gen Zers are entering the workforce and Baby Boomers are delaying retirement; Shortages in people trained to work in the growth areas of the future, such as biotechnology and robotics; Large numbers of skilled and unskilled workers from declining industries, such as steel, automobiles, and garment making, who are unemployed or underemployed and who need retraining. Underemployed workers are those who have more skills or knowledge than their current jobs require. These people will require retraining to prepare them for new careers in the changing economy; A growing percentage of new workers who are undereducated and not prepared for jobs in the contemporary global business environment; An increasing number of both single-parent and two-income families, resulting in a demand for job sharing, maternity leave, and special career advancement programs for women; A shift in employee attitudes toward work; leisure time has become a much higher priority, as have concepts such as flextime and a shorter workweek; An increased demand for temporary and part-time workers; A challenge from overseas labor pools whose members are available for lower wages and subject to many fewer laws and regulations. This results in many jobs being outsourced overseas; An increased demand for benefits tailored to the individual; A growing concern over issues such as health care, elder care, child care, equal opportunities for people with disabilities, and special attention given to affirmative action programs; A decreased sense of employee loyalty, resulting in increased employee turnover and increased costs of replacing lost workers. Difficulty: 3 Hard Topic: The Importance of Human Resource Management Learning Objective: 11-01 Explain the importance of human resource management, and describe current issues in managing human resources. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

416) Identify and describe three common methods of training and developing employees. Answer: Students can choose from the following possibilities: A. Employee orientation initiates new employees to the organization. It introduces the employees to their coworkers and immediate supervisors, and explains the policies, practices, and objectives of the firm. B. On-the-job training is the most fundamental type of training. The employee starts actual work almost immediately and learns by doing and by watching others on the job. This type of training is best suited for jobs that are relatively simple or jobs that involve repetitive tasks. C. Apprentice programs involve a period in which the new employee works alongside an experienced worker to master skills and procedures of a particular craft. Many unions provide this type of training. The apprenticeship period may last for several years. A worker who has completed the apprenticeship period is known as a journeyman. D. Off-the-job training occurs away from the workplace and consists of internal or external programs to develop any of a variety of skills or to foster personal development. E. Online training is an approach in which workers attend classes via the Internet. This approach is known as distance training because the students are separated from the instructor or content source. F. Vestibule training is done in classrooms where employees are taught on equipment that is similar to that used on the job. This allows the students to learn proper methods and safety procedures before taking on job responsibilities in the actual workplace. G. Job simulation uses equipment to duplicate not only the equipment used on the job, but also the job conditions. This type of training seeks to give workers a realistic work experience even though they are not actually on the job. Simulations are used in the training of airline pilots, astronauts, and ship captains. Difficulty: 3 Hard Topic: Training and Evaluation Learning Objective: 11-05 Outline the six steps in selecting employees. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

417) What is the purpose of a performance appraisal? What are the major steps involved in the performance appraisal process? Answer: A performance appraisal compares an employee's actual performance against established standards. Performance appraisals are used to help managers make decisions about promotions, compensation, training, and even firing, but the primary purpose of a performance appraisal is to improve employee performance if possible. Performance appraisals consist of six steps: 1. Establish performance standards that are reasonable, understandable, and measurable. 2. Clearly communicate the standards to employees. 3. Evaluate employee performance by comparing the employee's results to the established standards. If the first two steps of the process are done correctly, this step should be relatively easy. 4. Discuss results of the evaluation with employees. This step allows the manager to provide guidance and advice that can improve the employee's performance. It also gives the employee a chance to offer suggestions about how a particular task could be performed more efficiently. 5. Take corrective action, if necessary. 6. Use the results of the appraisal to make decisions about promotions, bonuses and raises, additional training, and firing. Difficulty: 3 Hard Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

418) What are the key features of flextime plans, compressed workweeks, and job sharing plans? Discuss the advantages and disadvantages of these approaches to scheduling employees. Answer: Flextime plans give employees some freedom to adjust when they work as long as they work the required number of hours. In the most common approach workers can report to work between 7:00 a.m. and 9:00 a.m. and leave between 4:00 p.m. and 6:00 p.m. Usually all employees are expected to be at work during specified hours known as core time. Flextime has the advantage of allowing employees such as members of two-income and single-parent households to have more flexibility to meet the various demands on their time. Students should also point out that flextime also has some disadvantages. For example, it is not practical for assembly-line workers where everyone must be at work at the same time. It may also force managers to work very long hours. Another disadvantage is that it may make communication more difficult since some employees may not be available when other workers need to talk to them. Finally, a flextime system could be abused, leading to resentment among other employees. A compressed workweek allows employees to work the required number of hours in fewer days than a standard work week. For example, workers who normally work 8 hours per day for 5 days each week (for a total of 40 hours per week) could achieve the same total number of hours in just 4 days if they worked 10 hours per day. The main advantage of this approach is that it gives workers more days off, something that many employees really like. However, one disadvantage is that some workers get tired working the longer days, and this could hurt productivity. Job sharing is an arrangement whereby two part-time employees share one full-time job. The advantage of this approach is that it enables retirees, students, and workers who have young children who only want to work part-time to satisfy their personal needs and responsibilities. By helping these employees meet their other responsibilities job sharing offers some real advantages: a reduction in tardiness and absenteeism, a higher level of enthusiasm and productivity, and the ability to attract and retain workers who otherwise would not be able to work for the organization. The disadvantages of job sharing include the need to hire, train, and supervise a larger number of workers. In some cases, firms may face additional complications because they need to prorate certain types of benefits. Difficulty: 3 Hard Topic: Training and Evaluation Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

419) What are the main provisions of the Americans with Disabilities Act, and how have these provisions affected human resource management in American companies? Answer: The Americans with Disabilities Act requires employers to give disabled applicants the same consideration for employment as people without disabilities. It also requires employers to make reasonable accommodations for people with disabilities. This might include things like widening doors, making sure office areas are wheelchair accessible, and making other modifications to furniture, computers, and other types of equipment so that they can be used by the disabled employee. For many firms, making physical changes in the workplace may not be a big issue. These adjustments often are relatively inexpensive. The more challenging aspects of bringing disabled workers into the workplace concern the need to make other adjustments. For example, many managers believe fairness means treating everyone the same. When some workers have disabilities, this view may not work. The key to making the needed cultural adjustments is the acceptance of the concept of accommodation, meaning that in order to deal with diversity people sometimes need to be treated differently. Difficulty: 3 Hard Topic: Legislation Affecting Human Resource Management Learning Objective: 11-02 Illustrate the effects of legislation on human resource management. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

Mini-Case Dee Pozitt had been the assistant HR director at Fleesum Financial Services for a bit more than a year when the company's HR director was injured in a sky-diving accident. Because of his injuries the director would be unable to work for several months. Howie Fleesum, the company's CEO, decided to name Dee the acting director of human resources. Though she had been at the firm for a shorter period of time than most other managers, he felt that her position as the director's assistant had given her insights into the company's human resource issues that the other managers lacked. He also was very impressed by the glowing performance appraisal Dee recently received from the director, her peers, and even subordinates. Before accepting the position as acting director, Dee made sure that Mr. Fleesum recognized her authority to implement some major changes in policies she and the director had been planning before his accident. The changes were intended to make the company more responsive to the needs of employees, thus improving morale and reducing worker turnover. Although Dee was sorry the director was injured, she was pleased that Mr. Fleesum had confidence in her and was willing to give her the authority to implement important new programs. The only aspect of her opportunity that worried her was the resentment and hostility she sensed from a few of the older, more experienced managers. One of the most hostile coworkers was a fellow named Mort Gage. Dee decided she had better talk to Mort and find out why he was so upset. 420) Before the director's accident, Dee had worked with him to devise a plan that would allow each employee to select the fringe benefits he or she wants up to a certain dollar amount. The type of plan Dee and the director developed is known as a(n) A) cafeteria-style fringe benefits plan. B) benefits buffet. C) open options plan. D) flexible spending plan. Answer: A Explanation: A cafeteria-style benefits plan allows employees to choose the benefits they want up to a certain dollar amount. Difficulty: 3 Hard Topic: Recruitment and Hiring Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

421) Dee wants to give Fleesum's employees more freedom to schedule when they begin and end their work days. Her plan still requires employees to work eight hours per day, but allows them to start as early as 7:00 a.m. or as late as 9:00 a.m., and leave as early as 4:00 p.m. or as late as 6:00 p.m. Her plan also requires all workers to be on the job between 9:00 a.m. and noon, and between 2:00 p.m. and 4:00 p.m. The type of plan Dee wants to implement is known as a A) compressed work day. B) flextime plan. C) personal time frame plan. D) block scheduling plan. Answer: B Explanation: A flextime plan gives workers some freedom to adjust when they work, as long as they work the required number of hours. Most flextime plans also designate core times when all employees are expected to be at work. Difficulty: 3 Hard Topic: The Importance of Human Resource Management Learning Objective: 11-09 Demonstrate how managers use scheduling plans to adapt to workers' needs. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 422) Dee's performance appraisal allowed the director to evaluate her performance, but also allowed peers and subordinates to provide feedback as well. This type of appraisal is called a(n) A) vertical appraisal. B) horizontal appraisal. C) global review. D) 360-degree review. Answer: D Explanation: A relatively new type of performance appraisal is called a 360-degree review, because it calls for feedback from all directions in the organization. Thus, it allows peers and subordinates to offer comments and suggestions about an employee's performance. Difficulty: 3 Hard Topic: Performance Appraisal Learning Objective: 11-07 Trace the six steps in appraising employee performance. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

423) Fleesum recently began using cross-functional teams. Dee wants to make sure the teams collaborate effectively, but also wants to avoid stifling individual initiative. One method she could use to achieve this goal would be to A) use a more autocratic management style. B) use a skill-based pay plan for the teams. C) base the compensation of team members on a commission rather than a salary. D) implement a job sharing plan for team members. Answer: B Explanation: Skill-based pay is a common form of compensation for teams. This approach relates the pay of team members to the growth of both the individual and the team. The goal of this type of compensation system is to encourage collaboration within teams while still recognizing the contributions of individuals. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Working in Teams Learning Objective: 11-08 Summarize the objectives of employee compensation programs, and evaluate pay systems and fringe benefits. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

Understanding Business, 12e (Nickels) Chapter 12 Dealing with Employee–Management Issues 1) Throughout most of American history, the relationship between managers and employees has been trouble-free. Answer: FALSE Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) Historically, managers were less concerned about productivity and more concerned with friendly relations among employees. Answer: FALSE Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) One of the things that labor is interested in is fairness. Answer: TRUE Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 4) A union is an employee organization that has the main goal of representing its members in employee-management negotiation concerning job-related issues. Answer: TRUE Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

5) Even in their infancy, the main goal of most labor unions was to provide members with increased management power. Answer: FALSE Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) Labor unions played a major role in establishing minimum wage laws, child-labor laws, and improvements in job safety. Answer: TRUE Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 7) Today labor unions have seen a revitalization of support and union membership has increased significantly. Answer: FALSE Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) Most historians view the increase in union membership in the United States as an outgrowth of the transition from an industrial economy to a service economy during the middle part of the 20th century. Answer: FALSE Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

9) The presence of formal labor organizations in the United States dates back to the late 1700s. Answer: TRUE Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10) Some contend that the main reason membership in labor unions has declined in recent years has been the passage of anti-labor legislation in the late 1980s that guaranteed all employees of a firm the same wages and benefits whether they joined a union or not. Answer: FALSE Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) The Knights of Labor was the first truly national labor organization in the United States. Answer: TRUE Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) A craft union is an organization of skilled specialists in a particular craft or trade. Answer: TRUE Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

13) A union that consists of members who are all skilled specialists in a particular trade is called an industrial guild. Answer: FALSE Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) The Knights of Labor, the first national labor organization, offered membership to all working people, including employers. Answer: TRUE Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) Samuel Gompers was the most important leader of the American Federation of Labor during its early years. Answer: TRUE Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 16) The American Federation of Labor (AFL) was initially intended to be a single craft union. Answer: FALSE Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

17) During its early years, the AFL tried to expand as rapidly as possible by recruiting both skilled and unskilled workers. Answer: FALSE Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) In its early years, the AFL limited its membership to skilled workers. Answer: TRUE Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 19) Membership in industrial unions was strictly limited to skilled craftspeople. Answer: FALSE Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) John L. Lewis broke with the American Federation of Labor (AFL) in 1935 over membership issues and formed a rival group known as the Congress of Industrial Organizations (CIO). Answer: TRUE Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

21) The initial objective of the American Federation of Labor (AFL) was to provide union membership to workers in all industries. Answer: FALSE Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 22) Today, 55 national and international labor unions are affiliated with the AFL-CIO. Answer: TRUE Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 23) For 20 years, the CIO was a major rival of the AFL in the contest for leadership of the labor movement. Answer: TRUE Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 24) In 1955, after the passage of the Taft-Hartley Act, the AFL and CIO merged to create the AFL-CIO. Answer: TRUE Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

25) Union membership is likely to rise in the coming decade, because the same economic and political conditions that gave rise to unions in the late 19th and early 20th centuries are now reappearing. Answer: FALSE Explanation: There is a great deal of debate concerning the future strength and viability of unions. However, it would be hard to argue that the conditions that plagued workers in the late 19th and early 20th centuries are reappearing. U.S. workers now have legal protection from abuse, exploitation, and discrimination, and contemporary managers tend to take a positive and progressive approach toward dealing with employees. Difficulty: 2 Medium Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26) A major difference between early labor organizations in the United States and today's labor unions is that the early labor groups often were temporary organizations that disbanded after achieving a short-range goal, while today's unions are permanent organizations. Answer: TRUE Explanation: Early labor organizations were often established to achieve a specific short-run goal. After the goal was achieved, the organization would disband. In contrast, today's unions are permanent organizations. Difficulty: 2 Medium Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

27) The Knights of Labor and the American Federation of Labor were actually very similar in their aims, tactics, and membership. The only major difference was in the effectiveness of their leaders. Answer: FALSE Explanation: The Knights of Labor was very broad-based, allowing all working people, including employers, to become members. It promoted social causes as well as labor goals. The AFL was a federation of craft unions. As such, membership was limited to skilled workers. Moreover, the AFL had a narrower focus, concentrating almost exclusively on fundamental labor issues. Difficulty: 2 Medium Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 28) The Industrial Revolution slowed the growth of unions by creating a rapidly rising standard of living for most workers. Answer: FALSE Explanation: The Industrial Revolution created harsh working conditions for most workers. Hours were long, pay was low, and job security was rare. Child labor was common. These conditions set the stage for the emergence of national labor organizations. Difficulty: 2 Medium Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) According to the Spotlight on Small Business box, today's labor leaders claim that the tragedy at the Triangle Shirtwaist Company is proof of why labor unions are crucial to maintain workplace balance in the U.S. Answer: TRUE Explanation: The Industrial Revolution created harsh working conditions for most workers. Hours were long, pay was low, and job security was rare. Child labor was common. These conditions set the stage for the emergence of national labor organizations. Difficulty: 2 Medium Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

30) George, an unskilled worker in the 1930s, toiled 10 hours a day on an assembly line. His hours were long, his wages were low, and his working conditions were unsafe and unpleasant. George would probably have been more sympathetic to the views of John L. Lewis than to those of Samuel Gompers. Answer: TRUE Explanation: The primary reason that the AFL did not recognize the CIO in its infancy was a disagreement over whether to include industrial as well as craft unions in the AFL. The AFL was founded in 1886, and under the leadership of Samuel Gompers, it initially limited its membership to skilled workers who belonged to craft unions. In 1935, John L. Lewis, president of the United Mine Workers, proposed that the AFL also organize unskilled and semiskilled workers in industrial unions. When his proposal was rejected, Lewis and his followers broke with the AFL and formed the CIO. Difficulty: 3 Hard Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 31) The Bompart Corporation operates a manufacturing plant in Maplewood. Semiskilled and unskilled labor work along an assembly line. These employees are looking into obtaining union representation. The type of union they would belong to would be classified as an industrial union. Answer: TRUE Explanation: An industrial union is a labor organization of unskilled and semiskilled workers in mass-production industries such as automobiles and mining. Difficulty: 3 Hard Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 32) The Norris-LaGuardia Act made it more difficult for unions to legally recruit new members. Answer: FALSE Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

33) A yellow-dog contract required workers to agree not to join a union as a condition of their employment. Answer: TRUE Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 34) The Norris-LaGuardia Act prohibits firms from requiring workers to agree not to join a union as a condition of their employment. Answer: TRUE Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) Samuel Gompers believed that collective bargaining was likely to be an ineffective way for unions to achieve their objectives. Answer: FALSE Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) The National Labor Relations Act (Wagner Act) gave labor the legal justification to pursue collective bargaining and other key labor issues. Answer: TRUE Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

37) The process by which a union is recognized by the NLRB as the authorized bargaining agent for a group of workers is called collective bargaining. Answer: FALSE Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) Once a union is certified to represent a group of workers, decertification is not a consideration or future possibility. Answer: FALSE Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39) Collective bargaining is the process whereby union and management representatives negotiate a labor-management contract for workers. Answer: TRUE Difficulty: 1 Easy Topic: The Elements of Collective Bargaining Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 40) The National Labor Relations Act (Wagner Act) established the first minimum wage for workers. Answer: FALSE Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

41) One goal of the Labor-Management Reporting and Disclosure Act (Landrum-Griffin Act) was to clean up union corruption. Answer: TRUE Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 42) The Norris-LaGuardia Act prohibited courts from issuing injunctions against nonviolent union activities. Answer: TRUE Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 43) The National Labor Relations Act (Wagner Act) gave employees the right to form and join labor organizations and the right to engage in activities such as strikes and boycotts. Answer: TRUE Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44) The Labor-Management Relations Act (Taft-Hartley Act) strengthened unions by giving them the right to engage in featherbedding and secondary boycotts. Answer: FALSE Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

45) The Labor-Management Relations Act (Taft-Hartley Act) allowed states to pass laws that prohibited compulsory union membership. Answer: TRUE Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 46) The Labor-Management Relations Act (Taft-Hartley Act) gave more power to management. Answer: TRUE Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 47) Under the National Labor Relations Act (Wagner Act), the National Labor Relations Board can establish a labor union in an organization if it finds evidence of substantial labor abuse within that organization. Answer: FALSE Explanation: The National Labor Relations Board does not have the right to establish a union. It does, however, oversee certification elections, and will recognize a union as the authorized bargaining agent for a group of workers if a majority of those workers vote in favor of union representation. Difficulty: 2 Medium Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

48) The National Labor Relations Board (NLRB) has created procedures that union advocates must follow in order to organize a union at a place of business. The multistep procedure culminates with a secret vote by the employees of the organization. Answer: TRUE Explanation: The U.S. government, through the Wagner Act, created the National Labor Relations Board, a five-member committee appointed by the President of the United States. It oversees the organization of unions and certifies union groups. Difficulty: 2 Medium Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 49) The NLRB oversees the decertification of unions. Company owners can petition and seek the signatures of 30% of the employees in order to decertify the union; in other words, officially, the union could no longer represent the employees in any bargaining negotiations. Answer: FALSE Explanation: The NLRB can also decertify unions; however, an employee or an employee's representative must initiate a petition and seek the signatures of 30% of the current employees, before the decertification goes to a secret ballot vote of all employees. The employer does not seek the signatures. Difficulty: 2 Medium Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 50) Candace is negotiating with management as a member of a union team. The union wants to obtain a labor contract for the workers represented by the union. Candace is involved in contract arbitration. Answer: FALSE Explanation: The process by which representatives of labor and management seek to negotiate a mutually acceptable labor contract is known as collective bargaining. Difficulty: 3 Hard Topic: The Elements of Collective Bargaining Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

51) During an interview with a Summit Systems company representative, Susie was told that Summit faces intense competition and management believes that the only way the company can survive is to have a nonunion workforce. Therefore, all workers Summit hires must sign an employment contract stating that they agree not to join a union while they work for Summit. This requirement by Summit is illegal in the United States. Answer: TRUE Explanation: A yellow-dog contract is a contract that requires workers to agree not to join a union as a condition of employment. The Norris-LaGuardia Act of 1932 declared that this type of arrangement was illegal. Difficulty: 3 Hard Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 52) The workers at the Fairfield Company are unhappy with the way they have been represented by their union. The National Labor Relations Act (Wagner Act) allows these workers to take away the union's right to represent them through a process known as decertification. Answer: TRUE Explanation: The Wagner Act established a process to take away the right of a union to represent a group of workers. This process is known as decertification. Difficulty: 3 Hard Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 53) Daniel remembers his grandfather telling him about going to work at 16 years of age in the coal mines of West Virginia. In order to get the job, he had to agree to a yellow-dog contract. Essentially this meant he would only get the job if he agreed not to join a union. Answer: TRUE Explanation: A yellow-dog contract made employees agree, as a condition of employment, they would not attempt to unionize, or join a union. Difficulty: 3 Hard Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

54) The main objectives of organized labor, better wages, and shorter hours, have remained remarkably stable over time. Answer: FALSE Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 55) Wage rates, hours of work, employee benefits, and job rights and seniority are issues covered in a typical negotiated labor-management agreement. Answer: TRUE Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 56) A union security clause in a labor-management agreement stipulates that employees who benefit from a union must either officially join or at least pay dues to the union. Answer: TRUE Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 57) The negotiated labor-management agreement clarifies the terms and conditions under which labor and management agree to function over a specified period of time. Answer: TRUE Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

58) Under a closed shop agreement, workers must agree not to join a union in order to keep their jobs. Answer: FALSE Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 59) Until passage of the Taft-Hartley Act, under a closed shop agreement, a company could only hire workers who already belonged to a union. Answer: TRUE Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 60) Under a union shop agreement, workers must belong to a union before they can be hired. Answer: FALSE Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 61) The Taft-Hartley Act made the union shop agreement illegal in all states. Answer: FALSE Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

62) A union shop agreement is illegal in states that have passed right-to-work laws. Answer: TRUE Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 63) In an agency shop agreement, workers who do not belong to the union must pay a union fee or pay regular union dues. Answer: TRUE Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 64) Under an agency shop agreement, only union members are represented at the bargaining table. Answer: FALSE Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 65) Under an open shop agreement, workers have the option to join or not join a union, if one is present in the workplace. Answer: TRUE Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

66) A grievance is a charge by managers that the union is not abiding by the terms of the negotiated labor-management agreement. Answer: FALSE Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 67) The sources of many grievances include overtime rules, promotions, layoffs, and job assignments. Answer: TRUE Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 68) The vast majority of grievances filed by union members are negotiated and resolved by shop stewards and supervisory managers. Answer: TRUE Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 69) A bargaining zone is the time period during which a third party is used to reach agreement on union disputes. Answer: FALSE Difficulty: 1 Easy Topic: The Elements of Collective Bargaining Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

70) A mediator has the power to impose a binding settlement on labor and management. Answer: FALSE Difficulty: 1 Easy Topic: The Elements of Collective Bargaining Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 71) Arbitration is an agreement to bring in an impartial third party to render a binding decision in a labor dispute. Answer: TRUE Difficulty: 1 Easy Topic: The Elements of Collective Bargaining Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 72) Many of the negotiated labor-management agreements in the United States call for the use of an arbitrator to end labor disputes. Answer: TRUE Difficulty: 1 Easy Topic: The Elements of Collective Bargaining Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

73) Arbitration and mediation are alike in that both involve an impartial third party to help in the negotiation process. The differences in these two approaches is that an arbitrator's decision is binding and both parties agree to this on the front end; a mediator encourages the two conflicting parties to continue to negotiate and may make suggestions in pursuit of a resolution. Answer: TRUE Explanation: Mediation is a process whereby an impartial third party steps in to help bring the two parties to resolution. The mediator makes suggestions but does not bind the parties to an agreement. An arbitrator is an agreed-upon third party who listens to both parties and prepares a binding decision in the labor dispute. Difficulty: 2 Medium Topic: The Elements of Collective Bargaining Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 74) In the past, a variety of professionals have served as mediators. If a labor dispute were to break out between the management at an auto manufacturer and the local union that represents workers at the auto manufacturing plant, it would be highly unusual for a university professor who has studied labor relations to be asked to mediate. The disputing parties would save his time for something more serious like arbitration. Answer: FALSE Explanation: Typical professionals who serve as mediators are college professors, attorneys, and elected political officials. Difficulty: 2 Medium Topic: The Elements of Collective Bargaining Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 75) Arkansas has passed a right-to-work law, which means that union shops are illegal in the state. Answer: TRUE Explanation: The Taft-Hartley Act recognized the legality of a union shop, but allowed individual states to declare them illegal through the passage of right-to-work laws. Difficulty: 2 Medium Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

76) Haven was recently hired to work at a production plant at Marshall Manufacturing. Upon her hiring, she was told she must join the union within 90 days in order to keep her job. Haven is employed in an agency shop. Answer: FALSE Explanation: An arrangement that requires workers to join a union within a specified period of time in order to keep their jobs is called a union shop agreement. Difficulty: 3 Hard Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 77) Kylie works for a company in which a union is recognized as the bargaining agent for the workers who perform her type of job. However, under the arrangements at her company, Kylie is not required to join the union, nor is she required to pay any fees or dues to the union. Kylie works under an agency shop agreement. Answer: FALSE Explanation: Under an agency shop agreement, workers cannot be required to join a union, but those workers who do not join must pay a union fee. The type of arrangement described in this question appears to be an open shop. Difficulty: 3 Hard Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 78) Robert works for a company under an open shop agreement. Under this type of arrangement, Robert must join the union at his company within 90 days or he will lose his job. Answer: FALSE Explanation: Under an open shop arrangement, workers aren't required to join a union to keep their jobs. Difficulty: 3 Hard Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

79) At the Atalanta Company, labor and management have reached a stalemate in their efforts to negotiate an acceptable labor-management agreement. The two sides have agreed to bring in an arbitrator. If the arbitrator issues a ruling that the union does not like, it can still reject the decision. Answer: FALSE Explanation: An arbitrator has the authority to render a binding decision. Difficulty: 3 Hard Topic: The Elements of Collective Bargaining Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 80) Over the years, Jennifer has acted in a number of supporting roles on TV sitcoms. Her last contract obligated her to perform in 22 episodes for a stipend of $500 per episode. Upon completion of the 11th episode, Jennifer broke her leg and was not able to complete the episodes in a timely manner. The studio claimed that Jennifer broke her contract and they are not obligated to pay her. She is confident that an impartial third party will view her circumstances as exceptional and will rule that she be reimbursed for the 11 performances. She has agreed to mediation. Answer: FALSE Explanation: Jennifer has agreed to arbitration, whereby an impartial third-party official is brought in to arbitrate a binding decision. Mediation also involves a third-party participant; however, this person keeps negotiations alive, by encouraging both parties to continue to negotiate and will also make suggestions to bring each side closer to resolution. Difficulty: 3 Hard Topic: The Elements of Collective Bargaining Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

81) Jian is a well-known professor of labor relations at a major university. She recently was asked by representatives of labor and management at a nearby corporation to help them resolve a disagreement that threatened to cause a breakdown in negotiations. If Jian agrees to help, her role will be to encourage both parties to continue negotiating and to offer constructive advice and suggestions, but she will not have the authority to render a binding decision. Jian's role is that of a mediator. Answer: TRUE Explanation: A mediator is a third party who encourages both sides to continue negotiating to overcome a disagreement. Although mediators often offer suggestions to help resolve the disagreement, they do not have the authority to render a binding decision to the dispute. Difficulty: 3 Hard Topic: The Elements of Collective Bargaining Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 82) Management at Eagle Enterprises has assigned Ernesto to work at two different facilities, which will require him to commute an extra 25 miles on the days he must work at both plants. Ernesto believes that the negotiated labor-management agreement requires the company to reimburse him for the extra mileage he has to drive. Management disagrees. Ernesto has decided to file a charge that management is not abiding by the terms of the negotiated agreement. Ernesto's complaint is called a grievance. Answer: TRUE Explanation: A grievance is a charge by an employee, or group of employees, that management is not abiding by the terms of the negotiated labor-management agreement. Difficulty: 3 Hard Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 83) A lockout is a tactic utilized by unions when collective bargaining breaks down. Answer: FALSE Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

84) The strike historically has been the most powerful weapon unions use to achieve their objectives in labor disputes. Answer: TRUE Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 85) A boycott occurs when workers collectively refuse to go to work. Answer: FALSE Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 86) Strikes have been an effective way of settling labor disputes without violence and bitterness. Answer: FALSE Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 87) Postal workers and other employees of the federal government who provide important services are allowed to form unions, but are denied the right to strike. Answer: TRUE Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

88) The "blue flu" refers to a situation in which union members (like police and firefighters) who are not allowed to strike refuse to work by calling in sick. Answer: TRUE Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 89) A cooling-off period is when workers in a critical industry return to their jobs while the union and management continue negotiations. Answer: TRUE Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 90) In a primary boycott, a union encourages its members and the general public not to buy the goods and services produced by a firm involved in a labor dispute. Answer: TRUE Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 91) In 2013, the U.S. Supreme Court ruled that primary boycotts are illegal. Answer: FALSE Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

92) Tactics used by management when collective bargaining breaks down include injunctions and lockouts. Answer: TRUE Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 93) The most potent weapon currently available to management when collective bargaining breaks down is the use of yellow-dog contracts. Answer: FALSE Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 94) The Supreme Court ruled in 1938 that employers had the right to hire strikebreakers. Answer: TRUE Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 95) A common tactic of management in labor disputes is the use of secondary boycotts. Answer: FALSE Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

96) The use of strikebreakers did not become a common management tactic used in labor disputes until the 1980s. Answer: TRUE Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 97) Workers who are hired to do the jobs of striking workers until the strike is over are often called "scabs" by the union. Answer: TRUE Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 98) A court order directing someone to do something or to refrain from doing something is called a judicial citation. Answer: FALSE Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

99) Hiring strikebreakers to replace striking workers was historically a common management tactic during labor disputes, but it is seldom used today. Answer: FALSE Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 100) The Taft-Hartley Act authorizes the U.S. president to ask for a cooling-off period to temporarily prevent a strike in a critical industry. Answer: TRUE Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 101) Courts will issue an injunction against union tactics only if management can show a just cause to restrict the union tactic. Answer: TRUE Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

102) The lockout is the most common tactic used by management today to deal with labor management disputes. Answer: FALSE Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 103) The largest labor organization in the U.S. is the National Education Association (NEA). Answer: TRUE Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 104) Membership in labor unions has grown steadily over the past 50 years. Answer: FALSE Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 105) The unions of the 21st century are likely to be quite different from those in the past. Answer: TRUE Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

106) In the future, unions are likely to leave training and recruitment of workers to management, and focus instead on encouraging those workers to join the union. Answer: FALSE Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 107) In the next few years, unions are likely to find that they must adopt a tough, confrontational approach in order to get what they want from management. Answer: FALSE Explanation: Due to significant declines in membership, as well as the decline in manufacturing, the role of unions has changed. The drop in membership has made it difficult for unions to take a hard stand against management, on just about any issue. The once powerful manufacturing-based unions do not exist. In the future, unions will need to cooperate with management in training workers, redesigning jobs, and helping to assimilate workers into the service-based economy. Difficulty: 2 Medium Topic: Objectives of Labor Unions Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 108) The Taft-Hartley Act gives the president the power to require striking workers in any industry to return to their jobs for a cooling-off period while representatives of management and the union continue to negotiate. Answer: FALSE Explanation: The Taft-Hartley Act allows the president to ask for a cooling-off period to prevent a strike only in a critical industry that is vital to the nation's health or safety. Difficulty: 2 Medium Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

109) Union representatives and the management at Bathtub Brewing Company's have reached an impasse. Going forward, the union is planning an organized strike and other tactics to put pressure on management where it will be most effective. Union supporters are being encouraged to avoid purchasing Bathtub Brewing's products. Now union leaders have contacted a variety of stores that stock Bathtub Brewing's beer telling them union members and other supporters will stop shopping at any store that continues to carry Bathtub Brewing's beer until the dispute is resolved in the union's favor. This tactic against stores that carry Bathtub Brewing Company is called a primary boycott. Answer: FALSE Explanation: A primary boycott is a boycott against a firm involved in a labor dispute. Thus, the action taken directly against Bathtub Brewing Company would be a primary boycott. However, the action against retail stores is a secondary boycott. A secondary boycott occurs when a union boycotts firms not directly involved in the labor dispute in an effort to persuade them to stop doing business with the firm that is the subject of the primary boycott. Secondary boycotts were declared illegal by the Taft-Hartley Act. Difficulty: 3 Hard Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 110) Striking union workers are picketing near the entrance of the Bathtub Brewing Company's plant. The workers are acting peacefully and have not threatened anyone entering or leaving the company or damaged any property. Bathtub Brewing's management is seeking an injunction to prevent the workers from picketing. The courts are unlikely to issue an injunction under the current circumstances. Answer: TRUE Explanation: Courts will issue injunctions against union activities if the company seeking the injunction can show a just cause such as the possibility of violence or destruction of property. Difficulty: 3 Hard Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

111) Workers at the Manchester plant of Vandelay Industries have gone out on strike. Management believes it could continue operations as normal by hiring replacement workers. If the company hires nonunion workers to continue its operations, it will be violating a recent Supreme Court ruling that declared hiring replacement workers as a violation of the Wagner Act. Answer: FALSE Explanation: The Supreme Court ruled in 1938 that employers had the right to replace striking workers. The law has not changed. Difficulty: 3 Hard Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 112) Last year, employees at your local community college were on strike. Very few students were crossing the picket line. In fact, the postal employees refused to deliver mail there claiming that they were honoring the strike for their fellow service union members. The postal employees were participating in a voluntary secondary boycott. Answer: TRUE Explanation: A secondary boycott occurs when union members encourage others to stop doing business with the company that is the focus of the primary boycott. Difficulty: 3 Hard Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 113) After adjusting for inflation, the average executive compensation is actually a little lower now than it was in 1960. Answer: FALSE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

114) The disparity in salaries is clearly reflected in the fact that the average executive compensation for a major company was $10.4 million, compared to about $38,000 that the average worker was compensated. Answer: TRUE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 115) CEOs only earn high salaries and bonuses when their companies earn substantial profits. Answer: FALSE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 116) Economist Thomas Piketty is very critical of the exorbitant compensations that some CEOs are getting. Answer: TRUE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

117) Despite their high pay, most CEOs work far fewer hours per week than the average employee in their companies. Answer: FALSE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 118) On the average, today's CEO of a Fortune 500 company makes over 344 times what the lowest-paid employee earns. Answer: TRUE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 119) The Dodd-Frank Wall Street Reform and Consumer Protection Act was intended to give shareholders more say in executive compensation. Answer: TRUE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

120) Comparable worth is concerned with making sure that women get paid as much as men when they do the same jobs. Answer: FALSE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 121) The Equal Pay Act of 1963 required companies to provide equal pay to men and women who perform the same job. Answer: TRUE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 122) The concept of comparable worth holds that people who do jobs that require similar levels of education, training, and skills should receive equal pay. Answer: TRUE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

123) Today, a woman usually receives a salary that is equal to over 80% of her male counterpart. Answer: FALSE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 124) The law protects both women and men from sexual harassment. Answer: TRUE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 125) In 1997, the Supreme Court ruled that same-sex harassment is prohibited by sexual harassment laws. Answer: TRUE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

126) Although workers and managers often know that their firm has a policy against sexual harassment, they seldom have a clear understanding of what the policy actually says. Answer: TRUE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 127) Quid pro quo sexual harassment occurs when a person's conduct creates an offensive, hostile, or intimidating work environment that adversely affects the job performance of some other employee. Answer: FALSE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 128) Because of the need to cut costs, very few U.S. companies provide some sort of child care benefits for their employees. Answer: FALSE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

129) Small firms often offer innovative child care programs as a way of competing for qualified employees. Answer: TRUE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 130) On-site childcare remains the only acceptable way for firms to meet the child care concerns of their employees. Answer: FALSE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 131) The number of households that face the burden of caring for one or more elderly parents has increased significantly and is expected to continue growing over the next 20 years. Answer: TRUE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

132) In recent years federal programs such as Medicare and Medicaid have greatly reduced the financial burden on families faced with caring for elderly adults. Answer: FALSE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 133) Costs associated with elder care are likely to have a much smaller impact on businesses than childcare costs. Answer: FALSE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 134) Elder care costs are likely to remain a major issue for businesses for many years. Answer: TRUE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

135) Alcohol and drug abuse are serious workplace issues but they involve far fewer workers than violence does. Answer: FALSE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 136) Alcohol is the most widely used drug in the workplace. Answer: TRUE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 137) Today, over 60% of all companies require some type of drug testing. Answer: TRUE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

138) The high cost of illegal drug use in the workplace has resulted in a rise in the number of firms that test employees and job applicants for drugs. Answer: TRUE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 139) According to the Occupational Safety and Health Administration (OSHA), 8% of jobrelated fatalities are homicides. Answer: TRUE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 140) Close to 20 percent of women's death in the workplace is from homicides.. Answer: TRUE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

141) Though workplace violence is decreasing, workplace bullying is increasing. Answer: TRUE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 142) Since violence in the workplace rarely results in severe injury, it is likely not to be much of a problem in the future. Answer: FALSE Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 143) Although the general public often sees the compensation of CEOs of major U.S. corporations as being much too high, the pay and benefits these top executives receive is actually quite similar to what is earned by top executives in other countries with market economies. Answer: FALSE Explanation: Top executives in American corporations typically earn much more than top executives from other countries. Difficulty: 2 Medium Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

144) Although child care concerns have become a pressing issue for many employees, most firms have been unable to find acceptable solutions to these concerns. Answer: FALSE Explanation: The number of companies that offer child care benefits is growing. Even small companies have developed innovative child care plans. The text describes several methods companies have used to help employees with child care, including discount arrangements, vouchers, and referral services as well as on-site child care centers. Difficulty: 2 Medium Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 145) According to the Adapting to Change box, recent research on executive compensation has found that CEOs' pay should be performance-based and not a fixed salary system. Answer: FALSE Explanation: Resent research has shown that CEOs' work is more suited to a fixed-salary system rather than performance-based. Difficulty: 2 Medium Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

146) Renee discovered that a male coworker at the hospital where they both work is paid $1.50 per hour more than she is even though they have the same job title, have similar qualifications, and have been employed the same length of time. Unfortunately for Renee, it is legal for the hospital to pay different salaries to different workers who perform the same job. Answer: FALSE Explanation: The Equal Pay Act of 1963 states that men and women who perform the same job must receive equal pay, as long as any additional compensation is not tied to merit increases or seniority on the job. Difficulty: 3 Hard Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 147) Often flirting with each other at work, Mike and Lindsay both view their actions as harmless fun, as do the other employees in their office. Their flirtation does not offend the other workers or make them feel threatened or uncomfortable. Nevertheless, under current criteria, both Mike and Lindsay could be found guilty of sexual harassment. Answer: FALSE Explanation: In evaluating a person's behavior to determine if it involves harassment, specific criteria are applied. A person's behavior is considered sexually harassing if: (1) another employee is required (either explicitly or implicitly) to submit to such conduct as a condition of employment, or if accepting or rejecting such behavior is used as a basis for employment decisions affecting the worker's status; or (2) the conduct unreasonably interferes with a worker's job performance or creates an intimidating, hostile, or offensive work environment. Since neither Mike nor Lindsay feels threatened or pressured to engage in this behavior, and since the work environment is not intimidating, offensive, or hostile to Mike, Lindsay, or their coworkers, the criteria for sexual harassment are not present. Difficulty: 3 Hard Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

148) Sharon's company, where she is a human resources manager, recently hired 100 new workers, 10 of whom were involved in workplace accidents soon after they were hired. It was determined that alcohol usage was the cause of these accidents. Top management has asked Sharon to do a better job in screening potential workers for alcohol abuse to avoid this in the future. Sharon should point out that in fact the 10 percent of the recent hires with alcohol issues is actually much lower than the overall percentage of employees with alcohol issues that are involved in industrial injuries and fatalities in the U.S. Answer: TRUE Explanation: Approximately 40 percent of industrial injuries and fatalities can be linked to alcohol consumption. Difficulty: 3 Hard Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 149) Recently a disgruntled employee walked into a large grocery chain's Midwest distribution center and opened fire on his fellow workers. He killed or injured several people before being killed by the local police. The grocery chain is very concerned about the threat of workplace violence in the future. One way to deal with this threat is for management to hold focus groups to invite employee input. Another way is to make certain that the company hires managers with good interpersonal skills. Answer: TRUE Explanation: As the text points out, many executives and managers consider workplace violence a serious issue and have taken action to prevent problems before they occur. To deal with this growing threat, firms have held focus groups to invite employee input, hired managers with strong interpersonal skills, and employed skilled consultants to deal with any growing potential of workplace violence. Difficulty: 3 Hard Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

150) A(n) ________ is an employee organization that represents workers in employeemanagement bargaining over job-related issues. A) trades guild B) union C) ESOP D) cross-functional team Answer: B Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 151) The presence of formal labor organizations in the United States dates back to the A) late 1700s. B) Civil War. C) late 1800s. D) depression years of the 1930s. Answer: A Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 152) Unions were originally formed A) to make certain that there were an equal number of nonmanagement and management-level employees within the company. B) to uphold the state and federal laws under which businesses operate. C) to seek protection against unfair treatment. D) to seek worker corporate voting rights, the same as stockholders. Answer: C Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

153) The union movement in the United States was an outgrowth of the economic transition caused by the A) Revolutionary War. B) Great Depression. C) Industrial Revolution. D) passage of antitrust legislation by the federal government. Answer: C Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 154) Labor unions were largely responsible for A) establishing the Republican party. B) the basic structure of the federal income tax system. C) the passage of NAFTA. D) minimum wage laws and laws against child labor. Answer: D Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 155) The purpose of the earliest recognized labor unions in the U.S. was A) to achieve some short-range goals and then disband. B) to achieve long-range foundations for their crafts. C) to teach their crafts to new workers. D) to enhance the reputations of their members. Answer: A Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

156) The first national labor organization in the United States was the A) Knights of Labor. B) Congress of Industrial Organizations. C) American Federation of Labor. D) United Farm Workers Union. Answer: A Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 157) Membership in the Knights of Labor was A) limited to skilled craftsmen. B) limited to unskilled and semiskilled workers who belonged to industrial unions. C) open to all working people, including employers. D) open to anyone willing to promote capitalism as the economic system most likely to lead to economic prosperity for the working men and women of the United States. Answer: C Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 158) In a(n) ________, all of the members are skilled specialists in a particular trade. A) ESOP B) craft union C) industrial union D) trade federation Answer: B Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

159) ________ provided dynamic leadership for the American Federation of Labor during its early years. A) Karl Marx B) Kenneth Adams C) George Meany D) Samuel Gompers Answer: D Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 160) The AFL was concerned primarily with A) fundamental labor issues. B) gaining political power. C) forming a workers' army to lead a socialist revolution. D) promoting a better public education system. Answer: A Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 161) In its early years, the AFL's strategy was to A) grow as rapidly as possible by allowing people from all professions and walks of life to join. B) limit its membership to skilled craftspeople. C) limit its membership to unskilled and semiskilled workers. D) form one big craft union which everyone could join; but it later split into several smaller organizations. Answer: B Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

162) The Congress of Industrial Organizations (CIO) organized unskilled and semiskilled workers into A) craft unions. B) a political party. C) industrial unions. D) union shops. Answer: C Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 163) The ________ was set up as a federation of many separate craft unions. A) Knights of Labor (KoL) B) Congress of Industrial Organizations (CIO) C) League of Unions (LoU) D) American Federation of Labor (AFL) Answer: D Difficulty: 1 Easy Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 164) In the early years, there were power struggles among the larger national unions. Leaders recognized that there was power in numbers. After the passage of the Taft-Hartley Act in 1947, A) the CIO defeated the AFL. B) the "Change to Win" campaign emerged. C) the AFL and CIO merged. D) the unions collapsed for several years. Answer: C Explanation: The Taft-Hartley Act favored management. The two rival unions, AFL, the craft union, and CIO, the unskilled labor union, merged in order to strengthen their position. There was power in numbers; for one thing, members would support each other in strike situations. Difficulty: 2 Medium Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 51 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

165) The Industrial Revolution was characterized by a(n) A) increased emphasis on production, resulting in longer hours and less job security for most workers. B) migration of manufacturing jobs from the Midwest and Northeast to the South as firms began locating in areas where labor costs were lower. C) rapid improvement in the wages and working conditions of most workers, resulting in a decline in the need for labor unions. D) movement away from scientific management, and a greater acceptance of the ideas of Herzberg and Maslow. Answer: A Explanation: The Industrial Revolution brought enormous productivity gains through mass production and job specialization. For the workers, however, this brought a realization that production was vital. If you failed to produce, you lost your job. Firms started expanding the length of the average workweek and employing child labor. Difficulty: 2 Medium Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 166) Critics of labor unions argue that unions are no longer needed to protect workers from abusive and unfair treatment because A) the widespread use of ESOPs has given most workers control over their workplace. B) supply and demand conditions in labor markets now favor labor rather than management. C) laws and modern management attitudes minimize the possibility of unsafe working conditions and unfair treatment of workers found in earlier eras. D) most of the firms that treated workers poorly have moved their operations to foreign countries. Answer: C Explanation: The harsh and unsafe working conditions, low pay, and unfair treatment of workers that characterized the Industrial Revolution contributed greatly to the rise of the labor movement. Today, however, laws and regulations exist to protect workers from sweatshop-like working conditions and arbitrary or unfair treatment. In addition, the attitudes and behaviors of most contemporary managers toward their employees are more positive than the attitudes and behaviors of managers from earlier eras. Critics of today's unions maintain that these changes have reduced the need for unions to serve as protectors of workers. Difficulty: 2 Medium Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

167) A major reason John L. Lewis and his followers broke with the AFL and formed the CIO was that A) the leaders of the AFL wanted to focus on political objectives while Lewis and his followers wanted to focus on economic objectives. B) Lewis felt that the AFL was growing too fast. C) the leaders of the AFL wanted to organize only skilled workers, while Lewis and his followers wanted to organize both unskilled and skilled workers. D) Lewis believed that the AFL would be more flexible and responsive to its members if it split into several smaller organizations, each representing workers with one specific skill. Answer: C Explanation: The AFL originally limited its membership to skilled workers in craft unions. Over time, an unauthorized committee within the AFL began organizing unskilled and semiskilled workers into industrial unions. In 1935, John L. Lewis, the leader of this unauthorized committee, proposed that the AFL actively organize both craft unions and industrial unions. When the AFL rejected his proposal, Lewis and his followers broke from the AFL to form the CIO. Difficulty: 2 Medium Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 168) The AFL originally was a federation of craft unions that did not attempt to organize industrial unions. The main reason for this strategy was that A) industrial unions were illegal until the passage of the Taft-Hartley Act in 1947. B) the leaders of the AFL believed that the skilled workers represented by craft unions would have better bargaining power than unskilled workers. C) craft unions had more political clout than industrial unions. D) most industrial unions had supported the Knights of Labor in a dispute with the AFL during the 1880s. Answer: B Explanation: Under the leadership of Samuel Gompers, the AFL intentionally limited its membership to skilled workers belonging to craft unions. A major reason for this strategy was that Gompers believed skilled workers would have more success with collective bargaining than unskilled workers. Difficulty: 2 Medium Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

169) At this time, close to 50% of all union workers are A) employed by governments. B) employed by private, for-profit industries. C) employed by health care companies. D) In management positions. Answer: A Explanation: Today, for the first time in U.S. history, 7.1 million of the 14.6 million workers in unions work in government not the private sector. Difficulty: 2 Medium Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 170) Which of the following statements is the most accurate assessment of the historical role of the AFL in the labor movement? A) In its early years, the AFL attracted a lot of public attention and political support because it was the first truly national labor organization in the United States. B) In its early years, the AFL operated as one union, but soon split into two interdependent groups and became known as the AFL-CIO. C) In its early years, the AFL was a federation of craft unions that championed basic labor issues. D) In its early years, the AFL had limited success because it suffered from poor leadership. Answer: C Explanation: The AFL was never a single union. Instead, it operated as a federation of craft unions. The organization succeeded largely due to the dynamic leadership of Samuel Gompers, who championed basic labor issues. Difficulty: 3 Hard Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

171) The tragedy at the Triangle Shirtwaist Company caused A) labor leaders to call for a limit of workers during a single shift. B) Americans to turn down factory jobs. C) the number of union members to increase. D) the number of union members to decline. Answer: C Explanation: Following the Triangle Fire, the International Ladies Garment Workers Union (now Workers United) grew in numbers and in public support. Difficulty: 2 Medium Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 172) Jerry received specific training to become an carpenter. He belongs to a union with other skilled carpenters. Jerry belongs to a(n) A) industrial union. B) craft union. C) open union. D) company union. Answer: B Explanation: A union whose members are skilled specialists in a particular skill or trade is known as a craft union. Difficulty: 3 Hard Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

173) Antonio is an assembly line worker for a major automobile manufacturer. When he was first hired for the job, he did not have any specific training or skill. Antonio joined a union with other assembly-line workers who perform a variety of jobs that do not require a highly specialized skill. Antonio belongs to a(n) A) industrial union. B) craft union. C) assembly union. D) traditional union. Answer: A Explanation: An industrial union is an organization of unskilled or semiskilled workers. This type of union is often found in industries characterized by mass production methods, such as the automobile industry. Difficulty: 3 Hard Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 174) The two major influences on the growth of unions in the U.S. were A) population growth and the agrarian economy. B) the agrarian economy and the Taft-Hartley Act. C) the Taft-Hartley Act and support of management. D) laws that supported unionizing and public opinion. Answer: D Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

175) The ________ Act established the National Labor Relations Board. A) Wagner B) Taft-Hartley C) Norris-LaGuardia D) Fair Labor Standards Answer: A Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 176) ________ is the process by which a union becomes recognized by the National Labor Relations Board as the bargaining agent for a group of employees. A) Accreditation B) Certification C) Arbitration D) Affiliation Answer: B Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 177) ________ is the process by which a group of workers legally take away a union's right to represent them. A) Disqualification B) Decertification C) Impeachment D) Disenfranchisement Answer: B Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

178) ________ is the process by which representatives of a union meet with representatives of management to negotiate a contract for workers. A) Mediation B) Arbitration C) Mutual conciliation D) Collective bargaining Answer: D Difficulty: 1 Easy Topic: The Elements of Collective Bargaining Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 179) The ________ was established by the Wagner Act to oversee labor-management relations. A) Federal Trade Commission B) Commission on Labor Relations C) National Labor Relations Board D) Equal Employment Opportunity Commission Answer: C Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 180) The first federal minimum wage was established in 1938 by the A) Fair Labor Standards Act. B) Wagner Act. C) Minimum Compensation Act. D) Pay Equity Act. Answer: A Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

181) The ________ outlawed the use of yellow-dog contracts and prohibited courts from issuing injunctions against nonviolent union activities. A) Landrum-Griffin Act B) Fair Labor Standards Act C) Wagner Act D) Norris-LaGuardia Act Answer: D Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 182) At one time, as a condition of employment, the employer could make the employee sign a statement prohibiting the worker from joining a union. What was this called? A) arbitrary agreement B) yellow-dog contract C) right-to-work contract D) employment at will agreement Answer: B Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 183) The ________ guaranteed the rights of individual union members when dealing with their union. A) Wagner Act B) Landrum-Griffin Act C) Norris-LaGuardia Act D) Taft-Hartley Act Answer: B Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

184) Which of the following acts gave more power to management in its relations with organized labor? A) Norris-LaGuardia Act B) Landrum-Griffin Act C) Wagner Act D) Taft-Hartley Act Answer: D Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 185) The Taft-Hartley Act A) established the first minimum wage. B) allowed individual states to pass right-to-work laws prohibiting compulsory union membership. C) required management to bargain in good faith with union representatives. D) set up the process by which unions could be recognized as the exclusive bargaining agents for a group of workers. Answer: B Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 186) The ________ guaranteed union members the right to nominate candidates for union office and participate in union meetings. A) Taft-Hartley Act B) Fair Labor Standards Act C) Norris-LaGuardia Act D) Landrum-Griffin Act Answer: D Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

187) One goal of the Landrum-Griffin Act was to A) firmly establish the right of unions to engage in collective bargaining. B) set up the means by which unions could be certified as bargaining agents for workers. C) clean up the corrupt practices of unions. D) prevent employees engaged in providing critical services such as health care or police protection from going out on strike. Answer: C Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 188) The National Labor Relations Board (NLRB) consists of A) a five-member panel appointed by the U.S. president. B) an eight- or ten-member board consisting of an equal representation of union officials and management personnel. C) two large unions: the AFL and the CIO. D) a congressional committee. Answer: A Difficulty: 1 Easy Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 189) The Wagner Act is best described as a(n) A) pro-management law. B) pro-union law. C) anti-communism law. D) anti-collective bargaining law. Answer: B Explanation: The Wagner Act explicitly allowed for collective bargaining, a right long sought by labor unions. The Wagner Act also established the National Labor Relations Board to offer legal protection to workers and to oversee the union certification process. Difficulty: 2 Medium Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 61 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

190) The Labor-Management Relations Act (Taft-Hartley Act) can be best described as a law which A) gave unions much more power and led to a rapid rise in union membership. B) gave employees the right to serve on the board of directors of their company, thus encouraging a more equitable treatment of workers. C) eliminated the need for unions in many industries by providing workers with widespread rights and protection against unfair labor practices by employers. D) placed limitations on union activities and gave more power to management in dealing with unions. Answer: D Explanation: The Taft-Hartley Act prohibited featherbedding (requiring payment for work not performed), secondary boycotts, and closed shops. These restrictions were very unpopular with unions. This act also allowed individual states to pass right-to-work laws prohibiting union shops and established provisions for dealing with strikes that threaten the nation's health and safety. These restrictions gave more power to management in dealing with unions. Difficulty: 2 Medium Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 191) The primary purpose of collective bargaining is to A) ensure worker participation in setting the goals and objectives of the company. B) establish and communicate clear guidelines for performance appraisals. C) limit the authority of management to set job categories and direct worker activities. D) negotiate a labor-management agreement that both the union and management are willing to accept. Answer: D Explanation: Successful collective bargaining results in a labor-management agreement that is mutually acceptable. Difficulty: 2 Medium Topic: The Elements of Collective Bargaining Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

192) If public employees and their union representatives were prohibited by a vote in the state senate from negotiating with government officials on issues that affected their labor contracts, which rights would be directly affected? A) collective bargaining B) process negotiation C) collective insurance D) individual taxpayer Answer: A Explanation: Collective bargaining refers to the collective right of union members or their representation to enter into negotiations and discussions about union employee labor contracts and other types of issues such as fair wages, benefits, and unfair employment practices that affect workers. Difficulty: 2 Medium Topic: The Elements of Collective Bargaining Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 193) Nick belongs to a labor union. He believes a few key people run the union by meeting secretly and making decisions without informing other members or allowing them to fully participate in the meetings. If Nick's suspicions are correct, the union is violating provisions of the ________ Act. A) Landrum-Griffin B) Fair Labor Standards C) Taft-Hartley D) Wagner Answer: A Explanation: The Landrum-Griffin Act guaranteed individual union members the right to attend and participate in union meetings, nominate candidates for union office, vote in union elections, and examine union records and accounts. Difficulty: 3 Hard Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

194) The management at an auto manufacturer planned to terminate production due to labor issues that were consuming most of the profits. For years, the strong union at this facility did some tough negotiating with the company's corporate headquarters. In a companywide vote, employees agreed to walk away from union membership in order to keep the factory open and save their jobs. The National Labor Relations Board (NLRB) agreed that it was in the best interest of the employees. ________ was started to take away the rights of union representation at the factory. A) Bargaining dismissal B) Decertification C) Arbitration D) Certification Answer: B Explanation: Decertification is the process where union workers decide to take away the right for union representation. Difficulty: 3 Hard Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 195) During the 1920s and early 1930s, the Rosedale Shoe Factory was able to prevent workers from forming a union by requiring them to sign an employment contract in which they agreed not to join a union as a condition of employment. Rosedale Shoe Factory was making use of A) yellow-dog contracts. B) blacklisting agreements. C) injunctions. D) implied consent decrees. Answer: A Explanation: A yellow-dog contract required workers to agree not to join a union as a condition of employment. This type of contract was declared illegal by the Norris-LaGuardia Act in 1932. Difficulty: 3 Hard Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

196) Sean believes that management is treating him unfairly because of his efforts to organize a vote for union representation. Which organization should he contact to report his concerns? A) Federal Board of Labor Rights (FBLR) B) National Labor Relations Board (NLRB) C) Federal Trade Commission (FTC) D) Federal Commission on Unfair Labor Practices (FCULP) Answer: B Explanation: The National Labor Relations Board (NLRB) provides guidelines and offers legal protection to workers seeking to vote on organizing a union to represent them in the workplace. Difficulty: 3 Hard Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 197) Union leaders at the Pacific Corporation are furious. Although the union is certified by the NLRB, its negotiating team has had little success in getting management to meet with them to work on a new labor contract. In fact, during the last three months, the management team has agreed to meet only twice, once on a weekend, and the other time after 8:00 p.m. Even during those two meetings, the management team was unwilling to offer serious proposals. Pacific's management team should review the legal rights of union members to participate in collective bargaining, as provided under the A) Taft-Harley Act. B) Norris LaGuardia Act. C) Wagner Act. D) Landrum-Griffin Act. Answer: C Explanation: The Wagner Act established a certification process by which a union was recognized by the NLRB as the authorized bargaining agent for a group of workers. The act required that once a union was certified, management must bargain at reasonable times and in good faith with the union on issues such as wages, hours, and terms and conditions of employment. Difficulty: 3 Hard Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

198) The objectives of labor unions have A) always placed the greatest emphasis on increasing wages and benefits. B) shifted with social and economic conditions. C) frequently taken global competition into account. D) consistently favored policies that would move the U.S. economy toward a command system. Answer: B Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 199) The ________ sets the tone and clarifies the terms and conditions under which labor and management agree to function over a specific period of time. A) negotiated labor-management agreement B) right-to-work agreement C) open shop agreement D) bargaining zone Answer: A Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 200) Under ________, workers are not required to join the union, but those who do not join are still required to pay a union fee or regular dues to the union. A) right-to-work laws B) all union security clauses C) agency shop agreements D) Employee Stock Option Plans (ESOPs) Answer: C Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

201) Under a(n) ________ shop agreement, workers must belong to the union before they are hired. A) open B) union C) agency D) closed Answer: D Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 202) The justification for dues or fees paid by nonunion members to the union in a(n) ________ shop is that the union represents all workers in collective bargaining, not just those who belong to the union. A) closed B) agency C) fee simple D) union Answer: B Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 203) In a(n) ________ shop, workers do not have to belong to a union before they are hired, but they must join a union within a specified period (usually 30, 60, or 90 days) in order to keep their job. A) agency B) closed C) open D) union Answer: D Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 67 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

204) If a union is present in a firm that has a(n) ________ shop arrangement, workers may join the union if they wish, but they are not required to join or pay a union fee in order to keep their jobs. A) open B) unrestricted C) freedom of choice D) agency Answer: A Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 205) A(n) ________ is a union official who works permanently in an organization and represents employee interests on a daily basis. A) arbitrator B) shop steward C) mediator D) president Answer: B Difficulty: 1 Easy Topic: The Elements of Collective Bargaining Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 206) Closed shops were declared illegal by the A) Taft-Hartley Act. B) Norris-LaGuardia Act. C) National Labor Relations Board in 1929. D) U.S. Supreme Court in 1946. Answer: A Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

207) ________ is the use of a third party to encourage labor and management to continue negotiating in an effort to settle a labor dispute or achieve a mutually acceptable labormanagement agreement. A) Arbitration B) Mediation C) Reconciliation D) Intercession Answer: B Difficulty: 1 Easy Topic: The Elements of Collective Bargaining Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 208) The process of bringing in an impartial third party to render a binding decision in a labor dispute is referred to as A) resolution. B) mediation. C) arbitration. D) confirmation. Answer: C Difficulty: 1 Easy Topic: The Elements of Collective Bargaining Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 209) If management and union officials cannot resolve a grievance, a(n) ________ is asked to listen to the arguments of each side and to make a decision that both sides will have to comply with. A) confirmer B) counselor C) arbitrator D) mediator Answer: C Difficulty: 1 Easy Topic: The Elements of Collective Bargaining Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 69 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

210) Which of the following topics is generally covered in a negotiated labor-management agreement? A) corporate pricing policy B) grievance procedures C) management fringe benefits D) management compensation Answer: B Explanation: A negotiated labor-management agreement typically includes the grievance procedures such as the arbitration agreement and mediation procedures. Difficulty: 2 Medium Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 211) In a union shop A) workers must join the union within a stipulated time period (usually 30, 60, or 90 days) in order to keep their jobs. B) workers must belong to the union before the company can hire them. C) workers who do not join the union must pay a union fee. D) workers are required to sign yellow-dog contracts. Answer: A Explanation: Under a union shop, workers do not have to belong to a union to be hired for a job, but they do have to join the union within a prescribed period in order to keep their job. Difficulty: 2 Medium Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

212) The key difference between an agency shop agreement and an open shop agreement is that in an agency shop A) workers must join the union within a stipulated time period (usually 30, 60, or 90 days) in order to keep their jobs, but in an open shop the workers are not required to join the union. B) the union is restricted to a limited number of employees who perform specific types of jobs, but in an open shop membership in the union is available to all workers. C) workers who do not join the union must pay a fee or regular dues, while in an open shop workers who choose not to join the union do not have to pay any union fees or dues. D) workers must agree not to join a union in order to keep their jobs while in an open shop workers are free to join a union if they wish, but they are not required to do so. Answer: C Explanation: In an agency shop workers are not required to join the union, but workers who choose not to join are required to pay a fee to the union or regular union dues. In an open shop, workers are free to join a union or not join, and those that do not join are not required to pay any fees or dues. Difficulty: 2 Medium Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 213) A key difference between a mediator and an arbitrator is that A) a mediator is appointed by labor and management, while an arbitrator is appointed by the federal government under terms set forth in the Taft-Hartley Act. B) a mediator is an unpaid volunteer, while an arbitrator is a paid professional. C) an arbitrator can settle a labor-management dispute by rendering a binding decision, while a mediator can only make suggestions and encourage the two sides in a dispute to continue negotiating. D) a mediator is a lawyer who represents either labor or management in a labor dispute, while an arbitrator is an impartial advisor who listens to both sides of the dispute and offers suggestions that help the two parties reach a mutually acceptable agreement. Answer: C Explanation: A mediator is an impartial third party who encourages both parties in a labormanagement dispute to continue negotiating. Mediators can offer suggestions to help the parties reach an agreement, but do not have the authority to end the dispute by making a binding decision. An arbitrator is an impartial third party who has the authority to settle a labormanagement dispute by rendering a binding decision. Difficulty: 2 Medium Topic: The Elements of Collective Bargaining Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 71 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

214) Which of these evolving workplace issues will likely continue to be a focus during future contract negotiations? A) shifting jobs from service back to manufacturing industries B) eliminating part-time work C) arranging for care assistance for children and elders D) increasing offshore outsourcing jobs Answer: C Explanation: Future contract negotiations will likely focus on evolving workplace issues such as child care and elder care. Difficulty: 1 Easy Topic: The Elements of Collective Bargaining Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 215) A grievance is A) an implication that management has broken a management-union agreement, but it must be proven. B) an employee's perception that management has not in some way fulfilled a labor contract agreement. C) the disappointment that members of a union feel when management refuses to participate in good faith collective bargaining. D) the result of a poorly arbitrated conflict. Answer: B Explanation: A grievance is a charge by an employee that management is not abiding by the agreed-upon labor contract, as he/she perceives it. Grievances are usually filed due to problems with overtime rules, promotions, layoffs, transfers, and job assignments. Difficulty: 2 Medium Topic: The Elements of Collective Bargaining Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

216) Labor unions and management hope to resolve issues through collective bargaining. Each side comes to the table with a range of options they are willing to consider, some more appealing than others. All options that each will consider fall within the ________. A) the LRB list of possibilities. B) the cases of consideration. C) the lands of indifference. D) bargaining zone. Answer: D Explanation: The bargaining zone is the range of options that each side is willing to consider in the process of collective bargaining. Difficulty: 2 Medium Topic: The Elements of Collective Bargaining Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 217) Simon, who is philosophically opposed to unions, often says, "Why should I be required to join an organization I don't agree with, or pay a fee to support it financially? I thought this was a free country, but I don't feel very free when I'm told that I'll lose my job if I don't join the union. It just isn't fair." Simon's comments suggest he favors a(n) ________ shop arrangement. A) closed B) open C) regulated D) certified Answer: B Explanation: Under an open shop arrangement, workers can join a union if they wish (if one is present in the workplace) but cannot be required to join a union or pay a fee to a union to keep their jobs. Difficulty: 3 Hard Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

218) Mary was recently hired at Marshall Industries as a repairperson. Upon starting her new job, she was informed that if she chose not to join the union representing her fellow repair workers, she would still have to pay a fee to the union. Apparently, Marshall operates under a(n) A) illegal arrangement, since nonmembers can never legally be required to pay fees to unions. B) closed shop agreement. C) union shop agreement. D) agency shop agreement. Answer: D Explanation: In an agency shop, workers do not have to join a union, but nonmembers are required to pay either a special union fee or regular union dues. Union supporters justify this type of arrangement because the collective bargaining efforts of the union gain benefits for all workers, not just those who belong to the union. Difficulty: 3 Hard Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 219) In the late 1930s management at Atalanta Industries agreed to hire only those workers who were already members of the Electrical Union. Atalanta agreed to a type of arrangement known as a(n) A) closed shop. B) open shop. C) union shop. D) restricted shop. Answer: A Explanation: In a closed shop, workers must belong to the union before they can be hired. While this type of arrangement was legal in the 1930s, the Taft-Hartley Act declared closed shops illegal in 1947. Difficulty: 3 Hard Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

220) At the Greeley Corporation, union and management have not been able to reach a mutually satisfactory agreement on a grievance. The two sides have agreed to bring in a(n) ________ who will examine the evidence and arguments on both sides and issue a binding decision. A) mediator B) arbitrator C) fact finder D) union steward Answer: B Explanation: Figure 12.5 illustrates the different steps the formal grievance procedure could follow. An arbitrator is an impartial third party who will render a binding decision in a labor dispute. Difficulty: 3 Hard Topic: The Elements of Collective Bargaining Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 221) During negotiations for a new faculty contract at a university, the ________ was quite narrow. Of thirteen items, the union representatives wanted concessions on the following items: Nos. 1, 2, 3, 4, 5, 7, 9, 10, and 13. The union overlapped with the university administration on the remaining items: Nos. 6, 8, 11, and 12. A) negotiation degree B) bargaining zone C) breakdown criteria D) well-being apportionment Answer: B Explanation: The bargaining zone is the area where two parties overlap, before negotiations begin. This is the range of options between the first offer and the final offer that both parties will consider. Difficulty: 3 Hard Topic: The Elements of Collective Bargaining Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

222) Amara believes that her manager violated the terms of the negotiated labor-management agreement when he required her to report to work on a holiday. She has discussed her concerns with her shop steward and he agrees with her. It is likely the steward will encourage Amara to A) start looking for another job in a right-to-work state. B) contact the local chapter of the ACLU. C) send a letter of protest to the president of the union. D) pursue a grievance over the interpretation of the labor contract. Answer: D Explanation: A grievance is a charge by employees that management is not abiding by or fulfilling the terms of the negotiated labor-management agreement. Difficulty: 3 Hard Topic: The Elements of Collective Bargaining Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 223) You've been on your hour-long lunch break for less than 45 minutes when your boss orders you to return to work immediately or lose an hour's pay. You complain that the current labor contract specifies a full hour for your lunch break and you still have over 15 minutes left. Your boss stands firm on his order for you to return to work. Under protest, you return to work, but plan to file a grievance. The first step you should take is to contact a(n) A) arbitrator. B) mediator. C) strikebreaker. D) shop steward. Answer: D Explanation: Shop stewards are union officials who work permanently in an organization and represent employee interests on a daily basis. Figure 12.5 in the text shows that the first step for an employee who wants to file a grievance is to contact the shop steward. Difficulty: 3 Hard Topic: The Elements of Collective Bargaining Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

224) Dr. Qiang, a professor at a local university, has been working with union leaders and management at Fairlawn Corporation to help the two sides resolve differences over desired wage levels for a new contract. First, he met with each side privately to determine any common ground for agreement. For the past week, he has worked with representatives from each side to promote communication and compromise at the bargaining table. Dr. Qiang is a(n) A) arbitrator. B) mediator. C) fact finder. D) shop steward. Answer: B Explanation: A mediator is an impartial third party who encourages both sides in a labor dispute to continue negotiating. Mediators will often make suggestions for resolving a disagreement. Difficulty: 3 Hard Topic: The Elements of Collective Bargaining Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 225) Yadier believes that an agency shop is the most desirable union security arrangement. Which of the following statements would be most likely to represent Yadier's views? A) A union can succeed in its collective bargaining efforts only if it represents all workers. Therefore, workers should be required to join the union soon after they are hired. B) Workers should be allowed to join a union if they wish, but they should not be required to join or pay a fee to the union in order to keep their job. C) Workers should not be required to join a union to keep their jobs. However, since all workers enjoy the benefits obtained through collective bargaining, even those who do not join should pay a fee to support the union. D) Unions should be replaced by employee stock ownership plans that give workers a say in the management of their firms. Answer: C Explanation: Under an agency shop arrangement, workers are not required to join a union, but those who do not join must pay a union fee. Difficulty: 3 Hard Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

226) Melvin has been a member of the American Arbitration Association and long-standing faculty member of the business school of a university for over a decade. Right now, he is on a plane headed for Detroit, where he will serve as an arbitrator between members of the United Auto Workers union and management of a major auto manufacturer. His responsibilities will deal with A) certifying union representation at the Michigan manufacturing sites. B) certifying union representation and collective bargaining at all manufacturing sites that the auto manufacturer currently has in operations, including any in Mexico and Canada (in accordance with NAFTA). C) listening to both sides of an unresolved dispute between labor and management and render a binding decision on the problem. D) protecting the interests of management and staving off a strike by the auto workers. Answer: C Explanation: Arbitration is a more extreme form of negotiation as compared to mediation. The arbitrator will listen to the perceptions and problems of both parties and work out a binding solution to the dispute. Both sides must preliminarily agree that they will accept the arbitrator's decision. Difficulty: 3 Hard Topic: The Elements of Collective Bargaining Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

227) A management executive just left a meeting between his team and the company's union representatives. She headed straight for the CEO's office and she reviewed where things seemed to break down. Union representatives came to the table with three different offers to resolve the insurance and vacation benefits problems laborers were experiencing. Management offered its own resolutions—two different ones, to be exact. The problem was that a bargaining zone did not emerge. Neither side was willing to consider each other's alternatives. As she reached the CEO's door, he was ready to concede that the negotiations were probably headed to A) collective bargaining. B) arbitration. C) a vote. D) mediation. Answer: D Explanation: Labor and management were proceeding with collective bargaining; however, they had reached an impasse because there was no bargaining zone. The next step is to enter into mediation, where an impartial third party listens to disagreements and solutions offered by both sides, encourages the talks to continue, and makes suggestions for alternative solutions leading toward resolution. Difficulty: 3 Hard Topic: The Elements of Collective Bargaining Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 228) Historically, the most potent union tactic when collective bargaining efforts break down has been the A) strike. B) lockout. C) court injunction. D) primary boycott. Answer: A Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

229) When union members who have a dispute with a company walk around outside the firm's place of business carrying signs and talking to the media and public about their concerns, they are using a tactic known as A) boycotting. B) estopment. C) striking. D) picketing. Answer: D Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 230) A(n) ________ occurs when a union encourages its members and the general public not to buy the products of a firm involved in a labor dispute. A) injunction B) wildcat strike C) primary boycott D) embargo Answer: C Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

231) A(n) ________ is a court order directing someone to do something or to refrain from doing something. A) restrictive covenant B) injunction C) judicial encyclical D) declaratory judgment Answer: B Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 232) Two of the most important tactics used by unions when collective bargaining efforts break down are A) strikes and boycotts. B) injunctions and lockouts. C) conciliation and yellow-dog contracts. D) enforcement of right-to-work clauses and cooling-off periods. Answer: A Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

233) A(n) ________ boycott is an illegal attempt by labor to convince others to stop doing business with a firm that does business with a company that is the subject of a primary boycott. A) extended B) secondary C) tactical D) strategic Answer: B Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 234) A(n) ________ occurs when management temporarily closes a business to deny employment to workers. A) lockout B) secondary boycott C) involuntary strike D) employment injunction Answer: A Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 235) At this time, the largest labor organization in the United States is the A) Teamsters. B) Service Employees International Union (SEIU). C) United Automobile Workers (UAW). D) National Education Association (NEA). Answer: D Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 82 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

236) Despite a 1938 Supreme Court ruling allowing their use, ________ were seldom used by management during labor-management disputes until the 1980s. A) injunctions B) secondary boycotts C) strikebreakers D) yellow-dog contracts Answer: C Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 237) Under the provisions of the Taft-Hartley Act, the president can ask for a(n) ________ to prevent a strike in a critical industry. A) arbitrator B) cooling-off period C) open shop agreement D) temporary take over by the federal government Answer: B Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

238) The ________ is a tactic police, firefighters, and other workers who are not legally allowed to strike sometimes use to express their frustration and displeasure with working conditions or pay. A) gold cold B) steel deal C) slow-mo D) blue flu Answer: D Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 239) ________ are workers a company hires to replace workers who are out on strike. A) Yellow dogs B) Convergent workers C) Structural replacements D) Strikebreakers Answer: D Difficulty: 1 Easy Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

240) In recent years, many unions have begun to A) focus primarily on the issue of equitable pay. B) assist management in redesigning work and recruiting and training workers from diverse backgrounds. C) take a more confrontational approach when attempting to achieve important goals. D) experience rapid but uneasy growth as more foreign-owned firms enter the U.S. economy, creating cultural problems for American workers. Answer: B Difficulty: 1 Easy Topic: Objectives of Labor Unions Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 241) Which of the following tactics would management be most likely to use during a labormanagement dispute? A) picketing B) secondary boycotts C) lockouts D) primary boycotts Answer: C Explanation: Picketing and boycotts are tactics that are used by labor rather than management. However, a lockout is a management tactic. Difficulty: 2 Medium Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

242) The ability of unions to achieve key goals in the future will depend on their ability to A) reestablish their base of strength in the manufacturing sector. B) find ways to cooperate with management in training workers and redesigning jobs. C) repeal the Wagner Act and the Norris-LaGuardia Act in order to eliminate restrictions on union tactics. D) return to the confrontational tactics used successfully in the 1930s when unions grew rapidly. Answer: B Explanation: Due to significant declines in membership, as well as the decline in manufacturing, the role of unions has changed. The once powerful manufacturing-based unions are declining. In the future, unions will need to cooperate with management in training workers, redesigning jobs, and helping to assimilate workers into the service-based economy. Difficulty: 2 Medium Topic: Objectives of Labor Unions Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 243) One strategy unions must adopt in order to grow in the future is to A) find ways to appeal to white-collar, female, and foreign-born workers. B) find ways to prevent foreign companies from entering the U.S. market. C) go back to the old methods of aggressive tactics and confrontation that were used successfully in the past. D) emphasize recruiting efforts in the manufacturing sector of the economy. Answer: A Explanation: The manufacturing sector has always been an area of union strength. However, future growth will require unions to find ways to appeal to workers that have not been attracted to unions in the past. Difficulty: 2 Medium Topic: Objectives of Labor Unions Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

244) Which of the following statements best summarizes the extent to which unions currently rely on strikes as a tactic when collective bargaining breaks down? A) Unions have become increasingly reliant on strikes as other, less confrontational, tactics have proven unsuccessful. B) Some highly visible strikes in recent years show that the strike is not dead as a labor tactic, but very few labor disputes actually lead to a strike. C) Unions have almost completely avoided strikes since President Reagan replaced striking air traffic controllers with strikebreakers in 1981. D) Strikes organized by unions are now less common than lockouts by management, indicating a major shift in attitudes between labor and management. Answer: B Explanation: Strikes are very costly to both the firm and the workers involved, and the aftermath of a strike can be hard feelings and poor morale that plague a company for years. Thus, both management and labor seek to avoid strikes when possible. Very few labor disputes actually lead to strikes. Difficulty: 2 Medium Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 245) When workers go on strike, management is often compelled to keep the business operation running. If it is unable to achieve this on its own, management may A) elect to proceed with a lockout. B) close down the facility and permanently fire the strikers. C) hire strikebreakers. D) picket. Answer: C Explanation: Two tactics used by management to deal with the consequences of a strike are to seek a court injunction, asking the legal system to demand that workers return to work, or to hire strikebreakers, bring in temporary employees that will work in place of the striking workers. Strikebreakers must cross the picket line—a choice that can often be intimidating. Difficulty: 2 Medium Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

246) Speculating on the future of organized labor unions, which of the following statements best summarizes real concerns? A) Future union membership will significantly increase due to workers age 19–30 perceiving value in union representation and membership. B) The age of union members is heavily skewed. Most members are 55 and older. Unions will be challenged to recruit younger employees to support the unions. C) Due to headstrong union negotiators who have refused givebacks, the value of unions will decline. D) The UAW (United Auto Workers) will continue to advance as the most powerful union in the U.S., while the public sector employee unions will continue to experience decline. Answer: B Explanation: It is reported that union membership is highest among 45–64-year-old workers and lowest among workers age 25 and younger. This fact is of major concern to unions whose membership numbers have been dwindling. Difficulty: 2 Medium Topic: Objectives of Labor Unions Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 247) The box "Walking a Fine Line" discusses A) the violence that occurs at picket lines, and the welfare of those who are physically hurt as a result of these occurrences. B) the ethics of participating as a strikebreaker in your community. C) how givebacks are very unethical on the part of management in large operations and an indication that management has "crossed the line." D) the ethics of participating in the blue flu. Answer: B Explanation: The box asks the student to consider how he or she would feel about taking advantage of a strike situation by seeking employment as a strikebreaker. Is it ethical to work in the place of friends and neighbors that you know are striking for reasonable concerns such as good health care benefits? Difficulty: 2 Medium Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

248) At Newport Pharmaceuticals Group, union reps strongly discouraged the firm's union employees from buying the company's products. Recently, they also took out an ad with an important message for consumers: "Don't give Newport your money. They don't share it with their employees!" What do these actions best describe? A) secondary boycott B) primary boycott C) direct strikebreaker initiative D) strikebreaker tactic Answer: B Explanation: A primary boycott occurs when labor encourages both its members and the general public not to buy the products or services of a firm engaged in a labor dispute. Difficulty: 3 Hard Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 249) Several Webster Groves police officers called in sick—one after the other. As the dispatcher took the calls, she thought there could be more to this story than she was hearing. In fact, she thought it might be related to the discussion she heard in the break room last night. Several officers were leaving their shifts and were not happy with the recent changes in scheduling, the excessive overtime hours, and management's reluctance to begin negotiations on a new benefits package. She even heard one officer saying, "It's time for a mental health day!" Although it is illegal for police to strike, what the police dispatcher was witnessing may have been A) a grievance. B) the blue flu. C) a lockout. D) a shutterbug. Answer: B Explanation: Even though they can unionize, it is illegal for public safety officers such as the police and firefighters to go on strike. When negotiations break down between these officers and their management, some may group together and call in sick, as a way of boycotting work and demonstrating to management that they are not agreeing to the their work conditions. This is called the blue flu. Difficulty: 3 Hard Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 89 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

250) The Food King chain stocks the products of VitaVeggies Food Company at all of their supermarkets. The Teamsters are currently involved in a labor dispute with VitaVeggies. The union has already encouraged its members and the general public not to buy VitaVeggie products. Now it is threatening Food King stores with the possibility of a boycott if it continues to carry the VitaVeggies line. Food King is being threatened with a(n) A) primary boycott. B) secondary boycott. C) jurisdictional boycott. D) informational boycott. Answer: B Explanation: A secondary boycott is an attempt to discourage other organizations from doing business with a firm that is the subject of a primary boycott. Secondary boycotts are prohibited by the Taft-Hartley Act. Difficulty: 3 Hard Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 251) At Tuxedo Park Tire and Rubber, a number of striking workers are picketing at the plant entrance. Because the picketers have started threatening people entering the plant and are vandalizing some company property, Tuxedo Park management believes it has just cause to ask the courts for a(n) ________ placing limits on the number of pickets and their actions while picketing. A) preemptive judgment B) writ of contention C) arbitration judgment D) injunction Answer: D Explanation: A court order directing someone to do something, or to refrain from doing something, is called an injunction. Courts will only issue injunctions in labor disputes if the company can show just cause such as the possibility of violence or the destruction of property. Difficulty: 3 Hard Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

252) Bathtub Brewing Company and the AFL-CIO are in an eight-month-long labor dispute. The AFL-CIO has called on its membership and the general public to refuse to purchase Bathtub Brewing products. The AFL-CIO is calling for a A) general boycott. B) secondary boycott. C) primary boycott. D) public boycott. Answer: C Explanation: A primary boycott occurs when organized labor encourages its membership and the general public not to buy products produced by a firm involved in a labor dispute. Difficulty: 3 Hard Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 253) Dockworkers were locked out of their jobs in 29 West Coast ports. Because many consumer goods used in the U.S. are transported from Asia to the U.S. through these ports, the lockout could have damaged the U.S. economy and security if allowed to continue. The U.S. president ordered the dockworkers back to work and both sides were ordered back to the bargaining table. Which of the following statements is the most accurate conclusion about the outcome of the labor dispute between the dockworkers union and shipping companies on the West Coast? A) The dispute between the dockworkers and shipping companies showed that the only effective weapon unions now have in labor-management disputes is the threat of a strike. B) The dispute between the dockworkers and shipping companies showed that arbitration is the only effective way to settle labor-management disputes in industries that are critical to the nation's safety or security. C) The dispute between the dockworkers and shipping companies showed that the Taft-Hartley Act must be invoked when critical industries are involved. D) The dispute between the dockworkers and shipping companies showed that unions have become so powerful that they can shut down the entire U.S. economy. Answer: C Explanation: To help settle this dispute the U.S. president stepped in, using the provision of the Taft-Hartley Act that applies to critical industries such as transportation, to get both sides to the bargaining table during a cooling-off period. Difficulty: 3 Hard Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 91 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

254) Concord Communications anticipated that 10,000 workers were planning to strike over unfair compensation. Management started to call staffing agents to temporarily employ persons to cover for striking employees. Traditionally, these workers are called A) mobile temps. B) picket busters. C) strikebreakers. D) boycotters. Answer: C Explanation: Strikebreakers are persons who are temporarily hired to replace striking employees. Difficulty: 3 Hard Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 255) A comparison of compensation of CEOs in the U.S. with compensation of top executives in Europe shows that A) U.S. CEOs are working for much lower compensation. B) pay for CEOs at major corporations is about the same in all of these nations. C) executives in the U.S. are compensated at a much higher rate. D) U.S. executives are paid better than average when their firms are successful, but worse than average when their firms struggle. Answer: C Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

256) According to noted economist Thomas Piketty A) top executives are entitled to any level of pay they can negotiate with their board of directors. B) the annual pay for top executives should include a small guaranteed salary and should include a very large bonus in years where the firm earns higher profits than competitors. C) all bonuses paid to CEOs should be tied to long-run increases in market share. D) CEOs should not earn more than 100–200 times the earnings of the company's average wage. Answer: D Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 257) Over the past several decades, the compensation of CEOs of large U.S. corporations has A) remained relatively stable once inflation is taken into account. B) become based more on salary and less on stock options. C) increased enormously, even when inflation is taken into account. D) consistently lagged behind the compensation of top executives in Europe and Asia. Answer: C Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

258) ________ is the demand for equal pay for jobs requiring similar levels of education, training, and skill. A) Affirmative action B) Compensation by objectives C) Equal opportunity pay D) Comparable worth Answer: D Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 259) Women have become a ________ part of the labor force. A) sizeable and permanent B) temporary C) smaller D) less important Answer: A Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

260) Today, women earn close to ________ of what men earn, though the disparity varies considerably by profession and the level of education. A) 25% B) 50% C) 80% D) 90% Answer: C Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 261) ________ refers to unwelcome sexual advances, requests for sexual favors, and other unsolicited conduct of a sexual nature. A) Sexual harassment B) Gender bias C) Sexual opportunism D) Sexual coercion Answer: A Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

262) Sexual harassment laws A) apply only to situations in which men make unwelcome advances to women. B) are enforceable only in states that have enacted right-to-work laws. C) apply to the conduct of women as well as men. D) are applied only in situations in which a person must submit to unwanted advances in order to keep his or her job. Answer: C Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 263) ________ sexual harassment refers to situations in which an employee's submission to unwanted conduct is made either explicitly or implicitly a term or condition of employment or is used to influence employment decisions affecting the worker's job status. A) Quid pro quo B) Post hoc C) Ceteris paribus D) Reflexive Answer: A Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

264) Harassment that creates an intimidating or offensive work environment falls under the type of sexual harassment known as a(n) A) hostile work environment. B) quid pro quo. C) extroverted harassment. D) de jure harassment. Answer: A Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 265) Small businesses have found that child care programs A) are too expensive to offer, which puts them at a serious disadvantage when competing against larger firms to attract the best workers. B) can be offered in creative ways that enable the firm to offer an attractive benefit to workers with young children. C) are less necessary now than they were before the federal government expanded its child care programs. D) are not very expensive, but tend to be more trouble than they are worth. Answer: B Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

266) As the workforce of the U.S. ages, a greater percentage of workers will have to concern themselves with A) finding care for their children. B) caring for older relatives. C) the educational benefits of downsizing. D) transportation issues. Answer: B Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 267) It is estimated that firms lose ________ annually in productivity, absenteeism, and employee turnover due to caring for aging parents. A) $42 million B) $10 thousand C) $33 billion D) a decreasing amount Answer: C Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

268) Drug problems among workers is costing the U.S. economy upwards of ________ in lost work, health care costs, and even crime and accidents. A) $100 million B) $50 billion C) $414 billion D) $50 thousand Answer: C Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 269) The National Institute of Health estimates that each drug abuser can cost an employer approximately ________ annually. A) $500 B) $1,000 C) $5,000 D) $10,000 Answer: D Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

270) Which of the following is an effective way to deal with the growing threat of workplace violence? A) Ignore it, as the amount of workplace violence has actually decreased substantially. B) Hire proactive managers. C) Ask employees that are experiencing threats or harassment to take paid leave. D) Avoid disciplining employees who are not performing up to par since they will learn on the job and their performance will improve over time. Answer: B Difficulty: 1 Easy Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 271) In 1997, the Supreme Court rendered a decision on a case stipulating that sexual harassment law A) did not apply to casual jokes of a sexual nature. B) applied to same-sex harassment, as well. C) did not apply to married couples who are working together. D) only applied to cases where a subordinate felt harassed by an immediate supervisor. Answer: B Explanation: The Supreme Court (in 1997) said that same-sex harassment also falls within the purview of sexual harassment law. Difficulty: 2 Medium Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

272) The subject "Who pays for childcare when the parent(s) works?" is A) not a concern because the law requires companies to provide child care facilities, or to pay employees a stipend if it is not available. B) by law a shared responsibility between employer and employee. C) not the concern of employees without children or single-income households because they always get to choose a different benefit. D) a controversial subject, with no legal resolution to date. Answer: D Explanation: There is no consensus or legal resolution about child care benefits at this time. Questions about responsibilities for child care subsidies, child care programs, and parental leave have spurred much debate. Difficulty: 2 Medium Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 273) Which of the following is likely to remain a controversial labor-management issue in the future? A) the ability of employers to use yellow-dog contracts B) enforcement of the Taft-Hartley Act C) sexual harassment D) a resurgence of the Knights of Labor Answer: C Explanation: The text discusses several controversial labor-management issues including executive compensation, pay equity, sexual harassment, child care and elder care, drug testing, and violence in the workplace. Difficulty: 2 Medium Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

274) The fact that workers sometimes serve on the board of directors of European companies helps explain why A) European executives accept less responsibility for the successes and failures of the firms they lead. B) European CEOs earn much less than American CEOs. C) European firms are more likely to seek protection from foreign competition than American firms. D) workers in Europe are less likely to believe unions are necessary than workers in the United States. Answer: B Explanation: Since boards set executive compensation, the presence of workers on boards can serve as a restraint on this compensation. Difficulty: 2 Medium Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 275) In Germany, there are some firms whose employees participate in the company decisions by actually serving as members of the board of directors. The policy of permitting nonmanagement employees to participate in the decision-making processes of some European companies is called A) co-habitating. B) co-determination. C) team management. D) dual management. Answer: B Explanation: Co-determination calls for cooperation between management and workers in decision making. Difficulty: 2 Medium Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

276) Comparable worth primarily is concerned with A) ensuring equal pay for men and women who work for the same firm and have the same job title. B) reducing the gap between pay for executives and the pay for nonmanagerial employees. C) ensuring equal pay for jobs requiring similar levels of skill, education, and training. D) determining whether men or women are better suited to perform various jobs. Answer: C Explanation: Comparable worth does not mean that men and women who perform the same job should receive the same pay. Rather, it focuses on comparing jobs, to ensure that people in jobs that require the same levels of skill, education, and training receive equal pay. Difficulty: 2 Medium Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 277) Which of the following statements about drug users is a claim made by the National Institute on Drug Abuse? A) If you drink a lot of alcohol, you also abuse drugs. B) Drug users typically cost their company more in health and workman's comp claims. C) Drug users are (overall) friendlier people because they do not take much seriously, including their jobs. D) There is a strong correlation between drug abuse and sexual harassment. Answer: B Explanation: According to the National Institute on Drug Abuse, drug users cost their companies twice as much in medical claims and workman's compensation claims than do nondrug users. Difficulty: 2 Medium Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

278) An assessment of elder care needs in the United States suggests that A) most firms have done a better job in responding to the need for elder care than they have in dealing with the need for child care. B) employees who must care for elderly parents are often in positions that are more critical to the firm's success than workers with concerns about child care. C) although an increasing number of employees must find ways to care for elderly parents, fewer firms will need to offer elder care than child care because the federal government already provides a great deal of assistance to the elderly. D) while an issue for some workers, at the present time elder care is not a high-profile item for most businesses. Answer: B Explanation: It is usually the older, more experienced employees that must care for elderly parents. These older employees are often in positions with job responsibilities that are critical to their company's success. Difficulty: 2 Medium Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

279) Which of the following statements about the costs of elder care is most accurate? A) It should be much less expensive for firms to provide elder care than for them to provide child care. B) The financial burdens of elder care on the children of aging parents are likely to become less serious in the future than they are today because many senior citizens are now remaining employed into their 70s rather than retiring in their early 60s. C) Although elder care is expensive, the good news is that companies can receive a great deal of assistance from the federal government when they establish qualified elder care programs. D) The costs of elder care to companies will rise higher in coming years as an increasing number of more experienced and high-ranking employees face the need to care for aging parents and other relatives. Answer: D Explanation: As the workforce of the U.S. ages, an increasing number of employees will face the need to care for aging parents or other relatives. Since the workers who have elderly parents are likely to be among the company's most experienced employees, they are likely to be in positions of greater authority and responsibility than workers who have child care needs. Thus, the cost of absenteeism, tardiness, turnover and reduced productivity of workers with elder care responsibilities could be especially high. Moreover, the federal government currently provides little assistance to providers of elder care. Difficulty: 3 Hard Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

280) Which of the following statements about sexual harassment is most accurate? A) Only men can be charged with sexual harassment. B) Sexual harassment cannot be proven unless the employee's submission to such conduct was made explicitly a term of employment or was used to influence the results of the employee's performance appraisal. C) One flaw with the current laws concerning sexual harassment is that they do not take into account the possibility of same-sex harassment. D) In evaluating charges of sexual harassment, the courts place a great deal of emphasis on whether the behavior was unwelcome. Answer: D Explanation: In evaluating charges of sexual harassment, a key word seems to be unwelcome, a term that refers to behavior that would offend a reasonable person. Difficulty: 3 Hard Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 281) Epic Electronics recently launched a program to evaluate the relative levels of skills, education, and training needed to perform various jobs. Based on the results of this evaluation, Epic intends to adjust pay scales so that jobs requiring similar levels of skills, abilities, and education will receive similar pay. Epic Electronics's program is an attempt to deal with the issue of A) comparable worth. B) affirmative action. C) reverse discrimination. D) equal employment opportunities. Answer: A Explanation: Comparable worth is concerned with achieving equal pay for jobs requiring the same level of skill, training, and education. Difficulty: 3 Hard Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

282) As an employee of the human resource department of a major corporation, you are concerned about the potential costs of drug abuse. You are contemplating testing employees for substance abuse. Before adopting such tests, you should know that A) this type of testing has been found to be illegal, but many firms do it anyway. B) medical tests of this nature are not very accurate. C) if you use these tests, your company will join over 60 percent of major companies that test workers and job applicants. D) these tests are very expensive, and should only be given to those who may belong to groups judged to be at higher risk. Answer: C Explanation: Today, over 60 percent of major companies test workers and job applicants for substance abuse. Difficulty: 3 Hard Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

283) Robert Buckman is a researcher studying the effects of alcohol and drug abuse. The alcohol center where he works states, "Our mission is to conduct, coordinate, and promote basic and clinical research on the causes, prevention, and treatment of alcoholism and alcoholic disease." Looking forward, which of the following statements are you likely to agree with? A) Robert's work, although impressive, will not have any short-term or long-term effect on the cost of labor in the U.S. B) The U.S. has seen significant declines in alcohol and drug-related issues in the workplace. Robert would better serve the business world by working on cancer-caused ailments. C) Illegal drug use is more of a problem than alcohol in terms of the number of work-related accidents that these problems cause. Robert should know, though, that the baby boomers are the major drug users, and they are retiring. D) Robert's work is greatly needed by business and industry. Alcohol and drug use continue to be on the rise and present serious work-related costs to businesses across almost all industries. Answer: D Explanation: Alcohol is the most widely used drug with over 8% of all full-time U.S. employees believed to be heavy drinkers. According to the National Institute on Drug Abuse, employed drug users cost their employers about twice as much in medical and workers' compensation claims than drug-free workers. Difficulty: 3 Hard Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

284) JetStream Airlines implemented a program to curb workplace violence before it occurs. Under this program, the employees of JetStream can expect to A) share in any profits their airline earns. B) get paid extended leave if they become especially and visibly angry at work. C) see much more use of contingent workers. D) take part in focus groups to share their ideas about workplace violence prevention. Answer: D Explanation: Many executives and managers consider workplace violence a serious issue and have taken action to prevent problems before they occur. To deal with this growing threat, firms have held focus groups to invite employee input, hired managers with strong interpersonal skills, and employed skilled consultants to deal with any growing potential of workplace violence. Difficulty: 3 Hard Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 285) As an advisor to a company setting up its sexual harassment policy, which of the following tactics would you suggest? A) Immediately making a sexual harassment claim public to every employee in the company. B) Asking the accuser and the accused to sit down, face to face, and participate in a verbal discussion about what has occurred. C) Make certain that there is a communication chain in place to immediately inform board members and executives of the accusation, so as to keep the information from being leaked to the news media. D) Setting up a proactive grievance procedure for quick action if and when there is an accusation of sexual harassment. Answer: D Explanation: Setting up proactive grievance procedures is a sound strategy for dealing with sexual harassment accusations. Difficulty: 3 Hard Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

286) Last year, a retired schoolteacher moved her parents from Michigan to northern Illinois to live with her. For the past year, she was traveling two times each month to provide care for this 86-year-old couple, including coordinating medical services and meals. In conversations with her family members, the teacher remarked, "If I were not already retired, I would have to quit my job to continue this way!" This retired teacher: A) is in an unusual situation because there are more persons entering the workforce with child care issues than with taking care of aging Americans. B) is like a growing number of families whose households are caring for aging parents and relatives. C) will benefit by all the affordable elder care facilities that cost about $20,000 per year. D) should be advised that Medicare and Medicaid are covering all medical expenses for person 65 years and older, so she should not be experiencing such a burden. Answer: B Explanation: Some workers may have to concern themselves with finding child care, but many workers will confront another problem: how to care for older parents and relatives. Today in the United States, about 40 million family caregivers provide unpaid care to an elderly person. Elder care is a key workplace issue. Difficulty: 3 Hard Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

287) Identify several laws that significantly influenced labor-management relations. Discuss the major provisions of each law. Answer: The text lists five acts that have had a major impact on labor-management relations. Much of the information about the major provisions of each law is provided in Figure 12.1. The Norris-LaGuardia Act of 1932 prohibited courts from issuing injunctions against nonviolent union activities, outlawed contracts forbidding union activities, and outlawed yellowdog contracts that required workers to agree not to join a union as a condition of employment. The National Labor Relations Act of 1935 (popularly known as the Wagner Act) gave employees the right to form and join labor unions, the right to engage in collective bargaining with employers, and the right to engage in strikes, picketing, and boycotts. This act also established the National Labor Relations Board to oversee labor-management relations and to oversee the union certification process. Under the certification process, if a union receives more than half the votes cast in a secret ballot election, the NLRB recognizes the union as the exclusive bargaining agent for the workers. Once a union is certified, the employer is required to bargain in good faith on wages, working conditions, and other terms of employment. This act gave a significant boost to the union movement. The Fair Labor Standards Act of 1938 established the first minimum wage (25 cents an hour) and established the maximum basic hours for workers engaged in interstate commerce. The Labor-Management Relations Act of 1947 (popularly known as the Taft-Hartley Act) prohibited closed shop arrangements (where employees had to belong to the union before they could be hired). It also allowed states to pass right-to-work laws banning the union shop (in which employees were required to join the union after they were hired in order to keep their jobs). Taft-Hartley also included provisions for handling strikes that threatened the nation's health and safety, and made featherbedding and secondary boycotts illegal. This act gave more power to management. The Labor-Management Reporting and Disclosure Act of 1959 (also known as the Landrum-Griffin Act) guaranteed the rights of individual union members to participate in union meetings, nominate candidates for union office, and vote in union elections. This law also gave union members the right to examine union records and accounts and required unions to make annual financial reports to the U.S. Department of Labor. The major goals of this act were to clean up union corruption and make unions more responsive to their members. Difficulty: 3 Hard Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

288) Explain the difference between closed, open, union, and agency shop agreements. What impact did the Taft-Hartley Act have on the use of closed and union shop arrangements? Answer: Under a union shop agreement, the firm can hire anyone it wishes to hire, but workers must join the union within a specified period of time (usually 30, 60, or 90 days) to keep their jobs. The Taft-Hartley Act recognized the legality of this arrangement, but allowed individual states to ban union shops by passing right-to-work laws. (At the present time, 23 states have passed right-to-work laws.) In open shop agreements, union membership is voluntary even if a union operates in the workplace. Workers who choose not to join the union do not have to pay union dues, yet share in the same benefits other workers receive. Needless to say, most unions oppose the open shop agreement. An agency shop agreement, like an open shop, allows workers to join a union or not join a union. In an agency shop, however, the workers who do not join must pay a fee to the union. In many instances the union fee is equivalent to the dues paid by members. A closed shop arrangement required workers to belong to the union before they could be hired. The Taft-Hartley Act outlawed this type of arrangement. Difficulty: 3 Hard Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

289) Identify and describe the major tactics used by unions and management when collective bargaining efforts break down. Answer: The primary tactics used by labor are strikes and boycotts. In addition, union members also will sometimes engage in picketing a place of work where a labor management dispute exists. Strikes: Historically, the strike has been the most powerful weapon of organized labor. In a strike workers refuse to go to work and attempt to stop the operations of the company with which they have a dispute. Strikes also focus public opinion on the labor dispute. Strikes tend to be very costly to both labor and management, and often result in hard feelings long after the labor dispute has been resolved. Thus both management and unions attempt to avoid strikes whenever possible and only a small percentage of labor disputes actually result in strikes. Boycotts: Boycotts can be either primary or secondary. In a primary boycott, labor encourages its membership, as well as the general public, not to buy the products of a firm involved in a labor dispute. Secondary boycotts attempt to convince other organizations that do business with a firm that is the subject of a primary boycott to stop their support. Primary boycotts are legal, but the Taft-Hartley Act prohibits secondary boycotts. Although strikes and boycotts are the major weapons used by unions, some students may also note that unions may also use picketing. This refers to having workers walk around the outside of the organization where a dispute exists, carrying signs and talking to the public about their issues and concerns. The idea is to call attention to the union's position and gain public support. Picketing often is done in conjunction with a strike, but may also be a tactic used as an informational tool even before a strike occurs. The most important tactics of management are lockouts, injunctions, and hiring strikebreakers. Lockouts: Management can try to put pressure on workers by temporarily closing the business, thus denying workers employment. Lockouts are not used very often in labor disputes today. Injunctions: An injunction is a court order directing someone to do something or refrain from doing something. Management commonly uses this tactic to get striking workers back to work, to limit picketing in front of a place of business, or to prevent other union practices that could be considered detrimental to the public welfare. The Norris-LaGuardia Act states that a court can only issue such an injunction if the company can show "just cause," such as the possibility of violence or the destruction of property.

Strikebreakers: When workers go out on strike, firms can hire replacement workers who are referred to as strikebreakers (or "scabs" by the striking workers). This tactic is used more frequently today than in the past. President Reagan used strikebreakers during the air traffic controllers' strike in 1981. Difficulty: 3 Hard Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

290) Identify and discuss three controversial employee-management issues. Answer: The text covers a large number of controversial issues. Any three of the following issues would be acceptable: ● Executive compensation—how much is too much? The average CEO of a major U.S. corporation makes about $10 million while the average worker makes $38,000, and executive compensation often rises even when the company performs poorly. ● Pay equity—The Equal Pay Act of 1963 requires companies to give equal pay to men and women who do the same job, yet in the U.S. today, women earn close to 80 percent of what men earn, though the disparity varies considerably by profession. As women continue to comprise a large percentage of the labor force, pay equity promises to be a challenging issue. ● Sexual harassment—what constitutes sexually harassing behavior? How can firms discourage such behavior? Sexual harassment is still the largest problem in the workplace. ● Child care costs continue to rise as single-parent and two-income households continue to grow. Employers are concerned because absences related to child care already cost American businesses billions of dollars annually, and employee child care is controversial around the question of who should pay for child care services. Some workers argue that single workers and single-income families should not subsidize child care for dual-income families. ● Elder care is rapidly becoming more important than the child care issue as the workforce ages. Companies are now offering employee assistance programs; however, they still have a long way to go to catch up with childcare benefits. ● The problems and dangers associated with drug and alcohol use have led many companies to test workers and job applicants for substance abuse. ● Workplace violence is a growing trend. OSHA reports that workplace homicides account for 8 percent of all workplace deaths. Proactive companies hold focus groups to invite employee input, hire managers with strong interpersonal skills, and employ skilled consultants to deal with any growing potential of workplace violence. Difficulty: 3 Hard Topic: Controversial Employee-Management Issues Learning Objective: 12-05 Assess some of todays controversial employee management issues, such as executive compensation, pay equity, child care and elder care, drug testing, and violence in the workplace. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

291) Union membership has declined in recent years. What has led to this decline and what can unions do to turn this trend around? Answer: The decline in union membership has resulted from a number of trends over the past several decades. The manufacturing sector, where unions were strongest in the past, is no longer the dominant sector of the economy. Today the U.S. economy is much more service oriented. The workforce is becoming increasingly diverse. Management styles are different, labor laws have changed, and global competition is tougher. All of these changes have caused many critics to state that traditional unions are no longer in touch with current needs and issues. For example, some critics maintain that improved legal protection and more democratic management styles have eliminated the harsh treatment and abuse that unions have cited in the past to justify their role. In order to grow and remain viable, unions must recognize and adapt to changes in the economic, legal, and social environment in which they operate. They will need to adapt to a workforce that is becoming increasingly culturally diverse, white-collar, female, and foreign-born. Another key to long-term union success is to recognize that it is vital for U.S. firms to remain competitive with foreign firms. Unions have already begun to work with management to find ways to train workers, redesign jobs, and adapt to the increasingly diverse workforce to improve U.S. competitiveness in key industries. Difficulty: 3 Hard Topic: Objectives of Labor Unions Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

Mini-Case The workers at Endrun Corporation are not affiliated with a union. Until recently, the workers felt they were well paid and treated fairly by the company, so they had little interest in seeking union representation. However, worker morale at Endrun has declined steadily since the board of directors fired the old CEO last year and replaced him with Ty Runt, a no-nonsense, autocratic manager with a reputation for cutting costs. As soon as he took over, Ty fired other members of the old top management team and replaced them with people who shared his views. Together, the new management team made a series of moves that did not sit well with Endrun's workers. First, they announced changes in work procedures designed to speed up the production line. Many workers complained that the new methods cut corners and were unsafe, but management refused to listen. A few months after changing work methods, the company told workers that it was reducing their health benefits. This led to even greater worker unrest. Finally, just a few weeks ago, workers received word that the wages of all production-line employees would be cut by 6 percent. Many employees felt this was the last straw, especially since the company's board of directors recently approved big salary increases and more lucrative stock option plans for Ty and his management team. A spokesperson for the board explained that the raises were justified because of the management team's "outstanding efforts to reduce costs, increase productivity, and improve the company's profits." Several disgruntled employees, led by Ima Striker and Boyd Cotter, now believe it is time to obtain union representation. Top managers at the company have hinted that workers who actively participate in the union campaign may be among the first workers laid off if the company decides to downsize. Ima and Boyd are not intimidated by these management threats. "I wish we didn't have to do this," Ima recently told many of her fellow workers at the plant. "But someone has to stop Ty Runt and his team from ruining our jobs." 292) Ima, Boyd, and their fellow employees at Endrun work on an assembly line and do not have a specialized skill. If they are successful in their quest to set up a union, they would probably be represented by a(n) ________ union. A) craft B) industrial C) freelance D) traditional Answer: B Explanation: An industrial union consists of unskilled and semiskilled workers in massproduction industries such as automobile manufacturing and mining. Difficulty: 3 Hard Topic: History of Organized Labor Learning Objective: 12-01 Trace the history of organized labor in the United States. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

293) The steps Ima, Boyd and their fellow workers must take to get the union legally recognized as the authorized bargaining agent are parts of the ________ process. A) accreditation B) arbitration C) certification D) collective bargaining Answer: C Explanation: The process by which a union is recognized by the NLRB as the authorized bargaining agent for a group of workers is known as certification. Difficulty: 3 Hard Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 294) After gaining union representation, any workers with complaints regarding promotions, layoffs, and job assignments will file a(n) ________ with their shop steward. A) grievance B) arbitration request C) injunction D) yellow-dog contract Answer: A Explanation: A grievance is a charge by employees that management is not abiding by or fulfilling the terms of the negotiated labor-management agreement. Difficulty: 3 Hard Topic: Labor-Management Legislation Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

295) The plant where Ima and Boyd work is located in Illinois, which does not have a right-towork law. If the workers approve the union as their bargaining agent, Boyd wants to get the greatest union membership that is legally possible. Boyd is likely to push for a(n) A) closed shop. B) agency shop. C) union shop. D) sweatshop. Answer: C Explanation: Although a closed shop used to be the strongest type of union security, the TaftHartley Act declared this type of arrangement illegal in 1947. The strongest union security arrangement that is permitted under the Taft-Hartley Act is a union shop. In a union shop, workers do not have to belong to a union before they are hired, but they do have to join the union within a specified time to keep their jobs. Union shops are legal in all states except those that have passed right-to-work laws. Difficulty: 3 Hard Topic: Objectives of Labor Unions Learning Objective: 12-03 Outline the objectives of labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 296) Ty Runt has always taken a hard line against unionization efforts. Two years ago, when workers at his previous company tried to obtain union representation, the company closed down the plant and refused to let employees work until they abandoned their efforts to form a union. This management tactic is called a(n) A) management strike. B) secondary boycott. C) injunction. D) lockout. Answer: D Explanation: The lockout is a management tactic designed to put pressure on workers by temporarily closing the business. Difficulty: 3 Hard Topic: Tactics Used by Labor and Management During Conflicts Learning Objective: 12-04 Describe the tactics used by labor and management during conflicts, and discuss the role of unions in the future. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

297) If management tries to threaten or punish Ima and Boyd for their efforts to gain union representation, the two workers could ask the ________ to investigate these unfair labor practices. A) National Labor Relations Board B) Bureau of Labor-Management Relations C) Department of Justice D) Federal Trade Commission Answer: A Explanation: The National Labor Relations Board was established by the Wagner Act to oversee labor-management relations and the union certification (and decertification) process. The NLRB is empowered to investigate allegations of unfair treatment of workers who participate in union activities. Difficulty: 3 Hard Topic: Labor-Management Legislation Learning Objective: 12-02 Discuss the major legislation affecting labor unions. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

Understanding Business, 12e (Nickels) Chapter 13 Marketing: Helping Buyers Buy 1) Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have a value for customers, clients, partners, and society at large. Answer: TRUE Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) The activities of marketers depend on what needs to be done to satisfy consumer wants and needs, in other words, helping the buyer buy. Answer: TRUE Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) In the evolution of marketing, the production era assumed an unlimited market. Answer: TRUE Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

4) The four eras of the evolution of marketing are (1) production, (2) selling, (3) advertising, and (4) stakeholder relationships. Answer: FALSE Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 5) The focus of the production era was on distribution and advertising. Answer: FALSE Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) The tremendous demand for consumer goods and services after World War II helped launch the production era of marketing. Answer: FALSE Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 7) In the production era the greatest marketing need was for distribution and storage. Answer: TRUE Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

8) During the selling era, businesses turned from an emphasis on production to an emphasis on selling. Answer: TRUE Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9) The marketing concept has three parts: (1) a consumer orientation, (2) a service orientation, and (3) an advertising orientation. Answer: FALSE Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10) In the evolution of marketing, the marketing concept era emphasized selling and advertising in an effort to persuade consumers to buy existing products. Answer: FALSE Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

11) The marketing concept emphasizes that everyone from the president of the firm to the delivery people should be customer oriented. Answer: TRUE Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) The marketing concept was used heavily by business when it was first suggested in the 1950s. Answer: FALSE Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 13) Customer relationship management (CRM) is the process of learning as much as possible about customers and doing everything you can to satisfy them. Answer: TRUE Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

14) The idea behind customer relationship management is to enhance customer satisfaction and stimulate long-term customer loyalty. Answer: TRUE Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) Because the marketing concept emphasizes a profit orientation, marketing has not been used successfully by nonprofit organizations. Answer: FALSE Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 16) The primary focus of marketing today is on selling and advertising. Answer: FALSE Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 17) During the early 1900s, businesses emphasized as much as possible about their customers and doing everything to satisfy them. Answer: FALSE Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 5 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

18) Outstanding service after the sale was a primary focus of businesses during the selling era. Answer: FALSE Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 19) After World War II, the tremendous demand for goods and services among the returning veterans allowed businesses to sell whatever they produced without having to worry about what the competition was doing. Answer: FALSE Explanation: Competition for the consumer's dollar was fierce after World War II. This competition forced businesses to be more responsive to consumers, leading to the emergence of the marketing concept. Difficulty: 2 Medium Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) It is the job of marketers today to persuade consumers to buy the goods and services those marketers have available to sell. Answer: FALSE Explanation: Although marketers in the 1920s might agree with this statement, marketing today is about as much as possible about customers and then exceeding their expectations and helping them buy. Difficulty: 2 Medium Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

21) Social media is having a minimal effect on the emerging era of mobile/on-demand marketing. Answer: FALSE Explanation: The digital age is increasing consumer power and this allows consumers to share information via many platforms, including social media. Difficulty: 2 Medium Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 22) The Connecting Through Social Media box shows marketers are increasing their customer reach through creative ways, like Snapchat filters. Answer: TRUE Explanation: When celebrities use a sponsored filter, marketers have the opportunity to reach 150 million daily users in a fun way without looking like a sponsored advertisement. Difficulty: 2 Medium Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 23) The marketing team at Classic Creatives emphasizes marketing the goods that will earn the company a profit. This focus on profit orientation shows that Classic Creatives has not yet adopted the marketing concept that emphasizes a customer orientation rather than a profit orientation. Answer: FALSE Explanation: The marketing concept has three parts: a customer orientation, a service orientation, and a profit orientation. The customer orientation and profit orientation components are not mutually exclusive, since firms are unlikely to earn a profit unless they are responsive to the needs of their customers. Difficulty: 3 Hard Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

24) The sales team at the Good Life Appliances works hard to develop a close relationship with their customers and to provide satisfaction even after the sale. These efforts by Good Life's sales employees are part of the marketing process. Answer: TRUE Explanation: Today, marketing has adopted the concept of customer relationship management. This concept calls for as much about customers as possible and doing everything possible to satisfy them with goods and services over time. Difficulty: 3 Hard Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 25) Muffie's Muffler Repair finds out what customers want and then determines how to best meet their needs. Based on feedback from her customers, Muffie provides a written estimate before any work is done, offers a more comprehensive guarantee than her competitors, and calls customers after completion to make sure they are satisfied. These efforts suggest she is applying the concepts of customer relationship management. Answer: TRUE Explanation: Customer relationship management is a concept that calls for learning as much as possible about customers and doing what it takes to satisfy and even delight them. Difficulty: 3 Hard Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

26) The Fairness Foundation is a nonprofit organization that helps underprivileged children. As a nonprofit organization, it does not perform marketing functions, since these functions are designed to help organizations earn a profit. Answer: FALSE Explanation: Although the marketing concept does emphasize a profit orientation, marketing functions must be performed by almost all organizations, including those that do not seek a profit. Difficulty: 3 Hard Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 27) The main concern of the marketing mix is to please firm's stockholders. Answer: FALSE Difficulty: 1 Easy Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 28) Placing a product in a location where people will buy it is part of the marketing mix. Answer: TRUE Difficulty: 1 Easy Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) Designing a want-satisfying product is part of the marketing mix. Answer: TRUE Difficulty: 1 Easy Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

30) Setting a price for the product or service is one element of the marketing mix. Answer: TRUE Difficulty: 1 Easy Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 31) The primary factors involved in the marketing mix are sometimes called the 5 intangibles of marketing. Answer: FALSE Difficulty: 1 Easy Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32) The marketing manager's job is to design a program that effectively combines the ingredients of the marketing mix. Answer: TRUE Difficulty: 1 Easy Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 33) The four elements of the marketing mix are product, production, price, and predictability. Answer: FALSE Difficulty: 1 Easy Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

34) Providing people with a description of a potential new good or service and asking if the idea appeals to them are key parts of the marketing process. Answer: TRUE Difficulty: 1 Easy Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) Concept testing involves placing a product in a place where consumers will buy it. Answer: FALSE Difficulty: 1 Easy Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) A test market refers to the people in a market that will be least likely to use the product or service the marketer is offering. Answer: FALSE Difficulty: 1 Easy Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 37) A brand name is generally thought of as part of the product. Answer: TRUE Difficulty: 1 Easy Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

38) Test marketing involves developing an accurate description of the product and asking people if the proposed product appeals to them. Answer: FALSE Difficulty: 1 Easy Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39) The marketing process includes decisions about the best way to get the product to the consumer. Answer: TRUE Difficulty: 1 Easy Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 40) Intermediaries are firms in the middle of a series of organizations that distribute goods from producers to consumers. Answer: TRUE Difficulty: 1 Easy Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 41) Promotion includes personal selling, publicity, and word-of-mouth efforts to persuade people to buy a firm's goods or services. Answer: TRUE Difficulty: 1 Easy Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

42) Unlike advertising, which is part of the promotional component of the marketing mix, personal selling is considered to be part of the distribution function. Answer: FALSE Difficulty: 1 Easy Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 43) The last step in the marketing process often includes building a continuing relationship with customers. Answer: TRUE Difficulty: 1 Easy Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44) Marketers are concerned with selling goods and services, and therefore are not involved in designing the products their firm will sell. Answer: FALSE Explanation: One of the four elements of the marketing mix is the design of a want-satisfying product. Difficulty: 2 Medium Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

45) Marketing involves developing and promoting a firm's products and allowing the firm's purchasing department to make all distribution and transportation decisions. Answer: FALSE Explanation: One of the 4 Ps in the marketing mix is "place" which refers to the marketer's role in distributing goods and services. Difficulty: 2 Medium Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 46) The most important component of the marketing mix is the actual design and production of the product. Answer: FALSE Explanation: The marketing mix involves decisions about product development, pricing, distribution, and promotion. However, the actual production process is not part of marketing. Difficulty: 2 Medium Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 47) Getting the product from the producer to the consumer is a production-related process and not related to the marketing mix. Answer: FALSE Explanation: Distribution is one component in the marketing mix. Difficulty: 2 Medium Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

48) Marketing focuses on the pricing and distribution of want-satisfying products, as well as determining the best way to promote the products to consumers. Answer: TRUE Explanation: Marketing is concerned with product, price, promotion, and distribution. These are the major components of the marketing mix for the firm. Difficulty: 2 Medium Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 49) Marketing is a limited activity, performed when a business is first established and when it introduces a new product to the market. Once a firm has fine-tuned its marketing activities, it can turn its attention elsewhere. Answer: FALSE Explanation: Marketing is an ongoing process. Companies must continually adapt to changes in consumer wants and needs in order to remain competitive. Difficulty: 2 Medium Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 50) For safety's sake, Marshall Metals produces as many products as possible since customers are not a good source of informing the organization what they want to buy. Answer: FALSE Explanation: Customers are very important sources in telling the firm what to produce to meet their needs. Difficulty: 3 Hard Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

51) Mobile apps, like Rewards4You, engage users by combining the most basic elements of social media. These apps are a great benefit to both customers and businesses. Customers get a special deal while businesses are able to get their names out to the friends of users. This is an effective form of promotion. Answer: TRUE Explanation: An effective promotional strategy informs people about products or services and motivates them to buy. Apps help the businesses get their name out there. Difficulty: 3 Hard Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 52) The marketing mix provides a detailed market analysis to determine opportunities and challenges as well as information needed to make good decisions. Answer: FALSE Difficulty: 1 Easy Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 53) Marketing research helps determine what customers have purchased in the past, what situational changes have occurred to change consumer preferences, and what consumers are likely to want in the future. Answer: TRUE Difficulty: 1 Easy Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

54) Effective marketing research involves listening to customers, employees, shareholders, and other stakeholders. Answer: TRUE Difficulty: 1 Easy Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 55) The first step in the marketing research process is to collect relevant data. Answer: FALSE Difficulty: 1 Easy Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 56) Secondary data should be gathered first because this type of information is less expensive to obtain. Answer: TRUE Difficulty: 1 Easy Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 57) Secondary data consists of information that has already been compiled by others and is published in journals and books or made available online. Answer: TRUE Difficulty: 1 Easy Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

58) A phone or online survey is an example of primary data collection. Answer: TRUE Difficulty: 1 Easy Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 59) A focus group consists of a small group of people who meet, under the direction of a discussion leader, to communicate their opinions about an organization, its products, or other issues. Answer: TRUE Difficulty: 1 Easy Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 60) Marketers use very detailed surveys to gather secondary data. Answer: FALSE Difficulty: 1 Easy Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 61) The final step of the marketing research process involves selecting from several alternative strategies, and performing follow-up research to see if results were as expected. Answer: TRUE Difficulty: 1 Easy Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

62) Marketing research is a process that most firms complete once a year, in order to gather information for the firm's budgeting process. Answer: FALSE Difficulty: 1 Easy Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 63) In the marketing research process, marketers should examine alternative solutions before making a recommendation. Answer: TRUE Difficulty: 1 Easy Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 64) Marketing research needs to be an ongoing process at a firm since changes in the marketplace and among consumers is a continuous process. Answer: TRUE Difficulty: 1 Easy Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 65) Government publications, such as the Statistical Abstract of the United States Survey of Current Business Census of Retail Trade, are sources of detailed primary data. Answer: FALSE Difficulty: 1 Easy Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

66) The secondary data collected in the research process does not need to be carefully evaluated since it's always collected from reliable secondary sources. Answer: FALSE Explanation: The secondary data collected in the research process might be turned into useful information. However, since this data has been collected from outside sources and can often be old, companies must be very careful relying on secondary data. Difficulty: 2 Medium Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 67) Because accurate and timely market information is vital to a firm's success, businesses should budget whatever it takes to get the best data available. Answer: FALSE Explanation: Research can be very expensive. The decision about how much to spend obtaining market information must compare with the need for the additional information against the costs the firm must incur to obtain that information. Difficulty: 2 Medium Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 68) Marketing research usually begins with secondary data because it is more accurate and more relevant than primary data. Answer: FALSE Explanation: Marketers often do look at secondary data first, but not because it is more accurate and relevant. The main advantage of secondary data is that it is already published and is less expensive than primary data. Difficulty: 2 Medium Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

69) Whenever available, marketers should rely exclusively on primary data because it is much more accurate than secondary data. Answer: FALSE Explanation: When doing research, marketers must be aware of the trade-off between information needs and the cost. Marketers can reduce costs by looking for relevant secondary data before gathering primary data. Since secondary data has already been published, it is available without the additional effort and expense needed to obtain primary data. Difficulty: 2 Medium Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 70) Overheard Communications just wrapped up a phone survey of several of their current customers. In addition, they also plan to hold detailed personal interviews with about 15 additional customers. Both the phone survey and the interviews are sources of primary data for Overheard. Answer: TRUE Explanation: Primary data are facts and figures not previously published that marketers gather for their own use. Telephone, online, and mail surveys and personal interviews are common ways to obtain primary data. Difficulty: 3 Hard Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

71) As a personal trainer at a local gym, Marie has been invited by a publisher to meet with nine other people to discuss a new concept for a health and fitness magazine. A member of the publisher's marketing staff will be at the meeting to guide the discussion and to record the participants' comments and suggestions. If Marie accepts the invitation, she will be participating in a focus group. Answer: TRUE Explanation: A focus group is a popular research method in which a small group of people meet under the direction of a discussion leader to communicate their opinions about an organization, its products, or other important issues. Difficulty: 3 Hard Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 72) Environmental scanning is a green concept that involves the tracking of pollution generated by a firm and its impact on society. Answer: FALSE Difficulty: 1 Easy Topic: The Marketing Environment Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 73) The process of identifying the factors that can affect marketing success is called environmental scanning. Answer: TRUE Difficulty: 1 Easy Topic: The Marketing Environment Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

74) Population growth and changing demographics are two elements of a firm's sociocultural environment. Answer: TRUE Difficulty: 1 Easy Topic: The Marketing Environment Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 75) Consumer databases, blogs, and social network sites are some of the technological factors that are used by marketers to develop goods and services. Answer: TRUE Difficulty: 1 Easy Topic: The Marketing Environment Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 76) Successful marketers adjust their product offerings as the level of economic activity changes. Answer: TRUE Difficulty: 1 Easy Topic: The Marketing Environment Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 77) The two major types of markets in business are the consumer market and the government market. Answer: FALSE Difficulty: 1 Easy Topic: B2B Marketing Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 23 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

78) The business-to-business (B2B) market involves the marketing of goods and services to institutions that sell, rent, produce, or supply goods to others. Answer: TRUE Difficulty: 1 Easy Topic: B2B Marketing Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 79) When classifying a product as a consumer product or a B2B product, the primary factor to consider is the financial status of the buyer. Answer: FALSE Difficulty: 1 Easy Topic: B2B Marketing Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 80) Price is the determining factor as to whether a good is classified as a consumer product or a B2B product. Answer: FALSE Difficulty: 1 Easy Topic: B2B Marketing Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 81) The purchase of a cash register is likely a B2B product. Answer: TRUE Difficulty: 1 Easy Topic: B2B Marketing Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 24 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

82) The consumer market consists of all the individuals or organizations that want goods and services in order to produce other goods and services to sell, rent, or supply to others. Answer: FALSE Difficulty: 1 Easy Topic: B2B Marketing Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 83) A cup of yogurt is an example of a product that is always classified as a consumer good. Answer: FALSE Explanation: The determining factor as to classification of a good is the buyer's reason for buying a product and the way it will be used. A cup of yogurt could be classified a B2B good if it is bought by a restaurant to resell to its customers. Difficulty: 2 Medium Topic: B2B Marketing Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 84) Products such as computers, tablets, telecommunication equipment, smartphones, and other manufactured or mass-produced items are always classified as B2B products. Answer: FALSE Explanation: The determining factor as to classification of a good is the buyer's reason for buying a product and the way it will be used. Computers, telecommunications equipment, PDAs could easily fall into the category of consumer products. Difficulty: 2 Medium Topic: B2B Marketing Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

85) Susan, a manager for Metallic Masters Manufacturing, spends much of her time reviewing the global, technological, sociocultural, competitive, and economic factors that can influence the success of her company's marketing efforts. Susan's efforts indicate that she is involved with environmental scanning. Answer: TRUE Explanation: Environmental scanning is the process of identifying the factors than can affect marketing success. Difficulty: 2 Medium Topic: The Marketing Environment Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 86) Market segmentation is the process of dividing a market into several groups whose members have dissimilar characteristics. Answer: FALSE Difficulty: 1 Easy Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 87) Selecting which groups an organization can serve profitably is called target marketing. Answer: TRUE Difficulty: 1 Easy Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

88) With careful attention to controlling costs and quality, businesses can successfully satisfy consumers with a standardized product for different markets. Answer: FALSE Difficulty: 1 Easy Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 89) Target marketing is a business strategy that focuses a firm's marketing efforts toward a potentially profitable segment of a larger market. Answer: TRUE Difficulty: 1 Easy Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 90) Because consumers differ in age, education, income, and tastes, companies will be more likely to succeed if they target a segment of a market and develop goods and services specially tailored to that group. Answer: TRUE Difficulty: 1 Easy Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

91) Firms developing products for a narrow segment of a market are less likely to profitably satisfy that group's needs. Answer: FALSE Difficulty: 1 Easy Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 92) Demographic segmentation divides a market into segments based on the customer's location. Answer: FALSE Difficulty: 1 Easy Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 93) Psychographic segmentation involves dividing a market into segments based on lifestyle, values, attitudes, or interests. Answer: TRUE Difficulty: 1 Easy Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 94) Separating a market by the amount of the product consumed is known as volume segmentation. Answer: TRUE Difficulty: 1 Easy Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 28 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

95) The strategy of focusing on small but profitable market segments is called micro marketing. Answer: FALSE Difficulty: 1 Easy Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 96) One-to-one marketing refers to developing a unique mix of goods and services for each individual customer. Answer: TRUE Difficulty: 1 Easy Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 97) Travel agencies demonstrate a one-to-one marketing strategy when they develop unique vacation packages for individual customers. Answer: TRUE Difficulty: 1 Easy Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 98) One-to-one marketing is seldom used in B2B markets. Answer: FALSE Difficulty: 1 Easy Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

99) Mass marketing means developing products and promotions using little segmentation. Answer: TRUE Difficulty: 1 Easy Topic: Relationship Marketing Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 100) A basic principle of relationship marketing is that firms should concentrate on producing and promoting products that appeal to large groups of people. Answer: FALSE Difficulty: 1 Easy Topic: Relationship Marketing Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 101) Relationship marketing makes heavy use of media such as television, radio, and newspapers, to convince large groups of customers to buy a standardized product. Answer: FALSE Difficulty: 1 Easy Topic: Relationship Marketing Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 102) Relationship marketing moves away from mass production and toward custom-made goods and services. Answer: TRUE Difficulty: 1 Easy Topic: Relationship Marketing Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

103) Relationship marketing is rather easy to implement in the B2B market but almost impossible to use in the consumer market due to the sheer size of the consumer market. Answer: FALSE Difficulty: 1 Easy Topic: Relationship Marketing Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 104) Firms adopting a relationship marketing strategy often establish an online presence to communicate with customers. Answer: TRUE Difficulty: 1 Easy Topic: Relationship Marketing Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 105) Relationship marketing depends on understanding individual consumers and responding quickly to their wants and needs. Answer: TRUE Difficulty: 1 Easy Topic: Relationship Marketing Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

106) Consumer behavior is influenced by the attitudes, values, and ways of doing things that are passed from one generation to the next. Answer: TRUE Difficulty: 1 Easy Topic: The Consumer Buying Process Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 107) The set of values, attitudes, and ways of doing things that result from belonging to a certain ethnic, religious, or racial group is called that group's cognitive dissonance. Answer: FALSE Difficulty: 1 Easy Topic: The Consumer Buying Process Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 108) Learning involves changes in an individual's behavior resulting from previous experiences and information. Answer: TRUE Difficulty: 1 Easy Topic: The Consumer Buying Process Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

109) A reference group is society's accepted values, attitudes, and ways of doing things that consumers have to learn. Answer: FALSE Difficulty: 1 Easy Topic: The Consumer Buying Process Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 110) Cognitive dissonance refers to the confusion and frustration people experience when they compare different products they rarely use before making a purchase. Answer: FALSE Difficulty: 1 Easy Topic: The Consumer Buying Process Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 111) In order to be successful, marketers avoid small market segments in favor of larger targets. Answer: FALSE Explanation: Marketers have discovered that small market segments can be very profitable. In fact, niche marketing, which finds small but profitable market segments and designs custommade products for those groups, has become very popular. Difficulty: 2 Medium Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

112) The purpose of market segmentation is to identify the features of a product that will appeal to as many customers as possible. Answer: FALSE Explanation: Market segmentation attempts to divide the overall market into several groups whose members have similar characteristics. Difficulty: 2 Medium Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 113) Using advances in technology to maintain databases of customer information is more important for firms involved in mass marketing than it is for those firms using relationship marketing. Answer: FALSE Explanation: Mass marketing tries to develop products that appeal to large groups of consumers without customizing them. Thus the individual preferences of consumers are not critical to firms using mass marketing. However, in relationship marketing the goal is to retain customers over time by offering products that are customized to precisely meet their needs. This requires the firm to know more about individual customers. Hence, maintaining a database of customer information is critical to the relationship marketing approach. Difficulty: 2 Medium Topic: Relationship Marketing Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

114) In general, the broader the market a firm tries to serve, the better its chances of success. Answer: FALSE Explanation: The best segmentation strategy is to use all the variables to come up with a consumer profile that's sizable, reachable, and profitable. On the one hand, that may mean not segmenting the market at all and instead going after the total market. On the other hand, it may mean going after smaller and smaller segments. Difficulty: 2 Medium Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 115) Elodie is a sales representative for a textbook publisher. She spends a great deal of time visiting college professors who have already adopted one of her books for use in her classes. She makes sure they have all the supplements to the book they need and are informed about when new editions will be available. Elodie's emphasis on keeping her existing customers satisfied is consistent with the philosophy of relationship marketing. Answer: TRUE Explanation: The goal of relationship marketing is to keep individual customers over time by offering them new products that exactly meet their requirements. Difficulty: 3 Hard Topic: Relationship Marketing Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

116) The management at Slick Automotive has replaced their outdated marketing approach with an approach that emphasizes relationship marketing. Under this new approach, Slick's salespeople will be expected to devote less time to current customers and a larger share of their time searching for new customers. Answer: FALSE Explanation: The goal of relationship marketing is to keep individual customers over time by offering them new products that exactly meet their requirements, so the salespeople at Slick Automotive would be encouraged to spend more time contacting existing customers and satisfying their wants. Difficulty: 3 Hard Topic: Relationship Marketing Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 117) The company website for SharpSmart Computers is a place for customers to get the latest information about new products, special offers, and technical support. The company has also added a chat function that allows customers to communicate with representatives immediately. SharpSmart's approach indicates that it is trying to utilize relationship marketing. Answer: TRUE Explanation: Relationship marketing tends to lead away from mass production and toward custom-made goods and services. One-way messages in mass media give way to a personal dialogue among participants. This may occur within a well-designed website. Difficulty: 3 Hard Topic: Relationship Marketing Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

118) Kaden bought an expensive sports car last week. Immediately after the purchase, he worried that he paid too much, and that a less expensive model with better gas mileage would have been a wiser choice. Marketers refer to the doubts Kaden is experiencing as post-purchase stress syndrome. Answer: FALSE Explanation: Marketers use the term cognitive dissonance to refer to the doubts consumers often experience after making a purchase. Difficulty: 3 Hard Topic: The Consumer Buying Process Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 119) Mallory wants the celebrity life. She often changes her dress, speech, and mannerisms in response to the latest trends. She even supports the same social causes her favorite stars support. Mallory's behavior suggests that people in show business are an important reference group for her. Answer: TRUE Explanation: A reference group is a group that an individual uses as a reference point in the formation of attitudes, values, and behavior. Difficulty: 2 Medium Topic: The Consumer Buying Process Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 120) B2B marketers include manufacturers, retailers, hospitals, and the government. Answer: TRUE Difficulty: 1 Easy Topic: B2B Marketing Learning Objective: 13-06 Compare the business-to-business market and the consumer market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

121) The B2B market involves fewer trades and fewer dollars spent than the consumer market because there are so many more consumers than there are businesses. Answer: FALSE Difficulty: 1 Easy Topic: B2B Marketing Learning Objective: 13-06 Compare the business-to-business market and the consumer market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 122) Marketing strategies used effectively in the business-to-business markets are exactly the same as strategies used by marketers in consumer markets. Answer: FALSE Difficulty: 1 Easy Topic: B2B Marketing Learning Objective: 13-06 Compare the business-to-business market and the consumer market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 123) In B2B markets, sellers rely on wholesalers and retailers to efficiently distribute their products. Answer: FALSE Difficulty: 1 Easy Topic: B2B Marketing Learning Objective: 13-06 Compare the business-to-business market and the consumer market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 124) The number of customers in B2B markets is quite large compared to the number of customers in the consumer market. Answer: FALSE Difficulty: 1 Easy Topic: B2B Marketing Learning Objective: 13-06 Compare the business-to-business market and the consumer market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

125) Buyers in the B2B market tend to make more rational decisions than buyers in the consumer market. Answer: TRUE Difficulty: 1 Easy Topic: B2B Marketing Learning Objective: 13-06 Compare the business-to-business market and the consumer market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 126) There is much more emphasis on personal selling in the consumer markets than in the B2B markets. Answer: FALSE Difficulty: 1 Easy Topic: B2B Marketing Learning Objective: 13-06 Compare the business-to-business market and the consumer market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 127) B2B markets tend to be geographically concentrated. Answer: TRUE Difficulty: 1 Easy Topic: B2B Marketing Learning Objective: 13-06 Compare the business-to-business market and the consumer market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 128) Marketing goods and services to the B2B market relies more heavily on advertising than marketing efforts aimed toward the consumer market. Answer: FALSE Explanation: The strategies used in B2B markets are often quite different from those used in the consumer market because the buyers are so different. B2B buyers expect personal service, while advertising, a nonpersonal promotional strategy, can more effectively reach the large number of customers in the consumer market. Difficulty: 2 Medium Topic: B2B Marketing Learning Objective: 13-06 Compare the business-to-business market and the consumer market. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

129) While most students find marketing an interesting and meaningful subject, one drawback of majoring in marketing is that it prepares students for only a narrow range of career options. Answer: FALSE Explanation: Marketing offers a wider variety of career choices than most business disciplines. Difficulty: 2 Medium Topic: The Evolution of Marketing Learning Objective: 13-06 Compare the business-to-business market and the consumer market. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 130) Romeo accepted a sales position at SharpSmart Computers. Before joining SharpSmart, Romeo worked in the electronics department of a retail store and sold personal computers and tablets to consumers. In his new job, Romeo will sell personal computers and tablets to businesses. Despite the fact that the products sold to these two customer groups are quite similar, Romeo is likely to find that purchasing decisions by buyers in the two markets will be influenced by different factors. Answer: TRUE Explanation: Buyers in the business-to-business market tend to be more rational than buyers in the consumer market. Industrial buyers often use buying specifications and carefully weigh the "total product offer" including quality, price, and service. Difficulty: 3 Hard Topic: B2B Marketing Learning Objective: 13-06 Compare the business-to-business market and the consumer market. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 131) ________ is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. A) Selling B) Advertising C) Marketing D) Mixing markets Answer: C Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 40 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

132) Which of the following marketing eras refers to the time period from our country's first settlers through the early 1900s? A) production era B) selling era C) marketing era D) customer relationship era Answer: A Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 133) The business philosophy of "produce as much as you can because there is a limitless market" is consistent with which of the following marketing eras? A) production era B) selling era C) marketing era D) customer relationship era Answer: A Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

134) Which of the following describes the marketing era immediately after the development of mass-production assembly lines? A) production era B) selling era C) marketing era D) customer relationship era Answer: B Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 135) During the ________ era, the prevalent business philosophy turned from an emphasis on production to an emphasis on advertising and selling. A) prefabrication B) selling C) mass communication D) customer relationship Answer: B Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

136) The significant increase in consumer demand following World War II marked the beginning of the A) production era. B) selling era. C) marketing concept era. D) customer relationship era. Answer: C Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 137) The ________ is based on three elements: (1) a customer orientation, (2) a service orientation, and (3) a profit orientation. A) mercantile philosophy B) hierarchy of needs C) relationship approach to marketing D) marketing concept Answer: D Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

138) According to the ________ concept, a firm must (1) find out what customers want and provide it, (2) make sure everyone in the organization has customer satisfaction as an objective, and (3) provide goods and services that will earn a profit. A) stakeholder relationship B) consumerism C) marketing D) demand-side Answer: C Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 139) Firms that have adopted ________ seek to do more than simply sell a product; they seek to learn as much as possible about their customers in order to satisfy them with goods and services over time. A) nonprofit marketing B) customer relationship management C) management by objectives D) the marketing mix Answer: B Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

140) A ________ orientation refers to the process of determining the wants and needs of buyers and then providing goods and services to meet or exceed their expectations. A) market B) profit C) customer D) production Answer: C Difficulty: 1 Easy Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 141) Which of the following is a part of the marketing concept? A) a consumer orientation B) avoidance of risk C) financial return orientation D) emphasis on efficient production Answer: A Explanation: The marketing concept has three basic components. They are (1) consumer orientation, (2) total organizational effort toward consumer satisfaction, and (3) profit orientation. Difficulty: 2 Medium Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

142) Which of the following statements is most consistent with today's views on effective marketing? A) "There's a sucker born every minute." B) "Find out what your competition does and do it better." C) "A good promotional campaign can sell anything." D) "Learn about your customers and exceed their expectations." Answer: D Explanation: Since the 1990s, marketing has focused on developing a relationship with customers by learning as much as possible about their wants and needs. Today marketers try to enhance customer satisfaction and stimulate long-term customer loyalty. Difficulty: 2 Medium Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 143) Comparing the business practices of the 1950s to those of today indicates that today's marketing managers A) have a more ambitious goal of not just satisfying customers, but of exceeding their expectations. B) are much more focused on production and mass marketing. C) put less emphasis on earning a profit, since doing so makes it harder to satisfy the needs of the firm's stakeholders. D) operate essentially the same as their predecessors. Answer: A Explanation: Today, firms are trying to go beyond satisfying customers by forging close relationships with customers to provide products that exactly meet their requirements and a level of service that both surprises and pleases them. Difficulty: 2 Medium Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

144) Which of the following statements about marketing is the most accurate? A) Because nonprofit organizations are not motivated by profit, marketing activities are not consistent with their goals. B) To be successful, marketers must be able to persuade consumers to purchase goods they don't really need. C) Once a product is sold, focus on the next customer. D) Marketers recognize the need to learn as much as possible about customers and do everything possible to satisfy them. Answer: D Explanation: Starting in the 1990s, marketing managers have embraced customer relationship management, which emphasizes learning as much as possible about customers and using this knowledge to do everything possible to exceed their expectations. Difficulty: 2 Medium Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 145) A key element of customer relationship management is to A) keep the price of goods as low as possible. B) develop a strategy to achieve the largest possible market share. C) allow customers to participate in the management decisions of the firm. D) learn as much as possible about customers. Answer: D Explanation: Customer relationship management attempts to learn as much as possible about customers in order to do a better job of providing goods and services that satisfy and even delight them over time. Difficulty: 2 Medium Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

146) A comparison of the marketing concept and customer relationship management indicates that customer relationship management A) and the marketing concept are in fact identical. B) attempts to improve profits by keeping quality high, while the marketing concept attempts to improve profits by a careful design of the promotional mix. C) turns the marketing concept upside down. The marketing concept emphasized that marketing was the most important function performed by a firm, but customer relationship management views management to be the most important function. D) extends the marketing concept by calling for the firm to learn more about its customers so that it not only satisfies them, but exceeds their expectations over time. Answer: D Explanation: Customer relationship management is an extension of the marketing concept. It calls for learning as much as possible about customers in order to satisfy them with goods and services over time. Difficulty: 2 Medium Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 147) Betty's Blossoms Nursery's social media presence has taken the company a step in the right direction toward building relationships with its customers. Betty posts her weekly recommendations to followers and even provides supplier sources for all kinds of rare and hard to find plants and shrubs. Customers provide other customers with reviews and comments about various plants they purchased through Betty's Blossoms and can message Betty's team with any questions or comments. As an extension of customer relationship management, this company is practicing A) production management (PM). B) processing customer relationships (PCR). C) customer-management relationship (CMR). D) psychological-managed relationship (PMR). Answer: C Explanation: Customer-management relationship gets the customer involved with suppliers and other customers. The customer is provided more opportunity to make informed decisions. Difficulty: 3 Hard Topic: The Evolution of Business Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

148) Malcolm works as the campaign manager for a candidate for the U.S. Senate. He needs to learn as much as possible about the candidate's potential voters. With the information he digs up, he hopes to focus the campaign on the issues most important to voters. What does this best represent? A) the use of marketing by a nonprofit organization B) a nonprofit application of the production era strategy C) the use of public service advertising to sell a political candidate D) an extension of the profit orientation to a nonprofit organization Answer: A Explanation: While the marketing concept emphasizes a profit orientation, marketing is a critical activity of all organizations. Nonprofit groups, such as political candidates, the Red Cross, the Girl Scouts of America, and Greenpeace, use marketing to promote their values and mission. Difficulty: 3 Hard Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 149) The Southside Sweetery has a loyal following. When it recently moved from its longtime storefront to a famous resort area, it took a big risk. However, the owners were confident that its unique candies, cookies, and pastries would win customer raves. Fortunately, one of the members of the family business was convinced the sweet shop needed to stay in touch with its customers. Southside collects names and email addresses of its customers and maintains a presence on a few social media sites in order to send messages about promotions and coupons to valued customers. Marketing professionals refer to this strategy as A) niche marketing. B) production management. C) customer relationship management. D) sales management. Answer: C Explanation: In order to retain loyal customers, marketers have adopted the practice of customer relationship management, the process of getting to know everything they can about their customers. Difficulty: 3 Hard Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

150) Which of the following strategies provides an example of the most current era whose principles today's businesses are embracing? A) At TapTops International, a smart phone manufacturer, the production line is a 24-hour operation, even if demand is low. B) Five Star Car Sales always maintains a large stock of pre-owned cars at great prices. You can almost always get a car for about 30–40% cheaper than at another car sales company, but you buy it "as is," without any warranties. C) Corner Bookstore is known for stocking the top ten books on the monthly best sellers list. These books are almost always available at a reasonable cost to the bookstore, and they usually fly off the shelves. Corner Bookstore sees this as a win-win situation for themselves and their customers. D) Comfy Corner Hotels is all about the experience. Their goal is to make certain that every guest leaves their properties with a better feeling than when they first arrived. The CEO of Comfy Corner says, "We want you to think of our brand first when you make a hotel reservation." Answer: D Explanation: As described in the textbook, starting in the 1990s, managers extended the marketing concept by adopting the practice of customer relationship management. CRM is the process of learning as much as possible about present customers and doing everything you can over time to satisfy them—or even to exceed their expectations—with goods and services. Difficulty: 3 Hard Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 151) While the four Ps help us remember the basics components of the ________, they don't have significant relevance in the marketing process. A) production operation B) marketing mix C) product development process D) competitive benchmarking process Answer: B Difficulty: 1 Easy Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

152) A firm's marketing mix consists of 4 major components, which are generally referred to as the four A) Ps. B) keys to success. C) intangibles of marketing. D) persuaders. Answer: A Difficulty: 1 Easy Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 153) A firm's marketing mix refers to the combination of A) goods the firm offers to different market segments. B) advertising media the firm utilizes to promote its products. C) strategies regarding product, price, place, and promotion. D) people directly involved in making marketing decisions. Answer: C Difficulty: 1 Easy Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 154) Marketers define a ________ as any physical good, service, or idea that satisfies a want or need. A) product B) copyright C) prototype D) concept Answer: A Difficulty: 1 Easy Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

155) Which of the following describes a process in which marketers present an accurate description of a new product to potential customers and ask if they find the idea appealing? A) prototype testing B) concept testing C) test marketing D) competitive benchmarking Answer: B Difficulty: 1 Easy Topic: Marketing Research Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 156) ________ is a process used to test consumer reactions about a product among potential users. A) Pro forma branding B) Virtual design C) Prototype D) Test marketing Answer: D Difficulty: 1 Easy Topic: Marketing Research Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 157) Which of the following describes a word, letter, or group of words or letters that differentiate the goods and services of a seller from those of competitors? A) brand name B) product designation C) prototype name D) generic name Answer: A Difficulty: 1 Easy Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

158) The last step in the marketing process often includes A) collecting the cash from sales to consumers. B) developing a written report to summarize the results of the period's marketing activities. C) deciding the best way to distribute the product. D) building relationships with customers. Answer: D Difficulty: 1 Easy Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 159) ________ consists of all the techniques sellers use to persuade consumers to buy their goods and services. A) Advertising B) Promotion C) Pre-selling D) Closing Answer: B Difficulty: 1 Easy Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 160) Which of the following would be considered part of a firm's marketing mix? A) Identifying the best source of funds to finance a firm's marketing activities B) Determining the best pricing strategy for a product C) Establishing a production schedule that enables the firm to meet forecasted sales D) Designing the most efficient production plan Answer: B Explanation: The marketing mix involves: (1) designing a want satisfying product, (2) setting an appropriate price for the product, (3) distributing the product, and (4) promoting the product. It does not directly involve financing, production, or employment decisions. Difficulty: 2 Medium Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

161) Which of the following tasks would be included in the marketing mix? A) evaluating various distribution alternatives to determine the best way to get the product to the consumer B) examining various sources of funds to determine the best way to finance an expansion of the organization's production facilities C) assigning tasks to specific workers on specialty product assembly lines D) developing financial statements based on the sales transactions of the firm during a specific time period Answer: A Explanation: One of the 4 Ps in the marketing mix is place, which refers to the best way to get a good or service to the consumer. Difficulty: 2 Medium Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 162) Which of the following is part of the marketing process? A) developing an understanding of company finances available for new products B) determining an appropriate brand name for a new product C) designing the most efficient method of production of a new product D) contacting suppliers after a purchase to ensure producer satisfaction Answer: B Explanation: Determining the brand name for a new product is part of the marketing process. Difficulty: 2 Medium Topic: Designing a Product to Meet Consumer Needs Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

163) Luna, a marketing manager for a retailer of lighting products, will likely be involved in which of the following? A) setting a price for the light fixtures her firm produces B) deciding the best way to hire new employees to produce the lights C) developing ideas for new ways to produce the lights D) determining the best way to finance the purchase of new production equipment Answer: A Explanation: Marketing managers deal with the 4 Ps: product development, pricing, place (distribution), and promotion; thus Luna will likely be involved in setting a price for the light fixtures her firm produces. Difficulty: 3 Hard Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 164) Brad is a real estate agent. He recently had an idea for a program to help perform appraisals more quickly and more accurately. He has a buddy who is a programmer that has helped him develop a detailed description of what the program will do and how it differs from existing apps. Now, Brad has taken this description and shown it to a number of fellow real estate agents to see if his idea appeals to them. What is Brad engaging in? A) prototype outsourcing. B) test marketing. C) concept testing. D) word-of-mouth promotion. Answer: C Explanation: Concept testing involves developing an accurate description of your product and asking people whether or not the concept appeals to them. Difficulty: 3 Hard Topic: Marketing Research Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Apply AACSB: Knowledge Application

165) Several years ago, Canadian Sam Holman realized there may be a need for a stronger, more durable wood baseball bat. He went through the process of developing the SamBat, a maple bat of precise dimensions. He set a price with a reasonable margin, he decided to take special orders and sell bats directly from his garage, and he promoted the bat with sales calls to professional baseball camps, where ball players could sample the bat. In marketing terms, we recognize that Mr. Holman designed the A) marketing process. B) marketing mix. C) marketing equity. D) marketing distribution. Answer: B Explanation: The marketing mix is the part of the marketing process where marketers design the 4 Ps: product, price, place, and promotion. Difficulty: 3 Hard Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 166) H2 O'Yeah has designed a water purification device that is drastically different and far superior to any product currently on the market. Although consumer response was positive to the idea of the new product, management wants to find out more before committing to full-scale production. The next step H2 O'Yeah's marketing department is likely to take is to: A) locate a low-cost production site. B) seek a joint venture with a larger competitor. C) test market the product among potential users. D) develop an advertising campaign to persuade consumers of the value of the new water purifier system. Answer: C Explanation: The process of testing products among potential users is called test marketing. This process can provide a firm with valuable insights about how consumers will respond to a product before they make a large commitment of money and resources to full-scale production. Difficulty: 3 Hard Topic: Marketing Research Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

167) Engineers at Epic Electronics have designed a new smartphone ready to rival iPhone. The marketing department wants to find a way to identify the new phone in the minds of current smartphone consumers and differentiate it from products made by Epic's competitors. An important part of this effort is likely to be the selection of a ________ for the new phone. A) merchandiser B) brand name C) copyright D) prototype Answer: B Explanation: A brand name is a word, letter, or group of words or letters that differentiates one seller's goods from those of its competitors. Difficulty: 3 Hard Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 168) Which of the following terms involves the analysis of markets to identify opportunities and challenges? A) market analysis B) marketing research C) opportunity identification D) market prospecting Answer: B Difficulty: 1 Easy Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

169) Successful marketing researchers A) focus their efforts on determining historical needs of customers, since the core value of marketing is that the customer needs don't change. B) develop as much information as possible from primary sources. C) listen to customers and other stakeholders. D) rely on their experience and personal opinions when making decisions. Answer: C Difficulty: 1 Easy Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 170) The first step in the marketing research process is to A) define the problem and determine the present situation. B) collect relevant data from primary and secondary sources. C) analyze the research data. D) decide upon the best ethical solution. Answer: A Difficulty: 1 Easy Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 171) A firm gathers ________ data by conducting surveys, interviewing customers, or mailing out questionnaires. A) primary B) secondary C) non-referenced D) unbiased Answer: A Difficulty: 1 Easy Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

172) ________ consists of information that has already been researched by others and is published in journals or books, or has been made available online. A) Primary data B) Secondary data C) Pre-coded information D) Technical data Answer: B Difficulty: 1 Easy Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 173) Exploring ________ data first helps marketers minimize marketing research costs. A) focus group B) personal interview C) primary D) secondary Answer: D Difficulty: 1 Easy Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 174) A widely used technique commonly used for collecting primary data is A) collecting relevant articles in trade journals. B) benchmarking. C) conducting a survey. D) reviewing government reports. Answer: C Difficulty: 1 Easy Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

175) Which of the following represents a technique used to obtain primary data? A) gaining access to an unpublished government report from the Federal Trade Commission (FTC) B) conducting personal interviews with potential customers C) establishing a database to store and cross-index articles from leading academics and researchers D) reviewing the best-selling trade books and textbooks that present marketing principles Answer: B Difficulty: 1 Easy Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 176) A ________ group consists of a small group of people who meet under the direction of a discussion leader to discuss opinions about an organization, its products, or other issues. A) concept B) focus C) peer D) consumer interest Answer: B Difficulty: 1 Easy Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 177) Which of the following is considered a step in the marketing research process? A) designing a product to meet the need based on research B) defining the question and determining the present situation C) planning for product modifications and test advertising D) setting the price for a product Answer: B Explanation: The market research process consists of four key steps beginning with defining the question and determining the present situation. Difficulty: 2 Medium Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 60 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

178) In the past, companies have designed intricate products that markets did not perceive any need for. They have aired promotional campaigns that have offended audiences. They have priced products out of reach of the target market. Marketing experts defend the importance of ________, the process of gathering all sorts of information about customers and products in order to make informed decisions about the product, price, place, and promotion. A) target marketing B) marketing research C) market segmentation D) global trekking Answer: B Explanation: Marketing research is the process of gathering information in order to understand the types of products and services customers want; the types of promotional messages that will appeal to the target audience for a particular product or service; and to understand business trends. Difficulty: 2 Medium Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 179) Pequeno Pesos Restaurants, Inc. is a chain of restaurants featuring authentic, affordable Mexican cuisine around the United States. The company is looking to expand its reach and to improve its menu. Which of the following is an example of secondary data the owners of Mucho Tacos might find useful? A) Information published by the U.S. Bureau of the Census that identifies which regions of the United States are experiencing the most rapid growth in Mexican-American population B) Telephone survey by the marketing department of Pequeno Pesos asking for opinions about the quality of the food at the restaurants C) Focus group of teenagers who like Mexican food who are asked about their reactions to new food dishes the restaurant may offer D) E-mail responses the chain receives to a series of customer satisfaction questions posted on its website Answer: A Explanation: Secondary data is previously published data available from journals, trade publications, government agencies, and similar sources. Census data revealing demographic trends would be a good example of secondary data. Difficulty: 3 Hard Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

180) Enrollment at Mountain Top Community College has been in decline for five years. In the past the college has relied strictly on enrollment from newly graduated high school students. In order to identify other potential markets, the school would benefit from A) test marketing. B) sales promotions. C) marketing research. D) a stakeholder audit. Answer: C Explanation: Marketing research is the analysis of markets to determine opportunities and challenges, and to find the information needed to make good decisions such as how to reach other target markets. Difficulty: 3 Hard Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 181) Elise has completed a review of data her department has collected. The team contacted potential customers through phone interviews, online surveys, and focus groups. Elise is disappointed because the results strongly indicate the product idea she helped develop is unlikely to be popular. What should Elise do? A) Proceed with product development because the opinions of experienced marketing managers often turn out to be more accurate than marketing research. B) Accept the research results and reevaluate the proposed product. C) Continue developing the product, but try to find ways to reduce production costs. D) Put the product on temporary hold, throw out the results of the research, and design and conduct a new study. Answer: B Explanation: Marketing managers must carefully and honestly interpret the data generated by marketing research in order to make informed decisions. Marketing research efforts should be an ongoing process. Difficulty: 3 Hard Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

182) Worlds of Fun is preparing to open its newest theme park in Shanghai. Once open, the marketing department will be collecting lots of information on what customers want while they are at the park. The marketing research team for Worlds of Fun will create original surveys with targeted questions to help collect reliable information. This type of research is described by marketing professionals as the collection of A) sequential data. B) formative data. C) primary data. D) secondary data. Answer: C Explanation: Primary data is the collection of original information, by creating research techniques unique to this particular study. The creation of a survey is one type of primary data. Difficulty: 3 Hard Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 183) ________ is the process of identifying factors that can affect marketing success. A) Environmental scanning B) Target marketing C) Niche marketing D) Segmentation analysis Answer: A Difficulty: 1 Easy Topic: The Marketing Environment Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

184) The most important technological change likely to affect the marketing success of many firms is the A) growth of consumer databases, blogs, and social networking sites. B) speed of service from faster check-outs. C) level of computer literacy of the target market. D) number of computers in use in the home. Answer: A Difficulty: 1 Easy Topic: The Marketing Environment Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 185) One of the social trends that marketers must monitor to maintain their close relationship with customers is the A) increase in the number of competitors servicing the target market. B) amount of unemployment in the target market. C) number of people who can use computers with proficiency. D) increase in the number of older Americans. Answer: D Difficulty: 1 Easy Topic: The Marketing Environment Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

186) People with unsatisfied wants and needs who have both the ability and the willingness to buy are A) a market. B) stockholders. C) a profit center. D) a marketing mix. Answer: A Difficulty: 1 Easy Topic: The Marketing Environment Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 187) The two major types of markets are the A) primary market and the secondary market. B) B2B market and the C2C market. C) consumer market and the B2B market. D) target market and the niche market. Answer: C Difficulty: 1 Easy Topic: The Marketing Environment Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 188) Which of the following describes individuals that want goods and services for personal consumption and have the resources to buy them? A) secondary market B) business-to-business market C) market segmentation D) consumer market Answer: D Difficulty: 1 Easy Topic: The Marketing Environment Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 65 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

189) The ________ market consists of individuals and organizations that want goods and services in order to produce goods and services or to sell, rent, or supply those goods to others. A) consumer B) B2B C) target D) super Answer: B Difficulty: 1 Easy Topic: B2B Marketing Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 190) The factor that determines whether a product is classified as a consumer product or an industrial product is A) the end use of the product. B) the decision-making process used to purchase the good or service. C) who the buyer represents. D) whether the good is new or used. Answer: A Difficulty: 1 Easy Topic: B2B Marketing Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

191) Which of the following statements about the distinction between consumer goods and B2B goods is the most accurate? A) The same product can be classified as either a consumer good or an industrial good, depending upon its end use. B) Industrial goods tend to have a useful life of several years and can be depreciated while consumer goods typically last less than a year. C) Consumer goods are typically more expensive than industrial goods. D) Industrial goods are custom-made to the specifications of the buyer, while the all consumer goods are mass-produced. Answer: A Explanation: The classification of a product as a consumer good or an industrial product is based on the buyer's reason for buying and the end use of the product. A loaf of bread bought by a household would be a consumer good, while the same loaf bought by a restaurant would be an industrial good. Difficulty: 2 Medium Topic: B2B Marketing Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 192) Which of the following is the best example of a market? A) group of high school students who are tired of cafeteria food and would like to eat lunch at an expensive restaurant located a few blocks from their campus B) physical facility large enough to accommodate all the people who want to buy or sell a good C) senior citizens willing and able to cruise to the Bahamas D) geographic region targeted by a firm for new promotional efforts Answer: C Explanation: A market is defined as people with unmet wants and needs who have both the resources (purchasing power) and the willingness to buy. Although the high school students are people who have an unmet want they are likely unable to afford to eat at the restaurant for lunch. The senior citizens have both the desire to cruise to the Bahamas and the resources to satisfy their desire. Difficulty: 2 Medium Topic: The Marketing Environment Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

193) According to the Spotlight on Small Business box, small businesses can make big money by A) participating in mass production. B) jumping on board with technological advances as they evolve. C) shipping products to consumers faster than competitors. D) opening online stores to accompany the already established brick-and-mortar shops. Answer: B Explanation: As seen with ISlide, small businesses can cash in on technological advances. Using consumer databases, blogs, social networking sites, and the like, companies can develop products and services that closely match consumers' needs. When Justin Kittredge realized he could create custom footwear faster than competitors, he revolutionized the custom footwear business. Difficulty: 2 Medium Topic: The Marketing Environment Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 194) Marco is a marketing manager for Securities Services. He has been looking at a variety of factors, such as technological, sociocultural, and economic trends as well as competitive conditions. Marco is confident that these factors will impact Securities' future marketing success. What are his efforts an example of? A) target marketing B) competitive benchmarking C) relationship marketing D) environmental scanning Answer: D Explanation: Environmental scanning is the process of identifying factors that can affect marketing success. These factors would include global, technological, social, competitive, and economic elements of the firm's business environment. Difficulty: 3 Hard Topic: The Marketing Environment Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

195) Green Goddess Lawncare, Inc., has enjoyed growing profits for 10 years. When newproduct development made it feasible for underground sprinkling systems to be installed at a reasonable price, business soared. Recently, through ________ the owner of Green Goddess learned about a seed that only needs to be watered two times each year. This innovation could have serious consequences on healthy revenues and profits. The owner is analyzing the ________ environment in order to remain knowledgeable about new trends that may affect his business. A) environmental scanning; economic B) environmental scanning; technological C) continuous processing; economic D) continuous processing; technological Answer: B Explanation: The process of environmental scanning analyzes several external business environments in order to assess opportunities and threats for your respective business. In this particular case, the owner is scanning the technological environment: new inventions and innovations that pose threats to more traditional solutions or methods of solving problems. Difficulty: 3 Hard Topic: The Marketing Environment Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 196) Which of the following refers to the process of dividing the total market into several groups with similar characteristics? A) market segmentation B) market differentiation C) market determinants D) market partitioning Answer: A Difficulty: 1 Easy Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

197) ________ marketing is the marketing of products to groups of customers a firm decides it can serve profitably. A) Objective B) Departmentalized C) Target D) Subjective Answer: C Difficulty: 1 Easy Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 198) A firm that uses ________ segmentation divides a market into groups based on values, attitudes, or interests. A) demographic B) benefit C) psychographic D) normative Answer: C Difficulty: 1 Easy Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

199) A firm that uses ________ segmentation divides a market into groups based on age, income, or level of education. A) demographic B) psychographic C) perceived value D) econometric Answer: A Difficulty: 1 Easy Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 200) A firm that uses ________ segmentation divides a market into groups based on life stage, race, or profession. A) benefit B) demographic C) value D) target Answer: B Difficulty: 1 Easy Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

201) ________ marketing involves developing a unique mix of goods and services for each individual customer. A) B2B B) Volume C) Usage D) One-to-one Answer: D Difficulty: 1 Easy Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 202) Which of the following refers to a marketing strategy in which the focus is on small but profitable market segments? A) micro targeting B) narrowcast marketing C) focused marketing D) niche marketing Answer: D Difficulty: 1 Easy Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

203) A ________ marketing strategy develops products and promotions designed to please large groups of people. A) volume B) mass C) relationship D) value Answer: B Difficulty: 1 Easy Topic: Relationship Marketing Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 204) The goal of ________ is to keep individual customers over time by offering them new products that exactly meet their requirements. A) niche marketing B) mass marketing C) relationship marketing D) segment marketing Answer: C Difficulty: 1 Easy Topic: Relationship Marketing Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

205) Understanding consumers in marketing is considered so important that a whole area of marketing called ________ emerged. A) customer programming B) consumer behavior C) individual benchmarking D) customers competency Answer: B Difficulty: 1 Easy Topic: The Consumer Buying Process Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 206) One factor that influences the consumer decision-making process is ________, referring to the set of values, attitudes, and ways of doing things passed from one generation to another in a given society. A) cognitive dissonance B) the legal environment C) group behavior D) culture Answer: D Difficulty: 1 Easy Topic: The Consumer Buying Process Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

207) A consumer's decision-making process is influenced by his/her ________, consisting of those people who help shape the consumer's beliefs, attitudes, values, or behavior. A) reference group B) focus group C) target audience D) social class Answer: A Difficulty: 1 Easy Topic: The Consumer Buying Process Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 208) Which of the following correctly identifies why companies would use a market segmentation strategy? A) They can avoid antitrust laws by selecting a small slice of a larger market. B) This strategy enables a firm to identify common traits in different consumer groups. C) With limited resources, firms can better satisfy the wants and needs of a smaller target market. D) Government regulations require firms to maintain accurate records to show that the firm has not discriminated against a market segment. Answer: C Explanation: The total potential consumer market consists of billions of people in global markets. Because consumer groups differ greatly in age, education level, income, and taste, a business usually can't fill the needs of every group. Therefore, it must decide which groups to serve and then develop products and services specially tailored to their needs. Difficulty: 2 Medium Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

209) "Selling to everybody and listening to nobody" might be the result of a firm that uses a ________ marketing strategy. A) niche B) mass C) target D) relationship Answer: B Explanation: Mass marketing means developing products and promotions to please large groups of people. Mass marketing relies on mass media to reach as many people as possible. This approach can cause marketing managers to lose touch with the individual consumers who make up their market. Difficulty: 2 Medium Topic: Relationship Marketing Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 210) Firms that adopt a relationship marketing strategy attempt to A) develop products that meet the specific requirements of individual customers. B) maximize their market share by designing products that appeal to large numbers of customers. C) develop their promotional efforts utilizing mass media such as television, newspapers, and radio in order to relate to a large audience. D) maximize market share by controlling production costs and maintaining low prices. Answer: A Explanation: The goal of relationship marketing is to keep individual customers over time by offering them products that exactly meet their requirements. Difficulty: 2 Medium Topic: Relationship Marketing Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

211) Which of the following is consistent with relationship marketing? A) maintaining transactional relationships with customers B) working with buyers to determine their individual needs C) developing market share through mass media advertising D) focusing more on obtaining new customers than on retaining existing customers Answer: B Explanation: Relationship marketing tends to lead away from mass production and toward custom-made goods and services. The goal is to keep individual customers over time by offering them new products that exactly meet their requirements. Difficulty: 2 Medium Topic: Relationship Marketing Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 212) Firms adopting a relationship marketing strategy view technology and social media as a(n) A) promising technique to expand to a mass market. B) threat to the effective and efficient implementation of their strategy. C) tool with limited value because many people are reluctant to place orders or send information electronically. D) increased opportunity to personalize marketing campaigns to meet customer needs. Answer: D Explanation: Technology and social media enables companies to meet specific needs of customers by launching loyalty programs, personalizing its marketing campaigns, and providing the contact center with more customer information. Difficulty: 2 Medium Topic: Relationship Marketing Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

213) Contacting customers after a sale to reassure them that they made the right decision is intended to offset A) reverse satisfaction. B) cognitive dissonance. C) doubt resolution. D) relationship conflict. Answer: B Explanation: Cognitive dissonance is the term used for the doubts consumers often experience after making a purchase. Marketers must work to reassure customers and help them overcome these doubts if they want to establish a strong long-term relationship. Difficulty: 2 Medium Topic: The Consumer Buying Process Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 214) Consumer decisions regarding the products they buy are often influenced by their nationality, religion, or ethnic origin. Marketers realize that the consumer decision-making process is impacted by the consumers' A) subcultures. B) four Ps. C) cognitive behaviors. D) market position. Answer: A Explanation: Subculture is the set of values, attitudes, and ways of doing things that result from belonging to a certain ethnic, religious, racial, or other group with which a consumer closely identifies. Difficulty: 2 Medium Topic: The Consumer Buying Process Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

215) Which of the following is most consistent with a relationship marketing strategy? A) developing a website that seeks customer feedback and allows customers to communicate with the company B) creating a national advertising campaign using radio and television to increase market share C) designing a promotional campaign to increase cooperation among the firm's suppliers D) distributing goods through limited service discount stores Answer: A Explanation: Relationship marketing calls for firms to establish a personal dialogue with customers. One way to accomplish this is through a website that seeks customer feedback. Difficulty: 2 Medium Topic: Relationship Marketing Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 216) According to the Adapting to Change box, while companies are utilizing social media and garnering a ton of "likes" and interactions, what are they struggling with? A) becoming household names B) getting clicks to their websites C) turning "likes" into followers D) turning "likes" into product subscriptions Answer: D Explanation: Technology enables companies to have great interactions with the customer base. Users can "like" an article, a song, video, or product. Companies, like Birchbox and Spotify, are looking to turn those "likes" into subscriptions. Difficulty: 2 Medium Topic: Relationship Marketing Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

217) Outdoor Adventure, a company that designs and manufactures sportswear, focuses their marketing efforts on people who participate in strenuous outdoor activities such as running, hiking, and climbing. For example, the firm advertises heavily in Runner's World and Women's Running. Outdoor Adventure is using ________ factors to segment its market. A) demographic B) value C) volume D) psychographic Answer: D Explanation: Outdoor Adventure is basing its segmentation on the interests and lifestyle of its customers. This approach is known as psychographic segmentation. Difficulty: 3 Hard Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 218) Fast Fine Foods markets some of its products to consumers looking for simple, quick meals. Fast Fine Foods also offers another line of products targeted to people interested in low-fat, highnutrition foods. The company's strategy of dividing the market into groups that want similar things from the products they buy is an example of A) benefit segmentation. B) demographic segmentation. C) volume segmentation. D) target segmentation. Answer: A Explanation: Benefit segmentation emphasizes the benefits a product provides in order to appeal to consumers interested in those types of benefits. Thus, people who are in a hurry or who do not like to spend much time in the kitchen may be attracted to one of these lines, while other consumers who are very health conscious may find the other line of foods appealing. Difficulty: 3 Hard Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

219) Jet Magazine focuses its marketing efforts on reaching young African Americans. The firm believes that they are positioned to profitably serve this group of consumers. Jet utilizes the strategy of: A) narrowcasting. B) target marketing. C) primary marketing. D) focus group selection. Answer: B Explanation: A target market is a group of customers with similar characteristics (a market segment) that a firm believes it can profitably serve. Difficulty: 3 Hard Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 220) Which of the following best represents an example of demographic segmentation? A) A recreational equipment company divides its market into groups by region of the country, designing different products for people in different parts of the country. B) A car manufacturer offers different types of cars designed to appeal to different age groups and income levels. C) An entertainment company divides its market according to the attitudes and interests of its customers, marketing some films to people who enjoy action movies and targeting other movies to people who prefer romantic comedies. D) A food company has designed a special line of easy-to-prepare microwavable meals that are low fat and high in fiber to attract people interested in the health benefits of the foods they eat. Answer: B Explanation: Demographic segmentation divides a market according to factors such as age, income, or education. Difficulty: 3 Hard Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

221) Which of the following would best benefit the development of niche marketing? A) decline in the cost of advertising on radio and newspapers enabling firms to more efficiently reach a wide audience B) Supreme Court ruling that limits the market share individual firms in a market are allowed to serve C) growing acceptance of free-trade agreements such as NAFTA D) manufacturing improvement enabling firms to more efficiently design and produce specialized products for small groups of consumers Answer: D Explanation: Niche marketing is the process of finding small but profitable market segments and designing custom-made products for those groups. Internet technology enables sellers to work with individual buyers to determine their wants and needs and to develop goods and services specifically designed for them. Difficulty: 3 Hard Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 222) Keepsake Collectibles focuses its marketing efforts on high-income buyers of unique collectible items. The firm realizes that the number of buyers in this segment of the collectible market is small. However, they are confident that this approach will be profitable since these buyers will pay premium prices for their unique products and superior customer service. Keepsake's approach is an example of: A) competitive benchmarking. B) niche marketing. C) relationship targeting. D) target positioning. Answer: B Explanation: Niche marketing is the marketing strategy of focusing on small but profitable market segments and offering these groups custom-designed goods and services. Difficulty: 3 Hard Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

223) In an effort to increase profits, Hunan Kitchen is attempting to appeal to a specific segment of the market by offering an all-you-can-eat buffet. These efforts, designed to identify specific groups that can be profitably served, represent an example of A) target marketing. B) a reference group strategy. C) benefit segmentation. D) B2B marketing. Answer: A Explanation: Target markets are the groups of customers (market segments) an organization believes it can profitably serve. Difficulty: 3 Hard Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 224) After years of using a mass marketing strategy, Precision Print Shop has responded to new competition from larger companies by focusing on small market segments that have been ignored by these competitors. Precision believes that by offering these market segments personalized customer service it can attract a loyal group of customers willing to pay premium prices. What is Precision's strategy known as? A) environmental scanning B) niche marketing C) micro-marketing D) respondent change Answer: B Explanation: Niche marketing is the process of finding small but profitable market segments and offering products designed to appeal specifically to those groups. Difficulty: 3 Hard Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

225) Rick, a marketing manager for Fix-It Tools, is discouraged with the way his organization markets its products. Currently Fix-It-Tools utilizes a strategy aimed toward the largest possible number of people. The company also relies heavily on television and online advertising. Rick protests to management that the company is not listening to its customers and is in danger of losing many of them to firms that create a personal dialogue with their buyers. What does Fix-It currently practice? A) a constant change strategy B) relationship marketing C) mass marketing D) market segmentation Answer: C Explanation: Mass marketing means developing products and promotions that are designed to please large groups of people. This approach relies heavily on mass media to promote products, which can lead to one-way messages rather than personal dialogues with customers. Difficulty: 3 Hard Topic: Relationship Marketing Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 226) Liberty Autos recognizes that it has some customers who like roomy SUVs, while others like more compact versions. Liberty designs and manufactures several models to satisfy the different tastes and lifestyles of its customers. Customers who want traditional SUV luxury and seldom settle for anything other than leather interiors, would prefer the Regal model. Rapido customers might be described as sportier and typically women. Fans of the Cowboy model may include a group that is seldom over 30 years of age, typically male, and have often served in the U.S. military. By recognizing differences in its customers and using different characteristics to define its customers, Liberty Autos is A) segmenting the market. B) practicing one-to-one marketing. C) grouping the markets. D) modeling. Answer: A Explanation: Target markets are the groups of customers (market segments) an organization believes it can profitably serve. Difficulty: 3 Hard Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 84 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

227) Looking to increase its customer loyalty, management at Epic International has worked to create a personal dialogue with their customers. This dialogue will enable Epic to offer products that exactly meet their customers' needs and provide personalized service before and after the sale. What strategy does Epic International illustrate? A) production orientation B) relationship marketing C) personalized promotion D) niche marketing Answer: B Explanation: Relationship marketing emphasizes pleasing customers by producing high-quality products that exactly meet their requirements. This approach to marketing also emphasizes retaining customers by offering fantastic service and special programs to reward long-time customers. Difficulty: 3 Hard Topic: Relationship Marketing Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 228) Sarah found success as an entrepreneur by employing a relationship marketing strategy. The goal of this strategy is to A) use radio and television advertising to attract new customers. B) work closely with existing customers to better satisfy their wants and needs. C) target large market segments of potential customers by working closely with a variety of suppliers. D) communicate to buyers the advantages offered by your firm's low prices and standardized products. Answer: B Explanation: Relationship marketing moves away from mass production toward custom-made goods. The goal is to keep individual customers over time by providing products that exactly meet their requirements. Difficulty: 3 Hard Topic: Relationship Marketing Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

229) Khloe only purchases designer jeans and high-priced stilettos endorsed by her favorite entertainers. On top of that, her attitudes and values are shaped by specific statements made by these celebrities. She also supports causes and charities the celebrities endorse. This illustrates how consumer decision making is influenced by A) marketing mix variables. B) cognitive dissonance. C) a reference group. D) primary group identification. Answer: C Explanation: A reference group is a group that an individual uses as a reference point in the formation of his or her beliefs, attitudes, values, or behavior. Difficulty: 3 Hard Topic: The Consumer Buying Process Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 230) Which of the following is the best example of cognitive dissonance? A) Phillip has been shopping for a new flat screen, but has not yet made a purchase because he is having trouble deciding which brand to buy. B) Lorelai decided to eat at a restaurant she previously avoided after learning several celebrities endorse the restaurant. C) Braylon is torn between going to the movies with friends or staying home and studying for an exam tomorrow. D) Drake just bought an expensive tablet and is already worried that he could have found a better deal if he had shopped more carefully. Answer: D Explanation: Cognitive dissonance is the term for the doubts a consumer may experience after making a purchase. For example, consumers often begin to question whether they got the best product at the best price. Difficulty: 3 Hard Topic: The Consumer Buying Process Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

231) ________ marketers include manufacturers, intermediaries, institutions, and the government. A) Profit seeking B) Undifferentiated C) Institutional D) B2B Answer: D Difficulty: 1 Easy Topic: B2B Marketing Learning Objective: 13-06 Compare the business-to-business market and the consumer market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 232) In terms of the number and dollar volume of transactions, the B2B market is ________ the consumer market. A) larger than B) smaller than C) the same size as D) unrelated to Answer: A Difficulty: 1 Easy Topic: B2B Marketing Learning Objective: 13-06 Compare the business-to-business market and the consumer market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 233) B2B markets tend to be A) dominated by marketing intermediaries. B) geographically concentrated. C) characterized by the presence of a large number of small buyers. D) more emotional than consumer markets. Answer: B Difficulty: 1 Easy Topic: B2B Marketing Learning Objective: 13-06 Compare the business-to-business market and the consumer market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

234) The number of buyers in B2B markets is A) roughly the same as the number of buyers in the consumer market. B) much larger than the number in the consumer market. C) relatively small compared to the consumer market. D) controlled by government regulation. Answer: C Difficulty: 1 Easy Topic: B2B Marketing Learning Objective: 13-06 Compare the business-to-business market and the consumer market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 235) Compared to consumer markets, B2B markets A) demand more promotional emphasis on radio and television in order to stimulate sales. B) rely less on relationship marketing. C) rely less on marketing intermediaries. D) are characterized by buyers who behave less rationally. Answer: C Explanation: B2B sales tend to be direct. Manufacturers sell products directly to other businesses, while consumer goods often utilize wholesalers and retailers. Difficulty: 2 Medium Topic: B2B Marketing Learning Objective: 13-06 Compare the business-to-business market and the consumer market. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 236) Which of the following statements about the B2B market is true? A) The markets are often geographically dispersed. B) Industrial buyers are usually large. C) Industrial buyers tend to be more emotional in their purchasing decisions. D) The size of the market is smaller than the consumer market. Answer: B Explanation: The size of business customers is relatively large; that is, a few large organizations account for most of the employment and production of various goods and services. Difficulty: 2 Medium Topic: B2B Marketing Learning Objective: 13-06 Compare the business-to-business market and the consumer market. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

237) Jessica, a sophomore in college, is contemplating majoring in marketing. She has asked several friends for advice and their comments are listed below. Which of these comments is the most accurate and likely to help Jessica? A) Marketing offers business students a wide array of career options. B) Majoring in marketing rules out a meaningful career with a nonprofit organization. C) You should major in marketing only if you want to work in advertising or personal selling. D) Marketing is a career that offers stability, good pay, and ample employment opportunities. Marketing activities today are essentially the same as they were several decades ago. Answer: A Explanation: Marketing majors could pursue careers in personal selling, advertising, public relations, transportation and distribution, product management, marketing research, and a wide range of other areas. Difficulty: 3 Hard Topic: The Evolution of Marketing Learning Objective: 13-06 Compare the business-to-business market and the consumer market. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 238) Pham, after years working with the consumer market, has just been transferred into a new job dealing with buyers in the B2B market. Which of the following correctly identifies a key difference Pham will likely notice between consumer markets and B2B markets? A) Businesses focus on developing wants and needs in consumer markets, while firms work to satisfy the existing needs of the B2B market. B) Relationship marketing tends to be much more important in consumer markets than in the business-to-business markets. C) Buyers in the business-to-business markets tend to be more rational than buyers in consumer markets. D) Business-to-business markets make greater use of marketing intermediaries such as wholesalers and retailers than do consumer markets. Answer: C Explanation: B2B buyers base their buying decisions on specifications and carefully weigh a variety of factors (such as price, quality, and service) before making a commitment to buy. Consumer markets purchases are thought to be more emotional. Difficulty: 3 Hard Topic: B2B Marketing Learning Objective: 13-06 Compare the business-to-business market and the consumer market. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

239) Lennox just moved from a position where he dealt with the consumer market to working as a salesperson in the B2B market. As he considers his new responsibilities, it's likely that he will A) find little difference between buyers in the consumer market and those in the business-tobusiness market. B) discover that decision making in the B2B market requires salespeople to be little more than order takers. C) learn that industrial buyers generally require more personal service than buyers in the consumer market. D) find that B2B buyers tend to purchase more on impulse than consumer buyers. Answer: C Explanation: There is much more emphasis on personal selling in B2B markets than in consumer markets. Difficulty: 3 Hard Topic: B2B Marketing Learning Objective: 13-06 Compare the business-to-business market and the consumer market. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

240) Describe the steps involved in the marketing process. Answer: Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at-large. The first step in the marketing process is to identify a market opportunity. This may involve marketing research. Using the information gleaned from marketing research, the next step is to identify a target market and design a product to satisfy a want or need. This may include anything that would enhance the product in the eye of consumers, such as the brand. This process often includes concept testing, in which marketers develop a detailed and accurate description of a product and ask people for their reaction. Marketers may also use test marketing. Assuming these activities result in positive customer reaction, the firm then is likely to commit to the product, though the actual production may be outsourced to another firm. The design and development of the product also involves coming up with an appropriate brand name that differentiates the firm's goods from those offered by competitors. The next step in the marketing process is setting an appropriate price. The pricing decision must look at a number of factors, such as the prices of competing products and costs of production, distribution, and promotion. Another decision that must be made concerns how the product will be distributed. This involves decisions about the use of middlemen such as retailers and wholesalers. The marketing process also involves developing an appropriate promotion strategy. Promotion consists of all of the techniques sellers use to motivate people to buy their products and services. It includes advertising, personal selling, public relations, publicity, and various forms of promotion such as coupons, contests, and rebates. The last step in the marketing process is to build a relationship with the buyers. This includes accepting advice and suggestions from customers and providing a way of resolving any unsatisfactory outcomes so that the customer is pleased. Difficulty: 3 Hard Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

241) Why is market segmentation important? Describe three ways firms can segment consumer markets. Answer: The overall market for most products consists of such a diverse set of customers that a single business could not serve the entire market effectively. Thus, firms usually try to segment the market into groups that have similar characteristics. They then target the markets they believe they can profitably serve. There are several ways to segment markets. Among the most common approaches are: Geographic segmentation divides the market according to geographic regions. Demographic segmentation groups customers according to factors such as age, income, or education. Psychographic segmentation divides the market into groups with different lifestyles, attitudes, values, and interest. Benefit segmentation identifies groups that seek different types of benefits from a product, such as comfort, convenience, or health and fitness. Volume segmentation separates the market according to volume of product use. Difficulty: 3 Hard Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

242) Marketing is different in B2B markets than in consumer markets. Identify and explain three differences between the business-to-business market and the consumer market. Answer: Students will choose three of the following: Marketing to manufacturers, institutions (for example hospitals or schools), commercial operations (retail stores), and the government is called business-to-business (B2B) marketing. As in consumer markets, the basic idea in B2B markets is to "help buyers buy." However, the strategies used to achieve this goal differ because the nature of the buyers and the marketing environment are very different. Students should identify and describe at least three of the following differences: Customers in the B2B market are relatively few compared to the over 125 million households in the U.S. consumer market. The size of industrial customers is relatively large compared to the consumer market. A few large organizations account for most of the employment and production of various goods and services. B2B markets tend to be geographically concentrated; therefore, marketing efforts are often concentrated on the particular geographic areas. This can simplify the process of distributing goods to a particular industrial market. For example, a firm may be able to reduce storage and transportation costs by locating warehouses and shipping facilities in the same geographic area. On the other hand, the consumer market is literally worldwide. Industrial buyers are generally more rational than consumer buyers in their selection of goods and services, making purchases based on specifications and a careful analysis of several factors. B2B sales tend to be direct and eliminate the need for the marketing intermediaries which consumer markets use. There is much more emphasis on personal selling in B2B markets since the B2B market consists of fewer customers that demand more personal service. Conversely, advertising plays a larger role in the consumer market. Difficulty: 3 Hard Topic: B2B Marketing Learning Objective: 13-06 Compare the business-to-business market and the consumer market. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

243) Explain how mass marketing and relationship marketing differ. Answer: Mass marketing means developing products and promotions to please large numbers of people. This approach often relies heavily on mass media to send one-way messages designed to build a large market for the firm's products. Relationship marketing moves away from mass production toward a more customized approach. The marketer attempts to develop a two-way dialogue with customers. The information obtained from this dialogue allows the firm to design products that exactly meet the requirements of individual customers. The latest in technology enables sellers to work with individual buyers to determine their wants and needs and to develop goods and services specifically designed for them (e.g., hand-tailored shirts and unique vacations). One-way messages in mass media give way to a personal dialogue among participants. When combined with enterprise resource planning (Chapter 9), firms can develop a smooth customer-oriented system. Difficulty: 3 Hard Topic: Relationship Marketing Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

244) Describe the steps involved in conducting marketing research. Answer: There are four steps in the marketing research process: Define the question and determine the present situation. Marketing research begins by identifying what the firm does well and what needs to be improved. Researchers should have the freedom to discover what the problems are, what alternatives exist, what type of information is needed, and how to go about gathering and analyzing the data. Collect the data. There are two major sources of data. Secondary data is already published in the form of studies, reports, or surveys conducted by someone else. In order to minimize costs, researchers should begin by looking at secondary data. Usually, however, secondary data doesn't provide all of the data researchers need. Primary data is data gathered from surveys, questionnaires, interviews, and other sources developed by the marketers themselves. Analyze the data. Researchers must analyze the data honestly so that useful alternatives to specific marketing opportunities can be identified. Choose the best solution. Researchers should present alternative solutions, indicate the solution they prefer, and provide reasons for their preference. In choosing the best solution, ethical considerations should be taken into account. Difficulty: 2 Medium Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

245) Identify and discuss the four eras of the evolution of marketing. Answer: The evolution of marketing involved four eras: (1) production, (2) selling, (3) marketing, and (4) customer relationship. The generally philosophy of the production era was "Produce as much as you can because there is a limitless market." From the time of the early settler to the early 1900s the production capacity fell short of consumer demand. The greatest marketing need was for distribution and storage. As a result of mass production techniques, business production capacity exceeded the immediate market demand by the 1920s. During the selling era, marketing efforts focused on persuading consumers to buy existing products with little concern for service after the sale. The boom in consumer spending and intensified competition following World War II marked the start of the marketing era. Businesses recognized the need to be responsive to consumers' wants and needs in order to generate profits. The marketing concept had three parts: (1) a customer orientation, (2) a service orientation, and (3) a profit orientation. The final and present stage of the evolution of marketing is the customer relationship era. The concept of customer relationship management involves knowing as much as you can about customers so that you can exceed their expectations with goods and services. Enhanced customer satisfaction will yield long-term profits and customer loyalty. *Students may reference the emerging era of mobile/on-demand marketing. This is not included in the four eras of marketing at this time. Difficulty: 3 Hard Topic: The Evolution of Marketing Learning Objective: 13-01 Define marketing, and apply the marketing concept to both forprofit and nonprofit organizations. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

Mini-Case Briana, a successful executive, is also a cardio queen. For years she worked out at Forever Fitness Gym, the only gym in her small hometown. However, she felt that the environment at Forever Fitness was too masculine, and discovered that her female friends agreed. They disliked the small, smelly locker room, and the limited selection of cardio equipment. Most of them eventually quit going to Forever Fitness. Briana talked to Jim Nasium, the owner of Forever Fitness, about things he could do to attract more women, but he had little interest in making any changes. "I've got all the business I can handle," he told Briana. "Why should I spend a bunch of money to redecorate and add extra equipment? Besides, lots of the guys who work out here tell me they like the simple, no-frills atmosphere." Frustrated by Jim's indifference, Briana began looking into the possibility of starting a gym to appeal to young, well-educated women. After visiting gyms in other towns and talking to several friends to get ideas, she came up with a detailed plan for her gym. She then described her ideas to women in the community to see how much interest there was in this type of facility. The extremely positive response encouraged her to go ahead with her plans. It took a while, but she ultimately obtained the financial backing to go into business. Briana calls her new health club ShapeUP. It offers a spacious and attractive locker room, better cardio equipment, a child care area so young mothers can have someone watch their toddlers while they work out, and exercise classes designed to appeal to young women. When a woman joins her club, Briana schedules a free session with a personal trainer who works with the new member to design a personalized workout program. Briana tries hard to keep close to her customers by maintaining a social media presence, sending them a monthly e-mail newsletter, and routinely sending surveys asking what they like and don't like about ShapeUP. She wants to please her existing customers and keep them coming back. In fact, now that ShapeUP has a strong membership base, Briana believes it is more important to keep existing customers loyal than to attract new customers. In addition to the comments from her own customers, Briana also spends a lot of time tracking economic, social, and competitive trends in the fitness industry, trying to identify factors that can affect the marketing success of her club. She subscribes to several journals and magazines that cover trends and report on research findings related to the business. She has found that these publications provide her with an inexpensive source of useful information. 246) When Briana wants to obtain information to research changes in her market or determine what her customers are likely to want in the future, she relies on the articles and data available in trade journals, feedback from surveys, and personal interviews of her customers. Which of the following statements about Briana's sources of information is most accurate? A) Briana is relying entirely on primary data for her research needs. B) Briana is relying entirely on secondary data for her research. C) The surveys and personal observations provide primary data, while the journals provide secondary data. D) The surveys and personal observations provide secondary data, while the journals provide primary data.

Answer: C Explanation: Secondary data is data that has already been researched by others and published in books and journals or made available online. Primary data is obtained when marketers do their own research. Two common ways of obtaining primary data are conducting personal interviews and conducting surveys. Difficulty: 3 Hard Topic: Marketing Research Learning Objective: 13-03 Summarize the marketing research process. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 247) The fact that ShapeUP is designed to appeal to women of a certain age, education, and income level means that Briana is using A) demographic segmentation. B) psychographic segmentation. C) volume segmentation. D) geographic segmentation. Answer: A Explanation: Demographic segmentation is based on factors such as age, education, and income. Difficulty: 3 Hard Topic: Market Segmentation Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 248) When Briana developed a detailed description of her ideas for a gym and asked for feedback from women about the proposal, she was engaging in A) test marketing. B) psychographic segmentation. C) concept testing. D) prototype analysis. Answer: C Explanation: Concept testing involves developing an accurate description of a product and asking people whether the idea appeals to them. Difficulty: 3 Hard Topic: The Marketing Mix Learning Objective: 13-02 Describe the four Ps of marketing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 98 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

249) Which of the following statements about Briana's marketing approach is most accurate? A) Briana is basing her marketing approach on a variation of the mass marketing strategy. B) Briana's marketing strategy appears to be consistent with several key aspects of relationship marketing. C) Many recent studies suggest that Briana will be unable to earn a reasonable profit because she is serving too small a segment of the market rather than the entire market. D) Briana's marketing efforts put too much emphasis on retaining existing customers and not enough on obtaining new customers. Answer: B Explanation: Briana's approach has several elements of relationship marketing, including (1) recognition of the need to offer programs designed to meet the individual needs of customers, and (2) making an effort to develop personal dialogues with customers. Difficulty: 3 Hard Topic: Relationship Marketing Learning Objective: 13-05 Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 250) When Briana attempts to identify economic, social, and competitive factors that could affect her success in the fitness market, she is engaging in A) positioning analysis. B) concept testing. C) target marketing. D) environmental scanning. Answer: D Explanation: Environmental scanning is the process of identifying the factors that can affect a firm's marketing success. This process involves looking at the various aspects of the surrounding environment, including the economic, social, and competitive conditions faced by the firm. Difficulty: 3 Hard Topic: The Marketing Environment Learning Objective: 13-04 Show how marketers use environmental scanning to learn about the changing marketing environment. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

Understanding Business, 12e (Nickels) Chapter 14 Developing and Pricing Goods and Services 1) When consumers calculate the value of a product, they look at the benefits and then subtract the cost. Answer: TRUE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) Successful businesses constantly monitor consumer wants and needs. Answer: TRUE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) To satisfy consumers managers must learn to listen better than they do now and to adapt constantly to changing market demands. Answer: TRUE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 4) Once an organization surveys the consumer's wants and needs, has designed a group of products to meet those needs, and begun to market them in stores, the organization is assured of success. Answer: FALSE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 1 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

5) Fast food restaurants must constantly monitor all sources of information for new-product ideas. Answer: TRUE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) Fast food restaurants, like Carl's Jr., pride themselves on offering precisely the same menu around the world so that customers know exactly what to expect when they eat at one of those restaurants. Answer: FALSE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 7) Product development is a key activity in any modern business, anywhere in the world. Answer: TRUE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) From a strategic marketing viewpoint, a total product offer includes all of the tangible attributes of a good or service, and excludes any intangible attributes. Answer: FALSE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

9) The image created by advertising is part of the total product offer of a product. Answer: TRUE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10) The reputation of the manufacturer and the retail store surroundings are considered part of the value enhancers of a total product offer. Answer: TRUE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) Price, store surroundings, service, and brand name are all elements that consumers evaluate in a total product offer. Answer: TRUE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) Successful marketers attempt to think like consumers and evaluate the total product offer as a collection of impressions created by all parts of the value package. Answer: TRUE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

13) The critical component of a total product offer is always a low price. Answer: FALSE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) Low prices can often help retailers create an attractive total product offer. Answer: TRUE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) In evaluating a total product offer, value enhancers such as service, guarantees, reputation of the seller, etc. are as important to customers as the basic product. Answer: TRUE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 16) A firm's product line refers to all of the different geographic markets in which it sells the same good or service. Answer: FALSE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

17) A single product line may contain several competing brands. Answer: TRUE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) The term product line describes the combination of product mixes offered by a manufacturer. Answer: FALSE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 19) A product line is a group of products that are physically similar or are intended for a similar market. Answer: TRUE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) The several product lines that a company offers for sale make up that organization's product mix. Answer: TRUE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

21) While service providers offer product lines, they are unable to offer product mixes. Answer: FALSE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 22) Artisan breads, bagels, sandwiches, soups, and pastries are products that would be included in the product mix of a cafe. Answer: TRUE Explanation: Different products offered by a cafe make up the company's product mix that it offers to its customers. Difficulty: 2 Medium Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 23) Car dealers realize that consumers focus exclusively on price and warranty. Answer: FALSE Explanation: Consumers consider the total product offer of benefits that the product provides. This may include many different attributes including factors other than the price and quality of the product. For example, the total product offer may include the image of the product created by advertising, the brand name, the atmosphere of the store, and the guarantee. Difficulty: 2 Medium Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

24) A bank's product line may include safety deposit boxes, car loans, and checking accounts. Answer: FALSE Explanation: These various services would comprise the bank's product mix, not its product line. A product line is a group of products that are physically similar. Difficulty: 2 Medium Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 25) The concepts of product lines and product mixes apply to marketers of both products and services. Answer: TRUE Explanation: Service providers have product lines and product mixes as well. For example, a bank may offer a variety of services from savings accounts, automatic teller machines, and computer banking. Difficulty: 2 Medium Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26) According to the Adapting to Change box, social celebrity-driven mobile games are not making as much money as app developers expected. Answer: FALSE Explanation: Social celebrity-driven mobile games are a huge money maker for both celebrities and app developers. In fact, developers are remodeling less popular games and adding in celebrities to enhance the product. As of today, it's a $200 million a year industry and is showing great growth possibilities. Difficulty: 2 Medium Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

27) A traditional McDonald's and a McCafe are examples of the McDonald's Corporation product mix. Answer: TRUE Explanation: A product mix is the combination of all product lines offered by a manufacturer. McDonald's Corporation has quick-service outlets that serve burgers and fries and they also have the McCafe that serves coffee and pastries, two different types of outlets. Each serves a different product line to a particular market. Difficulty: 3 Hard Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 28) At Affordable Appliances stores, all new products are offered with an extended service contract, as well as free delivery and installation. By offering these value enhancers, Isuzu's has added to their total product offer. Answer: TRUE Explanation: When people buy a product, they evaluate an entire total product offer of product benefits, including such things as delivery, service, warranty, image, and package. Difficulty: 3 Hard Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 29) Miller Light Beer, Maxwell House Coffee, Jell-O brand gelatin, Kraft mayonnaise, and Marlboro Cigarettes were all at one time products of the Philip Morris Company. These products represented a part of the product line Philip Morris offered. Answer: FALSE Explanation: A product line is a group of products that are physically similar or are intended for a similar market. These brands were part of the Philip Morris product mix. Difficulty: 3 Hard Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

30) In order for product differentiation to be effective, real product differences must be identified so that one product is clearly better than others. Answer: FALSE Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 31) Marketers use pricing, advertising, and packaging to differentiate their products from competitors' products even when actual differences are quite small. Answer: TRUE Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32) Creative product differentiation can enable a small business to increase market share. Answer: TRUE Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 33) The most common classification of consumer goods and services is based on producer or manufacturer behavior in the market. Answer: FALSE Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

34) One common way of classifying consumer goods is based on consumer purchasing behavior. Answer: TRUE Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) The uniqueness of convenience goods and services stimulates consumers to make an extra effort to purchase them. Answer: FALSE Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) Convenience goods are products that the consumer wants to purchase frequently and with minimal effort. Answer: TRUE Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 37) The characteristics of specialty goods restrict their effective sale online. Answer: FALSE Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

38) Unsought goods and services fail to provide the benefits consumers expect. Answer: FALSE Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39) Unsought goods and services are products consumers do not actively seek out for purchase on a regular basis. Answer: TRUE Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 40) The marketing efforts for convenience and specialty goods are essentially the same. Answer: FALSE Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 41) Shopping goods and services are purchased only after consumers compare value, quality, style, and price of competing goods and services. Answer: TRUE Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

42) Successful marketing of convenience and specialty goods require different marketing mixes. Answer: TRUE Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 43) Most consumers view specialty goods as having a variety of acceptable substitutes. Answer: FALSE Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44) The classification of goods or services into a particular class depends on the individual consumer. Answer: TRUE Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 45) A shopping good for one consumer could be a specialty good for another consumer. Answer: TRUE Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

46) Specialty goods are often marketed through specialty magazines. Answer: TRUE Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 47) Some goods can be classified as either consumer goods or as industrial goods. Answer: TRUE Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 48) Industrial goods are sold in the B2B market. Answer: TRUE Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 49) As a promotional strategy, advertising is more important in the marketing of industrial goods than it is in the marketing of consumer goods. Answer: FALSE Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

50) Capital items are industrial goods that are expensive and last a long time. Answer: TRUE Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 51) Industrial goods and services are used to produce other products. Answer: TRUE Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 52) Accessory equipment consists of capital items that cost less and are shorter lived than installation items. Answer: TRUE Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 53) The two types of industrial goods are production goods and unsought goods. Answer: FALSE Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

54) Equipment maintenance and repair of equipment used by businesses is an industrial support good. Answer: TRUE Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 55) Paper clips, stationery, and other office supplies used by businesses are types of industrial support goods. Answer: TRUE Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 56) A pickup truck can be classified as either a consumer good or an industrial good. Answer: TRUE Explanation: Some goods can be either a consumer good or an industrial good, depending on who buys them and how they are used. For example, if a construction company buys a pickup truck, it would be an industrial good, but if a household buys the same type of truck for personal use, it would be a consumer good. Difficulty: 2 Medium Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

57) Newspapers are sold daily in a wide variety of locations. This widespread distribution suggests that newspapers are classified as convenience goods. Answer: TRUE Explanation: Convenience goods are goods that consumers want to purchase frequently and with little effort. Thus, convenience goods typically are offered in a wide variety of locations. Difficulty: 2 Medium Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 58) Unsought goods and services are purchased on impulse and provide no added value to consumers. Answer: FALSE Explanation: Unsought goods and services are goods that consumers are unaware of, or haven't necessarily thought of buying, but they do provide benefits to the consumer and hence do have value. Examples of unsought goods are car towing and emergency plumbing services. Difficulty: 2 Medium Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 59) Consumers are best served by providing specialty goods in convenient locations. Answer: FALSE Explanation: Consumers actually expect to make an extra effort in acquiring specialty goods. They may be disappointed to find them too readily available. Difficulty: 2 Medium Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

60) Jackson is the owner of a small pizzeria and draws a variety of competition—from other local restaurants offering pizza to the large national chains. The small size of Jackson's business prevents him from successfully utilizing a product differentiation strategy. Answer: FALSE Explanation: Small firms sometimes have an advantage when it comes to differentiating their products, because they are close to their customers and are often more flexible than their larger competitors. In fact, creative product differentiation is often a key to the success of small businesses. Difficulty: 3 Hard Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 61) While White Glove Cleaners offers home and commercial cleaning services no different from competitors, the company is unable to utilize a product differentiation strategy. Answer: FALSE Explanation: Service firms can provide real differences in the quality or type of services they offer, and can also use advertising, pricing, and other techniques to create real and perceived differences in their products. Difficulty: 3 Hard Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 62) Cool Down Drinks, a national producer of soft drinks, wants to differentiate its products from those of other providers. To implement this strategy successfully will require Cool Down to create tangible differences in the physical product it offers. Answer: FALSE Explanation: Product differentiation can be based on either real or perceived differences in products. Thus, even if Cool Down soft drinks look and taste much like competing soft drinks, Cool Down could use clever advertising and distinctive packaging to create an image that stands out. Difficulty: 3 Hard Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

63) Louis expects to visit a variety of retailers and websites to compare features, quality, and prices of different speaker equipment brands. This behavior indicates that for Louis a speaker system is a shopping good. Answer: TRUE Explanation: Shopping goods and services are those that a consumer buys only after comparing value, quality, style, and prices from a variety of sellers. Difficulty: 3 Hard Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 64) Gabriella strongly prefers a specific brand of gourmet coffee. Since there is only one store in her area that sells her brand, she makes an extra effort to purchase this item. Gabriella's purchasing behavior indicates for her this product is a specialty good. Answer: TRUE Explanation: Specialty goods are goods that appeal to a relatively small market segment, but have a special attraction to consumers who are willing to go out of their way to obtain them. Difficulty: 3 Hard Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 65) Land Movers Equipment Company sells used heavy construction equipment such as bulldozers and cranes. Land Movers products represent examples of an accessory equipment industrial good. Answer: FALSE Explanation: Accessory equipment consists of capital items that are not quite as long lasting or as expensive as installations. Installations consist of major capital equipment such as new factories and heavy machinery. Difficulty: 3 Hard Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

66) Securitas Financial Services purchased several new computers and laser printers for office use. These items would be correctly classified as accessory equipment. Answer: TRUE Explanation: Accessory equipment refers to capital items that are not quite as expensive and do not last quite as long as installations. Computers, printers, and copy machines are common examples of accessory equipment. Difficulty: 3 Hard Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 67) Packaging is an important part of the total product offer. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 68) One function of effective packaging is to attract the attention of consumers. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 69) One function of effective packaging is to protect the goods inside during handling and storage, as well as deter product tampering and theft. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

70) One function of effective packaging is to provide information regarding warranties, benefits, and uses of the good inside the package. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 71) More than any other component of a total product offer, technology has reduced the importance of packaging. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 72) Changes in packaging can transform the product in the minds of consumers and open larger market opportunities. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 73) While packaging innovations benefit the consumer, they have vastly increased the workload of retailers. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

74) While the packaging of services has not yet captured the attention of businesses, technological improvements will likely create new opportunities. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 75) The exclusive goal companies expect of packaging is to protect the product from damage in transit. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 76) Today, the packaging of products has been given a greater role in product promotion. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 77) The trend toward self-service retailers has increased the importance of packaging. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

78) As a result of increased advertising and well-trained salespeople, packaging is less important than in the past. Answer: FALSE Explanation: Many goods that were once sold by salespersons are now being sold in selfservice outlets, and the package has therefore been given a greater role in the promotional message. Difficulty: 2 Medium Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 79) Regardless of changes in packaging, the total product offer remains unchanged. Answer: FALSE Explanation: Packaging can change a product by changing its visibility, usefulness, and/or attractiveness. Difficulty: 2 Medium Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 80) While the UPC improves efficiency at the retail checkout counter, it has increased problems in controlling inventory. Answer: FALSE Explanation: One purpose of packaging is to help make the product more attractive to retailers. The UPC can help a firm trace the flow of goods from the warehouse to the cash register. Difficulty: 2 Medium Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

81) NiceIce Meals designed a new type of packaging that significantly improves taste and texture of food when defrosted. Unfortunately, firms seldom find that improvements in packaging impact market share and profits. Answer: FALSE Explanation: Packaging has become a critical part of product design by performing many promotional functions. The text cites many examples of how improvements in packaging have changed consumer perceptions and opened up large markets. Difficulty: 3 Hard Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 82) A brand includes practically all means of identifying a product. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 83) The purpose of a brand name is to establish an image of generic goods or services. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

84) Brand names can significantly impact consumer perceptions of a product. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 85) A trademark is a brand that has been given exclusive legal protection for both the brand name and the pictorial design. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 86) The benefits provided by a brand name for a buyer include reduced search time, prestige, and quality assurance. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 87) The U.S. legal system does not offer trademark protection. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

88) Brand names help sellers with new-product introductions and create an opportunity for higher prices. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 89) Dealer (private) brands are products that do not carry the manufacturer's name, but rather carry the name of a distributor or retailer. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 90) Chevrolet is an example of a generic name in the automobile market. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 91) Manufacturers' brands carry the brand name of the producers that distribute the products nationally. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 25 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

92) Most manufacturers hope that their brand names will become a generic name. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 93) Sales of generic products are decreasing because consumers prefer the higher quality of the nationally known brands. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 94) The legal protection offered to an established brand name prevents that name from being used as a generic name for a product. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 95) The use of price discounts and coupons may erode the commitment of consumers to brand names. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

96) The best strategy for brand name manufacturers to respond to the challenge of generic goods is to use price discounts and coupons to price their products more aggressively. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 97) A knockoff brand is a brand name that has lost its exclusive legal protection. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 98) Brand equity refers to those factors that people associate with a specific brand name, such as awareness, perceived quality, and loyalty. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 99) Brand loyalty refers to the degree to which customers are satisfied with a brand and are committed to further purchases. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 27 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

100) Although their names are similar, brand loyalty and brand equity are unrelated. Answer: FALSE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 101) When consumer loyalty reaches the point of brand insistence, the product becomes a specialty good. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 102) Event sponsorship like the Tostito's Fiesta Bowl football game helps improve brand awareness. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 103) Price, appearance, and reputation can influence a consumer's perceptions of quality. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

104) Endorsements by sports or movie celebrities can help create a favorable brand association. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 105) Brand association is the linking of a brand to other favorable images such as a celebrity or geographic location. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 106) Brand managers have direct responsibility for all the elements of the marketing mix for a particular brand or product line. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 107) Firms use brand managers or brand teams to give them greater control over both newproduct development and product promotion. Answer: TRUE Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

108) Federal legislation requires that the brand name of a product clearly identify the manufacturer of that product. Answer: FALSE Explanation: Private or dealer brands do not carry the name of the manufacturer. They carry the name of a distributor or retailer instead. Difficulty: 2 Medium Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 109) Brand managers are responsible for the marketing of a product after it has been developed and a clear promotional message has been identified. Answer: FALSE Explanation: One reason why many companies have utilized product management is to gain greater control over product development and product promotion. Difficulty: 2 Medium Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 110) According to the Reaching Beyond Our Borders box, brand names must hold great meaning or customers will not acknowledge them. Answer: FALSE Explanation: Some of the world's most profitable and well-known brand names are made up, for example, Lululemon, Oreo, and Google. Difficulty: 2 Medium Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

111) Freddie's Market offers customers tissues, canned goods, napkins, and various detergents in basic packaging with no identified brand. These goods are popular with the more cost-conscious shoppers because they are significantly less expensive than nationally known brand names. These types of goods are examples of generic goods. Answer: TRUE Explanation: Generic goods are nonbranded products that usually sell at a sizable discount from national or private brands, have very basic packaging, and are backed with little or no advertising. Difficulty: 3 Hard Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 112) Hammer's Hardware, a nationwide chain of hardware stores, sells a line of tools under the Hammer's brand even though they were actually produced by another firm. Since the products are actually produced by another firm, the Hammer's Hardware brand is an example of a knockoff brand. Answer: FALSE Explanation: Knockoff brands are illegal copies of brand-name goods. However, there is nothing illegal about a firm (such as Hammer's Hardware) putting its brand on a good produced by another firm. This is an example of a dealer (or private) brand. Many retailers (the text cites the example of Sears) use this type of brand. Difficulty: 3 Hard Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

113) CarryOn, a manufacturer and seller of luggage and briefcases, has found marketing research indicates durability is the attribute that consumers most desire in their products. CarryOn now emphasizes durability in all of their promotional efforts. This strategy is intended to build brand equity. Answer: TRUE Explanation: Perceived quality is an important part of brand equity. The key to creating the perception of quality is to identify what consumers look for in a high-quality product and then make sure that the company uses this information when it sends messages about its product. The intended goal of brand equity is to establish the firm's brand name as the generic name for the product. Difficulty: 3 Hard Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 114) Sandy works for Epic Electronics and oversees the marketing mix for the firm's line of HDTVs. Sandy serves as a brand manager for Epic Electronics. Answer: TRUE Explanation: A brand manager has direct responsibility for a specific brand or product line at a company. This responsibility includes all elements of the marketing mix. Difficulty: 3 Hard Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 115) New-product failures are most often caused by excessively high prices. Answer: FALSE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-05 Explain the steps in the new-product development process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

116) New products often fail because they don't deliver to consumers their promised benefits. Answer: TRUE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-05 Explain the steps in the new-product development process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 117) Firms should listen to their suppliers for new-product ideas. Answer: TRUE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-05 Explain the steps in the new-product development process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 118) Employees, not the firm's research and development department, are the number one source of ideas for new industrial products. Answer: TRUE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-05 Explain the steps in the new-product development process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 119) Product testing is designed to reduce the number of new-product ideas that a firm works on at any one time. Answer: FALSE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-05 Explain the steps in the new-product development process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

120) In the new-product development process, product analysis is completed prior to the product screening stage. Answer: FALSE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-05 Explain the steps in the new-product development process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 121) The product analysis stage of the new-product development process considers the sales forecasts and cost estimates of a new-product idea. Answer: TRUE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-05 Explain the steps in the new-product development process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 122) Concept testing involves taking a product idea to consumers to test their reactions. Answer: TRUE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-05 Explain the steps in the new-product development process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 123) Social media and company websites are useful in the commercialization process for new products. Answer: TRUE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-05 Explain the steps in the new-product development process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

124) New-product commercialization includes promoting the product to distributors and retailers as well as developing strong advertising and sales campaigns. Answer: TRUE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-05 Explain the steps in the new-product development process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 125) "Create a better mousetrap and the world will beat a path to your door." This statement is consistent with the idea behind the commercialization of products. Answer: FALSE Explanation: The statement suggests that all that is needed to generate sales is a better product. Commercialization recognizes that even good products that meet the needs of consumers may not succeed without additional marketing effort. Specifically, commercialization involves (1) promoting the product to distributors and retailers to get wide distribution and (2) developing strong advertising and sales campaigns to generate and maintain interest in the product among distributors and consumers. Difficulty: 2 Medium Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-05 Explain the steps in the new-product development process. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 126) At the concept testing stage, factors such as packaging, branding, and ingredients should be tested to ensure that a product is acceptable to potential consumers. Answer: TRUE Explanation: Concept testing involves taking the product to consumers to test their reactions. Difficulty: 2 Medium Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-05 Explain the steps in the new-product development process. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

127) Sherrie's Snacks has found that an effective technique to generate ideas for new consumer products is to carefully listen to employees and suppliers. Answer: TRUE Explanation: Employees and suppliers are major sources of new ideas for new consumer goods. Difficulty: 2 Medium Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-05 Explain the steps in the new-product development process. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 128) The product life cycle presents a theoretical model describing what happens to sales and profits for a class of products over time. Answer: TRUE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 129) While the time in each stage may vary, all products progress through each stage of the product life cycle. Answer: FALSE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 130) The four stages in the product life cycle are introduction, market, exchange, and disposal. Answer: FALSE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

131) While some products remain in the introductory stage of the product life cycle for years, other products may go through the entire cycle in a few months. Answer: TRUE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 132) Knowledge of the product life cycle model can help firms develop marketing strategies and anticipate market changes. Answer: TRUE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 133) Successful firms maintain consistency in their marketing mix strategies throughout the product life cycle. Answer: FALSE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 134) Profits peak during the maturity stage of the product life cycle. Answer: FALSE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

135) While the product life cycle is a good theory, it's not important for marketers to recognize what life cycle stage a product is in. Answer: FALSE Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 136) Successful businesses develop a mix of price, product, place, and promotion that is consistently applied throughout a product's life cycle. Answer: FALSE Explanation: Different stages in the product life cycle call for different strategies. Difficulty: 2 Medium Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 137) Some goods have a product life cycle that is completed in a shorter amount of time than other goods. Answer: TRUE Explanation: Some products, such as items based on fads, may go through the entire cycle in a few months, while other products may have product life cycles that last for years. Difficulty: 2 Medium Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

138) Eddie has just taken a job with a local microbrewery after several years working as a brand manager for an established product. Now, he is responsible for managing the marketing mix for a new product introduction. In his new job, Eddie will find that while the products may be at different stages of the product life cycle, the marketing strategies will be essentially the same. Answer: FALSE Explanation: Products in different stages of the product life cycle call for different strategies. Difficulty: 2 Medium Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 139) As consumers evaluate a product, price plays a small role. Answer: FALSE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 140) A long-run pricing objective of almost all firms is to optimize profit. Answer: TRUE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 141) Sometimes a firm will lower prices below their costs in order to build a customer base. Answer: TRUE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

142) In order to achieve a social objective, firms use low prices to enable people with low incomes to buy their product. Answer: TRUE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 143) Consumer perceptions of product quality are affected by promotions and packaging, but not by the price of the product. Answer: FALSE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 144) Successful firms coordinate pricing objective strategies with decisions regarding product design, packaging, branding, distribution, and promotion. Answer: TRUE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 145) Successful firms always try to maintain consistency in their short-run and long-run pricing objectives. Answer: FALSE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

146) Cost-based pricing adds a desired profit margin to the cost of producing a product. Answer: TRUE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 147) In the long run the market determines what the price will be. Answer: TRUE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 148) Target costing adds a profit margin to estimated cost of production to determine the optimal price. Answer: FALSE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 149) Demand-based pricing is another name for cost-based pricing. Answer: FALSE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

150) Target costing is a cost-based pricing strategy. Answer: FALSE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 151) The target costing strategy establishes a selling price that consumers are willing to pay for a product, and then subtracts a desired profit margin to determine a target cost of production. Answer: TRUE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 152) In the long run, the cost of production and the length of the firm's supply chain determine the price of a product. Answer: FALSE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 153) Competition-based pricing is a strategy based on what all the other competitors are doing. Answer: TRUE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

154) Price leadership is a demand-based pricing strategy. Answer: FALSE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 155) Price leadership occurs when one or more dominant firms set pricing practices that other firms in the market follow. Answer: TRUE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 156) The purpose of break-even analysis is to determine the lowest price a firm can charge and still be able to cover its costs of production. Answer: FALSE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 157) Break-even analysis determines profitability of a firm at various levels of sales. Answer: TRUE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

158) The break-even point is that level of sales where total revenues equals total costs. Answer: TRUE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 159) Total fixed costs are those costs that change when the volume of production changes. Answer: FALSE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 160) Variable costs are costs that change with the level of production. Answer: TRUE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 161) A skimming price strategy involves a low pricing policy intended to attract price-sensitive customers from competitors. Answer: FALSE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

162) A penetration strategy calls for a firm to charge low prices with the intent of attracting a large number of customers and discouraging competition. Answer: TRUE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 163) Firms utilizing an everyday low pricing (EDLP) strategy establish a policy of special sales on a regular basis. Answer: FALSE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 164) A high-low pricing strategy may condition consumers to avoid paying the regular prices by waiting for sale prices. Answer: TRUE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 165) As more sales move to online retailers, it is likely that firms will adopt a high-low pricing strategy. Answer: FALSE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

166) Psychological pricing utilizes high prices to create the image of a high-quality product. Answer: FALSE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 167) Ultimately, the price of a good is determined by the interaction of supply and demand in the marketplace. Answer: TRUE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 168) The key to demand-oriented pricing is the recognition that not all producers face the same costs of production. Answer: FALSE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 169) Despite the fact that microeconomic theory places a great deal of emphasis on price, marketers often try to find ways to compete on product attributes other than price. Answer: TRUE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

170) For most firms, price competition is the most important way to gain a competitive advantage over rivals. Answer: FALSE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 171) Small firms often rely on nonprice competition when competing against larger firms. Answer: TRUE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 172) One way firms can gain a competitive advantage without relying on low prices is by developing close, friendly relationships with their customers. Answer: TRUE Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 173) The pricing objectives of a firm should be set independently of the other elements of their marketing mix. Answer: FALSE Explanation: Pricing objectives should be influenced by other marketing decisions regarding product design, packaging, branding, and promotion. Difficulty: 2 Medium Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

174) When a company establishes the price it charges for its products by determining the cost of production and then adding on a desired profit margin, it is known as target costing. Answer: FALSE Explanation: When firms set prices by adding a desired profit margin to production costs, they are using a pricing approach known as cost-based pricing. Difficulty: 2 Medium Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 175) Rather than having frequent special sales, a company maintains lower prices than competitors all the time. This pricing strategy is known as everyday low prices (EDLP). Answer: TRUE Explanation: EDLP stands for everyday low prices. Firms that use this approach have a strategy of charging prices lower than competitors on a regular basis, and not having any special sales. Difficulty: 2 Medium Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 176) Regina owns and operates the Regal Car Wash. She charges $12 per car wash. Her fixed costs are $850 per month, while her variable costs per car wash amount to $2. Regal Car Wash must service 60 cars to break even. Answer: FALSE Explanation: The formula to determine a firm's break-even point in sales volume is as follows: BEP = total fixed costs/(price of one unit minus variable cost per unit). Using the information provided, BEP = $850/($12 – $2). The resulting answer is 85 cars. Difficulty: 3 Hard Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

177) Haruto, owner and operator of a sushi bar, is working on a break-even analysis. His fixed costs would include rent, insurance, and property taxes. Answer: TRUE Explanation: Fixed costs are those costs that do not vary with changes to the level of production. Rent, insurance, and property taxes will certainly change from one time period to the next. However, these changes are not driven by changes to the level of production. Difficulty: 3 Hard Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 178) Lauren, owner and operator of Tastee Burgers, is working on a break-even analysis. The cost of pickles, onions, buns, ketchup, and meat would all be considered variable costs for her type of business. Answer: TRUE Explanation: Variable costs are those costs that vary with the level of production. As the number of burgers sold increases, the amount of pickles, onions, catsup, buns, and meat Lauren must buy will increase. Difficulty: 3 Hard Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 179) Isla is a marketing manager for Marshall Manufacturing. Her boss has asked her to evaluate a new-product idea. One of the things Isla wants to determine is how much of this product her firm would have to sell in order to break even. In order to compute this break-even level of sales, she will need to know the price of the good, the total fixed costs, and variable cost of producing each unit. Answer: TRUE Explanation: In order to compute the break-even point, Isla would divide the total fixed cost associated with producing the product by the difference between the price of the good and the variable cost of producing each unit. Difficulty: 3 Hard Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

180) Newport Industries is one of the first producers of a unique consumer product. The company has chosen a low-price strategy, hoping this will enable them to quickly attract many customers while discouraging potential competitors from entering the market. Newport's approach to pricing is a classic example of the skimming strategy. Answer: FALSE Explanation: Newport Industries is actually using a penetration pricing strategy designed to attract more customers and discourage competition. Price skimming refers to a strategy in which a firm offering a new product initially charges a high price while there is little competition. Difficulty: 3 Hard Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 181) Admiral Motors is the dominant firm in the auto market. When Admiral announces an increase in the prices of its automobiles, Chord and Frysler, the smaller firms in the market usually quickly announce similar price increases for their own cars. This situation is an example of demand-oriented pricing. Answer: FALSE Explanation: This "follow the leader" strategy of matching the pricing practices of one or more dominating firms is referred to as price leadership. Difficulty: 3 Hard Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

182) Lily's Floral Creations is located in a large town that has several other florists. Lily is likely to find that the presence of many larger competitors means that the only way she can survive is to charge rock-bottom prices. Answer: FALSE Explanation: Firms often try to avoid competing on prices because price changes usually are easy for competitors to match. In fact, cutting prices may set off a price war. Moreover, keeping prices very low is likely to hurt profit margins. Thus, instead of using a low-price strategy, many firms try to compete on nonprice factors such as fast delivery, friendly service, personalized treatment, quality, creativity, or other factors. Difficulty: 3 Hard Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 183) Cutter's Catering Services advertises that they are the "friendliest caterers in town." Though their prices are no lower than the rates of competitors, they put a great deal of emphasis on getting to know the needs of their customers. They tailor their efforts to meet these needs, providing a unique dining experience that exactly matches the customer's expectations. Cutter's Catering is likely to find that this approach is more effective in achieving its goals than the use of aggressive price cutting. Answer: TRUE Explanation: In many markets, cutting prices is not an effective competitive strategy since it is easy for other firms to respond by cutting prices as well. Many firms rely on nonprice strategies that focus on high quality, outstanding service, fast delivery, or similar factors to differentiate their products and achieve a high level of customer loyalty. Difficulty: 3 Hard Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

184) When consumers calculate the value of a product, they A) subtract the cost of production from the market price. B) eliminate all nontangible elements that might affect their perception of the product. C) look at the benefits the product provides then subtract the cost. D) identify the variable and the fixed components of the product's benefits. Answer: C Difficulty: 1 Easy Topic: Product Development and the Total Product Offer Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 185) Whether a consumer thinks a product provides the best value depends upon A) the actual product benefits. B) the consumer's perceptions. C) the global situation. D) the laws covering the product's manufacture. Answer: B Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 186) Restaurants, like other businesses, often find that the best way to succeed in the market is to A) listen to customers and adapt products to their needs. B) create a product for which they could charge an exceptionally high price. C) create a winning combination of advertising and personal selling for all of the stores in the chain. D) open more stores in a single year than other food-service operators. Answer: A Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

187) The combination of all the factors that consumers evaluate when deciding whether or not to buy a good or service is called a A) total product offer. B) product mix. C) product differentiation. D) product package. Answer: A Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 188) When people consider purchasing a good, they A) are responding to the market forces of supply and demand. B) are most influenced by the price of the product or service. C) will not consider goods that require them to make a special effort to purchase. D) may evaluate and compare a variety of factors. Answer: D Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 189) Which of the following refers to a group of products offered by a firm that are physically similar or are intended for a similar market? A) product matrix B) product line C) product mix D) total product offer Answer: B Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

190) The combination of product lines offered by a manufacturer is called the firm's A) product matrix. B) product mix. C) total product offer. D) product portfolio. Answer: B Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 191) The best product development strategy for most firms is to A) develop a small number of products that achieve market success and stick with them, because constantly changing old products (or introducing new ones) can confuse and frustrate customers. B) maintain one product line while adding regularly to that product line over time to sustain customer interest. C) constantly monitor consumer wants and needs and be willing to develop new products and adapt policies and services as those consumer needs begin to change. D) focus on the actual product or service and don't worry too much about factors such as image, price, and service. Answer: C Explanation: There must be a constant monitoring of consumer wants and needs because consumer and business needs change over time. Difficulty: 2 Medium Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

192) When consumers decide to purchase a particular product, they A) will search for the retailer that offers the lowest price. B) consider the total collection of benefits that the product offers. C) base their decision on a brand name nearly all of the time. D) initially evaluate the product's package. Answer: B Explanation: When people buy a product, they evaluate all the benefits that the product offers. This combination of benefits is called the product's total product offer. Difficulty: 2 Medium Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 193) In evaluating colleges, students and parents are likely to judge a school A) strictly on the basis of major curriculums offered. B) based on the tuition. C) by the collection of benefits offered by the school. D) on the anticipated rate of return on their tuition investment. Answer: C Explanation: The choice of a college is no different than any other purchase decision. Consumers will focus on the total product offer of the organization. Difficulty: 2 Medium Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

194) The Coca-Cola Company produces Diet Coke, Diet Coke with Splenda, and Coke Zero along with a number of other flavors. These products are part of Coca-Cola's A) product line. B) product mix. C) product position. D) product collection. Answer: A Explanation: Diet Coke, Diet Coke with Splenda, and Coke Zero are all part of Coke's product line. A product line is a group of products that are physically similar or are intended for a similar market. Difficulty: 3 Hard Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 195) The Connecting Through Social Media box showed us that while watching the online gaming market, some previously popular games were faltering. This led programmers to A) focus all marketing efforts on social media. B) watch comments on social media that led to termination of the games that were no longer popular. C) partner with other companies with a large social following to co-market. D) turbocharge the games by inserting a celebrity with a massive social following. Answer: D Explanation: Popular app developers are taking tried and proven games that have lost popularity and inserting celebrities, like Kim Kardashian and Ellen Degeneres, to turbocharge the product and give it new life. Difficulty: 2 Medium Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

196) Spokes sells high-quality bicycles and accessories. The store is known for a pleasant environment, friendly salespeople, and an excellent service department. All of these elements are part of the ________ offered by Spokes. A) total product offer B) product line C) competitive environment D) marginal utility package Answer: A Explanation: A total product offer consists of everything that consumers evaluate when deciding whether to buy something. Difficulty: 3 Hard Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 197) Sweet Tooth Confectioners may use the same ingredients as most other producers of chocolate candies and may not even be much better than other well-known brands of chocolate. However, the company wraps its candies in expensive-looking foil and places them in very attractive boxes. It promotes its products in advertisements as "the ultimate in chocolate experience." Sweet Tooth charges a much higher price than most competitors, but sales continue to grow. This success indicates that A) consumers always behave in an irrational manner. B) there is more to the total product offer than the physical product. C) consumers seldom consider price when making a buying decision for goods such as chocolate. D) chocolate is best classified as a convenience good. Answer: B Explanation: When making purchasing decisions, consumers look at a variety of factors, collectively known as a total product offer. The package, price, and the image created by the firm's advertising are all part of this package. Difficulty: 3 Hard Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

198) Having just graduated college and about to start a new marketing job, Terry needed transportation. He listed the kinds of things he wanted in a car: the ability to carry some large things; a comfortable back seat for his two dogs; 4-wheel drive for snow and ice; and economical on gas. Marketers know that today's consumers A) are educated and very savvy and are looking for features and not benefits. B) are willing to pay just about any price if they find the features they want. C) look for the best value (benefits outweigh the cost). D) are always economically sensitive, first. Answer: C Explanation: Consumers compare the benefits of a product and service to the cost. If benefits outweigh the cost, the consumer believes he/she has received a good value. Difficulty: 3 Hard Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 199) Borden, Inc. makes pasta, dairy items, and adhesives. These different types of products are referred to as Borden's A) product line. B) product mix. C) product differentiation. D) product life cycle. Answer: B Explanation: Product mix is the term used to describe the combination of product lines offered by a manufacturer. Difficulty: 3 Hard Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

200) The Procter & Gamble Company is a major producer of bar soaps. In fact, Procter & Gamble produces Ivory, Camay, Lava, Safeguard, Zest, and Coast bar soaps that all claim a variety of benefits. These products are part of Procter & Gamble's ________ in bar soaps. A) product mix B) product concentration C) product store D) product line Answer: D Explanation: A product line is a group of products that are physically similar or are intended for a similar market. Difficulty: 3 Hard Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 201) Donavan spent the day talking with a packaging company in Guam, a lighting specialist in Japan, a touchpad expert in the U.S., a prototype design firm in Malaysia, as well as a shipping firm in China. Each of these firms provided expertise in the development of his company's latest product, a back-lighted eReader. The strategy that Donavan's firm used to develop its latest product is A) singular source product development. B) distributed product development. C) multiple source product development. D) multitasking product development. Answer: B Explanation: Distributed product development means handing various aspects of the product development to other companies—even companies that are abroad. Difficulty: 3 Hard Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

202) The purpose of ________ is to create real or perceived product differences. A) niche marketing B) product differentiation C) product mixing D) target marketing Answer: B Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 203) For small businesses, product differentiation A) is more difficult than it is for larger firms because of the high cost of product research and development. B) usually concentrates on the pricing component of the total product offer. C) can be an important strategy to gain market share. D) is less important than it is for big firms with multiple product lines. Answer: C Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 204) Location is very important in the marketing of ________ because consumers desire to purchase these goods with a minimum of shopping effort. A) unsought goods B) shopping goods C) specialty goods D) convenience goods Answer: D Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

205) Which of the following are products consumers buy after comparing quality, price, and style from a variety of sellers? A) shopping goods B) specialty goods C) convenience goods D) unsought goods Answer: A Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 206) ________ goods appeal to consumers who are willing to make an extra shopping effort to acquire them. A) Specialty B) Shopping C) Convenience D) Consumer Answer: A Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 207) ________ goods and services represent those products that consumers are unaware of or haven't thought of buying. A) Inferior B) Convenience C) Shopping D) Unsought Answer: D Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

208) Products that are used in the production of other goods and services are called ________ goods. A) specialty B) shopping C) industrial D) sponsored Answer: C Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 209) ________ consist of major capital equipment such as new factories and heavy machinery. A) Accessory goods B) Specialty goods C) Installations D) Shopping goods Answer: C Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 210) Computers, copiers, and fax machines used by businesses would be classified as A) installations. B) shopping goods. C) specialty goods. D) accessory equipment. Answer: D Difficulty: 1 Easy Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

211) Successful product differentiation A) of consumer goods is determined exclusively by price. B) can be based on either real or perceived differences in products. C) is prohibited if it restricts price competition and market access. D) is less important due to the growth of the Internet. Answer: B Explanation: Product differentiation is the creation of real or perceived product differences. Difficulty: 2 Medium Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 212) Which of the following would a firm most likely use to differentiate its product? A) financial differences B) increased production C) elaborate packaging D) manual warehousing Answer: C Explanation: Marketers use a mix of pricing, advertising, and packaging to create a unique and attractive image for their product that will differentiate it from competitors. Difficulty: 2 Medium Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

213) Which of the following products would normally be classified as a shopping good or service? A) a tablet B) newspapers C) fur coats D) chewing gum Answer: A Explanation: Shopping goods require a special effort by consumers comparing value, quality, and price from a variety of sellers. This type of behavior is common when someone is shopping for a new technology, like a tablet. Chewing gum and newspapers represent products that consumers want to buy frequently with minimum effort, so they would be classified as convenience goods. Fur coats appeal to a relatively small market, but the people in this market are usually willing to go out of their way to purchase them. Thus, fur coats are usually classified as specialty goods. Difficulty: 2 Medium Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 214) Which of the following statements regarding convenience goods and services is accurate? A) Shoppers will exert lots of effort to obtain the product. B) Consumers purchase the product on an infrequent basis. C) Consumers buy only after carefully comparing quality and value. D) Brand awareness and image are important in marketing these products. Answer: D Explanation: Convenience goods and services are products that consumers desire to purchase frequently and with a minimum of effort. Brand awareness and image are also important. Difficulty: 2 Medium Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

215) Which of the following products would be considered an unsought good or service by a typical college student? A) college textbook B) pizza C) car towing D) cable television Answer: C Explanation: An unsought good or service is an item that consumers are unaware of, haven't necessarily thought of buying, or find that they need to solve an unexpected problem. College students (and most other people) don't recognize a need for car towing until their car breaks down or they have a wreck. Difficulty: 2 Medium Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 216) Which of the following products would most likely be classified as a specialty good or service? A) a microwave oven B) a limited-edition print signed by the artist C) a sports coat, slacks, and tie D) a car insurance policy Answer: B Explanation: Specialty goods and services are products that have a special attraction to consumers who are willing to go out of their way to obtain them. Consumers who want a signed, limited-edition print would be likely to make a special effort to find it. The rest are all shopping goods. Difficulty: 2 Medium Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

217) "It tastes better than candy!" is an advertising slogan for a new probiotic gummy. The manufacturer claims that their probiotics is of a higher quality and tastes better than any competing brand. These claims are part of the firm's strategy to achieve A) deceptive marketing recognition. B) the creation of knockoff products. C) new-product development. D) product differentiation. Answer: D Explanation: Product differentiation is the creation of real or perceived product differences. Difficulty: 3 Hard Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 218) Rosalita's and Antonio's are Mexican restaurant chains. Each restaurant offers similar items on their menus. However, Antonio's restaurants are positioned in the market as elegant establishments with high prices. Rosalita's, on the other hand, are located in middle-class neighborhoods, with a casual atmosphere that welcomes families with young children. The prices at Rosalita's are in the moderate range. When evaluating the marketing strategies used by these restaurants, we can conclude that A) both practice product mix effectiveness. B) they utilize product differentiation. C) Fernando's has chosen a shopping good strategy. D) their target markets differ, with one intended to appeal to the industrial market, and the other designed to attract the consumer market. Answer: B Explanation: Product differentiation attempts to create real or perceived differences in products. When making buying decisions, customers do not just look at the physical product itself, but also factors such as image and atmosphere. Thus, even though the food is very similar at the two restaurants, the overall dining experience (total product offer) is not the same. Difficulty: 3 Hard Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

219) Winter Cool Mints is a new brand of breath fresheners. The company knows product location is very important since consumers desire to buy this type product with a minimum of effort. Winter Cool Mints represent a A) shopping good. B) specialty good. C) convenience good. D) industrial good. Answer: C Explanation: Convenience goods and services are purchased frequently with a minimum of effort. Location becomes very important for the consumer of these items. Difficulty: 3 Hard Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 220) Suitorium is a men's clothing store in a large suburban shopping mall. The managers of the store know that their customers usually comparison shop, looking carefully at quality and price before deciding to buy. With this information, Suitorium carries quality clothing, offers competitive pricing, and friendly, helpful service. The target customers apparently view men's suits as a A) specialty good. B) convenience good. C) shopping good. D) unsought good. Answer: C Explanation: Shopping goods and services are those products that the consumer buys only after comparing value, quality, and price from a variety of sellers. Difficulty: 3 Hard Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

221) Eliza, a collector of fine art, particularly loves paintings. She has been looking for an original Jackson Pollack painting for months and has said that she is willing to go to extraordinary efforts to acquire this painting for her collection. Clearly this painting represents a ________ good for Eliza. A) shopping B) specialty C) unsought D) luxury Answer: B Explanation: Specialty goods and services are products that have a special attraction to consumers who are willing to go out of their way to obtain them. Difficulty: 3 Hard Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 222) A self-portrait of a celebrated photographer sold at a Christie's auction for about $4 million dollars. According to Christie's, this was the highest price ever received for a photograph in the history of the auction business. As a student of marketing, you would classify this photo and other rare items sold through Christie's as A) unsought for goods. B) specialty goods. C) intangible goods. D) shopping goods. Answer: B Explanation: A specialty good is a product that is offered in very few locations. Price is generally not that big of concern when a consumer is interested in purchasing a specialty good. Brand and brand image are very important. Difficulty: 3 Hard Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

223) Andrea lives in southern Mississippi where winters are normally fairly mild. Last January, during an unusually cold spell, the water pipes in her house froze and burst. She looked online to find a plumber who was able to come out and repair the pipes the same day. Prior to the frozen pipes, the plumber's services represented a(n) A) unsought service. B) industrial service. C) specialty service. D) convenience service. Answer: A Explanation: Unsought goods and services are items that consumers are unaware of, haven't necessarily thought of buying, or find that they need to solve an unexpected problem. Difficulty: 3 Hard Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 224) Marshall Manufacturing acquired several pieces of expensive heavy machinery it intends to use in its operations. As an industrial good, this heavy machinery represents A) an installation. B) accessory equipment. C) an intermediate good. D) a shopping good. Answer: A Explanation: Installations are major capital equipment such as factories and heavy machinery. Difficulty: 3 Hard Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

225) ________ is an important part of the total product offer for a product. A) Consumer income B) Management style C) Employee personality D) Packaging Answer: D Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 226) Today, packaging is: A) the least important component of the marketing mix. B) assuming an increasingly important role in the promotion of products. C) exclusively intended to protect the product from damage. D) the most expensive component of the production process. Answer: B Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 227) In marketing today, packaging carries the added responsibility of: A) promotion and sales. B) minimizing product liability. C) gaining access to international markets. D) keeping product costs down. Answer: A Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

228) The ________ on packages were intended to improve inventory control for businesses. A) stars and stripes B) UPCs C) lightweight adhesives D) Unit Standard Inventory bars Answer: B Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 229) The trend away from personal salespeople to self-service in many retail outlets has caused firms to A) reduce their advertising promotional budgets. B) rely more on personal sales efforts. C) place a greater promotional importance on packaging. D) decrease expenditures on social media and websites. Answer: C Explanation: Many products that were once sold by salespeople are now being sold in selfservice outlets. This has added to the promotional burden carried by packaging. Difficulty: 2 Medium Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

230) The evaluation of packaging as a marketing function indicates that A) the package is less important as the Internet provides consumers with easily obtained information. B) packaging carries more of the promotional burden of the product. C) consumers are influenced less by packaging. D) the primary purpose of packaging is to limit the product liability of businesses. Answer: B Explanation: Packaging has always been an important aspect of a product's total product offer, but today it is carrying more of the promotional burden. Difficulty: 2 Medium Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 231) Which of the following statements about packaging is the most accurate? A) Changes in packaging can improve the product itself and open up large new markets. B) Packaging is the least critical element of a firm's promotional strategy. C) Technology has had a very limited role in improving packaging. D) Packaging has avoided federal regulations. Answer: A Explanation: The text cites several examples illustrating how a change in packaging has made a product much more useful and appealing. These changes have been so important that they sometimes open up large new markets for the products. Difficulty: 2 Medium Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

232) Which of the following statements is the most accurate assessment of the role packaging plays in product offerings? A) The importance of packaging has diminished as the online retailing has grown. B) While packaging plays an important role in marketing goods, it is not relevant to the marketing of services. C) Effective packaging eliminates the potential of product liability suits. D) The importance of packaging is greater now than ever. Answer: D Explanation: Packaging is taking on increasing responsibilities in promoting products. One of the major reasons for its increased role is that many products that were once sold by salespeople are now sold in self-service outlets. Thus, the package becomes the main way to attract the buyer's attention and provide information about the product. Difficulty: 2 Medium Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 233) Attracting attention, describing contents, explaining benefits, and identifying the uses of a product are all functions of A) target marketing. B) UPCs. C) packaging. D) market segmentation. Answer: C Explanation: Packaging does much more than simply protect goods during shipping, handling, and storage. In fact the role of packaging in promotion has been growing in recent years. Packaging helps attract the buyer's attention, describe the contents, explain benefits, provide information about warranties and give some indication of price, value, and uses for the product. Difficulty: 2 Medium Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

234) According to the Making Ethical Decisions box, there is more and more confusion growing around what makes a product "natural." What is the Food and Drug Administration (FDA) considering doing to alleviate the confusion? A) banning companies from using "natural" B) allowing all companies to claim products are "natural" C) creating a definition for "natural" D) limiting the use of "natural" to only cleaning products Answer: C Explanation: The FDA is considering defining "natural" to eliminate customer confusion and allow people to know what it is they are buying. Difficulty: 2 Medium Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 235) Microchippers Computer Company thinks it will make a splash with galaxy-themed laptop cover designs scheduled for release next year. The computers do not reveal any other feature differences from what Microchippers currently offers. This effort is an example of using ________ to differentiate a product as new. A) packaging B) incremental coloring C) incremental channeling D) brand extension Answer: A Explanation: Packaging has many functions. New packaging can change the product in the minds of consumers. It can even be perceived as new. Difficulty: 3 Hard Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

236) Textbook publishers use a packaging strategy known as ________. Often the publisher will combine highly complementary products such as a new textbook and access code for online software that students can use to test themselves on new concepts and principles. A) proformatting B) bartering C) bundling D) trademarketing Answer: C Explanation: Bundling is a packaging strategy whereby producers will combine products and/or services, for a single price. Difficulty: 3 Hard Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 237) A ________ is a name, symbol, or design (or combination of these) that identifies the goods or services of one seller or group of sellers and distinguishes them from those of competitors. A) trademark B) brand C) logo D) copyright Answer: B Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

238) A brand that has been given exclusive legal protection, such as the McDonald's golden arches, is a A) private brand. B) promotional mark. C) dealer brand. D) trademark. Answer: D Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 239) From the buyer's perspective, which of the following is a benefit of a product with a wellknown brand name? A) quality assurance B) helps in promotional efforts C) adds to repeat purchases D) differentiates products so that prices can be set higher Answer: A Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 240) Which of the following is a benefit of a brand name for a seller? A) quality assurance B) reduction in search time C) increased repeat purchases D) additional prestige Answer: C Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 76 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

241) When a brand becomes commonplace and identified with a category of goods rather than the unique product of a specific manufacturer, the brand may become a A) generic name. B) trademark. C) universal product code. D) product liability issue. Answer: A Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 242) Nonbranded products that sell below the price of national brands, have very basic packaging, and are backed with little or no advertising are called A) universal goods. B) distributor brands. C) house brands. D) generic goods. Answer: D Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 243) Knockoff brands are ________ copies of national brand-name goods. A) exact B) online C) illegal D) licensed Answer: C Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 77 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

244) Brand ________ refers to the loyalty, perceived quality, and emotions people associate with a given brand name. A) equity B) identification C) positioning D) ownership Answer: A Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 245) The degree to which customers are satisfied and are committed to future purchases of a desired brand is called A) brand awareness. B) brand relations. C) brand loyalty. D) brand intensity. Answer: C Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 246) The apple is Apple Computer's A) generic name. B) label. C) trademark. D) brand. Answer: C Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 78 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

247) The brand names that are used by producers that distribute products nationally are called A) manufacturers' brands. B) product category brands. C) generic brand names. D) universal brand names. Answer: A Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 248) Which of the following refers to how quickly or easily a given brand name comes to mind when a product category is mentioned? A) brand equity B) brand loyalty C) brand awareness D) brand insistence Answer: C Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 249) When consumers reach the point of brand ________, the product becomes a specialty good. A) association B) desire C) awareness D) insistence Answer: D Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

250) Products that carry the name of a distributor or a retailer instead of the manufacturer's name are called A) dealer (private) brands. B) knockoff brands. C) generic brands. D) equity brands. Answer: A Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 251) Brand ________ refers to the linking of a brand to other favorable images, such as a celebrity. A) association B) loyalty C) awareness D) insistence Answer: A Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

252) A ________ has direct responsibility for all the elements of the marketing mix for one brand or product line. A) channel specialist B) brand manager C) product engineer D) brand specialist Answer: B Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 253) One reason many large consumer-product companies make use of ________ is to have greater control over new-product development and product promotion. A) brand equity teams B) equity specialists C) product consultants D) brand management teams Answer: D Difficulty: 1 Easy Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

254) Many supermarkets carry plain packages that only identify the name of the product that is inside. For example, a label may read simply "peaches" or "green beans." These goods represent A) private labels. B) manufacturers' brands. C) generic goods. D) universal code branding. Answer: C Explanation: Generic goods are nonbranded products that usually sell at a sizable discount from national brands, have very basic packaging, and are backed with little or no advertising. Difficulty: 2 Medium Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 255) Certain brand names, such as Kleenex and Rollerblade, fear they could become ________, because they are so commonly identified with a specific product category that consumers use these names to refer to any product in that category regardless of the manufacturer. A) family brands B) generic names C) universal products D) knockoff names Answer: B Explanation: If a brand name becomes so identified with a product category that people use it to identify the category rather than the product of a single firm, the term loses its brand status and may be considered a generic name. Difficulty: 2 Medium Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

256) Some businesses use nostalgic ads to rekindle the memories and emotions of consumers to an earlier time and place. This technique of linking a brand name to a pleasant memory or favorable image is the goal of brand A) association. B) tie-ins. C) insistence. D) preference. Answer: A Explanation: Brand association is the linking of a brand to other favorable images, such as a popular celebrity, a particular geographic region, or other similar factors. Difficulty: 2 Medium Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 257) One of the reasons why companies create the position of brand manager is to A) have greater control over new-product development and promotion. B) cut expenses associated with the marketing of products. C) limit the amount of market research expenses products require. D) identify and prosecute firms that violate trademark protection. Answer: A Explanation: Brand managers give a firm someone responsible for all aspects of the marketing mix for a particular brand or product line. This would include the responsibility to oversee product development and promotion. Difficulty: 2 Medium Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

258) Fashion experts readily understand the power of ________. Shortly after Kate Middleton married Prince William, throngs of soon-to-be-brides scrambled to find copies of her bridal gown, and also that of her sister Pippa's bridesmaid gown. A) brand equity B) brand association C) brand awareness D) marketing parity Answer: B Explanation: Brand association means utilizing a celebrity to endorse your product or service. Marketers know that the right celebrity endorsement, directed to the right target market, can elevate your brand in the minds of consumers. Difficulty: 2 Medium Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 259) The job performed by brand managers A) is mainly concerned with the promotion of the entire product mix of their firm. B) involves broad responsibilities for the marketing of a specific brand or product line. C) is likely to become less important in firms that utilize the Internet. D) focuses more on the pricing and promotion of established goods than on the development of new products. Answer: B Explanation: Brand managers have responsibility for the entire marketing mix for a given brand or product line. This responsibility includes overseeing the development of products as well as decisions about placement, pricing, and promotion. Difficulty: 2 Medium Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

260) The New Era Cap Company understands the importance of ________. In the mid-1990s, the company's products became very popular when film director Spike Lee requested a red Yankees cap, instead of the traditional blue cap. It did not take long for Yankees' fans who were also fans of Spike Lee to want to wear a similar cap. A) brand equity B) viral marketing C) brand association D) marketing parity Answer: C Explanation: Brand association means utilizing a celebrity to endorse your product or service. Difficulty: 2 Medium Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 261) The box, Playing the Name Game explains A) the importance of reality TV, and the various TV programs that have become international phenomena. B) the procedure a business goes through to register its domain name. C) how the positive appeal of a name can go a long way. D) how it is important for businesses to play a name game with their customers. A company should produce a product and give it a different name in each country where it is sold. Answer: C Explanation: The discussion of names remarks on the importance and appeal of a product name, in terms of creating a strong brand image. Difficulty: 2 Medium Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

262) Folgers's ________ allows customers to easily identify this product from other coffee products. A) patent B) trade symbol C) brand name D) brand equity Answer: C Explanation: A brand name is that part of a brand consisting of a word, letter, or group of words or letters making up a name that differentiates the goods of one seller from those of competitors. Difficulty: 3 Hard Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 263) The Pillsbury Doughboy is an example of a A) patent. B) trademark. C) private brand. D) generic label. Answer: B Explanation: A trademark is a brand that has been given exclusive legal protection for both the brand name and the pictorial design. Difficulty: 3 Hard Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

264) Eric is approached by a street vendor selling Rolex watches at ridiculously low prices. Eric, however, was suspicious that the watches were illegal ________ brands. A) knockoff B) private C) generic D) look alike Answer: A Explanation: Knockoff brands are illegal copies of national or international brand-name goods such as D&G shirts or Rolex watches. Difficulty: 3 Hard Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 265) Sears sells batteries under its own Diehard brand name even though another company actually produces these batteries. This is an example of a A) knockoff brand. B) generic brand. C) dealer (private) brand. D) brand association. Answer: C Explanation: Dealer (private) brands are products that do not carry the manufacturer's name, but rather carry the name of a distributor such as Sears. Difficulty: 3 Hard Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

266) Anheuser-Busch/InBev Company, Inc., has been given the exclusive right to the name Budweiser and is legally protected from others using this name by the ________ they hold. A) licensing agreement B) brand name C) copyright D) trademark Answer: D Explanation: A trademark is a brand that has been given legal protection from use by competitors or others in the market. Difficulty: 3 Hard Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 267) Green Giant Green Beans, Chevrolet Corvette, Coca-Cola, Dole Pineapple, and Peter Pan Peanut Butter are all examples of A) private brands. B) wholesaler brands. C) manufacturers' brands. D) registered generic brands. Answer: C Explanation: Manufacturer's brands are the brand names of national manufacturers and are generally well known among the buying public. Difficulty: 3 Hard Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

268) Associated Supermarkets operates a large chain of stores across several midwestern states. While Associated doesn't actually produce any canned foods, it markets a line of foods under its own brand name that were actually produced by another company. Associated canned foods represent a A) manufacturers' brand. B) generic brand. C) knockoff brand. D) dealer (private) brand. Answer: D Explanation: Dealer brands are products that carry a distributor's or retailer's name rather than the name of the actual manufacturer. (Dealer brands are also called private brands, distributor brands, or house brands.) Difficulty: 3 Hard Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 269) An advertisement for the Xerox Corporation encourages customers to say, "Copy it" rather than "Xerox it." This indicates that Xerox is fearful that its brand name might become a(n) A) equity name. B) generic name. C) private brand. D) public domain good. Answer: B Explanation: When a brand name becomes so completely identified with a product category, the producer runs the risk of losing the legal protection of a trademarked brand name. If that indeed happens, then the brand name becomes a generic name. Difficulty: 3 Hard Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

270) NoSneeze markets a group of similar products for people suffering from the common cold. The products differ mainly in the strength of the dosage and in whether they also contain additional medications to help the consumer sleep while sick. Sarah, a marketing manager at NoSneeze, is responsible for marketing the company's products and is involved in major decisions concerning the development of new products that will be included in this product line. Sarah serves as a A) brand manager. B) market mix specialist. C) target market manager. D) product line specialist. Answer: A Explanation: A brand manager has direct responsibility for all the elements of the marketing mix for a single brand or a product line. These include decisions about new product development as well as pricing, distribution, and promotion. Difficulty: 3 Hard Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 271) As a manager at IceCold Foods, Oscar is responsible for the firm's S'Cream brand of ice cream. He recently approved a proposal to test market new ice cream flavors. He is also considering the possibility of lowering the price of the ice cream and initiating a new advertising campaign. Oscar serves as a A) product development manager. B) target market manager. C) brand manager. D) commercialization manager. Answer: C Explanation: A brand manager is responsible for all of the 4 Ps of the marketing mix for a particular brand or product line. Difficulty: 3 Hard Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

272) A leading cause of new-product failure is A) insufficient competition. B) product promises that are not delivered. C) the automation of the product development process. D) excessive product differentiation. Answer: B Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-05 Explain the steps in the new-product development process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 273) Which of the following is considered a stage of the new-product development process? A) automation B) media screening C) commercialization D) selective perception Answer: C Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-05 Explain the steps in the new-product development process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 274) ________ presents an idea for a new product to potential customers to test their reactions. A) Idea generation B) Concept testing C) Screening D) Prototype development Answer: B Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-05 Explain the steps in the new-product development process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

275) ________ is the stage of new-product development that involves promoting a product to distributors, and developing advertising and sales campaigns in order to generate and maintain consumer interest. A) Commercialization B) Brand identification C) Product differentiation D) Merchandising Answer: A Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-05 Explain the steps in the new-product development process. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 276) The greatest source of ideas for new products is A) consumer suggestions. B) suggestions from competitors. C) employee ideas. D) research and development. Answer: C Explanation: The number one source of ideas for new industrial products has been company sources (e.g., employees) other than research and development. Employees are also a major source for new consumer goods ideas. Firms also receive new product ideas from their suppliers. Difficulty: 2 Medium Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-05 Explain the steps in the new-product development process. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

277) Product screening is designed to A) shorten the product life cycle. B) reduce the number of new-product ideas being worked on at any one time. C) reduce the time involved in new-product development. D) move production to low-wage countries. Answer: B Explanation: Product screening is designed to reduce the number of new-product ideas being worked on at any one time. Difficulty: 2 Medium Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-05 Explain the steps in the new-product development process. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 278) Which of the following is a relevant criterion for the product screening process? A) sales forecasts for the product B) production capacity of competitors C) profit potential D) the stage of the product life cycle Answer: C Explanation: Criteria needed for product screening include whether the product fits in well with present products, profit potential, marketability, and personnel requirements. Difficulty: 2 Medium Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-05 Explain the steps in the new-product development process. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

279) The Sweet Temptations Yogurt Company just completed the first stages of product development of its new low-calorie frozen yogurt breakfast bars and immediately took its product directly to consumers. Marketers partnered with a large theme park in Orlando, FL, to perform ________. The Sweet Temptations marketing department wanted to know if consumers found this product to be a quick way to eat breakfast on the road. Subsequently, they also wanted to determine what customers would be willing to pay for the breakfast bar. A) commercialization B) concept testing C) prototyping D) product screening Answer: B Explanation: Concept testing takes a product idea to consumers to test reactions. Marketers hear directly from potential customers about the quality of the product, its perceived value, and what customers may be willing to pay for it. Difficulty: 3 Hard Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-05 Explain the steps in the new-product development process. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 280) Kimberly, a brand manager, has proposed an aggressive advertising campaign that exaggerates the benefits of her company's newest product. While she is convinced that this strategy will encourage consumers to try the product, her assistant strongly opposes the idea. Which of the following presents the best explanation for the assistant's opposition to Kimberly's proposal? A) If a firm produces a quality product, the best advertising is word-of-mouth to generate excitement for a new product. B) The best way to promote new consumer products is with personal selling. C) Exaggerating the benefits of a product may backfire and injure the product's potential for success. D) Effective advertising for new consumer products should be subtle and low key. Ellen's proposal is more appropriate for the B2B market. Answer: C Explanation: By exaggerating the benefits of a new product, the firm may generate unreasonable expectations and thus lay the groundwork for consumer dissatisfaction. The text cites failure to deliver on what is promised as a major reason for new product failure. Difficulty: 3 Hard Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-05 Explain the steps in the new-product development process. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

281) Nicola works as a manager at Marshall Manufacturing. The innovative staff at the company is regularly encouraged to suggest ideas for new products. Since Nicola works in product screening, she A) gives the final approval for the commercialization of new products. B) reduces the number of new products being worked on at any one time. C) market tests the product ideas that originate with the staff. D) develops the concept testing to establish the personnel required for each new project. Answer: B Explanation: Product screening is designed to reduce the number of ideas being worked on at any one time. Difficulty: 3 Hard Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-05 Explain the steps in the new-product development process. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 282) The ________ is a theoretical model that describes the sales and profit performance of a product class over time. A) product life cycle B) marketing template C) market stages model D) commercialization time line Answer: A Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 283) The product life cycle consists of ________ stages. A) 3 B) 4 C) 5 D) 6 Answer: B Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 95 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

284) The stages of the product life cycle are A) production, inventory, exchange, usage, and disposal. B) conception, testing, production, commercialization, and obsolescence. C) introduction, growth, maturity, and decline. D) opportunity recognition, concept testing, production, market acceptance, brand insistence, and obsolescence. Answer: C Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 285) The four-stage theoretical model that describes the evolution of a product from birth to death is referred to as the A) growth-share matrix. B) developmental life span analysis. C) product life cycle. D) product market progression index. Answer: C Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 286) According to the product life cycle model, sales are expected to peak in the ________ stage. A) introduction B) maturity C) growth D) commercialization Answer: B Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

287) According to the product life cycle model, profits tend to A) remain relatively constant until the decline stage, when they begin to drop. B) reach a peak near the end of the maturity stage. C) rise rapidly during the market preference stage. D) peak before sales reach their highest level. Answer: D Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 288) The product life cycle model helps marketers realize that A) consumers are always ready to try a new product if it is priced correctly. B) different stages in the life cycle call for different marketing strategies. C) sales and profit levels can be forecasted accurately. D) careful product screening will increase profits over the life of a product. Answer: B Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 289) Which of the following is a stage in the product life cycle? A) commercialization B) decline C) peak D) acceptance Answer: B Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

290) As a product progresses through each stage of the product life cycle, successful marketers recognize that each stage requires A) a different marketing strategy. B) a consistent application of fundamental marketing practices. C) an increase in the amount spent on advertising. D) more emphasis on personal selling. Answer: A Difficulty: 1 Easy Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 291) When reviewing the product life cycle model, it is important to remember that A) although all products go through each stage of the life cycle, the time frame can vary considerably from one product to another. B) it is a theoretical model that may not be followed by all products. C) the maturity stage accounts for the fastest growth in sales. D) companies earn their largest profits in the introduction stage. Answer: B Explanation: Not all products follow the life cycle, and particular brands may act differently. For example, while frozen foods as a generic class may go through the entire cycle, one brand may never get beyond the introduction stage. Difficulty: 2 Medium Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

292) Once a good or service nears the end of its product life cycle, the firm recognizes that A) it is impossible to revert to an earlier stage of the model. B) it can return to an earlier stage through creative marketing. C) it will enjoy relatively high profits. D) marketing dollars spent now will provide little benefit. Answer: B Explanation: Through creative marketing, a product can revert to a previous stage of the product life cycle. A good example of this is Arm & Hammer Baking Soda. Difficulty: 2 Medium Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 293) Which stage of the product life cycle does rapidly rising sales, very high profit levels, and a growing number of competitors characterize? A) growth B) maturity C) saturation D) decline Answer: A Explanation: Figure 14.6 shows that all of these factors tend to characterize a product in the growth stage of its product life cycle. Difficulty: 2 Medium Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

294) Which of the following is expected during the maturity stage of a product life cycle? A) a rapid increase in profits B) a rapid increase in the number of competitors C) peak sales D) reduced emphasis on promoting the product's brand name Answer: C Explanation: As shown in Figure 14.6, during the maturity stage of the product life cycle sales reach their peak. Difficulty: 2 Medium Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 295) Which of the following is consistent with the introduction stage of the product life cycle? A) decreasing sales volume B) large number of competitors C) low profit levels or a potential loss D) minimum use of advertising Answer: C Explanation: Profits are likely to be low in the introduction stage, and the company may actually experience a loss in the early part of this stage. However, assuming the product becomes successful and promotional efforts inform potential consumers of the benefits of the product, sales volume and profits should grow. Difficulty: 2 Medium Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

296) During the ________ stage of the product life cycle sales reach a peak, profits are declining, and the number of competitors starts to decrease. A) growth B) maturity C) saturation D) decline Answer: B Explanation: Figure 14.6 suggests all of these are characteristics of the maturity stage of the product life cycle. Difficulty: 2 Medium Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 297) Which of the following is consistent with the growth stage of the product life cycle? A) a peak in the sales curve B) high profit levels C) a stable number of competitors D) declining profits Answer: B Explanation: During the growth stage of the product life cycle sales are rapidly rising; there are very high profits and a growing number of competitors. Difficulty: 2 Medium Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

298) Which of the following is a characteristic of the decline stage of the product life cycle? A) falling sales B) price reductions C) many new firms entering the market D) increasing profits Answer: A Explanation: During the decline stage of the product life cycle falling sales and profits cause competitors to look for "greener grass." Prices may actually increase. Difficulty: 2 Medium Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 299) Department store owner Brendan McGowan decided to make a gutsy move with his highend Western Son stores. Rather than focus on the upscale, luxury market that the store attracted earlier in the decade, he focused on bringing in clothing with more mass appeal. The stores succeeded in turning around downward trending sales. In conjunction with your understanding of the product life cycle, which of the following statements summarizes the marketing strategy? A) Western Son recognized that it was not competing well with its traditional higher income market. It decided to change its product offering and price to appeal to a broader market and increase sales and profits. B) Western Son stores recognized several markets that it could reach with its upscale clothing lines. C) Western Son positioned itself against, rather than with, the competition. It decided to adhere to its price leadership position. D) Western Son knew that in order to re-invent itself, it was going to have to practice the same marketing strategy followed by Walmart and other discount stores. It would make all marketing decisions based on cost. The price on an item need only exceed what it cost to make and ship it. Falling prices became the norm. Answer: A Explanation: When sales and profits begin to peak and drop off, products and services may have reached maturity, and it is time to reevaluate the 4 Ps and consider what differentiates the product to attract different market segments. Difficulty: 3 Hard Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

300) Currently, which of the following products would most likely be considered in the growth stage of the product life cycle? A) DVD players B) Welch's grape jelly C) VR games D) Camel cigarettes Answer: C Explanation: VR games are still enjoying rapidly rising sales and very high profit levels. All of the others have passed the growth stage. Difficulty: 3 Hard Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 301) Sales levels of Spokes mountain bikes are rising rapidly, profits are very high, and a growing number of competitors are taking aim at Spokes' market lead. Based on this information, Spokes mountain bikes are in which stage of the product life cycle? A) introduction B) growth C) maturity D) decline Answer: B Explanation: The growth stage of the product life cycle is characterized by rapidly rising sales and very high profits. These characteristics encourage new competitors to enter the market. Difficulty: 3 Hard Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

302) Epic Electronics' promotional efforts are intended to increase the public's awareness of its new product's benefits and uses. This effort is consistent with the ________ stage of the product life cycle model. A) introduction B) growth C) maturity D) decline Answer: A Explanation: The introduction stage of the product life cycle is the commercialization of a new good or service. Promotional efforts are intended to inform potential customers of the benefits of the new product. Difficulty: 3 Hard Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-06 Describe the product life cycle. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 303) Which of the following is a popular pricing objective? A) increasing sales B) increasing brand awareness C) fixing prices among competitors D) achieving less market share Answer: A Difficulty: 1 Easy Topic: Pricing Objectives Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 304) Pricing is A) one of the 4 Ps of the marketing mix. B) considered to be a part of promotion. C) normally a government-regulated variable. D) totally based on the cost of products. Answer: A Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 104 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

305) Producers often use ________ as a primary basis for setting prices on the goods and services they offer the public. A) tariffs B) costs C) market share D) quotas Answer: B Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 306) ________ involves designing a product so that it satisfies customers and meets the profit margins desired by the firm. A) Price discrimination B) Price leadership C) Target costing D) Cost-based pricing Answer: C Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 307) A competition-based pricing strategy called ________ involves one or more dominant firms establishing the pricing practices that all competitors in an industry follow. A) skimming B) penetration C) target costing D) price leadership Answer: D Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

308) ________ is the process used to determine the profitability of a product at various levels of sales. A) Cost-based pricing B) Break-even analysis C) Demand-based pricing D) Competition-based pricing Answer: B Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 309) Costs incurred regardless of the number of units of a product that are produced or sold are called A) mixed costs. B) controllable costs. C) fixed costs. D) variable costs. Answer: C Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 310) _______ costs are those costs that increase as the level of production increases. A) Fixed B) Mixed C) Variable D) Uncontrollable Answer: C Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

311) The number of units of a product that must be sold for total revenue to equal total costs is called the A) equilibrium volume. B) balanced quantity. C) contribution margin. D) break-even point. Answer: D Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 312) At the break-even point A) profits are maximized. B) variable costs are equal to total fixed costs. C) target profit is achieved. D) total revenue is equal to total cost. Answer: D Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 313) Which of the following represents a pricing strategy that establishes a low price in hopes of attracting a great number of customers and discouraging competitors? A) penetration strategy B) odd-even pricing strategy C) skimming strategy D) price lining strategy Answer: A Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

314) ________ uses price points to establish prices that help create the impression that the product is less expensive than it is. A) High-low pricing B) Everyday low pricing (EDLP) C) Bundling D) Psychological pricing Answer: D Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 315) A skimming pricing strategy A) allows low-income households the ability to purchase a particular good or service. B) drives competitors out of business in order to achieve a monopoly position in the market. C) creates a "common man" image to reach a larger market. D) establishes a high price in order to earn the highest possible profit while there is little competition. Answer: D Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 316) The ________ pricing strategy maintains low prices and avoids the use of special sales. A) everyday low pricing (EDLP) B) cost-based C) target-based D) skimming Answer: A Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

317) Department stores often use ________ pricing in which they have regular prices which are relatively high, but offer special sales where prices are set lower than competitors. A) penetration B) bundling C) strategic D) high-low Answer: D Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 318) Charging high prices to earn large profits during a time when there is little competition represents a ________ strategy. A) penetration B) bundling C) skimming D) cost-based Answer: C Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 319) A competition-based pricing strategy in which all the competitors in an industry follow the pricing practices of one or more dominant firms is known as A) market fixing. B) price penetration. C) price leadership. D) primary pricing. Answer: C Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

320) Which of the following strategies establishes a price based on the actions of rival firms? A) competition-based pricing B) cost-based pricing C) demand collection system D) bundling Answer: A Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 321) The strategy of charging prices based on consumer demand rather than cost or a predetermined profit margin represents A) competition-based pricing. B) cost-based pricing. C) target orientation. D) demand-oriented pricing. Answer: D Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 322) Firms utilize ________ when they attempt to add value to their product by offering service after the sale, product demonstrations, or interactive customer websites. A) nonprice competition B) relationship branding C) niche marketing D) break-even segmentation Answer: A Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

323) One way a small firm can succeed against larger competitors is to A) determine their break-even point price. B) add value to their product offering. C) eliminate the fringe benefits offered to frequent customers. D) use break-even segmentation. Answer: B Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 324) One of the reasons marketers emphasize nonprice differences in their competitive strategies is because A) consumers aren't concerned about prices. B) these methods have no impact on the cost of production. C) nonprice differences are tax deductible. D) relatively similar products can be enhanced. Answer: D Difficulty: 1 Easy Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 325) As firms develop their marketing mix, it is important to remember that A) prices must be linked directly to the cost of production. B) instincts and past history are the best guides in determining price. C) regardless of the strategy used, prices ultimately reflect the forces of supply and demand. D) firms are often restricted in creating pricing strategies by relevant government rules and guidelines. Answer: C Explanation: Ultimately the forces of supply and demand will set the price, as first pointed out in Chapter 2. Difficulty: 2 Medium Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

326) The cost of raw materials used to produce a good or service represent the firm's ________ costs. A) fixed B) variable C) mixed D) uncontrollable Answer: B Explanation: Variable costs are those costs that change according to the level of production. Since a firm will typically need to buy more raw materials and component parts when it increases its production levels, it will find these costs are variable. Difficulty: 2 Medium Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 327) The strategy of first determining what the market is willing to pay, then subtracting a desired profit margin to determine a desired cost of production is called A) cost-based pricing. B) target costing. C) penetration pricing. D) skimming pricing. Answer: B Explanation: Demand-based pricing is very different from cost-based pricing. It makes cost an input to the product development process rather than an outcome of it. This "backward engineering" strategy determines the targeted cost of production by subtracting the firm's desired profit margin from their intended selling price. A product is then designed to satisfy consumers and meet the target cost. Difficulty: 2 Medium Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

328) The formula for break-even analysis includes which of the following components? A) depreciation B) forecasted sales C) forecasted cash requirements D) variable cost per unit of output Answer: D Explanation: Break-even analysis finds the level of sales at which total revenue is equal to total cost. The break-even point is found by dividing total fixed cost by the difference between price and variable cost per unit. Difficulty: 2 Medium Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 329) The rent a firm pays each month for office space is an example of a(n) A) fixed cost. B) variable cost. C) mixed cost. D) uncontrollable cost. Answer: A Explanation: Fixed costs are the costs that do not vary with the level of production or sales. Difficulty: 2 Medium Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

330) Which of the following is a potential problem with a high-low pricing strategy? A) It confuses and frustrates customers. B) It places too much emphasis on nonprice competition. C) It teaches customers to wait for sales, and therefore reduces profits. D) It is difficult to implement. Answer: C Explanation: Firms that use a high-low pricing strategy set regular prices relatively high, but have many special sales where prices are lowered below those of the competition. This is a strategy used by many department stores. One problem with this approach is that customers soon learn not to buy anything at the "regular" price, but to wait instead for a sale. Difficulty: 2 Medium Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 331) Shopping online allows customers to compare prices of many goods and services. This technology will likely A) cause businesses to increase their focus on nonprice aspects of their promotional message. B) bring about more emphasis on demand-oriented pricing. C) diminish in importance as quickly as other fads. D) focus government attention on the collusive pricing practices of firms in specific industries. Answer: A Explanation: Price competition is likely to heat up as consumers have access to prices from all around the world. In response to this trend, nonprice competition is likely to increase. Difficulty: 2 Medium Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

332) Many products are promoted by emphasizing their key benefits, rather than setting the price lower than that of competitive goods. This emphasis on the product's benefits illustrates a(n) ________ strategy. A) penetration B) nonprice competition C) industry leader D) bundled package Answer: B Explanation: Nonprice competition is often used because prices are easy to match. Few competitors can match the image of a friendly, responsive, consumer-oriented company. Difficulty: 2 Medium Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 333) Which of the following statements about nonprice competition is most accurate? A) While still important, nonprice competition is becoming less critical as a result of the Internet. B) Marketers often rely on nonprice differences in their competitive strategy to enhance a relatively homogeneous product. C) Nonprice competition is much more important to large firms than it is to small firms. D) As microeconomic theory suggests, firms have found that nonprice competition plays a secondary role that supplements the more important competition based on price. Answer: B Explanation: The idea of nonprice competition is to enhance a relatively homogeneous product. Difficulty: 2 Medium Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

334) Big Dog Building is the one of the largest cement companies in the Midwest. When the firm raised its prices by 11 percent, all of its competitors soon announced they too were raising their prices by 11 percent. It appears this industry is influenced by a ________ strategy. A) price skimming B) price leadership C) market pricing D) price discrimination Answer: B Explanation: Price leadership is an industry practice in which all the firms in a specific industry follow the pricing leadership of one or more dominant firms. Difficulty: 3 Hard Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 335) PharmaSave Pharmacy will advertise a price of an over-the-counter drug at or below their cost. The intended goal of this loss leader strategy is to A) achieve a target profit. B) reduce the break-even quantity. C) build traffic and increase the customer base. D) create an upscale image. Answer: C Explanation: Charging low prices for certain products is a way firms attempt to entice customers to visit their stores and build a base of customers. Difficulty: 3 Hard Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

336) Brody asks you to calculate the break-even point for his firm. You respond that you will need the following information A) the values for all assets and liabilities. B) total fixed costs, selling price per unit, and variable costs per unit. C) forecasted sales volume, operating expenses, and asset values. D) sales revenue and total liabilities. Answer: B Explanation: The break-even point is found by dividing total fixed costs by the difference between selling price minus variable costs per unit. Difficulty: 3 Hard Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 337) Epic Electronics is considering a strategy to charge a very high introductory price for their automobile video theater. After identifying that their rival firms did not carry this new product, they chose this pricing strategy to achieve maximum profits. Epic Electronics has chosen a ________ strategy. A) high-low pricing B) penetration C) bundling D) skimming Answer: D Explanation: A skimming price strategy is one where the product is priced high to make optimum profit while there is little competition. Difficulty: 3 Hard Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

338) Barker Brothers Pens utilizes a strategy of low-priced pens to attract customers and discourage competition. This represents a ________ strategy. A) high-low B) bundling C) skimming D) penetration Answer: D Explanation: A penetration strategy is one in which a product is priced low in order to attract customers and discourage competitors. Difficulty: 3 Hard Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 339) Diego's company was bidding on the construction of a new penguin display at a zoo. When putting together his bid, Diego began by determining what the zoo would be willing to pay for the structure, and then subtracting a reasonable profit for the company. The result would be the cost of production. For example: If price to zoo = $8 million, and company profit margin = $3 million, the cost to produce cannot exceed $5 million. [$8 million – $3 million = $5 million.] The demand-based pricing strategy in this example is called A) target costing. B) penetration pricing. C) cost-based pricing. D) volume pricing. Answer: A Explanation: Target costing is a demand-based pricing strategy where the marketer first determines what the customer is willing to pay. He or she then subtracts a reasonable profit desired by the company. The remaining amount is the target cost, or the amount that costs for the product or service cannot exceed. Difficulty: 3 Hard Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

340) Jameson noticed that the vending machine soda bottles had changed shape. Upon further investigation, he saw that each bottle contained 2 ounces less than the previous bottles. But the price remained the same! The pricing objective of the beverage company is to A) increase profits by reducing the amount provided in each bottle. B) build traffic at the vending machines by changing the shape of the bottle. C) undercut the competition by changing the shape of the bottle. D) increase market share by reducing the amount provided in each bottle. Answer: A Explanation: Target costing is a demand-based pricing strategy where the marketer first determines what the customer is willing to pay. He/she then subtracts a reasonable profit desired by the company. The remaining amount is the target cost, or the amount that costs for the product or service cannot exceed. Difficulty: 3 Hard Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 341) What does a break-even point of 100 units mean to a firm? A) The firm must sell 100 units to maximize its profits. B) Fixed costs plus variable costs equals 100 units. C) By producing 100 units, the firm can ensure that variable costs completely cancel its fixed costs. D) If the firm sells 100 units, its total revenues will equal its total costs. Answer: D Explanation: The break-even point is the sales volume where revenues from sales equal all costs. Difficulty: 3 Hard Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

342) Bennett has entered into a contract with the federal government to design a computer simulation model for training helicopter pilots. The contract calls for the final price to be set at a fixed percentage profit over and above her cost of production. This seems to represent a A) cost-based pricing strategy. B) supply and demand formula. C) demand-based pricing strategy. D) price leadership pricing strategy. Answer: A Explanation: Cost-based pricing is based on production costs plus some margin of profit. Difficulty: 3 Hard Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 343) Cheryl is considering adding a rack of greeting cards to her product offerings at The Bitty Bookstore. Her fixed costs associated with adding the greeting cards would be $400. Variable costs per card are $1 each. The greeting cards will sell for $3 each. Helen's break-even point would occur at ________ cards sold. A) 150 B) 200 C) 300 D) 450 Answer: B Explanation: The break-even point is calculated by dividing the total fixed costs by the difference between the selling price and the variable costs per card. In this case, Cheryl would need to sell 200 cards. Difficulty: 3 Hard Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

344) Kayla wants to know how many units she must sell to cover all of her costs. She indicates to you that her selling price is $25 per unit, her fixed costs are $7,000, and the variable costs per unit are $15. What is her break-even point? A) 400 units B) 500 units C) 700 units D) 1,150 units Answer: C Explanation: $7,000 fixed costs/($25 selling price – $15 variable costs) = 700 units. Difficulty: 3 Hard Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 345) Ariel owns a company that markets high-quality office supplies to businesses. She faces stiff competition from larger firms like Staples. Which of the following competitive strategies would probably work best for Ariel? A) Keep costs as low as possible by offering a no-frills approach with little or no extra services. B) Develop a skimming pricing strategy. C) Utilize a high-low approach to pricing with a higher break-even point. D) Focus on nonprice competition by offering better service with customers and work on building good customer relationships. Answer: D Explanation: It is usually difficult for small firms to compete against larger firms solely on the basis of price. It is usually easy for larger firms to match price cuts, but much harder to match the image of a friendly responsive company that knows its customers on an individual basis. Achieving this type of relationship and providing superior service can allow small firms to charge high enough prices to prosper. Difficulty: 3 Hard Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

346) As a graphic artist, Randy has just finished a new calendar. The calendar cost him $1.00 for the glossy paper, $3.00 for the six color production, and $.50 for the plastic wire that holds it together at the top. The labor in developing the design was 4 hours of work at $50/hour, and labor is being added to the rest of the fixed costs of $500.00. At a price of $15.00 per calendar, how many calendars will Nate need to produce and sell in order to break even (cover all his costs, but not make a profit)? A) 670 calendars B) 34 calendars C) 46 calendars D) 67 calendars Answer: D Explanation: Break-even point = total fixed costs ÷ (price per unit – variable costs per unit). In this case, BEP= $700 ÷ ($15.00 per unit – $4.50 per unit). BEP = 66.66 or 67 calendars. [Variable costs in this problem = $1.00 + $3.00 + $.50 = $4.50.] Difficulty: 3 Hard Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 347) Operating in the southwestern states, PuddleJumper Airlines hopes to avoid entering the price war that currently is taking place between several airlines on the east coast. The best strategy to avoid severe price competition is to A) provide frequent travelers the added value of special fringe benefits. B) cut costs and services in order to maintain profit margins. C) reduce flights and in-flight services, and lay off employees. D) determine the break-even price and charge slightly more than that. Answer: A Explanation: It is usually difficult for small firms to compete against larger firms solely on the basis of price. Nonprice competition works much better. Difficulty: 3 Hard Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

348) From a marketing management perspective, what is the meaning of a total product offer? What are the important elements in the total product offer of your college or university? Answer: A total product offer consists of everything that consumers evaluate when deciding whether to buy something. Elements in a total product offer can include: price, brand name, convenience, package, service, store surroundings, Internet access, buyers' past experience, image created by advertising, guarantee, speed of delivery, and producers' reputation. Students will generally identify several important elements in their college's or university's total product offer. Among them may be: ● The tuition charged by the institution. ● The academic reputation of the institution. ● The "name" of the college, perhaps influenced by the success of the athletic department. ● The service the college offers in terms of degree programs, college placement, etc. ● The past experience of friends or relatives. ● The probabilities (guarantees) of getting a job after graduation. ● The surroundings or support facilities of the institution. Difficulty: 3 Hard Topic: The Product Life Cycle and the Product Development Process Learning Objective: 14-01 Describe a total product offer. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

349) Consumer goods and services are generally classified into four specific categories. What are the four categories, and how do they differ? Illustrate by giving examples of products that are often included in each category. Answer: Consumer goods and services are classified in one of the following four groups: convenience, shopping, specialty, and unsought goods and services. Convenience Goods and Services: Products consumers wish to purchase frequently with a minimum amount of effort. Location is very important for marketers as are image and brand awareness. Examples of convenience goods and services include newspapers, candy, snacks, and banking. Shopping Goods and Services: Products that consumers buy only after comparing value, quality, and price. They are products typically sold through shopping centers where consumers can make comparisons. Examples of shopping goods and services include personal computers, appliances, auto repair shops, and clothing. Specialty Goods and Services: Products that have a special attraction to consumers in that segment, so that they will go out of their way to obtain these goods. Specialty goods include certain types of medical services, expensive furs, luxury automobiles, fine jewelry, and gourmet food items. Unsought Goods and Services: Products that consumers are unaware of, haven't necessarily thought of buying, or find that they need to solve an unexpected problem. Emergency medical treatments, the services of a plumber when pipes burst or an electrician when wires short out, or towing services after a car breaks down are all examples of unsought goods. The text points out that not all consumers classify goods in the same way. What is a convenience good to one consumer might be a shopping good to another. Thus, when evaluating student answers to this question, some flexibility in assessing examples is a good idea. Difficulty: 3 Hard Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

350) Discuss the role of packaging in a firm's total product offer. Answer: Packaging performs several important functions in the marketing process. In many cases an innovative package design has literally made the product more useful and opened up large new markets for the good. The text cites several examples, such as the Morton Salt package that prevented salt from sticking together in humid weather. Packaging can also make the product more attractive to retailers by making it easier to store and display, or easier to track inventory. Packaging performs several important functions as required by the Fair Packaging and Labeling Act. It protects the contents during shipping, handling, and storage. It also attracts consumer attention, describes the contents inside and gives information about the contents, provides details about product benefits, and may also describe the warranty, provide directions for use, and indicate price, value, and usage. The role of packaging in attracting attention and providing information to customers has been growing in importance as goods that were once sold by salespersons are now being sold more often in self-service outlets. Difficulty: 3 Hard Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-03 Summarize the functions of packaging. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 351) What is a brand? What is a brand name? What is meant by brand equity? Answer: A brand is a name, symbol, or design (or combination of these) that identifies the goods and services of one seller or group of sellers and distinguishes them from the goods and services of competitors. A brand name is that part of the brand consisting of a word, letter, or group of words or letters that differentiates a seller's goods from those of competitors. Brand equity is a combination of factors, such as consumer awareness, loyalty, perceived quality, images, and emotions that people associate with a particular brand name. At the heart of brand equity is brand loyalty. This refers to the degree to which consumers are satisfied, like the brand, and are committed to further purchases. Difficulty: 3 Hard Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

Mini-Case Gourmet Pets is an innovative competitor in the billion-dollar pet food industry. In fact, two of its products, Kitty Sirloin and McDog T-bone, each claim over a 30% share in their market segments. The company has done detailed research and discovered that, for a growing number of pet owners, the family pet serves as a baby substitute. These owners tend to pamper their pets, and are very discriminating in what they purchase. With this in mind, the company has put a great deal of effort into developing a new dog food: Prime Cuts. The new product is packaged in a resealable, microwaveable container and can be purchased in a variety of flavors (including Western BBQ, Teriyaki, Australian Outback, and Hickory Smoked). Gourmet Pets promotes the product as far superior to "average" dog foods, even though the quality of meat and nutrient content of the food are virtually identical to many other brands. The company faces no competition in this market segment so it plans to charge a high price for the product. 352) The company currently markets McDog T-bone, Lapdog Lunchtreats, Rover's Potroast, and Puppy Porterhouse in the dog food market. Prime Cuts will be an addition to the company's ________ in the dog food market. A) product mix B) product line C) product time D) product screen Answer: B Explanation: The product line is a group of products that are physically similar or are intended for a similar market. Difficulty: 3 Hard Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-01 Describe a total product offer. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

353) Gourmet Pets hopes to use its special packaging and extensive advertising to create a perception in the minds of consumers that Prime Cuts is a superior product, even though the actual quality of meat used in the product is virtually no different from competing brands. The company is attempting to develop A) differential segmentation. B) cognitive dissonance. C) product differentiation. D) pioneer marketing. Answer: C Explanation: Product differentiation is the creation of real or perceived product differences. Difficulty: 3 Hard Topic: Classification of Products Learning Objective: 14-02 Identify the various kinds of consumer and industrial goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 354) Prime Cuts was the brainchild of Karen Terrier who guided all the marketing efforts of the product. She selected each element of the marketing mix such as the package, brand name, pricing, promotion, and placement decisions. Karen obviously serves in the job of A) marketing consultant. B) brand manager. C) operations analyst. D) marketing intermediary. Answer: B Explanation: A brand manager has direct responsibility for all the elements of the marketing mix for one brand or one product line. Difficulty: 3 Hard Topic: The Importance of Branding, Packaging, and Labeling Learning Objective: 14-04 Contrast brand, brand name, and trademark, and show the value of brand equity. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

355) Gourmet Pets is interested in computing the break-even point for its new product Prime Cuts. The fixed costs of adding this product to the product line amounts to $20,000. Variable costs to produce one package of Prime Cuts are $2. Prime Cuts will sell for $6 per package. The break-even point would be A) 900 units. B) 2,800 units. C) 5,000 units. D) There is not enough information to find the correct answer. Answer: C Explanation: Fixed costs of $20,000/(selling price $6, variable costs $2) = 5000 units. The break-even point is that sales volume where total sales revenue equals total costs. Difficulty: 3 Hard Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 356) Gourmet Pets feels its target market is more concerned with perceived quality than actual product cost. They also feel that the newness of this concept offers an opportunity to make high profits since they are the first firm to enter this market, so they face no direct competition. Their decision to charge a high price is consistent with the ________ strategy. A) market pricing B) price leadership C) skimming price D) penetration price Answer: C Explanation: A skimming price strategy is one in which a new product is priced high to make optimum profit while there is little competition. Difficulty: 3 Hard Topic: Pricing Objectives and Strategies Learning Objective: 14-07 Identify various pricing objectives and strategies. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

Understanding Business, 12e (Nickels) Chapter 15 Distributing Products 1) Organizations that assist in moving goods and services from producers to business and consumer users are called supply-side transition specialists. Answer: FALSE Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) Agents and brokers and wholesalers are types of marketing intermediaries. Answer: TRUE Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) Wholesalers are marketing intermediaries who sell goods or services to ultimate consumers. Answer: FALSE Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 4) A channel of distribution consists of the marketing intermediaries who join together to transport and store goods in their path from producers to consumers. Answer: TRUE Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

5) Brokers are marketing intermediaries that take title to the goods they help distribute. Answer: FALSE Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) Retailers are marketing intermediaries who sell to ultimate consumers. Answer: TRUE Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 7) Some manufacturers sell directly to consumers or businesses rather than relying on marketing intermediaries. Answer: TRUE Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) Agents are marketing intermediaries who do not take title to the goods they distribute and provide credit to customers who need it. Answer: TRUE Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

9) Manufacturers are usually able to perform marketing functions, such as transporting, advertising, and storing, faster and more cheaply than marketing intermediaries. Answer: FALSE Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10) One way marketing intermediaries improve marketing efficiency is by reducing the number of exchange relationships necessary to move goods through the channel of distribution. Answer: TRUE Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) Some economists would say that intermediaries add costs to the channel of distribution and need to be eliminated. Answer: TRUE Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) Marketers claim that intermediaries add value to the channel of distribution that outweighs the cost. Answer: TRUE Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

13) The activities performed by most marketing intermediaries are not essential to the marketing process. Answer: FALSE Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) The best way to reduce the cost of goods is to eliminate marketing intermediaries from the distribution channel. Answer: FALSE Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) Marketing intermediaries have survived because they have been able to perform marketing functions more efficiently and effectively than a manufacturer or consumer could perform these functions. Answer: TRUE Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 16) The costs added by marketing intermediaries usually outweigh the value they create. Answer: FALSE Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

17) Most marketing intermediaries have survived in the past because consumers were unaware of how much these companies add to the cost of distributing goods. Answer: FALSE Explanation: Even though intermediaries are profit-seeking organizations, they survive because they usually perform distribution functions faster and at lower cost than producers or consumers could, thus reducing the total cost of getting the goods from the producer to the final consumer. Difficulty: 2 Medium Topic: The Role of Marketing Intermediaries Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) An effective channel of distribution does more than simply ensure that goods are transported efficiently from producer to buyer. Answer: TRUE Explanation: A channel of distribution is concerned with transporting and storing goods, but it also involves the flow of communications, money, and the title to the goods, and ensures that the right quantity and assortment of goods will be available when and where needed. Difficulty: 2 Medium Topic: The Role of Marketing Intermediaries Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 19) Marketing intermediaries must charge a price for the functions they perform. Thus, a surefire way to reduce distribution costs is to eliminate marketing intermediaries from the channel of distribution. Answer: FALSE Explanation: Marketing intermediaries not only add costs to products, they also create value by storing, transporting, selling, and performing other marketing functions. Moreover, the reason intermediaries have survived is that they often perform these functions more efficiently than producers or consumers could perform them for themselves. Thus, eliminating marketing intermediaries could raise overall distribution costs rather than reduce them. Difficulty: 2 Medium Topic: The Role of Marketing Intermediaries Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

20) Marketing costs make up less than 25 percent of the total cost of the goods consumers buy. Answer: FALSE Explanation: Distribution (marketing) costs may add up to 75 cents for every 25 cents in manufacturing costs. See Figure 15.3. Difficulty: 2 Medium Topic: The Role of Marketing Intermediaries Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 21) According to the Spotlight on Small Business box, thredUP founders discovered their first distribution system, very similar to eBay's, was the best suited for their business. Answer: FALSE Explanation: After two years of operation, thredUP founders believed the initial way of distributing their products didn't offer the growth they were seeking. They created a new system in which everything is processed, photographed, listed, and shipped directly through the company. Difficulty: 2 Medium Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 22) Brad Gordon, a real estate agent, brings together the buyers and sellers of houses as well as commercial property. Brad helps the parties negotiate the terms and conditions of real estate sales, but he does not take title to the property, provide credit, or assume any risks associated with the exchanges he helps negotiate. Because Brad provides only limited services, he is not a true marketing intermediary. Answer: FALSE Explanation: It is not necessary for all marketing intermediaries to take title to goods or to perform all of the functions associated with distribution. Agents and brokers are examples of marketing intermediaries who help distribute goods without actually taking title to the goods. Difficulty: 3 Hard Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

23) Groceries and More sells a wide range of foods and household supplies within a suburb of a large city. The store frequently advertises that its prices are much lower than the prices charged by larger supermarket chains in the area. This low-price approach means that Groceries and More is a classic example of a merchant wholesaler. Answer: FALSE Explanation: The distinction between wholesalers and retailers is not based on whether prices are high or low, but rather on the types of customers these marketing intermediaries serve. A retailer sells to final consumers. A wholesaler sells to organizations and individuals who are not final users of the product. Since Groceries and More is selling to households (who are final users), it would be classified as a retailer. Difficulty: 3 Hard Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 24) Although SellSmart brings together buyers and sellers and helps negotiate exchanges, it does not actually take title to any of the goods being traded. SellSmart would be classified as an agent or broker. Answer: TRUE Explanation: As the text points out, agents and brokers are marketing intermediaries that do not take title to the goods they help distribute. Difficulty: 3 Hard Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 25) Currently, Spark Electrical sells directly to thousands of industrial customers. Spark could reduce the number of exchange relationships by including wholesalers in its channel of distribution. Answer: TRUE Explanation: As Figure 15.2 illustrates, wholesalers typically reduce the number of exchanges that must be established in a channel. Difficulty: 3 Hard Topic: The Role of Marketing Intermediaries Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

26) Home Helpers, Inc. produces a variety of reasonably-priced household appliances. To cut costs, the company has decided to eliminate all of the marketing intermediaries who help distribute its products. Home Helpers will be able to reduce its total marketing costs by eliminating the marketing functions these intermediaries perform. Answer: FALSE Explanation: Although marketing intermediaries can be eliminated, their functions must still be performed. If Home Helpers eliminates marketing intermediaries, it will have to perform their functions itself, or shift some of them to consumers. Unless Home Helpers and its customers are better at performing these tasks than its marketing intermediaries, total marketing costs could actually rise rather than fall. Difficulty: 3 Hard Topic: The Role of Marketing Intermediaries Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 27) To marketers, the term utility refers to the value added to goods or services by organizations when they make the product more useful or accessible to consumers. Answer: TRUE Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 28) Marketers provide a total of four types of utility: primary, secondary, marginal, and total. Answer: FALSE Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

29) Producers normally provide form utility, but retailers sometimes also provide this type of utility. Answer: TRUE Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30) Marketing intermediaries concentrate on providing mainly form, time, and place utility, while producers focus on the provision of possession, information, and service utility. Answer: FALSE Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 31) Delivery, installation, and follow-up services are the most common ways that marketing intermediaries provide information utility. Answer: FALSE Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32) One way that marketers can provide utility is by making sure the good is available at a location that is convenient for consumers. Answer: TRUE Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

33) Salespeople can be important providers of information utility. Answer: TRUE Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 34) Form utility has become the most important utility provided by retailers. Answer: FALSE Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) A key way for traditional retailers to compete with direct marketing is by providing outstanding service utility. Answer: TRUE Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) Marketers normally provide form, time, place, information, and service utility, but they are seldom involved in providing possession utility. Answer: FALSE Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

37) Providing buyers with credit terms such as "90 days same as cash" is a way marketing intermediaries can provide time utility to customers. Answer: FALSE Explanation: Offering attractive credit terms helps transfer ownership of goods from one party to another; thus it is a way for marketing intermediaries to provide possession utility. Difficulty: 2 Medium Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) In today's competitive market environment, traditional retailers will need to put more emphasis on providing form and place utility, and less emphasis on service utility. Answer: FALSE Explanation: Service utility is rapidly becoming the most important utility for many retailers because without providing personal service they could lose much of their business to direct marketing. Difficulty: 2 Medium Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39) Once the final customer has taken title to a good, marketing intermediaries no longer are involved in providing utility to the customer. Answer: FALSE Explanation: Marketing intermediaries such as retailers can continue to provide possession, information, and service utility even after the sale is completed. For example, possession utility may involve providing guarantees about the product's performance after purchase. Similarly, technical support and service calls are a way firms can continue to provide information and service utility after the sale. Difficulty: 2 Medium Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

40) Simon is a personal electronics salesperson for a major retail chain. When he makes recommendations to customers to help them select the product that will best meet their needs, Simon is providing information utility. Answer: TRUE Explanation: By answering questions and offering advice, salespeople supply information to customers that enables them to choose a product that suits their needs. This creates value, or utility. Difficulty: 3 Hard Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 41) Devar was driving on Interstate 95 in eastern Florida when he noticed he was running low on gas. Devar was relieved when he found a gas station open at the next exit just 2 miles ahead. This is an example of the value place utility provides to a consumer. Answer: TRUE Explanation: Marketing intermediaries add place utility by having products available where customers want them. Difficulty: 3 Hard Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 42) Some marketing intermediaries make both wholesale and retail sales. Answer: TRUE Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

43) A retail sale is a sale to a consumer of products for his or her own use. Answer: TRUE Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44) The sale of goods to a business purchasing the items for resale is a wholesale transaction. Answer: TRUE Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 45) A firm that makes wholesale sales cannot also legally make retail sales. Answer: FALSE Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 46) Merchant wholesalers do not take title to the goods they handle. Answer: FALSE Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

47) About 80 percent of all wholesalers are classified as merchant wholesalers. Answer: TRUE Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 48) The two main types of merchant wholesalers are storage wholesalers and distribution wholesalers. Answer: FALSE Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 49) Limited-function wholesalers are a type of merchant wholesaler. Answer: TRUE Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 50) Cash-and-carry wholesalers and drop shippers are both classified as limited-function wholesalers. Answer: TRUE Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

51) Rack jobbers furnish racks or shelves full of merchandise to retailers and keep title to these goods until they are sold. Answer: TRUE Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 52) Rack jobbers sell goods on consignment, splitting the profits from their sales with a retailer. Answer: TRUE Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 53) Although drop shippers own merchandise they have shipped to buyers, they do not actually handle, stock, or deliver this merchandise themselves. Answer: TRUE Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 54) Drop shippers are wholesalers that stock heavy or bulky items and transport them to retail stores. Answer: FALSE Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

55) Drop shippers are limited function wholesalers that typically put together many small shipments to form a single larger shipment. Answer: FALSE Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 56) Cash-and-carry wholesalers are limited-function wholesalers that serve mostly smaller retailers with a limited assortment of products. Answer: TRUE Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 57) The main difference between agents and brokers is that agents perform a wide array of marketing functions while brokers only negotiate exchanges between buyers and sellers. Answer: FALSE Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

58) As long as they do not represent competing products, manufacturer's agents can represent more than one manufacturer in a given sales territory. Answer: TRUE Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 59) A key distinction between agents and brokers is that agents tend to maintain long-term relationships with the people they represent whereas brokers are hired on a temporary basis. Answer: TRUE Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 60) A sales agent is an agent who represents the interests of the consumer in a particular territory when negotiating terms of purchases made directly from a producer. Answer: FALSE Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 61) A full-service wholesaler will provide suppliers with market information. Answer: TRUE Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 17 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

62) Wholesalers may provide market information and business consulting services. Answer: TRUE Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 63) A broker can expect to earn a fixed amount of profit for her efforts regardless of the dollar value of the contract she negotiated. Answer: FALSE Explanation: Brokers and agents do not earn a profit and the amount they receive is not a fixed dollar amount. Instead, they typically receive a commission based on a percentage of sales revenue. Difficulty: 2 Medium Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 64) Fernando and Mariana solicit orders for lumber from area wholesalers and retailers specializing in building supplies and arrange to have the orders shipped directly from nearby logging companies. Fernando and Mariana operate as drop shippers. Answer: TRUE Explanation: Drop shippers solicit orders from retailers and other wholesalers and arrange for the merchandise to be shipped directly from the producers to the buyers. Difficulty: 3 Hard Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

65) Seth supplies shelves of magazines to supermarkets and drug stores. He keeps title to the goods until they are sold and then splits the profits with the retailer. Seth is a drop shipper. Answer: FALSE Explanation: Wholesalers who furnish racks or shelves of merchandise to retailers and sell the goods on consignment are known as rack jobbers. Difficulty: 2 Medium Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 66) Keira owns and operates a home business. Once a month she heads to OfficePRO to buy office supplies for her business. The prices at the OfficePRO are very low, but it does not offer credit or delivery services. OfficePRO is a cash-and-carry wholesaler. Answer: TRUE Explanation: A cash-and-carry wholesaler mainly serves businesses that are too small to have wholesalers service them. This type of wholesaler usually does not extend credit or offer delivery (hence the name "cash-and-carry"). Today, some stores that serve the same functions as cashand-carry wholesalers do accept credit. The text cites Office Depot and Staples as examples of such firms that accept credit cards. The term cash-and-carry may become obsolete. Difficulty: 3 Hard Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

67) Phoebe helps small farmers negotiate sales to food processing companies. However, once she has helped negotiate the transaction, she does not maintain a long-term relationship with the farmers. Phoebe is an example of a sales agent in this market. Answer: FALSE Explanation: Agents typically develop long-term relationships with their clients. Because Phoebe does not maintain a long-term relationship, she is more likely to be a broker than an agent. Difficulty: 3 Hard Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 68) Retail organizations employ more than 40 million people in the U.S. Answer: TRUE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 69) Discount stores, department stores, supermarkets, and specialty stores are all among the major types of retail stores. Answer: TRUE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 70) Department stores offer a wide variety of products that are sold in separate departments. Answer: TRUE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

71) Warehouse clubs compete with enhanced service to customers and seldom try to compete on price. Answer: FALSE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 72) Discount stores compete in the retail market mainly on the basis of price. Answer: TRUE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 73) A category killer is an extremely successful product that kills the sales of other products in its category in a retail store. Answer: FALSE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 74) Specialty stores use a wide variety of products in one product category as their key competitive tool. Answer: TRUE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

75) Category killer stores tend to compete mainly on the basis of carrying a wide array of products, superior service, and low prices. Answer: FALSE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 76) Warehouse clubs are usually smaller than supermarkets. Answer: FALSE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 77) Discount stores and department stores sell different brands of products that are usually priced about the same. Answer: FALSE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 78) Exclusive distribution is the use of only one retail outlet in a given geographic area. Answer: TRUE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

79) Candy, gum, and popular magazines are usually distributed using a selective distribution strategy. Answer: FALSE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 80) A distribution strategy that puts the product into as many retail outlets as possible is known as an intensive distributive strategy. Answer: TRUE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 81) Producers of shopping goods such as furniture, appliances, and clothing usually rely on an exclusive distribution strategy. Answer: FALSE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 82) An advantage of a selective distribution strategy is that consumers are able to find a popular product at a wide variety of retailers. Answer: FALSE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

83) Retailers that participate in an exclusive distribution strategy will have a strong incentive to carry a large inventory of the good and provide exceptional service to customers. Answer: TRUE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 84) In order to succeed in today's market, all retailers must compete with low prices. Answer: FALSE Explanation: Some retailers seem to compete mostly on price, but others, such as specialty stores, use variety as a competitive tool. Difficulty: 2 Medium Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 85) The main difference between selective distribution and exclusive distribution is the number and type of market segments the firm chooses. In a selective strategy, a variety of profitable niche markets are selected, while in an exclusive strategy one specific market segment is targeted, and all others are excluded. Answer: FALSE Explanation: The difference between selective and exclusive distribution has to do with the number of retailers who sell the good in a given area. In a selective strategy, the product is sold by a select group of preferred retailers; in an exclusive distribution strategy the product is sold by only one retailer. Difficulty: 2 Medium Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

86) Book Binders is a nationwide chain of stores that offers such a huge selection of books at such competitive prices that small, local bookstores struggle to compete with them. Book Binders is best classified as a discount store. Answer: FALSE Explanation: Discount stores typically carry a wide array of products, whereas Book Binders specializes only in books. Thus, Book Binders is better classified as a category killer. This classification consists of stores that compete by offering a very large selection of products within a single category. Difficulty: 3 Hard Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 87) Cheapo Depot is a new chain of discount stores. A major part of Cheapo Depot's competitive strategy is likely to be based on keeping its prices lower than those of other types of retailers. Answer: TRUE Explanation: Various types of retail stores emphasize different competitive strategies. Discount stores tend to place a great deal of emphasis on low prices. Difficulty: 3 Hard Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 88) Soundwave Specialties is a manufacturer of high-quality speakers. The company sells its products through a few preferred retailers in any geographic area. Soundwave Specialties uses a selective distribution strategy. Answer: TRUE Explanation: A distribution strategy that uses a preferred group of retailers is known as a selective strategy. Difficulty: 3 Hard Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

89) The City Dispatch, a daily newspaper serving a city with a population of just over 200,000, is placed in vending machines throughout the city and surrounding suburbs. City Dispatch is also sold at most of the local supermarkets, convenience stores, bookstores, and pharmacies. The City Dispatch uses an intensive distribution strategy. Answer: TRUE Explanation: An intensive distribution strategy puts products in as many retail outlets as possible, including vending machines. Difficulty: 3 Hard Topic: Retail Distribution Strategy Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 90) The Galleria Mall contains many types of shops, including six different jewelers; however, only one jeweler carries the very expensive TimeStamp brand of watch that appeals to customers who are looking for status in their jewelry. TimeStamp is practicing exclusive distribution by placing its brand in only one store in a given area. Answer: TRUE Explanation: Exclusive distribution is the use of only one retail outlet in a given geographic area. Difficulty: 3 Hard Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 91) Firms that rely on online retailing are almost guaranteed success because they give companies easy access to literally millions of consumers all over the world. Answer: FALSE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

92) Online retailing is selling goods and services to ultimate consumers online. Answer: TRUE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 93) Some websites are trying to improve their service by providing assistance from a real person, especially through social media. Answer: TRUE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 94) A large number of traditional retailers have developed online stores, giving customers a choice of shopping techniques. Answer: TRUE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 95) Traditional retailers that have begun using online stores to supplement their physical stores are finding that the Internet not only provides a new way to sell goods, it also requires a new system to distribute goods. Answer: TRUE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

96) Social commerce is a form of electronic commerce that involves social media. Answer: TRUE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 97) Telemarketing is the sale of goods and services by telephone. Answer: TRUE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 98) Vending machines are used primarily to sell goods where consumers have little interest in convenience. Answer: FALSE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 99) Mall owners tend to like kiosks because they create a marketplace atmosphere. Answer: TRUE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

100) One drawback of kiosks is that their high overhead costs result in low profit margins. Answer: FALSE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 101) Direct selling is a distribution strategy that makes extensive use of websites and phone sales. Answer: FALSE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 102) Because so many people work outside the home and aren't at home during the day, companies that use direct selling are sponsoring parties at workplaces to sell their products. Answer: TRUE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 103) In multilevel marketing, salespeople not only sell the product, they also recruit other people to sell the product. Answer: TRUE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

104) In multilevel marketing, upliners recruit downliners and receive a commission on the sales their downliners make. Answer: TRUE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 105) Although there have been some unethical firms involved in multilevel marketing, this form of retailing remains quite successful for some. Answer: TRUE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 106) Direct marketing involves having a salesperson visit the customer's home or place of business. Answer: FALSE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 107) A major advantage of direct marketing is that it is a very convenient way for consumers to shop. Answer: TRUE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

108) Telemarketing, catalog sales, and online shopping are all examples of direct marketing. Answer: TRUE Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 109) In the battle between online and traditional brick-and-mortar retailers, the online retailers seem to have all of the advantages needed to emerge as the clear winners. Answer: FALSE Explanation: The battle between online and traditional retailers has no clear-cut winner. In fact, the two sides seem to be converging: traditional retailers have online sites to complement their traditional stores and online retailers are starting to invest in brick-and-mortar establishments. Difficulty: 2 Medium Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 110) Many firms that want to use an intensive distribution strategy would find vending machines an attractive method of selling their goods. Answer: TRUE Explanation: A major advantage of vending machines is that they can be located in a wide variety of locations including airports, office buildings, schools, motels, and service stations. Firms using an intensive distribution strategy want to make their products widely available, and vending machines can help them achieve that objective. Difficulty: 2 Medium Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

111) Direct selling has all but disappeared as a major form of nonstore retailing because the trend toward two-income households means fewer opportunities for selling in the home. Answer: FALSE Explanation: It is true that the increasing number of people who work outside the home has put a dent in the success of direct selling. However, it still remains a popular form of nonstore retailing. Direct selling has managed to change with the times with some degree of success. For example, in response to the increase in the number of people working outside the home, direct sellers have changed tactics, reaching customers at places of work or during evenings or weekends. Difficulty: 2 Medium Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 112) In multilevel marketing, salespeople have little incentive to recruit new salespeople, because the new salespeople may compete against them and reduce their income. Answer: FALSE Explanation: In multilevel marketing, salespeople receive a commission not only on their own sales, but also on the sales of any new salespeople they recruit. This gives existing salespeople an incentive to recruit new people. Difficulty: 2 Medium Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

113) An important reason for the popularity of direct marketing is that many people enjoy developing a personal relationship with a salesperson that comes directly to their home or place or work. Answer: FALSE Explanation: Direct marketing is not the same thing as direct selling. Only direct selling involves a personal visit by a sales representative to the customer's home or place of work. Direct marketing is any activity that directly links a producer or intermediary to the ultimate consumer. This approach includes telemarketing, direct mail, and online shopping. The main reason direct marketing is so popular is its convenience. Difficulty: 2 Medium Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 114) Foot Friends, a high-quality socks and stockings company, makes sales by sending catalogs to customers and offering them a toll-free telephone number so that they can call in their orders 24-hours-a-day, any day of the year. Foot Friends uses telemarketing. Answer: TRUE Explanation: Telemarketing is the sale of goods and services by telephone. Difficulty: 3 Hard Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 115) Brendan is a salesperson for Garden Gnomes Lawn Care products. His job requires him to sell Garden Gnomes' products, but he is also expected to recruit more salespeople for the company. He will earn a commission on all of the sales earned by the salespeople he recruits. Garden Gnomes is using a retail distribution strategy known as multilevel marketing. Answer: TRUE Explanation: In multilevel marketing, salespeople are expected to recruit more salespeople until a large sales force has been created. Each salesperson receives a commission on the sales of his or her recruits. Difficulty: 3 Hard Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

116) Traditional retailers can stay competitive with online retailers by being part of a unified system of distribution. Answer: TRUE Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 117) There are four specific types of channel systems available to companies that tie firms together in a unified way. Answer: TRUE Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 118) In a corporate distribution system one firm owns all of the organizations in the distribution. Answer: TRUE Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 119) Corporate distribution systems consist of several independently owned intermediaries, all of them organized as multinational corporations. Answer: FALSE Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

120) A problem with the corporate distribution system is that the manufacturer has very little control over the operations of the retailers and other marketing intermediaries in the system. Answer: FALSE Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 121) Franchise systems, wholesaler-sponsored chains, and retail cooperatives are all forms of contractual distribution systems. Answer: TRUE Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 122) One advantage of a franchise system of distribution is that it results in a consistent level of quality and service. Answer: TRUE Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 123) In retail cooperatives, the members of the distribution system are bound to cooperate by a contractual agreement. Answer: TRUE Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

124) Wholesaler-sponsored chains consist of stores that are all owned by a single corporation. Answer: FALSE Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 125) In an administered distribution system, retail stores manage all of the marketing functions at the retail level. Answer: FALSE Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 126) The entire collection of organizations that move goods and services from the source of raw materials to the final consumer is referred to as the supply chain. Answer: TRUE Difficulty: 1 Easy Topic: Supply Chain Management Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 127) Because supply chains are so complex, firms have found it difficult to outsource supply chain management. Answer: FALSE Difficulty: 1 Easy Topic: Supply Chain Management Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

128) The process of managing the movement of raw materials, parts, work in progress, finished goods, and related information through all of the organizations involved in the supply chain in a timely manner is called multi-modal management. Answer: FALSE Difficulty: 1 Easy Topic: Supply Chain Management Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 129) Supply chain management manages the movement of relevant information as well as the movement of parts and finished goods through all organizations involved in the supply chain. Answer: TRUE Difficulty: 1 Easy Topic: Supply Chain Management Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 130) Supply chain management not only deals with the movement of materials, parts, and finished goods, it also manages the return of goods and recycling of materials when appropriate. Answer: TRUE Difficulty: 1 Easy Topic: Supply Chain Management Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

131) For a supply chain to be efficient, all of the activities must be performed by organizations that are owned by the manufacturer. Answer: FALSE Explanation: Supply chains are longer than channels of distribution and typically consist of many different organizations. A single supply chain might include farmers, mining companies, suppliers of all kinds, manufacturers, wholesalers, and retailers. Thus, it often is impractical for a manufacturer to own all organizations in the chain. New software is available which makes it possible to coordinate the movement of goods and information so that consumer wants can be translated into products with the least amount of materials, inventory, and time. Difficulty: 2 Medium Topic: Supply Chain Management Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 132) Playtime Toys, Inc. manufactures toys designed to inspire the imaginations of children. In order to control all of the marketing operations, Playtime owns all of the organizations in the channel of distribution for its toys, including the chain of Playtime retail stores. The approach taken by Playtime is known as an administered distribution system. Answer: FALSE Explanation: A distribution system in which one firm owns all of the marketing organizations is known as a corporate distribution system. Difficulty: 3 Hard Topic: Distribution and Logistics Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

133) Though Hammer's Hardware stores are independently owned, operated, and managed, they have signed an agreement to participate in chain promotions, and cooperate as a unified system of stores. The Hammer's Hardware stores are using a distribution system known as a wholesalersponsored chain. Answer: TRUE Explanation: A wholesaler-sponsored chain is a distribution system in which independently owned and managed stores sign an agreement to use the same name, participate in chain promotions, and cooperate as a unified system of stores. Ace Hardware and IGA food stores use this type of distribution system. Difficulty: 3 Hard Topic: Distribution and Logistics Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 134) A greeting card company, Tiny Texts, has been approached by Novel Teas, a producer of herbal teas and exotic spices. Novel Teas wants to sell its products in the Tiny Text stores under an administered distribution system. If Tiny Texts accepts Novel Teas' proposal, it will perform many marketing services for the tea maker in exchange for a flat fee. Answer: FALSE Explanation: In an administered distribution system, the producer (Novel Teas) manages the marketing functions at the retail level. Retailers cooperate with producers because they receive a great deal of free marketing help. Difficulty: 3 Hard Topic: Distribution and Logistics Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

135) Cozy Corner Furniture obtains materials from several suppliers and uses these materials to produce its goods. It relies on several marketing intermediaries to help it distribute the furniture. Together, Cozy Corner, its suppliers, and the marketing intermediaries are all part of a supply chain. Answer: TRUE Explanation: A supply chain consists of all organizations that move goods from sources of materials to the ultimate consumer. Difficulty: 3 Hard Topic: Supply Chain Management Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 136) As she works in the marketing department of a major manufacturing firm, Cassidy spends most of her time trying to coordinate the movement of materials, parts, finished goods, and information through all of the organizations involved in the distribution process. These activities suggest that Cassidy's job responsibilities focus on supply chain management. Answer: TRUE Explanation: Supply chain management is the process of managing the movement of materials, parts, work in process, finished goods, and related information throughout the supply chain. Difficulty: 3 Hard Topic: Supply Chain Management Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 137) Logistics involves planning, implementing, and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption. Answer: TRUE Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

138) With the current emphasis on product development, pricing, branding, and promotion, the physical distribution of materials and goods is no longer a major concern of marketing. Answer: FALSE Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 139) Materials handling is that part of logistics that deals with moving goods within the warehouse, from the warehouse to the production floor, and to various work stations along the production process. Answer: TRUE Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 140) Inbound logistics is concerned with the flow of finished products from the manufacturer to the final consumer. Answer: FALSE Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

141) Inverted logistics is the term used for the activities involved in bringing products back to the producer due to defects or for recycling of materials. Answer: FALSE Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 142) Third-party logistics is the term used to describe the use of outside firms to help move goods from here to there. Answer: TRUE Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 143) Logistics is concerned with the flow of information as well as with the flow of goods. Answer: TRUE Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 144) The basic transportation service criteria are speed, cost, dependability, flexibility, frequency, and reach. Answer: TRUE Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 42 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

145) In the U.S. the largest percentage of goods (by volume) is shipped by truck. Answer: FALSE Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 146) Water transportation is the least expensive way to send goods overseas. Answer: TRUE Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 147) Water transportation has declined to the point where it now accounts for a very small part of transporting goods. Answer: FALSE Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 148) Water transportation has benefits and drawbacks; for example, it is inexpensive but slow. Answer: TRUE Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

149) A value of shipping by truck is that trucks can deliver small shipments to remote locations. Answer: TRUE Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 150) Pipelines are used primarily to transport water, petroleum, and petroleum products. Answer: TRUE Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 151) Pipelines move liquid products very efficiently and can even move products like coal. Answer: TRUE Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 152) Railroads are an energy-efficient mode of transporting many types of goods. Answer: TRUE Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

153) Although air transport currently accounts for only a small percentage of all shipments, it has become a critical mode in many industries. Answer: TRUE Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 154) The air freight industry is starting to focus on global distribution. Answer: TRUE Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 155) The use of multiple modes of transportation to complete a single long-distance movement of freight is known as multi-carrier shipping. Answer: FALSE Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 156) Services that specialize in intermodal shipping are known as intermodal marketing companies. Answer: TRUE Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 45 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

157) A freight forwarder breaks one large shipment into multiple small shipments so that it can be transported by trucks or aircraft with limited cargo capacities. Answer: FALSE Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 158) Some freight forwarders offer warehousing and customs assistance. Answer: TRUE Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 159) There are three major types of warehouses: centralized, dispersed, and mode-specific. Answer: FALSE Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 160) A distribution warehouse stores products for relatively long periods of time. Answer: FALSE Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

161) Seasonal goods are kept in storage warehouses. Answer: TRUE Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 162) Suppliers to large retailers like Target and Walmart may soon be required to use RFID tags when shipping products to these companies. Answer: TRUE Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 163) An increase in energy prices would encourage shippers to rely more on rail transportation. Answer: TRUE Explanation: Railroad shipment is a relatively energy-efficient mode of transportation. Hence an increase in energy prices would encourage firms to ship more goods by rail. Difficulty: 2 Medium Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

164) Freight forwarders are particularly useful to large firms who must ship very large quantities on short notice. Answer: FALSE Explanation: Freight forwarders combine many small shipments together to form a single large shipment. Their services are most useful to small companies who typically do not ship enough to fill a railroad car or truck. Difficulty: 2 Medium Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 165) The use of pipelines should decline in the future because this mode is suitable only for shipping petroleum. Answer: FALSE Explanation: Pipelines are used to ship more products than most people imagine. For example, pipelines have been used to ship coal. This is done by breaking coal into small pieces and mixing it with water to form slurry. Difficulty: 2 Medium Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 166) The main difference between storage warehouses and distribution warehouses is that storage warehouses are relatively small, specialized facilities used to store one particular type of good for short periods while distribution warehouses are large facilities used to store a wide variety of goods for longer periods of time. Answer: FALSE Explanation: Storage warehouses are used to store items for relatively long periods of time while distribution warehouses are facilities used to gather and redistribute products. Difficulty: 2 Medium Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

167) Epic Electronics has had to shut down its manufacturing plant for several hours twice in the past week. Some of its key suppliers have been late with their shipments of materials and parts. These difficulties indicate that Epic has done a poor job in managing its inbound logistics. Answer: TRUE Explanation: The problems Epic Electronics is experiencing are indeed related to inbound logistics, which is concerned with bringing materials, packaging, other goods and services, and information from suppliers to producers. Difficulty: 3 Hard Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 168) Keegan, a distribution specialist, has been looking for ways to improve the flow of parts and materials from his company's warehouses to the production line, and the movement of work in process throughout the company's factories. These efforts suggest that Keegan's primary interest is in improving his company's inbound logistics. Answer: FALSE Explanation: Keegan is concerned with materials handling rather than inbound logistics. Materials handling involves the movement of goods within a firm's own facilities, such as within its warehouses, from warehouses to the factory floor, and to workstations in the factory. Inbound logistics is concerned with bringing materials, packaging, other goods and services, and information from suppliers to producers. Difficulty: 3 Hard Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

169) Specializing in logistics, Miriam, a marketing manager, is likely to focus mainly on managing the flow of goods, and leave issues about how to manage the flow of information to managers in other areas of marketing. Answer: FALSE Explanation: Logistics is as much about the flow of information as it is about the flow of materials, parts, and finished goods. Consumer wants and needs must flow through the system all the way to suppliers quickly and efficiently. Information also must flow quickly in the other direction as well—from suppliers, to producers, to other members of the supply chain. Difficulty: 3 Hard Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 170) Marshall Manufacturing has recently reached an agreement with an intermodal marketing company to significantly reduce the cost of shipping its finished goods to some major business customers. This agreement will help Marshall reduce the costs associated with outbound logistics. Answer: TRUE Explanation: Outbound logistics manages the flow of finished products to business buyers and ultimate consumers. Difficulty: 3 Hard Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

171) Charmers is a small manufacturer of charm bracelets that include watches as well as other keepsake items. Rarely are Charmers' shipments large enough to be transported cost-efficiently by filling an entire truck or railcar. The company could benefit by relying on a freight forwarder to help it distribute its goods. Answer: TRUE Explanation: A freight forwarder puts together many small shipments to create a single large shipment that can be transported more cost-effectively to the final destination. Smaller manufacturers that don't ship enough products to fill a railcar or truck can get good rates and service from this type of wholesaler. Difficulty: 3 Hard Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 172) Marshall Manufacturing wants to ship a large quantity of its goods across the country. They have contacted Get Gone, Inc., to find out what the shipment would cost. Get Gone has shown Marshall how a combination of barges, trains, and trucks could be used to complete the shipment at low cost. Get Gone's strategy is an example of intermodal shipping. Answer: TRUE Explanation: Intermodal shipping is the use of multiple modes of transportation to complete a single long-distance shipment of freight. Difficulty: 3 Hard Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

173) Qwikship is a new delivery company that wants to compete against FedEx and UPS in the United States, Canada, and Mexico. One of the keys to Qwikship's success will be the ability to establish large storage warehouses at a few key locations throughout North America. Answer: FALSE Explanation: Shipping companies typically don't store items for long periods of time, so they do not need storage warehouses. Instead, they rely on distribution warehouses, which are used to gather and redistribute large quantities of products. Difficulty: 3 Hard Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 174) Those organizations that assist in the movement of goods and services from producer to industrial and consumer users are known as A) directed marketers. B) distributive specialists. C) marketing intermediaries. D) supplementary marketers. Answer: C Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 175) A(n) ________ consists of the marketing intermediaries that transport and store goods as they move through their path from producer to final user. A) channel of distribution B) marketing network C) input-output matrix D) mode of distribution Answer: A Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

176) A ________ is a marketing intermediary that sells products to other organizations. A) wholesaler B) retailer C) disintermediary D) jobber Answer: A Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 177) A ________ is a marketing intermediary that sells to ultimate consumers. A) channel captain B) wholesaler C) secondary marketer D) retailer Answer: D Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 178) A(n) ________ is one type of marketing intermediary that brings together buyers and sellers and assists in negotiating an exchange, but does not take title to the goods. A) agent B) retailer C) drop shipper D) merchant wholesaler Answer: A Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

179) Marketing intermediaries A) are unlikely to survive in a competitive global economy. B) have survived because they can often perform marketing functions faster and at lower cost than producers. C) create value, but this value is seldom great enough to justify the added cost they charge for their services. D) tend to increase the number of exchange relationships producers and consumers must deal with in order to buy and sell goods. Answer: B Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 180) Marketing intermediaries A) add value that exceeds the cost of their services. B) add cost that exceeds the value they provide. C) increase the number of exchange relationships in the channel. D) complicate the distribution process. Answer: A Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 181) In the distribution process, the largest percentage of the retail price goes to A) profits. B) warehouse costs. C) labor. D) transportation. Answer: C Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

182) Which of the following statements about channels of distribution is most accurate? A) Channels of distribution always begin with a manufacturer and end with consumers, and always have one or more marketing intermediaries in between. B) Channels of distribution always include retailers, but they may or may not also include wholesalers. C) The fewer the marketing intermediaries in a channel of distribution, the more efficient the channel is likely to be. D) Some channels of distribution include marketing intermediaries, while in others a manufacturer sells directly to the final consumer. Answer: D Explanation: As Figure 15.1 illustrates, channels of distribution can be set up in a variety of ways. Some include one or more intermediaries, such as wholesalers and retailers, while in others a manufacturer sells directly to the final consumer. Difficulty: 2 Medium Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 183) About ________ of the costs of things we buy are marketing costs that go to pay for distribution costs of intermediaries. A) 25 percent B) 30 percent C) 75 percent D) 90 percent Answer: C Explanation: Distribution (marketing) costs may add up to 75 cents for every 25 cents in manufacturing costs. See Figure 15.3. Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

184) The primary difference between retailers and wholesalers is that A) retailers sell consumer goods, while wholesalers sell industrial goods. B) retailers operate in local areas, while wholesalers operate over a wide geographic area. C) retailers sell to final consumers, while wholesalers sell to other organizations, such as retailers or manufacturers. D) retailers have sales of less than $100 million, while wholesalers have sales of $100 million or more. Answer: C Explanation: A wholesaler is a marketing intermediary who sells to individuals and organizations. A retailer is a marketing intermediary who sells to final consumers. Difficulty: 2 Medium Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 185) Which of the following statements about marketing intermediaries is true? A) All channels of distribution must contain at least one marketing intermediary. B) Marketing intermediaries and their functions can be eliminated. C) Marketing intermediaries survive because they can perform marketing functions faster and more cheaply than producers and consumers. D) The costs added to products by marketing intermediaries usually exceed the value they add to products. Answer: C Explanation: Intermediary organizations have survived in the past because they have performed marketing functions faster and cheaper than others could. Difficulty: 2 Medium Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

186) Caitlin, owner of a card shop in a small shopping center, sells cards produced by a national company. Caitlin sells to final customers, so she is a A) merchant wholesaler. B) retailer. C) rack jobber. D) channel captain. Answer: B Explanation: A retailer is an intermediary who sells to the final users of a product. Difficulty: 3 Hard Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 187) Colin is convinced that his product idea has tremendous potential. He has decided to produce the product himself, but plans to use other firms who specialize in storing and transporting to help him move the product along its path to the final consumer. These specialists Colin uses will be part of his A) wheel of retailing. B) market network. C) channel of distribution. D) franchise system. Answer: C Explanation: A channel of distribution consists of the marketing intermediaries who transport and store goods in their path from producers to final users. Difficulty: 3 Hard Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

188) Suppose that nine bakeries each tried to sell their products directly to eight supermarkets. The total number of exchange relationships that would be established is A) 22. B) 56. C) 72. D) 96. Answer: C Explanation: The total number of exchange relationships is found by multiplying the number of bakeries (9) by the number of supermarkets (8). Difficulty: 3 Hard Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 189) Cesar claims he found a definite way to save money, "Buy direct from the manufacturer. Any time intermediaries get involved, you'll pay a higher price. After all, every intermediary involved in the marketing process must charge enough to earn a profit." What do you make of Cesar's claim? A) It is entirely correct. Intermediaries must charge a high enough price for the activities they perform to earn a profit, so using intermediaries must result in a higher price. B) It is impractical, because in most markets the distribution process is so complex that it is impossible to determine who the actual producer really is. C) It is not valid in many cases. Intermediaries do add costs to products, but they also create value by performing marketing functions efficiently. In many cases the value they create more than offsets the costs they add. D) It is never true. Markets that make use of intermediaries can always provide goods at lower cost than those that rely on direct distribution. Answer: C Explanation: Cesar may be right in some cases. Some producers successfully sell directly to their final customers. However, in many cases the use of intermediaries still has advantages. If a channel of distribution has no intermediaries, producers and consumers must complete all of the marketing functions themselves, and they are usually less efficient at performing them than intermediaries. Thus, although intermediaries add costs, they also create value by efficiently performing important marketing functions. In many cases the value they create more than offsets the costs they add. Difficulty: 3 Hard Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

190) Tony brings together buyers and sellers of used heavy construction equipment, and helps them negotiate the terms of the sale. However, he never takes title to any of the equipment himself, nor does he provide any financing for the buyer. Tony is acting as a A) channel captain. B) broker. C) wholesaler. D) logistics specialist. Answer: B Explanation: A broker is a marketing intermediary who brings together buyers and sellers and helps negotiate exchanges. Brokers typically do not own the goods, offer credit, or assume risk. Difficulty: 3 Hard Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 191) Marketing managers at Focal Point Cameras are looking for ways to cut costs as the company is facing intense competitive pressure. They are considering a plan to cut distribution costs by eliminating marketing intermediaries from the channel of distribution. If Focal Point does this, it is likely to find that A) most of the marketing functions performed by marketing intermediaries are helpful, but they aren't really necessary. B) as the producer of the products, it will be able to perform the same functions more efficiently. C) it will be unable to perform the functions as efficiently as they were performed by the marketing intermediaries. D) telemarketing will become the only viable means of distributing its products. Answer: C Explanation: Marketing intermediaries can be eliminated, but their functions still must be performed. Manufacturers and final customers may be able to perform these functions without intermediaries. However, because intermediaries specialize in the marketing functions they perform, they often can provide them more efficiently and effectively than producers or consumers, thus creating value. The elimination of marketing intermediaries will not only eliminate the costs they add, it will also eliminate the value they create. Difficulty: 3 Hard Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

192) ________ is the value or want-satisfying ability that is added to products by organizations that make the product more useful or accessible to consumers. A) Utility B) Applicability C) Functionality D) User friendliness Answer: A Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 193) ________ utility is usually provided by producers rather than marketers. A) Possession B) Time C) Place D) Form Answer: D Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 194) The types of utility commonly provided by marketing intermediaries include A) product, price, place, and promotion. B) time, place, possession, information, and service. C) retailing, wholesaling, brokering, and financing. D) cost, value, flexibility, use, and resale. Answer: B Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

195) When marketing intermediaries perform the steps necessary to transfer ownership from one party to another, they are providing ________ utility. A) marginal B) title C) possession D) registration Answer: C Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 196) Placing ads in newspapers and having knowledgeable salespeople to answer customers' questions are ways marketing intermediaries can provide A) form utility. B) possession utility. C) time utility. D) information utility. Answer: D Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 197) One way a store selling HDTVs might add ________ utility is to provide convenient delivery and setup to customers. A) possession B) distributive C) conditional D) time Answer: A Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

198) Marketing intermediaries add ________ utility to products by having them available when consumers want them. A) time B) allocative C) response D) form Answer: A Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 199) ________ utility adds value to goods by having them available where people want them. A) Spatial B) Location specific C) Place D) Geographic Answer: C Difficulty: 1 Easy Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 200) Retailers who have stores at convenient locations are trying to add value by A) using a horizontal distribution strategy. B) using a broad resource allocation strategy. C) providing place utility. D) achieving market concentration. Answer: C Explanation: Marketing intermediaries provide place utility by having products available at convenient locations. Difficulty: 2 Medium Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

201) One way traditional retailers have maintained customers in the face of increasing competition from online sellers and other direct markers is to place more emphasis on providing ________ utility. A) psychographic B) place C) service D) form Answer: C Explanation: Providing fast, friendly service during and after the sale is one way that traditional retailers can compete successfully against direct marketers. Difficulty: 2 Medium Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 202) Marketing intermediaries can provide ________ utility by offering customers affordable credit, free delivery, and product guarantees. A) possession B) information C) form D) promotion Answer: A Explanation: Marketing intermediaries provide possession utility when they do what is necessary to transfer ownership from one party to another such as providing credit. Other activities that contribute to possession utility include delivery, installation, and follow-up services. Difficulty: 2 Medium Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

203) Stores that remain open 24 hours, seven days a week are providing ________ utility to their customers. A) possession B) time C) service D) schedule Answer: B Explanation: Marketing intermediaries provide time utility by providing products at times that are convenient to their customers. Difficulty: 2 Medium Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 204) Which of the following statements about service utility is most accurate? Service utility is A) becoming less important to retailers in this age of self-service marketing. B) the one type of utility that online firms provide more efficiently than traditional retailers. C) more likely to be provided by wholesalers than by retailers. D) becoming crucial to traditional retailers as they try to prevent their customers from defecting to firms using direct marketing. Answer: D Explanation: Service utility is rapidly becoming the most important utility for many retailers, because without it they could lose more customers to direct marketing. Difficulty: 2 Medium Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

205) According to the Connecting Through Social Media box, McDonalds's team of social media professionals used to field constant complaints about the lack of breakfast options on the all-day menu. Upon hearing of the large demand for all-day breakfast, McDonald changed its menu and added to its ________ utility. A) time B) possession C) form D) information Answer: A Explanation: Intermediaries, such as retailers, add time utility to products by making them available when consumers need them. Difficulty: 2 Medium Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 206) The Knot is an online company that helps people with the complex task of planning a wedding. Multiple vendors are recommended for things like flowers, caterers, wedding gowns, and more. Through The Knot, a couple can establish a website that acts as a registry. Once the couple is married, the website directs them to another site having to do with beginning married life. What type of utility or utilities is this site providing to its users? A) form and service B) service and time C) service and information D) form and information Answer: C Explanation: The Knot offers primarily service to people who are planning a wedding. The site also provides information. Difficulty: 3 Hard Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

207) Electronics Emporium, a chain of stores that specializes in devices and gadgets incorporating cutting-edge technologies, has over 150 stores in large cities throughout the Southeast and Midwest. Electronics Emporium picked the locations of its stores so that most customers living in upper middle class and wealthy neighborhoods can get to a location in under 15 minutes. Electronics Emporium is providing its customers with A) form utility. B) time utility. C) place utility. D) information utility. Answer: C Explanation: Marketing intermediaries provide place utility by having products available at convenient locations. Difficulty: 3 Hard Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 208) Morgner Heating and Cooling offers customers who buy air conditioners and furnaces free delivery and low installation charges. The company also offers a free follow-up inspection of the new equipment one month after it is installed. These services are ways that Morgner provides its customers with ________ utility. A) possession B) time C) marginal D) situational Answer: A Explanation: Possession utility is provided by marketing intermediaries when they do what is necessary to transfer ownership from one party to another. Activities that contribute to possession utility include delivery, installation, and follow-up services. Difficulty: 3 Hard Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

209) At Baumann's Fine Meats, the butchers will hand cut steaks to the thickness their customers specify and trim off the excess fat. This extra service provides ________ utility. A) possession B) form C) secondary D) alterational Answer: B Explanation: Form utility is provided when products or raw materials are changed so that they are in a more desirable or useful form for consumers. Producers normally provide form utility, but marketing retailers, such as a retail butcher, can also provide this type of utility. Difficulty: 3 Hard Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 210) ________ wholesalers are independently owned and take title to the goods they handle. A) Full service broker B) Merchant C) Agent D) Primary Answer: B Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

211) The two basic types of merchant wholesalers are A) full-service wholesalers and limited-function wholesalers. B) functional wholesalers and distributive wholesalers. C) independent wholesalers and subsidiary wholesalers. D) capital wholesalers and full-value wholesalers. Answer: A Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 212) ________ are merchant wholesalers who perform all of the distribution functions. A) Retailers B) Intensive contact wholesalers C) Total-capacity wholesalers D) Full-service wholesalers Answer: D Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 213) Marketing intermediaries that solicit orders from retailers or other wholesalers and have the products delivered directly from the producer to the buyer are known as A) drop shippers. B) truck jobbers. C) channel captains. D) merchandise agents. Answer: A Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

214) ________ are limited-function wholesalers who furnish shelves full of merchandise to retailers who sell these items on consignment. A) Cash-and-carry wholesalers B) Rack jobbers C) Merchandise forwarders D) Consignment agents Answer: B Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 215) Limited-function wholesalers that mainly serve small businesses by selling them a limited assortment of goods are known as A) backdoor wholesalers. B) consolidated wholesalers. C) cash-and-carry wholesalers. D) agency wholesalers. Answer: C Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

216) Unlike merchant wholesalers, ________ never actually own the goods they help to distribute. A) rack jobbers B) retailers C) cash-and-carry wholesalers D) agents and brokers Answer: D Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 217) ________ may represent several producers in a specific territory, as long as they do not represent competing products. A) Consignment brokers B) Sales contractors C) Manufacturer's agents D) Freight forwarders Answer: C Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

218) The main way ________ differ from agents is that they do not develop long-term relationships with the buyers or sellers they assist. A) brokers B) rack jobbers C) wholesalers D) sales discounters Answer: A Difficulty: 1 Easy Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 219) Which of the following activities would drop shippers be most likely to perform? A) provide delivery services from a wholesaler's warehouse to a retailer's store B) solicit orders from a retailer and arrange for the producer to make the deliveries C) manage a large stock of items in a single product category, and make large volume shipments to other intermediaries using rail or truck D) provide brokerage services by helping other wholesalers negotiate deals Answer: B Explanation: Drop shippers are marketing intermediaries who solicit orders from retailers and other wholesalers and have the goods delivered directly from the producer to the buyer. Although the drop shipper assumes ownership of the goods, it does not handle, stock, or deliver the merchandise. Difficulty: 2 Medium Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

220) Which of the following statements provides the most accurate distinction between an agent and a broker? A) Agents represent final buyers while brokers represent marketing intermediaries. B) Agents represent one manufacturer in a large sales area, while brokers represent several different manufacturers in a smaller area. C) Agents develop a long-term relationship with the people they represent, while brokers are usually hired on a temporary basis. D) Agents take title to the goods they help distribute, while brokers never assume ownership of the products they distribute. Answer: C Explanation: Both agents and brokers help negotiate exchanges between buyers and sellers. Agents and brokers are also similar in that neither takes title to the goods they distribute. The major difference is that agents maintain long-term relationships, while brokers are used on a temporary basis. Difficulty: 2 Medium Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 221) OfficePRO sells a variety of supplies to small businesses and local offices. The fact that it sells only to other firms and not consumers indicates that OfficePRO engages only in A) wholesale sales. B) mass marketing. C) pure retailing. D) second-tier retailing. Answer: A Explanation: A wholesale sale is a sale of goods and services to businesses and institutions for use in the business or to wholesalers or retailers for resale. Difficulty: 2 Medium Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

222) Ariel stocks several local supermarkets and discount stores with Shimmer Cosmetics. At the stores, she sets up displays of products carrying the Shimmer brand name, and sells the goods on consignment, sharing any profits on the sales with the retailer. What is Ariel? A) cash-and-carry wholesaler B) truck jobber C) broker D) rack jobber Answer: D Explanation: A rack jobber is a wholesaler that furnishes racks or shelves of merchandise to retailers, handles the display, and splits the profits with the retailer. Difficulty: 3 Hard Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 223) Miner's Coal Distributors does not mine coal itself, nor does it even store or handle the coal. Instead, Miner's solicits orders for low sulfur coal from other firms, then purchases the required amount from suppliers and directs them to ship the coal to its customers. What is Miner's? A) drop shipper B) resource delivery facilitator C) cash-and-carry wholesaler D) limited distribution broker Answer: A Explanation: A drop shipper is a wholesaler that solicits orders from other firms and arranges for the goods to be shipped from the producer to the buyer. Drop shippers take title to the goods they distribute, but do not handle, store, or deliver these goods. Difficulty: 3 Hard Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

224) Which of the following would be the best example of a broker? A) Woody's Lumber Supply does not actually store, handle, or deliver lumber, but rather solicits orders from retail hardware and home improvement stores, takes title to the lumber, then arranges for it to be shipped directly from sawmills to the retail stores. B) Dennis McGowan helps buyers and sellers of used heavy construction equipment negotiate the terms and conditions of their transactions, but does not actually take title to any of the equipment, nor does he develop long-term relationships with the buyers or sellers. C) Chipper Sheid is not an employee of Tee Time Golf Clubs, but he solicits sales for their products at golf and sporting goods stores in a fairly large sales territory. D) Hal Harrison is employed by a vacuum cleaner company, and goes door-to-door selling products produced by his company. Answer: B Explanation: Brokers, like agents, help bring together buyers and sellers and assist in negotiating exchanges. However, unlike agents, brokers do not maintain a long-term relationship with the people or organizations they represent. Difficulty: 3 Hard Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 225) Discount stores, supermarkets, and department stores are all common types of A) multilevel marketers. B) full-service wholesalers. C) retail stores. D) category killers. Answer: C Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

226) A(n) ________ sells general merchandise directly from the manufacturer at a discount; items may be discontinued or have certain product flaws. A) department store B) discount store C) outlet store D) specialty store Answer: C Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 227) Discount stores owe much of their success to a competitive strategy based on A) low prices. B) extra service. C) special credit arrangements. D) a wide selection in a limited number of categories of goods. Answer: A Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 228) Retailers such as jewelry stores, shoe stores, and bicycle shops are A) department stores. B) discount stores. C) warehouse clubs. D) specialty stores. Answer: D Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

229) A ________ offers a huge selection of one type of product (such as books, toys, or sporting goods) to dominate that category of goods. A) department store B) category killer store C) saturation retailer D) cash-and-carry retailer Answer: B Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 230) A firm that wants to distribute its products as widely in a market as possible would use a(n) ________ distribution strategy. A) extensive B) shotgun C) universal D) intensive Answer: D Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 231) A(n) ________ distribution strategy distributes a product through only a preferred group of retailers in a given area. A) intensive B) selective C) exclusive D) restrictive Answer: B Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

232) A(n) ________ distribution strategy uses only one retail outlet in a given geographic area. A) selective B) restrictive C) exclusive D) solitary Answer: C Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 233) Producers of snack foods (such as candy bars or potato chips) are most likely to use a(n) ________ distribution strategy for their products. A) intensive B) exclusive C) selective D) restrictive Answer: A Explanation: An intensive distribution strategy tries to make the product available in as many locations as possible. Firms that produce convenience goods such as candy bars and other snacks typically want to use an intensive strategy. Difficulty: 2 Medium Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

234) ________ would probably be distributed using an intensive strategy. A) Tablets B) HDTVs C) Men's suits D) Magazines Answer: D Explanation: Publishers of popular magazines want to reach a wide audience, so they want their products sold in a wide variety of locations such as discount stores, bookstores, newsstands, grocery stores, supermarkets, and convenience stores. Difficulty: 2 Medium Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 235) Which of the following firms would be most likely to use a selective distribution strategy for its products? A) newspaper publisher B) maker of designer men's suits C) super luxury car manufacturer D) maker of snack foods such as potato chips and pretzels Answer: B Explanation: Newspapers and snack foods are convenience goods, so their producers would use intensive distribution. Makers of luxury cars normally have a single dealership in a local area, so they tend to use exclusive distribution. Manufacturers of shopping goods, such as name brand suits, often employ a selective distribution strategy. Difficulty: 2 Medium Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

236) Producers who use an exclusive distribution strategy for their products can expect retailers who carry the products to do which of the following? A) carry a large inventory of their products B) provide limited service and delivery for their products C) sell their products at substantially discounted prices D) pay attention to the multiple competing brands that they carry Answer: A Explanation: A retailer that has the exclusive right to sell a manufacturer's products has an incentive to carry a larger inventory, provide exceptional service, and pay more attention to that manufacturer's brand than to other brands. Difficulty: 2 Medium Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 237) After developing a new jewelry design, Christina and Julee were fortunate to get the attention of a large online retailer. The retailer was willing to fund the production of the jewelry abroad, as long as the designers agreed to sell their design through its outlets for the first two years. The retailer was asking Christina and Julee to agree to A) intensive distribution. B) exclusive distribution. C) multi-level distribution. D) selective distribution. Answer: B Explanation: Exclusive distribution means the online retailer will be the only retailer to offer the product for the agreed-upon period of time. Difficulty: 3 Hard Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

238) Outdoor Adventures, Inc. operates a chain of very large stores that offer an incredible selection of sporting goods at very competitive prices. When Outdoor Adventures opens its first store in a new region, smaller sporting goods stores almost always experience a noticeable drop in sales. Outdoor Adventures stores can be classified as A) warehouse clubs. B) department stores. C) category killers. D) full-service wholesalers. Answer: C Explanation: A category killer store offers a huge selection of goods within a single product category (such as books or sporting goods). Difficulty: 3 Hard Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 239) Having just finalized its new tablet design, Epic Electronics's marketing team plans to begin a rollout with ________ to only one traditional retailer for the first two months. This strategy will give consumers the perception of the product's stand-out personality and increase demand. Epic will continue with ________ for the next four months, where it plans to distribute to three other retailers, as well. For the last six months of the year, it will initiate distribution agreements with discount retailers and online retailers, and any other electronics store that wants to carry it. The marketing team is confident that the tablet will cycle through the first three stages of its product life cycle quickly. As the tablet reaches maturity during the second half of its first year in the market, it is good strategy to proceed with ________, as described above. A) mono-level distribution; secondary level distribution; tertiary level distribution B) intensive distribution; selective distribution; exclusive distribution C) tertiary level distribution; secondary level distribution; mono-level distribution D) exclusive distribution; selective distribution; intensive distribution Answer: D Explanation: Exclusive distribution is the use of only one retail outlet; selective distribution is the use of a few carefully selected retail outlets; intensive distribution means the product is sold through several retail outlets, in fact, as many retail outlets as possible. Difficulty: 3 Hard Topic: Retail Distribution Strategy Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

240) Zara is the publisher of "Luxe Ladies Magazine," which is a publication targeted to Millennial and Gen Z women. Because it is a small, new publication, some of the larger bookstores, convenience stores, and newsstands are not agreeing to distribute the magazine. Zara is very concerned by this trend, because she believes that her publication, like most magazines, needs ________ distribution in order to succeed. A) selective B) exclusive C) intensive D) exhaustive Answer: C Explanation: Magazines are convenience goods. Producers of convenience goods use intensive distribution to put them into as many retail outlets as possible. Difficulty: 3 Hard Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 241) Soles Shoes produces top-quality designer shoes, created for the person concerned about style. Soles gives only a few preferred retailers in a given market area the right to market its product. Soles Shoes uses A) intensive distribution. B) selective distribution. C) exclusive distribution. D) limited function distribution. Answer: B Explanation: Selective distribution is the use of a limited number of preferred retailers in a given area. Difficulty: 3 Hard Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

242) Diamond Motor Car Company produces some of the most luxurious and expensive cars in the world. Typically, only a single dealership is authorized to sell its cars in certain major cities. In less populous areas, Diamond authorizes a single dealer for an entire state or region. The manufacturer of Diamond automobiles is using a(n) ________ distribution strategy for its product. A) intensive B) primary C) extrinsic D) exclusive Answer: D Explanation: Exclusive distribution is the use of only one retail outlet in a given geographic area. Difficulty: 3 Hard Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 243) ________ means selling goods and services to ultimate consumers over the Internet. A) Online retailing B) B2B distribution C) E-selling D) Intercommerce Answer: A Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

244) ________ is the sale of goods and services by telephone. A) Multilevel marketing B) Teleselling C) Telemarketing D) Direct marketing Answer: C Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 245) Though vending machines can sell just about anything, they are most often used to sell A) shopping goods. B) convenience goods. C) specialty goods. D) inferior goods. Answer: B Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 246) Mall owners like to have ________ located along the walkways of their malls, because they create a marketplace type of atmosphere. A) cartels B) storettes C) kiosks D) minimarts Answer: C Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

247) Companies who send salespeople to customers' homes or places of work are making use of ________ selling. A) direct B) point of contact C) downline D) nonretail Answer: A Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 248) In ________, salespeople are independent contractors who not only sell the product, but also recruit additional salespeople. A) telemarketing B) two-stage marketing C) hierarchical marketing D) multilevel marketing Answer: D Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 249) In multilevel marketing, independent contractors who sell a product can increase their own incomes by recruiting ________ to also sell the product. A) commissionaires B) front-men C) merchant wholesalers D) downliners Answer: D Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

250) In the terminology of multilevel marketing, downliners A) are the intermediaries who are responsible for handling the shipping of goods down the channel of distribution from the producer to the retailer. B) are salespeople who have been recruited by other salespeople known as upliners to market the product. C) sell through a telemarketing arrangement, while upliners use direct selling. D) are experienced salespeople who are allowed to sell in more than one franchise area by the distributor. Answer: B Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 251) Direct mail, telemarketing, and catalog sales are all common examples of A) direct marketing. B) downline selling. C) multilevel marketing. D) direct selling. Answer: A Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 252) Any marketing method that directly links manufacturers or intermediaries with the ultimate consumer could be classified as A) direct selling. B) online marketing. C) direct marketing. D) kiosk-based. Answer: C Difficulty: 1 Easy Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

253) The characteristic that all forms of direct marketing have in common is that they A) are carried out by agents or brokers. B) involve face-to-face or teleconferencing sessions with the customer. C) include some type of activity that directly links manufacturers to the ultimate consumer. D) make use of exclusive distribution systems with a network of traditional "bricks and mortar" stores. Answer: C Explanation: Direct marketing includes any activity that directly links manufacturers to the ultimate consumers. Electronic retailing, telemarketing, multilevel marketing, and direct selling are all common ways producers can use direct selling. Difficulty: 2 Medium Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 254) In the terminology of multilevel marketing, which of the following statements about the relationship between upliners and downliners is most accurate? A) In multilevel marketing, upliners are intermediaries who deal directly with final customers, while downliners are intermediaries who coordinate the transportation and storage services the upliners need to move the goods they sell through the channel of distribution. B) In multilevel marketing, upliners are salespeople who act as independent contractors, earning commissions on their own sales and also on the sales of downliners, who are additional salespeople that they recruit. C) In multilevel marketing, upliners sell through electronic retailing arrangements, while downliners use more traditional methods of retail selling. D) In multilevel marketing, upliners use intensive distribution strategies to sell a good, while downliners use either a selective or exclusive distribution strategy to sell the same type of good. Answer: B Explanation: In multilevel marketing the salespeople work as independent contractors. They earn commissions not only on their own sales, but also on sales of other salespeople they recruit. In the terminology of multilevel marketing, the salespeople who do the recruiting are called upliners, and the people they recruit are called downliners. These downliners can become upliners themselves by recruiting yet more salespeople. Difficulty: 2 Medium Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

255) Which of the following statements identifies a key advantage of direct marketing? A) Direct marketing enables salespeople to close a non-refundable sale in the customer's home or place of work. B) Direct marketing allows firms to expand their markets by selling to both ultimate consumers and other marketing intermediaries. C) Direct marketing is popular with consumers because it is so convenient to shop from home or work. D) Direct marketing creates a strong incentive for salespeople to recruit additional salespeople in order to gain the greatest possible market coverage. Answer: C Explanation: Direct marketing includes any activity that directly links manufacturers or intermediaries to the ultimate consumer. Examples include telemarketing, direct mail, catalog sales, and online shopping. These methods are popular with consumers because they are very convenient. Direct marketing does not require face-to-face contact. Face-to-face contact is a characteristic of direct selling, where sales representatives visit consumers in their homes or places of work. Difficulty: 2 Medium Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 256) Which of the following assessments of online retailing is most accurate? A) Online retailing has two major advantages over traditional businesses: simplicity and very low start-up costs. B) One of the reasons online retailing firms have been so successful has been their ability to deal with customer complaints and provide personalized services more efficiently than traditional firms. C) Traditional retailers seldom find much success when they attempt to incorporate online selling into their businesses. D) The line between online retailing and traditional retailing is blurring as traditional retailers go online. Answer: D Explanation: Established retailers are seeing advantages to supplementing their traditional approach with an online presence. One way they have done this is by using a "brick and click" approach that allows customers to choose the options they want. Difficulty: 2 Medium Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

257) Which of the following statements about kiosks and carts is the most accurate? A) Kiosks and carts are popular with mall owners because their sales are exempt from sales taxes. B) Mall owners often want kiosks and carts to be located along their walkways because they create a marketplace atmosphere. C) Kiosks and carts have struggled in recent years because of their high overhead costs. D) Most mall owners would like to eliminate kiosks and carts from their walkways, but are barred by law from doing so. Answer: B Explanation: Having colorful kiosks and carts staffed by friendly, helpful workers line a mall's walkways is one way to create an appealing marketplace atmosphere. Difficulty: 2 Medium Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 258) Athleisure, Inc. sells athletic gear by sending customers a catalog nine times a year. The company has no retail stores or website, but offers a toll-free order number that operates 24 hours a day, 365 days a year. Athleisure, Inc. sells using a technique known as A) teletailing. B) indirect marketing. C) telemarketing. D) multilevel marketing. Answer: C Explanation: Telemarketing is the sale of goods and services by phone. Many firms that use this approach send catalogs to potential customers and offer toll-free telephone numbers. Telemarketing is a form of direct marketing, but it is not direct selling. Direct selling involves going to the customer's home or place of work. Difficulty: 3 Hard Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

259) Which of the following is an example of a consumer making a purchase through a direct marketing arrangement? A) Pete purchased a box of cereal at a local grocery store with a coupon on the box. B) Pamela purchased a phone at a big-box retailer's special tech department. C) Phoebe purchased a set of towels featured in a department store's lower level. D) Patrick purchased a book on the history of the U.S. by sending in an order form attached to a pamphlet sent to the customer by the publisher. Answer: D Explanation: Direct marketing gives customers a direct link to sellers, via mail, telephone, or computer, thus enabling them to purchase items from their own home or place of work. Examples of direct marketing include telemarketing, catalog sales, online shopping, and direct mail. Difficulty: 3 Hard Topic: Retailers and their Strategies Learning Objective: 15-05 Explain the various kinds of nonstore retailing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 260) In a(n) ________ distribution system all of the organizations in the channel of distribution are owned by one firm. A) administered B) contractual C) supply-based D) corporate Answer: D Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

261) In a(n) ________ distribution system the producer manages all of the marketing functions at the retail level. A) administered B) contractual C) conglomerate D) master limited Answer: A Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 262) Franchise systems are one type of ________ distribution system. A) corporate B) wholesale C) contractual D) administered Answer: C Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 263) McDonald's, Planet Fitness, Baskin-Robbins, and Dunkin Donuts all make use of the ________ form of contractual distribution system. A) wholesale-sponsored chain B) franchise C) retail cooperative D) horizontally administered Answer: B Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

264) In a(n) ________, independently owned and managed stores sign an agreement to use the same name, participate in chain promotions, and cooperate as a unified system. A) administered distribution system B) corporate distribution system C) wholesaler-sponsored chain D) cash-and-carry chain Answer: C Difficulty: 1 Easy Topic: Distribution and Logistics Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 265) Taken together, all of the organizations that move goods from the sources of raw materials to ultimate consumers are known as a A) multifunction network. B) supply chain. C) critical distribution path. D) marketing priority network. Answer: B Difficulty: 1 Easy Topic: Supply Chain Management Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 266) ________ manages the movement of raw materials, parts, work in progress, finished goods, and related information throughout the supply chain, as well as managing the return of goods when necessary and the recycling of goods when appropriate. A) Distribution planning B) Multilevel marketing C) Supply chain management D) Distributional strategy Answer: C Difficulty: 1 Easy Topic: Supply Chain Management Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

267) A common trait of corporate distribution systems, administered distribution systems, contractual distribution systems, and supply chains is that they all A) are arrangements which seek to distribute goods more efficiently by eliminating most functions performed by marketing intermediaries. B) seek to consolidate and control the distribution system by having one firm own all of the distribution functions. C) attempt to improve the efficiency of distribution systems by linking the firms together in a formal relationship. D) have been replaced by more efficient distribution systems relying heavily on online linkages. Answer: C Explanation: Four distribution systems have emerged which attempt to improve distribution by establishing a formal relationship that links the firms involved: corporate systems, contractual systems, administered systems, and supply chains. Difficulty: 2 Medium Topic: Supply Chain Management Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 268) One thing that franchise systems, wholesaler-sponsored chains, and retail cooperatives have in common is that they are all A) distribution systems in which producers also act as intermediaries in the distribution process. B) dependent on multilevel marketing strategies. C) forms of distribution systems in which a single firm owns all of the organizations involved in distributing the product. D) forms of contractual distribution systems. Answer: D Explanation: The three basic types of contractual distribution systems are franchise systems, wholesaler-sponsored chains, and retail cooperatives. Difficulty: 2 Medium Topic: Distribution and Logistics Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

269) In administered distribution systems, retailers A) are reluctant to cooperate because they must perform many marketing functions for an uncertain payment. B) receive a great deal of marketing help from producers. C) are really subsidiaries of a manufacturer. D) sign a contract agreeing to cooperate with wholesalers in the channel of distribution. Answer: B Explanation: In an administered distribution system, producers manage all of the marketing functions at the retail level. Retailers often find this an attractive system because they get so much free help from the producer. Difficulty: 2 Medium Topic: Distribution and Logistics Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 270) Which of the following statements about wholesaler-sponsored chains is most accurate? A) In a wholesaler-sponsored chain, all stores are independently owned, but cooperate as a unified system of stores. B) In a wholesaler-sponsored chain, all stores act independently except for an agreement to share the costs associated with distribution. C) In a wholesaler-sponsored chain, all stores are owned by a single wholesaler, but operate under separate management. D) In a wholesaler-sponsored chain, all stores share profits and losses according to a contractual arrangement. Answer: A Explanation: The stores in a wholesaler-sponsored chain agree to cooperate as a unified system of stores, using the same name and participating in common promotions, but they remain independently owned and managed. Difficulty: 2 Medium Topic: Distribution and Logistics Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

271) Which of the following activities is most likely to be performed by someone responsible for supply chain management? A) developing an effective advertising campaign for a particular line of products B) establishing a budget for the firm's next fiscal year C) finding ways to handle the return of goods and recycled materials D) holding focus groups to learn what consumers want in new products Answer: C Explanation: Supply chain management is concerned not only with managing the movement of raw materials, parts, work in progress, finished goods, and information through the supply chain in a timely manner; but it is also responsible for managing the return of goods if necessary, and the recycling of materials when appropriate. Difficulty: 2 Medium Topic: Supply Chain Management Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 272) Sherwin Williams owns its manufacturing sites as well as over 3,000 retail stores in North America. Sherwin Williams exemplifies a A) selective distribution system. B) contractual distribution system. C) administered distribution system. D) corporate distribution system. Answer: D Explanation: When businesses elect to participate in a corporate distribution system, they own all the organizations in the channel of distribution. Difficulty: 3 Hard Topic: Distribution and Logistics Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

273) Eastern Spice Company was unable to get retailers to agree to a contractual arrangement to cooperate in the distribution process, so it took over all of the marketing functions for its products at grocery stores. The grocers like this arrangement because Eastern Spice provides outstanding marketing support for its products. Eastern Spice is using a(n) ________ system to distribute its products. A) corporate distribution B) franchise C) retail cooperative distribution D) administered distribution Answer: D Explanation: In an administered distribution system, the producer handles all of the marketing functions at the retail level. Difficulty: 3 Hard Topic: Distribution and Logistics Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 274) Selena owns and operates a Global Goods grocery store. Although her store is independently owned and operated, she has signed an agreement with over seventy stores in the Midwest to use a common name, participate in chain promotions, and cooperate with other stores in the chain. What is Selena's store a part of? A) administered chain B) wholesaler-sponsored chain C) corporate distribution system D) horizontal distribution chain Answer: B Explanation: In a wholesaler-sponsored chain, each store signs an agreement to use the same name, participate in chain promotions, and cooperate with other stores in the chain. The stores remain independently owned and managed. Difficulty: 3 Hard Topic: Distribution and Logistics Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

275) Edwin, an employee at an auto assembly plant for a U.S. auto manufacturer, manages a group of employees who measure the quality of parts that arrive on rail cars from Mexico and other countries. As a receiver of auto parts from other suppliers, Edwin works in A) third-party logistics. B) supply chain management. C) a corporate distribution system. D) direct mail operations. Answer: B Explanation: Supply chain management is the process of managing the movement of raw materials, parts, work in progress, finished goods, and related information through all organizations in the supply chain. Difficulty: 3 Hard Topic: Supply Chain Management Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 276) Anderson works in the marketing department at Marshall Manufacturing. Much of his job involves managing the movement of materials, parts, and information from suppliers to his firm. He tries to coordinate these flows with his firm's factory processes and assists with the efficient movement of finished goods to final consumers. These activities suggest that Anderson's job responsibilities focus on A) merchant wholesaling. B) multilevel marketing. C) utility processing. D) supply chain management. Answer: D Explanation: Supply chain management is concerned with managing the movement of raw materials, parts, work in progress, finished goods, and information through the supply chain in a timely manner. Difficulty: 3 Hard Topic: Supply Chain Management Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

277) ________ involves planning, implementing, and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption to meet customer requirements at a profit. A) Export management B) Multilevel marketing C) Logistics D) Shipping control management Answer: C Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 278) ________ brings raw materials, packaging, other goods and services, and information from suppliers to producers. A) Freight forwarding B) Inbound logistics C) Materials handling D) Supply side logistics Answer: B Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

279) ________ deals with moving finished products and information to business buyers and ultimate consumers. A) Inbound logistics B) Outbound logistics C) Final stage logistics D) Wholesale distribution Answer: B Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 280) When firms manage the return of goods from consumers either because they are defective or for recycling purposes, they are involved in A) materials handling. B) inbound logistics. C) factory processes. D) reverse logistics. Answer: D Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

281) ________ is the term used to describe the use of outside firms to help move their goods through the supply chain. A) Third-party logistics B) Multilevel distribution C) External logistics D) Mediated distribution Answer: A Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 282) Currently, in the United States the greatest volume of goods and services is shipped by A) trucks and vans. B) pipelines. C) rail. D) water. Answer: C Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 283) ________ put many small shipments together to create a single large shipment that can be transported more cost-efficiently to the final destination. A) Containerized shippers B) Freight consolidators C) Mixed merchandisers D) Freight forwarders Answer: D Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 99 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

284) Pipelines are used primarily to transport A) coal slurry. B) hazardous wastes. C) ammonia and acids. D) water, petroleum, and petroleum products. Answer: D Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 285) ________ shipping uses several different modes of transportation to complete a single longdistance movement of freight. A) Intermodal B) Multilevel C) Flexmode D) LAST (land-air-sea transport) Answer: A Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 286) The most expensive mode of transportation is A) railroad. B) truck. C) ship. D) air. Answer: D Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

287) The two basic types of warehouses are A) public and private. B) railside and portside. C) storage and distribution. D) seasonal and long term. Answer: C Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 288) ________ warehouses are used to gather and redistribute products. A) Storage B) Distribution C) Wholesale D) Merchandising Answer: B Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 289) ________ warehouses are used to hold products for a relatively long time. A) Storage B) Public C) Seasonal D) Distribution Answer: A Difficulty: 1 Easy Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

290) Logistics is concerned A) with flows of materials, finished products, and information. B) only with the flow of information, not the flow of materials and products. C) with the flow of materials to the manufacturer and with the flow of finished products to the consumer, but not with the flow of information. D) only with the flow of finished goods from the producer to the final consumer. Answer: A Explanation: Logistics involves planning, implementing, and controlling the physical flow of materials, final goods, and related information. Difficulty: 2 Medium Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 291) The part of logistics that is most concerned with the flow of goods as well as work in process within the manufacturing firm is A) inbound logistics. B) materials handling. C) reverse logistics. D) outbound logistics. Answer: B Explanation: Materials handling is the part of logistics that involves moving goods within warehouses, from warehouses to the factory floor, and to various workstations on the factory floor. Difficulty: 2 Medium Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

292) Compared to rail transportation, one of the advantages of shipping by truck is that trucks A) are more energy efficient. B) can carry a greater volume. C) can reach more destinations. D) are less expensive. Answer: C Explanation: Trucks are more expensive and less energy efficient than railroads, but they are also faster and reach more destinations. Difficulty: 2 Medium Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 293) Compared to railroads and trucks, the biggest advantage offered by air transport is that it is A) faster. B) more dependable. C) lower in cost. D) able to reach more destinations. Answer: A Explanation: Air transport is more expensive, less dependable, and reaches fewer destinations than railroads and trucks, but it is the fastest mode of transportation available. Difficulty: 2 Medium Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

294) Items such as snow skis, lawnmowers, and other highly seasonal items are often held in ________ warehouses during the months they are not in demand. A) seasonal B) distribution C) set aside D) storage Answer: D Explanation: Storage warehouses are used to store products for extended periods. This type of warehouse is used to store seasonal items during the time they are not in demand. Difficulty: 2 Medium Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 295) Businesses are using ________ and other ways to track goods and control the flow of goods from point of origin to point of consumption. "Tracking" is an important part of the process of managing the flow of goods, an activity that marketers call ________. A) tag team identification (TTI); materials handling B) radio frequency identification (RFID); intermediation C) radio frequency identification (RFID); logistics D) Reverse logistics; materials handling Answer: C Explanation: RFID (radio frequency identification) tags are used to track goods en route from origin to destination. Airports use them to keep track of luggage. Logistics is the planning, implementing, and controlling of the physical flow of materials, final goods, and related information from points of origin to points of consumption. Difficulty: 2 Medium Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

296) Which of the following activities would be most closely associated with inbound logistics? A) Arranging equipment on the factory floor so that materials move smoothly and efficiently from one work station to the next B) Evaluating various shipping methods to find the most efficient way to transport goods to the final customer C) Establishing a program to encourage customers to return used products to the manufacturer so materials can be recycled D) Working with suppliers to establish a more frequent delivery system that will enable the manufacturing firm to hold smaller inventories of parts and materials Answer: D Explanation: Inbound logistics is concerned with the movement of parts and materials from suppliers to producers. Difficulty: 2 Medium Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 297) According to the box, Online Grocery Shopping, what is Amazon's greatest challenge when it comes to competing against companies offering curbside pickup for online grocery orders at Walmart and Kroger? A) figuring out the most efficient ways to get groceries to customers' homes B) figuring out which local grocery stores to buy AmazonFresh products from C) figuring out where to set up curbside pickups at Amazon distribution centers D) figuring out where to build Amazon grocery stores around the U.S. Answer: A Explanation: Delivering fresh foods to customers' homes is a difficult task. Amazon needs to figure out the most efficient ways to deliver perishable goods to customers' doorsteps. Difficulty: 2 Medium Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

298) Vandelay Industries has discovered a defect in one of its products that may result in injury to users. The company believes it must quickly develop and implement a recall program. It is likely that Vandelay soon will be placing a great deal of emphasis on A) inbound logistics. B) materials handling. C) reverse logistics. D) third-party logistics. Answer: C Explanation: Reverse logistics involves bringing goods back to the manufacturer because of defects or for recycling materials. Difficulty: 3 Hard Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 299) Annie, a marketing manager, is worried her firm is doing a poor job of managing the movement of finished products to the final consumer. If she is right, the company should work to improve its A) outbound logistics. B) administered support system. C) materials handling. D) coordination of its freight forwarders. Answer: A Explanation: Outbound logistics manages the flow of finished products to business buyers or consumers. Difficulty: 3 Hard Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

300) Jordan is working to find ways to better her company's movement of materials and goods from the warehouse to the factory floor. Jordan is looking into ways of making her firm's ________ more efficient. A) internal logistics B) outbound logistics C) materials handling D) factory processes Answer: C Explanation: Materials handling is concerned with the management of goods within the company, including movement of goods or materials from the warehouse to the factory floor. Difficulty: 3 Hard Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 301) Jessi ships various perishable flowers from her greenhouses near St. Louis to florists thousands of miles away in cities such as San Antonio, Seattle, and Hartford. Since the flowers must reach the florists as quickly as possible, the best mode of transportation for Jessi to use would be A) railroads. B) trucks. C) air. D) ships. Answer: C Explanation: Airplanes are the fastest of all modes of transportation. Difficulty: 3 Hard Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

302) Which type of wholesale organization would be most useful to a small manufacturer that has shipments that are too small to fill a truck or railcar? A) rack jobbers B) cash-and-carry wholesalers C) piggy-backers D) freight forwarders Answer: D Explanation: A freight forwarder is a wholesaler that puts together many small shipments to create a single large shipment that can be transported more cost efficiently to the final destination. Difficulty: 3 Hard Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 303) Marshall Manufacturing wants to ship a large quantity of its goods across the country. They have contacted Get Gone Shipping, Inc., to find out what the shipment would cost. Get Gone has shown Marshall how it can arrange to use a combination of barges, trains, and trucks to complete the shipment at a low cost. Get Gone's strategy is an example of A) online shipping. B) intermodal shipping. C) supply chain shipping. D) multilevel distribution. Answer: B Explanation: Intermodal shipping uses multiple modes of transportation to complete a single long-distance movement of freight. Difficulty: 3 Hard Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

304) Explain why you agree or disagree with the following statement: "Marketing intermediaries must charge a high enough price for the functions they perform to earn a profit. Therefore, the cost of distributing goods can almost always be reduced by eliminating marketing intermediaries from the channel of distribution." Answer: It is true that marketing intermediaries seek to earn a profit on the activities they perform. However, because they specialize in the functions they perform, they can often do them much more efficiently than producers or consumers. In other words, intermediaries not only add to costs, they also create value when they perform distribution functions. Usually, the value they create more than offsets the cost they add; that is why intermediaries have survived and prospered. However, changes in technology (especially the Internet) have made it possible to replace some intermediaries. In order to survive in the future, intermediaries will have to be flexible and adapt to the changing needs of distribution. Difficulty: 3 Hard Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

305) What is utility? What are the major types of utility? Give an example of how marketing intermediaries can provide each type of utility. Answer: Utility is the value, or want-satisfying ability, that is added to goods by organizations that make the goods more useful or accessible to consumers than they were before. There are six types of utility: form, time, place, possession, information, and service. Form utility is provided when materials are changed in form to create a useful product. Producers usually create this type of utility, but marketing intermediaries sometimes provide it. For example, a hardware store may cut lumber to the length required by a customer, or a retail butcher may slice steaks to the thickness desired by a customer. Time utility is the value added to products by making them available when they are needed. Supermarkets or pharmacies that are open 24 hours a day seven days a week provide a great deal of time utility. Place utility adds value to goods by making them available where consumers want them. A service station that is located near a busy intersection, or a college bookstore located on campus are examples of marketing intermediaries who make sure their products are close to their customers. Possession utility adds value by transferring ownership of the good from one party to another. A store that accepts credit cards or offers a "90 days same as cash" plan makes the transfer of ownership easier. Stores can also provide possession utility by offering free delivery, fast installation, and follow-up service. Information utility adds value by opening two-way flows of information that enable customers to make an informed choice and buy a product which will satisfy their wants. One way marketing intermediaries can provide information utility is by having well-trained and well-informed salespeople who can answer customer questions accurately and offer useful advice. Service utility means providing customers with fast, friendly service during and after the sale and teaching consumers how best to use the product over time. This utility is crucial to retailers; without providing excellent service, they could lose customers to electronic marketing or direct marketing. Difficulty: 3 Hard Topic: The Role of Marketing Intermediaries Learning Objective: 15-02 Demonstrate how intermediaries perform the six marketing utilities. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

306) What is a wholesaler? Describe the difference between merchant wholesalers and agents and brokers. Identify three types of limited-function wholesalers. Answer: A wholesaler makes business-to-business sales. A merchant wholesaler is an independently owned firm that takes title to the goods they handle. About 80 percent of wholesalers fall in this category. Agents and brokers bring buyers and sellers together and assist in negotiating an exchange. However, unlike merchant wholesalers, agents and brokers never own the products they distribute. Usually they do not carry inventory, provide credit, or assume risks. While merchant wholesalers earn a profit from the sale of goods, agents and brokers earn commissions or fees based on a percentage of the sales revenues. Agents and brokers differ in that agents maintain long-term relationships with the people they represent, whereas brokers are usually hired on a temporary basis. Limited-function wholesalers perform only selected functions, but try to do them especially well. Three types of limited-function wholesalers are rack-jobbers, cash-and-carry wholesalers, and drop shippers. Difficulty: 3 Hard Topic: Types of Wholesale Intermediaries Learning Objective: 15-03 Identify the types of wholesale intermediaries in the distribution system. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

307) Retail distribution strategies can take three different forms. Identify the three forms and give examples of products that would be marketed using each strategy. Answer: The three categories of retail distribution strategies are intensive, selective, and exclusive. Intensive distribution puts products into as many retail outlets as possible, including vending machines. Candy, gum, soft drinks, magazines, and other convenience goods are products that utilize intensive distribution. Selective distribution is the use of only a preferred group of the available retailers in an area. Producers use this selection process to ensure quality sales and service. Producers of high-def televisions, furniture, clothing, and appliances often use selective distribution. Exclusive distribution is the use of only one retail outlet in a given geographic area. Producers who use this type of distribution believe that a retailer that has exclusive rights to carry a product has a greater incentive to stock more inventory, offer better service, and pay more attention to their brand. Manufacturers of luxury cars and producers of other expensive specialty goods often use exclusive distribution. Difficulty: 3 Hard Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

308) Identify and describe the four basic types of distribution systems that are used to link firms in a formal relationship. Answer: The four basic types of systems used to create a formal relationship among the firms that distribute a particular good or service are (1) corporate distribution systems; (2) contractual distribution systems; (3) administered distribution systems; and (4) supply chains. In a corporate distribution system, all of the organizations in the channel of distribution are owned by one firm (usually the manufacturer). This type of system gives the owner a great deal of control over all aspects of the channel from production to retail sales. In a contractual distribution system, the members of the channel of distribution are independently owned, but have signed a contractual agreement to cooperate. There are three different contractual systems: (1) franchise systems; (2) wholesaler-sponsored chains; and (3) retail cooperatives. In a franchise system, all franchisees agree to follow all of the rules, regulations, and procedures of the franchiser. In a wholesaler-sponsored chain, the firms remain independently owned and managed, but agree to use the same name and participate in chain promotions and cooperate in other ways. Retail cooperatives are much like wholesaler-sponsored cooperatives, except they are agreements initiated by retailers. In an administered distribution system, the manufacturer handles all of the marketing functions for its products at the retail level. Thus, the manufacturer displays the product in retail stores, controls inventory, sets pricing, and handles promotion. Retailers often see advantages in cooperating in an administered system because they get a great deal of marketing help for free. Supply chains are the latest and most complex type of distribution system. A supply chain consists of all of the organizations that move goods and services from the source of raw materials to the final customer. A supply chain is longer than a channel of distribution since it includes links from suppliers to the manufacturer as well as links from the manufacturer to the final consumer. Supply chain management is the process of managing the movement of materials, parts, work in progress, finished goods and related information through all of the organizations involved in the supply chain; it also includes managing the return of goods and recycling of materials when appropriate. Software companies such as SAP have developed software to help manage this complex process. Difficulty: 3 Hard Topic: Distribution and Logistics Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

309) What is logistics? Describe the types of issues you might deal with if you specialized in logistics. Answer: Logistics involves planning, implementing, and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption to meet the needs of consumers at a profit. There are several aspects to logistics. Inbound logistics involves bringing materials, components, and other goods and services from suppliers to producers. Materials handling is concerned with the movement of materials, components, and finished goods within a producer's warehouses, from the warehouses to the factory floor, and within the factory among various workstations. Outbound logistics manages the flow of finished products and information from the producer to the buyer. Finally, reverse logistics involves handling the return of goods from buyers to the producer, either because of defects or to recycle materials. Difficulty: 3 Hard Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

Mini-Case "We've got a number of important issues to discuss today," began Dee Stribyute as she opened the weekly marketing manager's meeting for Lite Bite Foods. Lite Bite is a producer of low fat, low calorie snack foods. The other managers attending the meeting were her two top assistants, Mark Etter and Rhea Taylor. "First, sales were hurt last year when we had to recall our almond chocolate bars because of concerns about contaminated ingredients. We've got our work cut out for us to recover from that setback. Many stores quit carrying our products, and even the ones that continued to do so put less emphasis on displaying and promoting them. We've got to get our products into as many stores as possible. Consumers shouldn't have to go all over town trying to find our snacks. We also need to make sure that our products are displayed and promoted in a way that attracts attention." Dee looked at her assistants, and saw that they seemed ready to make some proposals. However, she decided to get another important issue out on the table before stopping to discuss solutions, so she continued with her comments. "The other big concern is the cost of moving our goods. Distribution costs are a major part of the overall cost of selling our goods. What can we do to make the flow of products from our kitchens to our ultimate consumers more efficient?" Having laid out her concerns, Dee sat down at the head of the table, saying to her assistants, "O.K. guys, I'm ready for suggestions." 310) The need for Lite Bite to recall its almond chocolate bars suggests that it had to be very concerned with A) outbound logistics. B) reverse logistics. C) administered distribution. D) drop shipping. Answer: B Explanation: Reverse logistics involves bringing goods back to the manufacturer because of defects or for recycling of materials. Difficulty: 3 Hard Topic: Logistics Learning Objective: 15-07 Describe logistics and outline how intermediaries manage the transportation and storage of goods. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

311) Dee's comments about the need to get Lite Bite products into additional retail outlets suggests the company wants to use a(n) A) intensive distribution strategy. B) multilevel marketing strategy. C) intermodal distribution network. D) selective distribution strategy. Answer: A Explanation: An intensive distribution strategy attempts to put the products in as many retail stores as possible, so that customers can find the good quickly and easily. This strategy is commonly used for convenience goods such as cigarettes, candy, magazines, and gum. Difficulty: 3 Hard Topic: Retailers and their Strategies Learning Objective: 15-04 Compare the distribution strategies retailers use. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 312) Dee's suggestion that the company needed more control over the way its products were displayed, priced, and promoted prompted a lot of discussion. Mark suggested that the company should manage these marketing functions for its products at the retail outlets. Mark appears to be suggesting that Lite Bite use a(n) A) corporate distribution system. B) franchise arrangement. C) manufacturer-sponsored marketing chain. D) administered distribution system. Answer: D Explanation: In an administered distribution system, the producer manages all of the marketing functions at the retail level. This gives the manufacturer more control over the way its products are priced, displayed, and promoted. Retailers often are willing to agree to this approach since it means that producers give them a lot of marketing assistance for free. Difficulty: 3 Hard Topic: Distribution and Logistics Learning Objective: 15-06 Explain the various ways to build cooperation in channel systems. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

313) Currently, Lite Bite uses a lot of intermediaries to help distribute its products. Collectively, the organizations that participate in getting finished goods from Lite Bite to the ultimate consumers of its products are all part of the A) marketing mix. B) franchise system. C) channel of distribution. D) marketing network. Answer: C Explanation: A channel of distribution is the whole set of marketing intermediaries who join together to transport and store goods on their way from the producer to the consumer. Difficulty: 3 Hard Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 314) After listening to all of the challenges and issues, Rhea said she wanted to propose a more sweeping change. "Mark has already suggested doing some of the retailer's job for them. I say go even further—let's just do away with all of the intermediaries. We can perform all of their functions ourselves," she said. She went on to explain that, "Since we won't have to deal with intermediaries, my suggestion is bound to simplify the distribution process and cut costs dramatically." What do you think of Rhea's suggestion? A) It is truly radical because it calls for the elimination of the entire supply chain. B) It is an example of an administered and contractual distribution system. C) It should be viewed with some skepticism, because it ignores the fact that intermediaries usually create enough value to justify their inclusion in the distribution process. D) It is not really very radical, since most manufacturing firms in recent years have used this approach to bring about dramatic reductions in their costs of distribution. Answer: C Explanation: Rhea could be correct, but her argument is shaky. If Lite Bite eliminates intermediaries from its channel of distribution, it will have to perform all of the functions they have been providing. Intermediaries specialize in performing certain types of marketing functions, so they often can perform them more efficiently and at lower cost than the producer. Thus, Lite Bite could find that Rhea's proposal would result in higher costs. Difficulty: 3 Hard Topic: Distribution and Logistics Learning Objective: 15-01 Explain the concept of marketing channels and their value. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

Understanding Business, 12e (Nickels) Chapter 16 Using Effective Promotions 1) As a component of the promotion mix, advertising includes each of the activities marketers use to inform people about products and persuade them to participate in an exchange. Answer: FALSE Difficulty: 1 Easy Topic: Integrated Marketing Communications Learning Objective: 16-01 Identify the new and traditional tools that make up the promotion mix. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) A firm's promotion mix refers to the combination of different promotional tools used to persuade consumers to participate in an exchange. Answer: TRUE Difficulty: 1 Easy Topic: Integrated Marketing Communications Learning Objective: 16-01 Identify the new and traditional tools that make up the promotion mix. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) Integrated marketing communication simplifies the marketing process by replacing personal selling with extensive use of advertising to create a positive brand image. Answer: FALSE Difficulty: 1 Easy Topic: Integrated Marketing Communications Learning Objective: 16-01 Identify the new and traditional tools that make up the promotion mix. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

4) Integrated marketing communication combines all the promotional tools into one comprehensive, unified promotional strategy. Answer: TRUE Difficulty: 1 Easy Topic: Integrated Marketing Communications Learning Objective: 16-01 Identify the new and traditional tools that make up the promotion mix. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 5) Integrated marketing communication combines each element of the promotional effort to create a unique message for a product sold in different markets. Answer: FALSE Difficulty: 1 Easy Topic: Integrated Marketing Communications Learning Objective: 16-01 Identify the new and traditional tools that make up the promotion mix. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) Creating a unified positive image of a company in the public's mind is the end result of effective integrated marketing communication. Answer: TRUE Difficulty: 1 Easy Topic: Integrated Marketing Communications Learning Objective: 16-01 Identify the new and traditional tools that make up the promotion mix. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

7) Combining a firm's promotional tools and resources to create a positive brand image is the goal of integrated marketing communication. Answer: TRUE Difficulty: 1 Easy Topic: Integrated Marketing Communications Learning Objective: 16-01 Identify the new and traditional tools that make up the promotion mix. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) The promotional budget will clarify how much can be spent on advertising and personal selling. Answer: TRUE Difficulty: 1 Easy Topic: Integrated Marketing Communications Learning Objective: 16-01 Identify the new and traditional tools that make up the promotion mix. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9) The first step in creating a promotional campaign is to define the objectives for each element of the marketing mix. Answer: FALSE Difficulty: 1 Easy Topic: Integrated Marketing Communications Learning Objective: 16-01 Identify the new and traditional tools that make up the promotion mix. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

10) The last step in creating a promotional campaign is to evaluate the effectiveness of each element of the promotional mix. Answer: TRUE Difficulty: 1 Easy Topic: Integrated Marketing Communications Learning Objective: 16-01 Identify the new and traditional tools that make up the promotion mix. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) The development of a unified promotional strategy that uses each element of the promotion mix to create a favorable brand image is the goal of a primary promotional process. Answer: FALSE Difficulty: 1 Easy Topic: Integrated Marketing Communications Learning Objective: 16-01 Identify the new and traditional tools that make up the promotion mix. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) A firm's promotion mix consists of its pricing and distribution strategies. Answer: FALSE Explanation: A promotion mix includes advertising, personal selling, public relations, and sales promotion. Difficulty: 2 Medium Topic: Integrated Marketing Communications Learning Objective: 16-01 Identify the new and traditional tools that make up the promotion mix. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

13) When developing the promotional campaign for a new product, the first step for a firm is to identify their target market. Answer: TRUE Explanation: Figure 16.2 identifies the 6 steps in a promotional campaign. The first step involves the identification of the target market. Difficulty: 2 Medium Topic: Integrated Marketing Communications Learning Objective: 16-01 Identify the new and traditional tools that make up the promotion mix. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) Caroline has developed a new advertising message for one of her firm's new products. She has sent copies of the ad to all of the salespeople in the firm and asked them to stress the benefits mentioned in the ad when they call on their customers. Finally, the ad includes a free sample coupon to encourage people to try this new product. She is attempting to create one positive, unified brand image for the new product. Caroline is practicing brand communication. Answer: FALSE Explanation: Caroline is practicing integrated marketing communication because she is combining the promotional tools of advertising, personal selling, and sales promotion to achieve a positive, unified brand image for the new product. Difficulty: 3 Hard Topic: Integrated Marketing Communications Learning Objective: 16-01 Identify the new and traditional tools that make up the promotion mix. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 15) Dominic is a salesperson for Partners Publishing. His activities are part of Partners' promotion mix. Answer: TRUE Explanation: Advertising, personal selling, public relations, and sales promotion are all part of a firm's promotion mix. Difficulty: 3 Hard Topic: Integrated Marketing Communications Learning Objective: 16-01 Identify the new and traditional tools that make up the promotion mix. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

16) Comfy Corners Furniture has adopted integrated marketing communication. Comfy Corners Furniture now puts less emphasis on public relations, sales promotion, and personal selling, and concentrates on advertising designed to provide a uniform message to all markets. Answer: FALSE Explanation: The goal of integrated marketing communication is to create a unified image of the company, but it does not downplay the role of public relations, sales promotion, and personal selling to achieve this goal. Instead, it focuses on uniting and coordinating all of the elements of the promotion mix. Difficulty: 3 Hard Topic: Integrated Marketing Communications Learning Objective: 16-01 Identify the new and traditional tools that make up the promotion mix. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 17) Depending upon the promotional campaign, advertising may include paid and nonpaid forms of nonpersonal communication. Answer: FALSE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) Trade advertising is advertising to consumers by manufacturers to encourage them to try their products. Answer: FALSE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

19) Institutional advertising creates an attractive image for an organization rather than for a product. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) Advocacy advertising is advertising that supports a particular view of an issue such as nuclear power. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 21) When a manufacturer advertises to wholesalers and retailers in an attempt to encourage them to carry its products, it is engaging in institutional advertising. Answer: FALSE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 22) The purpose of institutional advertising is to create an attractive image for an organization. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 7 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

23) Advertising covers the major production costs of television and radio programs. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 24) Newspapers, radio, and directories are usually attractive to local advertisers. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 25) Advertising helps to cover the production costs of newspapers and magazines. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26) The major complaint with advertising is that it provides no real benefits to the public. Answer: FALSE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

27) Free television and radio programming is made possible by advertising. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 28) Online advertising has become the number one medium and ranks ahead of newspapers and television, based on total advertising expenditures. Answer: FALSE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) Television and direct mail are the top two advertising media when ranked by total expenditures. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30) Digital advertising is rapidly growing and now ranks third in terms of total advertising expenditures. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

31) Direct mail, television, and newspapers are the top three advertising media when ranked by total expenditures. Answer: FALSE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32) The number one advertising medium in terms of total dollar expenditures is newspapers. Answer: FALSE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 33) Because television advertising is so expensive, it is less popular than in the past, and it now ranks sixth in total advertising expenditures. Answer: FALSE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 34) Direct mail is usually the best advertising medium to reach specific target markets and ranks number two in overall advertising expenditures. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

35) Magazine advertising's main strengths are high visibility, repeat exposures, and basically very low cost. Answer: FALSE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) One problem with newspaper advertisements is that they have a short life span. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 37) Radio advertising has certain shortcomings but offers businesses an opportunity to reach a specific target market. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) A full-length television program made to look like a television show but devoted exclusively to promoting goods and services is called an infomercial. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

39) With the increase of digital advertising, infomercials are rarely shown on television. Answer: FALSE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 40) When marketers advertise on a big online search engine like Google, they can reach the people they most want to reach. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 41) One of the benefits of advertising online is that it provides a way to link firms and customers so that they can learn more about each other. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 42) Interactive promotion allows customers and companies to work together to create mutually beneficial exchange relationships in an ongoing dialogue. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

43) Online advertising allows advertisers to see how many people have clicked on an advertisement and how much of it the potential customer has read or watched. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44) Technology has changed the emphasis of promotion from promoting to customers to working with customers. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 45) Technology allows firms to listen to customers' wants, track their purchases, provide them with better service, and give them more access to information. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

46) The purpose of interactive promotion is to create a monologue that convinces customers to act quickly. Answer: FALSE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 47) When it comes to reaching global markets, evidence supports the conclusion that the "one size fits all" approach to promotional mix design is best. Answer: FALSE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 48) Global advertising can save companies money in research and ad design. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 49) The primary emphasis of advertising today is to move from a regional approach in global markets to a total globalist approach. Answer: FALSE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

50) When advertising in global markets it is important to remember that brand names and promotional campaigns can often be translated into a local language differently from what the marketer has attempted to say. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 51) Advertising reaches a national audience more effectively than it communicates with a local market. Answer: FALSE Explanation: Newspapers, radio, and directories are all advertising media that do an excellent job of covering a local market. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 52) Mailing ads to nearby residents helps grocery stores reach their target market with information about special sales. This represents direct mail advertising. Answer: TRUE Explanation: Advertising refers to paid, nonpersonal communication through various media. Since direct mail is paid, nonpersonal communication through the mail, it should be considered advertising. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

53) Magazines such as People, Sports Illustrated, and Bloomberg Businessweek pay for much of the cost of producing their publications by selling advertising space in the magazines. Answer: TRUE Explanation: Advertising covers the major costs of producing newspapers and magazines. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 54) Informing consumers about goods and services represents advertising's only benefit to society. Answer: FALSE Explanation: Advertising most importantly informs us about products. It also provides us with free television and radio programs because business advertisers pay for advertising time. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 55) The use of infomercials represents an effective use of advertising dollars. Answer: TRUE Explanation: Infomercials have been successful because they present the product in great detail. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

56) It is important to design promotional efforts specifically for individual countries or cultures, and also with great care—at risk of a brand not appealing to the targeted market. For example, a Japanese company tried to use English words to name a popular drink and called it Pocari Sweat. Answer: TRUE Explanation: Many experts believe that promotions carefully targeted at specific countries or regions may be much more successful than global promotions since each country or region has its own culture, language, and buying habits, which can be studied and understood. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 57) According to the Connecting Through Social Media box, production companies needed to change how they measure the popularity of a television program, since we don't necessarily tune in at a specific time. Now, companies track Twitter and Facebook buzz to analyze ratings. Answer: TRUE Explanation: For the decades before VCRs and DVRs, on-demand video, and long before Netflix and Amazon started producing their own shows, the popularity of a show was measured by the number of viewers tuning in at a specific time. Now, companies are using social media to track viewership. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 58) As mentioned in the Reaching Beyond Our Borders box, though Kraft Foods knows that there are varying tastes around the world, they only sell their original Oreos worldwide. Answer: FALSE Explanation: In addition to the many variations of Oreos we see in our supermarkets, Kraft has different kinds for different countries (i.e. green tea, banana, blueberry ice cream). Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 17 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

59) Forestry Friends is an organization concerned about preserving forests and wilderness areas. They hope to raise the public's awareness regarding this issue. Forestry Friends can communicate their concern by utilizing advocacy advertising. Answer: TRUE Explanation: Advocacy advertising, also known as cause advertising, supports a particular view of an issue. Antismoking ads are an example of advocacy advertising. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 60) Pie Oh My generates significant "word of mouth" by delighting their customers with delicious pies. Word of mouth represents a kind of advertising. Answer: FALSE Explanation: Word of mouth does not meet several of the criteria that characterize advertising. Advertising is paid nonpersonal communication through various media. Word of mouth is unpaid personal communication that does not go through a medium. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 61) Businesses pay for product placement to have their products displayed in a television episode of Empire or a feature movie. Answer: TRUE Explanation: Product placement refers to advertising dollars spent to put products into television shows and movies where they will be widely seen. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

62) Personal selling involves the face-to-face presentation and promotion of products. Answer: TRUE Difficulty: 1 Easy Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 63) Persuading others to buy your product represents the only goal of effective selling. Answer: FALSE Difficulty: 1 Easy Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 64) Effective selling involves helping others to satisfy their wants and needs. Answer: TRUE Difficulty: 1 Easy Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 65) Since personal selling involves face-to-face contact with customers, salespeople make little if any use of technology in performing their jobs. Answer: FALSE Difficulty: 1 Easy Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

66) Personal selling involves more than presenting the product and closing the deal. Other activities include the search for new prospects and follow-up services after the sale. Answer: TRUE Difficulty: 1 Easy Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 67) Closing the sale represents success for the salesperson and the final step in the selling process. Answer: FALSE Difficulty: 1 Easy Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 68) Validation refers to the process of determining whether a potential customer has the need for a product, the authority to buy, and the willingness to listen to a sales message. Answer: FALSE Difficulty: 1 Easy Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 69) The first step in the selling process involves prospecting for potential customers and choosing those most likely to buy. Answer: TRUE Difficulty: 1 Easy Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

70) The purpose of a trial close in the selling process is to learn as much as possible about customers and their wants and needs. Answer: FALSE Difficulty: 1 Easy Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 71) The B2B selling process may take a long time before a deal is finalized; therefore, gathering information about the customer before you approach them is critical. Answer: TRUE Difficulty: 1 Easy Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 72) B2C salespeople spend more time prospecting their customers than do B2B salespeople. Answer: FALSE Difficulty: 1 Easy Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 73) After-sale follow-up is an important but often neglected step in B2C sales. Answer: TRUE Difficulty: 1 Easy Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

74) The B2C selling process has fewer steps than the B2B selling process. Answer: TRUE Difficulty: 1 Easy Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 75) In evaluating personal selling it is safe to conclude that it represents a form of individualized advertising. Answer: FALSE Explanation: Personal selling is face-to-face presentation and promotion of goods and services. Advertising is nonpersonal communication through various media. Personal selling, therefore, is not advertising. Difficulty: 2 Medium Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 76) The hallmark of an effective salesperson is the ability to make a sale as soon as the sales presentation is completed. Answer: FALSE Explanation: The presentation stage of personal selling is usually followed by an effort to answer questions and overcome objections. An effective salesperson will realize that customers are likely to have legitimate questions and concerns, and will look at questions and objections as an opportunity to improve relationships. Even after objections are answered, the close may take some time. Difficulty: 2 Medium Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

77) Questions and objections from customers following a sales presentation indicate that a salesperson was poorly prepared for his/her presentation. Answer: FALSE Explanation: Customers often will have questions and legitimate concerns about a product. The salesperson should not take these concerns and doubts as an indication that the customer is challenging the presentation. Rather, customer questions and concerns should be viewed as an opportunity. In fact, by helping customers resolve their doubts, salespeople can create a better relationship with the customer. Difficulty: 2 Medium Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 78) To be successful, salespeople find that their job responsibilities extend far beyond just closing the sale. Answer: TRUE Explanation: The selling process often continues for years as the salesperson responds to existing customer requests for new information. Difficulty: 2 Medium Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 79) Effective salespeople push hard to finalize a sale as soon as they finish their presentation. Otherwise, the customer has time to come up with objections that will make the sale more difficult to close. Answer: FALSE Explanation: Salespeople cannot spend unlimited time with a single customer, so they must find ways to close the sale. However, this does not mean the salesperson must use high-pressure tactics or try to rush the customer into a decision. Salespeople must realize that customers can have legitimate questions and concerns, and they should look at these objections as an opportunity to forge a stronger relationship with the customer. Difficulty: 2 Medium Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

80) Nicola is a salesperson at one of Epic Electronics' retail stores. As an effective salesperson, Nicola is expected to help her customers resolve any doubts they might have before the sale, and follow up to ensure that the customer is satisfied after the sale. Answer: TRUE Explanation: A salesperson should anticipate potential objections and determine proper responses. Customers will have legitimate doubts, and salespeople are there to resolve those doubts. Moreover, the sales process doesn't end when the sale is made. Salespeople are expected to follow up after a sale and continue to build a relationship with the customer. Difficulty: 3 Hard Topic: Steps in the Selling Process Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 81) Steve is a salesperson for a firm that markets products in a B2B market. His wife, Fran, is a salesperson for a retail store selling top-quality electronics goods. While Steve is likely to be successful using follow-up after the sale, Fran should avoid this approach. Answer: FALSE Explanation: As in the B2B market, salespeople in consumer markets are finding success following up after the sale. Difficulty: 3 Hard Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 82) After her sales presentation, Cheryl asks her customers what color they prefer and if they would like to pay by credit card. She hopes that these questions will help the sales process move beyond the customer's questions and objections. With limited time, Cheryl is utilizing a trial close to help finalize the sale more quickly. Answer: TRUE Explanation: Salespeople can't spend forever with one potential customer answering questions and objections. By assuming that the customer has made the purchase decision, Cheryl's questions help finalize the sale. Difficulty: 3 Hard Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

83) Arturo is a salesperson for a firm that sells and leases heavy construction equipment. This equipment is very expensive, and is highly specialized. Arturo spends a great deal of time learning about potential customers' needs, then locates exact specifications of equipment offered by all the major producers in the industry. Armed with this information, Arturo is able to identify the best equipment for each job. Arturo has completed the preapproach stage of the selling process. Answer: TRUE Explanation: In the preapproach stage the salesperson does further research by learning as much as possible about customers and their wants and needs. Difficulty: 3 Hard Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 84) As customers walk into Leopard Prints clothing store, they are approached by a salesperson who immediately greets and asks, "May I help you?" Studies indicate that this is an effective opening in the B2C sales process. Answer: FALSE Explanation: Actually, "May I help you?" is not an effective opening because the answer too often is "No." A better approach is to ask, "What may I help you with?" or "Welcome to our store." The idea is to show the customer that you are there to help and that you are friendly and knowledgeable. As a salesperson greeting a customer, your goal is to discover what the customer wants. Difficulty: 3 Hard Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 85) As one of the tools included in a firm's promotion mix, public relations is intended to earn public understanding and acceptance. Answer: TRUE Difficulty: 1 Easy Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

86) Effective use of public relations includes an evaluation of public attitudes and the execution of a program to earn public acceptance. Answer: TRUE Difficulty: 1 Easy Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 87) An effective public relations department regularly listens to and communicates with the public. Answer: TRUE Difficulty: 1 Easy Topic: Public Relations; Building Relationships Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 88) An effective public relations program informs the public that the firm is responsive to their needs. Answer: TRUE Difficulty: 1 Easy Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

89) To be effective and maintain its independence, the public relations department should avoid establishing close relationships with the media, community leaders, and other corporate stakeholders. Answer: FALSE Difficulty: 1 Easy Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 90) Using effective public relations involves establishing a dialogue with customers so that information can be exchanged and trust can be developed. Answer: TRUE Difficulty: 1 Easy Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 91) Successful PR departments find that listening to the public is not enough. They have to tell the public that they are being responsive. Answer: TRUE Difficulty: 1 Easy Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

92) Public relations departments work closely with media, avoiding the time-consuming effort of interacting with individual customers. Answer: FALSE Difficulty: 1 Easy Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 93) Using effective public relations requires listening to the public and developing policies that reflect the public's interest. Answer: TRUE Difficulty: 1 Easy Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 94) PR firms find that their services can be enhanced and improved by listening to the public in different forums including social media. Answer: TRUE Difficulty: 1 Easy Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 95) Publicity is often referred to as the talking arm of public relations. Answer: TRUE Difficulty: 1 Easy Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 28 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

96) Unlike other promotional tools, such as advertising and personal selling, publicity is free. Answer: TRUE Difficulty: 1 Easy Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 97) Compared to effective comparative advertising, publicity is generally considered less believable. Answer: FALSE Difficulty: 1 Easy Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 98) One fact that marketers must keep in mind is that publicity can be either positive or negative. Answer: TRUE Difficulty: 1 Easy Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 99) Compared to advertising, publicity offers a firm greater control over when and how often the message is communicated. Answer: FALSE Difficulty: 1 Easy Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

100) Publicity works and is often used only if the media finds the information interesting or newsworthy. Answer: TRUE Difficulty: 1 Easy Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 101) The first step in the public relations process is to ensure that everyone in the organization understands the firm's position on key issues. With this information widely available, efforts can be made to persuade the public of the firm's virtues. Answer: FALSE Explanation: Good public relations begins with listening to the public. Public relations is not about generating propaganda to convince customers that they are always right. Instead, firms that make effective use of public relations earn public trust and approval by being willing to change their policies and procedures to make sure they are in the public interest. Difficulty: 2 Medium Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 102) Businesses always welcome publicity because it presents the name of the firm and its products to the public for free. Answer: FALSE Explanation: As the chapter clearly explains, not all publicity is good publicity. Difficulty: 2 Medium Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

103) Dean, a manager for a firm that produces a variety of recreational equipment and sporting goods, is convinced that his firm markets the safest, highest-quality equipment in the entire industry. Recent studies from the Consumer Product Safety Commission support his position. Dean feels that the best way to create an image of high-quality, safe products is to develop an extensive advertising campaign. Dean realizes that publicity lacks the credibility that advertising can generate. Answer: FALSE Explanation: Aside from being free, the biggest advantage of publicity is that it is more believable than advertising. Thus, if believability is a concern, Dean should first write a press release about the safety statistics that grabs the attention of media. If the news media report this information, Dean will not only save advertising money, but he may also enhance the public's belief in the information presented. Difficulty: 3 Hard Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 104) While the Logger's Woodworks legally harvests trees in national forests, this activity is particularly unpopular with environmentalists and tourists. The best strategy to respond to this criticism is to ignore the complaints or views of the public and design an aggressive ad campaign emphasizing the jobs and economic benefits created by their logging operations. Answer: FALSE Explanation: Effective public relations starts with listening to the public. A firm won't achieve public relations success by ignoring the public's concerns or by bombarding the public with propaganda. Difficulty: 3 Hard Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

105) Newport Chemicals demands complete control over any message communicated to the public regarding their products. The most efficient element of the promotion mix to achieve their desired control is publicity. Answer: FALSE Explanation: A disadvantage of publicity is that there is no guarantee the news media will use the information, and even if they do, the timing may not be desirable or the media may modify the story. Thus, the business has no control over how, when, or if the media gives it favorable publicity. Difficulty: 3 Hard Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 106) Sales promotion involves the long-term strategies firms use to enhance their image by listening to the public. Answer: FALSE Difficulty: 1 Easy Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 107) Sales promotion programs can be used as a means to generate employee enthusiasm. Answer: TRUE Difficulty: 1 Easy Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

108) Coupons, contests, and sampling are examples of sales promotion activities. Answer: TRUE Difficulty: 1 Easy Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 109) Internal sales promotion programs are targeted to reach the firm's internal auditors as well as external customers. Answer: FALSE Difficulty: 1 Easy Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 110) Internal sales promotion efforts include training for salespeople and participation at trade shows where salespeople can meet potential customers. Answer: TRUE Difficulty: 1 Easy Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 111) Internal sales promotion efforts target salespeople and employees that handle customer complaints. Answer: TRUE Difficulty: 1 Easy Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 33 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

112) The use of coupons and sales contests represent internal public relations and sampling activities. Answer: FALSE Difficulty: 1 Easy Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 113) The most effective sales promotion programs target customers, rather than employees and marketing intermediaries. Answer: FALSE Difficulty: 1 Easy Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 114) Trade shows represent sales promotion programs designed to create product enthusiasm from distributors and dealers. Answer: TRUE Difficulty: 1 Easy Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

115) Virtual trade shows are not effective at promoting tangible goods; therefore they promote services rather than tangible products. Answer: FALSE Difficulty: 1 Easy Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 116) It's just as important to generate employee enthusiasm about a product as it is to attract potential customers. Answer: TRUE Difficulty: 1 Easy Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 117) Sampling represents a quick and effective way to demonstrate a product's superiority at the time when consumers are making a purchase decision. Answer: TRUE Difficulty: 1 Easy Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

118) Because customers eventually lose interest, businesses achieve the best results when they use sales promotion activities on a limited and irregular basis. Answer: FALSE Explanation: Sales promotion activities are short term but are carried out on an ongoing basis to maintain enthusiasm. Different promotional techniques and strategies can be used over time to keep the ideas fresh. Difficulty: 2 Medium Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 119) Effective sales promotion efforts focus exclusively on external audiences such as dealers and consumers, since they ultimately decide the fate of a product. Answer: FALSE Explanation: Often the most important sales promotion efforts are directed internally at salespeople and other customer-contact persons such as complaint handlers and clerks. Difficulty: 2 Medium Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 120) Sales promotion efforts such as trade shows aimed at distributors and dealers are intended to generate their enthusiasm for a firm's products. Answer: TRUE Explanation: When dealers and distributors are excited about a manufacturer's product, they can be an integral part of the total promotional effort. Difficulty: 2 Medium Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

121) Calvin is a salesperson for an electrical contractor. This means he is included as part of the target audience for sales promotions from his own company. Answer: TRUE Explanation: It's just as important to get employees enthusiastic about a sale as it is to attract potential customers. The most important internal sales promotion efforts are directed at salespeople and other customer-contact people. Difficulty: 3 Hard Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 122) Bubbles Cola introduced Fruit Flash product line during spring break in Panama City and South Padre Island. It gave out free samples and provided free rides on Bubbles Cola trucks. Bubbles Cola was practicing event marketing. Answer: TRUE Explanation: Bubbles Cola introduced its Fruit Flash product line with a combination of sampling, event marketing, and a new website. Event marketing includes sponsoring events such as rock concerts or being at various events to promote your products. In the case of Fruit Flash, Bubbles first sent samples to Florida and Texas for spring break and was there to provide free rides on its trucks. Difficulty: 3 Hard Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 123) Anything that encourages people to talk favorably about an organization may be effective word-of-mouth promotion. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

124) Viral marketing describes everything from paying people to say positive things online to schemes where consumers get commissions for directing friends to specific websites. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 125) The Internet has severely reduced the importance and effectiveness of word-of-mouth promotion. Answer: FALSE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 126) A testimonial represents communication from a customer that praises a firm's products. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 127) While testimonials effectively promote products to new customers, they are not effective in reaching existing customers. Answer: FALSE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

128) Social media offers opportunities for positive and negative word-of-mouth promotion. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 129) Social media is an easy way for customers to communicate with companies. However, it is not an easy way for companies to communicate with customers. Answer: FALSE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 130) There are millions of blogs online, but businesses have found blogs do not serve much of a purpose since social media is more powerful. Answer: FALSE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 131) Podcasting is a means of distributing audio and video programs but these programs can only be seen and heard using mobile technology. Answer: FALSE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

132) The Internet enables companies to decrease their emphasis on traditional promotional tools such as television advertising. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 133) Mobile technology allows marketers to promote products to consumers through smartphones using text alerts. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 134) Even though advances in mobile media present some interesting opportunities, marketers expect that traditional promotions such as television advertising will dominate promotional efforts over the long term. Answer: FALSE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

135) In the evaluation of the promotion, it's best to establish a promotional strategy that can reach multiple targets rather than developing a separate promotion mix for each target group. Answer: FALSE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 136) Personal selling provides the most efficient element of the promotion mix for a firm attempting to create a good impression among a large group of consumers. Answer: FALSE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 137) In evaluating the promotion mix, it's fair to say that large organizations are best reached through personal selling. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

138) A pull strategy utilizes consumer demand for a product to motivate retailers and wholesalers to actively market the product. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 139) Push strategies target consumers with sales promotion and heavy discounting that are designed to create a strong demand for the product. Answer: FALSE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 140) The objective of a push promotional strategy is to move a product through a distribution channel by offering incentives to wholesalers and retailers to stock and sell the merchandise. Answer: TRUE Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

141) While word of mouth represents an effective promotional tool, the need for face-to-face communication limits its usefulness. Answer: FALSE Explanation: Word of mouth encourages people to tell others about products they have tried and liked. This does not require people to meet face-to-face. In fact, a great deal of word-ofmouth promotion these days takes place over the Internet. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 142) A recent study reveals that regardless of the product or target market, mobile media is not a promotion mix tool that works efficiently. Answer: FALSE Explanation: Mobile media using cell phones to text messages to customers is being used more and more by companies as a way to immediately reach consumers. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 143) To execute an effective promotional strategy, firms are required to choose between a push strategy and a pull strategy. Answer: FALSE Explanation: A firm could use both a push and pull strategy at the same time in a major promotional effort. A push strategy is aimed at wholesalers and retailers, while a pull strategy is aimed at consumers. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

144) According to the Adapting to Change box, companies tailor advertisements directly to you, even while you're driving along the highway. Answer: TRUE Explanation: Targeted billboards are growing in popularity around the United States. Data collected from nearby smartphones and cars prompts these billboards to show a message most appropriate for the current audience. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 145) Motivated by the impolite treatment he received at a department store, José shared his bad experience on Yelp. He encouraged others not to frequent that store. José's statements represent negative word of mouth. Answer: TRUE Explanation: Word of mouth can occur over the Internet. In fact, the popularity of the Internet has made word of mouth more important and effective than ever. Obviously, firms try to generate favorable word of mouth, but word of mouth can also be negative. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 146) At an Epic Electronics retail store, management knows the value of reassuring their current customers that they made the right choice when they decided to give Epic their business. Testimonials would be an effective promotional activity to confirm the purchase decisions of Epic's customers. Answer: TRUE Explanation: Testimonials are normally used to attract new customers, but they can also be very effective in confirming current customers' beliefs that they chose the right company. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 44 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

147) MusclePRO promotes its ready-to-drink protein shake directly to consumers through television ads, infomercials, and online coupons. The company is making use of a push strategy to reach their customers. Answer: FALSE Explanation: In a pull strategy, advertising and sales promotion efforts are directed toward consumers to motivate them to request the products from their local retailers. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 148) Fit Family utilizes newspaper and television ads designed to motivate potential buyers to seek out their product. This represents a push promotional strategy. Answer: FALSE Explanation: A pull strategy utilizes heavy advertising and sales promotion efforts directed toward consumers. A push strategy is directed to wholesalers and retailers in an effort to get them to stock and sell the product. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 149) Advertising the newest Avengers movie during Saturday Night Live is an example of a pull strategy being used by the film's producers. Answer: TRUE Explanation: A pull strategy utilizes heavy advertising and sales promotion efforts directed toward consumers. A push strategy is directed to wholesalers and retailers in an effort to get them to stock and sell the product. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

150) The goal of ________ is to inform and remind people in a target market about specific products, eventually persuading them to participate in an exchange. A) promotion B) market research C) market segmentation D) marketing loyalty Answer: A Difficulty: 1 Easy Topic: Integrated Marketing Communications Learning Objective: 16-01 Identify the new and traditional tools that make up the promotion mix. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 151) The combination of advertising, personal selling, public relations, and sales promotion activities traditionally used by an organization represents its A) marketing communications system. B) marketing mix. C) public relations package. D) promotion mix. Answer: D Difficulty: 1 Easy Topic: Integrated Marketing Communications Learning Objective: 16-01 Identify the new and traditional tools that make up the promotion mix. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

152) ________ combines all the promotional tools employed by a firm into one comprehensive and unified promotional strategy. A) A market unification plan B) Integrated marketing communication C) A push promotional program D) A target coordination program Answer: B Difficulty: 1 Easy Topic: Integrated Marketing Communications Learning Objective: 16-01 Identify the new and traditional tools that make up the promotion mix. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 153) A promotional campaign begins by A) identifying a target market. B) defining the objectives for each element of the promotion mix. C) determining a promotional budget. D) developing a unifying message. Answer: A Difficulty: 1 Easy Topic: Integrated Marketing Communications Learning Objective: 16-01 Identify the new and traditional tools that make up the promotion mix. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

154) The traditional promotion mix for a firm consists of the A) strategic mix of price, product, place, and advertising. B) various types of advertising media the firm selects to reach each specific target market. C) marketing intermediaries employed by the firm to create a supply value chain. D) advertising, personal selling, public relations, and sales promotion used to reach a target market. Answer: D Explanation: A promotion mix consists of the combination of all the promotional tools a firm uses to promote its products and services. Traditionally, this has included not only advertising, but also personal selling, public relations, and sales promotion. Difficulty: 2 Medium Topic: Integrated Marketing Communications Learning Objective: 16-01 Identify the new and traditional tools that make up the promotion mix. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 155) Creating a positive brand image by using all the promotional tools in a comprehensive, unified promotional strategy is called A) brand awareness. B) integrated management communication. C) interactive promotional communication. D) integrated marketing communication. Answer: D Explanation: Integrated marketing communication combines all the promotional tools into one comprehensive, unified promotional strategy. The idea is to use all the promotional tools and company resources to create a positive brand image and to meet the strategic marketing and promotional goals of the firm. Difficulty: 2 Medium Topic: Integrated Marketing Communications Learning Objective: 16-01 Identify the new and traditional tools that make up the promotion mix. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

156) Bathtub Brewing Company's ________ relies heavily on advertising, personal selling, and a limited use of product sampling. A) marketing mix B) promotion mix C) communication network D) transfer marketing Answer: B Explanation: A company's promotion mix is some combination of promotional tools such as advertising, personal selling, word of mouth, sales promotion, sampling, public relations, and publicity. Difficulty: 3 Hard Topic: Integrated Marketing Communications Learning Objective: 16-01 Identify the new and traditional tools that make up the promotion mix. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 157) Marshall Manufacturing has recently revamped its promotional strategy. Marshall now utilizes a system that combines all the elements of their promotion mix to create a more responsive organization providing a consistent message. Marshall Manufacturing has adopted a(n) A) internal marketing program. B) integrated marketing communication system. C) multilevel coordination plan. D) stakeholder response system. Answer: B Explanation: The purpose of integrated marketing communication is to combine all the promotional tools into one comprehensive, unified promotional strategy. The idea is to use all the promotional tools and company resources to create a positive brand image and to meet the strategic marketing and promotional goals of the firm. Difficulty: 3 Hard Topic: Integrated Marketing Communications Learning Objective: 16-01 Identify the new and traditional tools that make up the promotion mix. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

158) The management at GameGuys, Inc. designed a strategy that unifies advertising, personal selling, public relations, and sales promotion activities creating a consistent message. This effort to promote a positive brand image represents a(n) ________ program. A) global marketing B) interactive promotion C) integrated marketing communication D) unified segmentation Answer: C Explanation: Integrated marketing communication combines all elements of the promotion mix into one comprehensive and unified promotion strategy with the aim of building a positive brand image. Difficulty: 3 Hard Topic: Integrated Marketing Communications Learning Objective: 16-01 Identify the new and traditional tools that make up the promotion mix. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 159) ________ refers to any paid, nonpersonal communication through various media by organizations and individuals who are in some way identified in the message. A) Publicity B) Promotion C) Public relations D) Advertising Answer: D Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

160) The total annual expenditures on advertising in the United States A) peaked last year at approximately $700 billion. B) has declined significantly as firms utilize different online promotional opportunities. C) is about $420 billion. D) has been capped at $300 billion by a government stimulus package. Answer: C Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 161) Advertising to wholesalers and retailers by manufacturers to encourage them to carry their products is called A) retail advertising. B) trade advertising. C) business-to-business advertising. D) institutional advertising. Answer: B Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 162) When an organization uses advertising to create an attractive image for itself, this type of advertising is called A) retail advertising. B) trade advertising. C) comparison advertising. D) institutional advertising. Answer: D Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 51 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

163) ________ advertising encourages wholesalers and retailers to carry the products of a specific manufacturer. A) Advocacy B) B2B comparison C) Trade D) Institutional Answer: C Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 164) ________ advertising supports a particular view or position on an issue. A) Advocacy B) Institutional C) Comparison D) Trade Answer: A Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 165) In terms of total dollars spent, the number one and two advertising media are A) television along with direct mail. B) digital and television. C) television and newspapers. D) digital and radio. Answer: A Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

166) One advantage of magazine advertising is that A) the ad must conform to post office regulations. B) the exposure time is short. C) the ad is available at the point of purchase. D) the ad can target specific audiences. Answer: D Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 167) In evaluating the best advertising medium to reach a specific target market the clear choice is A) cable television. B) newspapers. C) network television. D) direct mail. Answer: D Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 168) The effectiveness of direct mail advertising suffers from A) its inflexibility. B) the limited length of the message. C) the consumer perception that it is junk mail. D) its inability to target specific markets. Answer: C Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

169) The effectiveness of magazine advertising is reduced by its A) inflexibility. B) inability to target specific markets. C) brief life span. D) higher total cost, relative to television advertising. Answer: A Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 170) Which of the following is a major strength of direct mail advertising? A) low cost B) widespread acceptance by consumers C) subject to few restrictions or regulations D) ability to accurately target specific markets Answer: D Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 171) Which of the following refers to the practice of paying to have a product appear favorably in a television show or movie? A) interactive promotion B) product placement C) brand association D) market recognition Answer: B Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

172) Infomercials provide the opportunity for A) the product to sell itself. B) product placement to occur. C) the use of outdoor advertising. D) the promotional mix to be avoided. Answer: A Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 173) Television programs devoted exclusively to promoting goods and services are called A) testimonials. B) infomercials. C) interactive television. D) online computer advertising. Answer: B Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 174) ________ changes the relationship between buyers and sellers from a monologue to a dialogue in which information is shared to create mutually beneficial exchanges. A) Advertising B) A push strategy C) Interactive promotion D) Public relations Answer: C Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

175) Advertisers like online advertising because A) they are able to see how many people have read or watched some part of an advertisement. B) it is easy to create. C) it is inexpensive. D) it is free. Answer: A Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 176) Which of the following offers the greatest potential for meaningful interaction between buyers and sellers? A) testimonials B) infomercials C) product placement D) online advertising Answer: D Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

177) Companies can implement global marketing by developing a product and promotional strategy that A) is tailored to each individual market. B) can be implemented worldwide. C) requires low-cost production through outsourcing. D) motivates intermediaries (i.e. wholesalers and retailers) to actively stock and sell the firm's goods and services. Answer: B Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 178) The evidence supports the position that promotional efforts specifically designed for individual countries produce A) less sales and profits than a global promotional strategy. B) better results than a global promotional strategy. C) higher overall costs than a global promotional strategy. D) superior results only when the product is also produced in each country. Answer: B Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

179) Future promotional efforts will likely be A) custom-designed to reach smaller audiences. B) targeted at larger audiences. C) less interactive and more persuasive. D) similar to promotional efforts today. Answer: A Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 180) Which of the following is an advantage of magazine advertising? A) short exposure time B) ability to quickly change message C) superior color D) relatively short life Answer: C Explanation: Magazine ads offer good use of color that can catch the consumer's attention. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

181) Which of the following media enables firms to quickly change their advertising message? A) irectories B) magazines C) newspapers D) television Answer: C Explanation: An advantage of newspapers is that they normally come out daily and allow firms to place revised ads quickly. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 182) Which of the following represents the primary purpose of a firm using institutional advertising? A) creates a positive image for the firm B) full coverage of local markets C) high visibility of a specifically targeted message D) reduces cost Answer: A Explanation: Institutional advertising is an attempt to create an attractive image for a firm. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

183) Firms with a very limited advertising budget would be very unlikely to use ________ advertising. A) Internet B) radio C) outdoor D) television Answer: D Explanation: A major disadvantage of television is its high cost. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 184) Which of the following helps explain the popularity of infomercials? A) interactive nature of the presentation B) ability to clearly demonstrate the product's benefits C) use of an inexperienced salesperson who is believable D) impact of favorable government testimonials on potential buyers Answer: B Explanation: Infomercials use product demonstrations that clearly show the product's benefits. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

185) Which of the following statements is the most accurate? A) Studies indicate that effective promotion focuses on the pricing elements of the marketing mix. B) The Internet changes the focus of promotion from "working with" to "promoting to" customers. C) New promotional efforts create a more interactive approach, developing a dialogue between the firm and its customers. D) Successful promotion utilizes each element of the promotion mix independently, creating a well-diversified message. Answer: C Explanation: Largely due to the Internet, promotion is becoming more interactive. The goal of this interactive promotion is to create a dialogue between a firm and its customers. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 186) In the past, ________ was an important advertising strategy used in movies. Now it is also used with video games. It can be easily altered to reflect another advertiser, depending upon which advertiser has purchased ad time. A) product placement B) direct mail C) sampling D) a commercial Answer: A Explanation: Product placement is the strategy of placing various brands in movie footage. The product or brand appears inside the movie itself. Advertisers pay to put their product inside movies, television shows, and now, video games. It is easy to change the product sponsor inside a video game, particularly those that the player downloads to play. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

187) One of the distinct differences between ________ and other forms of advertising is the fact that the medium used allows for a dialogue exchange of information between buyers and sellers, instead of a monologue type approach. A) product placement B) direct mail C) interactive promotion D) infomercials Answer: C Explanation: Interactive promotion is dialogue on a business's website between the buyers and sellers. The promotion becomes an informational and persuasive two-way conversation. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 188) Which of the following statements is the most accurate? A) Advertising helps pay for production costs of newspapers and magazines. B) Word of mouth is the most effective form of advertising. C) Advertising does not really provide information to consumers; it merely persuades consumers to buy advertised products. D) Consumers don't remember good advertisements. Answer: A Explanation: One of the benefits of advertising is that the money from advertisers helps pay for the production costs of newspapers and magazines. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

189) Evidence indicates that the best promotional strategy for firms operating globally is A) a "one-mix-fits-all" strategy. B) to uniquely design a strategy for each country. C) based on total operating costs and the nation's disposable income. D) designed by foreign intermediaries who control promotion. Answer: B Explanation: Evidence supports the theory that promotional efforts specifically designed for individual countries work best. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 190) Interactive promotion A) attempts to create a dialogue between buyers and sellers. B) transforms the approach from "working with" to "promoting to" customers. C) fails to build long-term relationships with customers. D) is an increasingly important element of the personal selling mix. Answer: A Explanation: Interactive promotion changes the promotion process from a monologue where sellers try to persuade buyers to purchase their goods, to a dialogue where buyers and sellers can work together to create mutually beneficial exchanges. This approach requires firms to listen to what consumers want, track their purchases, provide them with better service and give them more access to information. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

191) When marketing to consumers in the global population, it's important for companies to remember that promoting products A) is easy and profitable if they are well-known brands. B) can be accomplished using a global approach since consumers are more alike than most people think. C) is best done by using personal selling and product sampling. D) calls for attention to cultural differences and possible translation problems. Answer: D Explanation: Understanding a nation's culture, designing appropriate advertisements, and testing them are keys to successful marketing in global markets. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 192) Protectors' Insurance wants to build strong relationships with its customers and is looking to create a more interactive approach to advertising. Which of the following represents the preferred advertising medium to achieve their goal? A) online B) radio C) television D) newspapers Answer: A Explanation: Online advertising allows the company to interact with its customers. Customer relationship software and other specialized software make it possible for firms to track customer purchases online and answer customer questions. Of course, trade shows are also interactive but they are not an advertising medium. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

193) Newport Processing promotes its services through Mechanical Engineers Today, a trade magazine that charges Newport and other companies $5,000 per page for ________ to help offset the magazine's publishing costs. A) publicity B) advertising C) public relations D) trade shows Answer: B Explanation: Advertising is a paid, nonpersonal communication made through various media by organizations and individuals who are in some way identified in the advertising message. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 194) Which of the following statements about global advertising is most correct? A) Epic Electronics should avoid advertising in foreign markets and rely instead on other elements of its promotion mix, such as personal selling and public relations. B) Television is the best advertising medium for Epic Electronics to promote its products in foreign countries. C) Global advertising involves developing a single promotional strategy that can be implemented worldwide. D) Given the lower incomes of consumers in many foreign countries, the best way to promote Epic Electronics is utilizing a low-price strategy. Answer: C Explanation: Global advertising calls for the development of a single product and promotional strategy that can be implemented worldwide. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

195) Spokes Bicycles is looking to change up its promotional strategy and focus on its relationships with customers. Which of the following is required for Spokes to build meaningful relationships with its customers? A) giving consumers access to limited information B) tracking customer purchases C) promoting to rather than working with customers D) offering full-service purchases over their cell phones Answer: B Explanation: Interactive promotion and the Internet change the promotion process from a promoting-to approach to a working-with relationship. This requires firms to listen to what consumers want, track their purchases, provide them with better service, and give them more access to information. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 196) ________ refers to the face-to-face presentation and promotion of goods and services. This also includes searching for prospects and providing follow-up services. A) Word-of-mouth promotion B) Personal selling C) Public relations D) Internal marketing Answer: B Difficulty: 1 Easy Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

197) People with an unmet need, the authority to buy, and the willingness to listen to a sales message represent a firm's A) prospects. B) intermediaries. C) buyers. D) cohorts. Answer: A Difficulty: 1 Easy Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 198) In the seven-step B2B selling process, the selection of potential customers is known as A) prospecting. B) synchronizing. C) articulating. D) qualifying. Answer: D Difficulty: 1 Easy Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 199) After prospects have been identified and qualified, the next step in the selling process is ________. This step requires the salesperson to learn as much as possible about the potential customers' wants and needs. A) customer specification B) the preapproach C) consumer trait analysis D) customer quantification Answer: B Difficulty: 1 Easy Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

200) The approach step of the selling process attempts to A) qualify potential customers who are willing and able to buy. B) build credibility and establish rapport. C) close the sale. D) learn about potential customers and their wants and needs. Answer: B Difficulty: 1 Easy Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 201) The final step of the selling process involves A) follow-up. B) closing. C) posting. D) trial closing. Answer: A Difficulty: 1 Easy Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 202) The purpose of a ________ is to move the selling process toward an actual product purchase. A) follow up B) closing C) trial close D) commission Answer: C Difficulty: 1 Easy Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

203) In B2C sales the salesperson does not spend a great deal of their time A) following up. B) closing. C) qualifying. D) presenting. Answer: C Difficulty: 1 Easy Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 204) A review of the personal selling process indicates that selling is A) a matter of establishing relationships. B) getting a name on a sales contract. C) about 90 percent luck and 10 percent skill. D) giving way to computers in responding to consumer needs. Answer: A Explanation: The selling relationship often continues for years as the salesperson responds to new requests for information. Selling is a matter of establishing relationships, not just selling goods or services. Difficulty: 2 Medium Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

205) "You never get a second chance to make a good first impression," captures the importance of the ________ step in the selling process. A) prospecting B) introduction C) qualifying D) approach Answer: D Explanation: The approach is the step in selling where the salesperson calls on the customer for the first time. The objective of this step is to give an impression of professionalism, create a rapport, build credibility, and start a relationship. Difficulty: 2 Medium Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 206) Which of the following statements is the most accurate? A) Closing is the final and most important step in the selling process. B) Once a sales presentation is completed, the salesperson should attempt to close as quickly as possible before the customer expresses any doubts or concerns. C) Closing may involve getting the customer to agree to a trial close. D) If the salesperson has done a good job of qualifying prospects and has developed a strong presentation, then closing is the easiest step in the selling process. Answer: C Explanation: Closing is an important step in the selling process, but it is not the final step. Even after the sale is closed, the salesperson should follow up to make sure the customer is satisfied. Closing the sale may involve a trial close consisting of a question or statement that moves the selling process toward the actual close. Difficulty: 2 Medium Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

207) Madeline just finished giving a sales presentation to a major prospect. Next, Madeline will likely be A) processing the customer's order. B) closing the sale, by asking the customer to make a commitment. C) answering customer questions and dealing with objections. D) setting an appointment for the customer to meet with her boss. Answer: C Explanation: Even if a salesperson makes an excellent presentation, customers are likely to have questions they want answered and concerns that they want resolved before they are willing to make a purchase. Salespeople should not view these objections in a negative way. Instead, they should look at them as an opportunity to work with the customer to deal with their concerns and forge a stronger relationship. Difficulty: 3 Hard Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 208) Bailey is a new salesperson for a textbook publisher. She is compiling a list of professors who make textbook buying decisions and plans to contact these professors to determine what texts they are currently using, and if they plan to adopt a new text. Identifying those decision makers who are willing to consider one of her texts is called A) personal development. B) sales identification. C) preliminary sales analysis. D) prospecting and qualifying. Answer: D Explanation: Prospecting involves researching potential buyers and choosing the ones most likely to buy. The selection process is called qualifying. Difficulty: 3 Hard Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

209) Blake's client expressed her concerns and questioned some of the details of the sales proposal once he completed his sales presentation. An effective salesperson would A) downplay these objections and push to close the sale as quickly as possible to avoid the endless questions that some customers ask. B) address her concerns and develop a better relationship. C) consider revising the presentation so that next time customer concerns and objections can be avoided. D) bring in the top executives of the company to close the sale. Answer: B Explanation: After the presentation, the next step in the selling process is to answer customer objections. Questions and concerns by the customer should be viewed as an opportunity to create a stronger relationship. Difficulty: 3 Hard Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 210) The activity that evaluates public attitudes, changes policies and procedures in response to the public's requests, and executes a program of action and information to earn public understanding and acceptance is called A) public research. B) public relations. C) public communication. D) public advocacy. Answer: B Difficulty: 1 Easy Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

211) ________ refers to any information about a product or an organization that is communicated to the public through the media and is not paid for or controlled by the sponsor. A) A market presentation B) Promotion C) Public relations D) Publicity Answer: D Difficulty: 1 Easy Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 212) Compared to advertising, publicity offers the advantage of greater A) flexibility. B) personal appeal. C) believability. D) message repetition. Answer: C Difficulty: 1 Easy Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

213) A major responsibility of the public relations department is to A) decide on the appropriate mix of advertising media. B) maintain close ties with the media, community leaders, government officials, and other stakeholders. C) identify appropriate markets for the firm's products, and then select the most likely customers in each market. D) train salespeople to interact better with their company's customers. Answer: B Difficulty: 1 Easy Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 214) Compared to other promotional tools, publicity A) costs more. B) offers the firm little control over the message. C) prevents a response from competitive firms. D) is the easiest to manage. Answer: B Difficulty: 1 Easy Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 215) One way to see that publicity is handled well by the media is to A) pay for it. B) establish a friendly relationship with media representatives. C) write good press releases that attract attention. D) ask for the best location or time in the medium under consideration. Answer: B Difficulty: 1 Easy Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 74 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

216) Today's public relations departments A) focus more on advertising and less on publicity. B) are downsizing as firms emphasize personal selling to promote their products. C) are more actively listening to customers and helping to solve their problems. D) avoid relationships with the media and government officials. Answer: C Explanation: A good public relations program begins with listening to the public. Public relations starts with good marketing research when the firm evaluates public attitudes. Difficulty: 2 Medium Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 217) A good public relations program recognizes that the A) company must not ever admit fault. B) firm must be willing to make changes in its policies and procedures. C) firm must be independent of production and service activities. D) media are not to be trusted since they profit by selling bad news. Answer: B Explanation: The second step in a good public relations program is to change policies and procedures that are not in the public interest. Difficulty: 2 Medium Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

218) Jasmine finished writing a news release about her company's new product. She intends to email the message to local television and radio stations as well as newspapers in hope that they will find the information newsworthy and run a story about the product. Jasmine's efforts represent the firm's A) public relations. B) institutional advertising. C) secondary advertising. D) interactive marketing. Answer: A Explanation: A major element of public relations is publicity. Firms often generate publicity by sending news releases to the media that they hope the media will use in stories about the firm and its products. Difficulty: 3 Hard Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 219) Consumer research indicates that the public is very concerned about underage drinking. In response, Texas Brewing Company has created a website providing parents with information to help avoid underage drinking in their families. The firm also provides materials to retailers to help train their employees to avoid sales to minors. Publicizing these efforts: A) will likely backfire, since few people will believe a beer company would seriously support a program that would reduce their sales. B) represents a key step in a good public relations program. C) illustrates a push strategy applied to public relations. D) would distract the firm from its primary mission of selling beer to adults. Answer: B Explanation: Good public relations evaluates public attitudes and identifies and supports programs in the public interest. It then informs people that the firm is being responsive to their needs. Difficulty: 3 Hard Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

220) Lyla faces the challenge of developing the promotion mix for a new business. Given the uniqueness of the new products and a very limited budget, Lyla confronts a creditability problem. She realizes that the promotional messages of an unknown firm may be met with skepticism. What should Lyla consider? A) publicity to help create a positive image for her firm and its products B) extensive use of persuasive advertising C) emphasizing personal selling rather than public relations D) changing jobs because this situation is hopeless Answer: A Explanation: Publicity has two advantages that are likely to appeal to Lyla. One is the media will publish stories for free if the stories are interesting and newsworthy. Given the firm's limited budget, this would make publicity an attractive option. Perhaps even more important for Lyla, a second advantage of publicity is its believability. Difficulty: 3 Hard Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 221) The promotional tool that stimulates consumer purchasing and dealer interest by means of short-term activities, such as trade shows, event sponsorships, and contests, is known as A) publicity. B) public relations. C) every day low prices. D) sales promotion. Answer: D Difficulty: 1 Easy Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

222) Effective sales promotion activities target A) employees only. B) customers only. C) employees, dealers, and customers. D) dealers only. Answer: C Difficulty: 1 Easy Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 223) A ________ allows B2B buyers to see products online 24/7 without having to leave their office. A) virtual trade show B) direct marketing show C) shopping network D) cyber market Answer: A Difficulty: 1 Easy Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

224) Which of the following is a consumer sales promotion activity? A) contests B) advertising C) vending sales D) direct mail Answer: A Explanation: Sales promotion attempts to stimulate sales through short-term activities such as contests. Difficulty: 2 Medium Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 225) Which of the following is a B2B sales promotion activity? A) contests B) advertising C) vending sales D) conventions Answer: D Explanation: Sales promotion attempts to stimulate sales through short-term activities such as conventions. Contests are generally consumer sales promotions. Difficulty: 2 Medium Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

226) To generate enthusiasm about a good or service, sales promotion A) targets groups internally and externally. B) directs stockholders to sell their stock when prices increase. C) is ineffective in reaching the B2B market. D) has declined in importance because of time and cost limitations. Answer: A Explanation: It is just as important to get employees enthusiastic about a sale as it is to attract potential customers, and sales promotion can be used to achieve this enthusiasm. Difficulty: 2 Medium Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 227) Which of the following statements is most accurate? A) Sales promotions are targeted both internally and externally. B) Sales promotion efforts are directed at nonprofit organizations. C) Dealers are inappropriate targets of sales promotion activities. D) The goal of sales promotion activities is to create consumer awareness. Answer: A Explanation: Sales promotion attempts to stimulate consumer, salesperson, distributor, and dealer interest in a good or service. Difficulty: 2 Medium Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

228) At a recent baseball tournament, a local beer distributor gave free mugs to all adults with a paid admission. What is this an example of? A) market segmentation B) sampling C) publicity D) sales promotion Answer: D Explanation: Sales promotion is a promotional tool that stimulates consumer purchasing and dealer interest by the use of specially designed incentives to promote a business or a product. Difficulty: 3 Hard Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 229) Colossal Choco Chipper is a new, gigantic chocolate chip cookie created by the Kookie Cookie Company. To create interest for the Colossal Choco Chipper, the company sent a free package of six cookies to selected homes along with a coupon. Kookie Cookie's activities represent A) trade advertising. B) consumer publicity. C) sales promotion. D) public relations. Answer: C Explanation: Free samples and cents-off coupons are examples of sales promotion activities conducted by businesses to stimulate consumer purchasing. Difficulty: 3 Hard Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

230) Bookbinder Books partnered with Amazon to offer a unique ________. If you purchase 1 of 12 paperback books published by Bookbinder, you can choose 1 of 12 Kindle versions for $3 (a much lower price than a regular Kindle version). A) sales promotion B) publicity stunt C) direct marketing opportunity D) advertisement Answer: A Explanation: Sales promotion is about giving buyers incentives. In the past, marketers used incentives such as coupons or free give-aways to motivate people to buy. Now, marketers are offering sales promotions through social media, as well. Difficulty: 3 Hard Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 231) ________ encourages people to tell other people about goods or services they have enjoyed. A) Personal selling B) Publicity C) A trade show D) Word-of-mouth promotion Answer: D Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

232) ________ refers to such tactics as paying people to say good things about a product online or setting up multilevel selling schemes that reward people for directing their friends to a company's website. A) Virtual inducement B) Cyber offers C) Viral marketing D) Pseudo-marketing Answer: C Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 233) A ________ is an endorsement from a customer praising a firm's product. A) testimonial B) news release C) viral message D) virtual endorsement Answer: A Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 234) Two-way communication between businesses and customers becomes easier by using A) social media. B) viral marketing. C) product placement. D) mobile marketing. Answer: A Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 83 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

235) The distribution method for audio and video programs online that lets users subscribe to a number of files or feeds is called a(n) A) iCast. B) podcast. C) blog. D) filecast. Answer: B Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 236) The strategy of directing advertising and sales promotion toward consumers to stimulate them to request the products from their local retailers is called a A) pull strategy. B) segmentation strategy. C) push strategy. D) product placement strategy. Answer: A Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

237) The use of promotional tools to persuade wholesalers and retailers to stock and sell merchandise represents a A) pull strategy. B) segmentation strategy. C) push strategy. D) product placement strategy. Answer: C Difficulty: 1 Easy Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 238) The steps leading to a successful social media promotional campaign include A) only posting photos monthly. B) following back and replying to customers. C) not using hashtags because it annoys potential customers. D) leading customers to your website's FAQ section instead of answering questions. Answer: B Explanation: To lead a successful social media promotional campaign, a company should make sure to reply to comments and even follow back customers. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

239) Independent producers can create self-published syndicated shows using A) webcasting. B) email. C) podcasting. D) electronic production. Answer: C Explanation: Podcasting allows you to become your own newscaster, since it enables independent producers to create self-published, syndicated shows. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 240) Companies that adopt a pull strategy target their promotional efforts toward A) consumers. B) retailers. C) wholesalers. D) manufacturers. Answer: A Explanation: In a pull strategy, heavy advertising and sales promotion efforts are directed toward consumers so that they will request the products from retailers. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

241) The primary purpose of a pull strategy is to A) offer rebates and discounts to retailers and wholesalers. B) stimulate consumers to ask for a product, which then encourages retailers to stock it. C) pull the distribution network together to minimize costs and maximize profits. D) stimulate retailers to stock each product offered by a particular manufacturer. Answer: B Explanation: If a pull strategy works, consumers will request the product at their local retail store. This, in turn, will stimulate the retailer to request the product from the manufacturer or distributor. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 242) The primary purpose of a push strategy is to A) push products on consumers and convince them that they need the products. B) rush the production schedule for products and beat competitors to the market. C) push the product down the distribution channel to retail stores. D) push products away from traditional channels of distribution to save costs. Answer: C Explanation: In a push strategy, the producer uses promotional tools to convince wholesalers and retailers to stock and sell merchandise. Difficulty: 2 Medium Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

243) Frontier Filmmakers advertises their movies during television shows that their target market typically watches. Frontier Filmmakers believes the best way of reaching its customers is through a ________ strategy. A) push B) pull C) product placement D) word-of-mouth Answer: B Explanation: The goal of this pull strategy is to stimulate consumers to request movie theater operators to offer a showing of a particular film. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 244) Despite its name, Choco Central is located in a small shopping center far from customers. However, the company enjoys outstanding business because satisfied customers share their enjoyable experiences at Choco Central with their friends and relatives. Choco Central apparently benefits from positive A) trade advertising. B) word of mouth. C) sales promotion. D) public relations. Answer: B Explanation: Word-of-mouth promotion encourages people to tell other people about products they have enjoyed. It can be very effective in generating referral business. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

245) Registration in Ms. McNick's classes reaches maximum enrollment quickly. Students register immediately online just to insure their seat in her class. One student summed it up: "Everyone's heard she is the best teacher on campus." Ms. McNick's classes benefit from A) viral publicity. B) positive public relations. C) free advertising. D) word-of-mouth promotion. Answer: D Explanation: Word-of-mouth promotion occurs when people tell other people about products or services they have enjoyed. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 246) Tiffany recently received poor service at a local restaurant. After dinner, Tiffany made her complaints public by placing them online. What is this a form of? A) negative advertising B) institutional sales promotion C) public relations D) word of mouth Answer: D Explanation: Word of mouth can be positive or negative. Negative word of mouth can be quite destructive to a firm. Upset customers are getting online publishing their complaints and encouraging others to share their negative experiences. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

247) Starlight Movies markets its DVDs and Blu-rays online. Recently, Starlight adopted a new program that offers their current customers free rentals if they encourage their friends to visit Starlight's website. What does this promotional program represent? A) second stage advertising B) viral marketing C) interlinked promotion D) virtual inducement Answer: B Explanation: Viral marketing is the term now used to describe everything from paying people to say positive things on the Internet to setting up multilevel selling schemes whereby consumers get commissions for directing friends to specific websites. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 248) The Maryland Department of Travel and Tourism promotes tourism in the state by sending travel agents and bus tour companies information about the state's many attractions. The hope is that by stimulating interest in tour and travel agents, they will in turn encourage their customers to visit Maryland. This example represents a ________ promotional strategy. A) push B) pull C) sampling D) product placement Answer: A Explanation: In a push promotional strategy, distributors are encouraged to sell the good or service to their customers. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

249) AutoPROS uses its website to target car parts stores and car owners and tell them of the benefits of using their long-lasting spark plugs. What strategy is AutoPROS using? A) dialogue strategy B) word-of-mouth strategy C) push and pull strategies D) product placement strategy Answer: C Explanation: The latest in pull and push strategies are being conducted on the Internet, with companies sending messages to both consumers and businesses. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 250) Kerry Cottage carries authentic Irish gifts and clothing. The company uses a good deal of television advertising and sales promotion activities to attract consumers to retail shops in search of its brand. What strategy is Kerry Cottage utilizing? A) systems B) placement C) push D) pull Answer: D Explanation: In a pull strategy, heavy advertising and sales promotion are directed toward the consumer so that they will request the products from retailers. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

251) When managing the promotion mix, marketers are utilizing technology to deliver important information directly to the customer. For example, during the spring planting season, Home Depot and Lowes added QR codes to plants. When scanned with a mobile app, customers could make better buying decisions. The code offered information on planting time, watering schedule, and other pertinent tips on each plant. Home Depot even ran a commercial to let its customers know how it was using technology to assist them with their spring planting decisions. Whether using new promotional methods or traditional promotional methods, Home Depot A) utilized pull strategy because it directed its campaign to the stores where the products are sold. B) utilized push strategy because it directed its messages to consumers, permitting them to subscribe to the pick economy. C) utilized pull strategy because it directed its messages to consumers. D) utilized push strategy because it directed its messages to its stores that were already equipped with bar code technology. Answer: C Explanation: Pull strategy directs heavy advertising and sales promotion directly to the consumer or end-user. The idea is that the customer will go to the retailer or e-tailer in search of the product. The product is pulled through the channel of distribution. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

252) Identify the advantages and disadvantages of newspapers and television as media to carry your firm's promotional message. Which of the two receives the most advertising revenues and what are key advantages and disadvantages of both? Answer: The larger share of advertising expenditures goes to television (about $68 billion). Newspapers currently rank number four and represent around $17 billion of total advertising expenditures. Television's advantages are: · uses sight, sound, and motion. · reaches all audiences. · high attention with no competition from other material. Television's disadvantages are: · high cost. · short exposure time. · takes time to prepare ads. · DVRs skip over ads and more viewers are choosing on-demand video. Newspapers' advantages are: · good coverage of local markets. · ads can be placed quickly. · high consumer acceptance. · ads can be clipped and saved. Newspapers' disadvantages are: · ads compete with other features in the paper. · poor color in ads. · ads get thrown away with paper (short life span). Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

253) Explain how publicity differs from advertising. What are the advantages and disadvantages of publicity in a firm's promotion strategy? Answer: Publicity is any information about an individual, a product, or an organization that is distributed to the public through the media, and that is not paid for or controlled by the seller. Advertising is paid, nonpersonal communication through various media by organizations and individuals who are in some way identified in the message. A major value students should identify is that publicity is provided free in various media if a story is interesting or newsworthy. Another advantage is that publicity can reach people who would not read an advertisement. Publicity often gets very good placement in various media. Perhaps the major advantage of publicity is its believability. If a story is carried by a newspaper or in some other medium, the receiver often treats the information as news. News is considered more believable than advertising. Of course, publicity also has some disadvantages. There is no guarantee that the media will use news releases or other information a firm provides in its attempts to generate publicity. Also, the media may omit some of the message or modify the message in a way that makes it less positive. Finally, once media have run a story, they are unlikely to repeat it. Difficulty: 3 Hard Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

254) Explain the steps in the personal selling process. How does B2B personal selling differ from B2C personal selling? Answer: Personal selling is the face-to-face presentation and promotion of goods and services. It also involves the search for new prospects (in B2B selling) and follow-up service after the sale. The B2B selling process has 7 steps: 1. Prospect and qualify. Prospecting involves researching potential buyers and choosing those most likely to buy. That selection is called qualifying. To qualify people means to make sure that they have a need for the product, the authority to buy, and the willingness to listen to a sales message. 2. Preapproach. In the preapproach phase the salesperson must learn as much as possible about customers and their wants and needs. Gathering this information before the customer is approached is critical. 3. Approach. When a salesperson calls on a customer for the first time, the opening comments are important. The idea is to give an impression of friendly professionalism, to create rapport, to build credibility, and to start a relationship. 4. Make presentation. In the actual presentation of a good, the idea is to match the benefits of the value package to the client's needs. The presentation is a great time to use testimonials to show potential buyers that they are joining leaders in other firms. 5. Answer objections. Customers may have legitimate doubts, and the salesperson is there to resolve those doubts. Relationships are based on trust, and trust comes from successfully and honestly working with others. 6. Close sale. Closing the sale may include a trial close, a question or statement that moves the selling process toward the actual close, and asking for the order. 7. Follow up. The sales relationship may continue for years as the salesperson responds to new requests for information. Selling is often described as a process of establishing relationships, not just a matter of selling goods or services. The follow-up step includes handling customer complaints, making sure that the customer's questions are answered, and quickly supplying what the customer wants. The B2C selling process has 5 steps: 1. Approach. The idea is to show the customer that the salesperson is there to help and that they are friendly and knowledgeable. 2. Ask questions. Also the salesperson needs to discover what the customer wants. 3. Make presentation. Show customers how the products you have meet their needs. Answer questions that help them choose the products that are right for them. 4. Close sale. Using a trial close like "Will you be paying for that with your store credit card?" is important. A store salesperson walks a fine line between being helpful and being pushy. 5. Follow-up. Follow-up is an important but often neglected step in B2C sales. This may include delivery and installation procedures.

Most sales to consumers take place in retail stores, where the role of the salesperson differs somewhat from that in B2B selling. In both cases, knowing the product comes first. However, in business-to-consumer (B2C) sales the salesperson does not have to do much prospecting or qualifying. In sales processes involving expensive products such as automobiles and furniture, salespeople may have to ask a few questions to qualify prospective customers. Difficulty: 3 Hard Topic: Selling Processes Learning Objective: 16-03 Illustrate the steps of the B2B and B2C selling processes. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 255) Your company has developed a new nutritious snack and you are part of the team created to develop the promotion mix for the new product. Your specific task on this team is to determine the sales promotion activities of the promotion mix. Identify and describe several possible sales promotion activities the firm could use to promote the new snack food. Answer: Sales promotion is the promotional tool that stimulates consumer purchasing and dealer interest by means of short-term activities. The idea is to create enthusiasm for the overall promotion program. Sales promotion can include a variety of techniques, so student answers may vary as to specifics. However, since many customers are reluctant to buy a product that they have not tried, a technique that is likely to be important for the new snack food is the use of samples. Another technique that might be very useful is to set up special in-store displays to attract attention. Other typical promotional techniques include coupons and contests. Finally, many firms are using event marketing, which means they sponsor sporting, cultural, or entertainment events to build goodwill and to draw attention to the product. Sales promotion is not just directed toward consumers. It also can be used to build interest and enthusiasm among the firm's own salespeople and distributors of the firm's products. Thus, sales promotions can also include videos for the company's salespeople, or participation in trade shows. Difficulty: 3 Hard Topic: Sales Promotion Learning Objective: 16-05 Assess the effectiveness of various forms of sales promotion, including sampling. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

256) You are assigned the responsibility to prepare a promotional campaign for a new allergy relief drug produced by the PharmaOne Pharmaceutical Company. Outline the highlights of applying both (a) a pull strategy and (b) a push strategy. Answer: In a pull promotional strategy, heavy advertising and sales promotions are directed toward the consumer so that they will request the product. Any and all of the promotional media could be used to inform the consumer of the product's benefits and encourage them to ask their pharmacy to carry the drug. A push strategy is directed toward wholesalers and retailers. The goal is to motivate these distributors to carry and sell the product. This can be done through discounts, premiums, and other promotional tools along with personal selling. Another approach would be to stimulate doctors to recommend this drug as treatment for their patients. Drug companies have offered doctors "freebies" if they enthusiastically recommend the firm's products. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 257) Explain the difference between viral marketing, social networking, and podcasting. Answer: Viral marketing is the term now used to describe everything from paying people to say positive things online to setting up multilevel selling schemes whereby consumers get commissions for directing friends to specific websites. Social media helps companies increase exposure for products/services, create loyalty, increase website traffic, and come up with new ideas through two-way communication between companies and customers. Podcasting is a means of distributing audio and video programs via the Internet that lets users subscribe to a number of files, also known as feeds, and then hear or view the material at the time they choose. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

Mini-Case The Xer-Wise Corporation manufactures and markets high quality home exercise equipment. The firm has just developed a new piece of equipment that top executives believe will be a big seller if promoted correctly. The new product uses a system of adjustable weights that can be arranged in various ways to allow the user to perform exercises that tone all major muscle groups. Additionally, unlike other strength building machines, this equipment also incorporates a recumbent bicycle to provide a complete cardio workout. The entire piece of equipment is easy to assemble, and when not in use it can be folded into a compact unit that is easy to store. A group of fitness experts have tested the equipment and have provided rave reviews. Company executives believe that this product, called the MuscleMaster, will appeal to busy young adults living in relatively small apartments. Melody Fitt and Tom Trym have been assigned the responsibility of developing a promotion mix for this product. The team of Fitt and Trym is convinced that they can develop a successful promotion mix for this outstanding product. 258) Before they look at specific promotional tools, Melody and Tom agree that they want a promotion mix that is both comprehensive and unified. They want to use all of the promotional tools at their disposal to create a consistent message that promotes a favorable product image. Melody and Tom want to implement a(n) A) internal marketing program. B) integrated marketing communication program. C) multilevel market coordination plan. D) stakeholder response communication system. Answer: B Explanation: Integrated marketing communication combines all elements of the promotion mix into one comprehensive and unified strategy. The idea is to use all promotional tools and resources to create a positive brand image. Difficulty: 3 Hard Topic: Integrated Marketing Communications Learning Objective: 16-01 Identify the new and traditional tools that make up the promotion mix. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

259) Due to the unique nature of this product, Tom and Melody have decided to develop a halfhour television program to demonstrate the benefits of the MuscleMaster. It is hoped that this ________ will provide a great start in the market. A) interactive television ad B) online television ad C) infomercial D) publicity commercial Answer: C Explanation: Infomercials are programs on television that are devoted exclusively to promoting a particular good or service. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-02 Contrast the advantages and disadvantages of various advertising media, including the Internet and social media. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 260) Tom and Melody are considering the extensive use of ads in fitness magazines and a direct mail campaign targeted at people who have bought other products made by Xer-Wise. Since these messages are geared directly to customers, it is clear that Tom and Melody want to implement a ________ strategy. A) push B) pull C) placement D) stretch Answer: B Explanation: The pull strategy directs sales promotion efforts toward consumers so that they will request the products from retailers. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

261) Tom and Melody have decided to work together to write a news release that describes the benefits of MuscleMaster and cites the rave reviews of the fitness experts who have already tried the equipment. They intend to send the release to a list of columnists who write in fitness magazines or have health and fitness columns in newspapers, hoping that some of these writers will include information about the MuscleMaster in their articles. Tom and Melody hope to utilize A) publicity. B) a push strategy. C) viral marketing. D) swag promotion. Answer: A Explanation: Publicity is any information about an individual, product, or organization that is distributed through the media and that is not paid for or controlled by the seller. Firms often seek to obtain publicity by writing and sending news releases to various media. Of course, one drawback of this approach is that there is no guarantee that the media will use the information to generate favorable publicity. Difficulty: 3 Hard Topic: Public Relations Learning Objective: 16-04 Describe the role of the public relations department, and show how publicity fits in that role. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

262) Xer-Wise markets and promotes its products to consumers online. Melody and Tom are considering a more aggressive approach to generate enthusiasm for the MuscleMaster over the Internet. They have discussed offering young adults free T-shirts and special discounts on XerWise equipment if they will agree to hype the benefits of the MuscleMaster on Facebook. They are even considering setting up a program in which customers get commissions for directing friends to the Xer-Wise website. If they adopt these strategies, Tom and Melody would be utilizing A) secondary marketing. B) viral marketing. C) unified marketing. D) extended reach marketing. Answer: B Explanation: Viral marketing is the term now used to describe everything from paying people to say positive things on the Internet to setting up multilevel selling schemes whereby consumers get commissions for directing friends to specific websites. Difficulty: 3 Hard Topic: Advantages and Disadvantages of Various Promotion Techniques Learning Objective: 16-06 Show how word of mouth, viral marketing, social networking, blogging, podcasting, e-mail marketing, and mobile marketing work. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

Understanding Business, 12e (Nickels) Chapter 17 Understanding Accounting and Financial Information 1) Accounting is an easy subject for people to understand because almost everyone is exposed to basic accounting concepts in their everyday life. Answer: FALSE Difficulty: 1 Easy Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) Although managers who work for large firms must know something about accounting, people who run small businesses only need to know the basics of bookkeeping. Answer: FALSE Difficulty: 1 Easy Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) It is impossible to run a company effectively without the ability to read and understand basic accounting reports and financial statements. Answer: TRUE Difficulty: 1 Easy Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

4) With increased computer technology, the ability to read and understand financial statements is no longer an important skill for managers. Answer: FALSE Difficulty: 1 Easy Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 5) Accounting provides information about the financial condition and operating performance of a firm. Answer: TRUE Difficulty: 1 Easy Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) The sole purpose of accounting is to help managers evaluate the financial condition of the firm so that they may make better pricing decisions. Answer: FALSE Difficulty: 1 Easy Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 7) Inputs to the accounting system include sales documents. Answer: TRUE Difficulty: 1 Easy Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

8) Purchasing insurance, paying employees, and using supplies are examples of financial transactions. Answer: TRUE Difficulty: 1 Easy Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 9) Accounting provides financial information that can be useful to owners, creditors, suppliers, employees, and competitors of an organization. Answer: TRUE Difficulty: 1 Easy Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10) Accountants do the work involved in recording financial events and transactions, but the actual classifying and interpreting of this data is left to financial managers. Answer: FALSE Difficulty: 1 Easy Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) Accounting information is NOT relevant for nonprofit organizations. Answer: FALSE Difficulty: 1 Easy Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

12) Churches, schools, and charitable organizations all need accountants. Answer: TRUE Difficulty: 1 Easy Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 13) Accounting involves both the recording and the interpreting of financial events. Answer: TRUE Difficulty: 1 Easy Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) In an effort to maintain a competitive advantage, firms do not share accounting information with people outside of the firm. Answer: FALSE Explanation: Accounting is the measurement and reporting of financial information to users inside and outside of the organization. People outside the firm would include owners, creditors, suppliers, employees, and the government. Difficulty: 2 Medium Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

15) The U.S. government is a user of a firm's accounting information. Answer: TRUE Explanation: The U.S. government's Internal Revenue Service requires that a firm report its income so that the firm's tax liability can be determined; government regulatory agencies also sometimes require accounting information. Difficulty: 2 Medium Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 16) Good decisions are based on good information. Organizations need accounting—to provide good financial information. Answer: TRUE Explanation: Accounting provides management and other interested parties the information they need to make better decisions. Difficulty: 2 Medium Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 17) A firm's financial statements represent a health report regarding the condition of the firm. Answer: TRUE Explanation: Financial statements tell the owner, manager, and other stakeholders about the financial health of the business. Difficulty: 2 Medium Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

18) Accounting is NOT important for nonprofit organizations since financial data is not critical to their success. Answer: FALSE Explanation: Nonprofit organizations require accounting information. These organizations hire accountants to show contributors how their money is being used. Difficulty: 2 Medium Topic: Overview of the Different Types of Accounting Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 19) Accounting, as the language of business, is solely concerned with providing information useful to managers of profit-seeking firms. Answer: FALSE Explanation: One purpose of accounting is to help managers evaluate the financial condition and the operating performance of an organization, so they may make better decisions. This type of information is useful to managers of both profit-seeking and not-for-profit organizations. Difficulty: 2 Medium Topic: Overview of the Different Types of Accounting Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) Referring to an accounting system, inputs refers to events and transactions that occur within the business, while outputs refers to the journal entries and ledger categorization that occurs after the events and transactions are recorded. Answer: FALSE Explanation: An accounting system consists of inputs, processes, and outputs. Inputs are the events and transactions that occur within the business operations; processes are the recording of events and transactions into journals and posting of journal entries to the ledger; outputs refer to the financial statements that accountants prepare. Difficulty: 2 Medium Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

21) Government organizations such as the IRS and other government regulatory agencies are interested in a firm's accounting information in order to help the firm strategize about ways to cut costs in order to minimize net income before taxes. Answer: FALSE Explanation: Government agencies such as the IRS collect tax revenues. They are interested in the firm's tax obligations; and/or they audit publicly traded firm's accounting records to make certain they follow generally accepted accounting principles. Difficulty: 2 Medium Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 22) GAAP refers to a set of standards concerning accounting principles that were established by the Financial Accounting Standards Board. Answer: TRUE Explanation: GAAP refers to generally accepted accounting principles that were established by the Financial Accounting Standards Board. Difficulty: 2 Medium Topic: Overview of the Different Types of Accounting Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

23) Because each business is unique, the accounting profession recognizes that the accounting principles followed by one company may need to be completely different from the accounting principles followed by another firm. Answer: FALSE Explanation: In order for investors, creditors, government officials, employees, and other stakeholders to have faith and confidence in accounting reports and financial statements, it is important that methods used by accountants adhere to specific guidelines. The Financial Accounting Standards Board (FASB) defines the generally accepted accounting principles (GAAP) that accountants must follow. Difficulty: 2 Medium Topic: Overview of the Different Types of Accounting Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 24) Jeremy thinks his business will be successful as long as he just keeps his customers satisfied. He does NOT need to have a great deal of knowledge about accounting practices. Answer: FALSE Explanation: Financial information, provided mainly by accountants, is a critical input into managerial decision making. In order to be a successful manager, you must know something about accounting. Difficulty: 3 Hard Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

25) Lyell owns his own small business, but he doesn't want to be bothered with accounting information. He tells his friends, "All I need accounting for is to prepare my income tax return for my business. I'll hire someone to do that for me." Lyell's attitude would be disastrous if he managed a large firm, but it is a reasonable view for a small business owner. Answer: FALSE Explanation: The fact is that you have to know something about accounting if you want to understand business. Accounting information reveals the financial health of a business. Difficulty: 3 Hard Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 26) Bookkeeping is part of the accounting cycle, but accounting goes far beyond the activities involved in bookkeeping. Answer: TRUE Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 27) A major part of a bookkeeper's job is to interpret financial data and suggest strategies for improving the firm. Answer: FALSE Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

28) After recording a business's transactions, bookkeepers usually classify the recorded transactions into groups with common characteristics. Answer: FALSE Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) A bookkeeper's first task is to record the firm's transactions in a journal. Answer: FALSE Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30) The books where accounting data are first entered are called ledgers. Answer: FALSE Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 31) Double-entry bookkeeping requires that every transaction be recorded in two places. Answer: TRUE Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

32) Double-entry bookkeeping can help identify a recording error made by a bookkeeper. Answer: TRUE Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 33) A journal is where the initial record of a day's transactions is entered. Answer: TRUE Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 34) The accounting book that provides all the information about a single account in one place is called the ledger. Answer: TRUE Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) At present, accounting software packages have proven to be too complex and expensive to be useful for owners of small businesses. Answer: FALSE Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

36) The accounting cycle is a six-step procedure that results in the preparation and analysis of major financial statements. Answer: TRUE Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 37) Posting is a step in the accounting cycle that involves transferring information from the journal into the appropriate accounts in a ledger. Answer: TRUE Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) There are two major financial statements prepared at the completion of the accounting cycle: the journal and the ledger. Answer: FALSE Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39) The accounting cycle usually involves the work of both the bookkeeper and the accountant. Answer: TRUE Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

40) The purpose of a trial balance is to prepare a practice balance sheet. Answer: FALSE Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 41) One of the statements prepared in the accounting cycle is the statement of cash flows. Answer: TRUE Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 42) Many businesses now use computers and accounting software to simplify the mechanical aspects involved in accounting. Answer: TRUE Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 43) Accounting software for small businesses has become so sophisticated that most small business owners will never need to consult with an actual accountant or understand accounting information themselves. Answer: FALSE Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 13 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

44) Accounting software has proven to be especially helpful for small-business owners. Answer: TRUE Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 45) One advantage of the double-entry method of bookkeeping is that it helps to identify mistakes made in recording financial transactions. Answer: TRUE Explanation: To avoid mistakes and entry errors, bookkeepers record all transactions in two places. They then can check one list against the other to make sure that they add up to the same amount. Difficulty: 2 Medium Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 46) Computerized accounting programs have eliminated the need to prepare a trial balance. Answer: FALSE Explanation: Accounting software eliminates much of the time needed to prepare a trial balance. However, as part of the accounting cycle, a trial balance is required in order to prepare the financial statements of the firm. Difficulty: 2 Medium Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

47) In addition to the tasks of recording and classifying accounting information, the best accounting software programs currently available for small businesses have the ability to make financial decisions, thus eliminating the need for owners of small businesses to consult with accountants or understand accounting terminology. Answer: FALSE Explanation: No computer software program yet has the ability to make good financial decisions by itself. A trained, experienced accountant is still needed to assist a firm in achieving its financial goals. Difficulty: 2 Medium Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 48) The steps in the accounting cycle do not need to be followed in the order stated. Monthly financial statements can be prepared with a good amount of accuracy, prior to posting in the ledger or preparing the trail balance. Answer: FALSE Explanation: Financial statements rely on the accurate posting in the ledger, and the checks provided by the trial balance. Financial statements cannot be verified for accuracy if the proper entries are not transferred to the ledger, and into the appropriate accounts. Difficulty: 2 Medium Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

49) Sophie has been a bookkeeper for a small chain of boutiques for nearly four years. Six months ago, the manager retired and a new manager was brought in. The new manager routinely asks her for information and advice about how to interpret the information she records. Sophie's experience as a bookkeeper means she is qualified to provide this type of advice. Answer: FALSE Explanation: Bookkeepers typically handle the part of the accounting cycle that involves recording information about business transactions. Bookkeepers do not normally have the training and experience needed to analyze and interpret this information. That job is generally left to accountants. Difficulty: 3 Hard Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 50) Barkatorium Pet Supplies recently hired an accountant to make sense of each day's transactions, and keep better financial records for the business. The accountant showed the owner that the ledger in a computerized accounting system would automatically take entries and post them to the correct accounts in the ledger, making the bookkeeping tasks much easier. Answer: TRUE Explanation: A specialized accounting book or computer program in which information from journals is accumulated into specific categories and posted so that managers can find all the information about one account in the same place is called a ledger. Difficulty: 3 Hard Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

51) Sally prepares monthly financial statements for her client, Dent's Auto Body. Now, though, she must summarize the data in the accounting ledgers to determine if the figures are correct and balanced. Sally will prepare a statement of cash flows in order to complete this step of the cycle. Answer: FALSE Explanation: Sally is at the step of the cycle where she should prepare a trial balance. The purpose of a trial balance is to summarize all the data in the ledger accounts to determine if the figures are correct and balanced. A statement of cash flows is a financial statement prepared in the fifth stage of the accounting cycle. Difficulty: 3 Hard Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 52) Mike is the head of the accounting department at Micro Flash. After completing the trial balance, he will proceed with the preparation of the balance sheet, the income statement, and the statement of cash flows. Answer: TRUE Explanation: After the trial balance is completed, the accounting cycle moves to the preparation and analysis of the key financial statements: the balance sheet, income statement, and statement of cash flows. Difficulty: 3 Hard Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

53) Josephine has discovered her small business needs a better way to maintain accounting records and analyze business opportunities. Currently, she uses a manual accounting system. These days, any accounting program should do an excellent job of meeting her firm's accounting needs. Answer: FALSE Explanation: Businesses differ in their accounting needs. A computerized accounting system is a wonderful tool, but business owners should understand exactly which computer accounting system is best suited for their particular needs. Thus, it's a good idea for small-business owners to hire or consult with an accountant to identify the particular needs of the firm. Difficulty: 3 Hard Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 54) Isabel created Waterfront Sports at a nearby lake resort. She wanted to combine her accounting degree with her love of the outdoors and kayaking. One of her first business purchases was a computerized accounting program. She learned in her college classes that a good software system will eliminate accounting cycle steps and the time it takes for her to interpret the results. As she put it, "It should make the decisions for me!" Answer: FALSE Explanation: A good computerized accounting system will not replace the need for the decision-making skills of an accountant. Difficulty: 3 Hard Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 55) The key financial statements are the balance sheet, the income statement, and the statement of cash flows. Answer: TRUE Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

56) The income statement reports the difference between a firm's assets and its liabilities as of a certain date. Answer: FALSE Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 57) A firm's balance sheet reports its financial condition on a specific date. Answer: TRUE Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 58) The balance sheet reports revenues and selling costs for a period of time. Answer: FALSE Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 59) An income statement reports what a company owns and owes on a certain day. Answer: FALSE Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

60) Assets are reported on the firm's balance sheet. Answer: TRUE Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 61) Liabilities are reported on the income statement. Answer: FALSE Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 62) Assets are economic resources that are owned by a firm. Answer: TRUE Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 63) The fundamental accounting equation is as follows: Assets = Liabilities + Owners' equity. Answer: TRUE Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

64) The balance sheet reflects the fact that assets equal the sum of liabilities and owners' equity. Answer: TRUE Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 65) A balance sheet is composed of assets, liabilities, and revenues. Answer: FALSE Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 66) The cost of goods sold includes all the costs of buying and keeping merchandise available for sale. Answer: TRUE Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 67) Rent, salaries, insurance and depreciation are examples of the cost of goods sold. Answer: FALSE Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

68) Gross profit represents profit after the deduction of cost of goods sold, and before the deduction of all other selling expenses, general expenses, and tax expense. Answer: TRUE Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 69) Rents, salaries, utilities, and insurance are examples of operating expenses. Answer: TRUE Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 70) The two major classes of operating expenses are current expenses and long-term expenses. Answer: FALSE Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 71) General expenses include office salaries, rent, and insurance. Answer: TRUE Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

72) Net income before taxes is found by deducting total operating expenses from gross profit before factoring tax expense. Answer: TRUE Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 73) A statement of cash flows summarizes a company's cash receipts and cash payments over a period of time. Answer: TRUE Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 74) Cash flow statements identify three sources of cash receipts and disbursements: assets, liabilities, and owners' equity. Answer: FALSE Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 75) The statement of cash flows calculates cash flows from operations, investing activities, and financing activities. Answer: TRUE Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

76) An analysis of the statement of cash flows can help a firm prevent cash shortages. Answer: TRUE Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 77) The statement of cash flows shows a firm's revenues, costs of goods sold, expenses, and net income. Answer: FALSE Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 78) The equipment a firm owns and the money it has in its bank account are considered assets. Answer: TRUE Explanation: Firms hold current assets and fixed assets. Cash, accounts receivable, and inventory are examples of current assets. Property and equipment are examples of fixed assets. Typically, fixed assets have an estimated useful life, whereas current assets are used up within a year's time. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

79) Brand names such as Coca-Cola and McDonald's are examples of intangible assets. Answer: TRUE Explanation: Brand recognition has value. With the help of other firms which calculate the value of various brands, firms often include the value of their brand(s) as an intangible asset on the balance sheet. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 80) Assets are listed on the balance sheet in order of liquidity, with the most liquid assets listed first. Answer: TRUE Explanation: Liquidity refers to an asset's ability to be turned into cash. Cash of course is the most liquid asset. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 81) The firm's most valuable assets are listed at the top of its balance sheet. Answer: FALSE Explanation: Both current and fixed assets are needed and valued by most companies in order to efficiently and effectively run their operations. A firm purchases fixed assets with the intention of using them over an extended period of time—greater than one year. Fixed assets have an estimated useful life. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

82) Patents and copyrights are examples of intangible assets. Answer: TRUE Explanation: Intangible assets do not have physical form, yet they have monetary value for the firm. Sometimes these are referred to as intellectual capital due to their importance as a valuable economic resource. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 83) Liquidity refers to how quickly liabilities must be paid. Answer: FALSE Explanation: Liquidity is a term applied to a firm's assets. Liabilities are debts owed by the firm. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 84) Net income is simply the difference between revenue and cost of goods sold. Answer: FALSE Explanation: Revenues – Cost of goods sold = Gross profit. Net income represents the "bottom line" of the income statement. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

85) The cost of goods sold reflects the selling price of the merchandise sold over a period of time. Answer: FALSE Explanation: The cost of goods sold reflects the price that a firm paid for merchandise that it plans to resell; or the price of raw materials that a firm paid for in order to produce a good or service for resale. Revenues = Selling price x Volume. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 86) The cash a firm raised from issuing new debt or equity capital would be reported on a statement of cash flows. Answer: TRUE Explanation: Cash received or disbursed through financing activities is recorded on the statement of cash flows. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 87) One important source of financing for most small businesses is the owner's savings. If the owner contributes money to the business from his/her personal savings, it will be recorded in the owners' equity account on the balance sheet. Answer: TRUE Explanation: Two important sources of financing for businesses are borrowed funds (liabilities) and contributed funds (owners' equity). Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

88) The income statement computes net income by subtracting liabilities from assets. Answer: FALSE Explanation: The income statement records revenues and then subtracts all expenses (including taxes) in order to calculate net income. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 89) Revenue on the income statement represents the dollar amount of what is received for goods sold, services rendered, and/or from other revenue sources. Answer: TRUE Explanation: Revenues constitute sales from goods sold and/or services rendered, as well as monies received from other sources such as rent income or interest income from marketable securities. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 90) When an accountant writes off the cost of a tangible asset over its estimated lifetime, it is called depreciation. Answer: TRUE Explanation: Depreciation is the write-off each year of part of an asset over its estimated useful life. The government permits firms to depreciate a fixed asset over its lifetime, rather than deduct the entire expense when the asset is purchased. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

91) Although a firm may use different inventory valuation methods, generally accepted accounting principles (GAAP) states that these methods must produce the same dollar value for the cost of goods sold. Answer: FALSE Explanation: The accounting treatment of inventory may be different. Depending upon whether the accountant is using FIFO [first-in, first-out] or LIFO [last-in, first-out], the value of cost of goods sold may be different. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 92) Banks are likely to request a firm's balance sheet when determining whether or not to loan money to the firm. However, banks would have little interest in the firm's income statement since it covers a short period of time. Answer: FALSE Explanation: Both the income statement and the balance sheet are important in evaluating the financial health of an organization. Specifically, the income statement would show the firm's ability to generate the profits with which to pay back a loan. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 93) The best way for a firm to avoid serious cash flow problems is to sustain a rapid growth in sales. Answer: FALSE Explanation: Rapid growth can put a serious strain on a company's cash position. For example, a firm may be able to expand its sales rapidly by offering very easy credit, but if customers who buy on credit are late with their payment (or, even worse, default on their payments) the company could have serious problems with its cash flow. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

94) Cash flow difficulties are unlikely for a firm that is profitable. Answer: FALSE Explanation: A firm's net income after taxes shows whether the company had a profit or on a loss from operations. However, profits and cash do not mean the same thing. A firm may have the ability to generate revenues and profits, but still have a cash flow shortage. The company should always prepare a statement of cash flows in order to determine its ability to continue to generate cash flow. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 95) FIFO and LIFO are two common methods used to compute the depreciation of tangible assets. Answer: FALSE Explanation: FIFO [first-in, first-out] and LIFO [last-in, first-out] are inventory valuation methods. Depreciation methods include, but are not limited to "straight-line" and "doubledeclining." Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 96) FIFO is a method of computing net cash flows by subtracting financial inflows from financial outflows. Answer: FALSE Explanation: FIFO [first-in, first-out] is an inventory valuation method used for computing the cost of goods sold on an income statement. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

97) FIFO is a method of inventory valuation that assumes the items most recently purchased are also the items that are sold first. Answer: FALSE Explanation: FIFO [first-in, first-out] assumes that the oldest items in inventory are sold first. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 98) The LIFO method of inventory valuation assumes the newest items in inventory are sold first. Answer: TRUE Explanation: LIFO [last-in, first-out] assumes that the newest items in inventory are sold first. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 99) According to generally accepted accounting principles (GAAP), a firm must use the inventory valuation method that most accurately reflects the actual movement of goods through its inventory. Answer: FALSE Explanation: GAAP does not concern itself with the movement of goods through a firm's inventory system. It is concerned with a firm choosing a method of valuation and consistently using that method. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

100) When valuing items in inventory for financial reporting purposes, generally accepted accounting principles (GAAP) requires firms to value the cost of goods sold by assuming that the items that have been in inventory the longest are the ones that are sold first. Answer: FALSE Explanation: GAAP permits businesses to select from a few different methods of inventory valuation, including FIFO (first-in, first-out) and LIFO (last-in, first-out). Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 101) If prices of inventory are unchanged throughout the year, LIFO and FIFO inventory valuation methods will produce the same reported net income. Answer: TRUE Explanation: If the value of inventory items and/or the value of raw materials remain the same during the accounting period, the first items purchased and the last items purchased in inventory will have the same value. Both FIFO and LIFO accounting methods will produce the same figures. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 102) During a period of rising prices, the FIFO technique of inventory valuation will result in a lower net income figure than would the LIFO technique. Answer: FALSE Explanation: During a period of rising prices, each time a firm purchases inventory, the cost of goods will increase. The last goods purchased will cost more than the first goods purchased. In this case, the FIFO technique (first-in, first-out) will result in higher net income, while the LIFO technique (last-in, first-out) will result in lower net income. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

103) In businesses that handle a lot of perishable items (such as supermarkets) the actual movement of goods through inventory most closely resembles the LIFO inventory valuation technique. Answer: FALSE Explanation: For a business that sells perishable items, the movement of goods will more closely resemble FIFO (first-in, first-out). When firms are concerned about perishable goods, they attempt to sell their older stock before selling newer items. Dated, perishable items will be placed on the sales floor in the order received. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 104) If the economy began experiencing a prolonged period of deflation in which the prices of most goods are falling, many firms would find that the LIFO method of inventory valuation would result in higher reported profits. Answer: TRUE Explanation: The last-in, first-out (LIFO) inventory valuation technique would base the cost of goods sold on the items most recently put in inventory. In a period of falling prices, this would result in a lower cost of goods sold because the most recently purchased items are lower in price. Since cost of goods sold is subtracted from revenue as part of the process of computing net income, LIFO would result in a higher reported net income. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

105) During periods of rising prices, firms that want to report more attractive profits would tend to favor the FIFO technique of inventory valuation. Answer: TRUE Explanation: In a period of rising prices, the last inventory purchased would cost more than earlier purchases of the same items. The FIFO (items purchased earlier) approach will yield a lower cost of goods sold figure. This will cause the net income to be greater than if the LIFO method had been used. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 106) If the goal of a business is to pay lower taxes on its income during an inflationary period, it is likely to use the FIFO inventory costing method. Answer: FALSE Explanation: During a period of inflation, prices are rising. Using a LIFO method of inventory valuation will produce a lower gross profit, and subsequently, a lower net income before taxes. Taxes are paid only on the net income produced, after all expenses (including depreciation) are deducted. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 107) Barkatorium's balance sheet shows: what the business owns, minus what the business owes, which equals the book value (or net worth) of the business. Answer: TRUE Explanation: Assets (what the firm owns), minus liabilities (what the firm owes) = the owners' equity (its net worth). Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

108) Marshall Manufacturing has recorded its unpaid bill for supplies under a current liabilities account on the balance sheet. This payment will be due to the supplier in less than a year. Answer: TRUE Explanation: Current liabilities are debts that are due in less than one year. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 109) The Hendry Group wants to know the value of its owners' equity. It will total its assets and subtract its liabilities. Answer: TRUE Explanation: Assets – Liabilities = Owners' equity Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 110) The Newport Company balance sheet shows the following items: accounts payable totaling $60,000; salaries payable totaling $85,000; and notes payable totaling $120,000. These are liabilities, or money that the firm owes others. Answer: TRUE Explanation: Also known as debt, liabilities are obligations the firm owes others. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

111) The bottom line of the Cooper Corporation's income statement is equal to the net worth of the firm. Answer: FALSE Explanation: The bottom line of an income statement shows net profit (or net loss) after taxes are paid. The balance sheet will reflect the "net worth" of the firm. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 112) Green Goddess Lawn Services will refer to its income statements to determine whether it was profitable, or whether it lost money over the past year. Answer: TRUE Explanation: The bottom line of the income statement shows profits (or net losses) over a period of time. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 113) Ronnecker Construction has several trucks that are used in the business. Recently, the owners were told that even though the government permits the firm to depreciate the vehicles, it is not a deductible expense on the income statement. Answer: FALSE Explanation: Depreciation is a legitimate expense on the income statement. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

114) Henderson, Inc. owns land worth $800,000 and has $180,000 worth of cash in its bank account. In the asset section of the balance sheet, Henderson lists its land holdings prior to listing its cash since it is a higher value. Answer: FALSE Explanation: A balance sheet lists assets in order of liquidity—i.e., how easily and quickly they can be converted into cash. The most liquid assets are called current assets, and they are listed first on the balance sheet. Obviously, cash is the most liquid asset of all. Land is not considered a liquid asset because it usually takes a significant amount of time and paperwork to sell it and collect the cash proceeds. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 115) Ernesto borrowed money from a friend to acquire a liquor license for his new pub, and gave him a written promise to repay the amount within six months. Ernesto should list this business debt as an operating expense on his pub's balance sheet. Answer: FALSE Explanation: Debts are listed as liabilities on a firm's balance sheet. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 116) Barkatorium Pet Supplies established a line of credit with its local bank and used (borrowed) $95,000 against it to purchase its first year's inventory. Since it is required to repay the money before the end of its fiscal year, the company's accountant lists this liability with the current liabilities on the balance sheet. Answer: TRUE Explanation: Liabilities (borrowed funds) that must be repaid within a year's time are listed as current liabilities on the firm's balance sheet. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

117) At this point in time, Barkatorium Pet Supplies' balance sheet shows $100,000 in assets and $90,000 in liabilities. The company's accounting system will show the owners' equity as $190,000. Answer: FALSE Explanation: The fundamental accounting equation states: Assets = Liabilities + Owners equity. The equation can be manipulated by subtracting the Liabilities term from both sides of the equation and canceling the Liabilities term: Assets – Liabilities = Liabilities – Liabilities + Owners' equity. It is then restated as: Assets – Liabilities = Owners' equity. Therefore, $100,000 – $90,000 = $10,000. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 118) Marissa is taking her first course in accounting this semester. One of the first things she learns is that revenue and net income mean the same thing. Answer: FALSE Explanation: Although both of these accounts are noted on the income statement, they mean different things. Revenues are the money coming into the business from the sale of goods and services. Net income is calculated by subtracting the cost of goods sold, operating expenses, and taxes from the revenues. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 119) Barkatorium Pet Supplies' owner is concerned with how his business decisions affect the bottom line. This is another way of saying that he is concerned with the impact of his decisions on net income after taxes. Answer: TRUE Explanation: The term bottom line refers to the bottom line on an income statement, which is the firm's net income (or net loss). Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

120) Money received from tickets sold for the Taylor Swift concert is recorded as net income on the concert promoter's income statement. Answer: FALSE Explanation: Money received from the sale of tickets is considered revenue for a concert promoter. Net income is calculated by subtracting the cost of goods sold, operating expenses, and taxes from the sales revenue. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 121) Harrison, a potential investor, is interested in both Barkatorium's balance sheet and income statement when evaluating whether or not to invest. Answer: TRUE Explanation: Financial statements provide insight into a firm's financial health. Investors and potential investors seek out both the balance sheet and the income statement to measure the fundamentals of a firm. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 122) A hospital emergency room serves several patients from a ten-car pile-up on the local interstate. Most of the victims require bandages, antibiotics, foot and arm casts, topical ointments, and pain pills. These items are part of the costs of goods sold for the hospital emergency room. Answer: TRUE Explanation: Any costs directly related to producing the products this firm sells are considered part of the cost of goods sold. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

123) Portable Pet Care, Inc., a mobile veterinary care clinic, has more appointments than it ever expected to have when it first hit the road. Each week it orders more vaccines, antibiotics, and preventive care supplies from a major veterinary supplier, with the understanding that it will pay for these supplies in one month's time. Most of the company's clients are elderly and on fixed incomes, and often do not pay for services for two or more months. This is not a problem because as long as the company continues to increase its appointments, it will create profits and growth. Answer: FALSE Explanation: Increasing revenues and profits does not always increase cash flow. If payment from the sale of goods and services is not received in a timely manner, the business can experience a cash flow deficit. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 124) Cash revenues from the sale of new cars at Five Star Autos would be listed as a cash inflow from operations on Five Star's statement of cash flows. Answer: TRUE Explanation: Cash flows associated with the normal running of the business are shown as operating cash flows. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 125) A loan officer at Bigbux Bank is considering a loan application from Portable Pet Care, Inc. He is concerned about the company's ability to make payments on the loan. The loan officer is likely to be interested in Portable Pet Care's statement of cash flows. Answer: TRUE Explanation: Firms must manage cash flows carefully to ensure they have enough cash to pay debts as they come due. The statement of cash flows can help the loan officer determine if the firm is managing its cash inflows efficiently. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 40 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

126) Portable Pet Care, Inc., successfully took out a loan for $155,000 from Bigbux Bank. It used $90,000 of this loan to pay off an existing loan that had a higher interest rate, and purchased X-ray equipment with the remaining funds. These events were noted as financing and investing activities on its balance sheet. Answer: FALSE Explanation: These activities are financing and investing activities recorded on the statement of cash flows. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 127) Financial ratios are used to analyze a firm's financial condition and financial performance. Answer: TRUE Difficulty: 1 Easy Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 128) Liquidity ratios are of particular importance to stockholders, but have little relevance for creditors. Answer: FALSE Difficulty: 1 Easy Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

129) The purpose of liquidity ratios is to indicate the degree to which a firm relies on borrowed funds in its operations. Answer: FALSE Difficulty: 1 Easy Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 130) Liquidity refers to how fast an asset can be converted to cash. Answer: TRUE Difficulty: 1 Easy Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 131) The current ratio is used to evaluate a firm's ability to pay its short-term debts. Answer: TRUE Difficulty: 1 Easy Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 132) The current ratio is found by dividing the firm's total assets by its total liabilities. Answer: FALSE Difficulty: 1 Easy Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

133) The current ratio is a good indicator of the degree to which a firm relies on borrowed funds in its operations. Answer: FALSE Difficulty: 1 Easy Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 134) Both the current ratio and the acid-test ratio are liquidity ratios. Answer: TRUE Difficulty: 1 Easy Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 135) The acid-test ratio is found by dividing inventory by cost of goods sold. Answer: FALSE Difficulty: 1 Easy Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 136) For firms that sometimes have difficulty selling their inventory, the current ratio is likely to be a better measure of liquidity than the acid-test ratio. Answer: FALSE Difficulty: 1 Easy Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

137) A firm that takes on too much debt could experience problems repaying its lenders or meeting promises made to stockholders. Answer: TRUE Difficulty: 1 Easy Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 138) Leverage ratios are concerned with the extent to which a firm relies on borrowed funds in its operations. Answer: TRUE Difficulty: 1 Easy Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 139) The debt to owners' equity ratio is a common type of liquidity ratio. Answer: FALSE Difficulty: 1 Easy Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 140) Profitability ratios are often used to measure management's earnings performance. Answer: TRUE Difficulty: 1 Easy Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

141) A firm's basic earnings per share measures how much profit was earned for each dollar invested by the firm's owners. Answer: FALSE Difficulty: 1 Easy Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 142) The return on sales ratio measures a firm's use of leverage. Answer: FALSE Difficulty: 1 Easy Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 143) The basic earnings per share ratio does not take stock options, warrants, and preferred stock into account. Answer: TRUE Difficulty: 1 Easy Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 144) Activity ratios measure the effectiveness of the firm's management in using its various resources to achieve profits. Answer: TRUE Difficulty: 1 Easy Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 45 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

145) The inventory turnover ratio measures the speed of inventory moving through the firm and its conversion into sales. Answer: TRUE Difficulty: 1 Easy Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 146) An extremely high inventory turnover ratio may represent lost sales due to holding inadequate stocks of merchandise. Answer: TRUE Explanation: A high inventory turnover ratio can reflect the fact that inventory is turning over rapidly, and the firm may find it difficult to replenish the inventory in a timely way. Difficulty: 2 Medium Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 147) The acid-test ratio emphasizes the ability to convert inventory quickly into cash. Answer: TRUE Explanation: Inventory is not included as a highly liquid asset in the acid-test ratio. Thus, the acid-test ratio is actually a better measure of liquidity than the current ratio for firms that are likely to have difficulty converting inventory into cash. Difficulty: 2 Medium Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

148) The inventory turnover ratio for all firms should be greater than 2 times. Answer: FALSE Explanation: There is no set gauge for what constitutes a good inventory turnover ratio. Most businesses try to determine an acceptable industry average, and then evaluating the firm's capabilities, the business will utilize internal strategies to meet or exceed that industry norm. Difficulty: 2 Medium Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 149) One way to make ratio analysis more meaningful is to compare the ratios of one firm to those of other firms in the same industry. Answer: TRUE Explanation: In order to gain a competitive advantage, firms should compare the results of their ratio analysis with competing firms in their industry. Firms with market commonality and resource similarities should also have comparable ratios. Difficulty: 2 Medium Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 150) The basic earnings per share and the diluted earnings per share would have quite different values for a firm that relied heavily on preferred stock and convertible debt securities to acquire funds. Answer: TRUE Explanation: Diluted earnings per share measures the amount of profit earned for each share of outstanding common stock, but also considers stock options, warrants, preferred stock, and convertible debt securities in the calculation. Difficulty: 2 Medium Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

151) A lower than average inventory turnover ratio indicates excellent inventory management practices. Answer: FALSE Explanation: Low inventory turnover ratio indicates the firm is not selling its inventory in a timely manner, preventing the business from holding a larger cash position. Cash flow problems can occur when a firm does not sell its inventory in a timely manner. It prevents inventories from turning to cash. Difficulty: 2 Medium Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 152) A debt to owners' equity ratio of 25% indicates that a firm has more debt than equity. Answer: FALSE Explanation: Debt to owners' equity ratio = Total liabilities divided by total owners' equity [Total liabilities/total owners' equity]. A percentage less than 100% or 1.00 means that the company is using fewer borrowed funds than contributed funds to run the business. Borrowing provides 25% of the funds used to run the business, while stockholders are contributing 75% of the funds used to run the business. Difficulty: 3 Hard Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

153) Portable Pet Care, Inc., has recorded the following on its income statement for the period ending December 31, 2019: Net income after taxes

85,000

Net sales

250,000

The return on sales = 34%. This return is outstanding and there is no need to compare this return to competitors in the veterinary services industry. Answer: FALSE Explanation: While the calculation is accurate: Net income after taxes/net sales = $85,000/$250,000 = .34 or 34%, in order to determine if this is a good return, the firm would need to compare it with the ratio of competitor firms in the same industry. Difficulty: 3 Hard Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 154) The Barkatorium Pet Supplies accountant has recorded the following: Total current assets = $60,000, including Cash = $24,000; Accounts Receivable = $20,000; and Inventory = $16,000. Total assets = $230,000; Total current liabilities = $48,000; and Total current and long-term liabilities = $98,000. The store's current ratio = 1.25. The store's acid-test ratio = .92 Answer: TRUE Explanation: The current ratio = Total current assets/total current liabilities = $60,000/$48,000 = 1.25. The acid-test ratio = Cash + Accounts Receivables/Total current liabilities = .92. Difficulty: 3 Hard Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

155) There are five key working areas in accounting: financial accounting, managerial accounting, auditing, tax accounting, and governmental and not-for-profit accounting. Answer: TRUE Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 156) The accounting profession is divided into two main fields: bookkeeping and auditing. Answer: FALSE Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 157) Budget preparation is one aspect of managerial accounting. Answer: TRUE Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 158) The work of a certified management accountant is intended to enable people outside of the organization to make investment decisions. Answer: FALSE Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

159) Activities of managerial accountants include measuring and reporting the costs of production, marketing, and other functions within the organization. Answer: TRUE Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 160) Financial accounting and managerial accounting are similar in that they both provide information intended primarily for people inside the organization. Answer: FALSE Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 161) Financial accounting involves activities such as preparing budgets and measuring production costs. Answer: FALSE Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 162) Financial accounting is used to provide information and analysis managers within the organization can use to assist them in decision making. Answer: FALSE Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

163) Financial accountants prepare reports for owners, creditors, suppliers, and others outside of the organization. Answer: TRUE Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 164) A firm's annual report is a yearly statement of the financial condition, progress, and expectations of an organization. Answer: TRUE Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 165) An individual who provides accounting services to individuals and businesses on a fee basis is referred to as a private accountant. Answer: FALSE Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 166) The job of reviewing and evaluating the information used to prepare a company's financial statements is referred to as auditing. Answer: TRUE Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

167) Independent audits are prepared by accountants within the organization to ensure that proper accounting procedures are followed. Answer: FALSE Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 168) An independent audit is an evaluation and unbiased opinion about the accuracy of a company's financial statements. Answer: TRUE Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 169) A tax accountant is responsible for preparing tax returns and developing tax strategies. Answer: TRUE Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 170) The Internal Revenue Service is responsible for establishing accounting standards used by accountants working in government accounting. Answer: FALSE Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

171) Taxpayers and special interest groups often have interest in the information generated by government accounting. Answer: TRUE Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 172) Information contained in a firm's annual report largely represents work done by managerial accountants. Answer: FALSE Explanation: Annual reports are documents used by persons outside the organization to gain knowledge about the organization. Financial accountants prepare the financial documents for this report. Difficulty: 2 Medium Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 173) A series of high-profile scandals in the early 2000s put the accounting profession under intense scrutiny. Answer: TRUE Explanation: In the early 2000s, the accounting profession was plagued with several scandals that resulted in new laws such as the Sarbanes-Oxley Act, which requires tough government reporting standards. Difficulty: 2 Medium Topic: Ethics in Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

174) As a certified public accountant, you would be working in the area of managerial accounting. Answer: FALSE Explanation: A certified management accountant works in the area of managerial accounting. A certified public accountant is involved primarily in financial accounting. Difficulty: 2 Medium Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 175) Managers who are concerned about keeping costs under control should be very interested in the information and advice provided by their company's managerial accountants. Answer: TRUE Explanation: Managerial accountants provide information and analysis to managers to help them make better decisions. Among the areas of concern for managerial accountants are the reporting of costs of production, marketing, and other functions of an organization; and checking to determine if units in the organization are staying within their budgets. Difficulty: 2 Medium Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 176) Recent accounting scandals raised serious questions about the legitimacy of an accounting firm performing both auditing and consulting work for the same company. Answer: TRUE Explanation: The purpose of legislation such as the Sarbanes-Oxley Act is to prevent conflicts of interest occurring when an outside accounting firm is hired to perform both auditing and consulting services for a company. Difficulty: 2 Medium Topic: Ethics in Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

177) In large companies, certified internal auditors are usually responsible for preparing tax returns and developing tax strategies for businesses. Answer: FALSE Explanation: Internal auditors examine not only the financial health of an organization but also its operational efficiencies and effectiveness. Tax returns are prepared by tax accountants. Difficulty: 2 Medium Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 178) As the burden of taxes grows, the role of the auditor becomes increasingly important to the organization. Answer: FALSE Explanation: The burden of staying current with tax laws is the responsibility of the tax accountant. Difficulty: 2 Medium Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 179) The Sarbanes-Oxley Act strengthens the protection for whistleblowers who report wrongful actions of company officers. Answer: TRUE Explanation: By definition, whistleblowers are stakeholders who report fraudulent and other illegal behavior to government authorities. The Sarbanes-Oxley Act encourages whistleblowing. Difficulty: 2 Medium Topic: Ethics in Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

180) The Sarbanes-Oxley Act prohibits accounting firms from providing certain nonauditing work (such as consulting services) to companies they audit. Answer: TRUE Explanation: One of the main parts of this legislation prohibits firms from hiring public accounting firms to perform both independent audits and consulting services. Difficulty: 2 Medium Topic: Ethics in Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 181) According to the Adapting to Change box, the SEC is determined to crack down on and punish those accused of fraud. However, so many auditors and CPAs are trained in how to search for fraud that there are too many cases to prosecute. Answer: FALSE Explanation: Many accountants are simply not trained thoroughly enough to easily spot fraud. Difficulty: 2 Medium Topic: Ethics in Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 182) As mentioned in the Adapting to Change box, accountants that search for fraudulent activities are called forensic accountants. Answer: TRUE Explanation: Forensic accountants are investigative accountants that search for fraudulent activities. Difficulty: 2 Medium Topic: Ethics in Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

183) As a certified public accountant (CPA), Elizabeth might become involved in helping her clients select appropriate accounting computer software for their firm. Answer: TRUE Explanation: Many big public accounting firms earn a sizable percentage of revenues from consulting and other services. Public accountants may design an accounting system for a firm, and help select the appropriate computer and software to run the system. Difficulty: 3 Hard Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 184) Jerome is an accountant employed full time by The Newport Company. Jerome is an example of a public accountant. Answer: FALSE Explanation: A private accountant works for a single firm, government agency, or nonprofit organization. A public accountant provides services to individuals or businesses on a fee basis. Difficulty: 3 Hard Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 185) Eric holds a bachelor's degree in accounting and additional training in tax law. He is responsible for preparing tax returns and developing tax strategies for his employer, and has done so for the past seven years. Eric is a certified government accountant. Answer: FALSE Explanation: Eric is a tax accountant. In addition to being trained in tax law, tax accountants are responsible for preparing tax returns and developing tax strategies. Difficulty: 3 Hard Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

186) Coverall Insurance Corporation's internal accountants can prepare an audit for the company. Answer: TRUE Explanation: Internal audits are performed by accountants within the organization to ensure that proper accounting procedures and reports are being carried on within the company. Accountants outside of the firm prepare independent audits. Difficulty: 3 Hard Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 187) Sydney is a member of a conservative political group that wants to identify and publicize examples of wasteful government spending. The type of accounting information Sydney and her group will follow most closely is provided by certified public accountants. Answer: FALSE Explanation: Concerned citizens and special interest groups that want to determine how the government is using the taxpayers' money will be most interested in information provided by government accountants. Difficulty: 3 Hard Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 188) An important difference between accounting and other business functions, such as marketing and management, is that A) accounting functions must be performed by an outsider, rather than by an employee of the business, in order to avoid conflicts of interest. B) accounting offers us insight into whether the business is financially sound. C) accounting involves mainly clerical activities and thus requires very little analysis. D) accounting deals exclusively with numbers. Answer: B Difficulty: 1 Easy Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

189) To effectively run a business, it is necessary to A) hire a full-time accountant. B) use a public accounting firm. C) understand and use accounting information. D) make certain that you do not spend too much time on your accounting system. Answer: C Difficulty: 1 Easy Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 190) Which of the following is an example of a financial transaction? A) A firm purchases a fire insurance policy. B) An internal auditor discovers an error in a firm's inventory valuation. C) A potential customer accesses a firm's web page. D) A manager reviews the financial statements prepared by an accountant. Answer: A Difficulty: 1 Easy Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 191) Although accounting has several specific uses, the overall purpose of accounting can be summarized as A) to provide financial information that is useful to decision makers. B) to meet the legal requirements of the Financial Accounting Standards Board (FASB). C) to allow the government to track business activity levels. D) to compute the profit or loss and declared dividend of a business firm. Answer: A Difficulty: 1 Easy Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

192) Which of the following responses is the best and most comprehensive? "A company's accounting information is useful to ________." A) managers within the firm, exclusively B) marketing research firms for pricing insights C) primarily the IRS and other government agencies that regulate the firm D) managers, owners, creditors, employees, and the government Answer: D Difficulty: 1 Easy Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 193) Accountants record, classify, and ________ the results of the financial information they gather. A) interpret B) sell C) buy D) change Answer: A Difficulty: 1 Easy Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

194) The reports and financial statements prepared by accountants A) are more useful for profit-seeking businesses than they are for not-for-profit organizations. B) are mainly used to help the firm complete its tax forms. C) provide information that can be used by decision makers both inside and outside the organization. D) are not as useful now that firms have moved into a more global environment. Answer: C Difficulty: 1 Easy Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 195) The accounting profession follows generally accepted accounting principles as defined by A) GAAP. B) the PCAOB (Public Company Accounting Oversight Board). C) the FASB (Financial Accounting Standards Board). D) the Sarbanes-Oxley Act. Answer: C Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

196) A person's pulse rate and blood pressure are indicators of a person's health. Similarly, ________ can help assess the health of a business. A) financial statements B) production schedules C) transactions D) databases Answer: A Explanation: Financial statements can be used as diagnostic tools to identify existing and potential problem areas. Difficulty: 2 Medium Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 197) Accounting transactions are very important to a firm's operations. Which of the following activities would affect the firm's account balances? A) buying and selling goods and services B) interviewing prospective employees C) understanding economic reports D) forecasting consumer demand Answer: A Explanation: Accounting transactions will result in a change in two or more account balances. Forecasting consumer demand implies that this has yet to occur. Understanding economic reports does not require buying or selling items that would affect financial statements. Interviewing prospective employees also does not require buying or selling items or information. These therefore would not change any account balances. Difficulty: 2 Medium Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

198) Given that measuring a firm's financial health is important to its survival, which of the following strategies is good advice for a person just starting a business? A) Create a method for keeping your books that makes sense to you. Outside agencies such as creditors and suppliers will not evaluate you by the way you keep books. B) All transactions are important. Separating transactions only serves to create a perception that some transactions are of lesser importance than others. C) Accounting systems used by big business are not suitable for small businesses. D) Select an accounting system that helps you make decisions, and helps you report information to others outside your firm. Answer: D Explanation: It is almost impossible to effectively run a business without utilizing an accounting system to record, classify, and summarize financial events and transactions. We use our accounting systems to help make well-informed decisions, as well as to report financial information about the firm to interested stakeholders. Difficulty: 2 Medium Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 199) As an accountant, Janice's responsibilities include A) developing plans to help her company establish a supply chain. B) setting prices for specific goods and services. C) summarizing and interpreting financial information needed by her firm's managers. D) developing a fringe benefit program that improves employee morale. Answer: C Explanation: Accounting is the recording, classifying, summarizing, and interpreting of financial events. Difficulty: 3 Hard Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

200) Tracy wants to start her own business, but knows little about how to set up an accounting system or interpret financial information. "I'm not worried about accounting," she tells her friends. "I'll just hire a part-time bookkeeper to handle all that type of stuff, and focus my attention on what I like—finding ways to satisfy my customers." Which of the following is the best response to Tracy's comments? A) Fine. Just make sure the bookkeeper you hire knows how to use a database, since this type of software is the heart of any efficient accounting system. B) Although you can hire someone to keep your books, you'll still need to know how to read, understand, and interpret basic accounting reports in order to make good business decisions. C) Most entrepreneurs would agree with your opinion. The work done by accountants is mainly clerical in nature, so time spent by business owners on accounting tends to take them away from more important tasks. D) You have a good plan. Only managers of large firms require knowledge of accounting. Owners and managers of small businesses can easily get by with just a part-time bookkeeper. Answer: B Explanation: It is almost impossible to effectively run a business without being able to read, understand, and analyze accounting reports and financial statements. Difficulty: 3 Hard Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

201) Blake took a marketing class at the local community college before starting his landscape business. He decided that his time would be better utilized in this class because if he could learn to sell his services well, the revenues and profits would follow. Your assessment of his plan might include which of the following? A) Blake understands that marketing is the lifeblood of the company, and he is right on track with his approach. B) Blake has elected to operate like a virtual company and leave various parts of the business including accounting, environmental trends scanning, and management to outsourcers. C) Blake knows that increasing revenues will always keep the business profitable and in a positive cash position. D) Blake needs to realize that the ability to understand and interpret financial statements provided by his accountant might enhance his profits. Answer: D Explanation: It is almost impossible to effectively run a business without being able to read, understand, and analyze accounting reports and financial statements. Difficulty: 3 Hard Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

202) Terry is opening a small sports store in his town. At the advice of a friend who is a bookkeeper, he keeps the receipts of everything he purchases for the business in the bottom drawer of his desk, along with all other business expenses, such as his retail license, his rent expense, and insurance expense. You suggest that ________. A) Terry continue with this procedure, but only until the store opens, at which time he will need an additional drawer for his sales transactions. B) Terry invest some time in exploring an accounting system that will make it easier to classify and summarize accounting information. C) Terry continue with this procedure because there is very little difference between one expense and another. D) Terry stop wasting valuable time saving the receipts because accountants only record sales transactions. Answer: B Explanation: It is almost impossible to effectively run a business without utilizing an accounting system to record, classify, and summarize financial events and transactions. Difficulty: 3 Hard Topic: The Role of Accounting Information Learning Objective: 17-01 Demonstrate the role that accounting and financial information play for a business and for its stakeholders. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 203) As a first step in the accounting cycle, ________ involves the recording of business transactions. A) marketing B) bookkeeping C) auditing D) economics Answer: B Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

204) ________ is the accounting practice of recording each transaction in two places in the accounting journal. A) Double-entry bookkeeping B) Trial balancing C) Account matching D) Entry duplication Answer: A Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 205) A ________ is a specialized accounting book, where transactions are categorized according to type. For example, all utility transactions are recorded in the same category. A) journal B) trial balance C) ledger D) balance sheet Answer: C Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 206) A bookkeeper's first task is to A) separate all of the firm's transactions into meaningful categories. B) prepare the firm's financial statements. C) summarize the firm's financial data. D) interpret and report data to the firm's management. Answer: A Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 68 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

207) In the course of their jobs, bookkeepers A) interpret accounting data. B) approve decisions about major expenditures. C) record business transactions. D) prepare financial statements. Answer: C Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 208) The accounting book or computer program where each day's transactions are first recorded is called a A) posting workbook. B) general ledger. C) balance sheet. D) journal. Answer: D Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 209) A ________ summarizes all the data from the account ledgers to verify that they are correct and balanced. A) ledger statement B) balance sheet C) trial balance D) statement of cash flows Answer: C Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 69 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

210) The purpose of a trial balance is to A) affirm whether the figures in the account ledgers are correct and balanced. B) prepare a mockup of a real balance sheet. C) review the income statement accounts. D) meet a reporting requirement of the Securities and Exchange Commission (SEC). Answer: A Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 211) The ________ is a six-step procedure that results in the preparation and analysis of the major financial statements. A) double-entry method B) financial management process C) financial performance appraisal D) accounting cycle Answer: D Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 212) Once a trial balance has been prepared, the next step of the accounting cycle involves A) posting the information to the correct ledger accounts. B) completing a balance sheet and ratio analysis. C) preparing financial statements such as the balance sheet, income statement, and statement of cash flows. D) classifying the transactions into logical categories. Answer: C Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 70 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

213) One of the key financial statements prepared in the fifth step of the accounting cycle is A) general journal. B) statement of cash flows. C) asset summary. D) social audit. Answer: B Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 214) The balance sheet, the statement of cash flows, and the ________ are three key financial statements prepared by accountants. A) income statement B) statement of retained earnings C) statement of changes in financial position D) trial balance Answer: A Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 215) The sixth and final step in the accounting cycle involves A) performing a trial balance to verify that the accounting statements are internally consistent. B) auditing the books to ensure that they were prepared according to generally accepted accounting principles. C) preparing the income statement. D) analyzing major accounting statements to evaluate the financial condition of the firm. Answer: D Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 71 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

216) Careful consideration of the use of computers in accounting indicates that computers A) will soon eliminate all of the accounting functions. B) are tools to help the accountant perform his or her job. C) are of little use to small-business owners that need accounting services. D) have a very limited use in accounting due to inadequate privacy controls. Answer: B Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 217) Today's computerized accounting programs are A) very helpful for small-business owners who lack strong accounting support within their companies. B) too expensive and complicated for most small businesses. C) a poor investment for small start-up companies due to the fact that these programs are seldom needed unless the firm is considered a mid-sized to large company. D) so sophisticated that they can make most financial decisions without the aid of an accountant. Answer: A Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 218) Accountants not only provide financial information to the firm, they A) replace the firm's need for managers. B) provide information regarding competitors. C) assist in interpreting that information. D) design the computer information systems. Answer: C Difficulty: 1 Easy Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 72 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

219) A comparison of bookkeeping and accounting indicates that A) the two are virtually the same in practice. B) bookkeeping involves recording financial information, while accounting is concerned with classifying, summarizing, and interpreting this information. C) bookkeeping is more useful for small businesses while accounting is more useful for large businesses. D) accounting is a subsystem of the process of bookkeeping. Answer: B Explanation: The bookkeeping function in the accounting cycle involves the recording of transactions. The accounting function goes further and includes classifying, summarizing, and interpreting the recorded information. Difficulty: 2 Medium Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 220) Sales receipts, purchase orders, and payroll records are all examples of accounting transactions that would be recorded by a(n) A) auditor. B) forensic accountant. C) bookkeeper. D) purchasing agent. Answer: C Explanation: Sales receipts, purchase orders, and payroll records are original transaction documents. Bookkeepers record the data from these documents into journals. Difficulty: 2 Medium Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

221) Which of the following is a key step in the accounting cycle? A) recording information into journals B) collecting data from customers C) forecasting expenses and revenues D) preparing the advertising message Answer: A Explanation: Steps in the accounting cycle include all of the following: (1) categorize source documents, (2) record transactions in journals, (3) post journal entries to the ledger, (4) perform a trial balance, (5) prepare financial statements, and (6) analyze financial statements. Difficulty: 2 Medium Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 222) The main reason an accountant would conduct a trial balance is to A) determine whether account figures in the ledger are correct and balanced. B) obtain an estimate of the amount of taxes the firm owes. C) ensure the audit was done correctly. D) verify the validity of last year's balance sheet before beginning the next accounting cycle. Answer: A Explanation: The accountant performs the trial balance as a check to verify the accuracy of data recorded in the account ledger. Difficulty: 2 Medium Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

223) The use of computerized accounting systems ________. A) makes it possible for most firms to operate without the expense of hiring or consulting with accountants. B) reduces the pressure on managers in making financial decisions. C) allows firms to generate financial information almost instantly and whenever the organization needs it. D) creates an environment in which accounting has become nothing more than glorified bookkeeping, as all accountants are required to do is enter data into the system and monitor the results the program generates. Answer: C Explanation: Today, computerized accounting programs post information from journals into ledgers, and instantaneously produce reports, so that financial information is readily available whenever the organization needs it. Difficulty: 2 Medium Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 224) Chloe is categorizing journal entries in order to post to the ________. A) income statement. B) balance sheet. C) working papers. D) ledger. Answer: D Explanation: A ledger is a specialized accounting book in which information from the journal is classified into specific categories and posted so managers can find all the information about one account in the same place. Difficulty: 3 Hard Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

225) Diego owns and operates a small business with only four full-time employees and less than $700,000 in annual sales. He currently uses a manual accounting system and relies on a part-time bookkeeper to keep his records in order. In evaluating the possible adoption of a computerized accounting system, Diego will probably discover that A) the expense of setting up a computerized accounting system would not be affordable at this time. B) he would be better off hiring a full-time accountant. C) he could benefit from adopting such a system, but should also consult with an accountant for advice about what's best. D) a computerized system would be affordable, but that he would have little need for it unless his company became significantly larger. Answer: C Explanation: Computerized accounting systems have proven to be especially helpful for smallbusiness owners who often lack any strong accounting support within their companies. This appears to be the situation facing Diego. However, Diego should also realize that no computer program has yet been developed that makes good financial decisions. Thus, advice from an accountant would also be beneficial. Difficulty: 3 Hard Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 226) Ivy is a bookkeeper for the Newport Corporation. She takes the firm's transactions and records them in a record book or computer program referred to as A) a credit account. B) an asset database. C) a journal. D) a debit program. Answer: C Explanation: Journals are the books where accounting transactions are first recorded. Difficulty: 3 Hard Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

227) George works in the accounting department at the Green Goddess Lawn Services, where it is his job to record all transactions into journals. After completing this task, the next step in the accounting process is to A) prepare the firm's financial statements. B) post the information to the ledger. C) determine the tax liability of the firm. D) balance the difference between assets and liabilities. Answer: B Explanation: All journal entries are posted to the ledger on a regular basis. This is the third step in the accounting cycle. Difficulty: 3 Hard Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 228) Alex is responsible for recording sales transactions at Perry Enterprises. Alex's company utilizes ________, to help minimize entry errors. A) auditing B) capital budgeting C) double-entry bookkeeping D) revenue assessment Answer: C Explanation: Double-entry bookkeeping requires the bookkeeper to record two entries for each transaction. This procedure emphasizes accuracy in the recording of all transactions. Difficulty: 3 Hard Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

229) Audrey works in the accounting department of Colorado Manufacturing. Today she will use the firm's ledger to summarize information that was posted over the most recent time period. Her goal is to determine if the accounts are balanced as required by the double-entry method of bookkeeping. To be sure they are correct, Audrey will prepare a(n) A) account analysis. B) statement of cash flows. C) balance sheet. D) trial balance. Answer: D Explanation: A trial balance is a summary of all the financial data in the ledger to make certain the figures are correct and balanced. Difficulty: 3 Hard Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 230) Nathan works as an accountant for a mid-sized retail store. He has just completed a trial balance that resulted in no unexpected problems. Nathan's next task is likely to be A) conducting the full audit. B) preparing a tax return for the company. C) preparing the store's balance sheet and other major financial statements. D) presenting the trial balance to the company owners. Answer: C Explanation: The trial balance is the fourth step in the accounting cycle. If the accounts are correct and balanced, the next step is to prepare major financial statements such as the balance sheet, income statement, and statement of cash flows. Difficulty: 3 Hard Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

231) Brody has just finished working on the balance sheet, income statement, and statement of cash flows for his company. The next step in the accounting cycle involves A) posting the results of these statements to the appropriate journal. B) analyzing the firm's financial statements to evaluate the financial condition of the firm. C) conducting forensic tests of the data to ensure its accuracy. D) placing the data used to construct the statements into an archive known as a data warehouse. Answer: B Explanation: Preparing financial statements is the fifth stage of the accounting cycle. The next step is to analyze the information in these statements to better understand and evaluate the financial health of the firm. Difficulty: 3 Hard Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 232) PharmaONE plans to use its computers to post information from journals to the ledger instantaneously. One obvious benefit of this technology is A) a reduction in the number of accountants required by the firm. B) less scrutiny from agencies such as the Internal Revenue Service. C) to shift financial decision making from people to programmed technology. D) readily available financial information. Answer: D Explanation: Computerized accounting programs post information from journals instantaneously so that financial information is readily available whenever the organization needs it. Difficulty: 3 Hard Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

233) Personalized Products is a small manufacturing firm specializing in custom-order tool and die work. A computerized accounting system would help Personalized Products by A) making key accounting and financial decisions. B) helping management identify cash flow and other financial difficulties more quickly. C) eliminating the need to prepare financial statements and other reports. D) eliminating the need to perform the three middle steps of the accounting cycle. Answer: B Explanation: Computerized accounting programs post information from journals instantaneously, permitting accountants to run financial statements and reports at a moment's notice. Difficulty: 3 Hard Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 234) The three important financial statements prepared by accountants are A) ledger, journal, and trial balance. B) cash budget, capital budget, and master budget. C) revenue summary, expense summary, and consolidation statement. D) balance sheet, income statement, and statement of cash flows. Answer: D Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

235) The ________ is an accounting statement that reports the financial condition of a firm at a specific point in time. A) income statement B) balance sheet C) statement of cash flows D) trial balance Answer: B Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 236) A firm's ________ reports the profit or loss for the firm over a specified time period. A) income statement B) balance sheet C) statement of cash flows D) bank statement Answer: A Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 237) The ________ shows the assets, liabilities, and owners' equity of a firm, at a specific point in time. A) income statement B) balance sheet C) statement of cash flows D) trial balance Answer: B Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

238) Which financial statement reports the company's revenues and selling costs over a period of time? A) income statement B) balance sheet C) statement of cash flows D) trial balance Answer: A Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 239) A ________ provides a summary of cash coming into and money going out of a firm from operations activities, financing activities, and investing activities. A) income statement B) statement of cash flows C) cash budget D) cash receivables and payables report Answer: B Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 240) The balance sheet is composed of the following types of accounts: A) revenue, expenses, and earnings. B) operating expenses, cash flow, and capital expenditures. C) capital, cost, and valuation. D) assets, liabilities, and owners' equity. Answer: D Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

241) A balance sheet lists assets in order of their ________. A) dollar value, from smallest to largest B) date of acquisition, with the most recently acquired assets listed first C) liquidity, with the most liquid assets listed first D) income generating ability Answer: C Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 242) ________ refers to how quickly an asset can be converted into cash. A) Liquidity B) Velocity C) Fundability D) Accessibility Answer: A Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 243) When companies owe money to creditors, suppliers, and others, these outstanding amounts are recorded on the balance sheet as ________. A) contra-assets B) liabilities C) owners' equity D) expenses Answer: B Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

244) _______ refers to the value that stockholders or owners have in a company. A) Assets B) Liabilities C) Owners' equity D) Contra receivables Answer: C Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 245) The fundamental accounting equation states: Assets = ________. A) liabilities minus owners' equity B) liabilities plus receivables C) payables plus cash equivalents D) liabilities plus owners' equity Answer: D Difficulty: 1 Easy Topic: The Fundamental Accounting Equation Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 246) Company resources that are purchased with the intention that they will convert to cash within one year are A) fixed assets B) current liabilities C) current assets D) owners' equity Answer: C Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

247) Resources that a firm owns are called A) revenues. B) assets. C) equities. D) credits. Answer: B Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 248) The most liquid asset is A) sales. B) cash. C) accounts payable. D) owners' equity. Answer: B Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 249) Patents and copyrights are classified as ________ on the Balance Sheet. A) fixed assets B) intangible assets C) current assets D) owners' equity Answer: B Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Reflective Thinking Accessibility: Keyboard Navigation

250) Debts that are due in one year or less are classified on the balance sheet as A) current liabilities. B) bonds payable. C) callable bonds. D) immediate expenses. Answer: A Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 251) The value of resources the firm owns, minus the amount of money the firm owes to others = A) liabilities. B) liquidity. C) leverage. D) owners' equity. Answer: D Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 252) The ________ account on the balance sheet shows profits that the firm has reinvested in the company. A) retained earnings B) stockholder's equity C) intangible assets D) notes payable Answer: A Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

253) Revenue, minus cost of goods sold = A) retained earnings. B) fundamental accounting equation. C) gross profit. D) net income. Answer: C Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 254) Rent, depreciation, and salaries are examples of A) current assets. B) current liabilities. C) owners' equity. D) operating expenses. Answer: D Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 255) ________ is the monetary value that is received for goods sold, services rendered, and money received from other sources. A) Revenue B) Gross margin C) Net income D) Cost of goods sold Answer: A Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

256) Net profit refers to A) the result of deducting liabilities from the assets of the firm. B) the result of subtracting cost of goods sold from revenues. C) the result of deducting depreciation expense from revenues. D) the net earnings after the deduction of all expenses, including tax expense. Answer: D Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 257) Depreciation is a systematic write-off of the cost of a tangible asset that is listed on A) the statement of cash flows. B) the balance sheet. C) the income statement. D) the statement of retained earnings. Answer: C Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 258) The statement of cash flows identifies cash receipts and disbursements that result A) from selling goods and/or services, exclusively. B) solely from a firm's investments. C) from a firm's operations and investment activities, but not from financing activities. D) from a firm's operations, investment, and financing activities. Answer: D Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

259) The balance sheet is set up to reflect the Fundamental Accounting Equation. This equation shows A) Assets = Liabilities + Owners' equity. B) Revenues – Expenses = Gross profit. C) Cash inflows = Cash outflows. D) Current assets + Current liabilities = Owners' equity. Answer: A Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 260) The bottom line of an income statement shows the firm's A) retained earnings. B) gross profit. C) net income or net loss. D) owners' equity. Answer: C Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 261) Expenses a firm incurs for insurance, office salaries, and rent are classified as A) selling expenses on an income statement. B) general expenses on an income statement. C) current liabilities on a balance sheet. D) general expenses on a cash flow statement. Answer: B Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

262) Debts owed by a business are called A) revenues. B) liabilities. C) equities. D) assets. Answer: B Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 263) ________ is the systematic write-off of the value of a tangible asset over its useful life. A) Expense structuring B) Depreciation C) Capital budgeting D) Gross margin allocation Answer: B Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 264) Accounting recognizes that assets, such as machinery and buildings, lose value over time. Accountants will record a portion of the cost of an asset as an expense each year through the use of A) asset valuation. B) asset audits. C) appreciation. D) depreciation. Answer: D Difficulty: 1 Easy Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

265) The ________ shows how the capital is structured in the business, including the value of assets and the amount the firm owes at a specific point in time. A) income statement B) balance sheet C) statement of cash flows D) trial balance Answer: B Explanation: A balance sheet reports the firm's assets (what the firm owns), liabilities (debts of the firm), and owners' equity at a specific point in time. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 266) Use the fundamental accounting equation to solve the following: Assets minus liabilities equals A) net income. B) gross margin. C) owners' equity. D) cash reserves. Answer: C Explanation: Owners' equity is the residual claim of the owners on the assets of the business. After the creditors have made their claims against the assets of the firm, the remaining assets belong to the owners. In other words, owners' equity is the amount of the business that belongs to the owners minus any liabilities owed by the business. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

267) Many business decisions are made in hopes of improving a firm's bottom line. Which of the following financial statements will reveal a firm's bottom line? A) income statement B) balance sheet C) statement of cash flows D) trial balance Answer: A Explanation: The financial statement that shows the bottom line (profit after expenses and taxes) is the income statement. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 268) A company's income statement is important to accountants and other stakeholders. It reveals a A) company's sources of funding. B) company's ability to distribute goods or services in a timely manner. C) company's ability to earn a profit over time. D) company's capitalized value. Answer: C Explanation: The income statement contains several elements including revenues, expenses, and net profit or loss. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

269) When creating the income statement, which of the following statements is accurate? A) revenues, minus general operating expenses = gross profit. B) revenues, minus tax expense = gross profit. C) revenues, minus depreciation expense = gross profit. D) revenues, minus cost of goods sold = gross profit. Answer: D Explanation: The first line item on the income statement reports revenues earned over a period of time. The cost of goods sold is subtracted from revenues in order to determine gross profit. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 270) Which of the following would be classified as a general expense on an income statement? A) salaries paid to salespeople B) dividends paid to stockholders C) payments made for insurance D) costs associated with an advertising campaign Answer: C Explanation: Operating expenses are usually divided into two categories. Selling expenses include things like salaries for salespeople and advertising costs. General expenses include office salaries, insurance, and depreciation. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

271) Rapidly growing companies often buy increasing amounts of merchandise from suppliers on credit, and then sell the goods to their customers on credit. These companies sometimes have difficulty repaying their suppliers when customers who buy on credit don't pay on time. Firms that experience this difficulty need to do a better job of A) generating revenue. B) controlling inventory. C) managing cash flows. D) balancing assets with liabilities. Answer: C Explanation: These firms are generating lots of revenue. Revenues that are tied up in credit sales are not the same as cash. Firms need cash to pay their bills. This shows that even companies that enjoy increased sales and higher profits can suffer greatly from cash flow problems. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 272) FIFO and LIFO are two common A) depreciation strategies. B) ways to structure a balance sheet. C) inventory valuation methods. D) current ratios. Answer: C Explanation: Generally accepted accounting principles (GAAP) sometimes permit an accountant to use different methods of accounting for a firm's inventory. Two of the most popular treatments are FIFO and LIFO. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

273) The LIFO method of inventory valuation bases the cost of goods sold on the cost of A) merchandise that has been held in inventory for the longest period of time. B) most recent merchandise purchased by the firm. C) actual units customers purchased. D) merchandise the firm acquired at the lowest cost. Answer: B Explanation: LIFO stands for last in, first out. The most recent merchandise is the last in. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 274) During a period of rising prices, using FIFO (first-in, first-out) inventory valuation method will result in ________ net income figures than would LIFO (last-in, first-out). A) higher B) lower C) the same D) less accurate Answer: A Explanation: During periods of rising prices, using FIFO, the cost of goods sold is based upon older, less expensive merchandise. Using LIFO, the cost of goods sold would reflect the more recent, more expensive merchandise. FIFO, therefore, yields a smaller cost of goods sold figure. Subtracting this smaller cost of goods sold from the sales revenue will produce a higher net income. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

275) Retailers attempt to sell older merchandise before more recently acquired merchandise is sold. The assumptions made by the ________ method of inventory valuation are most consistent with this approach. A) FIFO (first-in, first-out) B) LIFO (last-in, first-out) C) average costing D) accelerated costing Answer: A Explanation: FIFO inventory valuation method bases cost of goods sold on the items that have been in inventory longest (i.e. those units that were "first in"). This is consistent with the behavior of retailers who try to sell older merchandise first. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 276) During a period of rising prices, if a firm desires to report a low gross profit figure in hopes of reducing their income tax liability, the firm will use the ________ inventory valuation method. A) FIFO (first-in, first-out) B) LIFO (last-in, first-out) C) sliding scale D) average cost Answer: B Explanation: The cost of goods sold figure will reflect more recent, higher costs when the LIFO method is used. Subtracting this higher cost of goods sold figure from sales revenue will produce a lower gross profit. Difficulty: 2 Medium Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

277) As Jaime was packing to return to college after his summer vacation, he realized that he owned many valuable things such as a laptop computer, a speaker system, and a Blu-ray player. An accountant would list all of these as Jaime's A) assets. B) liabilities. C) owners' equity. D) intangibles. Answer: A Explanation: Assets refer to tangible or intangible resources the firm owns and uses in order to operate the business. This question refers to personal assets the student will use for school purposes and/or for recreation. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 278) Ivan will graduate from Great State University this year. He has accumulated $39,000 in student loans during his four years at college. An accountant would classify the loans as A) assets. B) liabilities. C) owners' equity. D) intangibles. Answer: B Explanation: Liabilities represent debts or obligations of an individual or a firm. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

279) The balance sheet for Greeley Contracting shows assets totaling $207,000 and liabilities totaling $95,000. Which of the following statements is correct? A) Owners' equity equals $182,000. B) Current assets are worth $92,000. C) Net income for the period is $112,000. D) Owners' equity equals $112,000. Answer: D Explanation: The fundamental accounting equation states: Assets = Liabilities + Owners' equity. By subtracting liabilities from both sides of the equation, we arrive at: Assets – Liabilities = Liabilities – Liabilities + Owners' equity. The Liabilities terms on the right side of the equation cancel out. The equation becomes Assets – Liabilities = Owners' equity. Substituting the information provided, $207,000 – $95,000 = $112,000. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 280) When reviewing the balance sheet for Portable Pet Care, Inc., a mobile small animal care business, Ricky noted the following information: Company assets totaling $3.5 million, and liabilities totaling $1.3 million. On paper, the net worth (owners' equity) for this business = A) $2.2 million. B) $4.8 million. C) $3.5 million. D) $0.2 million. Answer: A Explanation: As noted in the fundamental accounting equation, Assets – Liabilities = Owners' equity. On the balance sheet, owners' equity is the same as net worth. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

281) Dirty Dog's Drilling recently issued a corporate bond on which it expects to pay interest for the next twenty years. Dirty Dog's would record this as a ________ on its balance sheet. A) declining balance asset B) retained earning C) long-term liability D) long-term expense Answer: C Explanation: Long-term liabilities are obligations that come due in a time period greater than one year. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 282) Mallory is running an income statement on her QuickBooks computer accounting program. Which of the following accounts will be used to calculate gross profit? A) revenues, net sales, depreciation, and operating expenses B) revenues, general expenses C) revenues, cost of goods sold, tax expenses, net income before taxes D) revenues, cost of goods sold Answer: D Explanation: The first two elements of the income statement are (1) revenue and (2) cost of goods sold. Revenues – Cost of goods sold = Gross profit. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

283) At the time the Bieg Plumbing Suppliers prepared its financial statements, it had several customers who bought goods over the past three months on its "90 days same as cash" credit plan. These customers had not yet paid their bills, but they have good credit ratings and Bieg is confident that they will make their payments on time. The amount these credit customers owe would show up as part of the A) current assets listed on Bieg's balance sheet. B) current liabilities listed on Bieg's balance sheet. C) a deferred cash flow on Bieg's statement of cash flows. D) unrealized revenue reported on Bieg's income statement. Answer: A Explanation: A current asset is an asset that can or will be converted into cash in less than a year. Current assets include cash, accounts receivable, and inventory. Because Bieg expects payments on these accounts receivable within 90 days, they are considered a current asset. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 284) Sun Smarts Solar installs solar panels in large newly constructed buildings. The company employs several expert installers who work on a full-time basis. Although the installation team works every day, the company pays them at the end of the month, for the previous month's work. Employee salaries are recorded as ________ on Sun Smarts's balance sheet. A) capital cash flows B) current liabilities C) retained earnings D) long-term liabilities Answer: B Explanation: The company is obligated to pay salaries out each month. This is a current liability, called "salaries payable." Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

285) Andrea is preparing her homework for her accounting class. She is uncertain as to the proper handling of patents and copyrights on a firm's financial statements. Which of the following is correct? A) Patents and copyrights are included with the firm's intangible assets on the balance sheet. B) Patents and copyrights are included with the firm's long-term liabilities on the balance sheet. C) Patents and copyrights are included with the firm's cost of goods sold on the income statement. D) Patents and copyrights are included with the firm's fixed assets on the balance sheet. Answer: A Explanation: Intangible assets include items of value that have no physical form, such as patents and copyrights. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 286) Fairlawn Partners Consulting is a management-consulting firm that provides its expertise to businesses that employ its services. Since it does not hold an inventory of goods or produce any goods itself A) its revenue will equal its net income. B) its gross profit could be identical to its net revenue. C) it is unlikely to have any operating expenses. D) its balance sheet will not record any current assets. Answer: B Explanation: In a service firm, there may be no cost of goods sold. In this case, there is no difference between net revenue and gross profit. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

287) Bailey is concerned because during the past four months her company has experienced difficulty in paying its bills on time. She knows if this continues, the firm will have difficulties in accomplishing its goals. What is Bailey concerned with? A) asset disbursement B) cash flow C) profit and loss D) inventory valuation Answer: B Explanation: Cash flow is simply the difference between cash flowing in and the cash flowing out of a business. If a firm is strapped for cash, it has difficulty purchasing and paying for needed inventory, supplies, and labor that ultimately help increase revenues. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 288) Paige noted that she disbursed $7,847 in payments for operations in her travel agency and received $7,162 in cash receipts for services rendered. She had no cash receipts or disbursements from investments or financing activities. Thus, Paige had a A) positive disbursement. B) negative cash flow. C) bad debt allowance. D) tax credit payment. Answer: B Explanation: Cash flow is the difference between cash flowing in and the cash flowing out of a business. If disbursements exceed receipts, the cash flow is negative. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

289) Talk Time Communications is considering the purchase of a new satellite. The firm believes the satellite will help generate future earnings. In addition, the firm recognizes the tax benefits of a lower net income provided by the annual ________ of the asset. A) inventory valuation B) declining balance C) appreciation D) depreciation Answer: D Explanation: Businesses are permitted to use depreciation as an expense of business operations. This extra expense will lower a firm's taxable income. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

290) Kayla and Kingston run a shuttle service from Water Tower Place to Chicago O'Hare airport. Last month, they recorded the following: Revenues [25 trips @80 per trip]

2000

Fuel Charge [$30 per trip]

750

Banking expenses

Insurance expense

Van Depreciation

250

Taxes (@25%)

228

Kayla and Kingston's gross profit for the past month was A) $682.00 B) Kayla: $341.00; Kingston: $341.00 C) $1250.00 D) $2750.00 Answer: C Explanation: Gross profit is calculated by subtracting cost of goods sold from revenues. Cost of goods sold represents items that are directly related to producing the product or service. In this problem, fuel charge represents a cost of goods sold. Revenues [$2000.00], minus cost of goods sold [$750] = gross profit [$1250.00]. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

291) Kayla and Kingston run a shuttle service from Water Tower Place to Chicago O'Hare airport. Last month, they recorded the following: Revenues [20 trips @80 per trip]

2400

Fuel Charge [$30 per trip]

900

Banking expenses

Insurance expense

Van Depreciation

250

If 25% of their net income is paid to the government in taxes, what is their net income after taxes? A) $1410.00 B) $1160.00 C) $682.00 D) $870.00 Answer: D Explanation: Revenues [$2400.00] – expenses [total $1240.00] = net income before taxes [$1160.00]. Taxes are calculated at 25% of the net income before taxes. [25% of $1160 = $290.00] Net income after taxes = $1160.00 – $290 = $870.00. Difficulty: 3 Hard Topic: The Income Statement Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

292) Day-by-Day Calendar Company's statement of cash flows showed the following activities for the year ended December 31, 2019: Cash from operating activities:

30,000

Cash from investing activities:

−

15,000

Cash from financing activities:

−

8,000

The year-end cash balance for this firm is: A) $7,000.00 B) $53,000.00 C) $23,000.00 D) $30,000.00 Answer: A Explanation: Statement of cash flows shows cash generated from three sources: operating activities, investing activities, and financing activities. Day-by-Day Calendar Company records show a positive cash position from operating activities, and a negative position for cash from investing and financing activities. $30,000 −15,000 − 8,000 = cash balance of $7,000. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

293) Similar to the example of FIFO and LIFO inventory accounting methods in the text, a college store purchased sweatshirts for the upcoming fall semester. Using the following data, where a total of 100 sweatshirts were purchased by the store and placed in inventory, select the correct statement from the following choices. Inventory Purchase Date 50 sweatshirts Inventory Purchase Date 8/1 9/1 Cost Per Sweatshirt $12.00 Cost per Sweatshirt Selling Price $28.00 Selling Price Total Sweatshirts sold from 8/1 – 12/31 = 50 sweatshirts

50 sweatshirts $14.00 $28.00

A) FIFO would provide the least profit. B) FIFO would provide the most profit. C) LIFO or FIFO will produce the same amount of profit. D) LIFO would provide the most profit. Answer: B Explanation: If the business sells the first 50 sweatshirts that it received on August 1, the cost of goods sold = $600 [50 sweatshirts x $12/each = $600]. If the business sells the last 50 sweatshirts that it received on September 1, the cost of goods sold = $700 [50 sweatshirts x $14/each = $700]. FIFO, or first-in, first-out (meaning the first sweatshirts that come into inventory are the first to sell), will provide the most profit because they cost $100 less than the sweatshirts that were purchased on September 1. Profit from first 50 sweatshirts: $1400 – $600 = $800 profit Profit from last 50 sweatshirts: $1400 – $700 = $700 profit Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

294) The financial ratios that measure a firm's ability to pay its short-term debts are called A) leverage ratios. B) liquidity ratios. C) equity ratios. D) profitability ratios. Answer: B Difficulty: 1 Easy Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 295) The current ratio is a type of ________ ratio. A) leverage B) profitability C) activity D) liquidity Answer: D Difficulty: 1 Easy Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 296) Which of the following ratios is a liquidity ratio? A) inventory turnover ratio B) acid-test ratio C) debt to owners' equity ratio D) basic earnings per share Answer: B Difficulty: 1 Easy Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

297) The purpose of the current ratio is to evaluate the firm's ability to A) generate sales with a given level of current assets. B) utilize current assets profitably. C) pay its bills in the short run. D) effectively use borrowed funds. Answer: C Difficulty: 1 Easy Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 298) The ________ ratio helps determine the ability of a firm to repay its short-term debts even if it has difficulty selling its inventory. A) acid-test B) cash flow C) diluted current asset D) required reserve Answer: A Explanation: The acid test ratio eliminates the inventory account from the current ratio. Acid test ratio = Cash + Accounts receivable = Marketable securities/Current liabilities. Difficulty: 2 Medium Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

299) Financial ratios that reflect the degree to which a firm relies on borrowed funds are called ________ ratios. A) leverage B) liquidity C) activity D) profitability Answer: A Explanation: Leverage ratios measure the degree to which a firm relies on borrowed funds as opposed to funds contributed by the owners. Difficulty: 2 Medium Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 300) Earnings per share, return on sales, and return on equity are examples of A) leverage ratios. B) liquidity ratios. C) equity ratios. D) profitability ratios. Answer: D Explanation: Profitability ratios measure how effectively the company is using its resources to create profits. Difficulty: 2 Medium Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

301) ________ measures the amount of profit earned by a company for each share of outstanding common stock. A) Basic earnings per share (basic EPS) B) Diluted earnings per share (diluted EPS) C) Simple earnings per share (simple EPS) D) Return on shares outstanding (RSO) Answer: A Explanation: Basic EPS measures the earnings per share of common stock outstanding. Difficulty: 2 Medium Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 302) ________ earnings per share measures the amount of profit a firm earns per share of outstanding common stock when preferred stock, stock options, warrants, and convertible debt securities are also taken into account. A) Basic B) Diluted C) Restricted D) Broad-based Answer: B Explanation: Diluted earnings per share takes into account stock options, convertible preferred stock, warrants, and other convertible debt securities in the earnings per share calculation. The addition of these sources of funds will dilute the earnings per share. It will be something less than the basic earnings per share calculation. Difficulty: 2 Medium Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

303) Generally the higher the risk involved in an activity, the ________ the rate of return expected by investors. A) higher B) lower C) more stable D) less frequent Answer: A Explanation: An axiom of finance, investors are willing to take on added risk if they realize higher returns. Difficulty: 2 Medium Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 304) A firm's efficient use of its assets in running the business is key to maintaining sufficient cash flow. Ratios that accountants utilize to measure the efficient use of assets are called ________ ratios. A) leverage B) liquidity C) activity D) profitability Answer: C Explanation: Activity ratios such as the inventory turnover ratio measure a firm's efficient use of assets. The goal is to maintain a relatively high turnover ratio. Difficulty: 2 Medium Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

305) ________ measures the speed of inventory moving through the firm and its conversion into sales. A) Asset turnover ratio B) Inventory turnover ratio C) Sales turnover ratio D) Cost of goods sold turnover ratio Answer: B Explanation: The inventory turnover ratio utilizes the value of the cost of goods sold (the inventory that the firm has sold) and divides by the value of the average inventory the firm maintains. A sufficient turnover ratio (higher is better) will add to the company's cash flow. Difficulty: 2 Medium Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 306) In order to understand if the results of ratio calculations indicate a financially strong company, the results A) should be compared to other firms in the same industry. B) are compared to same size firms in the same geographic region of the country. C) are compared to the norms established by generally accepted accounting principles. D) are compared to the largest firms in the country. Answer: A Explanation: Financial ratios are especially useful in analyzing the actual financial performance of the company compared to its financial objectives and compared to other firms within its industry. Difficulty: 2 Medium Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

307) If a firm has a debt to owners' equity ratio of .75 (or 75%) we can conclude that A) it has relied more on debt than equity to finance its operations. B) the firm is likely to have trouble paying its short-term debts when they come due. C) its total liabilities are less than its owners' equity. D) the firm has expenses that are exactly 75% of its gross profit. Answer: C Explanation: This ratio compares the debt (total liabilities) invested in the company with the total equity (total owners' equity) invested in the company. If the result is greater than 1 (or 100%), the firm is funded with more debt capital than equity capital. Difficulty: 2 Medium Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 308) Generally, a high ________ ratio could lead investors and creditors to view the company as being very risky. A) debt to owners' equity B) acid-test C) diluted earnings per share D) inventory turnover Answer: A Explanation: A high debt to owners' equity ratio indicates that the company is relying heavily on debt to fund its operations. Many investors and creditors would view this as a risky approach. Difficulty: 2 Medium Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

309) In order to calculate the current ratio for your firm, you divide the total value of current assets by A) earnings per share. B) the total value of current liabilities. C) the total owners' equity. D) the total cost of goods sold. Answer: B Explanation: The current ratio is calculated by dividing current assets by current liabilities. [Current ratio = Current assets/Current liabilities] Difficulty: 2 Medium Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 310) Leverage ratios indicate the extent to which ________ has been used to fund a business's operations. A) debt B) equity C) owner invested capital D) profit Answer: A Explanation: Leverage ratios refer to the degree to which a firm relies on borrowed funds in its operations. Borrowed funds represent debts of the business. Difficulty: 2 Medium Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

311) Music Masters sells a unique assortment of sheet music including just about any published music ever written before 1970. Its customers are high school and college band directors and choir directors who require several copies of the same music, including music written for a variety of instruments. To buy inventory for resale, the business seeks out wholesalers with large inventories. Due to the fact that cash flow is always an important concern, the owner keeps a watchful eye on how quickly various genres of sheet music sell. To help him in this assessment, which of the following ratios would be an important part of this company's financial analysis? A) asset turnover ratio B) inventory turnover ratio C) sales turnover ratio D) cost of goods sold turnover ratio Answer: B Explanation: The inventory turnover ratio measures the speed at which inventory moves through the firm and is converted to sales. Difficulty: 3 Hard Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 312) Your firm is a supplier to a major chain of discount stores. You have heard rumors that this chain of discount stores is struggling financially. Which financial ratios would indicate the discount store's ability or inability to pay its short-term debts? A) liquidity ratios B) leverage ratios C) activity ratios D) profitability ratios Answer: A Explanation: Liquidity ratios measure the company's ability to pay its short-term debts. Difficulty: 3 Hard Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

313) As a bank loan officer, you are considering a loan application by Peak Performance Sporting Goods. The company has provided you with the following information from its balance sheet Cash

25,000

Account Receivable

45,000

Inventory

140,000

Fixed Assets

190,000

Current Liabilities

70,000

Long-Term Liabilities

90,000

Peak Performance's current ratio is: A) 1.0. B) 1.5. C) 2.5. D) 3.0. Answer: D Explanation: The current ratio is found by dividing total current assets by total current liabilities. Peak Performance's current assets = $210,000 and its current liabilities = $70,000. $210,000/$70,000 = 3.0. Difficulty: 3 Hard Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

314) Peak Performance Sporting Goods Company has just applied for a bank loan in order to expand the business. Using the most recent balance sheet data provided by the company owner, you calculate that the company's current ratio is 2.5. In your presentation to the company boss, you remark A) Peak Performance is currently having trouble meeting its short-term obligations. B) Peak Performance has $2.50 that it owes each month, for every $1.00 of cash that it is generating. C) Peak Performance has $2.50 of current assets for each $1.00 of current liabilities. D) Due to the fact that most of Peak Performance's current assets are tied up in inventory, there is no need to worry about whether Peak Performance will be able to make loan payments. Answer: C Explanation: The current ratio compares total current assets to total current liabilities. A current ratio of 2.5 can be written as a fraction: 2.5/1. This means: The firm has $2.50 worth of current assets for every $1.00 of current liabilities. Difficulty: 3 Hard Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

315) As a bank loan officer, you are considering a loan application by Peak Performance Sporting Goods. The company has provided you with the following information: Cash

25,000

Accounts Receivable

45,000

Inventory

140,000

Fixed Assets

190,000

Current Liabilities

70,000

Long-term Liabilities

90,000

Peak Performance's debt to owners' equity ratio (rounded to the nearest tenth of a percent) is: A) 45.4%. B) 66.7%. C) 112.5%. D) 133.3%. Answer: B Explanation: Step one: Use the fundamental accounting equation to calculate Owners' equity: Total assets – Total liabilities = Owners' equity. Total assets = $400,000 [$25,000 + $45,000 + $140,000 + $190,000]. Total liabilities = $160,000 [$70,000 + $90,000]. Total assets of $400,000 – Total liabilities of $160,000 = Owners' equity of $240,000. Step two: Calculate the debt to owners' equity ratio = Debt [total liabilities]/Owners' equity. The ratio of total liabilities to owners' equity = $160,000/$240,000 = 0.667 (or 66.7%). Difficulty: 3 Hard Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

316) The company controller asked Jade to determine if it could borrow more money for an expansion project. When she calculated a leverage ratio, she determined that the company already had 1.5 times as much debt as equity. Do you agree with her assessment that the company should back off with borrowing more funds at this time? A) Yes, but if the company would increase sales, it could go ahead with borrowing more funds. B) Not necessarily. She should investigate the debt to equity ratios of other firms in the same industry. C) Yes, but the firm should pursue equity investment until the ratio equals 1:1. D) Not necessarily. In poor economic times, it is good financial strategy for a firm to be highly leveraged. Answer: B Explanation: It is good strategy to compare your firm's debt ratios with other firms in the same industry. Debt financing is more acceptable in some industries than in others. However, in a poor economic climate, too much debt may be very detrimental to a company's existence. Difficulty: 3 Hard Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

317) You have just calculated the acid-test ratio for Peak Performance Sporting Goods [acid test ratio = 1.0]. As a loan officer for the local bank, you are called into your boss's office to interpret the results of this ratio. Which of the following statements best reflects an understanding of these results? A) A company with an acid-test ratio = 1.0 demonstrates the ability to operate very conservatively. The bank should anticipate that this firm will always be able to meet its shortterm liabilities. B) This company is already having problems meeting its short-term liabilities. C) An acid-test ratio = 1.0 means that this firm has $1.00 in current assets for every $2.00 in current liabilities. Peak Performance is a well-run operation, as long as it can continue to sell off its inventory. D) An acid-test ratio = 1.0 tells us that without adequate inventory turnover, this company may represent a higher risk. Peak Performance's acid-test ratio shows that the firm maintains $1.00 in current assets for every $1.00 in current liabilities. Answer: D Explanation: The acid-test ratio calculation: [Cash + Accounts receivables + Marketable securities/Current liabilities]. Unlike the current ratio, the acid-test ratio does not include the inventory value in the calculation. It is a more conservative measure of liquidity. Difficulty: 3 Hard Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

318) Damian, a recent college graduate with a degree in accounting, is helping a newly formed construction company set up its accounting system. Although the company had purchased accounting software, Damian wants to make certain that future reports will distinguish between current liabilities and long-term liabilities. In the future, he will need to know the amount of total current liabilities in order to A) know when it is time to make a long-term mortgage payment. B) calculate if the company has purchased too much inventory for home building. C) analyze whether the company can afford to make capital purchases such as additional land acquisition. D) analyze whether the company has enough funds to pay the near-term bills. Answer: D Explanation: In order to analyze whether the company has enough funds to pay bills that come due in less than a year, Damian will perform the current ratio. The accountant must separate current liabilities from long-term liabilities. Total current assets (cash + accounts receivables + inventory) are divided by total current liabilities. The resulting multiple (known as the current ratio) serves as a gauge that helps the accountant determine if the company has an adequate cash position to pay near-term bills. Difficulty: 3 Hard Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

319) Peak Performance Sporting Goods Company continues to perform well. Company executives credit this to the strong partnerships it enjoys with category killer and large discount chains. Last week Peak Performance reported basic EPS [earnings per share] = $.80/share. If the firm has 4,000,000 shares outstanding, net income after taxes for the same period = A) $80,000. B) $5,000,000. C) $3,200,000. D) $32,000. Answer: C Explanation: Basic earning per share = Net income after taxes/Number of common stock shares outstanding. This problem asks the student to determine one component of this formula: net income after taxes. Net income after taxes = Basic earnings per share x Number of common stock shares outstanding. Net income after taxes = $.80 x 4,000,000 shares = $3,200,000. Difficulty: 3 Hard Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 320) The top managers of Pages and Pages Bookstores want to indicate to the firm's shareholders how effectively they have managed the company. Perhaps the most meaningful way to do this would be by reporting strong A) liquidity ratios. B) leverage ratios. C) activity ratios. D) profitability ratios. Answer: D Explanation: Profitability ratios measure how effectively managers are using the firm's resources to generate profits for the firm's owners. Difficulty: 3 Hard Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

321) Peak Performance Sporting Goods Company has reported net income after taxes = $3,750,000, with 18,250,000 shares outstanding. Basic Earning per Share for Peak Performance = A) approximately $.21/share. B) approximately $20.50/share. C) approximately $4.87/share. D) approximately - $2.00/share. Answer: A Explanation: Basic EPS = Net income after taxes/Number of common stock shares outstanding. For this problem, EPS = $3,750,000/18,250,000 = $.2050/share or approximately $.21/share. Difficulty: 3 Hard Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 322) Bob Stewart plans to visit his financial planner today to discuss investment strategy. As a young accountant, he knows he can afford to invest in a few riskier investments. Which of the following ratios will be an important measure of profitability for Bob? A) return on sales B) return on equity C) inventory turnover D) acid test ratio Answer: B Explanation: Risk is a market variable that concerns investors. Investors are willing to take on more risk, if they can expect to get a higher return. As an investor, Bob should be calculating his return on equity. Return on equity measures how much was earned for each dollar invested by owners. Difficulty: 3 Hard Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation

323) Mayree is the owner of Spines Books, a small eclectic-style bookstore in a bustling college town. Mayree prides herself in selecting hard-to-find books and magazines that her clientele enjoy. Recently, Mayree is experiencing a cash flow shortage, and she is concerned that she may be purchasing too many copies of each title. Having recently completed a business class, you suggest to Mayree that she calculate the ________ ratio for her store, and then compare it to other stores in her industry. A) current B) debt to equity C) return on equity D) inventory turnover Answer: D Explanation: A higher inventory turnover ratio indicates greater efficiency in the operation. The goal is to maximize the use of cash and minimize inventories. Difficulty: 3 Hard Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 324) We would expect the inventory turnover ratio for a ski shop to be ________ than the turnover for a convenience store. A) higher B) more meaningful C) lower D) less helpful Answer: C Explanation: The inventory turnover ratio measures the speed of inventory moving through a firm and into sales. Due to the nature of the products involved, a ski shop would more than likely have a lower turnover. Difficulty: 3 Hard Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

325) The accounting profession is divided into 5 key working areas, two of which are A) auditing and managerial accounting. B) forecasting and logistical accounting. C) inventory control and budgeting. D) income accounting and expenditure accounting. Answer: A Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 326) The area of accounting that provides managers inside the organization with information they need to make decisions is called A) tax accounting. B) managerial accounting. C) informational accounting. D) financial accounting. Answer: B Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 327) The preparation of financial statements for people outside the firm (creditors, unions, suppliers, and others) is the goal of A) auditing. B) financial accounting. C) managerial accounting. D) cost accounting. Answer: B Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

328) A(n) ________ provides accounting services to individuals or firms on a fee basis. A) contract accountant B) account agent C) public accountant D) independent accountant Answer: C Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 329) An accountant who works for a single business or government agency is referred to as a A) public accountant. B) private accountant. C) certified accountant. D) commission accountant. Answer: B Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 330) ________ involves the review and evaluation of the records that are used to prepare the organization's financial statements. A) Auditing B) Financial accounting C) Managerial accounting D) Certified bookkeeping Answer: A Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

331) A(n) ________ is a yearly published statement of the financial condition, progress, and expectations of an organization. A) balance sheet B) independent audit C) mission statement D) annual report Answer: D Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 332) A(n) ________ is an evaluation and unbiased opinion about the accuracy of a firm's financial statements. A) internal audit B) annual report C) independent audit D) certified audit Answer: C Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 333) Skilled professionals who are primarily responsible for the development of strategies to minimize taxes are called A) tax accountants. B) certified public accountants. C) certified management accountants. D) certified internal auditors. Answer: A Difficulty: 1 Easy Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

334) The accounting scandals of the early 2000s led many people to question the legitimacy of A) ratio analysis as a means of evaluating the performance of a firm. B) the five-member Public Company Accounting Oversight Board (PCAOB) under the Securities and Exchange Commission (SEC) that had been created to oversee the accounting industry. C) publishing financial information about a firm on the Internet. D) allowing an accounting firm to do both consulting and auditing work for the same company. Answer: D Difficulty: 1 Easy Topic: Ethics in Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Remember AACSB: Ethics Accessibility: Keyboard Navigation 335) Important provisions of the Sarbanes-Oxley Act A) approve corporate loans to directors of the company. B) encourage the destruction of financial documents. C) require the CEO and CFO of corporations to certify the accuracy of financial reports. D) encourage outside CPA firms to deliver several services to their clients, including auditing services and consulting services. Answer: C Explanation: The Sarbanes-Oxley Act includes several key provisions. It disapproves of corporate loans to directors and executives, requires the CEO and CFO of corporations to certify the accuracy of financial reports, and considers the destruction of important financial documents as a crime that can result in felony charges. Difficulty: 2 Medium Topic: Ethics in Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

336) The ________ sets accounting standards used in government accounting. A) Federal Accounting Review Board B) Governmental Accounting Standards Board C) Academy of Public Sector Accountants D) Federal Reserve Board Answer: B Explanation: The U.S. government has its own agency that defines accounting standards for government accountants. It is known as the GASB (Governmental Accounting Standards Board). Difficulty: 2 Medium Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 337) As U.S. firms focus on cost cutting in order to stay competitive with producers in low-wage countries, they will rely on ________ to create strategies to help reduce costs. A) managerial accountants B) financial accountants C) government accountants D) auditors Answer: A Explanation: Managerial accounting is concerned with measuring and reporting costs of production, marketing, and other functions; preparing budgets (planning); checking whether or not units are staying within their budgets (controlling); and designing strategies to minimize taxes. Difficulty: 3 Hard Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

338) Which of the following agencies would have the greatest impact on the methods used to record, classify, summarize, and interpret accounting information for the State of Kentucky's Department of Transportation? A) Commission on Accounting Practices for State Governments B) Government Accounting Standards Board C) Independent Not-For-Profit Accounting Standards Board D) Institute for Public Sector Accounting Standards Answer: B Explanation: The Government Accounting Standards Board (GASB) sets standards for generally accepted practices in governmental accounting. Difficulty: 2 Medium Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 339) A basic difference between managerial accounting and financial accounting is that managerial accounting A) adheres to rules set by the GASB, while financial accounting uses a different group of rules set by the FASB. B) involves the preparation of the balance sheet and income statement while financial accounting involves the preparation of the statement of cash flows. C) handles recording and classifying information about transactions that have no direct financial impact on the firm, while financial accounting handles the recording and classifying of information about transactions that do have a financial impact. D) provides information primarily intended for managers and others inside the company, while financial accounting provides information primarily intended for people outside the organization. Answer: D Explanation: Managerial accounting provides information to managers inside the company to assist them in making better decisions. Financial accounting provides information to people outside the firm such as owners and potential owners, creditors, the government, and the general public. Difficulty: 2 Medium Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

340) Calvin works in the accounting department for a textbook publishing firm preparing budgets and reporting production costs. What job does Calvin hold? A) managerial accountant B) financial accountant C) tax accountant D) auditor Answer: A Explanation: Managerial accounting provides information to managers within an organization to assist them in decision making. Difficulty: 3 Hard Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 341) Kimberly has been helping Jonah in preparing his personal income tax forms for a couple of years. Jonah's boss recommended Kimberly because she had done a good job setting up the company's new accounting system. Jonah is very satisfied with Kimberly's work and feels that the fees she charges are quite reasonable. Kimberly would be classified as a(n) A) independent auditor. B) private accountant. C) public accountant. D) accounting broker. Answer: C Explanation: A public accountant provides services to individuals and businesses on a fee basis. Difficulty: 3 Hard Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

342) Abel just graduated earned a bachelor's degree in accounting. He plans to go to work for the American Red Cross as an accountant. What job will Abel hold? A) private accountant B) public accountant C) forensic accountant D) independent accountant Answer: A Explanation: A private accountant works for a single business, government agency, or nonprofit organization. Difficulty: 3 Hard Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 343) Coolest Closet, a chain of retail clothing stores, wants to assure investors and other outsiders that its financial statements are accurate. One way to do so would be to hire a public accounting firm to A) produce an internal audit. B) take overall stock of its accounting functions. C) provide a "generally accepted practices" endorsement. D) perform an independent audit. Answer: D Explanation: An independent audit is an evaluation and unbiased opinion about the accuracy of a company's financial statements. Such audits are performed by public accountants. Difficulty: 3 Hard Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

344) Valeria, owner of Coolest Closet, has applied for a business loan. Her prospective banker has requested information concerning the financial condition of her business. Which accounting discipline is responsible for providing accounting information to outside stakeholders? A) management accounting B) financial accounting C) tax accounting D) certified bookkeeping Answer: B Explanation: The intended audience of financial accounting information and reports is people outside of the organization. This would include creditors, banks, owners, unions, and government units. Difficulty: 3 Hard Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 345) Stockholders of Marshall Manufacturing are concerned about irregularities in the firm's accounting system. One approach to identify problems in the records of the company would be to have a(n) ________ performed. A) internal audit B) independent audit C) unofficial audit D) GAAP analysis Answer: B Explanation: An independent audit is an evaluation and unbiased opinion about the accuracy of a firm's financial statements. A firm's annual report often includes a written opinion by an auditor. Difficulty: 3 Hard Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

346) Quinn is an accountant employed by CCDL Enterprises. Recently, she has spent much of her time working on defining measures of costs for the production department and checking to ensure that various departments are staying within their budgets. Quinn is a A) public accountant whose work is mainly concerned with auditing. B) public accountant whose work is mainly concerned with financial accounting. C) private accountant whose work is mainly concerned with managerial accounting. D) private accountant whose work is mainly concerned with financial accounting. Answer: C Explanation: Quinn is a private accountant because she works for a single organization. Measuring costs and working on budgets are two common tasks involved in managerial accounting. Difficulty: 3 Hard Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 347) While reviewing the books at his firm, Colin noticed discrepancies between how the firm recorded revenues last year and how it elected to record revenues during the recent quarter of the current year. As a recent business graduate, Colin felt confident that the changes needed clarification. To get another opinion, Colin suggested to the company's controller that the firm solicit A) the assistance of the Government Accounting Standards Board. B) the services of a certified internal auditor. C) the services of a senior executive at the IRS. D) the services of an independent auditor. Answer: D Explanation: An independent auditor is responsible for providing an unbiased opinion about the accuracy of a company's financial statements and reporting procedures. Difficulty: 3 Hard Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

348) Explain the differences between managerial and financial accounting, and give examples of the types of problems and issues examined by each of these areas of accounting. Answer: Managerial accounting is used to provide information and analyses to managers within the organization to assist them in decision-making. Managerial accounting is involved with measuring and reporting costs of production, marketing, and other functions; preparing budgets; checking whether or not units are staying within their budgets; and designing strategies to minimize taxes. Financial accounting is different because the information and analyses are for people outside of the organization. Creditors, lenders, prospective owners, investors, employee unions, customers, governmental units, and the general public are all interested in financial accounting information. A good deal of the firm's information is compiled in the company's annual report that shows the financial position and progress of the firm. This report typically includes key financial statements such as the balance sheet, income statement, and statement of cash flows. Difficulty: 3 Hard Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation 349) Discuss the role of an independent auditor. Provide information about the types of accounting activities they perform and the recent laws that have emerged to help guide them as they do their job. Answer: Auditors can be either private or public accountants. Internal audits are performed by private accountants who work inside a firm. Independent audits are performed by public accountants who work on a fee basis. Auditors can earn professional accreditation as a certified internal auditor. The Sarbanes-Oxley Act put in place new rules about auditing and consulting to ensure the integrity of the auditing process. This law prohibited a firm from serving as an outside auditor and an outside consultant for the same client. It also required key executives of the company such as the CEO and CFO to certify the accuracy of financial reports. It established a Public Accounting Oversight Board to oversee the accounting industry. Difficulty: 3 Hard Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

350) Thoroughly describe each of six parts of the accounting cycle. Answer: Part 1 requires the bookkeeper or accountant to separate documents into logical groupings, such as sales transactions, utility disbursements, travel records, etc. Part 2 requires the bookkeeper to record all events and transactions into journals, which are accounting records. The recorder will enter each entry in two different areas. This is called double-entry bookkeeping. Part 3 requires the bookkeeper to post each journal entry to the ledger. This posting will put the entry into the proper classification (grouping of similar activities) so that a manager can quickly determine the total amount in each category. Computerized software such as QuickBooks or Peachtree will do the journal entry and the ledger posting at the same time. Part 4 requires the accountant to perform the trial balance to make certain that entries were posted correctly and that the accounts balance. Part 5 requires the accountant to prepare the firm's financial statements, including the balance sheet, the income statement, and the statement of cash flows. Part 6 requires the accountant to analyze the financial statements by calculating liquidity, activity, profitability, and leverage ratios. Difficulty: 3 Hard Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

351) What is the difference between a journal and a ledger? How are journals and ledgers incorporated into the accounting cycle? Answer: A journal is a record book or computer program where information about financial transactions is first recorded. This information is based on original transaction documents such as sales slips and checks and invoices, and the information is entered in chronological order. Analyzing and categorizing documents is the first step of the accounting cycle, and recording information in the journal is the second step in this process. Both of these steps are performed on a continual basis. A journal will include information about a wide variety of transactions that affect a number of different accounts. Thus, while the journal provides a complete description of all of the transactions that occur on a given day, it would be awkward to use the journal to examine information about a single type of account. Ledgers are books or computer programs that have separate sections for each type of account. Thus, a ledger would have one section devoted to transactions affecting the cash account, another for transactions affecting accounts payable, yet another for office supplies, and so on. The third task in the accounting cycle is transferring information from the journal to appropriate accounts in the ledger. This process is called posting. Like the first two steps in the cycle, posting is done on a continual basis. Difficulty: 3 Hard Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

352) Explain the meaning of the fundamental accounting equation and its relation to the balance sheet. If it is helpful, create an example using numbers. Answer: The fundamental accounting equation is a mathematical formula that equates a firm's assets with its liabilities and owners' equity. Mathematically, it is written: Assets = Liabilities + Owners' equity. If we manipulate this equation by subtracting the liabilities from both sides of the equation, we arrive at: Assets – Liabilities = Liabilities – Liabilities + Owners' equity The liabilities on the right side of the equation cancel, and we arrive at: Assets – Liabilities = Owners' equity Assets = What the business owns; Liabilities = What the business owes (its debts); Owners' equity = The business's net worth. As a mathematical sentence, the equation states: [What the business owns] – [What the business owes] = [The business's net worth] The balance sheet is set up like the fundamental accounting equation. The three main parts of the balance sheet are the same as the three main terms of the fundamental accounting equation: Assets, liabilities, and owners' equity. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation 353) Explain the difference between current, fixed, and intangible assets. Give two examples of each of these different types of assets. Answer: Current assets are items that can be converted to cash within one year. Cash would certainly be a current asset as would such items as accounts receivable and inventory. These are listed on the balance sheet in order of liquidity, with the most liquid listed at the top. Fixed assets are items such as land, buildings, machinery, equipment, and fixtures that are relatively permanent and cannot be converted to cash quickly. Intangible assets are assets that have no real physical form but do have value. Patents, trademarks, copyrights, and goodwill are examples of intangible assets. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation 139 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

354) Identify the three key financial statements that corporations are required to prepare, and describe the type of information found on each. Answer: Balance sheet reports the firm's financial position on a specific date. It is composed of three major sections: assets, liabilities, and owners' equity. The assets section lists the things of value the firms own, such as its cash, inventory, land, buildings, machinery, and any intangible assets such as patents or goodwill. The liabilities section describes the claims that others have against the firm—in other words, what the firm owes to outsiders. Examples would include any short-term amounts owed to suppliers or workers and any long-term claims by banks or bondholders. The owners' equity section shows the value of the firm to its owners. It is the difference between the total assets of a firm and its total liabilities. The way the balance sheet is organized reflects the fundamental accounting equation: Assets = Liabilities + Owners' equity. The income statement identifies the revenue, cost of goods sold (or cost of goods manufactured), and operating expenses for the firm over a specific time period. The "bottom line" of the income statement reports the firm's net income (or net loss) for that period. According to generally accepted accounting principles, this statement is organized to reflect the following formulas, which define specific measures that appear on the statement: · Revenue – cost of goods sold (or cost of goods manufactured) = gross margin · Gross margin – operating expenses (which include selling and general expenses) = net income before taxes · net income before taxes – taxes = net income (or net loss) The statement of cash flows reports cash receipts and disbursements related to (1) operations, (2) investing activities, and (3) financing activities. Cash flows from operations are cash transactions associated with running the business, such as the receipt of cash due to a cash sale or the disbursement of cash to pay workers. Cash flows from investing activities refer to cash received from investments made by the firm, or cash disbursed to obtain additional investments. An investment could also be the purchase of a new fixed asset, or the selling of an old fixed asset. Cash flows from financing refer to cash raised by issuing securities such as stocks or bonds, or cash disbursed to pay off debts or to pay dividends. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

355) Identify and explain the differences between LIFO and FIFO inventory valuation methods. What would be the difference in gross margin using FIFO versus LIFO? Answer: FIFO stands for first-in, first-out. This means that the oldest merchandise is used as the basis for determining the firm's cost of goods sold. LIFO stands for last-in, first-out. This means the cost of the most recently purchased merchandise would be used as the basis for determining the cost of the goods the firm sold. For example, when prices are rising, firms that wish to show high gross margin will generally use a FIFO system of valuation. Since inflation tends to drive prices up, the first-in merchandise would generally be valued at a lower cost. Hence, gross margin would be higher. Firms that wish to show lower gross margin will generally use a LIFO system of valuation. The last-in merchandise would generally be valued at a higher cost. Hence, gross margin would be lower. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

356) What is ratio analysis? Explain the four different types of ratios and how each is used. Answer: Ratio analysis is the assessment of a firm's financial condition and performance through calculations and interpretation of financial ratios developed from the firm's financial statements. Financial ratios are especially useful in analyzing the actual performance of the company compared to its financial objectives and compared to other firms within its industry. Liquidity ratios measure a company's ability to turn assets into cash to pay its short-term debts. These short-term debts are of particular importance to lenders of the firm who expect to be paid on time. Two key liquidity ratios are the current ratio (current assets divided by current liabilities) and the acid-test ratio (cash + accounts receivable + marketable securities divided by current liabilities). Leverage ratios measure the degree to which a firm relies on borrowed funds in its operations. The debt to owners' equity ratio measures the degree to which the company is financed by borrowed funds that must be repaid (total liabilities divided by owners' equity). Profitability ratios measure how effectively a firm is using its various resources to achieve profits. Company management's performance is often measured by the firm's profitability ratios. Three of the more important ratios used are earnings per share (net income after taxes divided by number of common stock shares outstanding), return on sales (net income divided by net sales), and return on equity (net income after tax divided by total owners' equity). Activity ratios measure the effectiveness of a firm's management in using the assets that are available. The inventory turnover ratio (cost of goods sold divided by average inventory) measures the speed of inventory moving through the firm and its conversion into sales. Difficulty: 3 Hard Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

357) What is the difference between a profit (net income after taxes) on an income statement and the cash balance reflected at the bottom of the statement of cash flows? Answer: The income statement will show: · net revenues recorded by the company, even if these revenues were created on account, and the firm has not yet received payment. · depreciation expense, even though the firm has not actually dispersed funds for the expense. · taxes for an entire period, even though the firm may not have dispersed the entire tax payment. The net income after taxes will reflect all revenues and deductions (expenses) allowable for a period of time, even if the firm has not yet received cash for all the revenues, nor dispersed cash payments for all the expenses. The statement of cash flows will analyze all the cash changes that occurred in the firm over a period of time. The accountant records all cash exchanges made by the company: cash coming in and cash going out. These may be different from the revenues and expenses recorded on the income statement. The statement of cash flows reconciles the cash position at the end of an accounting period. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

Mini-Case Minnie A. Wright-Hoff works as an accountant for Double Entry Doors, Inc. Her company sells and installs oversized garage doors needed by large vehicles. Most of Minnie's work involves helping department heads and other decision makers by measuring and reporting costs for their departments, and by identifying areas where departments are exceeding their budgets. However, as one of only three accountants employed by Double Entry Doors, Minnie is something of a "jill-of-all-trades" in terms of her accounting assignments. For example, she recently spent several hours summarizing all of the financial data in account ledgers to see if the information was correct and balanced. Her efforts revealed no problems, so she is now ready to start working on the firm's financial statements. Minnie is interested in this part of the accounting cycle because she likes to be one of the first to know the "bottom line" her company will report. She knows that she and the other accountants who work on these statements can influence the results by the choices they make about the way they report certain items. 358) The fact that Minnie spends most of her time measuring costs and checking to see if departments are staying within their budgets suggests that she is often involved in A) auditing. B) managerial accounting. C) bookkeeping. D) departmental certification. Answer: B Explanation: Managerial accounting is used to provide managers with information that will help them make decisions. This area of accounting is frequently concerned with measuring and reporting costs, preparing budgets, and checking to see whether or not units are staying within their budgets. Difficulty: 3 Hard Topic: Overview of the Different Types of Accounting Learning Objective: 17-05 Identify the different disciplines within the accounting profession. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

359) The last major task Minnie completed before getting ready to prepare the firm's financial statements was the preparation of the A) cash budget. B) master budget. C) trial balance. D) internal audit. Answer: C Explanation: A trial balance is a summary of all the financial data in the account ledgers to see whether they are correct and balanced. This is the fourth step in the accounting cycle. Difficulty: 3 Hard Topic: The Accounting Process Learning Objective: 17-02 List the steps in the accounting cycle, distinguish between accounting and bookkeeping, and explain how computers are used in accounting. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 360) The fact that Minnie wants to determine the "bottom line" for Double Entry Doors means that she is particularly interested in preparing her firm's A) income statement. B) cash flow statement. C) master budget. D) capital budget. Answer: A Explanation: An income statement reports the net income (or net loss) for the firm. Net income after taxes and the "bottom line" are the same. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

361) Double Entry Door's suppliers maintained very stable prices for many years, but Minnie has noticed that the cost of doors has been rising steadily for the past few years. She is concerned that, given the company's current accounting methods of basing its cost on the most recent doors purchased, this will result in a much lower net income than in the past. The most likely reason for her concern is that Double Entry has apparently been using A) the FIFO inventory valuation method to determine its cost of goods sold. B) a great deal of equity financing to purchase the doors. C) the LIFO inventory valuation method to determine its cost of goods sold. D) a depreciation method based on the average value of inventory. Answer: C Explanation: The LIFO inventory valuation method uses the cost of the last items bought to determine the cost of goods sold. With FIFO, the cost of goods sold is based on the oldest (first) items in inventory. In a period of rising inventory prices, LIFO would result in a higher cost of goods sold than FIFO. Since cost of goods sold is subtracted from revenue in the determination of net income, LIFO would result in a smaller net income. Difficulty: 3 Hard Topic: Describe the Various Types of Financial Statements Learning Objective: 17-03 Explain how the major financial statements differ. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

362) Minnie knows that Double Entry has a lot of short-term debt coming due in the next year, and wants to make sure that the company will have the ability to make the required payments. Given a troubling downturn in construction activity over the past couple of months, she is not confident that Double Entry can count on selling its current inventory of doors before the debt comes due. Which of the following ratios would be most relevant to Minnie? A) current ratio B) debt to equity ratio C) return on sales D) acid-test ratio Answer: D Explanation: Liquidity ratios, such as the current ratio and the acid-test ratio, are calculated to provide insight into the ability of firms to meet their short-term debt obligations. They do this by comparing current assets (which are expected to convert into cash in the next year) to current liabilities (which must be paid within the year). In a situation where a firm may have difficulty selling its inventory, the acid-test ratio is a better measure of liquidity because the acid-test ratio excludes inventory from the calculation. Difficulty: 3 Hard Topic: Financial Ratio Analysis Learning Objective: 17-04 Demonstrate the application of ratio analysis in reporting financial information. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

Understanding Business, 12e (Nickels) Chapter 18 Financial Management 1) Finance is the function in a business that acquires funds for the firm and manages those funds within the firm. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) Managing a firm's resources so that it can meet its goals and objectives is the goal of financial accounting. Answer: FALSE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) A financial manager makes recommendations to top executives regarding strategies for improving the financial strength of a firm. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 4) The duties and responsibilities of a financial manager are virtually identical to the duties and responsibilities of an accountant. Answer: FALSE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 1 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

5) Financial managers use data prepared by accountants to develop strategies for improving the financial performance of the firm. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) There is actually a stronger relationship between finance and marketing than there is between finance and accounting. Answer: FALSE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 7) Financial managers examine the data prepared by accountants and make recommendations to top management regarding strategies for improving the financial performance of the company. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) Financial management is more important for a large firm than it is for a small firm. Answer: FALSE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

9) The chief financial officer (CFO) is responsible for accounting and financial functions. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10) The chief financial officer of a company is responsible for managing cash, accounts receivable, and inventory. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) While finance is a critical activity for profit-seeking organizations, by definition nonprofit organizations are not required to fulfill the finance function. Answer: FALSE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) A comptroller is responsible for the acquiring and managing of funds for an organization. Answer: FALSE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

13) Inability to attract and retain qualified employees is one of the most common ways for a firm to fail financially. Answer: FALSE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) Financial managers are responsible for controlling cash flows. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) Undercapitalization refers to the problem of insufficient start-up funds. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 16) Investors and entrepreneurs should have an understanding of financial issues. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

17) Financial managers are responsible for budgeting, auditing, and advising top management on financial matters. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) One of the most common ways for a firm to fail financially is poor control over cash flow. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 19) Inadequate control of expenses represents a common financial problem that contributes to business failure. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) A comptroller is the chief accounting officer of an organization. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

21) Tax payments are important to the finance manager because they represent a cash inflow to a firm. Answer: FALSE Explanation: Tax payments are a disbursement. Taxes represent a cash outflow for the firm. Finance managers must stay abreast of changes in tax laws in order to minimize the tax obligations of their firms. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 22) An internal auditor is responsible for paying the company's bills and collecting overdue payments from customers. Answer: FALSE Explanation: The auditing function involves reviewing the company books to make certain they are in compliance with generally accepted accounting principles (GAAP). The finance team is responsible for bill collection and for making timely payments to suppliers and creditors. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 23) Financial managers are responsible for buying merchandise on credit and collecting payment from accounts receivable. Answer: TRUE Explanation: In order to maintain adequate cash flows, the finance team makes decisions on purchasing inventory and other goods on credit, and also for the timely collections of credit sales. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

24) Accountants truly represent the financial managers of a business. Answer: FALSE Explanation: Accountants perform the technical aspects of gathering, organizing, classifying, and summarizing events and transactions, and prepare technical documents such as financial statements and reports. Finance managers interpret the results of these reports and create financial strategy for the firm. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 25) Inadequate expense control typically occurs as a result of undercapitalization. Answer: FALSE Explanation: Undercapitalization refers to a problem many beginning business ventures have— insufficient start-up funds. Expense control problems can occur even in firms that do not start out undercapitalized, and is an area of concern to all businesses, not just new firms. Constant attention is needed to ensure expenses increase only when necessary. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26) The importance of financial managers to firms with large cash inflows is greater than for firms with smaller cash flows. Answer: FALSE Explanation: Finance professionals are greatly needed in small firms. Small and medium-sized firms have smaller cash or credit cushions than large firms, which increases the need for monitoring cash flows. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

27) Financial managers are responsible for the management of accounts receivable and accounts payable. Answer: TRUE Explanation: The finance functions of buying merchandise on credit (accounts payable) and collecting payment from customers (accounts receivable) are the responsibilities of financial managers. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 28) Tax management by financial managers involves the development of strategies to evade tax liabilities. Answer: FALSE Explanation: The goal is not to evade tax liabilities. The goal is to minimize a firm's tax consequences. Tax management is the analysis of tax implications of various managerial decisions in an attempt to minimize the taxes paid by the business. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) Generally accepted accounting principles require that any assessment of a firm's financial statements be performed by independent outside auditors. Answer: FALSE Explanation: A firm can use internal auditors to evaluate whether the firm is in compliance with generally accepted accounting principles (GAAP). Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

30) To be effective, an internal auditor must be critical of any improprieties or deficiencies found in the financial activities of the firm. Answer: TRUE Explanation: An organization's accounting statements would be less reliable if an internal auditor was biased and subjective in the evaluation of the firm's accounting procedures. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Apply AACSB: Reflective Thinking Accessibility: Keyboard Navigation 31) Melanie, a financial manager, holds responsibilities that include the interpretation of financial statements provided by the firm's accountants and the preparation of recommendations to top management. Answer: TRUE Explanation: Financial managers interpret accounting data in order to develop suggestions for improving the company's financial health. Difficulty: 3 Hard Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 32) Jason manages credit and collections at Barkatorium Pet Supplies. He is responsible for accounts receivable and accounts payable. These activities suggest that Jason's job is in financial management. Answer: TRUE Explanation: Determining the customers that qualify for credit and making collection of overdue accounts are important responsibilities of financial managers. Difficulty: 3 Hard Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

33) Ivy has always loved designing and tending to gardens, and now she's a master gardener in charge at a large botanical garden. Ivy requires her staff to pursue continuing education and, because it's an area where she is weak, she is enrolling in two courses—accounting and finance—at the local community college. This is a good plan, especially since she is the boss. Answer: TRUE Explanation: Although you do not have to be an expert in finance to be the boss, it is important that you have an understanding of how money flows in and out of your company. Financial understanding is important to anyone who wants to run a business, whether for-profit or nonprofit. Difficulty: 3 Hard Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 34) The overall objective of financial planning is to optimize the firm's profitability and make the best use of its money. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) The first step in financial planning is to develop a budget to better control costs. Answer: FALSE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

36) One step in the financial planning process is to establish financial control procedures that allow managers to monitor the organization's performance. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 37) A firm's short-term forecast helps top management in preparing a company budget. Answer: FALSE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) A firm's short-term financial forecast provides a projected sales estimate. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39) The primary focus of a cash flow forecast is the firm's revenue and costs for the current operating period. Answer: FALSE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

40) A firm's most recent financial statements often serve as the basis for predicting future sales, costs, and expenses. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 41) The long-term financial forecast plays a crucial part in the company's long-term strategic plan. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 42) The long-term financial forecast gives top management some sense of the profit potential of various strategic decisions. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

43) A budget reflects management's expectations for revenues and allocates the use of specific resources throughout the firm. Answer: TRUE Difficulty: 1 Easy Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44) Budgets are prepared after the financial forecasts are developed. Answer: TRUE Difficulty: 1 Easy Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 45) To be effective, budgets are prepared independently of organizational forecasts. Answer: FALSE Difficulty: 1 Easy Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 46) A capital budget highlights the expected funds provided by owner investments. Answer: FALSE Difficulty: 1 Easy Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

47) An operating budget analyzes the firm's spending plans for long-lasting assets that require large sums of money. Answer: FALSE Difficulty: 1 Easy Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 48) A capital budget highlights a firm's spending plans for major assets, such as property, buildings, and equipment. Answer: TRUE Difficulty: 1 Easy Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 49) A capital budget combines all of the other budgets into one detailed plan for monitoring the operations of the firm. Answer: FALSE Difficulty: 1 Easy Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

50) The operating (master) budget identifies the funds (and the allocation of those funds) required to operate a business at a projected level of revenue. Answer: TRUE Difficulty: 1 Easy Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 51) A cash budget helps managers anticipate borrowing, debt repayment, operating expenses, and short-term investment opportunities. Answer: TRUE Difficulty: 1 Easy Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 52) The main objective of financial control is to establish priorities for the purchase of plant and equipment. Answer: FALSE Difficulty: 1 Easy Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

53) By identifying variances from the financial plan, managers are able to focus on those departments that require corrective action. Answer: TRUE Difficulty: 1 Easy Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 54) Financial control is a process where firms compare actual revenues and costs with budgeted revenues and costs. Answer: TRUE Difficulty: 1 Easy Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 55) Since short-term financial forecasts predict expected future events, they should not be influenced by recent financial statements. Answer: FALSE Explanation: Past financial statements are often used as the basis for making projections about future sales revenues, costs and expenses used in the short-term forecast. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

56) A budget's primary purpose is to provide managers with a financial summary of past operations. Answer: FALSE Explanation: A budget is a future plan, not a summary of past operations. When properly constructed, a budget becomes the primary basis and guide for the firm's financial operations. Difficulty: 2 Medium Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 57) Forecasting means determining how closely the actual revenue and expense results matched up with the predicted revenues and expenses. Answer: FALSE Explanation: Forecasting means looking out into the future and estimating the firm's revenue opportunities and expenses. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 58) Budgets assist managers in performing the functions of planning and control. Answer: TRUE Explanation: A budget should reflect the plans of the organization, as well as the resources devoted to achieve those plans. Financial control can be exercised by comparing the budgeted plans to the actual operations of the firm. Difficulty: 2 Medium Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

59) A company's capital budget helps management plan for cash shortages or surpluses. Answer: FALSE Explanation: A capital budget highlights the firm's planned spending on fixed assets such as buildings and equipment. It is the cash budget that provides managers with information regarding projected cash balances. Difficulty: 2 Medium Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 60) Portable Pet Care plans to purchase a second mobile veterinary clinic next year that will cost an estimated $95,000. The finance manager will include this projected purchase in the company's capital budget. Answer: TRUE Explanation: A capital budget highlights the firm's spending plans for major assets that usually require large sums of money. Difficulty: 3 Hard Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 61) Gavin, a financial manager of a small firm, needs to determine how much his company will have to borrow in the coming months. He also needs to establish when the borrowed funds will be needed. The preparation of the cash budget will help. Answer: TRUE Explanation: The cash budget shows projected revenues, expenses, and cash balance for a specific period of time, usually one month or one quarter. It provides insight as to whether the firm needs to borrow in the short term in order to pay for expenses for the same period. Difficulty: 3 Hard Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

62) Lydia is a financial manager with Securitas Financial. She regularly compares actual revenues and expenses against their projected values. After identifying areas with significant deviations from planned values, she investigates to find the cause of these variances. Lydia's activities represent the steps involved in the preparation of Securitas's capital budget. Answer: FALSE Explanation: Karen is involved in financial control, which is the process of comparing actual revenues, costs, and expenses against their projected values. The control process helps financial managers identify deviations and take corrective action when necessary. The capital budget is a projected statement of the number and types of fixed assets required to run the operation over a specified period of time. Difficulty: 3 Hard Topic: Financial Management Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 63) Portable Pet Care, Inc., a mobile veterinary clinic, is planning for the future. The company owners (two seasoned veterinarians) have brought together the vice president of marketing and the director of information systems to talk about their expansion campaign, "We come to you!" The talks are in the preliminary stages, so there is no need to concern the finance team at this time because cash flow is currently not a problem. Answer: FALSE Explanation: Forecasting for the future is an important part of any firm's strategic plan. If a firm is planning to expand, it is important to begin creating long-term forecasts, where the firm predicts revenues and expenses for periods longer than one year, sometimes 5 to 10 years out. Difficulty: 3 Hard Topic: Financial Management Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

64) Snowy Mountain Ski Lodge owners know that the lifts on the north slope will need replacing in the next two years. Three months prior to replacement, they will include the expenditure in their cash budget. Answer: FALSE Explanation: Chair lifts would be considered a capital budget item—a major capital expenditure for a ski lodge. A major purchase such as this would be part of the capital budget in the company's financial plan. Difficulty: 3 Hard Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 65) Snowy Mountain Ski Lodge's cash budget for the month of March 2019 shows a negative amount. Due to the fact that the months of January and February were quite lucrative and showed positive amounts, the finance manager will not borrow any money in the short term to cover for March's deficit. Answer: FALSE Explanation: The finance manager utilizes the cash budget (see Figure 18.3) to estimate cash inflows and outflows on a period-by-period basis (usually a month or a quarter). If the month of March shows a deficit, the cash collected in January and February has already been dispersed to pay for expenses during those months and the subsequent month of March. The manager will need to consider short-term financing to cover the shortage. Difficulty: 3 Hard Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 66) One very important responsibility of the finance department in both large and small businesses involves acquiring needed funds to operate the business. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

67) Finance managers need funds for capital purchases, but seldom for the day-to-day operations. Answer: FALSE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 68) The concept of the time value of money is based on the interest-earning power of money. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 69) When a firm is owed money, the financial manager tries to collect as early as possible. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 70) Financial managers generally oppose credit sales because of the impact on cash flows. Answer: FALSE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

71) Effective financial managers evaluate customers' ability to pay for merchandise purchased on credit. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 72) With added competition, firms prefer not to offer the availability of credit sales to their customers. Answer: FALSE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 73) Accepting credit cards, such as MasterCard or Visa, enables a firm to decrease the expense of extending credit to customers. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 74) The cost to a retailer of accepting credit cards is generally greater than the benefits provided. Answer: FALSE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

75) Acquiring and storing inventory represents a sizable expenditure for many businesses. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 76) To improve cash flow and profitability, effective managers attempt to minimize the firm's investment in inventory. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 77) Capital expenditures are major investments in long-term assets such as property and equipment. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 78) Sound financial management involves determining the most appropriate sources of funds to meet short-term and long-term needs of an organization. Answer: TRUE Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

79) While firms finance their long-term needs with debt financing, their short-term needs are served by equity financing. Answer: FALSE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 80) Short-term financing refers to borrowed funds that must be repaid in a year or less. Answer: TRUE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 81) Equity financing must be repaid. Answer: FALSE Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 82) Equity financing represents funds acquired from within the firm or through the sale of stock, representing ownership in the company. Answer: TRUE Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

83) Business organizations always use long-term financing for (both) short-term and long-term needs, but they never use short-term financing for (both) short-term and long-term needs. Answer: FALSE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 84) Debt financing refers to funds acquired from the profitable operations of a firm or through the sale of ownership in the firm. Answer: FALSE Explanation: Debt financing refers to borrowing money from lending institutions, with the understanding that these sources of funds will be repaid at a later date. Difficulty: 2 Medium Topic: Debt and Equity Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 85) Expansion into new markets (either domestic or global) is sometimes financed with longterm funds. Answer: TRUE Explanation: Expanding production in order to capture new markets is an endeavor that usually takes a sizeable investment over a long period of time. Difficulty: 2 Medium Topic: Short and Long Term Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

86) Companies raising funds must choose either debt or equity sources, but not both. Answer: FALSE Explanation: Firms may utilize several sources and several combinations of financing. These generally include debt financing (borrowed funds), equity financing (funds acquired through the sale of company stock), and even internal sources of financing such as companies retaining their earnings. Difficulty: 2 Medium Topic: Debt and Equity Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 87) Financial managers understand the time value of money. They try to maximize cash expenditures, as opposed to minimizing cash expenditures. Answer: FALSE Explanation: Financial managers try to minimize cash expenditures to free up funds for investment in interest-bearing accounts. The interest received from interest-bearing accounts contributes to profits. Difficulty: 2 Medium Topic: Short and Long Term Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 88) Based on the time value of money, $100 received a year from today is worth more than $100 received today. Answer: FALSE Explanation: A dollar is worth more today than it is worth a week, a month, or a year from now. A dollar may be invested today, and grow to a larger value one year from now. If you were offered $1.00 today, you should expect a little more than a dollar, one year from now, if everything else is equal. Difficulty: 2 Medium Topic: Short and Long Term Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

89) Money has time value due to the fact that if invested, it has the potential to earn more money at some point in the future. Answer: TRUE Explanation: A dollar today is worth more than the same dollar in the distant future, due to time value of money. If you invest a dollar today, it has the potential to earn interest, which would make it worth more at some time in the future. Financial managers are aware of this time value and often try to shift some of their cash on hand into investments in interest-bearing accounts. Difficulty: 2 Medium Topic: Short and Long Term Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 90) Efficient cash management requires firms to pay their bills as quickly as possible, and delay the collection of accounts receivable. Answer: FALSE Explanation: In order to increase cash flow, businesses attempt to collect credit sales from their customers as soon as possible, and delay payment of outstanding bills. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 91) Successful businesses establish restrictive credit policies encouraging customers to pay cash. Answer: FALSE Explanation: Making credit available helps make current customers happy and attracts new customers. Although extending credit ties up funds and entails risk, many businesses would have trouble surviving without making credit available to customers. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

92) Offering cash discounts to customers who pay their bills by a certain date represents an effective technique to manage accounts receivable. Answer: TRUE Explanation: Although selling on credit is a necessity for many businesses, a major problem with offering credit is that it ties up funds that the firm needs for other purposes. Offering cash or quantity discounts to customers who pay their account early is an effective way of improving collections and speeding the inflow of cash into the firm. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Apply AACSB: Reflective Thinking Accessibility: Keyboard Navigation 93) An effective strategy to manage cash flows requires retail businesses to eliminate their inventory. Answer: FALSE Explanation: Financial managers face a trade-off when dealing with inventory. Investment in inventory is costly, but businesses must maintain some inventory in order to provide customers an adequate selection of available goods. The goal of inventory management is not to eliminate inventory but rather to minimize the cost of holding inventory. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 94) A firm will choose to seek debt financing only for the purpose of paying for short-term operating needs. Answer: FALSE Explanation: Debt financing is synonymous with borrowing funds. Funds can be borrowed either short-term or long-term. Difficulty: 2 Medium Topic: Debt and Equity Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

95) Equity financing may involve the sale of stock (representing ownership) to new investors. Answer: TRUE Explanation: Equity capital is money raised by retaining profits within the firm or by the sale of ownership in the firm. There is no requirement to repay these funds. Difficulty: 2 Medium Topic: Debt and Equity Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 96) As financial manager for Marshall Manufacturing, Elena evaluates the purchase of expensive machinery and the construction of new facilities. Elena is analyzing capital expenditure proposals. Answer: TRUE Explanation: Capital expenditures are major investments in long-term assets like buildings, equipment, and land or intangible assets such as patents, trademarks, and copyrights. Difficulty: 3 Hard Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 97) Willow's small floral shop specializes in weddings. Though she knows her competitors allow customers to buy on credit, she is concerned about the risk and expense of unpaid customer accounts. One strategy to reduce risk and collect sales revenue more quickly would be to accept bank-issued credit cards. Answer: TRUE Explanation: Not only are credit cards a convenient means of payment for many customers, the banks that issue the cards have already established the creditworthiness of the cardholders. Moreover, accepting credit cards is a good way for firms to cut the time and expense involved in collecting accounts receivable. Firms believe the benefits outweigh the credit card company fees. Difficulty: 3 Hard Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

98) Burger Barn is a chain of hamburger restaurants on the West Coast. The corporation plans to expand to the Midwest and then along the East Coast. The acquisition of land and construction of new restaurants represent major capital expenditures. Answer: TRUE Explanation: Capital expenditures are major investments in tangible, long-term assets, such as land, buildings, and equipment, as well as intangible assets such as patents, trademarks, and copyrights. Difficulty: 3 Hard Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 99) Portable Pet Care, a mobile veterinary service, wants to expand. After thoroughly reviewing the possibility of expansion, Portable Pet Care plans to offer a similar service in the Indianapolis metropolitan area as it does in its original Columbus, Ohio area. This will require a large capital expenditure. Due to the nature of this project, the firm will consider only equity financing. Answer: FALSE Explanation: Although a project of this nature is considered a capital expenditure, it may be financed in one of three ways: with debt financing (long-term borrowing); with equity financing (the sale of private or public offering of stock), or with retained earnings. Difficulty: 3 Hard Topic: Debt and Equity Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 100) Luna, the owner of Pages and Pages Booksellers, is seeking additional financing for books that she plans to buy and sell in the same fiscal year. Even though it will be a sizeable investment in inventory, Luna is seeking short-term financing. Answer: TRUE Explanation: Inventory that is purchased and sold in the same year is financed with short-term sources of funds. Difficulty: 3 Hard Topic: Short and Long Term Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

101) Pages and Pages Booksellers is seeking financing to fund the opening of two new locations in nearby college towns. There is no need to consider debt financing for this project. It will require a sizeable investment in equity funds. Answer: FALSE Explanation: Although an expansion project is a sizeable investment that usually requires longterm financing, both debt financing and equity financing may be considered for this project. Long-term loans (debt financing) are repaid in a time period longer than one year and usually carry terms of anywhere from 2–10 years. Equity financing, funds from the sale of stock in the firm, does not need to be repaid. Difficulty: 3 Hard Topic: Short and Long Term Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 102) Financial managers devote the majority of their time to obtaining long-term financing to fund the firm's capital expenditures. Answer: FALSE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 103) Small businesses rely heavily on long-term financing. Answer: FALSE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

104) Much of a financial manager's day-to-day activities involve managing the short-term financial needs of the firm. Answer: TRUE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 105) The most widely used source of short-term funding is trade credit. Answer: TRUE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 106) Trade credit represents one of the most expensive forms of short-term financing. Answer: FALSE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 107) Trade credit is the practice of buying goods now and paying for them later. Answer: TRUE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

108) The terms "2/10, net 30" indicate that the seller is offering a 20% discount for early payment. Answer: FALSE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 109) Trade credit means the seller will sell and deliver products and/or services to the buyer, with the understanding that the buyer will pay for these products and/or services at a later date. Answer: TRUE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 110) Suppliers prefer to offer trade credit to customers with poor credit ratings or no credit history. Answer: FALSE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 111) A promissory note is a written contract between a supplier and a business customer, with a promise that customer will pay supplier a specified amount by a certain date. Answer: TRUE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

112) Family and friends represent problem-free sources of financing for most small businesses. Answer: FALSE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 113) A line of credit is designed to reduce the risk of lending money. Answer: FALSE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 114) Inventory financing represents the selling of accounts receivables as collateral for a loan. Answer: FALSE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 115) A secured loan means the borrower has the security of knowing repayment is not due for several years. Answer: FALSE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

116) An unsecured loan does not require a borrower to provide collateral to secure a loan. Answer: TRUE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 117) A line of credit represents a guarantee from a bank to lend a firm a given amount of money. Answer: FALSE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 118) A line of credit is a given amount of unsecured short-term funds a bank will lend to a business. Answer: TRUE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 119) Commercial finance companies normally charge lower rates on short-term loans than those charged by commercial banks. Answer: FALSE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

120) Factoring refers to the process of selling accounts receivable for cash. Answer: TRUE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 121) Factoring refers to the process of selling inventory to generate short-term funds. Answer: FALSE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 122) Factoring represents the least expensive way for a firm to raise short-term funds. Answer: FALSE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 123) A tool that provides lots of convenience, credit cards are a source of a readily available line of credit for a small business because they provide convenience. Answer: TRUE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

124) Commercial paper is unsecured short-term debt. Answer: TRUE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 125) Financially stable firms are able to sell commercial paper to raise short-term funds. Answer: TRUE Explanation: Commercial paper consists of unsecured promissory notes in amounts of $100,000 and up that mature in 270 days or less. Since it offers no collateral, only financially stable firms are able to sell commercial paper. Difficulty: 2 Medium Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 126) Many sellers offer a 2% discount to a buyer that makes payment 20 days before the due date, (2/10, net 30). Firms that fail to take advantage of this early payment discount are giving up approximately 36%. Answer: TRUE Explanation: There are about eighteen 20-day periods in a year. The penalty for not taking a discount is calculated as follows: 18 periods x 2% equals 36%. Difficulty: 2 Medium Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

127) If a buyer is offered the terms of sale of "3/10, net 30" this means that the buyer can receive a 10 percent discount by making full payment within 30 days of the billing date. Answer: FALSE Explanation: The terms "3/10, net 30" indicate the buyer is offered a 3 percent discount if payment is made within 10 days of the billing date. Difficulty: 2 Medium Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 128) A line of credit from a bank guarantees a firm that a specified amount of financing will be available when it is needed. Answer: TRUE Explanation: A line of credit means a bank will lend a business a given amount of short-term funds provided the bank has funds readily available. In other words, the availability of funds is not guaranteed. Difficulty: 2 Medium Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 129) According to the box, Adapting to Change, most online loans are safe with a low interest rate. Answer: FALSE Explanation: Since most traditional lenders are not very receptive to new businesses, entrepreneurs sometimes turn to online lending websites. However, not all of these sites are reputable and many have high interest rates, some even 300%! Difficulty: 2 Medium Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

130) Diana is a financial manager for Eagle Eye Care, a chain of retail stores offering optical care and glasses. The majority of Diana's day likely involves efforts to locate and secure longterm financing to fund Eagle Eye Care's capital expenditures. Answer: FALSE Explanation: The bulk of the job of a financial manager requires handling of short-term financial needs for his/her company. This includes managing cash, accounts receivables, and inventory. Difficulty: 3 Hard Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 131) When Asher received a loan from Bigbux Bank, he was required to pledge his house and car as collateral. The money from the loan was used to start his new business, which unfortunately failed within 6 months. The bank can now claim Asher's house and car to satisfy its claim. Answer: TRUE Explanation: Collateral is a valued asset that is pledged to the lender, at the time a loan is secured. If the borrower fails to pay the loan, the lender can take possession of the collateral. Difficulty: 3 Hard Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 132) As the chief financial officer (CFO) for a medium-sized service company, Cora is concerned about the possibility of temporary cash shortages. Given the irregular cash flows from seasonal sales, she wants to ensure that her company's bank will provide adequate funds to cover any potential cash flow problem. The best strategy to ease Cora's concern would be to arrange a revolving credit agreement with the bank. Answer: TRUE Explanation: A revolving credit agreement is a guaranteed line of credit. This type of arrangement is a good way to obtain funds for unexpected cash needs. Difficulty: 3 Hard Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

133) Rock Solid Concrete Company relies on factoring to meet its short-term financing needs. This means that Rock Solid borrows money from a finance company and pledges its accounts receivable as collateral. Answer: FALSE Explanation: Factoring does not involve borrowing money. It is the sale of an asset (accounts receivable) for cash. Difficulty: 3 Hard Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 134) Epic Electronics holds commercial paper issued by SafeONE Insurance that matures in 180 days. However, shortly after Epic purchased the commercial paper, SafeONE went out of business. The finance manager for Epic is not worried because his loan to the corporation is secured by collateral that he can now claim. Answer: FALSE Explanation: Commercial paper is an unsecured promissory note. No assets are pledged by the company as collateral. In this case, the one firm lent money to the other firm, on the short term, for 270 days or less. Difficulty: 3 Hard Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 135) Most companies require long-term capital to purchase fixed assets such as plant and equipment, to develop new products and services, or to finance an expansion. Answer: TRUE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

136) Equity financing refers to the money a firm receives from the sale of bonds. Answer: FALSE Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 137) When using equity financing, firms incur a legal obligation to repay the amount of money invested. Answer: FALSE Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 138) A term-loan agreement requires the borrower to repay the loan in one lump sum at the end of the loan period. Answer: FALSE Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 139) The interest paid for debt financing is a tax-deductible expense for the firm. Answer: TRUE Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

140) According to the risk/return trade-off, the higher the risk, the lower the interest rate charged by the lender. Answer: FALSE Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 141) A share of stock represents a company-issued IOU including a promise to repay on a certain date. Answer: FALSE Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 142) A bond represents a long-term debt obligation of a corporation or government. Answer: TRUE Difficulty: 1 Easy Topic: Bonds Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 143) An unsecured corporate bond is known as a debenture bond. Answer: TRUE Difficulty: 1 Easy Topic: Bonds Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

144) A debenture bond is backed only by the reputation of the issuer. Answer: TRUE Difficulty: 1 Easy Topic: Bonds Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 145) The types of organizations which can issue bonds are privately and publicly held corporations, exclusively. Answer: FALSE Difficulty: 1 Easy Topic: Bonds Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 146) The indenture terms refer to the agreements of a bond issue, such as how much interest it promises to pay and when it promises to repay the issue. Answer: TRUE Difficulty: 1 Easy Topic: Bonds Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 147) Funds obtained from venture capitalists are considered equity financing. Answer: TRUE Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

148) Retained earnings represent a source of equity financing. Answer: TRUE Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 149) The first time a company offers to sell its stock to the general public is called an initial private label (IPL). Answer: FALSE Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 150) Corporations must comply with the Securities and Exchange Commission (SEC) requirements in order to sell their stock publicly. Answer: TRUE Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 151) Venture capital is money that is invested in new or emerging companies that are perceived as having great profit potential. Answer: TRUE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

152) Venture capitalists expect lower than average returns on their investment since they are exposed to little risk. Answer: FALSE Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 153) Most companies have the ready cash available to make large purchases. Answer: FALSE Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 154) Acquiring funds through equity financing requires the firm to pay annual dividends. Answer: FALSE Difficulty: 1 Easy Topic: Figure 18.6 Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 155) Acquiring funds through debt financing actually decreases the overall risk of the firm. Answer: FALSE Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

156) Acquiring funds through debt financing enhances the firm's ability to increase profits. Answer: TRUE Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 157) Leverage refers to the use of borrowed funds to increase a firm's rate of return. Answer: TRUE Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 158) The cost of capital is the rate of return a firm must earn in order to meet the demands of its lenders and expectations of its equity holders. Answer: TRUE Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 159) Long-term loans are often more expensive than short-term loans. Answer: TRUE Explanation: Because long-term loans involve larger amounts of funding than short-term loans, they are generally more expensive to the firm than short-term loans are. Also, since the repayment period could be quite long, lenders are not assured that their capital will be repaid in full. Thus most long-term loans require collateral. Difficulty: 2 Medium Topic: Short and Long Term Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

160) Corporations that issue debenture bonds are required to provide collateral. Answer: FALSE Explanation: Bonds can be either secured or unsecured. Unsecured bonds have no specific assets pledged as collateral. This type of bond is called a debenture. Difficulty: 2 Medium Topic: Bonds Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 161) Corporations that issue stock to raise long-term funds accept the legal obligation to repay the amount borrowed. Answer: FALSE Explanation: Stock represents equity capital or owner-provided funds. Stockholders are owners of the firm and are not repaid their investment. Difficulty: 2 Medium Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 162) Unlike bonds, stocks offer the advantage of tax-deductible interest payments. Answer: FALSE Explanation: Interest payments made by a firm are a tax-deductible expense. However, interest is paid to creditors, not owners. Since shares of stock represent shares of ownership, there is no interest paid on stock. Difficulty: 2 Medium Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

163) One important consideration for a firm accepting funds from a venture capitalist is the ownership interest demanded by the venture capital firm. Answer: TRUE Explanation: The share of ownership is the incentive for a venture capital firm to invest in a promising start-up company. Venture capitalists hope to profit as part owners from the financial assistance they offer. Difficulty: 2 Medium Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 164) According to the Spotlight on Small Business box, to be a venture capitalist, a person needs to have years of expertise in the field of businesses they are funding. Answer: FALSE Explanation: Upon his retirement from the NBA, Kobe Bryant joined with Jeff Stibel to start a $100 million venture capital firm that invests primarily in technology, media, and data companies. Difficulty: 2 Medium Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 165) As mentioned in the Spotlight on Small Business box, Kobe Bryant is pivoting into being a venture capitalist. Answer: TRUE Explanation: Upon his retirement from the NBA, Kobe Bryant joined with Jeff Stibel to start a $100 million venture capital firm that intends to invest primarily in technology, media, and data companies. Difficulty: 2 Medium Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

166) Pure Power issued $300 million of bonds to finance a major upgrade of its largest power plant in Georgia. The issuance of these bonds indicates that Pure Power utilizes equity capital to meet its long-term financing needs. Answer: FALSE Explanation: Bonds represent a long-term debt obligation of the company. This is not a means of financing with equity. Difficulty: 3 Hard Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 167) As a financial manager at Marshall Manufacturing, Chase is exploring sources of long-term funds to finance the construction of Marshall's newest plant. Chase would prefer a funding source that does not require interest payments or involve major underwriting fees. Chase will consider using retained earnings to fund the construction project. Answer: TRUE Explanation: Retained earnings are profits that have been reinvested in the company. Since Marshall Manufacturing is profitable, such funds may be available. Using retained earnings saves the company interest payments, dividends, and any possible underwriting fees. Also, there is no dilution of ownership. Difficulty: 3 Hard Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

168) Financial managers at Epic Electronics have always had a conservative attitude toward long-term financing. In particular, they are interested in keeping risk to a minimum. This philosophy suggests that managers at Epic consider the extensive use of leverage an attractive financial strategy. Answer: FALSE Explanation: Leverage is the use of borrowing to increase a firm's rate of return. One of the drawbacks of leverage is that reliance on debt increases the financial risk of the firm. If the firm's earnings on the borrowed funds were less than the interest the firm is required to pay, the rate of return to the owners would decline. This type of strategy is not likely to appeal to the conservative financial managers at Epic. Difficulty: 3 Hard Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 169) An example of a firm using leverage to its advantage is a firm that borrows funds at 9% and invests those funds to earn 14%. Answer: TRUE Explanation: Leverage refers to the use of borrowed funds to increase the firm's rate of return. Borrowing funds at 9% and then investing those funds in assets yielding more than 9% (in this case 14%) will increase the firm's rate of return. Leverage is risky, because there is no guarantee the firm will earn a return sufficient to cover the cost of borrowing. In this case, however, the return is sufficient to overcome the cost of borrowing and increase the firm's rate of return. Difficulty: 3 Hard Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

170) If a firm earns 10% return on funds they borrowed at 15% interest, the owners of the firm realize a benefit from using leverage. Answer: FALSE Explanation: Leverage refers to the use of borrowed funds to increase the firm's rate of return. Borrowing at 15% interest (cost of capital) and using those funds to earn 10% decreases the return on investment for the firm. Difficulty: 3 Hard Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 171) ________ examine the data prepared by ________ and then make recommendations to top management regarding strategies for improving the firm. A) Accountants; financial managers B) Accountants; bankers C) Financial managers; accountants D) Financial managers; bankers Answer: C Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 172) ________ is the function in business that is responsible for acquiring funds for the firm, and managing funds within the firm. A) Accounting B) Managerial accounting C) Finance D) Financial accounting Answer: C Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

173) Which of the following correctly identifies areas of authority and responsibility for a chief financial officer (CFO)? A) accounting and finance B) marketing and finance C) production and accounting D) finance and research and development Answer: A Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 174) No matter the size of the business, finance is a critical activity for A) profit-seeking, but not for nonprofit organizations. B) profit-seeking and nonprofit organizations. C) nonprofit organizations, but not for profit-seeking businesses. D) accountants, but not for financial managers. Answer: B Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 175) Undercapitalization refers to the problem of A) insufficient start-up funds. B) inadequate control of expenses. C) inappropriate cash flows. D) undervalued capital stock. Answer: A Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

176) Which of the following statements is most accurate? A) Accounting and finance are not related. B) Financial managers keep the books for a firm. C) Financial managers need to understand accounting. D) Nonprofit organizations must choose between accounting and finance. Answer: C Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 177) Which of the following is a primary area of concern for financial managers? A) undercapitalization B) inability to recruit qualified workers C) poor advertising messages D) inadequate market control Answer: A Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 178) Which business function involves credit management/collecting funds from customers? A) accounting B) production C) marketing D) finance Answer: D Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

179) Which of the following statements about taxes is accurate? A) Taxes represent an inflow of cash to the firm. B) Profitable businesses usually pay taxes. C) Tax management falls within the responsibility of marketing managers. D) Taxes cannot be managed because of fluctuations in political policy. Answer: B Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 180) A(n) ________ is responsible for verifying that the accounting procedures within a firm are consistent with established accounting principles. A) managerial accountant B) tax accountant C) bookkeeper D) internal auditor Answer: D Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 181) Which of the following commonly results in the financial failure of a firm? A) diversification B) undercapitalization C) control of expenses D) management of cash flows Answer: B Explanation: Undercapitalization refers to the problem of insufficient cash to adequately fund the firm's activities. Our text suggests that undercapitalization and inadequate control over cash flows and expenses are the most common ways for a firm to fail financially. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

182) A(n) ________ job includes forecasting, budgeting, cash flow analysis, cost control, taxes, and credit management. A) CPA's B) investment banker's C) financial manager's D) portfolio manager's Answer: C Explanation: Financial managers examine the financial data prepared by accountants and make recommendations to top executives regarding strategies for improving firm performance. They manage the firm's taxes, cash, credit accounts, and inventory. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 183) Which of the following companies is undercapitalized? A) A large corporation that has been hit with a major lawsuit because one of its products has a design flaw that has led to serious injuries. B) A new company struggling because it has insufficient start-up funds. C) A medium-sized company that has decided to buy out a smaller competitor. D) An electric utility that has recently experienced a significant increase in the cost of coal and labor. Answer: B Explanation: Undercapitalization is the problem of having insufficient start-up funds. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

184) Which of the following activities is most likely to be performed by a financial manager? A) design of a marketable product that satisfies an unmet need B) identification of specific target markets for a firm's goods C) preparation of the balance sheet and income statement for the firm D) analysis of the tax implications of various managerial decisions Answer: D Explanation: Tax management often is an important part of a financial manager's job. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 185) Julia started a cake decorating business last year. Unfortunately it failed quickly. She is convinced that she lacked the necessary funds to promote her business and get it off the ground. What did Julia experience? A) inadequate financial control B) undervalued inventory C) undercapitalization D) a cash flow issue Answer: C Explanation: Undercapitalization occurs when a business has insufficient start-up funds. Difficulty: 3 Hard Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

186) Ezra is the manager of Outdoor Adventure Sporting Goods. During the past six months, his cash expenditures have exceeded his cash receipts. Outdoor Adventure is suffering from a(n) ________ problem. A) accounting B) undercapitalization C) cash flow D) exchange rate Answer: C Explanation: Cash flow problems occur when a firm's outflows of cash exceed its inflows. Poor management of cash flow is a common cause of business failure. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 187) Riley, a new graduate with a finance degree, was recently hired by a large corporation to work in tax management. Riley's goal is A) to prepare the company's tax returns. B) to develop ways to increase taxes in order to enhance the bottom line. C) to minimize the firm's tax consequences. D) to be the firm's tax collector. Answer: C Explanation: Since tax payments represent an outflow of cash from the business, minimizing a firm's taxes is an important responsibility of financial managers. Difficulty: 3 Hard Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

188) Zachary is going to major in business. However, he has never had much interest in subjects with numbers. He would like to avoid taking any finance courses if possible. What should Zachary do? A) Avoid finance courses and focus on subjects that he enjoys. B) Take a finance course to satisfy graduation requirements. C) Realize that his success in business requires an understanding of financial issues. D) Change majors and go into the arts. Answer: C Explanation: Finance and accounting are two areas that everyone involved in business should study. Difficulty: 3 Hard Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 189) When Portable Pet Care, a mobile veterinary company, first started operations, it extended three months of credit to customers. It soon began to experience a cash flow problem. A finance professional was hired to A) manage accounts receivable. B) manage accounts payable. C) develop tax strategies. D) audit the company ledgers. Answer: A Explanation: Particularly in small companies such as the example in this question, monitoring and collecting payments owed by customers is an important effort that leads to better cash flow. Difficulty: 3 Hard Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

190) The overall objective of financial planning is to A) forecast the impact of technological trends. B) prepare financial statements for managers. C) optimize the firm's profitability. D) establish budgets for financial control. Answer: C Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 191) The first step in the financial planning process is A) forecasting financial needs. B) preparing financial statements. C) developing budgets. D) establishing financial control. Answer: A Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 192) A ________ forecast predicts the revenues, costs, and expenses a firm will incur for a period of one year or less. A) near-horizon B) short-term C) capital expenditures D) tactical Answer: B Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

193) A ________ forecast predicts the future cash inflows and outflows in future periods. A) money based B) short-term C) cash flow D) long-term Answer: C Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 194) A ________ forecast predicts the revenues, costs, and expenses a firm will incur for a period longer than one year. A) cash flow B) short-term C) capital expenditures D) long-term Answer: D Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 195) In order to assist in revenue realization, a(n) ________ allocates resources throughout the firm. A) forecast B) balance sheet C) budget D) income statement Answer: C Difficulty: 1 Easy Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 60 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

196) Which of the following shows a firm's spending plans on fixed assets such as large equipment? A) capital budget B) operating budget C) cash budget D) surplus budget Answer: A Difficulty: 1 Easy Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 197) The budget that estimates a firm's projected cash inflows and outflows, as well as cash shortages or surpluses during a given time period, is called the ________ budget. A) capital B) operating C) cash D) monetary Answer: C Difficulty: 1 Easy Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

198) ________ refers to the process that identifies variances by comparing actual revenues and expenses to projected revenues and expenses. A) Factor analysis B) Forecasting C) Financial planning D) Financial control Answer: D Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 199) An effective budget requires A) a successful advertising campaign. B) accurate forecasts. C) management approval. D) stakeholder consensus. Answer: B Difficulty: 1 Easy Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

200) If a company wants to predict how much money it can make this coming year, it would benefit from developing a A) master budget. B) consolidated income statement. C) short-term forecast. D) statement of cash flows. Answer: C Explanation: A short-term forecast is a prediction of revenues, costs, and expenses for a period of one year or less. Difficulty: 2 Medium Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 201) Which of the following would be most helpful for a company looking to know the income potential during the next five years? A) cash flow forecast B) long-term forecast C) short-term forecast D) capital budget forecast Answer: B Explanation: The long-term forecast plays a crucial part in the company's long-term plan. The long-term financial forecast gives top management, as well as operations managers, some sense of the income or profit potential possible over a period of time greater than one year. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

202) Securitas Financial Services is contemplating purchasing and installing a new, expensive computer network. This is the type of expenditure that would be included in a(n) A) capital budget. B) cash budget. C) operating budget. D) asset budget. Answer: A Explanation: The capital budget highlights a firm's spending plans for major asset purchases that often require large sums of money. Difficulty: 3 Hard Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 203) The managers of Comfort Clothing regularly compare actual profits with the firm's projected profits. When deviations occur, the managers use the feedback to take corrective action when necessary. The management of Comfort Clothing is exercising financial A) derivatives. B) control. C) planning. D) budgeting. Answer: B Explanation: Comparing actual performance with projected results is part of the financial control process. Difficulty: 3 Hard Topic: Financial Management Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

204) Marcus, a management consultant, knows that regardless of how good his firm's product might be, the business has little chance of success without a(n) A) financial plan. B) outside consultant. C) auditor. D) warranty. Answer: A Explanation: Financial planning involves analyzing short-term and long-term money flows to and from the firm. The overall objective of financial planning is to optimize the firm's profitability and make the best use of its money. Difficulty: 3 Hard Topic: Financial Management Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 205) Akiko realizes the importance of developing a ________ for her interior design business. Akiko understands the importance of appropriately allocating resources in order to achieve the goals of her firm. A) market prediction B) financial forecast C) budget D) cash flow analysis Answer: C Explanation: A budget sets forth management's expectations for revenues and, based on those financial expectations, allocates the use of specific resources throughout the firm. Difficulty: 3 Hard Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

206) As a finance manager at Outdoor Adventure Sporting Goods, Roman worries about the firm's borrowing requirements for the upcoming year. He knows the benefit of estimating the company's cash disbursements and short-term investment expectations. Facing these concerns, a(n) ________ would provide Roman with valuable information by providing a good estimation of whether the firm will need to do short-term borrowing. A) operating budget B) cash budget C) capital budget D) line item budget Answer: B Explanation: Cash budgets can be important guidelines that assist managers in anticipating borrowing, debt repayment, cash disbursements, and short-term investment expectations. Difficulty: 3 Hard Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 207) Roman, the finance manager at Outdoor Adventure Sporting Goods, has asked his assistant, Vincent, to prepare the ________ budget. Vincent will gather as much information as possible by utilizing the firm's other budgets and any documents that summarize proposed financial activities. A) master B) cash C) capital D) line item Answer: A Explanation: The master budget (also known as the operating budget) summarizes and ties together all the company's other budgets. Difficulty: 3 Hard Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

208) One of the challenges of effective financial management is A) to have sufficient cash on hand without compromising the firm's investment potential. B) ensuring the satisfaction of each of the stakeholder groups. C) working within the strict regulations of the Financial Accounting Standards Board (FASB). D) providing the financial data in a timely manner for management consultants to improve decision making. Answer: A Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 209) The concept time value of money indicates A) the value of a dollar decreases over time as prices increase. B) the prices of goods and services will fluctuate over time due to inflation and higher costs of production. C) monetary systems tend to become more sophisticated over time. D) a dollar received today is worth more than a dollar received a year from today. Answer: D Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 210) Money has a time value because A) inflation increases the value of money over time. B) money earns interest over time. C) monetary systems are more automated than in the past. D) a dollar received today is worth more than a dollar received yesterday. Answer: B Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

211) The rationale behind offering customers credit is A) permitting customers to pay with credit cards or on credit makes it easier for them to buy, and it also attracts new customers. B) offering customers credit helps with the firm's cash flow position. C) offering customers credit helps match revenues with expenses for the same time period. D) permitting customers to pay with credit cards or on credit forces a company to rely less on accounts receivables and more on accounts payables. Answer: A Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 212) A major concern for firms selling on credit is A) the realization that many credit customers always pay their bills. B) the large amount of assets tied up in accounts receivable. C) the resulting increase in the debt ratio for the firm. D) the inability to utilize factoring as a source of financing. Answer: B Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 213) To reduce the time and expense of collecting their accounts receivable, some firms A) extend credit to new customers. B) offer extended payment plans to existing customers. C) adopt a just-in-time inventory policy. D) accept bank credit cards. Answer: D Difficulty: 1 Easy Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

214) Acquiring funds through borrowing represents A) debt financing. B) venture capital. C) speculative capital. D) equity financing. Answer: A Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 215) If a firm sells shares of stock, it is financing with A) debt. B) liabilities. C) spectator capital. D) equity. Answer: D Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 216) If a company secures a three-year bank loan, this is considered A) short-term financing. B) asset funding. C) liability funding. D) long-term financing. Answer: D Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

217) If a company secures a one-year bank loan this is considered A) short-term financing. B) asset funding. C) liability funding. D) long-term financing. Answer: A Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 218) The effective management of accounts receivable requires financial managers to A) review the credit history of new customers. B) provide prompt cash payments to suppliers. C) allow customers more time in paying their past due accounts. D) refuse bank-issued credit cards. Answer: A Explanation: Finance managers are responsible for carefully evaluating old and new credit customers to determine if they have a favorable history of meeting their credit obligations on time. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

219) Which of the following would normally involve long-term financing? A) workers' salaries B) unanticipated emergencies C) purchase of modern equipment D) expansion current inventory Answer: C Explanation: Long-term financing is used for major purchases or projects that are financed for a time period greater than one year such as new-product development, building or purchasing new facilities, and replacing capital equipment. Difficulty: 2 Medium Topic: Short and Long Term Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 220) Which of the following presents an effective technique to improve cash management? A) Speed up cash payments and slow down cash collections. B) Speed up cash collections and slow down cash payments. C) Speed up both collections and payments of cash. D) Slow down both the payment and collections of cash. Answer: B Explanation: In order to maximize the investment potential of a firm's funds, it's not unusual for finance managers to suggest that the firm pay bills as late as possible, unless a cash discount is available. The other half of this rule of thumb is to collect what's owed to the firm as quickly as possible. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

221) Which of the following represents a capital expenditure? A) issuing paychecks to workers B) paying for advertising on a local radio station C) purchasing raw materials to be used in the production of a firm's product D) purchasing a building to be used for office space Answer: D Explanation: Capital expenditures are major investments in long-term assets such as land, buildings, and equipment; or intangible assets such as patents. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 222) Which of the following statements represents good advice prior to making capital expenditures? A) Capital expenditures represent borrowed funds that must be repaid in one year or less. It is important to seek the advice of your accountant prior to committing. B) Capital expenditures represent investment in inventories and expendable assets that the firm will use in one year or less. It is important to maintain the appropriate level of monthly cash flow to pay for these expenditures. C) Most firms do not value capital expenditures on their balance sheets, so it is important to stay abreast of the market value of these assets at all times, in case you want to sell them. D) Capital expenditures are major investments, meaning they require large sums of funds. Companies should weigh all possible options before committing available resources to projects that take significant amounts of funds and extended time. Answer: D Explanation: In many organizations the purchase of major assets—such as land for future expansion, manufacturing plants to increase production capabilities, research to develop newproduct ideas, and equipment to maintain or exceed current levels of output—is essential. Expanding into new markets, however, can be expensive with no guarantee of success. There is no guarantee that this investment will result in good returns for the firm. These investments must be thoroughly evaluated. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

223) The Making Ethical Decisions box "Good Finance or Bad Medicine" has an important message for managers who make financial decisions. Which of the following statements summarizes this message? A) Managers must balance good economic decisions with socially forward thinking. B) Financial decisions must be based on what insurance companies are willing to pay. C) Checking academic credentials of recently graduated doctors is imperative due to the cost of lawsuits that patients may file if they learn that they were served by a surgeon without a license. D) The support of a good law firm is worth every penny a hospital might pay. The finance manager should always budget for a legal team. Answer: A Explanation: The story is about a hospital finance manager who wants to limit drug inventories in order to boost cash flow. Doctors want immediate access to any and all medicines that may be important to treat patients. The ethical dilemma is about balancing the need to limit costs with the need to support the needs of doctors and their patients in a timely way. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Understand AACSB: Ethics Accessibility: Keyboard Navigation 224) According to the Not What the Doctor Ordered! box, a just-in-time inventory system allows a firm to A) extend credit to new customers. B) provide sufficient inventory for most contingencies. C) reduce their investment in inventory. D) reduce capital expenditures. Answer: C Explanation: Using a carefully planned and managed inventory control system, like just-in-time inventory, reduces the amount of cash an organization has tied up in inventory. Difficulty: 2 Medium Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

225) Theme Park Thrillers has plans to build a new $175 million theme park and intends to finance this project through the sale of additional shares of ownership in their firm. Selling new shares of stock represents ________ financing. A) retained B) debt C) initial offering D) equity Answer: D Explanation: Equity financing refers to funds raised from either selling shares of ownership or from retained earnings. Difficulty: 3 Hard Topic: Debt and Equity Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 226) The owners of Spokes Bicycle Shop worry that cash flow this winter may be insufficient to meet the current operating expenses. While they anticipate a surplus of cash inflow as warm weather approaches, they need funds now to meet the company's immediate obligations. The owners can best resolve cash flow concerns by obtaining ________ financing. A) intermediate B) contingency C) short-term D) long-term Answer: C Explanation: Short-term financing is intended to meet the immediate funding needs of an organization. These are funds that will be repaid within a year. Difficulty: 3 Hard Topic: Short and Long Term Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

227) Worldwide Wholesale Company wants to improve cash flow. Which of the following strategies would be most likely to help Worldwide achieve this objective? A) relaxing its credit policy for new customers B) offering cash discounts to buyers who pay their accounts promptly C) accepting IOUs from customers who buy in large quantities D) offering extended payment plans to qualified buyers Answer: B Explanation: Businesses often provide cash or quantity discounts to buyers who pay their accounts by a certain date. By continually turning accounts receivable into cash, the firm is increasing cash flow. Difficulty: 3 Hard Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 228) If you are at the Phoenix Sky Harbor International Airport, you will no longer get a patdown if you go through the metal detector. The airport now has full body screening ports that scan the entire body and readily detect weapons or explosive devices that someone may want to take on board a plane. These expensive devices represent A) long-term assets. B) short-term assets. C) intangible assets. D) interest-bearing assets. Answer: A Explanation: Large capital expenditures such as represented by expensive machinery are longterm assets. These are purchased by businesses with the understanding that they will be used in the business's operation for several years. Difficulty: 3 Hard Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

229) Rock Solid Concrete Company does not offer customers a cash discount for early payment of their accounts receivable. As a result, most customers wait to pay their bill on the last day before late penalties are charged. These customers apparently understand the A) time value of money. B) benefits of tax-deductible expenses. C) financial community's perception of equity financing. D) government's regulations of the chemical industry. Answer: A Explanation: Money has a time value because of the interest-paying investments that are available. To encourage customers to pay earlier, New World would need to reward them with a discount. This would compensate the customers for missed investment opportunities. Difficulty: 3 Hard Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 230) By selling shares of ownership in their company, Seattle Scientific acquires the funds needed to finance their research and development projects. Seattle Scientific provides for their long-term funding needs through ________ financing. A) debt B) equity C) retained D) asset Answer: B Explanation: Equity financing is generated through the sale of stock. It is also generated when a firm retains its earnings and reinvests those earnings back into the company. Difficulty: 3 Hard Topic: Debt and Equity Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

231) The CFO of a satellite radio company was trying to work his magic today as he solicited another telecommunications/entertainment company to invest in his company in order to prevent bankruptcy. Having refinanced the company less than a year ago, the satellite radio finance manager had a $75 million note coming due today. The current financing arrangement represents A) a long-term sale of stock to private investors. B) short-term debt financing. C) the issuance of long-term bonds. D) a leveraged buy-out. Answer: B Explanation: Debt financing refer to funds raised through various forms of borrowing that must be repaid. In this case, the money was raised less than a year ago, and it is already due to be repaid. This represents a short-term loan. Difficulty: 3 Hard Topic: Short and Long Term Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 232) When Newport Industries renegotiated their loan agreement, they borrowed an additional $2 million. The new loan requires Liberty to repay the new amount in nine months. Liberty's activity represents ________ financing. A) equity B) debt C) revitalized D) secured Answer: B Explanation: Debt financing refers to funds acquired through various forms of borrowing that must be repaid. Difficulty: 3 Hard Topic: Debt and Equity Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

233) Finance managers spend the majority of their time managing A) cash flow. B) long-term financial needs. C) short-term financial needs. D) equity financing. Answer: C Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 234) Which of the following represents a source of short-term funding? A) retained earnings B) commercial paper C) common stock D) corporate bonds Answer: B Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 235) The most widely used source of short-term funding is A) trade credit. B) a line of credit. C) factoring. D) commercial finance companies. Answer: A Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

236) ________ is a form of short-term financing. Businesses buy merchandise from their suppliers, but are not required to pay for their purchases until some future date. A) Secured credit B) Trade credit C) Revolving credit D) Factoring Answer: B Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 237) Some suppliers hesitate to offer trade credit to firms with a poor credit history. In these cases, the supplier may insist that the customer sign a(n) A) indenture agreement. B) promissory note. C) line of credit. D) factoring agreement. Answer: B Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 238) A loan backed by collateral represents a(n) A) bond trust. B) debenture bond. C) pledging factor. D) secured loan. Answer: D Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

239) Typically, only highly regarded customers with financial stability receive A) secured loans. B) bank premiums. C) unsecured loans. D) commercial paper. Answer: C Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 240) A firm negotiates a(n) ________ with its bank. This arrangement gives the firm access to a specified amount of unsecured short-term funds, provided the bank has the funds available. A) asset drawing account B) capital drawing agreement C) reserve account D) line of credit Answer: D Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 241) ________ offer short-term secured loans to high-risk borrowers. These loans usually require collateral. A) Commercial finance companies B) Reserve banks C) Credit brokers D) Investment bankers Answer: A Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

242) Selling accounts receivable to obtain short-term funds is called A) pledging. B) factoring. C) equity financing. D) debt financing. Answer: B Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 243) Since commercial finance companies offer loans to higher-risk customers than commercial banks, the interest rates they charge are usually ________ than rates charged by banks. A) higher B) lower C) more predictable D) subject to lower taxes Answer: A Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 244) ________ offers financially stable corporations a technique to raise short-term funds by issuing unsecured promissory notes to the general public with the promise of repayment within 270 days. A) Trade credit B) A line of credit C) Factoring D) Commercial paper Answer: D Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

245) Although best used as a last resort, many small businesses find it convenient to use ________ as a short-term source of financing. Although this form of short-term debt comes with high interest rates, it provides a quick line of credit for many firms, including start-up companies who may not be able to secure bank loans. A) factoring B) credit cards C) commercial paper D) promissory notes Answer: B Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 246) Many small businesses rely on factoring as a source of short-term financing because A) factoring provides a much cheaper source of funds than bank loans. B) interest paid to a factor qualifies for a tax credit. C) small firms often find it difficult to qualify for bank loans. D) loans provided by factors do not require collateral. Answer: C Explanation: Factoring is the sale of accounts receivables at a discount for cash. Since factoring involves a sale of an asset, the funds received are not a loan. Small businesses often find it difficult to obtain loans from bankers. These same firms often can obtain the needed funds from factors if their customers are judged to be creditworthy. Difficulty: 2 Medium Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

247) Which of the following organizations would be most likely to acquire short-term funding by issuing commercial paper? A) a well-known, financially stable corporation B) a small business that is unable to qualify for loans from commercial banks C) a firm with a significant percentage of current assets held as accounts receivable D) a company that prefers equity financing to obtain short-term funds Answer: A Explanation: Commercial paper consists of unsecured promissory notes. Because the notes are unsecured, only large, financially sound corporations are able to sell them. Difficulty: 2 Medium Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 248) Shopper's Choice Department Stores has fallen behind in payments to suppliers due to cash flow shortages. Some suppliers are withholding shipments to Shopper's Choice until they receive payments on overdue accounts. To meet their immediate needs, Shopper's Choice Department Stores should utilize A) vulture capital. B) long-term financing. C) contingency capital. D) short-term financing. Answer: D Explanation: Finance managers use short-term financing to run the day-to-day operations. This includes the purchase of inventory and supplies. Difficulty: 3 Hard Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

249) Treetop Nursery offers customer credit terms of 2/15 net 30. This gives customers a A) 15 percent discount if they pay in two days. B) 2 percent discount if they pay in thirty days. C) 2 percent discount if they pay in fifteen days. D) 15 percent discount if they pay in thirty days. Answer: C Explanation: The terms 2/15, net 30 indicate that a 2% discount is offered to customers paying by the 15th day after the billing. No discount is offered to customers paying between the 16th and the 30th day after the billing. Difficulty: 3 Hard Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 250) Recently, Epic Electronics borrowed $600,000 from Dinero Finance to secure financing for a planned expansion. The ________ loan agreement requires that Epic Electronics provide the title to their factory as collateral. A) recapitalization B) secured C) pledged D) minority Answer: B Explanation: A secured loan is a loan that's backed by something of value, such as property or collateral. If the borrower fails to pay the loan, the lender may take possession of the collateral. Difficulty: 3 Hard Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

251) Bigbux Savings and Loan agreed to extend Appleman's Orchards $250,000 of unsecured short-term funds, contingent upon the bank having the funds available. This arrangement represents a A) line of credit. B) pledge agreement. C) factoring agreement. D) trade voucher. Answer: A Explanation: A line of credit is an agreement that states that a bank will extend a specified amount of unsecured short-term credit to a business, provided that the bank has the funds available. Difficulty: 3 Hard Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 252) Shoreline Supply offers their customers trade credit with terms 2/15 net 30. This implies that A) Shoreline's customers have very little incentive to pay within the discount period. B) paying within 30 days will let a customer deduct 15% off the invoice price. C) most customers will pay their bill within 2 days in order to take the maximum discount. D) the annual financing cost of failing to pay within 15 days is about 48%. Answer: D Explanation: The terms state that Shoreline Supply will allow a 2 percent discount if a customer pays within 15 days. If the customer does not pay during the 15-day discount period, the entire amount is due within 30 days of the invoice date. Thus, the customer pays 2% more for waiting for 15 additional days before making payment. Using the computational method described in the text, there are approximately 24 15-day periods in a year, so the annual rate is 2% per period x 24 periods = 48%. Difficulty: 3 Hard Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

253) The financial manager of Picture Perfect Graphics negotiated a ________ with her bank that allows Picture Perfect to borrow up to $75,000 without collateral. This arrangement eliminates the need to renegotiate the terms of the loan and complete new paperwork each time Picture Perfect borrows money. The preapproved short-term loan agreement is contingent upon the bank having the funds available. A) line of credit B) factor agreement C) cash flow conversion D) renewable income option Answer: A Explanation: A line of credit means that a bank will lend your business a given amount of unsecured short-term funds, provided that the bank has the funds readily available. Difficulty: 3 Hard Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 254) Gemstone Jewelers obtains needed short-term funds by selling its accounts receivable to the Friendly Finance Company. Friendly Finance usually pays Gemstone about 80% of the value of the receivables. Gemstone Jewelers utilizes ________ as a means of raising short-term funds. A) trade credit B) revolving credit agreements C) factoring D) receivable draft agreements Answer: C Explanation: Factoring is the process of selling accounts receivable at a discount for cash. The factor assumes the risk of collecting on the accounts receivable. Difficulty: 3 Hard Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

255) Long-term financing would normally be used to purchase A) supplies. B) inventory. C) buildings. D) highly liquid assets. Answer: C Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 256) Businesses match their long-term capital needs to A) the firm's debt to equity ratio. B) the ratio of long-term vs. short-term capital available. C) trade credit discounts. D) their long-term goals and objectives. Answer: D Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 257) Businesses acquire long-term financing from two major sources, A) debt financing and government funds. B) equity financing and trade credit. C) retained earnings and commercial paper. D) debt financing and equity financing. Answer: D Difficulty: 1 Easy Topic: Short and Long Term Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

258) When using ________ financing, the company incurs a legal obligation to repay the amount borrowed. A) debt B) equity C) retained earnings D) commitment Answer: A Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 259) A promissory note that requires the borrower to repay the loan in specified installments is called a(n) A) repayment scheduling. B) term loan agreement. C) amortization installment. D) revolving line of credit. Answer: B Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 260) A less-established company, or a company with a high debt to equity ratio, would be considered a riskier investment to the lender. Which of the following principles attests to this axiom? A) direct relationship principle B) compensating balance concept C) risk/return trade-off D) cost-benefit analysis Answer: C Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

261) A ________ represents a long-term debt obligation issued by a corporation or a government. A) share of stock B) commercial note C) certificate of deposit D) bond Answer: D Difficulty: 1 Easy Topic: Bonds Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 262) The terms of the agreement in a bond issue are referred to as the A) articles of the issue. B) terms of indebtedness. C) bond specifications. D) indenture terms. Answer: D Difficulty: 1 Easy Topic: Bonds Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 263) Which of these is backed only by the reputation of the issuer? A) venture capital B) secured bonds C) debenture bonds D) long-term financing Answer: C Difficulty: 1 Easy Topic: Bonds Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

264) Which of the following provides the buyer with collateral? A) common stock B) secured bond C) unsecured bond D) debenture bonds Answer: B Difficulty: 1 Easy Topic: Bonds Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 265) Through equity financing, stockholders become ________ of the firm. A) creditors B) employees C) suppliers D) owners Answer: D Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 266) ________ represent a favorable source of meeting long-term financing needs because there are no interest payments, dividends, or underwriting fees required when using this source. A) Secured bonds B) Debentures C) Warrants D) Retained earnings Answer: D Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

267) ________ provide financing to new or emerging companies with high profit potential. In return, these organizations expect a share of ownership in the company. A) Commercial banks B) Venture capital firms C) Federal Reserve banks D) Investment bankers Answer: B Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 268) ________ refers to the strategy of using borrowed funds to increase the rate of return for stockholders. A) Leverage B) Retained earnings C) Factoring D) Pledging Answer: A Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 269) The rate of return a company must earn to meet the demands of its lenders and expectations of its equity holders is called A) opportunity rate. B) retained earning. C) cost of capital. D) acquisition cost. Answer: C Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

270) The interest paid on ________ represents a tax-deductible business expense. A) bonds B) stock C) retained earnings D) depreciated assets Answer: A Explanation: Lenders usually require borrowers to pay interest on loans. Firms must also pay interest to their bondholders. Interest payments are deductible expenses on the firm's income statement. Difficulty: 2 Medium Topic: Bonds Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 271) Which of these is a common source of long-term financing for a corporation? A) a revolving credit agreement B) commercial paper C) a bond issue D) trade credit Answer: C Explanation: When firms issue bonds, they are seeking a very large, long-term loan. Investors will lend their money to the company in exchange for one or more bonds. The company will borrow these funds for an extended period of time, anywhere from two to several years, with the understanding that the bondholder expects repayment, plus interest. Difficulty: 2 Medium Topic: Bonds Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

272) One of the primary factors that influences the interest rate a firm pays on long-term loans is the A) intensity of competition the firm faces with new products. B) current level of government regulations. C) general level of market interest rates. D) exchange rate of the euro to the U.S. dollar. Answer: C Explanation: A business's credit rating, the type of collateral offered, and the general level of market interest rates are factored into the rate of interest a company will pay. Difficulty: 2 Medium Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 273) Venture capital firms look to invest their funds in firms that A) operate in established, mature industries. B) present financial statements indicating stronger than average cash flows. C) are new with great profit potential. D) require extra funding to avoid financial difficulties. Answer: C Explanation: Venture capital is a source of funds for new and emerging companies with great profit potential. Difficulty: 2 Medium Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

274) Which of these statements about corporate bonds is correct? A) Bonds provide equity financing. B) Issuing new bonds dilutes the existing ownership in the firm. C) Interest paid to bondholders represents a tax-deductible business expense. D) Debenture bonds require assets pledged as collateral. Answer: C Explanation: Corporate bonds are essentially long-term IOUs issued by corporations. The interest paid on long-term debt is a tax-deductible expense. Difficulty: 2 Medium Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 275) Successful use of financial leverage requires a firm to A) negotiate with lenders to establish a line of credit. B) establish and operate a venture capital organization to minimize the use of equity financing. C) register with the local government commission that administers market leverage. D) earn a higher return on its investments than the interest rate it pays to acquire funds. Answer: D Explanation: The goal of leverage is to use borrowed funds to increase a firm's rate of return. This can be accomplished by investing borrowed funds at a higher rate of return than the cost of acquiring those funds. Difficulty: 2 Medium Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

276) To maximize the benefits of using financial leverage, a firm should A) strive to minimize their cost of capital. B) avoid securing funds through long-term debt financing. C) limit their investments to projects with minimum risk levels. D) incorporate in states with relatively low tax rates. Answer: A Explanation: Financial leverage involves raising needed funds through borrowing to increase a firm's rate of return. By reducing the cost of acquiring funds, the firm positions itself to earn a rate of return greater than the interest costs associated with borrowing. Difficulty: 2 Medium Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 277) Which of the following situations represents a successful use of financial leverage? A) A firm issues new shares of stock and uses the proceeds from the sale to retire its outstanding debt. B) A firm borrows money at 8% and earns an 11% return on its investment of these funds. C) A firm attracts the interest of two venture capitalists and plays one against the other to gain the best deal. D) A retail firm purchases merchandise at $10 and sells it for $15. Answer: B Explanation: Leverage refers to the use of borrowed funds to increase the return to stockholders. Of course, to increase the firm's rate of return to stockholders, the borrowed funds must be invested to earn more than the interest cost of the borrowed funds. Borrowing at 8% and investing at 11% is an example of a successful use of leverage. Difficulty: 2 Medium Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

278) As Miles considers approaching a venture capital firm to provide funding for his new mobile app, he should realize that a venture capital firm will A) offer no more than 20 percent of the funding he needs. B) charge a higher interest rate than a commercial bank. C) expect the company to provide a steady dividend income. D) probably want an ownership interest in the business. Answer: D Explanation: Venture capitalists typically expect a share of ownership in the company. Difficulty: 3 Hard Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 279) By purchasing stock in Film Files, Mackenzie has become a(n) ________ the company. A) creditor of B) owner of C) general partner of D) venture capitalist in Answer: B Explanation: Selling stock in an organization is actually selling ownership in a firm. Difficulty: 3 Hard Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

280) After earning $50 million in net income, Marshall Manufacturing distributed $15 million in dividends to their stockholders. Marshall's board of directors decided to invest the remaining $35 million back into the business. This $35 million reinvestment of profits represents A) a trust fund. B) retained earnings. C) preferred capital. D) mutual funds. Answer: B Explanation: Retained earnings are the profits the company keeps and reinvests in the firm. Difficulty: 3 Hard Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 281) After enjoying increased sales of and profits from several popular products, Braggs & Stritton plans to expand their production facilities. The firm, a well-known producer of lawn care products, prefers financing this project with a funding source that avoids interest and dividend payments as well as underwriting costs. Which of the following best meets the needs of Braggs & Stritton? A) venture capital B) debenture bonds C) common stock D) retained earnings Answer: D Explanation: Retained earnings are often the most favored source of meeting long-term capital needs since the company saves interest payments, dividend payments, and underwriting costs. Difficulty: 3 Hard Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

282) Charlie Chicken Restaurants announced it plans to issue $300 million in debenture bonds to fund the expansion of its fast food chain of restaurants. In financial terms, this means A) the corporation will borrow $300 million worth of long-term financing. The bond issue will not carry any collateral. B) the corporation will issue $300 million worth of equity financing. The bond issue will be backed by the property and buildings purchased with the funds. C) the corporation will borrow $300 million worth of long-term financing. The issue will be backed by the property and buildings purchased with the funds. D) the corporation will issue $300 million worth of interest-free bonds. Financiers will be paid from the revenues created by the individual franchises. Answer: A Explanation: Debenture bonds are unsecured bonds that are not supported by collateral. The company is engaging in debt financing through the issuance of long-term bonds. Difficulty: 3 Hard Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 283) Seedling Plant Science invented a drought resistant grass seed that only needs watering three times each year. In order to expand distribution worldwide, the company whose product produces lush green foliage needs a large amount of funding—fast! The handful of seed scientists that own the company decide to offer shares of stock to general investors. This firsttime offering is a(n) A) Stock Equity Commission (SEC). B) Stock Fund Offering (SFO). C) Broad-Based Offering (BBO). D) Initial Public Offering (IPO). Answer: D Explanation: The first time a company offers to sell its stock to the general public, the event is called an initial public offering. Difficulty: 3 Hard Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

284) Seedling Plant Science invented a drought resistant grass seed that only needs watering three times each year. In order to expand distribution worldwide, the company whose product produces lush green foliage needs serious funding. The handful of seed scientists that own the company are seeking ________, but understand that they will relinquish a sizeable share of ownership in order to obtain the funds. A) debenture capital B) international line of credit C) leverage D) venture capital Answer: D Explanation: Venture capital is money invested in new or emerging companies that have great profit potential. Venture capitalists usually demand a share of ownership in return for equity funding. Difficulty: 3 Hard Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

285) What is financial management? Identify the duties and responsibilities of financial managers. Answer: Financial management is the job of managing a firm's resources so that it can meet its goals and objectives. It is, therefore, a critical activity in both profit-seeking and nonprofit organizations, no matter the size. The fundamental charge of financial managers is to obtain money and then plan, use, and control that money effectively. Responsibilities include forecasting, budgeting, and managing cash, accounts receivable, and inventory. Financial managers are responsible for paying the organization's bills in a timely manner. Additionally, they are involved in making decisions about buying merchandise on credit and collecting payments from customers. They are responsible for collecting overdue payments and dealing with bad debts. Another critical area for financial managers is tax management. As tax laws and tax liabilities have changed, finance specialists have become increasingly involved in the analysis of tax implications on various types of management decisions. The objective of this analysis is to find ways to legally minimize the taxes paid by the business. Finally, some members of the finance department, known as internal auditors, may have the responsibility of checking the journals, ledger, and financial statements prepared by the firm's accounting department to ensure that they are consistent with generally accepted accounting rules and procedures. Difficulty: 3 Hard Topic: Financial Management Learning Objective: 18-01 Explain the role and responsibilities of financial managers. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

286) Identify and describe the major steps involved in financial planning. Answer: There are three major steps involved in financial planning: Step one in financial planning is to forecast both short-term and long-term financial needs. The short-term forecast predicts revenues, costs, and expenses for a period of one year or less. This forecast is the foundation for most other financial plans, so accuracy is critical. A long-term forecast predicts revenues, costs, and expenses for a period longer than one year, and sometimes for as much as 5 to 10 years into the future. This type of forecast is important in the formulation of a firm's strategic plan. The second step in financial planning is to develop a set of budgets. A budget serves as the primary basis and guide for the firm's financial operations. Most firms develop their budgets from the short-term and long-term financial forecasts that were developed in step one. Firms typically develop several types of budgets, including an operating budget, a capital budget, a cash budget, and a master budget. The master budget ties together all of the other budgets and summarizes the proposed financial activities of the firm. The third and final step in financial planning is financial control, which consists of comparing actual revenues, costs, and expenses to projected values in order to locate any deviations and take corrective action if necessary. Most firms hold financial reviews at least once a month to ensure adequate financial control. Difficulty: 3 Hard Topic: Financial Management Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

287) Explain the role the operating budget, the capital budget, and the cash budget play in financial planning. Answer: The operating budget (master budget) ties together all the firm's other budgets and summarizes the business's proposed financial activities. An operating budget is the projection of dollar allocations to various costs and expenses incurred in operating the business, given projected revenues. Operating budgets get into the planning of how much the firm will spend on operating expenses such as travel, supplies, rent, advertising, salaries, etc. A capital budget highlights the firm's spending plans for major asset purchases that often require large sums of money. The acquisition of assets such as property, buildings, machinery, and equipment is covered in these budgets. A cash budget estimates a firm's projected cash inflows and outflows that the firm can use to plan for any cash shortages or surpluses during a given period. It usually will cover specific periods such as months, quarters, etc. Cash budgets are important guidelines that help managers to anticipate borrowing, repaying debt, operating expenses, and short-term investments. The cash budget is often the last budget that is prepared. Difficulty: 3 Hard Topic: Budgeting Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

288) Identify and describe three types of short-term financing. Answer: Students may mention that short-term financing is the key job of the finance manager. They can select from a wide range of options in answering this question. The following are specific types of short-term financing: Trade credit is the most widely used source of short-term financing. This refers to buying goods today and being able to pay for them later. Discounts are often available with the use of trade credit to encourage firms to pay quickly. Promissory notes are often required from customers as a condition of obtaining credit. A promissory note is a written contract with a promise to pay. Promissory notes can be sold by the supplier to a bank at a discount (the amount of the note less a fee for the bank's service). Family and friends are another source of short-term financing, though the text mentions that the National Federation of Independent Businesses has found that entrepreneurs have come to rely less and less on this source over the years. It's important to remember to treat this source of funding just as you would treat financing from any other source. Commercial banks are also a source of short-term financing, as are commercial finance companies. Businesses are well advised to keep in contact with banks and build a relationship that ensures financing when needed. Banks tend to be conservative and are often reluctant to lend money to new or risky ventures. Finance companies are willing to accept higher levels of risk than commercial banks, but they also charge higher interest rates. Finance companies typically require borrowers to offer tangible assets as collateral. Banks may also demand some form of collateral, though in some cases they offer unsecured loans. (The stronger the firm, the more likely the firm will be able to obtain an unsecured loan.) Other financing options available from commercial banks include: • inventory financing: financing that uses inventory such as raw materials as collateral. • line of credit: an arrangement in which the bank will lend a given amount so long as the funds are available. Factoring involves the process of selling accounts receivable for cash. The factor buys the accounts receivables at a discount. The discount rate depends on the age of the accounts, the nature of the business, and the condition of the economy. Also, the discount will be less if the firm selling the receivables is willing to assume the risk for nonpaying customers. Commercial paper consists of unsecured promissory notes, in amounts of $100,000 or more that mature in 270 days or less. The notes state a specific amount of money the business agrees to repay by a stated date. Since commercial paper is unsecured, only well-known, financially stable corporations typically issue it.

Credit cards are used by about half of all small businesses to form or expand the business. Credit cards provide a readily available line of credit to a business that can save time and the likely embarrassment of being rejected for a bank loan. They are extremely risky and costly. Credit cards are an expensive way to borrow money and are probably best used as a last resort. Difficulty: 3 Hard Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 289) What is equity financing? Identify and describe the major sources of equity financing. Answer: Equity capital represents money raised from within the firm or through the sale of ownership in the firm. The major sources of equity capital are sale of stock, retained earnings, and funds provided by venture capital firms. A share of stock represents a share of ownership in a corporation. The corporation's board of directors normally decides how many shares of stock will be issued and authorizes the sale of stock to the public. However, before a company can issue shares for sale to the public it must meet requirements set by the Securities and Exchange Commission (SEC). Retained earnings are the profits a company keeps and reinvests. This is a very attractive source of funds, because it saves the firm from having to pay the interest, dividends, or underwriting fees associated with issuing securities. Moreover, unlike new stock issues, this source of financing does not dilute ownership. Obviously, however, this source of financing is limited by the amount of profits the firm has available. Venture capital firms provide funds to new companies that they believe have great profit potential. Venture capitalists generally provide their funds in exchange for a share of ownership in the firm. They also typically expect a high rate of return on their investment. Many famous companies, including Apple Computer, Compaq, Sun Microsystems, and Boeing received funds from venture capitalists when they were just starting out. Difficulty: 3 Hard Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

290) What are two major forms of debt financing? Describe and differentiate between the two types. Answer: The two forms of debt financing are (1) selling bonds, and (2) long-term loans from individuals, banks, and other financial institutions. Long-term loans are usually due within 3 to 7 years but may extend to 15 or 20 years. A termloan agreement is a promissory note that requires the borrower to repay the loan with interest in specified monthly or annual installments. Loans usually require the payment of interest to the lender. The lender requires a higher interest payment to compensate for higher-risk loans. A firm or government issues bonds, in return for a large sum of money. The bond is an IOU that is held by the bondholder until the borrowed funds are repaid at a future designated date. The bond indenture specifies how and when bondholders will receive interest payments for lending their money to the institution. Bonds are like other forms of long-term debt; they may be secured or unsecured (debenture bonds). Difficulty: 3 Hard Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation 291) Explain the term leverage. When is it more favorable for firms to use this strategy? Answer: Leverage is borrowing funds to invest in expansion, major asset purchases, or research and development that may take several years to produce a product or service. Firms will employ leveraging when the risk of borrowing is measurably less than the value of potential profits that will result from the investment of capital. The goal is that the return on investment will be greater than the cost of debt. Difficulty: 3 Hard Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

Mini-Case Tishian's Funeral Home has been in business for over 80 years. Throughout its history, the firm has been a family-run operation. Today, the business is managed by Mort Tishian, a grandson of the founder. Unfortunately, Mort Tishian's tenure has been plagued with problems neither his father nor grandfather before him experienced. The reason is simple: the funeral business is undergoing rapid change. Small, family-owned funeral homes are losing ground to a new type of competitor, a large national network service that resembles a franchise system. More and more families "in their time of need" are choosing the new, highly promoted competitors instead of the traditional small family-operated funeral homes. This trend has required a response from organizations like Tishian's Funeral Home. Bigger and better facilities are needed to remain competitive. All of this puts more pressure on the family owners to be more active in the financial side of the business. Mort summed it up best when he said, "Grandpa told people, 'You pay me when you can, I ain't goin' nowheres.'" His creditors did the same with him. Today, it's a different game. Cash flow is key, and obtaining funds is no simple task. Additionally, creditors want their money now, not later. Banks are also more demanding. "Heck, Grandpa knew all the bankers he dealt with personally. I see new faces every time I go to the bank. If things don't get better, I suspect after eighty years of service, Tishian's Funeral Home will have its own funeral." 292) Mort Tishian feels it's necessary to predict revenues, costs, and expenses on a six-month basis. "It's the only way you get an idea of what to expect," explains Mort. In order to obtain these predictions, Mort needs to develop a(n) A) cash-basis accounting system. B) short-term forecast. C) capital budget. D) econometric model. Answer: B Explanation: A short-term forecast is a prediction of revenue, costs, and expenses for a period of one year or less. Difficulty: 3 Hard Topic: Financial Management Learning Objective: 18-02 Outline the financial planning process, and explain the three key budgets in the financial plan. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

293) Mort is seriously considering a major expansion in the size of his funeral home. The money spent on this type of project would be classified as a(n) A) capital expenditure. B) equity expenditure. C) off-budget expense. D) depreciation charge. Answer: A Explanation: A capital expenditure is a major investment in a long-term asset such as a building, land, and equipment, or intangible assets such as patents, trademarks, and copyrights. Difficulty: 3 Hard Topic: Financial Management Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 294) To raise the funds for the major improvements needed at the funeral home, Mort has talked to two investors about incorporating his business and selling them shares of stock in the company. Mort is considering the use of A) debt financing. B) commercial paper. C) equity financing. D) revolving credit. Answer: C Explanation: Equity financing is money raised from retained earnings or through the sale of ownership in the firm. Difficulty: 3 Hard Topic: Debt and Equity Financing Learning Objective: 18-03 Explain why firms need operating funds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

295) Mort approached the chief lending officer at First Virginia Bank about obtaining a $75,000 loan. The banker said she would approve the loan provided that the funeral home's building was pledged as collateral. The banker was offering a(n) A) trade credit agreement. B) institutional loan. C) secured loan. D) revolving credit agreement. Answer: C Explanation: A secured loan is one backed by something valuable, such as property. Difficulty: 3 Hard Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 296) After much searching, Mort located an old banking friend of his father's. The banker offered Mort up to $25,000 in unsecured funds, which Mort's firm could borrow any time within a year, as long as the bank has the money available. Mort was offered a(n) A) revolving credit agreement. B) asset guarantee pledge. C) pledging agreement. D) line of credit. Answer: D Explanation: A line of credit is an agreement with a bank to provide a business a maximum amount of money in an unsecured, short-term loan. However, this agreement is subject to the bank having the necessary funds available. Difficulty: 3 Hard Topic: Short and Long Term Financing Learning Objective: 18-04 Identify and describe different sources of short-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

297) After seeing Mort's advertisement: "You Aren't Gettin' Any Younger! Start Planning for Heaven Today!" a(n) ________ firm decided the aging population was a good investment. Although they typically look at start-ups with great promise, they approached Mort with $6 million dollars for his new idea of a major three-city expansion that included six new funeral homes, a crematory, and mausoleum. After researching the offer, Mort agreed to give up 50% ownership of the business in order to secure these funds. His last thoughts as he began to sign the papers were: "Now, I'll be able to compete with the big guys!" A) retained earnings B) indentured C) venture capital D) leveraged buyout Answer: C Explanation: Venture capital is money that is invested in new or emerging companies that are perceived as having great profit potential. Difficulty: 3 Hard Topic: Debt and Equity Financing Learning Objective: 18-05 Identify and describe different sources of long-term financing. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

Understanding Business, 12e (Nickels) Chapter 19 Using Securities Markets for Financing and Investing Opportunities 1) Securities markets represent the financial marketplaces for stocks and bonds. Answer: TRUE Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) Securities markets provide private investors a place to buy and sell stocks, bonds, and mutual funds. Answer: TRUE Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) An initial public offering (IPO) represents the first time a corporation's stock is offered and sold to persons outside of the company. Answer: TRUE Difficulty: 1 Easy Topic: IPOs Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 4) The proceeds from a secondary market sale of securities go to the corporation whose security is being traded. Answer: FALSE Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

5) In a secondary market sale of stock, the proceeds go to the investor selling the stock, not to the corporation. Answer: TRUE Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) Corporations sell a new issuance of securities in the primary market. Answer: TRUE Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 7) The primary market allows an investor to purchase financial securities from other investors. Answer: FALSE Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) The secondary market is where investors (both individuals and companies) go to find someone who is interested in selling their investments to them. Answer: TRUE Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

9) When given a choice, businesses prefer to obtain long-term financing through retained earnings or by borrowing from a lending institution such as a bank instead of issuing stock. Answer: TRUE Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10) Issuing stock is considered equity financing. Answer: TRUE Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) Issuing bonds is considered debt financing. Answer: TRUE Difficulty: 1 Easy Topic: Debt and Equity Financing Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) It is easier for a small business to raise funds through a stock issuance than for a large, wellknown company. Answer: FALSE Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

13) Before issuing stock or bonds, corporations must meet the disclosure requirements of the Federal Trade Commission (FTC). Answer: FALSE Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) An investment banking firm assists corporations in selling the new security issue. Answer: TRUE Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) When investment bankers underwrite an issue, they buy at a discounted price the entire stock issue of a firm and then sell the stock, at full price, to private investors. Answer: TRUE Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 16) Only government employees represent institutional investors. Answer: FALSE Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

17) Examples of institutional investors are pension funds, mutual funds, and insurance companies. Answer: TRUE Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) Securities markets help companies raise long-term debt and equity financing. Answer: TRUE Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 19) Many observers suggest that the stock market is dominated by the buying and selling activities of institutional investors. Answer: TRUE Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 20) Investment bankers assist in the issuing and selling of new securities. Answer: TRUE Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

21) Institutional investors include insurance companies, individual investors, and mutual funds. Answer: FALSE Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 22) Corporations receive needed funds when they sell a new issuance of a security in the primary market. Answer: TRUE Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 23) Investors who trade securities buy securities they are interested in holding or sell securities to make a profit or cut losses by trading in the secondary market. Answer: TRUE Explanation: The proceeds of the sale of securities traded in the secondary market go to the investor selling the security, not the corporation whose security is being traded. Difficulty: 2 Medium Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

24) The Securities and Exchange Commission does not intercede in any way in the process of an IPO. Doing so would disrupt the natural process of the capital markets. Answer: FALSE Explanation: The Securities and Exchange Commission (SEC) is the regulator of publicly traded firms, and the financial markets. Any company planning to issue an IPO must first provide the SEC with the proper documentation and financial statements that describe the firm's intent. Difficulty: 2 Medium Topic: IPOs Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 25) Government employees, public school system employees, and even employees of some large companies pay a percentage of their monthly earnings into pension funds. These funds collect a large pool of money that they invest in securities. Large organizations—such as pension funds, mutual funds, and insurance companies—that invest their own funds or the funds of others into stocks, bonds, or other securities are called institutional investors. Answer: TRUE Explanation: Institutional investors are large organizations—such as pension funds, mutual funds, and insurance companies—that invest their own funds or the funds of others. Because of their vast buying power, institutional investors are a powerful force in securities markets. Difficulty: 2 Medium Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26) Investment bankers are in the business of underwriting securities. They profit from purchasing the new stock offering of a corporation at a discount, and then selling those shares of stock to the public at the market price. Answer: TRUE Explanation: Investment bankers buy the entire issue of a new security and then attempt to profit from selling the new security to investors at a higher price. Difficulty: 2 Medium Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

27) Your company is privately held but needs additional funding for a planned expansion. Having never issued stock to the public, your firm is well advised to seek the assistance of an investment banker prior to an initial public offering of stock. Answer: TRUE Explanation: Investment bankers are specialists who assist in the issue and sale of new securities. These specialists will help corporations prepare the financial analysis necessary to gain SEC approval for stock or bond issues. Difficulty: 3 Hard Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 28) Leafy Greens wants to raise an undisclosed amount of funds in order to expand the companyowned vegetarian restaurants overseas. The CFO of the company will negotiate with an expert at the FTC who will underwrite the issue of stock that Leafy Greens plans to offer. Answer: FALSE Explanation: A company that wants to issue an offering of stock will document its intention with the SEC (Securities and Exchange Commission) and will confer with an investment banker who will help the company sell the issue. Difficulty: 3 Hard Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 29) Katherine inherited $35,000 when her grandfather died and decided to invest it in the Leafy Greens restaurants. As a student of business, you inform her that she can call a stockbroker who will help her purchase stock on the secondary market. Answer: TRUE Explanation: A stockbroker who is licensed to work for a financial company and trade stocks, bonds, mutual funds, and other investments will purchase stocks on Ina's behalf on the secondary market. The broker will find someone who already owns the stock and wants to sell it. Difficulty: 3 Hard Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

30) Jason, a stockbroker at Securitas Financial Services, called you the other day asking if you would like to purchase an IPO. "The hot new company, Leafy Greens, is going public, and I thought you might want to get in on it," he exclaimed. If you agree to buy shares of this company, this trade will occur on the secondary market. Answer: FALSE Explanation: An Initial Public Offering (IPO) is sold on the primary market. An IPO is a new issuance of stock or bonds that is being offered by a firm that wants to raise a large sum of money. It is the first time that this issuance is being offered, so it is sold in the primary market. Difficulty: 3 Hard Topic: IPOs Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 31) Game Guys, Inc. needs several million dollars in order to expand and become the international company that it says it wants to be in its strategic plan. After consulting with an investment banker who is willing to underwrite the issue, it learned that investors will purchase the stock for $32/share. Game Guys will receive a smaller amount for each share that is sold. Answer: TRUE Explanation: When an investment banker agrees to underwrite an IPO, it agrees to buy the entire issue at a discount. It will then sell the shares to interested investors for the full market price. The difference in the market price per share and the discount price per share is the amount that the investment banker keeps as payment for its services. Difficulty: 3 Hard Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 32) If an investor, Cora, buys a share of stock in Epic Electronics from another investor, Nathan, Epic Electronics automatically receives a fixed percentage of the selling price. Answer: FALSE Explanation: The proceeds of the sale of a security go to the investor selling the security, not the corporation whose security is being traded. Difficulty: 3 Hard Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Apply AACSB: Reflective Thinking Accessibility: Keyboard Navigation

33) Stocks that are not listed as trading on one of the national or international stock exchanges can be traded on the OTC, over-the-counter exchange. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 34) A stock exchange provides a marketplace where the public can directly buy and sell securities without the need for a membership. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 35) Only those with a membership on a stock exchange can buy and sell securities on that stock exchange. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) Securities and Exchange Commission (SEC) rules prohibit the listing of the stock of foreign firms on U.S. stock exchanges. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

37) The over-the-counter market utilizes an electronic securities trading system. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) The stock of companies that fail to meet a stock exchange's minimum requirements can be delisted. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39) The NASDAQ is a floor-based exchange. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 40) Stock exchanges compete with each other for the listing of a corporation's stock. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

41) The Federal Trade Commission (FTC) regulates the security markets in the United States. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 42) Before a corporation's stock can be sold on a major stock exchange, the firm must provide detailed financial information to the Securities and Exchange Commission (SEC). Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 43) Insider trading involves the sale of stock to employees at discounted prices. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44) The Securities and Exchange Commission (SEC) requires that all prospective investors receive a copy of a firm's prospectus prior to investing. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

45) Insider trading refers to someone who benefits unfairly from information about a security not available to the general public. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 46) Insider trading laws prevent employees from buying or selling the securities of their employers. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 47) Well-known foreign exchanges that also exchange the securities of U.S. firms include the Sydney Exchange and the Tokyo Exchange. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 48) The number of U.S. companies that are listed on foreign stock exchanges is declining. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

49) The prospectus is summarization of the results of detailed financial documents that a firm files with the SEC prior to being given approval to issue securities. Answer: TRUE Explanation: A prospectus is a condensed version of the financial and economic disclosure documents that a firm files with the Securities and Exchange Commission prior to the new issuance of stocks or bonds. The prospectus is sent to anyone who is interested or committed to purchasing the securities. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 50) Once a stock exchange agrees to list a company, the firm can be assured that it will always be listed by that exchange. Answer: FALSE Explanation: A company's stock can be delisted from an exchange if, at any time, it fails to meet the requirements of listing. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 51) With recent mergers of stock exchanges, beginning with the New York Stock Exchange merger with Archipelago, and subsequently with Euronext and eventually the Intercontinental Exchange (ICE) in Atlanta purchase of the NYSE Euronext for $8.2 billion. Most exchange floors are symbolic because trades today usually take place on computers. Answer: TRUE Explanation: Stock exchange locations still exist, mostly as symbolic gestures. With the merger of major exchanges, beginning with NYSE and Archipelago (a sophisticated, state-of-the-art electronic exchange), members still represent their clients, but trades take place electronically. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

52) According to the Securities Act of 1933 it is against the law for a firm that is publicly trading securities to deny an investor from knowing how the firm is doing financially. Answer: TRUE Explanation: The Securities Act of 1933 requires full disclosure of financial information by firms selling stocks or bonds. Financial statement information assists investors in making investment decisions. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 53) According to the Connecting Through Social Media box, one goal of the JOBS Act of 2012 (Jumpstart Our Business Startups Act) is to make crowdinvesting more accessible to small businesses. Answer: TRUE Explanation: Financing is not always easy to come by for small businesses. The JOBS Act has allowed businesses to accept investments from accredited and unaccredited investors, opening up the pool of investors for small businesses. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 54) In an effort to profit from stock market trading, Tony landed a job with the Newport Group. Tony intends to use his position to obtain privileged information about his new employer that would not be available to the public. While he realizes that he may be benefiting unfairly, he is not acting illegally because he is an employee. Answer: FALSE Explanation: Insider trading is the name applied to this strategy. It is illegal to benefit unfairly from fluctuations in security prices based upon information not available to the general public. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

55) Avery, an executive assistant at the Newport Group, photocopied documents detailing a major merger that will be finalized in two weeks. Avery is thrilled to read about the merger, plans to call her broker immediately and buy stock in the company, and suggests that you should also act on her stock tip. Since you are not employed at her firm your purchase is legal. Answer: FALSE Explanation: Insider trading involves buying or selling a stock on the basis of company information not available to the investing public. In this case the secretary would be participating in insider trading and you would be as well. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 56) Stocks represent shares of ownership in a company. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 57) Stock certificates identify per share dividends, expressed as a percentage of par value. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

58) Par value reflects the current market price for a stock. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 59) Dividends represent a portion of a firm's profits that are distributed to bondholders first then stockholders. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 60) Although companies that issue bonds are required to pay interest, companies issuing stock are not required to pay dividends. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 61) When a corporation enjoys a profitable year, dividends must be paid. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

62) Issuing new common stock usually expands ownership, giving all owners the right to vote for the firm's board of directors. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 63) Issuing new stock increases the firm's outstanding debt on their balance sheet. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 64) If paid, dividends come from any profits remaining after the firm has paid taxes. The company cannot deduct dividends as an expense of doing business. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 65) Corporate management decisions are influenced by the desire to keep stockholders happy. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

66) Preferred stockholders have voting rights, privileges not shared by common stockholders. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 67) Preferred stockholders receive dividend payments before common stockholders are paid any dividends. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 68) If the firm should find itself in bankruptcy, preferred stockholders would have claim to the value of any remaining assets before common stockholders. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 69) Preferred stock may include callable and convertible provisions. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

70) Preemptive rights provide common stockholders the first right to purchase any new shares of common stock issued by the firm. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 71) Cumulative preferred stockholders enjoy the first right to purchase any new shares of stock issued by the firm. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 72) Cumulative preferred stockholders enjoy a promise that missed dividends will accumulate and be paid later, before any dividends are paid to common stockholders. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

73) Both preferred stocks and bonds represent funding sources that require repayment to investors. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 74) Corporations that issue preferred stock incur a legal obligation to pay dividends to those stockholders. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 75) For the firm, the cost of paying dividends to common stockholders is higher than the cost of the same amount of interest paid to bondholders. Answer: TRUE Explanation: Dividends are paid out of after-tax profits. Interest payments are a tax-deductible expense and therefore paid before taxes are calculated. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

76) The similarities between common stocks and bonds include a face or par value and a fixed rate of return for investors. Answer: FALSE Explanation: Preferred stock and bonds are similar in that both may have a face or par value, and both have a fixed rate of return. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 77) While common stockholders of corporations have voting rights, preferred stockholders generally do not. Answer: TRUE Explanation: Preferred stock is frequently referred to as a hybrid investment in that it has characteristics of both bonds and stocks. Normally preferred stock, like bonds, does not include voting rights in the firm. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 78) A preferred stock's par value establishes the base used for calculating the preferred stockholders' dividend. Answer: TRUE Explanation: Par value is the basis for the dividend the firm is willing to pay to preferred stockholders. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

79) A company with cash flow shortages must pay common stockholders their dividends before paying preferred stockholders their dividends. Answer: FALSE Explanation: This order of payment is incorrect. If dividends are declared, preferred stockholders receive their dividends, first. Then, if the board of directors declares sufficient money to be paid in dividends, common stockholders will be paid a dividend. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 80) Preferred stockholders possess the first right to purchase any new stock the company issues. Answer: FALSE Explanation: Common stockholders have a preemptive right to purchase any new shares of common stock the firm issues in order to maintain a proportional share of ownership in the company. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 81) Lucas purchased 250 shares of Marshall Manufacturing last year but was not paid dividends. He now is going to hire an attorney to sue the company for failure to pay dividends. If he follows through with his plan, Lucas will probably win the lawsuit because companies are obligated to pay their stockholders dividends for owning and holding the firm's stock. Answer: FALSE Explanation: Although companies will offer shareholders dividends if they have earnings after taxes, they are under no legal obligation to pay dividends. High-growth companies will often retain their earnings and further expand the business. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

82) Through disciplined investing, Ella now owns 10% or 60,000 shares of PharmaONE. Although she has enjoyed a lot of control, she realizes that in order for the firm to acquire the funds to grow in a recessionary economy, it will need to issue more stock. Her regret is that it will dilute her ownership. Answer: TRUE Explanation: When company boards of directors vote to issue additional stock for public sale, the disadvantage is that there is dilution of ownership. Owners usually have one vote per share of ownership. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 83) A share of preferred stock is currently selling for $160. It offers the investor a dividend rate of 7%, with a par value of $100. If the company is able to pay dividends, preferred stockholders would receive a dividend of $11.20 per share. Answer: FALSE Explanation: Par value is the basis for the dividend the firm is willing to pay to preferred stockholders. In this case, 7% of $100 is an $7 dividend. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Analyze AACSB: Knowledge Application Accessibility: Keyboard Navigation 84) When acquiring funds through the sale of a bond, the business incurs a legal obligation to pay regular interest payments. Answer: TRUE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

85) A bond represents a contract of indebtedness issued by a corporation that promises payment of a principal amount plus interest at a specified future date. Answer: TRUE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 86) The interest paid to bondholders represents the principal of the bond. Answer: FALSE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 87) The interest rate paid to bondholders is sometimes called the coupon rate. Answer: TRUE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 88) Although the interest rate is fixed when the bond is issued, the interest rate that one firm must pay compared to another may vary depending upon risk factors such as the reputation of the firm. Answer: TRUE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 25 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

89) U.S. government bonds are considered safe investments. Therefore such government bonds usually have a lower interest rate than corporate bonds. Answer: TRUE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 90) The maturity date of a bond refers to the date on which the interest payment is due to be paid. Answer: FALSE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 91) Bond classifications include, but are not limited to corporate bonds, treasury bonds, treasury notes, and municipal bonds. Answer: TRUE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 92) Standard and Poor's and Fitch Ratings are well-known companies that rate bonds. Answer: TRUE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

93) Bond interest is usually paid in two times each year, even though the interest rate that is usually quoted is an annual rate. Answer: TRUE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 94) Interest rates vary with changes in the state of the economy. Answer: TRUE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 95) Bonds represent a permanent source of funding for companies. The money firms acquire by issuing bonds does not need to be repaid. Answer: FALSE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 96) In the language of bonds, the terms "principal" and "face value" are synonymous. Answer: TRUE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

97) Bondholders represent creditors of a firm. Answer: TRUE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 98) As a legal contract, bonds issued by different companies carry the same level of risk. Answer: FALSE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 99) Firms are at a disadvantage when issuing bonds because the interest rate that they must pay to bondholders is not tax deductible. Answer: FALSE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 100) As creditors of a firm, bondholders enjoy voting privileges for the firm's board of directors' elections. Answer: FALSE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

101) Both stocks and bonds represent temporary sources of funding for a firm. Eventually they must be repaid. Answer: FALSE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 102) By issuing bonds, a firm's debt level increases, which may adversely affect the firm's image in the financial community. Answer: TRUE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 103) Debenture bonds represent bonds that are not secured by collateral. Answer: TRUE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 104) A sinking fund is a reserve account where the firm will periodically deposit funds in anticipation of repayment of a bond issue on the maturity date. Answer: TRUE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

105) A callable bond allows a bondholder to exchange his/her bond for shares of common stock in the same corporation. Answer: FALSE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 106) The owner of a convertible bond can exchange the bond for a specified number of shares of common stock in the same corporation. Answer: TRUE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 107) Raising long-term funds through the sale of bonds requires the firm to make debt repayment when and if the organization has sufficient cash flow. Answer: FALSE Explanation: The organization issuing bonds has a contractual obligation to make regular interest payments and to repay the principal. Difficulty: 2 Medium Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

108) With everything else constant, investors prefer a bond issued with a sinking fund compared to a bond without a sinking fund. Answer: TRUE Explanation: A sinking fund bond requires the issuing organization to regularly set aside funds in a reserve account in order that the firm has sufficient cash with which to repay the principal. Difficulty: 2 Medium Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 109) A bond sold with a sinking fund provision requires the firm to allow a stockholder to exchange his/her bond for a specified number of shares of common stock. Answer: FALSE Explanation: A sinking fund bond requires the issuing organization to regularly set aside funds in a reserve account in order that the firm has sufficient cash with which to repay the principal. Difficulty: 2 Medium Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 110) A company often exercises the call provision of a bond if it's available when prevailing interest rates fall below the interest rate currently being paid to bondholders. Answer: TRUE Explanation: In an effort to reduce the cost of their debt capital, it would benefit a firm to call in higher interest rate bonds and reissue new bonds at lower interest rates. Difficulty: 2 Medium Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

111) Taking into account the risk/return trade-off, it would stand to reason that a secured bond holds a lower interest rate than an unsecured bond. Answer: TRUE Explanation: Secured bonds are backed by collateral, thus are a less risky investment than an unsecured bond. In order for corporations to attract investors to unsecured bonds, they generally must pay a higher interest rate. Difficulty: 2 Medium Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 112) A sinking fund provision decreases the risk of repayment in the minds of the investors. Answer: TRUE Explanation: A sinking fund provision can be attractive for firms and investors because it provides for an orderly retirement of a bond issue, thereby reducing the risk associated with the bond. Difficulty: 2 Medium Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 113) As he was approaching retirement, Gabriel began a search for a low-risk investment. He should consider buying a secured bond of a major corporation. Answer: TRUE Explanation: Secured bonds are a relatively safe investment in that the risk of default is reduced by the value of the pledged collateral. Difficulty: 3 Hard Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

114) The U.S. government just announced an increase in the interest rate paid on U.S. government bonds. This will likely cause a decrease in the interest rates paid on corporate bonds. Answer: FALSE Explanation: The interest rate being paid by U.S. government bonds impacts the interest rate a firm must agree to pay since government bonds are considered to be very safe investments. Corporate bonds would be considered riskier. The risk/return trade-off states that investors demand higher interest rates in order to accept higher risk levels. Difficulty: 3 Hard Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 115) Michael is looking for an investment that will pay a little better than what he can get from a government bond. You suggest that he consider a new issue of debenture bonds by Leafy Greens that pay 7.5% annually. You explain that Leafy Greens has been in business a long time, and the debenture feature makes these bonds more secure than others. Answer: FALSE Explanation: Debenture bonds are unsecured bonds. Unsecured bonds usually carry a higher interest rate to compensate for the added risk that the investor is taking. Difficulty: 3 Hard Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

116) Investors and corporations are on the opposite sides of the interest rate risk scenario. If interest rates go up to 7%, the bondholder holding a bond with a 6% interest rate knows that he could do better. If he is forced to sell his bond on the secondary market before it matures, he will receive less than the face value. Answer: TRUE Explanation: Investors and corporations are on the opposite side of the interest rate risk scenario. If corporations issued a bond carrying an interest rate of 7%, and interest rates go down, they are paying more in interest rates than they would be if they waited for interest rates to drop. Investors are thrilled because they made a good investment. Other investors who invest in a similar investment will make less. Difficulty: 3 Hard Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 117) As a registered representative of a stock brokerage firm, a stockbroker works as an intermediary to buy and sell securities for clients. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 118) The high start-up costs of online businesses cause online brokers to charge higher commissions than traditional brokerage firms. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

119) Online investors expect more expert advice than investors using traditional brokerage firms. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 120) Young investors place more importance on low-risk investments, while elderly investors prefer significant growth in the value of their investments. Answer: FALSE Difficulty: 1 Easy Topic: Risk-Return Relationship Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 121) Diversification means buying several different types of investments with the funds you have available for investment. Answer: TRUE Difficulty: 1 Easy Topic: Risk-Return Relationship Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

122) For starters, investors should consider the return on investment, the liquidity, and riskiness of an investment. Answer: TRUE Explanation: The five criteria to use when selecting an investment option are as follows: (1) investment risk; (2) yield; (3) duration; (4) liquidity; and (5) tax consequences. Difficulty: 2 Medium Topic: Risk-Return Relationship Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 123) A well-diversified portfolio would consist of a variety of investments and even cash for emergencies. The important thing is that the choice of investments spreads the risk. Some investments may perform very well in any one year while others may lag. Those performing well will balance out those that are underperforming. Answer: TRUE Explanation: Diversification spreads the risk. If some investments in the portfolio are showing lackluster performance, they will be balanced by those who show growth. Another term for this strategy is asset allocation. Difficulty: 2 Medium Topic: Risk-Return Relationship Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 124) The advantage of using an online broker is that these services usually provide you with a wealth of information and help you allocate your assets. Sometimes they even help you create an investment plan for life! Answer: FALSE Explanation: At this time, online brokers provide fast and efficient service; however, the service comes with very limited assistance and low commissions. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

125) In the Adapting to Change box, Millennials, who distrusted and overlooked traditional financial advisors, started using robo-advisors when investing. Answer: TRUE Explanation: Robo-advisors, automated online tools that make investment suggestions, have grown in popularity among Millennials. The fees for robo-advisors are lower than traditional advisors and robo-advisors use advanced algorithms to help manage money. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 126) In the Adapting to Change box, inaccuracies in robo-advisor algorithms have led more investors back to traditional financial advisors. Answer: FALSE Explanation: Robo-advisors, automated online tools that make investment suggestions, have grown in popularity among Millennials. The fees for robo-advisors are lower than traditional advisors and robo-advisors use advanced algorithms to help manage money. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 127) Last week, Caitlin met with her financial planner, Derek. Derek urged Caitlin to consider only government bonds and mutual funds in her portfolio. Since she is in her 20s, Caitlin thinks she can accept a little more risk. You suggest that it is a better plan to follow Derek's advice, rather than research her choices on her own. Answer: FALSE Explanation: As a rule, younger people may be able to tolerate fluctuations in the market, because they have more time to recover financially. Difficulty: 3 Hard Topic: Risk-Return Relationship Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

128) Julio and his grandfather receive individualized investment advice from the same chartered financial analyst. When comparing their customized investment recommendations, it is likely that Julio's strategy targets lower-risk investment options than the advice received by his grandfather. Answer: FALSE Explanation: Generally, a young person can afford to invest in higher-risk investment options than a person nearing retirement. If the investment loses value, Julio has the time to hold on for better times. A younger person also has the expectation of many years of income. Julio's grandfather, on the other hand, has expectations of a fixed income at retirement. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 129) Will just returned from Afghanistan and has $25,000 in his savings account. His girlfriend recommends he speak with a financial advisor and let his money "make more money." Will has his eye on a new truck, but knows that his old Jeep will most likely last another four years. By then, though, he will definitely need this money to buy something new. Not to mention, he also knows he will have other needs too. Will should buy high-growth stock with his funds because even though they are risky, they also have the greatest potential of bringing in a better return on his investment. Answer: FALSE Explanation: Although he is young and probably has time to recover from downward spirals in the stock market, Will requires liquidity, and cash availability in four years or less. It is best to consider a lower-yielding, but less-risky investment. Difficulty: 3 Hard Topic: Risk-Return Relationship Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

130) Buying a stock makes the investor an owner in the firm. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 131) Investors earn a capital gain when they sell a stock for more than they paid for it. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 132) The market price and growth potential of a common stock depends heavily on the performance of the firm in meeting its objectives. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 133) A bull market occurs when overall stock prices increase. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

134) A bear is an investor that expects stock prices to rise. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 135) Growth stocks are the stocks of corporations whose earnings are expected to grow faster than the overall economy. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 136) Growth stocks offer investors the attractive combination of low risk and high returns. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 137) A blue chip stock represents a highly speculative stock investment. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

138) An income stock offers investors a relatively high dividend yield on their investment. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 139) A penny stock generally sells for a low initial price, pays regular dividends, and provides consistent growth in the stock's value. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 140) Penny stocks represent a high-risk stock investment. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 141) When you place a limit order, it means you are willing to buy or sell the stock at the best price available. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

142) An investor placing a market order with a broker agrees to buy or sell a stock immediately at the best price available. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 143) If a company announces a stock split, the investor may receive two or more shares of the company stock, for every one share that he/she holds. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 144) A stock split immediately increases the value of an investor's holdings. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 145) The stocks of high-quality companies such as Coca-Cola and IBM are called blue chip stocks. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

146) Buying stock on margin lowers the overall risk for the investor. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 147) A margin call requires an investor to repay money borrowed from the broker used to purchase the stock. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 148) Buying on margin means you are borrowing part of the value of the stock purchase from the brokerage firm. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 149) Buying on margin is a relatively risk-free way of investing in the stock market. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

150) A stock split refers to buying a share of stock at a discounted price if full payment is made at the time of purchase. Answer: FALSE Explanation: When companies find their stock price has appreciated sufficiently high such that it may be out of reach for many investors, the Board of Directors will announce a stock split, where investors on record of holding the stock will receive two or more shares of stock for each one share that they currently hold. The dollar value of the investor's holdings in this stock stays the same. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 151) Investing in common stock can give an individual the opportunity to participate in the success or failure of a corporation. Answer: TRUE Explanation: As a part owner, common stockholders will benefit from the profitable operations of a corporation. However, the flip side of that scenario is also true. A stockholder of a corporation that suffers a financial setback will experience a decrease in the stock value and lower dividends. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 152) If you are willing to hold on to your growth stock long enough, at least five years or more, you will realize capital gains. Answer: FALSE Explanation: An investor will earn capital gains if the market price when he/she purchased the stock is less than the current market selling price of the stock. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

153) Buying stock on margin allows investors to increase the potential rate of return made on a stock investment. Answer: TRUE Explanation: Buying stock on margin involves the purchase of stock with funds borrowed from the brokerage firm. An investor buying on margin is effectively using someone else's money to make money. If the value of the stock purchased increases, the investor benefits from investing money at a higher rate of return than the cost of borrowing the money. (This is called favorable leverage.) Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 154) If you buy 100 shares of IBM for $120/share, and the margin on your account is 50%, the broker will float you an interest-free loan of $6,000, until the price of IBM sufficiently rises to the point where you are willing to sell. You pay the broker back its $6,000, and you enjoy the capital gain. Answer: FALSE Explanation: Buying on margin is never interest free. The broker will demand that you pay interest on your loan. If the market price of your 100 shares decreases in value, you may receive a margin call, asking you to make up the loss; if you are unable to make up the loss, the brokerage firm can legally sell your shares to cover your losses. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 155) Gregory bought a share of stock in the Marshall Manufacturing for $70. When he sold the stock later that year, he received $90. The par value of the stock is $5. Gregory capital gain is $25. Answer: FALSE Explanation: Gregory capital gain is the difference between his purchase price of $70 and his net selling price of $90. His capital gain, therefore, is $20. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 45 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

156) Victoria places a limit order at $48 and the stock currently sells for $61 per share, the broker will buy the stock for her. Answer: FALSE Explanation: A limit order tells the broker to buy or to sell stock at a specific price, if and when that price becomes possible. If the price is not achieved, no transaction will take place. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 157) Levi owns 100 shares of stock in Epic Electronics that currently sell for $100 per share. Epic just announced a two-for-one stock split for all current stockholders. Levi now owns $20,000 worth of stock in Epic Electronics. Answer: FALSE Explanation: The purpose of stock splits is to reduce the market price of the stock so that more investors will buy and sell this particular issue. A two-for-one stock split doubles Levi's current holdings from 100 shares to 200 shares. The price of each share will drop to $50.00. The value of Levi's investment in Epic is still the same: $10,000. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 158) Ryan owns 100 shares in Marshall Manufacturing, currently selling for $80 per share. His stock split yesterday 3-for-1. The number of shares that Ryan owns has tripled. Answer: TRUE Explanation: The value of Ryan's stock has, theoretically, remained unchanged. A 3-for-1 stock split would likely decrease the market value of each share. Ryan has tripled his number of shares; however, they are worth proportionately less per share. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

159) Tomas purchased on margin 100 shares of stock in the Marshall Manufacturing for $50 per share yesterday. Today, the price of the shares dropped by $20 per share. Tomas expects his broker to issue a margin call. Answer: TRUE Explanation: Buying on margin involves borrowing some of the stock purchase cost from the brokerage firm. If the investor's account goes down in market value, the broker will issue a margin call requiring the investor to come up with more money to cover the losses the stock has suffered. Margin calls require an investor to repay a significant portion of the loss within days or even hours. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 160) For investors who desire the least possible risk, a share of stock in an established corporation provides the safest investment. Answer: FALSE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 161) The interest earned on municipal bonds is often tax-free at the state level. Answer: TRUE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

162) From an investor's point of view, corporate bonds offer less risk than government bonds. Answer: FALSE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 163) Corporate bonds provide investors the option of reselling the bond back to the issuing corporation at any time during the life of the bond. Answer: FALSE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 164) A corporate bond provides the owner with the right to sell the bond to other investors at any time during the life of the bond. Answer: TRUE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 165) Unlike stocks, for selling purposes, bond prices remain stable over the life of the bond. Answer: FALSE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

166) Normally, the higher the risk associated with a bond issue, the higher the interest rate the organization must offer potential investors. Answer: TRUE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 167) Bonds, like stocks, trade daily on major security exchanges. Answer: TRUE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 168) Bonds sold at a discount are sold for more than the bond's face value. Answer: FALSE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 169) As interest rates increase, bond prices fall. Answer: TRUE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

170) From an investor's viewpoint, bonds generally provide a safer investment option than does the stock of the same corporation. Answer: TRUE Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 171) If an investor owns a bond that pays a higher rate of interest than other bonds of similar risk, the investor should be able to sell the bond on the secondary market for more than its face value. Answer: TRUE Explanation: If an investor owns a bond that is highly valued by other investors, the laws of supply and demand will cause the price of that bond to be bid upwards. Bonds sold above their face value are sold at a premium. Difficulty: 2 Medium Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 172) Junk bonds are offered at higher interest rates than government bonds or corporate bonds with good ratings. Answer: TRUE Explanation: Due to the higher risk of default, investors will only take the added risk if they believe they can earn a higher reward. In this case, the higher reward is a higher interest rate on the junk bond. Difficulty: 2 Medium Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

173) A bond offering description reads: "6s of 2020." This means the bond pays 3% interest semi-annually and matures in 2020. Answer: TRUE Explanation: "6s" is an abbreviation for 6 percent interest bonds. This bond pays annual interest of 6%, and it matures in 2020. It will pay semi-annual interest of 3%. Difficulty: 2 Medium Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 174) A U.S. government bond paying 3.25% interest annually is a lower risk than a Bathtub Brewing Company bond paying 6%. Answer: TRUE Explanation: Bonds that offer a more secure investment pay lower interest rates. Difficulty: 3 Hard Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 175) Therese prefers corporate bonds as an investment option because investors always receive the face value of the bond whenever it is sold. Answer: FALSE Explanation: If Therese holds the bond until its maturity, she is assured of receiving the face value. However, if she sells her bonds to another investor prior to maturity, she is not guaranteed to get the face value of the bond. Difficulty: 3 Hard Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

176) John invested in a new issue corporate bond on the primary market for $1,000, with a coupon rate of 7%, and a maturity date of 2025. The bond was held in his brokerage account electronically, so he did not think about it on a daily basis. In 2020, he thought about selling the bond on the secondary market to help pay for his school tuition. At that time, interest rates had climbed to 8.5%. This was great news for John because now he could sell his bond for more than the principal amount he would receive in 2025. Answer: FALSE Explanation: The price of bonds and the market interest rate have an inverse relationship. Although John would receive interest = 7% annually on his bond, interest rates on new issue long-term bonds of similar quality had risen to 8.5%. Investors would not be willing to offer John $1,000 for his bond when they could buy a new issue $1,000 bond guaranteed to pay 8.5% annually. They may be willing to pay something less than $1,000 for John's bond. Difficulty: 3 Hard Topic: Investing in Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 177) Recently, Josiah bought a bond with face value of $1,000. He paid $1,150 for the bond. His bond investment undoubtedly pays a higher interest rate than the going rate for similar bonds currently out on the market. Answer: TRUE Explanation: Josiah is buying a bond on the secondary market. In order for him to pay more than the face value for the bond, the future stream of interest payments the bond promises to pay are greater in value than the going interest rate for similar bonds. New issue bonds of similar quality hold a fixed interest rate that is less than the interest rate on Josiah's bond. Difficulty: 3 Hard Topic: Investing in Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

178) A mutual fund pools investors' money and then buys stocks and bonds in many companies in accordance with the purpose of the fund. Answer: TRUE Difficulty: 1 Easy Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 179) A mutual fund's purpose is rapid investment growth, not to provide diversification for investors. Answer: FALSE Difficulty: 1 Easy Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 180) When investing in mutual funds, the investor will buy shares of a fund that consists of stocks or bonds; the fund will hold shares of many companies. Answer: TRUE Difficulty: 1 Easy Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 181) Americans have invested over $15 trillion in mutual funds. Answer: TRUE Difficulty: 1 Easy Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 53 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

182) Small investors can spread the risk of investing by purchasing shares of mutual funds or ETFs. Answer: TRUE Difficulty: 1 Easy Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 183) Most mutual funds provide investors an opportunity to buy shares directly without using a stockbroker. Answer: TRUE Difficulty: 1 Easy Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 184) A mutual fund that carries a load will require the investor to pay a commission, only if the fund appreciates in price. Answer: FALSE Difficulty: 1 Easy Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 185) A no-load mutual fund charges no commission fees to buy or sell its shares. Answer: TRUE Difficulty: 1 Easy Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 54 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

186) When comparing the investments of different mutual funds, little variation in the risk level exists. Answer: FALSE Difficulty: 1 Easy Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 187) Index funds invest in one specific type of investment; for example, an index fund might only invest in income stocks, companies whose stocks pay dividends. Answer: TRUE Difficulty: 1 Easy Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 188) Exchange traded funds (ETFs) are like mutual funds because these funds permit the investor to buy shares of a collection of several stocks or shares of a collection of stocks and bonds, but, unlike mutual funds, they are traded during the day on the exchanges. Answer: TRUE Difficulty: 1 Easy Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

189) The investor always pays a fee when purchasing a share of a mutual fund. Answer: FALSE Explanation: Many mutual funds are no-load funds, which indicate that these shares can be bought without paying a commission to a salesperson or a fee to enter the fund. Difficulty: 2 Medium Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 190) Mutual funds offer small investors an opportunity to diversify their investments. Answer: TRUE Explanation: The benefit of a mutual fund is the opportunity to buy shares of a single mutual fund and thereby share in the ownership of many different companies. Ownership in all of the different companies that a mutual fund offers might not be affordable for a small individual investor. Difficulty: 2 Medium Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 191) The degree of risk in mutual fund investments remains nearly the same from one fund to the next. Answer: FALSE Explanation: A variety of investment objectives are available in mutual funds, ranging from very conservative funds to high-risk funds. Difficulty: 2 Medium Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

192) Most investment advisors put mutual funds high on the list of recommended investments for experienced investors, but consider them too risky for beginning investors. Answer: FALSE Explanation: Due to diversification, mutual funds are considered a medium risk investment. Difficulty: 2 Medium Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 193) From a risk standpoint, stocks are considered the riskiest investments, followed by mutual funds, preferred stock, and ETFs. Bonds represent a lower-risk investment. Answer: TRUE Explanation: According to Figure 19.6, investment in common stock has high risk, followed by preferred stock, mutual funds, and ETFs. Bonds have a lower risk factor. Difficulty: 2 Medium Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

194) Natalie landed her first job after from college. The same year, she also started her first investment account. Having met with several brokers before choosing someone to work with, Natalie wanted to make certain that her investment choices would provide for long-term growth, yet satisfy her concern for diversification. The person who won her business prepared an asset allocation plan that would start her account by investing in several index funds. Her advisor has offered her a sound way to combine the concern for diversification since index funds are a sensible way for Natalie to start. Answer: TRUE Explanation: Index funds are indexed to the total stock market. They usually consist of a wide variety of stock issues whose risk balances each other out. Although index funds cannot protect the investor from market risk (the market in general), they can help protect the investor from the specific risk that accompanies the stocks of specific industries. Difficulty: 3 Hard Topic: Investing in Mutual Funds and Exchange Traded Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 195) Every time someone sells a stock believing the price has reached its maximum, someone else buys it believing the price will go still higher. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-09 Describe how indicators like the Dow Jones Industrial Average affect the market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 196) The Dow Jones Industrial Average reflects the daily average price of all the stocks traded on the New York Stock Exchange. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-09 Describe how indicators like the Dow Jones Industrial Average affect the market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

197) The Dow Jones Industrial Average utilizes the prices of the same 30 companies' stocks each year to ensure consistency. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-09 Describe how indicators like the Dow Jones Industrial Average affect the market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 198) The Dow Jones Industrial Average provides us with a sense of direction (up or down) of the overall stock market. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-09 Describe how indicators like the Dow Jones Industrial Average affect the market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 199) The NASDAQ reports its own average that investors follow to observe trends in the market. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-09 Describe how indicators like the Dow Jones Industrial Average affect the market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 200) Black Tuesday refers to the stock market crash that occurred in October 1987. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-09 Describe how indicators like the Dow Jones Industrial Average affect the market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

201) Program trading refers to computer trading software that automatically sells stocks when their price dips to a predetermined level. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-09 Describe how indicators like the Dow Jones Industrial Average affect the market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 202) Trading curbs motivate traders to utilize their computerized programs to reduce overall market volatility. Answer: FALSE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-09 Describe how indicators like the Dow Jones Industrial Average affect the market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 203) Stock market circuit breakers stop stock trading for a short time when the stock market experiences a significant drop in stock values. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-09 Describe how indicators like the Dow Jones Industrial Average affect the market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

204) Many stock market analysts suggest that program trading was a big cause of the stock market crash of 1987. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-09 Describe how indicators like the Dow Jones Industrial Average affect the market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 205) The largest one-day drop in the stock market occurred in 1987—a 22% drop. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-09 Describe how indicators like the Dow Jones Industrial Average affect the market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 206) Changes in investor trust and confidence strongly influence stock market prices. Answer: TRUE Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-09 Describe how indicators like the Dow Jones Industrial Average affect the market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

207) The Dow Jones Industrial Average reflects the average of the eleven largest corporations traded on the New York Stock Exchange as originally selected by Charles Dow. Answer: FALSE Explanation: The Dow Jones Industrial Average was broadened in 1982 to include 30 stocks. New stocks are substituted when deemed appropriate. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-09 Describe how indicators like the Dow Jones Industrial Average affect the market. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 208) One of the criticisms of the Dow Jones Industrial Average is that it does not include enough stocks to provide a good representation of the entire stock market. Answer: TRUE Explanation: Some analysts prefer to watch other indexes such as the Standard & Poor's 500, or the NASDAQ average. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-09 Describe how indicators like the Dow Jones Industrial Average affect the market. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 209) Like many stock analysts, Layla believes that program trading greatly decreases the volatility of stock market prices. Answer: FALSE Explanation: Computerized trading at specific price points by large institutional investors can significantly affect the number of shares of stock traded. Since stock prices are determined through supply and demand, prices can change drastically in a single day. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-09 Describe how indicators like the Dow Jones Industrial Average affect the market. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

210) Corporations benefit from securities markets primarily by A) creating an efficient mechanism to invest in stocks and bonds. B) obtaining the capital they need to finance their operations. C) securing memberships on various stock exchanges. D) participating in the mutual funds of investment bankers. Answer: B Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 211) Private investors benefit from securities markets primarily by A) having a place to buy and sell stocks and bonds. B) obtaining the capital they need to finance their operations. C) securing memberships on various stock exchanges. D) participating in the primary markets of investment bankers. Answer: A Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 212) A(n) ________ refers to the first public offering of a corporation's stock. A) primary market offer (PMO) B) initial securities proposal (ISP) C) initial public offering (IPO) D) primary public sale (PPS) Answer: C Difficulty: 1 Easy Topic: IPOs Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

213) Trading in newly issued securities takes place in the A) primary market. B) secondary market. C) initial offerings market. D) corporate trading market. Answer: A Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 214) The trading of previously issued securities from one investor to another takes place in the A) primary market. B) secondary market. C) initial offerings market. D) corporate trading market. Answer: B Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 215) When retained earnings are not enough to meet their long-term funding needs, businesses may be able to raise funds by A) selling common stock. B) petitioning the government for a loan. C) purchasing additional assets. D) decreasing their accounts payable. Answer: A Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

216) ________ represent a powerful force in the buying and selling of corporate securities. A) Individual investors B) Mutual banks C) Institutional investors D) Investment banks Answer: C Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 217) Investment bankers ________ new issues of bonds or stocks by purchasing, at a discount, the entire stock or bond issue of a firm and selling the issue to interested investors at a higher price. A) syndicate B) underwrite C) guarantee D) sanction Answer: B Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 218) Corporations receive the proceeds for the sale of their stock in A) the primary market. B) the secondary market. C) both primary and secondary markets. D) venture capital markets. Answer: A Difficulty: 1 Easy Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

219) Security markets assist businesses in performing their ________ function. A) long-term investing B) long-term planning C) long-term financing D) concurrent controlling Answer: C Explanation: Businesses look to the securities markets for long-term financing. Difficulty: 2 Medium Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 220) Which of the following would be classified as an institutional investor? A) pension funds B) federal Reserve banks C) stock exchanges D) commodity brokers Answer: A Explanation: Institutional investors are large investors such as pension funds, mutual funds, insurance companies, and banks. Difficulty: 2 Medium Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 221) Most businesses prefer to meet their long-term financial needs through A) debt financing. B) capital from the sale of stock. C) retained earnings. D) capital from the sale of bonds. Answer: C Explanation: Retained earnings require no interest or dividend payments. In addition, retained earnings involve no investment banker fees. Difficulty: 2 Medium Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 66 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

222) Investment bankers provide ________ services by purchasing the entire new security issue from a corporation seeking to raise capital, and selling it to interested investors. A) underwriting B) investing C) leveraging D) discounting Answer: A Explanation: Investment bankers buy an entire new issue at a discount from a corporation. Acting as a market specialist, the bankers then sell the issue, hopefully at a higher price, in the open market. Difficulty: 2 Medium Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 223) How do investment bankers generate revenues for their firms? A) They invest their own funds, or the funds of others, in mutual funds and commodities. B) They earn commissions by managing the investments of insurance companies and mutual funds. C) They buy, at a discount, the entire issue of a new security and then sell the issue to investors at full price. D) They receive consulting revenues from the advice they offer the Securities and Exchange Commission. Answer: C Explanation: Investment bankers underwrite new issues of bonds or stocks. In other words, the investment banking firm buys the entire bond or stock issue a company wants to sell at an agreed-upon discounted price. The investment banker then sells the issue to private and/or institutional investors at full price. Difficulty: 2 Medium Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

224) Marshall Manufacturing plans to issue $100 million of common stock. The firm will likely rely on the advice and assistance of a(n) A) Federal Reserve bank. B) commercial bank. C) mutual fund. D) investment banker. Answer: D Explanation: Investment bankers are specialists who assist in the issue and sale of new securities. Difficulty: 3 Hard Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 225) Christopher, a Leafy Greens shareholder, sells 100 shares of Leafy Greens stock to Martin. This transaction takes place in the A) primary market. B) secondary market. C) initial offerings market. D) security resale market. Answer: B Explanation: The secondary market handles the trading of securities between investors. Difficulty: 3 Hard Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

226) As the chief financial officer (CFO), you identify that your firm needs to raise additional funds by selling new shares of stock. Which of the following refers to a specialist that assists corporations in the issue and sale of new securities? A) an investment banker B) a commodities broker C) an officer of the Securities and Exchange Commission (SEC) D) an institutional investor advisor Answer: A Explanation: Investment bankers provide assistance to firms issuing new securities. Difficulty: 3 Hard Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 227) As a new father, Dan plans to accumulate funds over the next 18 years to help pay for his son's college education. Security markets provide Dan with A) financing opportunities. B) investing opportunities. C) opportunities to reduce his taxes. D) borrowing opportunities. Answer: B Explanation: Investors benefit from the securities market by having a convenient place to buy and sell stocks, bonds, mutual funds, and commodities. Difficulty: 3 Hard Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

228) Samantha has a brokerage account with a large investment firm. This morning her broker called asking if she is interested in participating in an IPO. He went on to say that he could get her 300 shares for $33/share. If Samantha agrees to buy the IPO, the trade will take place in the A) fair trade market. B) outer market. C) primary market. D) secondary market. Answer: C Explanation: IPOs (initial public offering) take place in the primary market. These trades are only offered to a select few individuals or companies, and not to the investing public. Difficulty: 3 Hard Topic: IPOs Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 229) Game Guys, Inc., needs several million dollars to expand and follow its strategic plan. In negotiations with the investment banker, they agree to issue 50 million shares of common stock, at $25/share. If the investment banker's fee for underwriting the total sale is 5.82%, what is the discounted price that the investment bank is willing to pay Game Guys for the shares? A) around $120,000,000 B) around $1,200,000,000 C) around $140,000,000 D) around $14,000 Answer: B Explanation: If the investment banker sells the entire issue, he will bring in revenue of $1.25 billion (50,000,000 shares x $25/per share). The banker will take [$1,250,000,000 x .0582 = $72,750,000], a total of $72,750,000 for their services, leaving Game Guys approximately $1,177,250,000 for their expansion project. Difficulty: 3 Hard Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

230) Tee Time Golf Resort found that Jordan Spieth wants to put his name on golf course designs. However, for any course to be acceptable, it will cost at least $20 million to build. The plan is to purchase real estate for four new golf resorts. Proceeding with their venture, the owners have calculated that they will need approximately $100 million. But putting together an IPO is another matter. After meeting with their investment banker, they believe that investors will be willing to pay $22/share for the IPO. As the ________ for this issue, the investment bank requires 3% of the revenues generated by the sale. Tee Time will need to issue ________ shares in order to have the $100 million they need to proceed with their plan. A) underwriter; 6.25 million shares B) underwriter; more than 6.25 million shares C) regulator; 6.25 million shares D) regulator; more than 6.25 million shares Answer: A Explanation: When the investment banker serves as an underwriter, it buys the entire issue and takes the risk of selling it to interested investors in the primary market. In order to take the risk and perform the responsibilities of an intermediary, they will purchase the issue at a discount to the market value, and then sell it to investors for the full market value. The number of shares that will be sold at full market value = $100 million ÷ $22/share = 22,000,000 shares; however, in order to pay the underwriting fee, they will need to issue more than 4.5 million shares. Difficulty: 3 Hard Topic: IPOs Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 231) Which of the following terms best describes the relationship between the New York Stock Exchange and the NASDAQ? A) cooperative B) dependent C) competitive D) disastrous Answer: C Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

232) An organization whose members can buy and sell securities for companies and investors is known as a A) public securities dealer. B) securities facilitator. C) transfer medium. D) stock exchange. Answer: D Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 233) A company's stock does not have to be listed on one of the major stock exchanges in order to trade. It can be traded on A) over-the-counter market. B) NYSE Euronext. C) NASDAQ. D) AMEX. Answer: A Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 234) If a publicly traded corporation fails to maintain specific minimum requirements, the exchange can ________ the firm's securities. A) relist B) transfer ownership of C) delist D) provide preemptive rights to Answer: C Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

235) The ________ is a large national electronic stock trading market. A) SEC B) NYSE C) NASDAQ D) NLRB Answer: C Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 236) Which of the following trades corporate stocks not listed on the national securities exchanges? A) Federal Investment Assurance Agency B) American Stock Exchange C) over-the-counter market D) Chicago Board of Trade Answer: C Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 237) A(n) ________ represents a condensed version of the registration statement that enables prospective investors to evaluate a stock for possible purchase. A) insider report B) securities disclosure C) evaluative report D) prospectus Answer: D Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

238) Which of the following federal government agencies has responsibility for regulating the various stock exchanges in the U.S.? A) SEC B) NASDAQ C) FCC D) ICC Answer: A Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 239) Using information not available to the public to unfairly benefit in the stock market represents A) security fraud. B) an unethical, but a legal activity. C) blue-sky violations. D) insider trading. Answer: D Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 240) Which of the following legislative acts created the Securities and Exchange Commission? A) Dealers Trust and Assistance Act of 1933 B) Federal Trade Commission Act of 1933 C) Securities and Exchange Act of 1934 D) Bond Trading Act of 1934 Answer: C Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

241) Which of the following statements best describes the current legal interpretation of insider trading? A) Is only possible when you are a board member or a chief officer of a company. B) Can be any employee and relatives or friends of the employee. C) Would involve members of the SEC (Securities and Exchange Commission) and the investment banker who handles most of a firm's transactions. D) Anyone who has securities information about a particular firm that is not known by the general public. Answer: D Explanation: Insider trading involves buying or selling stock on the basis of company information that is not available to the general public. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 242) According to the Connecting Through Social Media box, which of the following is a way the SEC changes altered securities laws following the JOBS Act? A) No longer required crowdinvestors to disclose their financial information to the SEC. B) Required small businesses to have at least 100 employees before allowing crowdinvestors to be pursued. C) Allowed a maximum of 20 crowdinvesting groups to invest in projects. D) Allows businesses to accept crowdinvestments from both accredited and unaccredited investors. Answer: D Explanation: Financing is not always easy to come by for small businesses. The JOBS Act has allowed businesses to accept investments from accredited and unaccredited investors, opening up the pool of investors for small businesses. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

243) After operating for years as a privately held corporation, Iron Age Metalworks plans to publicly trade its stock. As a midsized firm, Iron Age wants to avoid excessive paperwork, and the fear of being delisted in the future. The ________ provides the best fit for Iron Age's plans. A) over-the-counter market B) New York Stock Exchange C) American Stock Exchange D) secondary market Answer: A Explanation: The over-the-counter (OTC) market provides companies and investors with a means to trade stocks not listed on the national securities exchanges. The OTC market is a network of several thousand brokers that maintain contact with one another and buy and sell securities through a nationwide electronic system. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 244) Tressan wants to purchase stock in a company that is headquartered in Australia. Tressan A) will have to place her order through the Sydney Stock Exchange. B) cannot legally own the stock of a Australian corporation. C) can buy the shares from a broker on a U.S. exchange. D) must obtain an investor visa to complete the purchase. Answer: C Explanation: You can usually obtain shares of stock with little difficulty from a U.S. broker who has access to the foreign stock exchanges. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

245) The Securities and Exchange Commission has accused Martha of benefiting unfairly from information secured from a corporate officer of Stewart Engineering. Because Martha used that information to profit in the stock market, she faces ________ charges. A) insider trading B) security tampering C) corporate fraud D) short selling Answer: A Explanation: Insider trading involves the use of knowledge or information that individuals gain through their position that allows them to benefit unfairly from fluctuations in security prices. Difficulty: 3 Hard Topic: Security Regulations and the Securities and Exchange Commission Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 246) Which of the following situations would be considered insider trading? A) You read online that Marshall Manufacturing has a new CEO, who plans to bring in his own team. You decide to call your broker and buy shares of Marshall Manufacturing. B) Your Uncle Tim works for Marshall Manufacturing and sends you a news release put out by the company that talks about the acquisition of a Korean company. You believe this will significantly boost Marshall Manufacturing revenues so you buy 200 shares through an online service. C) You buy 500 shares of Marshall Manufacturing because you just heard from the CEO's administrative assistant that the CEO was just fired. You figure that this emotional news has got to help the stock price. D) Your stockbroker recommends that you diversify your portfolio with a few shares of Marshall Manufacturing because its request through the FTC and several international trade commissions to finalize the purchase of two oil companies was successful. You act on this information. Answer: C Explanation: Insider trading involves buying or selling a stock on the basis of company information that is not available to the general public. Difficulty: 3 Hard Topic: Security Regulations and the Securities and Exchange Commission Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

247) Although you were not fortunate enough to get Tee Time Golf Resort stock as an IPO, you are still thinking about trying to add some to your portfolio. Last week when you mentioned it to your broker, he said that there are plenty of shares trading on ________, but he wanted to send you the company's financial disclosures provided in the ________ before you finalize your decision. A) the secondary market; prospectus B) the NASDAQ; regulatory agreement C) the OTC; regulatory agreement D) the primary market; prospectus Answer: A Explanation: After the entire issue of an IPO is sold on the primary market, shares may start trading between investors on the secondary market. The official document that provides a condensed version of a company's financial disclosure to the SEC is called the prospectus. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 248) Which of the following securities provides the owner the right to vote for the corporate board of directors? A) common stock B) bonds C) preferred stock D) callable bonds Answer: A Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

249) Two kinds of equity financing are A) common and preferred stock. B) convertible and superior stock. C) fixed and variable stock. D) common and superior stock. Answer: A Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 250) A ________ certificate provides evidence of ownership in a specific corporation. A) stock B) bond C) debt D) capital Answer: A Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 251) ________ represents the most basic form of company ownership and includes voting rights and dividends, if and when the firm elects to pay dividends. A) Capital stock B) Common stock C) Preferred stock D) Carrier stock Answer: B Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

252) ________ are the firm's after tax profits that are distributed to stockholders. A) Equity capital B) Interest payments C) Dividends D) Retained earnings Answer: C Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 253) The dollar amount assigned to shares of stock by the corporation's charter represents the stock's A) net asset value. B) legal value. C) market value. D) par value. Answer: D Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

254) When investors purchase ________ stock, they receive a priority claim in the payment of dividends, as well as assets if the business is liquidated. However, these investors do not have voting rights. A) common B) preferred C) secured D) debenture Answer: B Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 255) Investors in ________ preferred stock receive a guarantee that missed dividends will accumulate and potentially be paid later. A) participating B) superior C) convertible D) cumulative Answer: D Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

256) Each share of common stock provides the investor with a ________ right that offers the investor the first right to purchase any new shares of common stock the firm decides to issue. This allows common stockholders to maintain a proportional share of ownership in the company. A) participating B) preemptive C) cumulative D) convertible Answer: B Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 257) When issuing stock to obtain long-term funding, dividend payments are A) tax deductible. B) legally required. C) intended to discourage firms from issuing an excessive number of shares. D) not tax deductible. Answer: D Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

258) Similar to bond investments, preferred shares can be ________, meaning the firm may buy them back. A) cumulative B) callable C) responsive D) retroactive Answer: B Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 259) Stock certificates represent evidence of ownership in an organization. A stock certificate contains which of the following? A) current market value of the stock B) the total number of shares issued by the company C) the type of stock the investor is buying D) the stock symbol and trading exchange of the company Answer: C Explanation: A stock certificate will identify the name of the company, the number of shares it represents, and the type of stock it is. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

260) Dividends are paid out of a corporation's A) profit, before taxes. B) profit, after taxes. C) sales revenue. D) capital contributed by bondholders. Answer: B Explanation: Dividends are paid out of profit after taxes and are not tax deductible. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 261) Dividends on preferred stock are A) paid after common stockholders receive their dividends. B) guaranteed, except in the event of bankruptcy. C) normally fixed, if and when dividends are paid. D) always greater than dividends on common stock. Answer: C Explanation: Preferred stockholders generally receive a fixed dividend, often expressed as a percentage of the stock's par value. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

262) Which of the following securities guarantees preferred stockholders payment of missed dividends before any dividends are paid to common stockholders? A) call provision B) cumulative preferred C) participating preferred D) convertible preferred Answer: B Explanation: Cumulative preferred stock guarantees an investor that if one or more dividend payments are not paid, the missed dividends will be accumulated. All the dividends, including past dividends, must be paid in full before any common stock dividends can be distributed. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 263) The disadvantages of issuing stock to obtain long-term financing include A) the legal obligation to pay dividends if the company is profitable. B) the funds contributed by stockholders must be repaid from after-tax profits. C) a reduction in the market value of the firm's products. D) a possible change in management and policies in the company. Answer: D Explanation: As owners, stockholders vote for the board of directors. Changes in the makeup of the board of directors can result in changes in top management and corporate direction. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

264) Jacob impresses his friends by stating that he just cast four votes in the election of the board of directors of Epic Electronics, indicating that Jacob owns ________ stock in Epic Electronics. A) preferred B) cumulative preferred C) registered D) common Answer: D Explanation: Common stock represents ownership privileges that include the right to vote to elect the board of directors. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 265) After many years as a privately held corporation, Greeley Industries decided to offer stock to the general public. Greeley may discover that stockholders A) expect to be repaid at a future date. B) can legally demand dividend payments if the corporation maintains profitability. C) adversely affect the company's debt level. D) can exercise a significant impact on company management and policies. Answer: D Explanation: As owners, stockholders vote for the board of directors. Changes in the makeup of the board of directors can result in changes in top management and corporate direction. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

266) When Ira purchased 500 shares of preferred stock in the Fairlawn Corporation, his certificate indicated the stock had a par value of $50 per share. This means that Ira A) will never get less than $50 per share when selling his stock. B) has shares that are currently worth $50 per share. C) may receive dividends based on this value per share. D) must receive a $5 dividend each and every year. Answer: C Explanation: Par value is an arbitrary value used for calculating preferred stock dividends. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 267) Iron Age Metalworks, known for its very generous dividend policy, easily attracts investors. These dividend payments basically represent A) a part of the firm's profit distributed to stockholders. B) the increase in market share the company has earned. C) current value of the firm's stock holdings. D) income that is sheltered from taxes. Answer: A Explanation: A dividend is a part of the firm's profits that is distributed to shareholders. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

268) Juanita owns stock in Elite Technologies. Her stock provides a priority claim on dividend payments and on the firm's assets in the event of liquidation. However, her ________ stock ownership does not offer her voting rights. A) common B) preferred C) superior D) callable Answer: B Explanation: Preferred stock gives its owners preference in the payment of dividends and an earlier claim on assets if the company is liquidated. However, preferred stock normally does not include voting rights in the firm. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 269) Hallie owns 20% of the common stock of the Bean Brothers Coffee Company. The company announced plans to offer an additional 10,000 shares of common stock for sale. If Hallie exercises her preemptive rights, Bean Brothers must offer her the opportunity to purchase A) 8,000 shares. B) 2,000 shares. C) as many of the new shares as the investor is willing and able to buy. D) 20% of the outstanding preferred stock. Answer: B Explanation: Preemptive rights give existing stockholders the opportunity to maintain their proportional share of ownership in the company. If the investor currently owns 20%, she must be offered the opportunity to buy 20% of the new issue (10,000 shares x 20% = 2,000 shares). Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

270) Greg purchased 2,000 shares of common stock of the Rite Track Corporation last year. He learned several months later that the stock does not pay a dividend. Greg should proceed to A) hire an attorney and file a lawsuit. B) hire an attorney and go after the registered representative that brokered the trade. C) do the proper research before he invests. D) immediately proceed to sell the shares. Answer: C Explanation: The investor bought several shares of what is probably a growth stock. Prior to investing, it is important to research and determine a historical view of the stock of interest. Many stocks are only purchased for growth, while others are purchased for growth and income. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 271) Maggie owns 10% or 50,000 common shares of a small biotech company. Although she has enjoyed a lot of control, Maggie realizes that in order for the firm to acquire the funds to grow in a recessionary economy, it will need to issue more stock. Unless she and others exercise preemptive rights, A) the company will surely begin to pay dividends. B) the new issue will dilute her ownership. C) the new issue will decrease the market price of the stock. D) The new issue will be traded on the secondary market. Answer: B Explanation: When company boards of directors vote to issue additional stock for public sale, the disadvantage is that there is dilution of ownership. Owners usually have one vote per share of ownership. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

272) A share of preferred stock for Marshall Manufacturing currently sells for $120. It offers the investor a dividend rate of 8%, on a par value of $100. If the investor owns 500 shares, her total annual dividend will equal A) $800 B) $8.00 C) $2,000 D) $4,000 Answer: D Explanation: Par value is the basis for the dividend the firm is willing to pay to preferred stockholders. In this case, 8% of $100 is an $8 dividend. The shareholder owns 500 shares. Her total annual dividend = $4,000. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 273) The corporate certificate issued to an investor that has loaned money to the corporation or government is called a A) common stock. B) preferred stock. C) bond. D) debt document. Answer: C Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

274) Issuing bonds to obtain long-term funds legally compels a firm to pay regular ________ payments and repay the ________ at the maturity date. A) dividend; par value B) interest; bond premium C) dividend; maturity value D) interest; principal Answer: D Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 275) The cost of a firm borrowing money is called the A) interest rate. B) dividend payment. C) prime charge. D) opportunity charge. Answer: A Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 276) Another name for the fixed rate of interest attached to a bond is the A) yield to maturity. B) dividend. C) coupon rate. D) security rate. Answer: C Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

277) A bond's face value is the same as its A) risk rating. B) principal. C) coupon value. D) yield. Answer: B Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 278) Government bonds can vary in denomination, but most corporate bonds are issued in A) discounted denominations. B) $1,000 denominations. C) $100 denominations. D) $5,000 denominations. Answer: B Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 279) Which of the following accurately describes an advantage of selling bonds to raise longterm capital? A) Interest is a legal obligation. B) Face value must be repaid. C) Bondholders have voting rights. D) Interest is a tax-deductible expense. Answer: D Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

280) Issuing ________ increases a firm's debt and may adversely affect the financial community's perception of the firm. A) common stock B) bonds C) preferred stock D) retained earnings Answer: B Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 281) An unsecured bond, backed only by the well-respected name of the organization, is called a ________ bond. A) mortgage B) leveraged C) debenture D) convertible Answer: C Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

282) Corporations issuing ________ bonds pledge a tangible asset as collateral to reduce the risk incurred by a bondholder. A) secured B) endorsement C) escrow D) replacement Answer: A Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 283) Firms establish a ________ so that sufficient funds are available to repay bondholders on the maturity date. A) mutual fund B) sinking fund C) retirement account D) encumbered account Answer: B Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

284) By issuing bonds with a ________, the corporation retains the right to pay off the bond prior to the maturity date. A) redemption feature B) discount clause C) retirement privilege D) call provision Answer: D Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 285) By buying a ________ bond, investors will have an option to exchange their bond for shares of common stock in the company at a future date. A) discount B) contingent C) convertible D) preferred Answer: C Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

286) According to the Standard & Poor's Investor Services ratings, which of these ratings indicates a highly speculative bond? A) AA B) B C) C D) BBB Answer: C Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 287) Which of the following represents a disadvantage of issuing bonds? A) Bonds are permanent debt on the firm's balance sheet. B) Dividends are legally required. C) Bonds increase the firm's debt. D) Bondholders receive voting rights. Answer: C Explanation: Bonds increase debt and may adversely affect the market's perception of the firm. Difficulty: 2 Medium Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

288) Bonds perceived as high risk typically pay ________ interest rates. A) higher B) lower C) more volatile D) less volatile Answer: A Explanation: The risk/return trade-off suggests that interest rates must be sufficiently high to attract investors to an above average risky investment. Difficulty: 2 Medium Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 289) The investor will receive the face value of the bond on the ________ date. A) purchase anniversary B) declaration C) maturity D) annual interest Answer: C Explanation: The maturity date refers to the date the issuer of a bond must pay the principal to the bondholder. Difficulty: 2 Medium Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

290) Which of these represents a special feature included with some bond issues? A) no repayment of par value B) no obligation to pay dividends C) no increase in the firm's debt level D) convertibility of a debt security (bond) into an equity security (stock) Answer: D Explanation: Convertible bondholders can choose to exchange their bonds for shares of stock in the same company. Difficulty: 2 Medium Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 291) A convertible bond allows the bondholder to exchange the bond for A) preferred stock. B) common stock. C) collateral. D) debt holder privileges. Answer: B Explanation: Convertible bonds allow the bondholder to convert the bond into shares of common stock in the issuing company. Difficulty: 2 Medium Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

292) Melodic Music, Inc., recently offered bonds for sale to the public. The unsecured corporate bond paid interest of 8% to investors for the 20-year life of the bonds. Melodic Music is obligated to A) represent each bondholder as an owner in the company. B) pay interest semi-annually. C) pay stockholders their dividends, before paying bondholders their interest. D) pay each owner their principal if and when they want to cash in their investment. Answer: B Explanation: Selling bonds to raise long-term capital obligates the organization to pay interest payments throughout the life of the bond, usually semi-annually. Difficulty: 3 Hard Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 293) Your Uncle Mike is approaching retirement and he asks for your advice for a safe place to invest several thousand dollars. He wants to receive some kind of payment each year for investing his money without a great deal of risk. You explain A) Yankee bonds are certain not to default. B) common stock always pays quarterly dividends. C) junk bonds do not pay annual interest. D) treasury and top-grade corporate bonds pay interest two times each year. Answer: D Explanation: The interest on most bonds is quoted as an annual rate, but it is usually issued in two increments each year. Difficulty: 3 Hard Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

294) Marshall Manufacturing issues a $1,000 bond, with an interest rate of 10%, and a maturity date of 2025. This creates a liability for Marshall Manufacturing to pay the bondholder A) $100 interest per year and $1,000 in the year 2025. B) 10% of the selling price of the bond. C) an interest payment equal to the dividend payment distributed to the common stockholders. D) $1,100 annually until the year 2025. Answer: A Explanation: The bondholder will receive 10% of $1,000 per year. The bondholder will also receive the face value of $1,000 on the maturity date in 2025. Difficulty: 3 Hard Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 295) Standard & Poor's currently rates Careful Corporation bonds as a D grade. This indicates that these bonds are A) of the highest quality with lowest default risk. B) moderately speculative. C) corporate bonds with variable interest rates. D) the lowest quality and the highest risk. Answer: D Explanation: Figure 19.3 shows that Standard & Poor's rates bonds on a scale from AAA (highest quality and lowest default risk) to D (lowest grade). Difficulty: 3 Hard Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

296) Epic Electronics decides to pay off its bonds several years before the maturity date. Apparently, the bonds A) contain an early dismissal clause. B) have an early retirement option. C) are callable. D) have discount authorization. Answer: C Explanation: When a bond is "callable," it contains a special call provision that permits the bond issuer to pay off the bond prior to its maturity date. Difficulty: 3 Hard Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 297) Mineral Mining Corporation makes regular monetary deposits that will accumulate and provide for an orderly retirement of their bonds when they come due in 2025. Mineral Mining appears to be utilizing a A) call provision. B) sinking fund. C) compensating balance system. D) retirement escrow account. Answer: B Explanation: A sinking fund requires the issuer of a bond to regularly set aside funds in a reserve account to provide for accumulated funds necessary to repay the principal of the bond. Difficulty: 3 Hard Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

298) Teeny Toys hopes to raise long-term capital by promising in writing to repay the principal provided by potential creditors in ten years. Additionally, the certificate issued by Teeny Toys promises to pay 5% interest annually for the ten-year life of the security. Teeny Toys intends to issue A) stocks. B) bonds. C) mutual funds. D) commodities. Answer: B Explanation: A bond is a contract of indebtedness issued by an organization that promises payment of a principal amount at a specified future time plus interest. Difficulty: 3 Hard Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 299) After owning a Maplewood Company bond for five years, Michelle exercised an option that allowed her to exchange her bond for 20 shares of the company stock. Michelle owned a A) callable bond. B) revenue bond. C) junk bond. D) convertible bond. Answer: D Explanation: A convertible bond is one that can be converted into shares of common stock in the issuing company. Difficulty: 3 Hard Topic: Special Bond Features Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

300) Matthew recently invested in 15-year Bathtub Brewing Company bonds paying 8% interest annually, with a maturity date of 2035. The bonds are callable in 2030. If interest rates go down to 5.5% in the year 2030, the brewery is likely to A) not exercise the call. B) exercise the call. C) give bondholders a choice of whether they want to turn the bonds back to the brewery. D) decrease the interest rate that they are willing to pay the holder. Answer: B Explanation: If interest rates go down, the brewery is likely to call in the bond issue, pay off the investors, and re-issue new bonds at the lower interest rate. Difficulty: 3 Hard Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

301) Investors buying bonds and corporations issuing bonds (both) accept investment risk. Which of the following statements is most correct when it comes to the investment risks that one or the other party accepts? A) If investor Joe is holding a bond that pays 5% and market interest rates on similar bonds go down, Joe must hold the bond until maturity because if he were to sell it today, he would have to sell it at a discount. B) If investor Joe is holding a bond that pays 5% and market interest rates on similar bonds go down, Joe's bond is now worth more than its face value, and if he needed to sell it on the secondary market, he could probably sell it at a premium. C) If investor Joe is holding a bond that pays 5% and interest rates on similar bonds go up, Joe stands to gain more than the face value of the bond if he were to sell it on the secondary market today. D) If XYZ Corporation wants to issue bonds to pay for an expansion project, and analysts predict that interest rates are projected to climb over the next few years, it is to the corporation's advantage to wait until next year to issue the bonds. Answer: B Explanation: Investors and corporations are on the opposite side of the interest rate risk scenario. If corporations issued a bond carrying an interest rate of 7%, and interest rates go down, they are paying more in interest rates than they would be if they waited for interest rates to drop. Investors are thrilled because they made a good investment. Other investors who invest in a similar investment will make less. Difficulty: 3 Hard Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 302) A ________ is a registered representative acting as an intermediary to buy and sell securities for clients. A) certified stock underwriter B) stockbroker C) securities banker D) trading accountant Answer: B Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

303) Investors trading online A) receive more advice than offered by traditional stockbrokers. B) buy and sell securities without using a brokerage firm. C) generally do their own research and make their own investment decisions. D) generally were insured against the market downturn of the early and late 2000s. Answer: C Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 304) Investing online is usually ________ than trading through a traditional stock brokerage firm. A) more expensive B) less expensive C) more volatile D) less profitable Answer: B Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 305) Creating a portfolio by buying several different types of investments to spread the risk of investing is called A) modulation. B) diversification. C) re-allocation. D) formula investing. Answer: B Difficulty: 1 Easy Topic: Risk-Return Relationship Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 105 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

306) Another term for portfolio strategy is A) modulation model. B) formula model. C) allocation model. D) equity model. Answer: C Difficulty: 1 Easy Topic: Risk-Return Relationship Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 307) When an investor purchases a security, the investor does so with the expectation of A) maintaining his or her capital position. B) minimizing risk. C) making a profit. D) providing commissions. Answer: C Explanation: Key investment decisions often center on personal objectives such as growth and/or income. Difficulty: 2 Medium Topic: Risk-Return Relationship Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

308) Online trading services target those investors who A) require the research and advice of a licensed stockbroker. B) are interested in purchasing government bonds. C) are willing to do their own research. D) trade the securities of foreign firms. Answer: C Explanation: Customers interested in online trading services are primarily investors willing to do their own research and make their own investment decisions without the assistance of a broker. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 309) Which of the following measures how quickly an investor has access to his/her invested funds, if they are needed? A) risk B) tax consequences C) yield D) liquidity Answer: D Explanation: Liquidity measures how quickly you can get back your invested funds if you want them or need them. Difficulty: 2 Medium Topic: Risk-Return Relationship Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

310) Diversification means A) allocating all your investment funds into one type of investment. B) buying investments on margin. C) being knowledgeable about the various types of investment opportunities. D) allocating your investment funds to several types of investments. Answer: D Explanation: Diversification is buying several types of investments to spread the risk of investing. Difficulty: 2 Medium Topic: Risk-Return Relationship Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 311) The risk/return trade-off investors assume means A) the less you risk, the more you stand to gain. B) the same as diversification of your portfolio. C) you will assume added risk, if you believe you can get a greater return. D) the goal is to never risk liquidity; your investments should always be liquid and of short duration. Answer: C Explanation: Investors are willing to take added risk, if they believe they can achieve a greater return. Difficulty: 2 Medium Topic: Risk-Return Relationship Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

312) Callahan and Megan plan to invest in corporate securities. While Callahan plans to retire next year on his 65th birthday, Megan is celebrating her first job after college and her 22nd birthday. Which of the two investors would be well advised to choose a more conservative investment strategy? A) Callahan B) Megan C) A conservative investment strategy is always the best strategy for both of them. D) It depends on whether they want to invest in stocks or bonds. Answer: A Explanation: The younger person can afford to invest in higher risk options because they have the time to wait for a security that may hit a slump to rise again. The older person does not have the luxury so would look for a more conservative, safer investment. Difficulty: 3 Hard Topic: Risk-Return Relationship Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 313) Though Miguel relies on his stockbroker to execute his buy and sell orders for shares of stock, he has found that the process of buying or selling a share of stock on a major stock exchange normally takes A) weeks. B) seconds. C) days. D) months. Answer: B Explanation: Large brokerage houses can actually confirm your transaction within seconds of your placing the order. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

314) Having just returned from serving with the U.S. Marines in Afghanistan, Nick has managed to save most of his earnings. He has enrolled in the local community college and he is back living with his parents while he assimilates back into U.S. life. As his business major friend, he has come to you for advice. He would like to see his $40,000 savings grow, yet he knows that he will need it in about five years when he and his girlfriend are out of school and make plans to get married. He also worries that his car may break down and he will need to invest in another used car. Which of the following would you suggest for Nick? A) In order for Nick to see growth, he will need to place the entire $40,000 in one stock offering. You suggest a biotech stock that promises growth. B) Nick is still young. He needs to consider high-growth, higher-risk stocks and corporate bonds. He is young enough to recoup his investment if it should experience a loss. C) Nick should determine what types of companies he is passionate about. He should lead with his heart, but should be warned that some of those companies will produce better yields than others. D) Since liquidity is a concern, Nick would do best to diversify into four to eight different investments, and keep a reasonable amount in cash (a savings account) for emergencies. Answer: D Explanation: Diversification spreads out the risk. Nick will decrease the chance (risk) of losing everything on one investment. Difficulty: 3 Hard Topic: Risk-Return Relationship Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 315) An investor who purchases stock in a company becomes a(n) A) creditor. B) owner. C) blue chip master. D) speculator. Answer: B Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

316) The market price of a share of common stock depends heavily on A) the number of stocks traded on the New York Stock Exchange. B) the default rate on U.S. government bonds. C) the overall performance of the company. D) the relative value of the U.S. dollar compared to the euro. Answer: C Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 317) When an investor sells a security for more than the purchase price, the investor earns a(n) A) dividend payment. B) appreciated interest receipt. C) corporate benefit. D) capital gain. Answer: D Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 318) The term ________ refers to investors who anticipate increases in stock prices. A) bears B) bulls C) dogs D) lions Answer: B Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

319) When stock prices decline steadily, investors refer to the market as a ________ market. A) bear B) bull C) dog D) lion Answer: A Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 320) Stocks of corporations with earnings expected to increase faster than other stocks are called ________ stocks. A) penny B) growth C) preferred D) blue sky Answer: B Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 321) Some analysts refer to ________ stocks as issues that sell for less than $2 (others say for less than $5). A) dollar B) growth C) penny D) discount Answer: C Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

322) Which of the following securities are historically considered high quality and usually pay dividends? A) dollar stocks B) growth stocks C) preferred stocks D) blue chip stocks Answer: D Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 323) Stocks offering investors a high dividend yield are called A) growth stocks. B) blue chip stocks. C) income stocks. D) penny stocks. Answer: C Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 324) An investor places a ________ order with a broker to buy a particular stock at a specific price, if and when that price becomes available. A) call B) market C) put D) limit Answer: D Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

325) An investor places a ________ order with a broker to sell a stock at the best price available at that time. A) discretionary B) market C) limit D) leveraged Answer: B Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 326) When corporations elect to issue two or more shares of stock to existing stockholders for each share they currently own, they have initiated a(n) A) stock split. B) dividend spread. C) share dividend. D) earnings split. Answer: A Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 327) Which of the following describes the process where an investor borrows a percentage of the purchase price of stocks from the brokerage firm? A) margin call B) futures trading C) buying on margin D) dealer's account trading Answer: C Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

328) What agency sets the margin rates for purchasing stock in the U.S.? A) high commissioners of the Securities and Exchange Commission B) board of governors of the Federal Reserve System C) Securities Division of the Treasury Department D) Federal Trade Commission on Exchange Markets Answer: B Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 329) If a stock's closing price for the day is 32.47, the stock's price in U.S. dollars would be A) $32 plus a $.47 commission. B) $32.47. C) in between a low of $32 and a high of $47. D) $3,247. Answer: B Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 330) If an investor's strategy is: "buy low, and sell high," we could conclude that his optimism regarding future stock price increases indicates that he is A) bullish. B) bearish. C) only marginally confident about the stock market. D) lionish. Answer: A Explanation: Bullish investors believe that stock prices are going to rise. They buy stock in anticipation of the increase. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

331) In the securities markets, capital gains take place when A) the value of the Dow Jones Industrial Average appreciates. B) a security sells for more than the original purchase price. C) additional investors buy stock in an existing corporation. D) stockholders profit from the firm's use of leverage. Answer: B Explanation: A capital gain is the positive difference between the price at which you bought a stock and what you sell it for. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 332) ________ stocks represent investments in emerging fields that have the potential to realize better than average increases in the stock's prices. A) Blue chip B) Penny C) Growth D) Income Answer: C Explanation: Growth stocks are stocks of corporations whose earnings are expected to grow faster than other stocks in that industry or the overall economy. While often considered risky, such stocks offer investors the potential for high returns. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

333) The stock of well-known, high-quality firms, such as Coca-Cola, General Electric, and Procter & Gamble, fit the characteristics of ________ stocks, because investors can almost always be assured a dividend and consistent stock price appreciation. A) growth B) blue chip C) income D) callable Answer: B Explanation: Blue chip stocks describe the stock of a firm that is considered to be of high quality and most often pays dividends. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 334) Corporations that want to attract more investors by lowering the selling price of their common stock might consider declaring a A) bankruptcy filing. B) cash dividend. C) margin call. D) stock split. Answer: D Explanation: A stock split will increase the number of shares outstanding. The price of the stock decreases proportionately to the size of the stock split. There is no immediate change in value for the stockholder. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

335) Buying stock on margin allows an investor to borrow funds from the brokerage company as part of the transaction. This ________ the potential return to the investor and ________ the risk. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases Answer: A Explanation: The leveraging of an investment by the use of borrowed funds can greatly exaggerate the percentage of profit or loss. As the risk/return trade-off indicates, the possibility of a greater rate of return is accompanied by a greater potential for loss. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 336) Amy plans to buy 100 shares of common stock in Marshall Manufacturing. She willingly accepts the risk of this investment because she A) understands that creditors are protected from risk. B) desires an opportunity to share in the success of this company. C) knows that every gambler wins occasionally. D) believes that a bear market is on the way. Answer: B Explanation: Common stockholders participate in the success or failure of the firm. While common stock does offer great opportunities for profit, it also is subject to a high degree of risk. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

337) After buying 200 shares of common stock in Epic Electronics for $20 per share, Rashad later sold the same shares for $25 per share. Rashad's capital gain on the total transaction is: A) $10. B) $110. C) $1,000. D) $1,500. Answer: C Explanation: A capital gain is the positive difference between the price at which Rashad bought the stock and the price at which he sold it. The capital gain per share is $5 ($25 – $20). Rashad's total capital gain is $1,000 ($5 x 200 shares). Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 338) Norman wants to supplement his current investments with a high-risk, low-priced security. Which of these best fits his strategy of high risk, low price and a potentially high rate of return? A) time deposits B) penny stocks C) blue chip stocks D) split stocks Answer: B Explanation: Norman's stocks sell for less than $2.00 per share (some analysts say less than $5.00 per share) and are considered risky investments. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

339) Ernesto told his broker to buy 75 shares of PharmaONE at the best possible price available that day. These directions indicate that Ernesto placed a ________ order with his broker. A) market B) limit C) margin D) split Answer: A Explanation: A market order tells the broker to buy or sell a security immediately at the best price available. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 340) Realizing that Iron Age Metalworks stock currently sells for $37 a share, Alex directed her broker to buy 100 shares if and when the price dropped to $31. Alex placed a ________ order with her broker. A) market B) limit C) margin D) confirmation Answer: B Explanation: A limit order tells the broker to purchase a stock at a specific price, if that price becomes available. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

341) Brad told his stockbroker to buy 100 shares of Mineral Mining common stock if and when the price falls to $18 per share. Brad placed a(n) A) market order. B) odd-lot order. C) limit order. D) contingent order. Answer: C Explanation: A limit order tells the broker to buy or to sell stock at a specific price, if and when that price becomes available. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 342) Game Guys announced a 2-for-1 common stock split for investors on record. Which of the following will occur? A) The stock price will increase to reflect the value of two shares for every one share. B) Each share will be worth ½ of its previous value, but shareholders' total value of Game Guys will remain the same. C) The value of Game Guys common stock will remain the same, for a short period of time, and then experience a guaranteed growth spurt. D) The shareholders will sell their shares immediately after the split and take their capital gains, as well as provide others an opportunity to invest in Game Guys. Answer: B Explanation: A two-for-one stock split would cause stock prices to drop by 50%. While there is no change in each investor's total value in that issue after the stock split, they generally approve of stock splits because often the demand for a share of stock at the lower price will be greater than the demand at the higher price. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

343) Before the announcement of a three-for-one stock split, the selling price for a share of stock in Fossil Oil Refineries was $150 per share. Immediately after the stock split, the probable price per share is A) $450. B) $ 50. C) $350. D) $150. Answer: B Explanation: A three-for-one stock split will give stockholders three shares of stock for each one they currently own. The impact of this split on the trading price of the stock is a reduction by one-third [$150 x 1/3 = $50]. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 344) Anjali's stockbroker called to inform her of a margin call that requires that she pay $1,000. This indicates that the value of Anjali's stock has A) just split. B) decreased. C) increased. D) changed causing the Federal Reserve to increase the margin rate. Answer: B Explanation: Buying stock on margin allows the investor to borrow a specified percentage of the purchase from the stockbroker. If, however, the stock value decreases, the broker will issue a margin call requiring the investor to come up with more money to cover the losses the stock has suffered. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

345) Brittany read about PharmaONE and wants to buy 100 common shares at $40 per share. Unfortunately, she only has $3,000 available to invest. One risky strategy Brittany could consider is A) buying on margin. B) buying from the dealer's account. C) arranging for security funding. D) Leveraging her future professional earnings. Answer: A Explanation: Buying on margin involves the purchase of stocks by borrowing some of the purchase cost from the stockbroker. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 346) Bondholders can sell their bonds A) on the secondary market prior to the maturity date. B) early if the bonds were issued with a callable option. C) after the bonds are converted into common stock. D) after receiving the written permission of other stakeholders. Answer: A Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 347) Which of the following organizations provides an assessment of the relative level of risk of a particular firm's bond issue? A) Securities and Exchange Commission B) E*trade C) Wall Street Journal D) Standard & Poor's Answer: D Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 123 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

348) Bonds sold at a ________ sell for less than face value. A) secondary market B) discount C) premium D) date before the maturity date Answer: B Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 349) Bonds offering a higher interest rate than other bonds of similar risk will likely sell at a A) secondary market. B) discount. C) premium. D) price equal to the face value of the bond. Answer: C Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 350) The higher the risk associated with a bond issue, the ________ the interest rate the organization must offer investors. A) higher B) lower C) more stable D) less stable Answer: A Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

351) Which of the following offers low risk, guaranteed income, backed by the full faith and credit of the federal government? A) municipal bonds B) U.S. government preferred stocks C) common stock in the U.S. postal service D) U.S. government bonds Answer: D Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 352) Bonds that pay very high interest rates and typically have a higher risk of default are known as A) zero-coupon bonds B) bearer bonds C) junk bonds D) volatile bonds Answer: C Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 353) High-risk, high-interest bonds are called A) convertible bonds. B) preferred bonds. C) discount bonds. D) junk bonds. Answer: D Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

354) Bond prices in the newspaper or online are quoted as a percentage of their face value of $1,000. If the bond price is 103.25, this bond's value is equal to A) $103.25 B) $1,032.50 C) $10,325.00 D) $10.33 Answer: B Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 355) A recent publication referred to a series of bonds as "the 6s of 35." What does this mean? A) They were issued in 2006, and they mature in 2035. B) That any bond in this issue, whose series' numbers end in "6" are callable in the year 2035. C) They are 35-year bonds that were due in 2006. D) They pay 6% interest and they mature in 2035. Answer: D Difficulty: 1 Easy Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 356) When market interest rates increase, the selling price of existing bonds will A) increase. B) decrease. C) remain constant. D) be less volatile. Answer: B Explanation: Bond prices generally fluctuate inversely with current market interest rates. As interest rates go up, existing bond prices fall, because the existing bonds are paying a fixed interest rate that is lower than the market interest rate. Difficulty: 2 Medium Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

357) The risk associated with Firm A's bond is greater than the risk of Firm B's bond. All other things being equal, investors would be willing to pay ________ for Firm B's bond. A) less B) more C) the same D) a premium Answer: B Explanation: The risk/return trade-off suggests that the greater the risk associated with a specific security, the less investors are willing to pay for the bond, but the more they expect in interest payments for their willingness to take the risk. Investors will invest in a bond considered risky only if the potential expected return is sufficiently high to counter the risk. Difficulty: 2 Medium Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 358) U.S. government bonds are considered a secure investment because A) the interest rates are protected from inflation and tied to the consumer price index. B) they are backed by the full faith and credit of the federal government. C) the interest rates are higher than for corporate bonds of equal duration. D) if they are lost or stolen the federal government promises to replace them when the proof of purchase is provided. Answer: B Explanation: U.S. government bonds are a secure investment because they are backed by the full faith and credit of the federal government. Difficulty: 2 Medium Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

359) Abraham found a $1,000 face value bond that belonged to his father. He checked The Wall Street Journal and found the bond was currently selling for $1,220. This bond sells at a A) discount. B) premium. C) price that is overvalued. D) primary market. Answer: B Explanation: A bond selling for more than face value is selling at a premium. Difficulty: 3 Hard Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 360) The new issue $1,000 face value bonds due in 2030 issued by Bathtub Brewing Company are seen by investors as less attractive than other bonds offered by other businesses at the same time. The coupon rate attached to these bonds will need to be ________ than other corporate bond issues in order to attract investors. A) the same B) lower C) higher D) not important because it is a new issue Answer: C Explanation: In order to attract investors to bonds with poor ratings and a high risk of default, corporations must attach a high interest rate to the bond. Difficulty: 3 Hard Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

361) Andrea invests $5,000 in five Epic Electronics bonds that mature in 10 years. Unexpectedly just the week after she invests, she has the opportunity to work abroad, which she has always wanted to do, but she needs cash. Which of the following most likely applies to Andrea? A) She can immediately sell the bonds for $5,000 plus interest for the week. B) She is out of luck. She must keep the bonds for the full 10 years. C) She may immediately sell the bonds but it is unclear how much money they will sell for. D) She will be able to sell the bonds immediately on the primary market. Answer: C Explanation: Andrea may sell the bonds on the secondary market. Depending upon market interest rates, Andrea stands to receive the full $5,000, or something less, or something more. Difficulty: 3 Hard Topic: Bonds Learning Objective: 19-07 Analyze the opportunities bonds offer as investments. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 362) An investment that pools together investors' money in order to buy securities in many different companies or governments is a A) commercial fund. B) mutual fund. C) holding company. D) public investment corporation. Answer: B Difficulty: 1 Easy Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

363) A mutual fund company buys securities from corporations and governments and packages them together into a mutual fund. It then A) sells shares of this packaged investment to interested investors. B) deposits the mutual fund into a pension fund for institutional investors. C) charges investors a fee to find out how these investments fared, so that investors can decide for themselves as to whether they want to own the investments. D) gives investors the option to bid on a share of this investment. Answer: A Difficulty: 1 Easy Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 364) Which of the following describes a benefit enjoyed by investors in mutual funds? A) Guaranteed dividend payments are received annually. B) Investment risk is eliminated. C) Investors buy an ownership interest in many different companies. D) Investors exercise managerial authority in many different companies. Answer: C Difficulty: 1 Easy Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

365) New investors may want to consider ________ funds, which are mutual funds that invest in one particular kind of stock or a particular kind of bond, or even stocks that are representative of the entire market. A) international B) index C) global D) relief Answer: B Difficulty: 1 Easy Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 366) ________ are collections of stocks that are traded on exchanges but are traded more like individual stocks than like mutual funds. A) REITs B) ETFs C) LOCs D) SRTs Answer: B Difficulty: 1 Easy Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

367) Buying several different investment alternatives to spread the risk helps an investor achieve A) lower rates of return. B) lower commission fees. C) isolation. D) diversification. Answer: D Difficulty: 1 Easy Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 368) ________ means that the mutual fund company does not show a fee or commission for investing in the fund. A) Front load B) Back load C) Double load D) No load Answer: D Difficulty: 1 Easy Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 369) ________ have a set dollar goal the fund manager wants to manage. Once the fund has reached that goal, it does not accept new investors. A) No-load funds B) Closed-end funds C) Drop-off funds D) Zero-sum load funds Answer: B Difficulty: 1 Easy Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 132 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

370) ________ represent the best way for investors to have their investments managed by a trained specialist for a fee. A) Individual stocks B) Mutual funds C) Corporate bonds D) Government bonds Answer: B Explanation: Mutual funds offer investors an easy way to diversify their investments while receiving professional investment management. Difficulty: 2 Medium Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 371) To reduce the risk of investing in an individual stock, an ownership position in many different companies can be achieved by purchasing shares in a(n) A) indexed security. B) mutual fund. C) diversification bond. D) stock cooperative. Answer: B Explanation: Mutual funds offer small investors the opportunity to diversify their investments. Rather than investing in the stock of a single firm, by purchasing shares of a mutual fund the investor has an investment interest in many different businesses. Difficulty: 2 Medium Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

372) Which of the following describes a mutual fund that charges no commission to buy or sell its shares? A) open-end fund B) closed-end fund C) no-load fund D) front-load fund Answer: C Explanation: One advantage of mutual funds is that you can buy many funds directly and save brokerage fees. A no-load fund is one that charges no commission to either buy or sell its shares. Difficulty: 2 Medium Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 373) Mutual fund investors will note that A) fund managers have not yet added foreign securities into their funds. B) mutual funds cannot be purchased through a traditional brokerage house. C) loads can vary from one mutual fund to another. The fund manager dictates the commissions and fees. D) by law, mutual funds can no longer charge loads. Answer: C Explanation: Different mutual funds have different fees. Funds can contain loads, meaning there are additional fees and commissions, either on the front end or back end, to buy or sell the shares. No-load funds do not charge commissions. Difficulty: 2 Medium Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

374) The initial cost of investing in mutual funds depends in part on A) whether the fund is a load or no-load fund. B) the risk tolerance of the companies in the fund. C) the tax rate on capital gains. D) the imposition of government tariffs. Answer: A Explanation: While there are fees or charges imposed by all mutual funds, a load fund will charge a commission to buy or sell shares in the fund. Difficulty: 2 Medium Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 375) Elisa has an ownership interest in many different companies, yet she owns the shares of stock of just one organization. Elisa undoubtedly owns shares in a(n) A) investment trust. B) security account. C) options association. D) mutual fund. Answer: D Explanation: A mutual fund is an investment group that buys stocks and bonds of many different organizations and then sells shares in the investment group to the public. Difficulty: 3 Hard Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

376) Orlando, a recent graduate of a community college, is about to make his first investment in the stock market. Which of the following would be a cautious way for Orlando to start investing? A) future contracts in oil B) index funds C) short-selling technology stocks D) commodity market transactions in precious metals Answer: B Explanation: Many investment advisors recommend young investors buy a few index funds and diversify those investments among different kinds of stock. An index fund is a fund that invests in a certain kind of stock. The most recommended is an index fund that covers the whole stock market. Difficulty: 3 Hard Topic: Mutual Funds Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 377) Applying what you have learned about investments as introduced to you in Chapter 19, put the following investments in order from least risky to riskiest. Which of following lists begin with the least risky investment and ends with the most risky? Least risky = 1; most risky = 5. A) 1) Bonds; 2) Mutual Funds; 3) ETFs; 4) Preferred Stock; 5) Common Stock B) 1) Preferred Stock; 2) Common Stock; 3) Mutual Funds; 4) ETFs; 5) Bonds C) 1) Common Stock; 2) Bonds; 3) Mutual Funds; 4) ETFs; 5) Preferred Stock D) 1) Bonds; 2) Common Stock 3) Mutual Funds 4) ETFs 5) Preferred Stock Answer: A Explanation: Although the chart in Figure 19.6 shows mutual funds, ETFs, and preferred stock having "medium" risk, due to diversification; mutual funds and ETFs are slightly lower because they spread the risk among several investments. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-08 Explain the investment opportunities in mutual funds and exchangetraded funds (ETFs). Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

378) The traditional market barometer used to measure the direction of the stock market is the A) Value Line Composite (VLC). B) Moody's Investment Index (MII). C) Dow Jones Industrial Average (the Dow). D) Fitch's Industrial Index (FIA). Answer: C Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-09 Describe how indicators like the Dow Jones Industrial Average affect the market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 379) The Dow Jones Industrial Average represents the average price of ________ industrial stocks. A) 11 B) 30 C) 500 D) all the above Answer: B Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-09 Describe how indicators like the Dow Jones Industrial Average affect the market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 380) ________ involve(s) computer instructions that automatically sell stocks whose value has dropped by a predetermined amount. A) Software action B) Program trading C) Curbs D) Circuit breakers Answer: B Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-09 Describe how indicators like the Dow Jones Industrial Average affect the market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 137 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

381) To reduce market volatility, ________ require that a key computer is turned off so that program trading is halted. A) ultra restraints B) trading curbs C) market stops D) nutmeg halts Answer: B Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-09 Describe how indicators like the Dow Jones Industrial Average affect the market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 382) The Securities and Exchange Commission developed ________ to halt trading in the stock market for a short time when the market has experienced a dramatic decrease in prices. A) program trading B) online investing C) circuit breakers D) insider trading Answer: C Difficulty: 1 Easy Topic: Securities and Stock Markets Learning Objective: 19-09 Describe how indicators like the Dow Jones Industrial Average affect the market. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

383) One criticism of the Dow Jones Industrial Average suggests that it A) magnifies the fluctuations in the stock market. B) does not indicate the cause of changes in stock prices. C) is too small (too few companies) to get a good statistical representation. D) is biased causing an overstatement of bond price increases and an understatement of stock price decreases. Answer: C Explanation: Critics argue that if the purpose of the Dow is to give an indication of the direction of the broader market over time, the 30-company sample is too small. Many investors and market analysts, therefore, prefer to follow stock indexes like the Standard & Poor's 500 that track the performance of 500 companies' stocks. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-09 Describe how indicators like the Dow Jones Industrial Average affect the market. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 384) Daily reporting of the Dow Jones Industrial Average serves to A) show the direction of the market over time. B) distort short-term fluctuations for the financial community. C) identify the beginning of a recession in the economy. D) disclose the average price of a share of stock on the major exchanges. Answer: A Explanation: The generally accepted assumption is that the 30-company average gives an indication of the direction of the market over time. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-09 Describe how indicators like the Dow Jones Industrial Average affect the market. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

385) The purpose of the SEC's circuit breakers rule is to A) prevent market disruption caused by a communication malfunction. B) halt trading for a short time following a dramatic drop in stock prices. C) allow floor traders to specialize in trading the securities of specific industries. D) prevent individuals from profiting from information not available to the general public. Answer: B Explanation: Following the precipitous drop of market value in 1987 (brought on by program trading), the SEC developed circuit breaker rules to stop trading for a period of time to give investors a chance to assess the market after a significant drop in prices. If prices continue to fall, additional pauses in trading will occur. Difficulty: 2 Medium Topic: Securities and Stock Markets Learning Objective: 19-09 Describe how indicators like the Dow Jones Industrial Average affect the market. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 386) Bill is reviewing the firms whose stocks have comprised the Dow Jones Industrial Average over the years. He discovers A) the same 30 stocks have been used since the inception of the indicator. B) different companies are used each year. C) these stocks change periodically as deemed appropriate. D) there is an even mix between big and small companies. Answer: C Explanation: New stocks are substituted when the Dow Jones Corporation believes that this is needed to reflect a change in the structure of the market. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-09 Describe how indicators like the Dow Jones Industrial Average affect the market. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

387) Bonds represent a major source of long-term financing. What is a bond? Explain the major elements that must be in a bond issue. Answer: A bond is a corporate certificate indicating that a person has lent money to a firm. A company that issues bonds has a legal obligation to make regular interest payments to investors and to repay the entire bond principal amount at a prescribed time. This definition contains the major elements involved in bond issues. A bond must have a principal, which refers to the face value of a bond. Bonds are almost always originally issued in denominations of $1,000. Bonds offer interest to investors as a condition of their lending money to the firm. Interest rates vary according to the state of the economy, the reputation of the company issuing the bond, and the going interest rate for government bonds or bonds of similar companies. It's important to recall that bond interest must be paid when due. A bond is issued with a specific interest rate attached to it. This rate does not change throughout the life of the bond. A bond has a specified date when the bond issue will be repaid. This date is referred to as the maturity date. Classes of bonds include both secured and unsecured issues. Secured bonds are backed by collateral, in case they should default. Unsecured bonds usually pay a higher interest rate due to the fact that they are not backed by collateral and investors are subject to added risk. The most common type of bond issued by well-respected companies is a debenture bond (unsecured). There are many other alternative classes of bonds that can be issued. Students may also mention other characteristics of bonds such as convertible bonds that can be converted to common stock and callable bonds that can be called back by the company prior to the date of maturity. Difficulty: 3 Hard Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

388) Explain the major advantages and disadvantages of issuing stock as a source of long-term financing. Answer: Raising long-term capital through equity financing involves the sale of stock or use of retained earnings. The primary advantages of issuing stock are as follows: · Stockholders are owners of the firm. Therefore, their investment never has to be repaid. The firm has funds available for use for a longer period of time. · There is no legal obligation to pay dividends to stockholders. Income can therefore be reinvested in the firm for future financing needs. · The sale of stock can also often improve the condition of the firm's balance sheet. The firm incurs no added debt and yet the company has more funds with which to generate revenues. Issuing stock also offers the following disadvantages: · As owners of the firm, stockholders vote for members of the board of directors. The board of directors in a firm selects top management and sets overall corporate policy. Depending on the size of the stock issue, the company could be altered significantly through the sale of stock. · Dividends are paid out of profit after taxes. Thus, dividends cost more than similar amounts of interest, which is a tax-deductible expense. · Management often feels pressured by stockholders to use short-term planning tactics to keep earnings up and stockholders happy rather than looking at strategic planning for the future. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

389) Discuss the role of investment bankers in the securities markets. Answer: Most corporations do not raise long-term capital frequently. Because corporate financial managers are more involved in the daily activities of working-capital management, they often seek the assistance of investment banking firms. Investment bankers are specialists who assist in the issue and sale of new corporate securities. Large financial institutions usually have an investment banking arm. They provide the service of assisting companies who want to issue securities, by preparing documents for submittal to the Securities and Exchange Commission (SEC), including the prospectus. Investment bankers will also assume the risk of selling a security at a satisfactory price. This is referred to as underwriting. The investment banking firm buys the entire bond or stock issue from the corporation at a discount. At this point, the investment banking firm owns the securities. The corporation has the funds they required. Now the investment banking firm will sell the securities in the stock and bond markets. Investment bankers profit when they successfully sell the security at a higher price than they paid for it. Difficulty: 3 Hard Topic: Understand the Functions of Money and the Role of Financial Markets Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

390) Explain the differences between preferred stock and common stock. Answer: Preferred stock gives owners preference in the payment of dividends and a prior claim on assets if the company is forced out of business and its assets sold. Preferred stockholders do not have voting rights in the firm. Preferred stock is also generally issued with a par value. Common stock may or may not be issued with a par value. The purpose of the par value on preferred stock is to set the dividend rate proposed for the preferred stock. Common stock dividends are always susceptible to the performance of the firm. Again, remember preferred stockholders must be paid their dividends in full before common stockholders can receive any dividend payment. Preferred stock may also contain special features not available with common stock. Preferred stock may be: · callable. · convertible into common stock. · cumulative, meaning dividends accumulate if they are not paid on schedule. Common stock is also considered to be more risky than preferred stock. However, common stock offers investors the opportunity for higher returns. Holders of common stock have the right (1) to vote for company board directors and important issues affecting the company and (2) to share in the firm's profits through dividends, if approved by the firm's board of directors. Common stockholders also have a preemptive right, which is the first right to purchase any new share of common stock the firm decides to issue. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-03 Compare the advantages and disadvantages of equity financing by issuing stock, and detail the differences between common and preferred stock. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

391) The risk/return trade-off is inherent in any investment strategy. What are the five key criteria investors should consider when selecting investment options? Answer: Investment risk: The chance that an investment will be worth less at some future time than it's worth now. Yield: The expected rate of return on an investment, such as interest or dividends, usually over a period of one year. Duration: The length of time your money is committed to an investment. Liquidity: How quickly you can get back your invested funds if you want them or need them. Tax consequences: How the investment will affect your tax situation. Difficulty: 3 Hard Topic: Risk-Return Relationship Learning Objective: 19-05 Explain how to invest in securities markets and set investment objectives such as long-term growth, income, cash, and protection from inflation. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation 392) Describe four different types of common stock that an investor may consider, depending upon the investor's strategy and risk tolerance. Answer: Blue Chip Stocks: These are the stocks of well-established companies that show consistent profits over time. Typical blue-chip stocks are IBM, Procter & Gamble, and GE. Blue-chip common stock usually pays a dividend. Growth Stocks: These are the stocks of corporations that are typically in emerging fields such as biotechnology. Analyst predictions usually expect these stocks to grow at a rate faster than the total market. While a little riskier, they have the potential for higher returns. Income Stocks: These stocks pay high dividend yields, and investors buy them for the dividend. Utility company stocks are examples of income stocks. Penny Stocks: These are risky issues that usually trade below $2.00 per share (some analysts place any stock that trades below $5.00 per share in this category). Investors who have a high risk tolerance and like to speculate may trade in penny stocks. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Analyze AACSB: Analytic Thinking Accessibility: Keyboard Navigation

Mini-Case Penny Stock is the chairperson of Pirate Recording Company Inc. She is the person responsible for the tremendous growth this company has enjoyed over the past three years. It was Penny's intuition and clever negotiating that enabled the company to sign two very hot recording artists: Half a Dollar and N'elli. These groups have generated profits of over $25 million. The future looks even brighter at the firm because several current and aspiring entertainers have indicated an interest in signing on with Pirate Recording. This incredible growth has delighted everyone at the company, but it has also created a major problem for Penny. Pirate Recording has never been a major player in the recording industry, primarily because of limited capital. In order to take the company to the next level Penny realizes that she will need to expand the firm's personnel and equipment. The amount of new funds required to finance this needed expansion is $150 million. Penny has started to consult with others about how to finance this major expansion of the company. 393) One funding source under consideration is the issuance of $150 million worth of corporate bonds. A financial advisor predicted that in order for the fast growing company to attract investors, it would have to put up collateral to back up the bond issue. The type of bond the financial advisor suggests is A) debenture bonds. B) asset bonds. C) secured bonds. D) preferred bonds. Answer: C Explanation: Secured bonds are bonds that are backed by some tangible asset that is pledged to the bondholder if interest is not paid or principal is not paid back. Difficulty: 3 Hard Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

394) Penny is concerned about the interest rate risk if the company decides to issue bonds. Penny would like protection from interest rate fluctuation. Therefore, the bond issue's features should include a(n) A) equity proposition. B) call provision. C) convertibility clause. D) collateral agreement. Answer: B Explanation: A call provision permits the issuer to pay off a bond prior to its maturity date. If interest rates fall, corporations want the flexibility to issue new bonds at the lower interest rate, and then proceed to call in the previously higher interest carrying bonds early, and pay them off with the proceeds from the new issue. Difficulty: 3 Hard Topic: Bonds Learning Objective: 19-04 Compare the advantages and disadvantages of obtaining debt financing by issuing bonds, and identify the classes and features of bonds. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 395) If Pirate Recording elects to offer an Initial Public Offering (IPO), it will involve preparing full financial disclosure with the ________. The firm is advised to solicit the services of an investment banker/underwriter, who will analyze the market and determine the best price for the new issue of Pirate Recording stock. The offering will then be sold on the ________. A) Internal Revenue Service; secondary market B) Fair Trade Commission; primary market C) Federal Trade Commission; secondary market D) Securities and Exchange Commission; primary market Answer: D Explanation: The Securities and Exchange Commission (SEC) is the regulating body of all publicly traded firms. By preparing an Initial Public Offering (IPO), Pirate Recording would be selling common stock to the general public, allowing several other investors to own a part of the firm, with voting rights. A new issue of stock, on an IPO, is sold on Primary Market. When the entire issue is sold, Pirate Recording would get its needed funding. Difficulty: 3 Hard Topic: IPOs Learning Objective: 19-01 Describe the role of securities markets and of investment bankers. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

396) If stock is issued in Pirate Recording, analysts predict that the company has potential for strong growth. The prospects for dividend payments to stockholders, at least in the beginning, are not good. Pirate Recording will need to retain its earnings in order to grow rapidly. The firm's stock would most likely be classified as a(n) A) blue chip stock. B) income stock. C) growth stock. D) capital stock. Answer: C Explanation: Growth stocks are stocks of corporations whose earnings are expected to grow faster than other stocks in the market. They seldom pay dividends. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-06 Analyze the opportunities stocks offer as investments. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 397) Penny is impressed with contemporary high-tech companies that have listed their stock on an electronic telecommunications network of securities dealers who trade the stock. She is referring to firms such as Microsoft, Google, and Apple. Penny ideally would like her company's stock listed on the A) AMEX. B) NASDAQ. C) OTC. D) NYSE Euronext. Answer: B Explanation: The NASDAQ is a telecommunications network of dealers who trade stocks electronically. Difficulty: 3 Hard Topic: Securities and Stock Markets Learning Objective: 19-02 Identify the stock exchanges where securities are traded. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

Understanding Business, 12e (Nickels) Chapter 20 Money, Financial Institutions, and the Federal Reserve 1) Economic growth and the creation of jobs depend on the availability of money. Answer: TRUE Difficulty: 1 Easy Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 2) Most countries restrict the flow of money in and out of their borders. Answer: FALSE Difficulty: 1 Easy Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 3) Economic events in other nations seldom impact the powerful U.S. economy. Answer: FALSE Difficulty: 1 Easy Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 4) Barter is the trading of goods and services for other goods and services. Answer: TRUE Difficulty: 1 Easy Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

5) Barter involves the use of electronic payment systems, like PayPal, for online transactions. Answer: FALSE Difficulty: 1 Easy Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 6) Money is anything people generally accept as payment for goods and services. Answer: TRUE Difficulty: 1 Easy Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 7) Efficient monetary systems eliminate the use of barter. Answer: FALSE Difficulty: 1 Easy Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 8) A barter exchange is a system where you input into a system the goods and services that you are willing to trade, and receive trade credit. Answer: TRUE Difficulty: 1 Easy Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

9) Coins and bills are portable and durable. Answer: TRUE Difficulty: 1 Easy Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 10) The strength of the U.S. money system rests on the silver content of the coins. Answer: FALSE Difficulty: 1 Easy Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 11) Electronic money is a newer form of money. Answer: TRUE Difficulty: 1 Easy Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 12) Historically, coins and paper money complicated the exchange process. Answer: FALSE Difficulty: 1 Easy Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

13) The U.S. government has done its best to create dollar bills that are easily duplicated. Answer: FALSE Difficulty: 1 Easy Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 14) Companies are now developing ways to send money across international boundaries using emoney. Answer: TRUE Difficulty: 1 Easy Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 15) The president of the U.S. is in control of the money supply in the U.S. Answer: FALSE Difficulty: 1 Easy Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 16) The size and strength of the U.S. economy insulates U.S. businesses from the economic problems of other countries. Answer: FALSE Explanation: Each day, about $5 trillion is exchanged in the world's currency markets. Thus, what happens to any major country's economy has an effect on the U.S. economy and vice versa. Difficulty: 2 Medium Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

17) Printed dollars are made with various lines of colors such as peach and blue. They have art work that is off-center, and there are other identifiable watermarks for the purpose of making replication quite easy. Answer: FALSE Explanation: The painstaking process of creating real dollars involves creating invisible lines that only show up under certain conditions and are identifiable by banks and other businesses. Art work is slightly off-center. Newer colors have been introduced to differentiate between counterfeit dollars and real dollars. Difficulty: 2 Medium Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 18) The currencies of some countries, although durable and portable, are relatively unstable, which makes international exchanges difficult. Answer: TRUE Explanation: The currencies of other nations are not always equally stable, even though they may be equally portable, divisible, and durable. Difficulty: 2 Medium Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 19) The problem with barter exchanges is that it is too difficult to find people to exchange your good with. Answer: FALSE Explanation: Barter exchanges make it very convenient to find exchange partners. You enter your goods into a system and you get a certain value of trade credit. Difficulty: 2 Medium Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

20) Trading internationally by using money appears easy and almost effortless, but the fact is there is a very complex banking system that makes it happen. Answer: TRUE Explanation: A complex banking system is behind the scenes, making the free flow of money for the purposes of trade appear quite smooth and uncomplicated. Difficulty: 2 Medium Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 21) The U.S. production of the Sacagawea dollar coins provides greater durability than paper dollar bills. Answer: TRUE Explanation: Coins can actually last for thousands of years, as divers have discovered when exploring sunken ships. Difficulty: 3 Hard Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Apply AACSB: Reflective Thinking Accessibility: Keyboard Navigation 22) According to the Adapting to Change box, a Harvard professor is suggesting we should carry around more large bills, like $50s and $100s, in our wallets. Answer: FALSE Explanation: Kenneth Rogoff, a professor at Harvard, suggests we take large bills out of circulation and use cash for small transactions. Difficulty: 2 Medium Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

23) Citizens of the island nation of Winstone readily accept a specific type of seashell as payment for the goods and services they trade. For Winstonians, seashells serve as money. Answer: TRUE Explanation: Money is anything that people readily accept as payment for goods and services. Difficulty: 3 Hard Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 24) When Natalia exchanges her famous chocolate chip cookies for the lawn care services of her neighbor, she engages in a barter transaction. Answer: TRUE Explanation: Barter occurs when people trade a good or service in exchange for other goods and services. Difficulty: 3 Hard Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 25) The money supply represents the amount of money the Federal Reserve Bank makes available for people to buy goods and services. Answer: TRUE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 26) Both the M-1 and M-2 definitions of money include coins and paper money. Answer: TRUE Difficulty: 1 Easy Topic: Money Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

27) The M-1 money supply includes money in savings accounts, mutual funds, and money market accounts. Answer: FALSE Difficulty: 1 Easy Topic: Money Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 28) M-2 represents the most commonly used definition of the money supply. Answer: TRUE Difficulty: 1 Easy Topic: Money Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 29) The M-1 definition of the money supply includes travelers' checks. Answer: TRUE Difficulty: 1 Easy Topic: Money Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 30) The M-3 includes M-1 money, but not M-2 money. Answer: FALSE Difficulty: 1 Easy Topic: Money Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

31) A significant increase in the money supply creates inflationary pressures in the economy. Answer: TRUE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 32) Inflation occurs in an economy with too little money chasing too many goods. Answer: FALSE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 33) Changes in the money supply produce little or no change in inflation, employment, and economic growth. Answer: FALSE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 34) When the value of the dollar falls, foreign goods become less expensive for American consumers. Answer: FALSE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

35) The strength of the U.S. dollar depends on the strength of the U.S. economy relative to the economies of other nations. Answer: TRUE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 36) The Federal Reserve establishes the tax policies of the U.S. Answer: FALSE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 37) Theoretically, with the proper monetary policy, the U.S. economy can continue to grow without causing inflation. Answer: TRUE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 38) The Federal Reserve consists of seven Federal Reserve districts. Answer: FALSE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

39) The president of the United States appoints the members of the Federal Reserve's board of governors. Answer: TRUE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 40) Open-market operations is the buying and selling of government securities by the Federal Reserve Board. Answer: FALSE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 41) The reserve requirement represents the interest rate charged by the Federal Reserve for government-guaranteed student loans. Answer: FALSE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 42) The reserve requirement represents the Fed's most powerful tool for conducting monetary policy. Answer: TRUE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

43) When the Fed increases the reserve requirement, banks make fewer loans. Answer: TRUE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 44) When the Federal Reserve wants to increase the money supply, they decrease the reserve requirement. Answer: TRUE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 45) When the Federal Reserve acts to reduce inflation, they decrease the reserve requirement. Answer: FALSE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 46) The Fed commonly buys or sells U.S. government securities to regulate the money supply. Answer: TRUE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

47) The federal funds rate is the interest rate that banks charge each other. Answer: TRUE Difficulty: 2 Medium Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 48) The rate of interest charged by the Federal Reserve is called the federal funds rate. Answer: FALSE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 49) The three basic tools the Fed uses to manage the money supply are reserve requirements, open-market operations, and the discount rate. Answer: TRUE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 50) The Federal Reserve assists in the processing of checks between banks. Answer: TRUE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

51) The electronic transfer of money increases the Federal Reserve's check-clearing operations. Answer: FALSE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 52) The goal of Federal Reserve monetary policy is to affect the level of competition in the U.S. banking system. Answer: FALSE Explanation: The major impact of Federal Reserve policies is that they affect the supply of money, thus exerting enormous influence over the economy. Changes in the money supply can influence the rate of inflation and the overall rate of economic growth. Difficulty: 2 Medium Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 53) When the value of the euro increases compared to the U.S. dollar, the price of U.S. exports to Europe will decrease. Answer: TRUE Explanation: If the value of the euro appreciates against the dollar, American-made goods will be less expensive to holders of euros. It will take fewer euros to buy items priced in U.S. dollars. Difficulty: 2 Medium Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

54) To decrease the money supply, the Federal Reserve sells U.S. government bonds in openmarket operations. Answer: TRUE Explanation: The Fed's open-market operations involve the buying and selling of securities on the open market. If the Fed wants to tighten the money supply it will sell securities. If the Fed wants to loosen the money supply (create more money to flow through the economy), it will buy securities. Difficulty: 2 Medium Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 55) When the Fed increases the reserve requirement it forces banks to increase the number of loans they make. Answer: FALSE Explanation: The reserve requirement is the amount of total deposited funds that member banks are required to keep on reserve in their vaults. They are not permitted to loan or invest the entire amount of deposits that they hold. If the Fed raises the percentage reserve requirement, banks cannot loan as much money. Difficulty: 2 Medium Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 56) To decrease the money supply, the Federal Reserve sells U.S. government bonds in openmarket operations. Answer: TRUE Explanation: The Fed's open market operations involve the buying and selling of securities on the open market. If the Fed wants to tighten the money supply it will sell securities. If the Fed wants to loosen the money supply (create more money to flow through the economy), it will buy securities. Difficulty: 2 Medium Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

57) An increase in the discount rate produces a decrease in money supply. Answer: TRUE Explanation: When the Fed increases the discount rate, the rate it charges member banks to borrow money, the result is a decrease in loans. Member banks must raise the interest rate they charge to customers, in order to cover the increase in what they had to pay to borrow the funds from the Fed. Difficulty: 2 Medium Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 58) To reduce inflation, the Federal Reserve increases the discount rate. Answer: TRUE Explanation: Decreasing the discount rate provides more opportunity for businesses and individuals to borrow money to make purchases. Eventually, availability of money to make purchases will increase the demand on goods and services, which will increase the prices on those goods and services. Increasing the discount rate will deter borrowing, which will eventually decrease the demand for goods and services, and prices will fall, stabilizing inflation. Difficulty: 2 Medium Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 59) By reducing the reserve requirement, the Fed intends to increase the money supply. Answer: TRUE Explanation: When the Fed reduces the reserve requirement, banks have more funds available for making loans, thus increasing the availability of money. Difficulty: 2 Medium Topic: Figure 20.2 Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

60) When the Fed sells U.S. government securities, the U.S. money supply increases. Answer: FALSE Explanation: When the Fed sells securities, the money it receives in payment for the securities is taken out of circulation, thus decreasing the money supply. Difficulty: 2 Medium Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 61) If the owners of Spokes Bicycles are trying to sell state-of-the-art bicycles into the Japanese market, they are likely to sell more bicycles if the dollar has strength against the Japanese yen. Answer: FALSE Explanation: A strong dollar means that you would need more Japanese yen in exchange for one dollar. If your bicycle sells for $500, it will take more than 500 yen to buy the bicycle in Japan. Difficulty: 3 Hard Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 62) Newspapers in the nation of Hasalot report a significant increase in money supply during the past few months. This information indicates that Hasalot may experience a serious recession in the near future. Answer: FALSE Explanation: An increase in the money supply tends to stimulate spending, deterring a recessionary climate. The increased spending is more likely to create inflationary pressures in Hasalot because there will be more money available to buy the same amount of goods and services. Difficulty: 3 Hard Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

63) The U.S. government is concerned about inflationary pressures that seem to be building within the nation. Restricting the growth of money supply provides an effective strategy to reduce these inflationary pressures. Answer: TRUE Explanation: A basic cause of inflation is a rapid increase in the supply of money, where "too much money is chasing too few goods." When the money supply increases too rapidly, the extra money in circulation increases the demand for goods relative to supply, causing inflationary pressures to build. Difficulty: 3 Hard Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 64) When the value of the dollar increases relative to the euro, the number of U.S. dollars needed to purchase a block of Dutch cheese increases. Answer: FALSE Explanation: A rising value for the dollar relative to another nation's currency means that Americans can buy more of that nation's goods with dollars. Difficulty: 3 Hard Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 65) Bigbux Bank holds $300 million in deposits from their customers. If the Fed sets the reserve requirement at 12 percent, Springfield must hold $24 million in cash at the bank or in noninterest-bearing deposits at the local Federal Reserve district bank. Answer: FALSE Explanation: The reserve requirement specifies the amount of reserves (vault cash or deposits with the Federal Reserve district bank) a bank must hold as a percentage of its deposits. Thus, if the reserve requirement is 12 percent, banks must hold reserves equal to 12 percent of deposits. In this case, 12 percent of $300 million is $36 million. Difficulty: 3 Hard Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

66) The Fed has just reduced the reserve requirement from 14% to 12%. Bigbux Bank holds $650 million in deposits. It will need to become more conservative with its lending procedures because it now must hold $78 million in reserves. Answer: TRUE Explanation: Reducing the reserve requirement would increase lending ability. The reserve requirement specifies the amount of reserves (vault cash or deposits with the Federal Reserve district bank) a bank must hold as a percentage of its deposits. Thus, if the reserve requirement is 12 percent, banks must hold reserves equal to 12 percent of deposits. In this case, 12 percent of $650 million is $78 million. Difficulty: 3 Hard Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 67) Next month, Bigbux Bank plans to increase the amount of new loans it makes. As a member bank of the Federal Reserve, Commerce can borrow from the Fed. Bigbux will charge the customer an interest amount greater than the discount rate. Answer: TRUE Explanation: Federal Reserve member banks borrow money from the Federal Reserve Bank. The discount rate is the rate of interest the Fed charges when it loans funds to member banks. Difficulty: 3 Hard Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 68) Recently, the Fed announced a reduction in the discount rate and the reserve requirement. These actions clearly suggest that the Fed intends to decrease the money supply. Answer: FALSE Explanation: Reducing the reserve requirement will free up funds and encourage banks to make more loans. Reducing the discount rate will enable banks to borrow funds from the Fed at lower cost, thus also encouraging banks to make more loans. Thus, both policies are likely to increase the money supply. Difficulty: 3 Hard Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

69) Yesterday it was reported that the U.S. was clearly experiencing an economic downturn. A strategy the Fed may enact if the nation is facing recession is to buy government securities in open-market operations. Answer: TRUE Explanation: The Fed commonly relies on open-market operations, which consists of buying and selling U.S. government securities, to increase or decrease the money supply. The Fed buys securities when it wants to stimulate the economy, which loosens the supply of money. Difficulty: 3 Hard Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 70) Great news! The Fed just announced that the discount rate will rise by as much as 1% over the next three months. This will make it easier for Sean, the owner of a laser engraving business, to borrow money for that new piece of equipment he needs. Answer: FALSE Explanation: If the Fed increases the discount rate, the rate that it charges member banks to borrow money, the banks will increase the rate that they charge their customers, deterring companies from borrowing money. Difficulty: 3 Hard Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 71) When the U.S. was still a colony of Great Britain, land banks were created to lend money to farmers. Answer: TRUE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

72) The United States first established a central bank in 1913 by establishing the Federal Reserve System. Answer: FALSE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 73) A central bank allows individual banks to deposit and to borrow funds. Answer: TRUE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 74) Thomas Jefferson proposed the establishment of the first central bank in the United States. Answer: FALSE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 75) Early in our nation's history, people generally accepted the importance of a central bank authority. Answer: FALSE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

76) Alexander Hamilton persuaded Congress to create a central bank. Answer: TRUE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 77) Prior to the Civil War, the United States had two unsuccessful attempts at a central bank. Answer: TRUE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 78) In the early 1800s, the United States allowed banks to issue different kinds of currencies. Answer: TRUE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 79) A series of bank failures and a cash shortage in 1907 led to the establishment of the Federal Reserve System in 1913. Answer: TRUE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

80) By the time of the Civil War, the efficient banking system of the United States was the envy of the rest of the world. Answer: FALSE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 81) The Federal Reserve System was designed to prevent a repeat of the 1907 banking crisis. Answer: TRUE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 82) Thanks in part to the Federal Reserve System, few banks failed during the Great Depression. Answer: FALSE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 83) Created during the Great Depression, the federal deposit insurance program resulted in a large number of bank failures. Answer: FALSE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

84) In the 1930s, during the Great Depression, the government started an insurance program to protect the public from bank failures. Answer: TRUE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 85) All federally chartered banks are members of the Federal Reserve. Answer: TRUE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 86) The Federal Reserve is the bankers' bank. Answer: TRUE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 87) Bank crises tend to correlate with economic recessions. Answer: TRUE Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

88) Prior to the establishment of the Federal Reserve System in 1913, the United States had no experience with a central bank. Answer: FALSE Explanation: The United States had two experiences with a central bank prior to 1913. The First Bank of the United States, which was the brainchild of Alexander Hamilton, lasted from 1791– 1811. The Second Bank of the United States was established in 1816 and was closed in 1836. Difficulty: 2 Medium Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 89) The Federal Reserve, which was established in 1907 and was to be a "lender of last resort," loans money to small businesses that are unable to obtain loans through private banks. Answer: FALSE Explanation: The Fed was a lender of last resort to federally chartered banks and state banks that were member banks. It was ready to lend funds to banks when cash shortages arose due to emergencies such as banking panics. Difficulty: 2 Medium Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 90) The Federal Reserve System enabled the U.S. economy to avoid serious banking problems during the Great Depression. Answer: FALSE Explanation: Despite the establishment of the Federal Reserve System, many banks failed during the Great Depression. Difficulty: 2 Medium Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

91) The wave of bank failures during the Great Depression prompted the government to establish federal deposit insurance to protect the public from bank failures. Answer: TRUE Explanation: Despite the presence of the Federal Reserve System to serve as a "lender of last resort," many banks failed during the early years of the Great Depression. Congress responded by passing legislation to strengthen the U.S. banking system in 1933 and 1935. One of the most important results of this legislation was the establishment of federal deposit insurance. Difficulty: 2 Medium Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 92) During the Civil War, gold and silver coins were hoarded not because of their currency value, but because they were worth more than currency. Answer: TRUE Explanation: By the time of the Civil War, the banking system was a mess. Different banks issued different kinds of currencies. During the Civil War, coins were hoarded because they were worth more as gold and silver than as coins. Difficulty: 2 Medium Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 93) Commercial banks, savings and loan associations, and credit unions all represent components of the American banking system. Answer: TRUE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

94) Commercial banks offer services to depositors and borrowers. Answer: TRUE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 95) Depositors represent a bank's primary responsibility, while borrowing customers are secondary. Answer: FALSE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 96) Commercial banks operate as nonprofit institutions. Answer: FALSE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 97) Commercial banks attempt to profit by using funds deposited by customers to make interestbearing loans to borrowers. Answer: TRUE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

98) A savings account represents a demand deposit. Answer: FALSE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 99) A demand deposit is the technical name for a checking account. Answer: TRUE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 100) Typically, banks impose a service charge for check-writing privileges or demand a minimum deposit. Answer: TRUE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 101) Checking accounts that pay interest to depositors have experienced solid growth in recent years. Answer: TRUE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

102) A savings account is also known as a time deposit. Answer: TRUE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 103) Technically, a bank can require depositors to give prior notice before they withdraw funds from time deposits. Answer: TRUE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 104) Certificates of deposit (CDs) represent demand deposits issued by banks. Answer: FALSE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 105) The Federal Reserve requires that all commercial banks offer mobile deposits. Answer: FALSE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

106) A growing trend today is mobile banking. In fact, nearly 90 million customers make deposits by taking a photo of their checks. Answer: TRUE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 107) Banks focus on the creditworthiness of the borrower when determining whether to grant a loan. Answer: TRUE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 108) A major cause of the recent banking crisis was the neglect of banks to seriously scrutinize loan applicants for creditworthiness. Answer: TRUE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 109) A savings and loan association (S&L) is a financial institution that accepts both savings and checking deposits and provides home mortgage loans. Answer: TRUE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

110) Historically, savings and loans always paid lower interest rates on time deposits. Answer: FALSE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 111) Savings and loan associations, also known as thrift institutions, were created to promote consumer thrift and home ownership. Answer: TRUE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 112) Many S&Ls failed due to the inflation of the 1970s, deregulation, regulatory failure, and fraud. Answer: TRUE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 113) Credit unions represent nonprofit, member-owned financial cooperatives that offer the full variety of banking services to their members. Answer: TRUE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

114) As nonprofit institutions, credit unions enjoy an exemption from federal income taxes. Answer: TRUE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 115) Credit unions are for-profit cooperatives. Answer: FALSE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 116) Pension funds are monies put aside by corporations, nonprofit organizations, or unions to fund the financial needs of their employees, upon retirement. Answer: TRUE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 117) Nonbanks accept deposits, but do not offer lending services, brokerage services, or insurance services. Answer: FALSE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

118) Pension funds invest monies contributed by employers and/or employees for the benefit of their members' retirement. Answer: TRUE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 119) Large pension funds represent a powerful force in U.S. financial markets. Answer: TRUE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 120) Commercial and consumer finance companies specialize in making low-interest loans to individuals and businesses with strong credit ratings. Answer: FALSE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 121) Brokerage firms now compete with commercial banks by offering high-yield combination savings and checking accounts. Answer: TRUE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

122) The interest paid on time deposits, today, represents the main difference between time and demand deposits. Answer: FALSE Explanation: The main difference between demand deposits (such as checking account deposits) and time deposits (such as deposits in savings accounts) is that while demand deposits are payable to the depositor on demand, a bank can require prior notification before a depositor withdraws funds from a time deposit. In the past, banks did not offer interest on demand deposits, but they now offer interest-bearing checking accounts. Difficulty: 2 Medium Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 123) The ability to access funds without a penalty helps to explain why certificates of deposit (CDs) have gained popularity among conservative investors and savers. Answer: FALSE Explanation: A certificate of deposit is a time deposit that earns interest. You commit to depositing your money in the bank for a set amount of time, which can vary anywhere from three months to a few years. Depositors who hold certificates of deposit agree not to withdraw any of the funds in the account prior to the certificate's maturity date. Difficulty: 2 Medium Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 124) Today's consumers have fewer options and less flexibility as a result of increased regulation of the banking industry. Answer: FALSE Explanation: As the entire discussion for this learning objective indicates, in recent years increased competition among financial institutions (including nonbanks) has given consumers more options and greater flexibility when making financial choices. Difficulty: 2 Medium Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

125) Due to federal regulations limiting their investment opportunities, pension funds play a minor role in U.S. financial markets. Answer: FALSE Explanation: Pension funds are becoming a major force in U.S. financial markets. Difficulty: 2 Medium Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 126) Because they charge higher interest rates, commercial and consumer finance companies often fail to attract borrowers. Answer: FALSE Explanation: Consumer and commercial finance companies make loans to businesses or individuals who either can't meet the credit requirements of regular banks or who have exceeded their credit limits. These companies accept higher-risk borrowers in exchange for higher interest rates. Difficulty: 2 Medium Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 127) According to the Spotlight on Small Business box, SoFi strives to branch out from student loan refinancing to become the bank of choice for Millennials. Answer: TRUE Explanation: SoFi experienced rapid growth with student loan refinancing. Now it is moving into mortgages and personal loans. SoFi wants to be the bank of choice to Millennials due to the relationships it has created with its customers. Difficulty: 2 Medium Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

128) After years of banking with Bigbux Bank, Samuel decided to switch to a competing institution. Thanks to changes in government regulation, his search will uncover a variety of options; however, he will also learn that banks and nonbanks have merged in order to be more competitive in the banking and financial services industries, which may or may not increase his options. Answer: TRUE Explanation: Due in part to changes in government regulations, brokerage firms now offer many of the same types of accounts and services as banks, including checking accounts. The distinction between nonbanks and commercial banks is becoming less and less apparent. For example, brokerage firms now make loans and offer high-yield combination savings and checking accounts as well as money market accounts. Further, brokerage firms are merging with banks, in order to be more competitive. Difficulty: 3 Hard Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 129) Eric is looking for a place to deposit a $30,000 inheritance from his Great Aunt Clementine, who passed away three months ago. He is not planning to spend his money fast and frivolously. He will need part of the funds from time to time for his college education, which he promised his aunt. After speaking with several sales consultants in banking and nonbank institutions, he likes the fact that he can open a stock brokerage account and a money-market account at Securitas Investment Company (a nonbank company), and will be issued checks for paying bills. You remind him that with the recent mergers between banking and nonbank institutions, he may be able to find a company that provides both the convenience of banking services and lowrisk/high-risk securities products. Answer: TRUE Explanation: Traditionally, brokerage firms did not offer cash deposit services. Their physical facilities did not have vaults, nor were they members of the Federal Reserve System. Due to changes in regulations, the financial services industry and the banking industry began to offer similar products and services. After the recent recession that affected both, some banks acquired financial services companies. Now, financial services companies have subsidiaries where they can link customers to the few banking services that they did not offer a few years ago. It makes for one-stop shopping for the customer. Difficulty: 3 Hard Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

130) The U.S. government's lack of regulation alone caused the banking crisis and collapse of banks that had been in business for several decades. Answer: FALSE Difficulty: 1 Easy Topic: The Great Recession of 2008 Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 131) In the early 2000s, banks took the mortgages that they owned, created mortgage-backed securities out of them, and sold them as safe investments. Answer: TRUE Difficulty: 1 Easy Topic: The Great Recession of 2008 Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 132) Due to the fact that investors did not individually purchase mortgage-backed securities (MBSs) in their investment accounts, they remained unaffected when the value of some of these investments became worthless. Answer: FALSE Difficulty: 1 Easy Topic: The Great Recession of 2008 Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

133) One thing is for certain, the average borrower's risk-averse behavior did not contribute to the problems that spiraled out of control and caused the recent banking crisis. Answer: FALSE Difficulty: 1 Easy Topic: The Great Recession of 2008 Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 134) Persons with deposits less than $100,000 in banks, savings and loans, and credit unions run the risk of losing their money in an economic downturn. Answer: FALSE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 135) The FDIC exists to maintain the public's confidence in the banking system. Answer: TRUE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 136) When a commercial bank fails, depositors lose all of their money. Answer: FALSE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

137) The FDIC traditionally protects depositors up to $250,000 per account. Answer: TRUE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 138) As a response to a rise in savings and loan failures, the federal government no longer insures holders of accounts in savings and loan associations. Answer: FALSE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 139) The Savings Association Insurance Fund insures the holders of accounts in savings and loan associations. Answer: TRUE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 140) The National Credit Union Administration provides coverage up to $250,000 per individual depositor at each credit union. Answer: TRUE Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 39 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

141) The practices of several participants (for-profit companies, government regulators, and customers) came together to create the crisis that caused the collapse of several banks, financial services companies, and corporations. Answer: TRUE Explanation: As indicated in Chapter 20, several factors came together to cause the serious banking crisis that caused the collapse of major banking and financial companies. Difficulty: 2 Medium Topic: The Great Recession of 2008 Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 142) There is much speculation that prior to the recent banking crisis, the Federal Reserve System (the Fed) and the Securities and Exchange Commission (SEC) were not enforcing the regulations they were charged to enforce. Answer: TRUE Explanation: The Fed and the SEC failed to accurately measure and then report the quality and risk of securities being traded, and the financial state of member banks. Difficulty: 2 Medium Topic: The Great Recession of 2008 Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 143) After the bank failures that occurred during the Great Depression of the 1930s, the U.S. government formed three organizations: the Federal Deposit Insurance Corporation (FDIC); the Savings Association Insurance Fund (SAIF); and National Credit Union Administration (NCUA) to restore people's confidence and insure deposits. Answer: TRUE Explanation: The FDIC, the SAIF, and the NCUA insure customer deposits in banks, savings and loans, and credit unions, respectively, up to a limit of $250,000. Difficulty: 2 Medium Topic: The Great Recession of 2008 Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

144) Rico need not worry that his $8,347 in a checking account at Bigbux Bank could be lost if the bank fails, because Bigbux is a Federal Deposit Insurance Corporation (FDIC) member bank. Answer: TRUE Explanation: The FDIC currently insures individual accounts for up to $250,000. Difficulty: 3 Hard Topic: Financial Institutions Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 145) Erica has three types of deposits at her credit union. She has a checking account in her own name worth $42,000, a joint savings account with her husband, which currently holds $91,000, and an IRA account worth $145,000. Her deposits are at risk because they exceed the $250,000 limit on insurance coverage by NCUA. Answer: TRUE Explanation: The National Credit Union Administration offers coverage of $250,000 per depositor. Difficulty: 3 Hard Topic: Financial Institutions Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 146) Existing regulations prohibit online banking activities unless the bank also operates a traditional brick-and-mortar facility. Answer: FALSE Difficulty: 1 Easy Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

147) An electronic funds transfer system (EFT) is an electronic transaction system used for paying bills, making direct deposits of paychecks, and paying for a purchase. Answer: TRUE Difficulty: 1 Easy Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 148) A debit card is better than a credit card because it allows the purchaser to float a short-term loan, until the credit card company sends the bills at the end of the month. Answer: FALSE Difficulty: 1 Easy Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 149) Payroll debit cards are cheaper for employers because your paycheck is loaded on a debit card instead of cutting a check. This is convenient for customers who do not qualify for a regular debit or credit card, because they can use it to pay bills, do online purchasing, and even get cash from an ATM. Answer: TRUE Difficulty: 1 Easy Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 150) High start-up costs cause online banks, such as E*Trade Bank, to have higher operating costs than traditional banks. Answer: FALSE Difficulty: 1 Easy Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

151) Online banks offer customers better interest rates and lower fees because these businesses avoid the costs of constructing and maintaining a bank building. Answer: TRUE Difficulty: 1 Easy Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 152) Although there are many features about online banking that customers do not care for, they are seldom concerned with security due to continued assurances by the banking industry. Answer: FALSE Difficulty: 1 Easy Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 153) In an electronic funds transfer (EFT) system, the information of a transaction is communicated from one computer to another. Answer: TRUE Difficulty: 1 Easy Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 154) Electronic funds transfer (EFT) tools include debit cards, smart cards, direct deposit, direct payments, and electronic check conversion. Answer: TRUE Difficulty: 1 Easy Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

155) Many employers offer direct deposit as a convenient and cost-saving method of distributing employee pay each month. Answer: TRUE Difficulty: 1 Easy Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 156) From a bank's point of view, debit cards and credit cards are treated in identical ways. Answer: FALSE Difficulty: 1 Easy Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 157) Both checks and debit cards will immediately transfers funds from the customer's account to the seller's account. Answer: FALSE Difficulty: 1 Easy Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 158) Smart cards contain a microprocessor chip that stores information about the user, such as driver's license data and bank balance. Answer: TRUE Difficulty: 1 Easy Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

159) Smart cards can allow the user to access secure areas within buildings or buy gas with the swipe of the card. Answer: TRUE Difficulty: 1 Easy Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 160) A direct payment is a preauthorized electronic payment. Answer: TRUE Difficulty: 1 Easy Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 161) Although there are many new ways to perform electronic funds transfer, legally, the only way that an employer can pay an employee is by writing a check. Answer: FALSE Explanation: Employers are utilizing electronic funds transfer in several cost-effective ways, including when distributing payroll. Direct deposit and payroll debit cards have grown in popularity. Difficulty: 2 Medium Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

162) Lower fees and better interest rates motivate customers to open accounts with online banks. However, the lack of personal service and concern for information security encourages some customers to return to a traditional bank. Answer: TRUE Explanation: Since online banks do not have the costs of physical overhead that more traditional banks have, this allows them to offer lower fees and better interest rates. However, putting financial information into cyberspace raises security concerns for some, while others miss the personal relationship of their local bank. Difficulty: 2 Medium Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 163) While an electronic funds transfer represents a faster and more flexible method of making payments than writing checks, it is more expensive for banks. Answer: FALSE Explanation: Checks are very expensive, primarily because of all of the paperwork involved. Electronic funds transfer will reduce paperwork and improve the efficiency of the banking system, thus reducing costs. Difficulty: 2 Medium Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 164) Hunter travels extensively on business. Most of the hotels where he stays provide him with a card that unlocks his room. The card is keyed to the particular lock that matches the lock on the assigned room and also contains Hunter's credit card information for other hotel purchases. The type of card that Hunter is using is a smart card. Answer: TRUE Explanation: The smart card is a card with a microprocessor that can hold lots of different information including the recipient's credit card and debit card information; and his/her driver's license. It can also be programmed to unlock doors, such as dorm-room doors, hotel doors, and office doors. Difficulty: 3 Hard Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 46 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

165) Aaron has played supporting roles in a number of movies and is passionate about his craft to the point where he created a home theatre inside his house. He has subscriptions to Netflix, Hulu, and all the premium cable channels. For added convenience, he has set up direct payment to these companies. This means when his statement arrives each month, he will get online and tell his bank how much to pay these vendors. Answer: FALSE Explanation: For direct payment, the customer authorizes the vendor to automatically transfer funds from the customer's bank account to the vendor's account. Difficulty: 3 Hard Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 166) A letter of credit represents a promise that a bank will disburse a specified amount of funds at a particular time if certain conditions are met. Answer: TRUE Difficulty: 1 Easy Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 167) Banks help businesses operate in other countries by exchanging the currency of one nation for the currency of another. Answer: TRUE Difficulty: 1 Easy Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

168) A banker's acceptance represents a promise that a bank will pay a specified amount at a specified time if certain conditions are met. Answer: FALSE Difficulty: 1 Easy Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 169) When traveling in other countries, tourists can use their MasterCard or Visa bankcards to obtain foreign currencies at ATMs. Answer: TRUE Difficulty: 1 Easy Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 170) More than ever, the American economy operates as a distinctly separate entity from the international economy. Answer: FALSE Difficulty: 1 Easy Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 171) International bankers prefer to invest in their own countries whenever possible. Answer: FALSE Difficulty: 1 Easy Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 48 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

172) The global money markets trade about $5 trillion every day. Answer: TRUE Difficulty: 1 Easy Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 173) International bankers make loans wherever they can get the maximum return for their money. Answer: TRUE Difficulty: 1 Easy Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 174) While Federal Reserve actions impact domestic investors, they have little effect on decisions made by international investors. Answer: FALSE Difficulty: 1 Easy Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 175) The World Bank primarily finances projects to protect the environment. Answer: FALSE Difficulty: 1 Easy Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

176) The World Bank primarily finances projects to improve the productivity and standard of living in less-developed nations. Answer: TRUE Difficulty: 1 Easy Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 177) The International Monetary Fund assists with the smooth flow of money among nations. Answer: TRUE Difficulty: 1 Easy Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 178) The International Monetary Fund does not lend money. Answer: FALSE Difficulty: 1 Easy Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 179) The IMF's goal is to maintain a global monetary system. Answer: TRUE Difficulty: 1 Easy Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

180) Given the size and strength of the U.S. economy and the widespread use of the dollar, the Federal Reserve essentially regulates international monetary markets. Answer: FALSE Explanation: The net result of the free flow of trillions of dollars across international boundaries has been to link the economies of the world into one interrelated system with no regulatory control. Difficulty: 2 Medium Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 181) When the Federal Reserve pursues policies that increase interest rates, the amount of foreign funds flowing into the United States also increases. Answer: TRUE Explanation: International bankers and investors tend to invest where they can get the best return at a reasonable risk. When the Fed drives up interest rates, foreign investors are attracted by the higher return and move more of their money into the United States. Difficulty: 2 Medium Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 182) International Industries wants to import heavy machinery from a producer located in the Croatia. To facilitate payment to the Croatian firm, International Industries arranged for its bank to issue a banker's acceptance. Under this arrangement, the bank pays the exporter after the equipment passes inspection. Answer: FALSE Explanation: A banker's acceptance is a promise that a bank will pay a certain amount at a particular time. No conditions are imposed on payment. Difficulty: 3 Hard Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

183) As a relatively poor nation, Forlornia wants to obtain funds for a project to improve the availability of water and electricity. Forlornia should contact the International Monetary Fund. Answer: FALSE Explanation: The World Bank is primarily responsible for financing economic development. In recent years the World Bank has lent most of its funds to less-developed nations to help improve productivity and standards of living. In contrast, the International Monetary Fund is more concerned with overseeing the monetary and exchange rate policies of member nations. Difficulty: 3 Hard Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 184) Tee Time Golf Resort plans to carry an inventory of golf clubs from a German manufacturer. The manufacturer has promised delivery in four weeks, which will be just in time for the beginning of Tee Time's golf season at its St. Louis course. In order to prudently watch cash flow, you have recommended that Tee Time Resort sign a letter of credit with an international bank asking the bank to disburse payment when the clubs arrive at the St. Louis course and after they are inspected. Answer: TRUE Explanation: A letter of credit represents an agreement issued by the customer for products coming from other nations. It is a promise for a bank to pay the seller at a specified time, if certain conditions have been met. Difficulty: 3 Hard Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

185) Everything else held constant, an international bank based in San Francisco would prefer to loan money to an efficient firm operating in Amsterdam, Holland, than an inefficient firm operating in New York. Answer: TRUE Explanation: International bankers make investments anywhere they can get a maximum return of their money at a reasonable risk. An efficient firm offers less risk and greater probability of repayment. Difficulty: 3 Hard Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 186) ________ includes anything that people generally accept as payment for goods and services. A) An intangible asset B) Money C) A commodity D) A barter good Answer: B Difficulty: 1 Easy Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 187) ________ occurs when goods are traded directly for other goods. A) Barter B) Direct exchange C) Direct marketing D) Credit Answer: A Difficulty: 1 Easy Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

188) Which of the following represents a benefit of coins over paper money? A) improved portability B) increased divisibility C) enhanced stability D) improved durability Answer: D Difficulty: 1 Easy Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 189) The redesign of and new colors added to U.S. paper money are intended to A) make the currency more difficult to counterfeit. B) increase the use of the barter system. C) improve the durability of our monetary system. D) increase the portability of our money. Answer: A Difficulty: 1 Easy Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 190) The problem with bartering is A) one person in the trade does not feel he/she got a fair shake. B) there is a significant amount of corruption in the process, and things get stolen before they are traded. C) it is not an easy process, and often cumbersome to carry goods to the place of trade. D) it has no place in today's international trading operations. Answer: C Explanation: Bartering requires that the trader carry the goods to the place where trading will take place. Most people need something that is more portable and durable to use for the exchange. Difficulty: 2 Medium Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

191) Today, a regular ________ is a system where you can exchange goods for other goods. You submit your goods and you receive trade credit that you can use to buy other goods. A) world market B) barter exchange C) world trade center D) trading post Answer: B Explanation: A barter exchange is a system where you can submit goods or services into the system, and receive trade credit for other goods and services that you may need. Difficulty: 2 Medium Topic: Money Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 192) Leah trades some of her homegrown peppers to her neighbor, Charlie, for some tomatoes fresh from his garden. This type of trade represents an example of A) barter. B) e-commerce. C) direct exchange. D) tax avoidance. Answer: A Explanation: Barter occurs when people trade goods and services for other goods and services. Difficulty: 3 Hard Topic: What is Money? Learning Objective: 20-01 Explain what money is and what makes money useful. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 193) The Fed Chairman is in control of A) the world's money supply. B) the U.S. money supply. C) fiscal policy. D) the IMF. Answer: B Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 55 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

194) The ________ category of money supply includes money that is quickly and easily accessed. A) e-cash B) M-3 C) M-2 D) M-1 Answer: D Difficulty: 1 Easy Topic: Money Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 195) ________ represents the most commonly used category of the money supply. A) M-1 B) M-2 C) M-3 D) L Answer: B Difficulty: 1 Easy Topic: Money Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 196) A rapid increase in the money supply may lead to a(n) A) increase in the rate of inflation. B) recession. C) decrease in interest rates. D) decrease in spending by consumers and businesses. Answer: A Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

197) When the value of the U.S. dollar increases relative to other currencies, A) the rate of inflation increases. B) the size of the national debt decreases. C) foreign goods become less expensive to U.S. consumers. D) U.S. goods become less expensive to foreign buyers. Answer: C Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 198) The strength of the U.S. dollar relative to other currencies depends mainly on A) the rate of inflation in the United States. B) the performance of the U.S. economy relative to other economies. C) how much gold backs the money supply. D) exchange rate decisions made by the International Monetary Fund. Answer: B Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 199) The organization responsible for conducting monetary policy in the United States is the A) Federal Trade Commission. B) Council of Economic Advisors. C) Federal Reserve System. D) Federal Monetary Control Authority. Answer: C Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

200) The Federal Reserve System consists of ________ Federal Reserve banks. A) 5 B) 9 C) 12 D) 14 Answer: C Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 201) The board of governors of the Federal Reserve System determines A) exchange rates. B) U.S. monetary policy. C) inflows and outflows of gold reserves to ensure a stable money supply. D) how much money the U.S. will loan to foreign governments. Answer: B Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 202) The Fed uses ________ to regulate the money supply. A) stock market investments B) the deposit requirement C) the political negotiation process D) the discount rate Answer: D Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

203) The ________ represents one of the Fed's most powerful monetary policy tools. A) reserve requirement B) discount rate C) margin requirement D) working capital requirement Answer: A Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 204) Open-market operations involve A) monitoring the reserve requirement. B) the buying and selling of bonds. C) increasing and decreasing interest rates. D) participating with the IMF. Answer: B Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 205) ________ involve(s) the Fed buying and selling U.S. government securities to increase or decrease the money supply. A) Discounting B) Reserve requirements C) Deficit funding D) Open-market operations Answer: D Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

206) The ________ rate represents the interest rate charged by the Fed when loaning funds to member banks. A) discount B) prime C) federal funds D) reserve Answer: A Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 207) The ________ plays a role in making certain that checks clear and sellers get paid. A) National Check Register B) Federal Reserve System C) Uniform Commercial Check Processors D) paypal.com network Answer: B Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 208) Which of the following is included in the M-2 definition of the money supply but NOT in the M-1 definition? A) currency B) checking account deposits C) traveler's checks D) savings account deposits Answer: D Explanation: Savings account deposits are included in the M-2 definition of the money supply, but not in the M-1 definition. Difficulty: 2 Medium Topic: Money Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

209) Which of the following is NOT included in the M-1 or M-2 definitions of the money supply? A) savings account deposits B) gold C) checking account deposits D) currency Answer: B Explanation: Gold is not a component of either the M-1 or the M-2 definition of the money supply. Currency and checking account deposits are included in both the money supply definitions. Difficulty: 2 Medium Topic: Money Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 210) Which of the following statements best summarizes the difference between M-1 and M-2? A) The M-1 definition of the money supply includes only domestic currencies while the M-2 definition includes foreign currencies. B) The M-1 definition consists of hard currencies which are backed by gold and silver, while M2 consists of soft currencies which are not backed by gold and silver. C) The M-2 definition includes everything in the M-1 definition, plus additional components such as money in savings accounts, money market accounts, and certificates of deposit. D) The M-1 money supply consists only of the currency (coins and paper money) that circulates in our economy, while the M-2 includes traveler's checks and funds in demand deposits. Answer: C Explanation: The M-1 definition of the money supply consists of money that is quickly and easily raised. The main components of the M-1 money supply are currency, checking account deposits, and traveler's checks. The M-2 definition is broader than the M-1 definition. It includes everything in the M-1 definition plus other types of money, such as savings account deposits, certificates of deposit, and money market accounts. Difficulty: 2 Medium Topic: Money Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

211) An increase in the rate of inflation would likely result from a(n) A) decrease in spending by the federal government. B) rise in the unemployment rate. C) rise in interest rates. D) increase in the supply of money in circulation. Answer: D Explanation: An increase in the money supply would stimulate an increase in total spending, putting upward pressure on prices and creating an increase in the rate of inflation. Difficulty: 2 Medium Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 212) A significant decrease in the money supply tends to A) reduce the supply of gold held by the federal government. B) create shortages that would cause prices of goods and services to rise. C) send the economy into a recession. D) reduce the size of the federal government's deficit. Answer: C Explanation: A decrease in the money supply tends to depress spending. If the money supply decreased substantially, spending could decline enough to send the economy into a recession. Difficulty: 2 Medium Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

213) When the Fed increases the reserve requirement, banks A) must increase the dollar volume of loans they make to customers. B) must pay more to borrow from the Fed. C) have fewer funds available for lending. D) will find their balance sheets temporarily out of balance. Answer: C Explanation: The reserve requirement specifies the amount of reserves a bank must hold as a percentage of its deposits. An increase in the reserve requirement means that banks must hold more reserves, leaving them with fewer funds available for loans. Difficulty: 2 Medium Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 214) When the Fed increases the discount rate, banks A) must purchase more government securities. B) must pay a higher rate when they borrow from the Fed. C) will lower the rate they charge to borrowers. D) must hold a greater amount of funds in reserve against deposits. Answer: B Explanation: The discount rate is the rate of interest the Fed charges when it makes loans to banks. Difficulty: 2 Medium Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

215) Which of the following represents one way the Fed increases the amount of money in circulation? A) reduce taxes B) raise the discount rate C) buy government securities D) increase the reserve requirement Answer: C Explanation: The major tools of monetary policy are the reserve requirement, open-market operations, and the discount rate. The Fed does not have the authority to cut taxes. Difficulty: 2 Medium Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 216) When the Fed buys U.S. government securities, the A) size of the federal deficit falls. B) discount rate rises. C) money supply increases. D) banking system loses reserves. Answer: C Explanation: When the Fed buys and sells government securities, it is engaging in open-market operations. When the Fed buys government securities, the money it pays for these securities enters circulation, resulting in an increase in the supply of money. Difficulty: 2 Medium Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

217) Jared read an article that showed a dramatic increase in money market accounts and certificates of deposit in the last quarter. The story reported that all other major components of the U.S. money supply remained unchanged. Based on this information, Jared can conclude that for the past quarter A) both the M-1 and M-2 money supplies were stable. B) the M-1 money supply has increased, but the M-2 money supply was stable. C) the M-2 money supply has increased, but the M-1 money supply was stable. D) both the M-1 and the M-2 money supplies have increased. Answer: C Explanation: The M-1 definition of the money supply consists of currency, checking account deposits, and travelers' checks. Since all of these components remained stable in size, the M-1 money supply must have remained stable. The M-2 definition includes everything in the M-1 definition, but it also includes other components such as funds held in certificates of deposit and money market accounts. Since CDs and money market accounts grew dramatically, and no other components decreased, the M-2 money supply must have increased. Difficulty: 3 Hard Topic: Money Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 218) Arturo owns an import business. After traveling to Spain on numerous occasions, he developed a taste for the local wines. An online article he read this morning suggested that the dollar has fallen sharply against the euro. Based on this information, Arturo expects that A) American goods will become more expensive in Spain. B) Spanish wines will become more expensive in the United States. C) Spanish wines will become less expensive in the United States. D) the Spanish government will place an embargo on American exports. Answer: B Explanation: When the dollar falls relative to the euro, the same number of dollars will purchase fewer Spanish goods, so Spanish goods become more expensive to American consumers. If you travel to Europe (including Spain), you will exchange one dollar for less than one euro. Difficulty: 3 Hard Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

219) Tee Time Golf Resort plans to use famous Kauri wood from New Zealand for parts of the interior of the magnificent clubhouse at its new golf resort near Salem, OR. According to the importer, each 10-foot slab will cost Tee Time approximately $5,000. Looking at the exchange rates, Tee Time's finance director noted that $500 US dollars = $738 NZ dollars. The importer will order directly from his source in New Zealand. Tee Time's finance director has determined that A) it's not a good time to buy the wood. B) it's a good time to buy the wood. C) there will be a shortage of the wood. D) it will cost less when the exchange rate of U.S. dollars to NZ dollars is just about equal. Answer: B Explanation: When the value of a U.S. dollar has strength relative to the NZ dollar, American consumers will get more for their dollar in New Zealand. In this case, $1 U.S. dollar = $1.47 New Zealand dollars. The importer will get $1.47 worth of Kauri wood for $1.00 U.S. dollar. Difficulty: 3 Hard Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 220) The president of the island nation of Winstone refuses to raise taxes, but wants to expand many government services and increase the size of Winstone's armed forces. He plans to pay for all of the desired expenditures by printing more money. If the president carries out his plan by rapidly increasing the supply of money, Winstone will likely experience A) a severe recession. B) reduced private sector spending. C) widespread surpluses of goods and services. D) an increase in the rate of inflation. Answer: D Explanation: An increase in the supply of money tends to stimulate more spending and drive up prices, resulting in an increase in the rate of inflation. Difficulty: 3 Hard Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

221) Bigbux Bank currently has deposits of $300 million. If the Fed establishes a reserve requirement of 12 percent, Bigbux must hold reserves of ________ against its deposits. A) $24 million B) $36 million C) $72 million D) $144 million Answer: B Explanation: The reserve requirement states that banks must hold reserves equal to a specified percentage of their deposits. Since the requirement is 12 percent in this example, Bigbux must hold reserves equal to 12 percent of $300 million, or $36 million. Difficulty: 3 Hard Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 222) The Fed bought several billion dollars' worth of U.S. government securities. The purpose of this action is to A) decrease the size of the national debt. B) improve its financial position by investing in relatively safe interest-earning assets. C) stimulate the economy by increasing the amount of money in circulation. D) drive up interest rates to cool off inflationary pressures. Answer: C Explanation: When the Fed buys government securities, it puts more money into circulation. This method of altering the money supply is called open-market operations, and it is the tool the Fed relies on the most to implement monetary policies. Difficulty: 3 Hard Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

223) The Fed plans to raise the discount rate to 7%. This indicates that A) banks borrowing funds from the Fed will now pay 7% on the amount they borrow. B) banks must hold funds in their vault or on deposit with the Fed equal to at least 7% of their deposits. C) the Fed will pay 7% on any securities issued by the federal government during the current time period. D) the amount of money in circulation can be no more than 7% greater than the amount of gold held in reserve by the government. Answer: A Explanation: The discount rate is the interest rate the Fed charges for loans to member banks. Difficulty: 3 Hard Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 224) News reports indicate that the Fed plans to announce its third increase in the discount rate in the past five months. Additional reports suggest that the Fed may also increase the reserve requirement in the near future. Apparently the Fed perceives the number one problem facing the economy is A) the size of the federal deficit. B) unemployment. C) excessively high interest rates. D) inflation. Answer: D Explanation: Raising the discount rate and the reserve requirement are policies that would restrict the money supply. The Fed is most likely to pursue these policies when it is trying to control inflationary pressures in the economy. Difficulty: 3 Hard Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

225) When Alex in Quince Orchard, MD, uses a check to buy a tractor from Steven in Austin, TX, ________ different banks are involved in the transaction. A) 4 B) 12 C) 15 D) no Answer: A Explanation: Steven would deposit the check in his local bank in TX. The local bank would then deposit the check in the Federal Reserve Bank in Dallas. The Federal Reserve Bank in Dallas sends the check to the Federal Reserve Bank in Richmond, which then forwards the check to Alex's local bank in MD. Alex's bank deducts the amount from his account and then the payment is sent back through the system until eventually Steven's account is credited. Four banks are involved in the transaction. Difficulty: 3 Hard Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 226) Early settlers of the New World relied heavily on barter because A) they found barter more convenient than the use of money. B) strict laws limited the number of coins that could be brought into the colonies. C) money had not yet evolved. D) they wanted to protest against British control of the banking system. Answer: B Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

227) ________ persuaded Congress to establish the first central bank in the United States. A) Benjamin Franklin B) David Farragaut C) Franklin Roosevelt D) Alexander Hamilton Answer: D Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 228) Historically, there was ________ a central bank in the U.S. A) very little resistance to B) resistance to C) insufficient funding of D) disinterest in Answer: B Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 229) By the time of the Civil War, the U.S. banking system operated A) as an efficient model that many other countries copied. B) under the control of the first Federal Reserve System. C) inefficiently with different banks issuing different types of currencies. D) much the same as it does today. Answer: C Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

230) The banking panic of 1907 and the resulting cash shortage led to the formation of the A) Federal Reserve System. B) Comptroller of the Currency. C) gold standard for currency, and the establishment of a gold repository at Fort Knox. D) FDIC. Answer: A Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 231) Under the Federal Reserve Act of 1913, A) membership in the Federal Reserve System was made voluntary for all banks. B) federally chartered banks were required to join the Federal Reserve System. C) membership in the Federal Reserve System was required of all banks that had deposits of more than $1 million. D) all banks were required to hold reserves equal to at least 50 percent of their deposits. Answer: B Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 232) As a response to the bank failures of the ________, a system of federal deposit insurance was established to strengthen the banking system. A) Civil War B) wildcat banking crisis of the 1880s C) Great Depression D) banking crisis of the early 1980s Answer: C Difficulty: 1 Easy Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

233) Which of the following historical events motivated Congress to establish the Federal Reserve System? A) the significant outflow of gold during the Civil War B) the collapse of the Second National Bank of the United States C) the banking panic and cash shortage of 1907 D) the Great Depression Answer: C Explanation: The banking panic of 1907 and the cash shortage that resulted when people tried to withdraw their funds from banks led Congress to establish the Federal Reserve System in 1913. One of the functions of the Fed was to serve as a "lender of last resort" during panics, lending reserves to banks so that cash shortages did not arise. Difficulty: 2 Medium Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 234) The Federal Reserve fulfills its role as a "lender of last resort" when it loans funds to A) small businesses that are unable to obtain loans from other sources. B) banks during banking emergencies. C) major corporations that are on the verge of bankruptcy. D) the federal government when deficits exceed borrowing limits set by Congress. Answer: B Explanation: The Federal Reserve was established in the wake of the banking panic of 1907 and the resulting cash shortage. The Fed was intended to be a "lender of last resort" in such emergencies, standing ready to provide liquidity to banks when runs by nervous depositors depleted their reserves. Difficulty: 2 Medium Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

235) One of the most important aspects of the banking legislation passed during the 1930s was that it established A) the Federal Reserve System. B) the gold standard for currency. C) the Comptroller of the currency. D) federal deposit insurance. Answer: D Explanation: In the wake of banking failures during the early years of the Great Depression, Congress passed legislation in 1933 and 1935 to strengthen the U.S. banking system. One of the most important elements of this legislation was the establishment of federal deposit insurance. Difficulty: 2 Medium Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 236) The Federal Reserve represents a "bankers' bank" because A) it was created as a central clearinghouse for the transactions of the largest banks. B) commercial banks compete with the Fed for business customers. C) it lobbies Congress in support of banking reform legislation. D) it holds the deposits of commercial banks and makes loans to banks that need additional funds. Answer: D Explanation: The Fed is called the bankers' bank because it provides the same basic services for bankers (holding deposits and making loans) that bankers provide for the general public. Difficulty: 2 Medium Topic: The History of Banking and the Need for the Fed Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

237) Which of the following statements most accurately represents the history of U.S. banking? A) Although many technological changes have occurred, and banks have grown tremendously in size, the basic structure of banking in the United States has survived since the Revolutionary War. B) A major trend in U.S. banking was a move from federal control during the 1800s and early 1900s to a system now controlled by individual states. C) Although the early history of banking in the United States was very chaotic, the establishment of the Fed stabilized the banking system. D) The U.S. banking system has experienced a great deal of change and instability throughout its history. Answer: D Explanation: The United States failed twice at establishing central banks, experienced episodes of wildcat banking, and dealt with a whole series of banking panics. Even the establishment of the Federal Reserve System did not prevent a wave of bank failures during the Great Depression or the serious banking problems the U.S. faced with the recent recession. Difficulty: 3 Hard Topic: The Federal Reserve System Learning Objective: 20-03 Trace the history of banking and the Federal Reserve System. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 238) A ________ is a profit-seeking organization that receives deposits from individuals and corporations and uses some of these deposits to make loans. A) credit union B) Federal Reserve Bank C) commercial bank D) consumer finance company Answer: C Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

239) Commercial banks primarily serve two types of customers— A) depositors and borrowers. B) commercial clients and residential clients. C) secured creditors and unsecured creditors. D) short-term borrowers and long-term borrowers. Answer: A Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 240) Which of the following represents the technical name for a checking account? A) free deposit B) variable annuity C) demand deposit D) certificate of deposit Answer: C Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 241) The technical name for a savings account is a A) time deposit. B) demand deposit. C) deferred account. D) retained income account. Answer: A Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

242) A time deposit that earns interest is a A) certificate of deposit. B) passbook account. C) discount deposit. D) NOW account. Answer: A Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 243) Traditionally, banks provide loans to individuals and companies according to the recipient's A) future earnings potential. B) family history. C) volume of credit already established. D) creditworthiness. Answer: D Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 244) A(n) ________ accepts savings and checking account deposits and provides home mortgage loans. A) nonbank B) insurance company C) savings and loan association D) commercial finance company Answer: C Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

245) Savings and loan associations are sometimes known as A) nonbanks. B) thrift institutions. C) credit unions. D) bankers' banks. Answer: B Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 246) ________ are nonprofit, member-owned financial cooperatives that offer a full variety of banking services such as accepting deposits and making loans. A) Mutual thrift associations B) Credit unions C) Commercial banks D) Mutual fund companies Answer: B Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 247) Traditionally, life insurance companies, pension funds, and brokerage firms are known as A) nonbanks. B) thrift institutions. C) bond companies. D) federally chartered banks. Answer: A Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

248) ________ represent money set aside by corporations, nonprofit organizations, or unions to cover part of the retirement needs of their members. A) Annuity accounts B) Pension funds C) Individual retirement accounts D) Term-life retirement funds Answer: B Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 249) Commercial banks, savings and loan associations, and credit unions A) specialize solely in loaning money for home mortgages. B) operate as nonprofit organizations. C) deposit their excess funds with the U.S. Treasury. D) accept deposits and make loans. Answer: D Explanation: Commercial banks, savings and loan associations, and credit unions are all depository institutions that accept deposits and make loans. Difficulty: 2 Medium Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

250) Originally, savings and loan associations A) offered brokerage services to small investors. B) promoted consumer thrift and home ownership. C) acted as a fiscal agent for the federal government, and issued and redeemed U.S. savings bonds. D) handled the overflow of business from national and state banks. Answer: B Explanation: Savings and loan associations are often called thrift institutions because they were originally established to encourage thrift and home ownership. Difficulty: 2 Medium Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 251) Which of the following represents a nonbank? A) life insurance companies B) savings and loan associations C) credit unions D) thrift institutions Answer: A Explanation: Nonbanks are financial institutions that traditionally do not accept deposits, but offer many of the services offered by regular banks. Examples of nonbanks include life insurance companies, pension funds, as well as commercial and consumer finance companies. Credit unions and savings and loan associations (thrift institutions) are part of the U.S. banking system. Difficulty: 2 Medium Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

252) Wyatt keeps $25,000 in an interest-bearing time deposit with the Bigbux Bank. While earning a relatively attractive rate of interest, Wyatt had to agree to not withdraw any of the funds until the end of a three-year period. Wyatt's investment represents a(n) A) passbook savings account. B) negotiable order of withdrawal (NOW) account. C) individual deferred earnings account (IDEA). D) certificate of deposit (CD). Answer: D Explanation: A certificate of deposit is a time deposit that pays interest, but requires the depositor to leave all of the funds deposited until the certificate matures. Maturity dates on CDs now range from 3 months to several years. Difficulty: 3 Hard Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 253) Anthony would like to have his brokerage firm handle more of his financial needs because he has been pleased with the service provided when he bought and sold stocks and bonds. If he explores the services offered by such firms in more depth, he will find that A) federal laws prohibit brokerage firms from competing with banks, savings and loan associations, and credit unions. B) although brokerage firms can offer some banking services, they typically are less efficient at providing them than banks, because they specialize in buying and selling securities. C) brokerage firms are becoming serious competitors for banks and other depository institutions by offering high-yield combination savings and checking accounts and money market accounts, as well as certain types of loans. D) although brokerage firms offer attractive banking services, federal law prohibits individual investors from holding both a checking account and a securities account with the same firm. Answer: C Explanation: Brokerage firms are becoming serious competitors for banks by offering highyield combination savings and checking accounts and other types of accounts. Brokers can also make loans to their customers, using the customers' securities as collateral. Difficulty: 3 Hard Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

254) Ryan works at a community college and the college requires all employees to contribute to a pension fund. At this time, he is not too worried about the safety of this contribution because A) the pensions fund's investments are always backed by the full faith and credit of the U.S. government. B) pension funds are provided by nonbanks so they are not going to take this money and lend it to others. C) he is considered a state employee, and as such, he is protected from this fund going bankrupt. D) pension funds usually make conservative investments. Answer: D Explanation: Pension funds are provided by some corporations and government employers as retirement accounts for their employees. Pension funds are usually bound by rules and regulations requiring them to only invest in low-risk securities. Difficulty: 3 Hard Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 255) Nora is an investment specialist for the Teamsters Union Central States Pension Fund. Her job involves deciding how to invest the contributions paid into the fund. Which of the following statements about Nora's job are true? A) She works for a bank. B) She will probably invest most of the pension's funds in safe corporate stocks and other conservative investments such as government securities. C) In order to qualify for maximum tax benefits, the funds Nora invests all must be contributed by the companies who employ members of the Teamsters Union, rather than by the union members themselves. D) The purpose of the investments Nora is making is to increase the current pay of union members. Answer: B Explanation: Pension funds are amounts of money set aside by organizations to help meet the financial needs of their members when they retire. Pension funds are considered to be nonbanks. Contributions to the fund are made either by employers and employees, or by the employees alone. These funds usually invest contributions in safe and conservative securities. Difficulty: 3 Hard Topic: Financial Institutions Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

256) Which of the following represent an independent agency of the U.S. government that insures bank deposits? A) National Deposit Assurance Cooperative B) Federal Deposit Insurance Corporation C) Insurance Corporation of America D) Deposit Protection Fund Answer: B Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 257) How did banks contribute to the recent financial crisis? A) They began to offer investment products other than demand and time deposits. B) They provided loans higher than the discount rate. C) They made risky loans and then created mortgage-backed securities from the assets they held. D) They refused to sell anything other than fixed-rate mortgages. Answer: C Difficulty: 1 Easy Topic: The Great Recession of 2008 Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 258) The ________ insures holders of accounts in savings and loan associations. A) Savings Association Insurance Fund B) Federal Savings Protection Agency C) Savings and Loan Assurance Corporation D) National Savings Deposit Insurance Cooperative Answer: A Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

259) Designed to create more confidence in banking institutions, the FDIC was established A) soon after the Civil War. B) in 1908, as the result of the banking panic in 1907. C) in 1917, as the nation entered World War I. D) during the Great Depression of the 1930s. Answer: D Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 260) The ________ insures deposits held in credit unions. A) Federal Credit Insurance Agency (FCIA) B) Credit Union Insurance Fund (CUIF) C) Federal Deposit Insurance Corporation (FDIC) D) National Credit Union Administration (NCUA) Answer: D Difficulty: 1 Easy Topic: Financial Institutions Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

261) The Federal Deposit Insurance Corporation (FDIC) operates as a(n) A) department of the Federal Reserve System and sells insurance to mortgage holders. B) independent agency of the U.S. government, and sells insurance to banks. C) arm of the Department of the Treasury. D) private nonprofit cooperative operated by member banks, offering insurance premiums for banking clients. Answer: B Explanation: The Federal Deposit Insurance Corporation is an independent agency of the United States government that insures bank deposits. Difficulty: 2 Medium Topic: Financial Institutions Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 262) The purpose of creating the FDIC was to A) restore confidence in banking institutions. B) serve as clearinghouses for transactions involving commercial banks and savings and loans. C) provide federally guaranteed insurance to small businesses at low cost. D) help the Federal Reserve enforce reserve requirements. Answer: A Explanation: The FDIC was established during the Great Depression to protect depositors from loss and restore public confidence in banking institutions. Difficulty: 2 Medium Topic: Financial Institutions Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

263) Timothy has $42,000 in a savings account with the Jefferson Credit Union. While economic conditions have caused financial institutions to struggle, Timothy feels that his money is safe due to the fact that the credit union's accounts are protected by the A) Federal Deposit Insurance Corporation (FDIC). B) Credit Union Insurance Fund (CUIF). C) National Alliance of Credit Union Underwriters (NACUU). D) National Credit Union Administration (NCUA). Answer: D Explanation: The National Credit Union Administration insures deposits at credit unions for up to $250,000 per depositor, per institution. Difficulty: 3 Hard Topic: Financial Institutions Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 264) Enrico banks at a commercial bank that advertises its membership in the FDIC. This means that A) the bank guarantees it will pay the highest possible interest rate on his savings. B) his money is insured by an independent agency of the federal government. C) his money is automatically invested in securities issued by the federal government. D) the bank is a member of a larger consortium of banks that will enable Alfredo to cash checks and obtain basic bank services in virtually any major city in the United States. Answer: B Explanation: The FDIC is an independent agency that insures individual bank accounts. Difficulty: 3 Hard Topic: Financial Institutions Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

265) After Xavier and Alyssa deposited nearly $55,000 in a savings account at Bigbux Bank, the bank failed and filed for bankruptcy. Because the Bigbux was an FDIC member bank, Xavier and Alyssa A) should be protected because their account is fully insured by the FDIC. B) can recover up to $25,000, but they will probably lose the rest since their deposits exceed the maximum coverage offered by the FDIC. C) will lose their savings because the FDIC only insures business deposits. D) will be eligible to recover 80 percent of the value of their deposit, less a $2,500 deductible. Answer: A Explanation: The Federal Deposit Insurance Corporation insures most bank deposits up to $250,000. When a bank fails, the FDIC arranges for its accounts to be transferred to another bank or pays depositors the amount lost, up to $250,000 per account. Difficulty: 3 Hard Topic: Financial Institutions Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 266) Roberto deposited $66,000 in various individual accounts at his local credit union. He and his wife also have a joint savings account worth $54,700. What portion of these deposits is insured? A) $0, because the NCUA does not insure individual credit union deposits. B) $66,000 C) $54,700 D) $120,700 Answer: D Explanation: The NCUA insures accounts for up to $250,000 per depositor, but depositors can obtain additional coverage by opening joint accounts, which are insured separately. Thus, both Roberto's individual accounts and his joint account would be fully insured since neither exceeds the $250,000 limit. Difficulty: 3 Hard Topic: Financial Institutions Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

267) For banks, check-processing activities A) still represent the cheapest way to permit customers use of their funds. B) are expensive and time consuming. C) are not trustworthy and reliable. D) are extremely efficient and have deterred customers from using other ways to access their funds. Answer: B Difficulty: 1 Easy Topic: Using Technology to Make Banking More Efficient Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 268) Which of the following is a major difference between Internet banks and traditional banks? A) The government does not regulate online banks. B) Traditional banks are prohibited from having ATMs. C) Online banks have lower overhead costs. D) Traditional banks offer less personal care and attention to customers. Answer: C Difficulty: 1 Easy Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 269) The ________ provides the same results as a check because it withdraws funds from a checking account. A) credit card B) debit card C) smart card D) cashier's check Answer: B Difficulty: 1 Easy Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

270) A(n) ________ allows money to be exchanged electronically more quickly and more economically than with paper checks. A) electronic check conversion (ECC) B) electronic funds transfer system (EFT) C) virtual banking operation (VBO) D) telechecking system (TELE) Answer: B Difficulty: 1 Easy Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 271) ________ replace the typical magnetic strip on a credit or debit card with a microprocessor. A) Smart cards B) Direct deposit cards C) E-cards D) Check conversions Answer: A Difficulty: 1 Easy Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 272) Which of the following can include an embedded RFID chip that allows the holder to access secure areas in buildings or buy gas with the swipe of a card? A) smart cards B) direct deposit cards C) e-cards D) check conversion cards Answer: A Difficulty: 1 Easy Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

273) On payday, employers can designate their banks to electronically transfer funds from the business's checking account to the employees' checking account. This represents an example of a(n) A) debit card system. B) check kiting system. C) electronic check conversion. D) direct deposit. Answer: D Explanation: A direct deposit is part of an electronic funds transfer system where checks are eliminated. Difficulty: 2 Medium Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 274) Payroll debit cards A) are protected if lost or stolen. B) have limited use because they can only act as a credit card, and the recipient does not have access to cash. C) must go through the Federal Reserve's Automated Clearing House system. D) can be issued to persons without bank accounts who can use them to pay bills online, or access cash from an ATM. Answer: D Explanation: Payroll debit cards are an efficient way for some firms to pay their workers. Employees can access funds from their pay account immediately, and even use ATM to withdraw cash by using the card. Difficulty: 2 Medium Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

275) Which of the following explains why online banks often offer their customers better interest rates than traditional banks? A) Online banks provide their customers a greater sense of security. B) Traditional banks charge lower prices for financial services. C) Online banks have lower overhead costs. D) Traditional banks offer the electronic transfer of customer funds. Answer: C Explanation: Online banks, such as E*Trade Bank, can offer better interest rates and lower fees because they do not have the costs of physical overhead that brick-and-mortar banks have. Difficulty: 2 Medium Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 276) When a customer purchases an item with a debit card, A) they actually are taking out a short-term loan with 30 days to pay before any interest is charged. B) the payment flows first through an electronic clearinghouse which then sends the customer a bill. C) the transaction duplicates the process of a credit card. D) the funds are automatically transferred from the customer's account to the store's account. Answer: D Explanation: Electronic funds transfer enables money to be sent from one account to another electronically. Difficulty: 2 Medium Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

277) Banks prefer that customers use an electronic funds transfer system rather than traditional methods of payment because A) traditional payments are subject to regulation by the Fed and electronic transactions are not. B) electronic funds are subject to a smaller reserve requirement than traditional funds. C) electronic funds transfer is more efficient and less expensive for banks than traditional checkbased payments. D) the bank generates advertising revenue from its website. Answer: C Explanation: The traditional method of payment using checks is costly and inefficient. Electronic payments save the bank time and money. Difficulty: 3 Hard Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 278) As is common payroll procedure for most employers, Penelope's company ________ her paycheck semimonthly into her checking account. This is a paperless process and no check is issued to the employee. By logging into her personnel system, Penelope has record of the net pay that was deposited into her personal checking account and an account of how much was taken out for taxes, Medicare, social security (FICA), and other deductions. Penelope's company has adopted an efficient ________ system. A) debits; enterprise funds transfer B) debits; electronic funds transfer C) direct deposits; electronic funds transfer D) markets; smart card Answer: C Explanation: Most companies today utilize direct deposit as a means to issue paychecks weekly, bi-monthly, or monthly. Funds are electronically transferred from the employer's account to each employee's account. Direct deposit is one of many ways that companies and banks utilize ETF, electronic funds transfer. Difficulty: 3 Hard Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

279) Brendan travels extensively for his company. He stays at hotels that provide him with a(n) ________ that is imbedded with his personal information as well as a code to unlock his hotel room. A) smart card B) RFID tag C) credit card D) automatic key Answer: A Explanation: Smart cards are embedded with microprocessors that can store a variety of information. They are often used in place of keys in hotels and dorm rooms. Difficulty: 3 Hard Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 280) Ricardo has an authorized work permit issued by the U.S. government to work in the U.S. Each day, he travels from Mexico to El Paso, TX, to work in the construction trade. At the time that he was first employed, his U.S. employer issued him a(n) ________. Each week, the employer scans his work stipend onto it. Ricardo can purchase with it, access cash through an ATM with it, and transfer funds with it. The risk for Ricardo is ________. A) paycheck; if the check is stolen, he is out the money. B) payroll debit card; it serves as a credit card, so if stolen he is out the money and any money he had left from the previous pay date. C) payroll debit card; if it is lost or stolen and someone successfully uses it to make purchases, he has no recourse—he is simply out the money. D) ETF voucher; minimal because funds are transferred directly from the employer's account to the employee's account. Answer: C Explanation: Employers can issue payroll debit cards to employees, particularly for employees who do not have bank accounts. These are like any other debit card. The bank issuer does not insure the funds if the card is lost or stolen and unauthorized persons gain access to the funds. Difficulty: 3 Hard Topic: Using Technology to Make Banking More Efficient Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

281) Bryan searched for a new bank prior to filling out his direct deposit form at his new employer. He noted that 2-4-7 Bank offered higher interest rates on savings accounts and money market accounts; and it offered other amenities such as online banking and funds transfer that many traditional banks offer. What is the most logical reason that 2-4-7 Bank can compete for customers by offering higher interest rates? A) The bank probably cannot compete this way, for long. In order to build its market share, it is offering this as a one-time promotion. B) Its bank reserve requirement is less, due to the fact that the assets it is holding are not as substantial as bigger, traditional banks. C) The bank has no buildings and locations. Due to low overhead, it is able to share the savings it realizes with its customers. D) The bank pays its employees less than other banks. Answer: C Explanation: Online banks have less overhead expense than traditional, brick-and-mortar operations. These cost savings are passed on to customers, who receive higher interest rates and cheaper fees. Difficulty: 3 Hard Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 282) Which of the following is a bank service provided to help companies conduct business in other countries? A) transaction letters B) certificates of deposit C) banker's depositories D) currency exchange Answer: D Difficulty: 1 Easy Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

283) A ________ represents an agreement by a bank to pay a foreign company a given amount if certain conditions are met. A) certificate of deposit B) banker's acceptance C) callable option D) letter of credit Answer: D Difficulty: 1 Easy Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 284) A ________ represents an unconditional agreement by a bank to pay a specified amount at a particular time. A) certified trade acceptance B) banker's acceptance C) letter of credit D) guaranteed funds agreement Answer: B Difficulty: 1 Easy Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

285) If the Fed increases interest rates in the U.S. relative to other nations, A) foreign investors are likely to transfer funds to U.S. investments. B) foreign investors are likely to reduce their investment in U.S. securities. C) foreign governments will likely reduce their interest rates further, to remain complementary to what the U.S. is doing. D) foreign investors will see this as a sign of a looming recession and redirect their funds to time deposits. Answer: A Difficulty: 1 Easy Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 286) The ________ primarily provides for the financing of economic development projects throughout the world. A) International Monetary Fund B) International Reserve Bank C) World Bank D) World Development Authority Answer: C Difficulty: 1 Easy Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

287) The World Bank provides funding for A) the developed nations in Europe and Asia. B) firms that want to participate in international trade but lack foreign exchange. C) multinational corporations that have a strong credit rating. D) projects to improve the standard of living in less-developed nations. Answer: D Difficulty: 1 Easy Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 288) Which of the following helps to provide for the smooth flow of money between nations? A) International Monetary Fund B) Foreign Exchange Bank C) World Bank D) International Exchange Center Answer: A Difficulty: 1 Easy Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation 289) Critics of the World Bank charge the organization with A) financially supporting the military of oppressive leaders. B) financing projects that damage the ecosystem. C) lending most of its money to poor nations. D) a wide array of computer security violations. Answer: B Difficulty: 1 Easy Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Remember AACSB: Reflective Thinking Accessibility: Keyboard Navigation

290) When comparing a letter of credit and a banker's acceptance for financing international business transactions, a letter of credit A) provides payment anywhere in the world. A banker's acceptance pays in areas in which the bank has a branch. B) pays a specified amount if certain conditions are met. Conversely, a banker's acceptance represents an unconditional promise to pay. C) requires both the buyer and seller to deal in the same currencies. A banker's acceptance provides for currency exchange. D) provides financing directly between buyers and sellers in different countries. A banker's acceptance provides an arrangement in which a bank serves as a broker taking title to the goods. Answer: B Explanation: Both a letter of credit and a banker's acceptance are ways banks help companies conduct business in other countries. A letter of credit is a promise by a bank to pay a seller a certain amount if certain conditions are met. A banker's acceptance promises the bank will pay a certain amount at a specified time without imposing any conditions on payment. Difficulty: 2 Medium Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 291) Which of the following institutions monitors the monetary policies of member nations to ensure a global monetary system that works best for all nations? A) International Monetary Fund B) World Bank C) International Development Administration D) International Reserve Bank Answer: A Explanation: The International Monetary Fund was established to assist in the smooth flow of money among nations. Members of the IMF are required to inform the organization of any changes in monetary policy, and to modify those policies on the advice of the IMF to accommodate the needs of the entire membership. Difficulty: 2 Medium Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

292) Which of the following institutions primarily finances economic development projects in less-developed countries? A) International Monetary Fund B) World Bank C) International Development Administration D) International Reserve Bank Answer: B Explanation: The World Bank is primarily responsible for financing economic development. In recent years, most World Bank loans have gone to less-developed nations to improve productivity and raise standards of living. Difficulty: 2 Medium Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation 293) The Fed announces that it intends to implement policies to increase interest rates. Which of the following correctly identifies the most likely result of higher U.S. interest rates? A) More money will flow into the United States from foreign investors. B) The economy will experience an increase in business investment spending. C) The value of the dollar will fall relative to other currencies. D) The rate of inflation will increase. Answer: A Explanation: Today's money markets form a global system. Investors throughout the world can move their money quickly into countries where the return is most attractive relative to risk. If the Fed increases interest rates, the higher return will attract more money from foreign investors into the United States. Difficulty: 2 Medium Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Understand AACSB: Reflective Thinking Accessibility: Keyboard Navigation

294) Importers Direct arranged to have a French winery ship a large quantity of fine wine to the United States. By signing a(n) ________, Importers Direct authorized its bank to make full payment to the French winery if and when the wine arrives at the Importers Direct warehouse in Philadelphia. A) letter of credit B) certificate of deposit C) trade agreement D) banker's acceptance Answer: A Explanation: A letter of credit is one of the services banks provide to help businesses engaged in international business. A letter of credit is a promise by a bank to make payment if certain conditions are met. In this case, the condition is the arrival of the wine at the Importers Direct warehouse. Difficulty: 3 Hard Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 295) Rob works as a loan officer for a major U.S. commercial bank, specializing in international loans. When considering loans to governments and businesses in other nations, Rob A) must be aware of federal limits on the total amount of U.S. funds his bank can lend to foreign borrowers. B) can only make loans if his bank has funds in excess of those sought by American firms. C) is likely to approve loans to foreign borrowers if the return is high enough to justify the risk. D) must be careful to get approval from the International Monetary Fund. Answer: C Explanation: International bankers make loans whenever and wherever they see an opportunity to maximize their return at a reasonable risk. Difficulty: 3 Hard Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

296) It's no secret these days that the People's Bank of China is fat with cash from the increasing rate of Chinese exporting. As a smart player on the global stage, which of the following strategic decisions will the People's Bank of China probably make on a daily basis? A) Invest its free cash in the securities of other nations whose interest rates remain at a low and acceptable rate, for a long period of time. B) Limit its global investment of free cash, and continue to invest in the construction trade in China, to build more factories, while providing its clientele with the highest possible interest rates. C) Invest its free cash in the securities of other nations that do not participate in the same type of industries such as soft goods and electronics. D) Invest its free cash in the securities of other nations where it can get the highest available interest rate, for the shortest period of time. Answer: D Explanation: Banks and other institutions with cash to invest will invest on the global financial market. These institutions will look for short-term securities, with the highest interest rates. Difficulty: 3 Hard Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

297) The World Bank's mission is to lend money to developing nations to help boost their economic development in various industries. Since its inception, the World Bank has taken significant criticism of its programs. Farmers in a cooperative in the developing nation of Forlornia have benefited by World Bank loans. Most recently, however, their processing facilities that employ several laborers are taking criticism from human rights organizations. After studying this chapter, which of the following is a common criticism of these groups? A) The loans are too small, for all practical purposes. Farmers are spending their funds on sustainability measures rather than producing the most they can from each crop. B) Working conditions in the processing plant are unacceptable, similar to sweatshop conditions. C) Forlornia is most likely not paying back its loans, and still asking for the World Bank to raise its debt ceiling. D) Farmers who own the cooperative are not vaccinating their workers against AIDS, even though the World Bank partners with pharmaceutical firms who provide free AIDS medications. Answer: B Explanation: The World Bank is criticized for several unsolved problems. These include human rights activists who complain about the working conditions in facilities that have acquired World Bank loans; others complain that the World Bank is not doing enough to provide low-cost AIDS medications to developing nations; and environmentalists believe that some finance projects are contributing to the destruction of the ecosystem. Difficulty: 3 Hard Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

298) Describe and compare the three major types of organizations that make up the U.S. banking system: commercial banks, savings and loan associations, and credit unions. Answer: The U.S. banking system consists primarily of commercial banks, savings and loan associations, and credit unions. All of these institutions accept deposits and make loans, but they initially evolved to appeal to different types of depositors and borrowers. In recent years the banking system has been deregulated, and competitive pressures have led the institutions to provide similar services. Commercial banks are profit-seeking organizations that receive deposits from individuals and corporations in the form of checking and savings accounts, and use some of these funds for making loans. Commercial banks have two major customers: depositors and borrowers. A commercial bank will earn a profit if the revenue it earns on loans to borrowers (and from other sources such as fees) exceeds the interest it pays to depositors (and other costs and expenses). In addition to holding demand deposits (checking accounts) and time deposits (savings accounts) and making loans, banks also provide many additional financial services. Saving & loan associations are financial institutions that accept both savings and checking deposits and provide home mortgage loans. S&Ls were originally set up to encourage thrift and home ownership. Today, however, they compete with commercial banks. Credit unions are nonprofit, member-owned financial cooperatives that offer the full variety of banking services to their members. Typically, credit unions offer their members interest-bearing checking accounts at relatively high rates, short-term loans at relatively low rates, financial counseling, life insurance policies, and a limited number of home mortgage loans. As nonprofit institutions, credit unions enjoy an exemption from federal income taxes. Difficulty: 3 Hard Topic: Financial Management Learning Objective: 20-04 Classify the various institutions in the U.S. banking system. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

299) Discuss the methods the Fed uses to enact monetary policy and provide an explanation of the effects these methods have on the supply of money. Answer: The Federal Reserve System has three basic tools to regulate the money supply: the reserve requirement, open-market operations, and the discount rate. The reserve requirement requires banks to hold reserves (in the form of vault cash or noninterest-bearing deposits at the district Federal Reserve Bank) equal to a stated percentage of their deposits. The reserve requirement is the Federal Reserve's most powerful tool. If the Fed raises the reserve requirement, banks must hold more reserves against deposits, thus limiting the amount they can lend. If the Fed lowers the reserve requirement, more reserves (funds that were held against deposits) become available for loans. Open-market operations involve buying and selling of U.S. government securities in order to regulate the money supply. If the Federal Reserve wants to take money out of circulation, it sells securities. If the Federal Reserve wants to increase the supply of money, it buys securities and the money paid goes back into circulation. This is the most common way the Fed tries to regulate the supply of money in circulation. The Federal Reserve can also use the discount rate for regulating the money supply. The discount rate is the interest rate the Fed charges for loans to member banks. An increase in the discount rate discourages banks from borrowing from the Fed, resulting in a decrease in the money supply. The opposite effect occurs when the Fed lowers the discount rate. Difficulty: 3 Hard Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

300) Compare and contrast the functions of the World Bank and the International Monetary Fund. Answer: The World Bank and the International Monetary Fund (IMF) are the twin intergovernmental pillars that support the structure of the world's banking community. The World Bank is primarily responsible for financing economic development. Immediately after World War II, the bank made large loans to countries in Western Europe to help them rebuild. In recent years, the World Bank has emphasized loans to poor, less-developed countries to help finance projects that will improve productivity and enhance standards of living and quality of life. Unlike the World Bank, the IMF is not primarily a lending institution. Rather, the IMF was established to facilitate monetary flows among nations. Membership in the IMF is voluntary. Members are required to allow their currencies to be exchanged for foreign currencies freely. Members are also expected to keep the IMF informed of changes in monetary policies, and to modify those policies on the advice of the IMF to accommodate the needs of the entire membership. Difficulty: 3 Hard Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Analyze AACSB: Analytical Thinking

301) Identify and discuss the tools and products that electronically transfer funds. Answer: In an electronic funds transfer (EFT) system funds can be transferred more quickly and more economically than by paper checks. EFT tools include electronic check conversion, debit cards, smart cards, direct deposits, and direct payments. Electronic check conversion (ECC) converts a traditional paper check into an electronic transaction at the cash register and processes it through the Federal Reserve's Automated Clearing House. Debit cards look like a credit card, but serve the same functions as checks, i.e., they withdraw funds from your checking account. When a customer uses a debit card, the transaction is electronically reported to the bank, transferring funds from the customer's account to the store's account automatically. Payroll debit cards are issued to employees by employers in lieu of checks or direct deposit. These are for employees without bank accounts. They allow them to make online payments, use the card as a credit card or debit card, and access cash from an ATM. Smart cards are a combination of credit cards, debit cards, phone cards, driver's license cards, and more. Smart cards replace the typical magnetic strip on a credit or debit card with a microprocessor. Merchants can access the card's information to check the card's authenticity and spending limits. The dollar amount of the transaction is then debited to the card. Some smart cards have embedded radio-frequency antennae that make it possible to access buildings and secure areas within buildings, as well as buy gas and fast food. Students are using smart cards to open locked doors to dorms and identify themselves to retailers near campus and on the Internet. They also serve as ATM cards. For many, the ultimate convenience in banking involves automatic transactions such as direct deposit and direct payments. A direct deposit is a credit made directly to a checking or savings account. Many employees have their paycheck automatically deposited to their checking account. A direct payment is a pre-authorized electronic payment. Customers sign a separate authorization form for each company they would like to pay automatically. This form authorizes the designated company to collect funds for the amount of the bill from the customer's account. Difficulty: 3 Hard Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Analyze AACSB: Analytical Thinking Accessibility: Keyboard Navigation

Mini-Case The Bank of Bramblewood survived the Great Depression through the dedication, hard work, and conservative practices of its first president, Red E. Kash. Indeed, Red's personal drive and business skills helped the Bank of Bramblewood thrive during his 50-year tenure as president. After his retirement, his granddaughter, Patty, took a position with the bank. Patty inherited her grandfather's business skills and by 1994 she had risen to become the second member of the Kash family to head the bank. Patty admits she owes a great deal to her grandfather's leadership and advice, but she also quickly points out that the banking industry has changed significantly since Red retired. Patty graduated from college with a degree in finance, and also holds several certifications with the American Institute of Banking. "What Granddad achieved during his era was truly remarkable," Patty points out. "But times have changed, and banking regulations and bank competitors have certainly changed. If we hope to prosper in this century, we have to adjust to new competition, learn to work with new technologies, and take advantage of new opportunities. The Bank of Bramblewood has always operated for the benefit of our customers and we will continue to do so. But we must serve them more efficiently and creatively than in the past." 302) During Red's time as head of the Bank of Bramblewood, the bank offered three services: time deposits, demand deposits, and home and business loans. Under Patty's leadership, the bank offers those same services, a variety of investment opportunities such as mutual funds and bonds, and ________ through the Internet, which supports a number of services such as paying bills directly from customers' accounts, direct deposit, and transferring money. A) demand deposits B) online banking C) passbook banking D) composite banking Answer: B Explanation: Just about all large and small banks now provide online banking services, which include bill payment transactions and the movement of funds from one account to another. Difficulty: 3 Hard Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

303) Since the Great Depression, the Bank of Bramblewood has the FDIC designation. What does this mean? A) The bank is a member of a consortium of banks that can pool funds to make loans too big for any single bank to finance. B) The bank gives preference to veterans. C) The depositors of the bank are also its owners. D) Individual accounts at the bank are insured by an independent agency of the federal government. Answer: D Explanation: The FDIC is the Federal Deposit Insurance Corporation, an independent government agency that insures individual deposits in member institutions for up to $250,000. Difficulty: 3 Hard Topic: Financial Institutions Learning Objective: 20-05 Briefly trace the causes of the banking crisis starting in 2008 and explain how the government protects your funds during such crises. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 304) The Bank of Bramblewood promotes a sustainability initiative encouraging all transactions increasingly to be paperless. Each time the bank issues checks or sends out a paper statement, it includes a promotion asking customers to support methods that eliminate paperwork. The bank encourages customers to use debit cards, smart cards, direct deposit, and direct payments, as well as online statement retrieval. All of these tools are used in conjunction with the bank's A) electronic funds transfer system. B) automated deposit system. C) check clearinghouse system. D) limited documentation checking program. Answer: A Explanation: In an electronic funds transfer (EFT) system, funds can be transferred more quickly and more economically than with paper checks. EFT tools include electronic check conversion, debit cards, smart cards, direct deposits, and direct payments. Difficulty: 3 Hard Topic: Technology and Banking Learning Objective: 20-06 Describe how technology helps make banking more efficient. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation

305) Under Patty's leadership the Bank of Bramblewood would like to increase its loans to customers, but its resources are currently limited by a high reserve rate. As a Federal Reserve member bank, it will borrow additional funds from the Fed and charge its customers an interest rate that is higher than the A) reserve rate. B) federal funds rate. C) discount rate. D) prime rate. Answer: C Explanation: The discount rate is the rate of interest the Fed charges its member banks when they borrow money. Difficulty: 3 Hard Topic: The Federal Reserve System Learning Objective: 20-02 Describe how the Federal Reserve controls the money supply. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 306) As the bank has grown and expanded to other towns in its region, several of its business customers are participating in global trade. Which of the following services provided by the bank would help companies conduct international business? A) letters of credit B) banker's transactions C) certificates of deposit D) trade exchange letters Answer: A Explanation: Banks help companies conduct business in other countries by providing three services: letters of credit, banker's acceptances, and currency exchange. When a business signs a letter of credit with its bank, it gives the bank permission to disburse funds from its account in payment of foreign goods and services, providing that certain conditions are met, as designated on the letter of credit. Difficulty: 3 Hard Topic: International Banking Learning Objective: 20-07 Evaluate the role and importance of international banking, the World Bank, and the International Monetary Fund. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation