Anybody_s Business Barbara Van Syckle Test Bank by Ace Test Banks

Anybody_s Business

By Barbara Van Syckle

Email: richard@qwconsultancy.com

Anybody’s Business TIF questions: Chapter 1 True/False 1) Whenever your standard of living goes up, so does your quality of life. Answer: FALSE Diff: Easy Page Ref: 4 Objective: Explain why financial statements matter to businesses and the people who own them, manage them, and work in them. 2) Net profit, when used alone, shows a company’s true financial health. Answer: FALSE Diff: Easy Page Ref: 7 Objective: Explain why financial statements matter to businesses and the people who own them, manage them, and work in them.

Formatted: English (United States)

3) A budget quantifies all of a company’s expected inflows and outflows of cash. Answer: TRUE Diff: Easy Page Ref: 9 Objective: Recognize cash flow and how to interpret a cash flow statement. 4) Income and revenue are not the same thing. Answer: TRUE Diff: EASY Page Ref: 13 Objective: Recognize profit and how to interpret an income statement.

Formatted: English (United States)

5) Revenue can come from goods and services, but not from experiences that customers have. Answer: FALSE Diff: Easy Page Ref: 13 Objective: Recognize profit and how to interpret an income statement. 6) Not-for-profit organizations do not need net income. Answer: FALSE Diff: Easy Page Ref: 14 Objective: Recognize profit and how to interpret an income statement. 7) A company can still have cash flow problems if it is profitable. Answer: FALSE Diff: Easy Page Ref: 17 Objective: Recognize profit and how to interpret an income statement. Multiple Choice 8) Which of the following is NOT a financial statement? A) cash flow statement

Formatted: English (United States)

B) general ledger C) income statement D) balance sheet Answer: B Diff: Easy Page Ref: 4 Objective: Explain why financial statements matter to businesses and the people who own them, manage them, and work in them. 9) Which of the following is NOT a factor affecting standard of living? A) your income B) the quality of goods and services available to you C) tour well-being D) the consumption patterns of the people in your community Answer: C Diff: Moderate Page Ref: 4 Objective: Explain why financial statements matter to businesses and the people who own them, manage them, and work in them. 10) A publicly traded company is A) a company that is family-owned and –founded. B) a company that is funded primarily through federal income taxes levied by the government. C) a company that is owned by its employees. D) a company that issues stock for people to buy on a stock exchange or other markets. Answer: D Diff: Easy Page Ref: 5 Objective: Explain why financial statements matter to businesses and the people who own them, manage them, and work in them. 11) An annual report is A) a description of a firm’s financials, distributed to everyone who owns stock in the firm. B) a statement describing market growth in a specific industry, such as automotive or telecommunications. C) a set of documents explaining trends and challenges in a nation’s economy. D) a booklet published by the Treasury Department each year outlining returns on Treasury bill investments. Answer: A Diff: Moderate Page Ref: 5 Objective: Explain why financial statements matter to businesses and the people who own them, manage them, and work in them. 12) Which of the following is NOT true about open book management? A) Employees are encouraged to suggest ways to improve the company’s performance.

B) Employees directly review their managers’ on-the-job performance. C) Employees have access to the firm’s financial statements and other information about the company’s performance. D) Employees see how their performance affects the company’s performance. Answer: B Diff: Moderate Page Ref: 5 Objective: Explain why financial statements matter to businesses and the people who own them, manage them, and work in them. 13) Which of the following is the most likely objection to open book management? A) Employees will feel disrespected by management if the company’s financial performance is poor. B) The company will be violating laws about keeping financial information confidential. C) The firm’s financial information will get into the hands of competitors. D) Employees will have difficulty seeing the connection between their performance and the company’s. Answer: C Diff: Moderate Page Ref: 6 Objective: Explain why financial statements matter to businesses and the people who own them, manage them, and work in them. 14) Open book management improves employees’ quality of life because A) it creates a work environment characterized by reduced stress. B) it ensures employees a steady paycheck. C) it enables employees to buy higher-quality goods and services. D) it frees employees from having to contribute ideas for improving the company’s performance. Answer: A Diff: Moderate Page Ref: 6 Objective: Explain why financial statements matter to businesses and the people who own them, manage them, and work in them. 15) The “bottom line” is A) the lowest possible revenue a company can earn without having to declare bankruptcy. B) the final decision a CEO makes regarding whether to sell the company or divest a division. C) an accounting calculation that figures out a company’s financial performance based on net profit. D) an equation showing how much market share a company lost during the previous fiscal year. Answer: C Diff: Easy Page Ref: 7 Objective: Explain why financial statements matter to businesses and the people who own them, manage them, and work in them.

16) Which of the following is a well-stated business goal? A) “Strengthen our ability to manufacture products without error.” B) “Enhance morale and engagement throughout our workforce.” C) “Improve our ability to innovate new products and services.” D) “Increase revenues twofold by the end of the fiscal year.” Answer: D Diff: Moderate Page Ref: 7 Objective: Explain why financial statements matter to businesses and the people who own them, manage them, and work in them. 17) In a company using open book management, which of the following incentives would likely motivate the majority of employees to improve their performance? A) vacations to resorts on distant, exotic locations B) gift certificates to local cultural and sports events C) a profit-sharing or equity-sharing program D) a bonus check that is a specific percentage of employees’ pay Answer: C Diff: Moderate Page Ref: 7 Objective: Explain why financial statements matter to businesses and the people who own them, manage them, and work in them. 18) Financial statements help managers and employees A) understand their company’s previous, current, and possibly future performance. B) improve their standard of living but not their quality of life. C) select other companies that may be worth investing in. D) distinguish differences between their company’s and rival companies’ offerings. Answer: A Diff: Moderate Page Ref: 8 Objective: Explain why financial statements matter to businesses and the people who own them, manage them, and work in them. 19) Which of the following are NOT reflected in a company’s cash flow statement? A) purchases of office supplies needed by the business B) payments from customers for products C) monies the company owes investors D) rent checks from a property the company is subleasing. Answer: C Diff: Challenging Page Ref: 9 Objective: Recognize cash flow and how to interpret a cash flow statement. 20) A budget A) spells out which vacant positions a company will need to fill with new hires. B) quantifies all of a company’s expected inflows and outflows of cash. C) shows the trends in a firm’s revenues and profits over the previous three years. D) depicts salary differences between executives, managers, and employees.

Answer: B Diff: Easy Page Ref: 9 Objective: Recognize cash flow and how to interpret a cash flow statement. 21) You are comparing cash flow statements for your business from the current month and the previous month. Which of the following would you be able to figure out? A) what denominations the business’s cash is in B) whether the business has cash C) how much cash the business has D) whether the business has more or less cash this month than last month Answer: A Diff: Easy Page Ref: 10 Objective: Recognize cash flow and how to interpret a cash flow statement. 22) Which of the following indicates that a company has negative cash flow? A) The company’s cash on hand is unpredictable from month to month. B) The company’s cash is in the form of small bills. C) The company has more cash now than it did the previous month. D) The company has less cash now than it did the previous month. Answer: D Diff: Easy Page Ref: 11 Objective: Recognize cash flow and how to interpret a cash flow statement. 23) A company raises the price on its products and sells more of them. What is the impact on its cash flow? A) Cash inflow increases. B) Cash inflow decreases. C) Cash outflow increases. D) Cash outflow decreases. Answer: A Diff: Moderate Page Ref: 11 Objective: Recognize cash flow and how to interpret a cash flow statement. 24) How would you apply the principle of “paying yourself first”? A) Every time you get paid, put most of the money into a checking account that you can easily access. B) Every time you get paid, use a set amount of money to buy a small luxury item you’ve been wanting. C) Every time you get paid, transfer a set amount of money to a savings account or 401(k). D) Every time you get paid, pay your most important bills first and save the rest of the money. Answer: C Diff: Moderate Page Ref: 11 Objective: Recognize cash flow and how to interpret a cash flow statement.

25) What is an important benefit of the practice of paying yourself first? A) The practice enables you to treat yourself to lavish purchases. B) You keep all your money in a liquid form that you can easily access as needed. C) You can pay off your largest bills in a more timely manner. D) The money you save will create personal cash inflow by earning interest. Answer: D Diff: Moderate Page Ref: 11 Objective: Recognize cash flow and how to interpret a cash flow statement. 26) Interest is A) the fee that a bank or other institution pays you for the use of your money. B) the fee that you pay a bank in order to use a personal or business checking account. C) the money you set aside in a savings account every time you get paid. D) the money taken out of your paycheck to pay taxes. Answer: A Diff: Easy Page Ref: 11 Objective: Recognize cash flow and how to interpret a cash flow statement. 27) Suppose you have put $50 in an interest-bearing account and you want to double the amount of money in the account. What calculation would you use to determine how many years it would take to double your money? A) Divide 50 by the interest rate and add 2. B) Divide 72 by the interest rate. C) Multiply the interest rate by 2. D) Add the interest rate to 5. Answer: B Diff: Moderate Page Ref: 12 Objective: Recognize cash flow and how to interpret a cash flow statement. 28) How does the Rule of 72 calculation work? A) Subtract the interest rate from 72. B) Divide 72 by the interest rate. C) Multiply the interest rate by 72. D) Add the interest rate to 72. Answer: B Diff: Moderate Page Ref: 12 Objective: Recognize cash flow and how to interpret a cash flow statement. 29) You have saved $200 in an interest-bearing account and plan to leave it there for 5 years. How would you calculate the interest you would need to earn in order to double your money in those 5 years? A) Divide 72 by the number of years you have to save. B) Multiply 72 by the number of years you have to save. C) Multiply 5 by 2, then subtract the product from 72. D) Divide the number of years you have to save by 72. Answer: A

Diff: Moderate Page Ref: 12 Objective: Recognize cash flow and how to interpret a cash flow statement. 30) In addition to cash-in and cash-out transactions, a cash flow statement shows A) cash a company’s creditors have on hand. B) the profit a company earned in the most recent quarter. C) a company’s beginning and ending cash balances. D) amounts a company owes suppliers. Answer: C Diff: Easy Page Ref: 12 Objective: Recognize cash flow and how to interpret a cash flow statement. 31) What is another term for net profit? A) net cash B) net income C) net revenue D) net value Answer: B Diff: Easy Page Ref: 13 Objective: Recognize profit and how to interpret an income statement. 31) What is net profit? A) the amount of money a business has paid to its suppliers over one year B) the amount of money a business has in the bank at any one time C) the amount of money a business brings in from customers in one year D) the amount of money remaining after a business has paid all its expenses Answer: D Diff: Easy Page Ref: 13 Objective: Recognize profit and how to interpret an income statement. 33) What is another term for income statement? A) profit and loss statement B) general ledger statement C) business value statement D) revenue and expense statement Answer: A Diff: Easy Page Ref: 13 Objective: Recognize profit and how to interpret an income statement. 34) An income statement measures A) a company’s budget for the coming year and the resources needed to fund the projects in the budget. B) a company’s cash flow recorded over the course of one year of selling to customers. C) a company’s net profit by tracking the firm’s revenues and expenses during a given period.

D) a company’s debts and other liabilities incurred by its strategic plan executed over the previous year. Answer: C Diff: Moderate Page Ref: 13 Objective: Recognize profit and how to interpret an income statement. 35) Income is A) the amount of cash a company deposits in its bank during one year. B) the amount of cash a company expects to bring in during the coming year. C) the amount of money a company generates during a period of time. D) the total amount of money received by a company for a good, service, or experience. Answer: C Diff: Moderate Page Ref: 13 Objective: Recognize profit and how to interpret an income statement. 36) Revenue is A) the amount of cash a company deposits in its bank during one year. B) the amount of cash a company expects to bring in during the coming year. C) the amount of money a company generates during a period of time. D) the total amount of money received by a company for a good, service, or experience. Answer: D Diff: Moderate Page Ref: 13 Objective: Recognize profit and how to interpret an income statement. 37) Revenue is recorded A) only after payment for a sale has been received by the company. B) when a sale is made, but not necessarily when payment for the sale is received. C) as soon as a customer has expressed interest in placing an order with a company. D) when a customer approves the price proposed for a particular good or service. Answer: B Diff: Moderate Page Ref: 13 Objective: Recognize profit and how to interpret an income statement. 38) Which of the following is NOT an example of a good? A) a car B) a vacation C) a bottle of shampoo D) a washing machine Answer: B Diff: Easy Page Ref: 13 Objective: Recognize profit and how to interpret an income statement. 39) Which of the following companies is in the service business? A) a company that rents cars

B) a company that sells consumer products C) a company that makes medical devices D) a company that manufacturers military equipment Answer: A Diff: Easy Page Ref: 13 Objective: Recognize profit and how to interpret an income statement. 40) In the equation for calculating a company’s net profit, what do expenses refer to? A) the invoices sent to the company by the suppliers it is buying from B) the cash flowing out of the company during the current period C) the amount of money the company spent on something during a certain time D) the total amount money the company expects to spend in the coming year Answer: C Diff: Moderate Page Ref: 13 Objective: Recognize profit and how to interpret an income statement. 41) When does a company record its expenses? A) when the company receives a bill B) when the company pays a bill C) when the company’s supplier has put a bill in the mail D) when the company decides to purchase something Answer: A Diff: Moderate Page Ref: 13 Objective: Recognize profit and how to interpret an income statement. 42) When does an expense become a cash outflow? A) when a company makes a withdrawal from its bank B) when a company decides to make a purchase C) when a company receives a bill D) when a company pays a bill Answer: D Diff: Easy Page Ref: 14 Objective: Recognize profit and how to interpret an income statement. 43) Expenses are divided into A) operating expenses and income. B) cost of revenue and operating expenses. C) cash out and cash deferred. D) invoices received and invoices paid. Answer: B Diff: Easy Page Ref: 14 Objective: Recognize profit and how to interpret an income statement. 44) What is another term for cost of revenue? A) cost of profit B) cost of operating income

C) cost of goods sold D) cost of interest Answer: C Diff: Easy Page Ref: 14 Objective: Recognize profit and how to interpret an income statement. 45) What is cost of revenue? A) any amount incurred by a company for expenses directly related to sale of a product B) amounts a company pays for expenses not directly related to the sale of its product C) unavoidable expenses that a company incurs when it generates reports on its financial dealings D) costs incurred only by companies that sell services rather than tangible goods Answer: A Diff: Easy Page Ref: 14 Objective: Recognize profit and how to interpret an income statement. 46) What are operating expenses? A) amounts incurred by a company for expenses directly related to sale of a product B) amounts a company pays for expenses not directly related to the sale of its product C) unavoidable expenses that a company incurs when it generates reports on its financial dealings D) costs incurred only by companies that sell services rather than tangible goods Answer: B Diff: Easy Page Ref: 14 Objective: Recognize profit and how to interpret an income statement. 47) You are a car dealer. Which of the following would your cost of revenue consist of? A) rent paid to the owner of your building B) amounts spent on utilities C) money paid for administrative salaries D) purchase of cars for resale Answer: D Diff: Moderate Page Ref: 14 Objective: Recognize profit and how to interpret an income statement. 48) You are an antiques dealer. Which of the following would NOT be an example of your operating expenses? A) rent paid to the owner of your building B) amounts spent on utilities C) money paid for administrative salaries D) purchase of antiques for resale Answer: D Diff: Moderate Page Ref: 14 Objective: Recognize profit and how to interpret an income statement.

49) Shareholders are A) people who own a part of a company and have a vested interest in its profits. B) people who may or may not own a part of a company but are directly affected by its activities. C) computer systems that keep track of a company’s stock price. D) companies that track the financial performance of a particular industry. Answer: A Diff: Easy Page Ref: 14 Objective: Recognize profit and how to interpret an income statement. 50) Stakeholders are A) people who own a part of a company and have a vested interest in its profits. B) people who may or may not own a part of a company but are directly affected by its activities. C) computer systems that keep track of a company’s stock price. D) companies that track the financial performance of a particular industry. Answer: B Diff: Easy Page Ref: 14 Objective: Recognize profit and how to interpret an income statement. 51) A business model is A) a corporation’s strategy for gathering information about competitors. B) a prototype for a new product or service a company wants to develop. C) a physical rendering of how a company’s facilities will be constructed. D) an organization’s plan for creating value for its stakeholders. Answer: D Diff: Easy Page Ref: 15 Objective: Recognize profit and how to interpret an income statement. 52) The goal of a not-for-profit organization is to A) eventually advance to for-profit status. B) earn a profit for its owners. C) use any money it makes to further the cause or association it promotes. D) deliver products or services that benefit corporations. Answer: C Diff: Easy Page Ref: 15 Objective: Recognize profit and how to interpret an income statement. 53) The goal of a for-profit organization is to A) eventually advance to not-for-profit status. B) earn a profit for its owners. C) use any money it makes to further the cause or association it promotes. D) deliver products or services that only benefit charities. Answer: B Diff: Easy Page Ref: 15 Objective: Recognize profit and how to interpret an income statement.

54) Which two types of income statements are allowed under GAAP? A) cash and accrual B) inflow and outflow C) credit and debit D) receivable and payable Answer: A Diff: Easy Page Ref: 15 Objective: Recognize profit and how to interpret an income statement. 55) In your business, you record revenue when money comes in from customers, and record expenses when you pay bills. What basis of accounting are you using? A) cash B) income C) accrual D) debit Answer: A Diff: Moderate Page Ref: 16 Objective: Recognize profit and how to interpret an income statement. 56) In your business, you record income when you deliver a good or provide a service, and record expenses when they are incurred, not necessarily when you pay the bills. What basis of accounting are you using? A) cash B) income C) accrual D) debit Answer: C Diff: Easy Page Ref: 16 Objective: Recognize profit and how to interpret an income statement. 57) What are accounts receivable? A) paid bills for products or services a company has sold B) unpaid bills for products or services a company has sold C) unpaid bills for expenses a company has incurred D) paid bills for expenses a company has incurred Answer: B Diff: Easy Page Ref: 16 Objective: Recognize profit and how to interpret an income statement. 58) What are accounts payable? A) paid bills for products or services a company has sold B) unpaid bills for products or services a company has sold C) unpaid bills for expenses a company has incurred D) paid bills for expenses a company has incurred Answer: C

Diff: Easy Page Ref: 16 Objective: Recognize profit and how to interpret an income statement. 59) Why is that large businesses that have a lot of accounts receivable and payable cannot use the cash basis of accounting? A) It doesn’t give them an accurate picture of their net profits for a set period. B) The law says that such business cannot use the cash basis of accounting. C) The cash basis of accounting is too complex for large businesses to use. D) They don’t have IT systems designed to handle the cash basis of accounting. Answer: A Diff: Moderate Page Ref: 16 Objective: Recognize profit and how to interpret an income statement. 60) Which financial statement answers the question “Is my company making a profit”? A) the balance sheet B) the general ledger C) the cash flow statement D) the income statement Answer: D Diff: Easy Page Ref: 19 Objective: Recognize profit and how to interpret an income statement. 61) Which of the following is NOT a source of cash flow? A) operating activities B) investing activities C) maintenance activities D) financing activities Answer: C Diff: Moderate Page Ref: 20 Objective: Examine how people make decisions based on their impact on cash flow and profit. 62) You own a computer company. Activities such as selling computers, buying components, and assembling the components to make computers are A) operating activities. B) investing activities. C) maintenance activities. D) financing activities. Answer: A Diff: Moderate Page Ref: 20 Objective: Examine how people make decisions based on their impact on cash flow and profit. 63) You own a steel company. You build a state-of-the-art manufacturing facility that lets your business operate more efficiently and sell more products. Building the facility is a(n)

A) operating activity. B) investing activity. C) maintenance activity. D) financing activity. Answer: B Diff: Moderate Page Ref: 20 Objective: Examine how people make decisions based on their impact on cash flow and profit. 64) You own a media company. You decide to issue and sell shares of your company’s stock. This is a(n) A) operating activity. B) investing activity. C) maintenance activity. D) financing activity. Answer: D Diff: Moderate Page Ref: 20 Objective: Examine how people make decisions based on their impact on cash flow and profit. 65) What is an operating activity? A) an activity that entails the investment in or purchase of assets that could increase a company’s profitability B) an activity that requires upgrades to a company’s information technology system C) an activity that uses or generates cash to keep a company’s daily operations going D) an activity that involves cash exchanges between a company’s shareholders, investors, and creditors Answer: C Diff: Easy Page Ref: 20 Objective: Examine how people make decisions based on their impact on cash flow and profit. 66) What is an investing activity? A) an activity that entails the purchase of assets that could increase a company’s profitability B) an activity that requires upgrades to a company’s information technology system C) an activity that uses or generates cash to keep a company’s daily operations going D) an activity that involves cash exchanges between a company’s shareholders, investors, and creditors Answer: A Diff: Easy Page Ref: 20 Objective: Examine how people make decisions based on their impact on cash flow and profit. 67) What is a financial activity?

A) an activity that entails the purchase of assets that could increase a company’s profitability B) an activity that requires upgrades to a company’s information technology system C) an activity that uses or generates cash to keep a company’s daily operations going D) an activity that involves cash exchanges between a company’s shareholders, investors, and creditors Answer: D Diff: Easy Page Ref: 20 Objective: Examine how people make decisions based on their impact on cash flow and profit. 68) What is gross profit? A) revenue plus the costs of creating and delivering products for sale (not including overhead) B) revenue divided by the costs of creating and delivering products for sale (not including overhead) C) revenue minus the costs of creating and delivering products for sale (not including overhead) D) revenue multiplied by the costs of creating and delivering products for sale (not including overhead) Answer: C Diff: Moderate Page Ref: 21 Objective: Examine how people make decisions based on their impact on cash flow and profit. 69) You are an employee of a company. Which of the following is NOT a benefit of understanding the company’s financial statements? A) This understanding helps you determine the company’s financial health and judge whether your job is secure. B) This understanding inspires and helps you to do your job more effectively. C) This understanding gives you an idea of how likely it is you’ll get a raise or promotion. D) This understanding positions you to predict which employees could be demoted into which positions. Answer: D Diff: Moderate Page Ref: 23 Objective: Examine how people make decisions based on their impact on cash flow and profit. 70) A manager’s primary job is to A) make sure his or her employees’ work meets certain criteria. B) assemble the products or provide the services that the company sells. C) respond to customers’ complaints about the company’s offerings. D) invest some of his or her compensation in company shares. Answer: A Diff: Easy Page Ref: 25

Objective: Understand four perspectives in business: the BizHats. 71) You participate in the day-to-day work of a business. Which of the following perspectives does this give you on the business? A) customer B) manager C) employee D) owner/investor Answer: C Diff: Easy Page Ref: 25 Objective: Understand four perspectives in business: the BizHats. 72) You are purchasing a good or service from a business. Which of the following perspectives does this give you on the business? A) customer B) manager C) employee D) owner/investor Answer: A Diff: Easy Page Ref: 25 Objective: Understand four perspectives in business: the BizHats. 73) You guide employees and make sure their work meets certain criteria in a company. Which of the following perspectives does this give you on the company? A) customer B) manager C) employee D) owner/investor Answer: B Diff: Easy Page Ref: 25 Objective: Understand four perspectives in business: the BizHats. 74) You have a vested interest in the financial success of a company, though you are not participating in its day-to-day activities. Which of the following perspectives does this give you on the company? A) customer B) manager C) employee D) owner/investor Answer: D Diff: Easy Page Ref: 25 Objective: Understand four perspectives in business: the BizHats. 75) What is another term for cost of goods sold? A) cost of profit B) cost of operating income

C) cost of revenue D) cost of interest Answer: C Diff: Easy Page Ref: 14 Objective: Recognize profit and how to interpret an income statement.

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CHAPTER 2: BUILD: BALANCE SHEET, RISK, FINANCING, AND DIVERSIFICATION TRUE/FALSE 1. Because they own a lot of valuable items that make more money, wealthy people become even more wealthy. Answer: True Diff: Easy Page Ref: 31 Goal: Making Money Work for You 2. Finding the right balance between revenues and spending can mean all the difference between success and failure. Answer: True Diff: Easy Page Ref: 32 Goal: Differentiate an asset from a liability, recognize assets that generate income, and evaluate an organization's financial position by its balance sheet. 3. Liquidity is the ability of an asset to be converted into cash. Answer: True Diff: Easy Page Ref: 33 Goal: Differentiate an asset from a liability, recognize assets that generate income, and evaluate an organization's financial position by its balance sheet. 4. The fundamental accounting equation is Assets = Liabilities + Owners' Equity. Answer: True Diff: Easy Page Ref: 34 Goal: Differentiate an asset from a liability, recognize assets that generate income, and evaluate an organization's financial position by its balance sheet. 5. The income statement, cash flow statement, and balance sheet are all equally important to business operation. Answer: True Diff: Easy Page Ref: 35 Goal: Differentiate an asset from a liability, recognize assets that generate income, and evaluate an organization's financial position by its balance sheet. 6. A balance sheet is helpful both on a business level and on a personal level. Answer: True Diff: Easy Page Ref: 36 Goal: Differentiate an asset from a liability, recognize assets that generate income, and evaluate an organization's financial position by its balance sheet. 7. A risk is any circumstance in which the outcome of a decision or action is uncertain. Answer: True Diff: Easy Page Ref: 37 Goal: Appreciate the value and necessity of risk in business by conducting a SWOT analysis and considering opportunity costs.

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8. A company's weaknesses are the internal factors that will help it achieve its objective. Answer: False Diff: Easy Page Ref: 38 Goal: Appreciate the value and necessity of risk in business by conducting a SWOT analysis and considering opportunity costs. 9. A company's opportunities are external conditions that can assist the company in achieving its objectives. Answer: True Diff: Easy Page Ref: 39 Goal: Appreciate the value and necessity of risk in business by conducting a SWOT analysis and considering opportunity costs. 10. When making a decision, the cost of passing up another option is known as opportunity cost. Answer: True Diff: Easy Page Ref: 40 Goal: Appreciate the value and necessity of risk in business by conducting a SWOT analysis and considering opportunity costs. 11. Giganto Corporation makes tanker ships and corn syrup. The company decides to get out of the tanker ship industry. This is an example of diversification. Answer: False Diff: Moderate Page Ref: 41 Goal: Use the concept of diversification to not only manage risk, but also thrive in it. 12. Mergers and acquisitions are different methods to diversify risk. Answer: True Diff: Easy Page Ref: 42 Goal: Use the concept of diversification to not only manage risk, but also thrive in it. 13. The long tail describes the idea that companies can succeed selling a few units of millions of products. Answer: True Diff: Moderate Page Ref: 43 Goal: Use the concept of diversification to not only manage risk, but also thrive in it. 14. Financing for a period of one year or less is generally known as short-term financing. Answer: True Diff: Easy Page Ref: 44 Goal: Make short-term and long-term financing decisions based on risk and diversification. 15. When a bank lends money with no collateral backing it up, the bank is making a secured loan. Answer: False Diff: Easy Page Ref: 44 Goal: Make short-term and long-term financing decisions based on risk and diversification. 16. A bond is an agreement to lend money that will be repaid at a later date. Answer: True Diff: Easy Page Ref: 45

AB_Ch02_TIF Goal: Make short-term and long-term financing decisions based on risk and diversification. 17. When a company borrows money that it has a legal obligation to repay, the company is using equity financing. Answer: False Diff: Easy Page Ref: 46 Goal: Make short-term and long-term financing decisions based on risk and diversification. 18. A portfolio is a collection of several different types of investments. Answer: True Diff: Easy Page Ref: 47 Goal: Become a wise investor who makes decisions based on risk and diversification. 19. Vertical diversification is the situation in which you have assets that address different aspects of the same situation. Answer: False Diff: Easy Page Ref: 48 Goal: Become a wise investor who makes decisions based on risk and diversification. 20. Investments in objects, such as coins, stamps, and art, are considered to be very liquid. Answer: False Diff: Easy Page Ref: 49 Goal: Become a wise investor who makes decisions based on risk and diversification.

MULTIPLE CHOICE 21.

Most wealthy people know that ________. a. just wanting a million dollars is enough b. the more money you earn, the less you pay in taxes and expenses c. you cannot put all your financial "eggs" in one basket d. spending a lot of money is the path to riches Answer: c Diff: Moderate Page Ref: 31 Goal: Making Money Work for You 22.

In order to make more money for themselves, rich people ________. a. pay taxes b. take out loans for personal uses c. charge purchases with credit cards d. own stocks, property, and their own businesses Answer: d Diff: Moderate Page Ref: 31 Goal: Making Money Work for You

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23. Owning items that make you money gives you the ability to acquire ________ items that make you ________ money. a. more; no b. more; even more c. no; no d. no; even more Answer: b Diff: Moderate Page Ref: 31 Goal: Making Money Work for You 24.

Anything you own or control, which you can exchange for some value is a(n) ________. a. liability b. asset c. retained earning d. equity Answer: b Diff: Easy Page Ref: 32 Goal: Differentiate an asset from a liability, recognize assets that generate income, and evaluate an organization's financial position by its balance sheet. 25.

Accounts receivable is _______. a. any money that you or a business are owed b. property, manufacturing plants, and equipment c. any money that you owe to a business d. credit that is extended to a business for necessary purchases Answer: a Diff: Easy Page Ref: 32 Goal: Differentiate an asset from a liability, recognize assets that generate income, and evaluate an organization's financial position by its balance sheet. 26.

Which of the following is a fixed asset? a. an item of intellectual property b. a patent c. a manufacturing plant d. a copyright Answer: c Diff: Easy Page Ref: 32 Goal: Differentiate an asset from a liability, recognize assets that generate income, and evaluate an organization's financial position by its balance sheet. 27.

Which of the following is an intangible asset? a. property b. a manufacturing plant c. a patent d. equipment Answer: c Diff: Easy Page Ref: 32 Goal: Differentiate an asset from a liability, recognize assets that generate income, and evaluate an organization's financial position by its balance sheet.

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An example of an asset that can earn money while you own it is a(n) ________. a. MP3 music player that you listen to while eating dinner b. shoebox of cash hidden under your bed c. computer server that your business uses to double the number of Web site visitors d. console that only you use to play video games Answer: c Diff: Moderate Page Ref: 33 Goal: Differentiate an asset from a liability, recognize assets that generate income, and evaluate an organization's financial position by its balance sheet. 29.

A legal obligation that an individual or company has to pay back is a(n) _______, a. inventory b. liability c. owners' equity d. asset Answer: b Diff: Easy Page Ref: 33 Goal: Differentiate an asset from a liability, recognize assets that generate income, and evaluate an organization's financial position by its balance sheet. 30.

________ consist of credit that is extended to a business for necessary purchases. a. Accounts receivable b. Accounts payable c. Intangible assets d. Retained earnings Answer: b Diff: Easy Page Ref: 33 Goal: Differentiate an asset from a liability, recognize assets that generate income, and evaluate an organization's financial position by its balance sheet. 31.

The assets you keep after you have paid off all your liabilities make up your ________. a. current assets b. net worth c. balance sheet d. long-term assets Answer: b Diff: Easy Page Ref: 34 Goal: Differentiate an asset from a liability, recognize assets that generate income, and evaluate an organization's financial position by its balance sheet. 32.

Owners' equity can be also known as ________ equity. a. current b. long-term c. shareholders' d. asset Answer: c Diff: Moderate Page Ref: 34 Goal: Differentiate an asset from a liability, recognize assets that generate income, and evaluate an organization's financial position by its balance sheet.

AB_Ch02_TIF 33. A record of a company's assets and liabilities at a fixed point in time is known as a(n) ________. a. cash flow statement b. balance sheet c. account payable d. income statement Answer: b Diff: Easy Page Ref: 34 Goal: Differentiate an asset from a liability, recognize assets that generate income, and evaluate an organization's financial position by its balance sheet. 34. All of the following are included in the fundamental accounting equation EXCEPT ________. a. assets b. owners' equity c. bonds d. liabilities Answer: c Diff: Easy Page Ref: 34 Goal: Differentiate an asset from a liability, recognize assets that generate income, and evaluate an organization's financial position by its balance sheet. 35. From looking at Apple Inc.'s balance sheet in Figure 2.2, an investor knows that Apple would not be forced to sell fixed assets to cover its debts because ________ are more than enough to pay off all its liabilities. a. property, plant, and equipment b. current assets c. intangible assets d. common stock Answer: b Diff: Challenging Page Ref: 34-35 Goal: Differentiate an asset from a liability, recognize assets that generate income, and evaluate an organization's financial position by its balance sheet. 36. From Apple Inc.'s balance sheet in Figure 2.2, an investor knows that Apple is financing its business from the sale of stock and retained earnings because its long-term debt is ______. a. $0 b. over $39 billion c. about $4 billion d. about $19 billion Answer: a Diff: Challenging Page Ref: 35 Goal: Differentiate an asset from a liability, recognize assets that generate income, and evaluate an organization's financial position by its balance sheet.

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37. The greater the risk, the ________ difference between a favorable or unfavorable outcome. a. less important is the b. more likely there is no c. larger the d. smaller the Answer: c Diff: Easy Page Ref: 37 Goal: Appreciate the value and necessity of risk in business by conducting a SWOT analysis and considering opportunity costs. 38.

Risk affects ________. a. neither your personal nor your business life b. both your personal and your business lives c. only your business life and not your personal life d. only your personal life and not your business life Answer: b Diff: Moderate Page Ref: 37 Goal: Appreciate the value and necessity of risk in business by conducting a SWOT analysis and considering opportunity costs. 39.

All of the following are financial risks reflected on the balance sheet EXCEPT ________. a. excess inventory b. not enough cash c. zero long-term debt d. too much debt Answer: c Diff: Moderate Page Ref: 37 Goal: Appreciate the value and necessity of risk in business by conducting a SWOT analysis and considering opportunity costs. 40.

A factor in SWOT analysis is ________. a. officers b. workers c. strengths d. terminations Answer: c Diff: Easy Page Ref: 38 Goal: Appreciate the value and necessity of risk in business by conducting a SWOT analysis and considering opportunity costs. 41.

What are internal factors that will help a company achieve its objective? a. strengths b. weaknesses c. opportunities d. threats Answer: a Diff: Easy Page Ref: 38 Goal: Appreciate the value and necessity of risk in business by conducting a SWOT analysis and considering opportunity costs.

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42.

High quality employees are an example of a(n) ________. a. strength b. weakness c. opportunity d. threat Answer: a Diff: Moderate Page Ref: 38 Goal: Appreciate the value and necessity of risk in business by conducting a SWOT analysis and considering opportunity costs. 43.

What are internal factors that may stop a company from achieving its objective? a. threats b. strengths c. weaknesses d. opportunities Answer: c Diff: Easy Page Ref: 38 Goal: Appreciate the value and necessity of risk in business by conducting a SWOT analysis and considering opportunity costs. 44.

An unknown brand in the marketplace is an example of a(n) ________. a. strength b. weakness c. opportunity d. threat Answer: b Diff: Moderate Page Ref: 38 Goal: Appreciate the value and necessity of risk in business by conducting a SWOT analysis and considering opportunity costs. 45.

What are external conditions that can assist the company in achieving its objective? a. weaknesses b. strengths c. threats d. opportunities Answer: d Diff: Easy Page Ref: 39 Goal: Appreciate the value and necessity of risk in business by conducting a SWOT analysis and considering opportunity costs. 46. A major customer looking for a new company for its advertising campaign is an example of a(n) ________. a. strength b. opportunity c. threat d. weakness Answer: b Diff: Moderate Page Ref: 39 Goal: Appreciate the value and necessity of risk in business by conducting a SWOT analysis and considering opportunity costs.

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47.

What are external conditions that may deter a company from achieving its objective? a. threats b. opportunities c. strengths d. weaknesses Answer: a Diff: Easy Page Ref: 39 Goal: Appreciate the value and necessity of risk in business by conducting a SWOT analysis and considering opportunity costs. 48. A weak economic environment in which customers cannot pay on time or at all is an example of a(n) ________. a. threat b. opportunity c. strength d. weakness Answer: a Diff: Easy Page Ref: 39 Goal: Appreciate the value and necessity of risk in business by conducting a SWOT analysis and considering opportunity costs. 49.

Companies use SWOT to analyze________ risks and benefits. a. neither internal nor external b. only external c. both internal and external d. only internal Answer: c Diff: Moderate Page Ref: 40 Goal: Appreciate the value and necessity of risk in business by conducting a SWOT analysis and considering opportunity costs. 50. You are thinking about attending a business conference. But spending three days on the trip will mean falling behind on your current project. By considering the value of lost time, you are applying the concept of ________. a. SWOT analysis b. diversification c. opportunity cost d. merger Answer: c Diff: Moderate Page Ref: 40 Goal: Appreciate the value and necessity of risk in business by conducting a SWOT analysis and considering opportunity costs.

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51.

Spreading resources out over several different areas is called ________. a. diversification b. risk c. opportunity d. liability Answer: a Diff: Easy Page Ref: 41 Goal: Use the concept of diversification to not only manage risk, but also thrive in it. 52.

Diversification is a method of managing ________. a. risk b. strengths c. retained earnings d. dividends Answer: a Diff: Easy Page Ref: 41 Goal: Use the concept of diversification to not only manage risk, but also thrive in it. 53. When Google announced that it was developing software for cell phones, the company showed that it was ________ its sources of income. a. diversifying b. risking c. merging d. factoring Answer: a Diff: Easy Page Ref: 42 Goal: Use the concept of diversification to not only manage risk, but also thrive in it. 54.

What is a merger? a. two companies agree to go forward as a single new company b. one company takes over another company and sets itself up as the new owner c. one company divides into two or more companies d. three or more companies spread resources out over several different areas Answer: a Diff: Easy Page Ref: 42 Goal: Use the concept of diversification to not only manage risk, but also thrive in it. 55.

What is an acquisition? a. one company takes over another company and sets itself up as the new owner b. three or more companies spread resources out over several different areas c. one company divides into two or more companies d. two companies agree to go forward as a single new company Answer: a Diff: Easy Page Ref: 42 Goal: Appreciate the value and necessity of risk in business by conducting a SWOT analysis and considering opportunity costs.

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56.

Which of the following is a reason for two companies to join together? a. expanding the size of each company b. closing stores in other geographic areas in order to concentrate on just one area c. giving up control over a competitive advantage d. increasing risk Answer: a Diff: Easy Page Ref: 42 Goal: Use the concept of diversification to not only manage risk, but also thrive in it. 57. When a business borrows money, it pays a fee for the use of that money. The fee is called ________. a. collateral b. factoring c. equity d. interest Answer: d Diff: Easy Page Ref: 44 Goal: Make short-term and long-term financing decisions based on risk and diversification. 58.

For which of the following purchases would a company use short-term financing? a. property b. manufacturing facility c. equipment d. inventory or supplies Answer: d Diff: Moderate Page Ref: 44 Goal: Make short-term and long-term financing decisions based on risk and diversification. 59. A loan that is backed by something of value, such as property or inventory, is known as a(n) ________. a. credit card balance b. unsecured loan c. line of credit d. secured loan Answer: d Diff: Easy Page Ref: 44 Goal: Make short-term and long-term financing decisions based on risk and diversification. 60. A kind of loan that is generally given only to trusted customers or to companies perceived to be extremely financially stable is called a(n) ________. a. unsecured loan b. secured loan c. factoring arrangement d. credit card balance Answer: a Diff: Easy Page Ref: 44 Goal: Make short-term and long-term financing decisions based on risk and diversification.

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61.

A line of credit ________. a. allows a business to borrow short-term funds, up to a set amount, whenever it is necessary without having to apply for a new loan every time b. requires a company to use property as a collateral c. requires a company to use accounts receivable as collateral d. involves selling accounts receivable to a third party at a discounted rate Answer: a Diff: Easy Page Ref: 44 Goal: Make short-term and long-term financing decisions based on risk and diversification. 62. When a business uses accounts receivable as collateral for a bank loan, this is known as ________. a. factoring b. long-term financing c. pledging d. equity financing Answer: c Diff: Easy Page Ref: 44 Goal: Make short-term and long-term financing decisions based on risk and diversification. 63. The sale of accounts receivable to a third party at a discounted rate in exchange for immediate cash is called ________. a. factoring b. pledging c. long-term financing d. equity financing Answer: a Diff: Easy Page Ref: 45 Goal: Make short-term and long-term financing decisions based on risk and diversification. 64.

Which of the following involves repaying a loan over periods longer than one year? a. short-term financing b. equity financing c. long-term financing d. retained earnings financing Answer: c Diff: Easy Page Ref: 45 Goal: Make short-term and long-term financing decisions based on risk and diversification. 65.

The two main debt-financing options are ________. a. bonds and factoring b. bank loans and bonds c. stocks and retained earnings d. bank loans and pledging Answer: b Diff: Easy Page Ref: 45 Goal: Make short-term and long-term financing decisions based on risk and diversification.

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66. Which of the following occurs when a company raises money by either selling stock to investors or withdrawing it from the owners' retained earnings? a. debt financing b. equity financing c. short-term financing d. dividend financing Answer: b Diff: Easy Page Ref: 46 Goal: Make short-term and long-term financing decisions based on risk and diversification. 67.

Stock is a(n) ________. a. investor who receives ownership interests in a company b. share of ownership in a company c. agreement to lend money that will repaid at a later date d. portion of a company's earnings Answer: b Diff: Easy Page Ref: 46 Goal: Make short-term and long-term financing decisions based on risk and diversification. 68.

Measuring risk versus ________ is the key to any investment decision. a. portfolio b. horizontal diversification c. return d. interest Answer: c Diff: Easy Page Ref: 47 Goal: Become a wise investor who makes decisions based on risk and diversification. 69.

A portion of a company's earnings paid to an owner of stock is called a(n) _______. a. bond b. dividend c. interest d. credit line Answer: b Diff: Easy Page Ref: 47 Goal: Become a wise investor who makes decisions based on risk and diversification. 70.

Mutual funds are organizations that do all of the following EXCEPT ________. a. issue bonds to investors b. collect investors' money c. pool investors' money d. buy a variety of stocks and bonds Answer: a Diff: Easy Page Ref: 47 Goal: Become a wise investor who makes decisions based on risk and diversification.

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71.

A major advantage of investing in mutual funds is that ________. a. the judgment of the fund managers may be wrong b. you pay fees to the money managers c. the fund managers do the hard work of research and diversification d. the fund managers ignore diversification Answer: c Diff: Easy Page Ref: 47 Goal: Become a wise investor who makes decisions based on risk and diversification. 72.

A major disadvantage of investing in mutual funds is that ________. a. the judgment of the fund managers may be wrong b. the fund managers do the hard work of research and diversification c. if one investment fails, the losses should be balanced by gains among other investments d. there are no fees to be paid to the money managers Answer: a Diff: Easy Page Ref: 47 Goal: Become a wise investor who makes decisions based on risk and diversification. 73.

A ________ market happens when the stock market rises for an extended period of time. a. cow b. bear c. bird d. bull Answer: d Diff: Easy Page Ref: 48 Goal: Become a wise investor who makes decisions based on risk and diversification. 74.

The mix of investments in a portfolio is called portfolio ________. a. liquidity b. risk c. dividend d. diversification Answer: d Diff: Easy Page Ref: 48 Goal: Become a wise investor who makes decisions based on risk and diversification. 75.

Vertical diversification ________. a. focuses your money on just one type of asset b. spreads your money between different types of assets c. involves owning assets that address different aspects of the same situation d. moves the value of your money only upward Answer: b Diff: Easy Page Ref: 48 Goal: Become a wise investor who makes decisions based on risk and diversification.

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76.

Horizontal diversification ________. a. keeps the value of your money level b. involves owning assets that address different aspects of the same situation c. spreads your money between different types of assets d. focuses your money on just one type of asset Answer: b Diff: Easy Page Ref: 48 Goal: Become a wise investor who makes decisions based on risk and diversification. 77. Although a certificate of deposit (CD) provides a ________ rate of return than a savings account, the CD is ________ liquid than the savings account. a. lower; less b. lower; more c. higher; less d. higher; more Answer: c Diff: Easy Page Ref: 49 Goal: Become a wise investor who makes decisions based on risk and diversification. 78.

All of the following assets are considered to be liquid EXCEPT ______. a. bank accounts b. certificates of deposit (CDs) c. artwork d. common stock that is traded regularly Answer: c Diff: Easy Page Ref: 49 Goal: Become a wise investor who makes decisions based on risk and diversification. 79.

Investments in objects—such as coins, stamps, and art—are ________ liquid. a. less b. not at all c. slightly d. extremely Answer: a Diff: Easy Page Ref: 49 Goal: Become a wise investor who makes decisions based on risk and diversification. 80.

When you make investment decisions, you need to think about ________. a. the short term, but not the long term b. neither the short term nor the long term c. both the short term and the long term d. the long term, but not the short term Answer: c Diff: Easy Page Ref: 49 Goal: Become a wise investor who makes decisions based on risk and diversification.

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SHORT ANSWERS 81.

Other than cash, list and define five types of assets. ANSWER: (1) Accounts receivable is any money that you or a business is owed. (2) Notes receivable is any money that you or a business is owed and that has a written promise for payment. (3) Fixed assets include property, manufacturing plants, and equipment. (4) Intangible assets include intellectual property or patents. (5) Inventory consists of all merchandise, raw materials, and products that have not yet been sold. Diff: Easy Page Ref: 32 Goal: Differentiate an asset from a liability, recognize assets that generate income, and evaluate an organization's financial position by its balance sheet. 82.

What are current assets? ANSWER: Current assets can be easily converted into cash within one calendar year. Examples include cash, checking accounts, accounts receivable, and notes receivable that are due within one year. Diff: Easy Page Ref: 33 Goal: Differentiate an asset from a liability, recognize assets that generate income, and evaluate an organization's financial position by its balance sheet. 83. The text describes a townhouse that you can rent out as an example of an asset that generates income. Give another example. ANSWER: Student answers will vary. Examples might include land that can be rented out for a parking lot, a factory assembly line that produces goods to be sold, and a copyright for a book that generates royalty income. Diff: Moderate Page Ref: 33 Goal: Differentiate an asset from a liability, recognize assets that generate income, and evaluate an organization's financial position by its balance sheet. 84.

What is the difference between an asset and a liability? ANSWER: An asset is something that a person or a business owns. A liability is a legal obligation that a person or a business has to pay back or something owed. A liability is an asset to the person or business to whom the debt is owed. Diff: Easy Page Ref: 32-33 Goal: Differentiate an asset from a liability, recognize assets that generate income, and evaluate an organization's financial position by its balance sheet. 85.

What kind of liability is a 30-year mortgage on your company's office building? ANSWER: A 30-year mortgage is a long-term liability. A long-term liability can be paid over a period of time longer than one year. Diff: Easy Page Ref: 34 Goal: Differentiate an asset from a liability, recognize assets that generate income, and evaluate an organization's financial position by its balance sheet. 86.

On a balance sheet, the sum of total liabilities plus owners' equity must equal what total? ANSWER: The sum of total liabilities plus owners' equity must equal total assets. In this way the balance sheet represents the fundamental accounting equation. Diff: Easy Page Ref: 34 Goal: Differentiate an asset from a liability, recognize assets that generate income, and evaluate an organization's financial position by its balance sheet.

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87.

List people or organizations who might make use of a balance sheet. ANSWER: Businesses use financial statements, including the balance sheet, to get a complete picture of how well a business is performing. Company leaders, investors, and employees can also use a balance sheet to try to answer questions about the future of a company. Individuals can also use a balance sheet to manage their personal finances. Diff: Easy Page Ref: 36 Goal: Differentiate an asset from a liability, recognize assets that generate income, and evaluate an organization's financial position by its balance sheet. 88.

Comment on the suggestion that businesses should avoid all risks. ANSWER: This is not possible. Almost everything in business involves some kind of risk. Risk, furthermore, often comes with rewards. The goal of a business is to seek opportunities, assess threats and risks, and enjoy rewards. Diff: Moderate Page Ref: 37 Goal: Appreciate the value and necessity of risk in business by conducting a SWOT analysis and considering opportunity costs. 89.

Can financial statements be used in SWOT analysis? ANSWER: Yes, financial statements can be used in SWOT analysis. Some internal strengths and weaknesses are financial. External opportunities and threats also can change financial results. A company must look at its financial statements as part of its SWOT analysis. Diff: Moderate Page Ref: 38-39 Goal: Appreciate the value and necessity of risk in business by conducting a SWOT analysis and considering opportunity costs. 90.

Give an example of a time when you considered opportunity cost in making a decision. ANSWER: Student answers will vary. Examples in the text include using tax return money to deposit in a savings account instead of paying down credit card debt, eating a free lunch instead of eating something tastier, investing in a partner company instead of putting money into a savings account. Student answers should explore the value of the choice not made. Diff: Challenging Page Ref: 40 Goal: Appreciate the value and necessity of risk in business by conducting a SWOT analysis and considering opportunity costs. 91.

Explain why two companies would want to join together in a merger or acquisition. ANSWER: Mergers and acquisitions help companies diversify and manage risk. A company may join with another company that offers different types of products, does business in new geographic areas, or has a specialized piece of information or a patent. Diff: Easy Page Ref: 42 Goal: Use the concept of diversification to not only manage risk, but also thrive in it. 92.

What is the concept of the long tail? ANSWER: Instead of selling millions of units of a single product, some companies succeed by selling a few units of millions of products. Movie and music download sites are examples. Diff: Easy Page Ref: 43 Goal: Use the concept of diversification to not only manage risk, but also thrive in it.

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93. What are the disadvantages to using friends, family, and credit cards for short-term financing? ANSWER: Relationships with friends and family could be damaged if the borrower cannot pay back the debt or if the lenders do not like how the business is being operated. Credit cards usually have higher interest rates than other types of loans. Diff: Easy Page Ref: 44 Goal: Make short-term and long-term financing decisions based on risk and diversification. 94.

Describe two methods for using accounts receivable to generate short-term funding. ANSWER: Pledging involves using accounts receivable as collateral for a bank loan. Factoring is the sale of accounts receivable to a third party at a discounted rate. These types of financing free up money that is otherwise stuck in accounts receivable. Diff: Easy Page Ref: 44-45 Goal: Make short-term and long-term financing decisions based on risk and diversification. 95.

What is the relationship between risk and the interest rate on a long-term bank loan? ANSWER: The greater the risk of a bank issuing a long-term loan, the higher the interest rate the bank charges the business. Diff: Easy Page Ref: 45 Goal: Make short-term and long-term financing decisions based on risk and diversification. 96.

What should a company consider before issuing bonds? ANSWER: The company should consider the overall cost, such as the interest rate that must be paid. The company should also consider the length of the repayment period. The longer the bond term, the riskier the issuing of the bonds. Diff: Easy Page Ref: 45 Goal: Make short-term and long-term financing decisions based on risk and diversification. 97.

Define an IPO. ANSWER: IPO stands for initial public offering. An IPO occurs when a company first makes stock available to the public. The company receives money from the stock purchases, and buyers receive part ownership of the company. Diff: Easy Page Ref: 46 Goal: Make short-term and long-term financing decisions based on risk and diversification. 98.

Name three types of investments that can make up a portfolio. ANSWER: (1) Stocks are a small slice of ownership in a company. (2) Bonds are a loan to a company and are more secure than stock. (3) Mutual funds are organizations that collect investors' money, pool it, and buy a variety of stocks and bonds. Mutual funds provide diversification of risk. Diff: Easy Page Ref: 47 Goal: Become a wise investor who makes decisions based on risk and diversification. 99.

What is the ideal way to diversify? ANSWER: There is no one ideal way to diversify. The mix must be appropriate for a specific investor. In addition, the ideal portfolio diversification will change throughout an investor's lifetime. Diff: Moderate Page Ref: 48 Goal: Become a wise investor who makes decisions based on risk and diversification.

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100. Why should you consider liquidity in making investment decisions? ANSWER: The more liquid an investment is, the lower the return that the investment will earn. A savings account has a lower interest rate than a certificate of deposit. You must also estimate the amount of cash that you will need in any time period. If you have too little money invested in liquid assets, you may have to convert other assets into cash. This can be time-consuming, expensive, and inefficient. Diff: Moderate Page Ref: 49 Goal: Become a wise investor who makes decisions based on risk and diversification.

CHAPTER 3 Compete: Economics and Competition TRUE/FALSE 1. In a capitalistic economy, the means to produce goods and services are owned by private interests. Answer: True Diff: Easy Page Ref: 56 Goal: Describe why and how companies compete in a capitalist economy, and how a focus on sustainability and the triple bottom line keeps companies competitive. 2. The United States is more of a mixed market economy than a capitalistic economy. Answer: True Diff: Moderate Page Ref: 56 Goal: Describe why and how companies compete in a capitalist economy, and how a focus on sustainability and the triple bottom line keeps companies competitive. 3. Competition plays a large part in both capitalistic and mixed market economies. Answer: True Diff: Easy Page Ref: 56 Goal: Describe why and how companies compete in a capitalist economy, and how a focus on sustainability and the triple bottom line keeps companies competitive. 4. In a free market, people generally may choose what they buy and sell. Answer: True Diff: Easy Page Ref: 56 Goal: Describe why and how companies compete in a capitalist economy, and how a focus on sustainability and the triple bottom line keeps companies competitive. 5. The triple bottom line approach to sustainability focuses on people, planet, and product. Answer: False Diff: Moderate Page Ref: 57 Goal: Describe why and how companies compete in a capitalist economy, and how a focus on sustainability and the triple bottom line keeps companies competitive. 6. The field of economics attempts to understand how individuals and countries act in response to certain material constraints. Answer: True Diff: Easy Page Ref: 59 Goal: Identify the economic principles that dictate how competition occurs. 7. The study of economics takes into account consumers’ irrational behavior in fulfilling their wants and needs. Answer: False Diff: Moderate Page Ref: 59 Goal: Identify the economic principles that dictate how competition occurs.

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8. As prices rise, the quantity of product demanded falls. Answer: True Diff: Easy Page Ref: 60 Goal: Identify the economic principles that dictate how competition occurs. 9. The prices of substitute products may cause the demand curve to shift. Answer: True Diff: Easy Page Ref: 61 Goal: Identify the economic principles that dictate how competition occurs. 10. The demand curve slopes downward and the supply curve slopes upward. Answer: True Diff: Moderate Page Ref: 62 Goal: Identify the economic principles that dictate how competition occurs. 11. As the price of a product rises, the quantity of the product supplied falls. Answer: False Diff: Easy Page Ref: 62 Goal: Identify the economic principles that dictate how competition occurs. 12. When the cost of producing a particular item increases, producers will make less of that item. Answer: True Diff: Moderate Page Ref: 62 Goal: Identify the economic principles that dictate how competition occurs. 13. Scarcity and shortage are interchangeable economic terms. Answer: False Diff: Moderate Page Ref: 64 Goal: Identify the economic principles that dictate how competition occurs. 14. An example of perfect competition is the automobile industry. Answer: False Diff: Easy Page Ref: 66 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 15. In a monopoly, there is only one provider for a product or service and there are no substitutes. Answer: True Diff: Easy Page Ref: 67 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 16. The beginnings of monopolies can be traced back to the Great Depression. Answer: False Diff: Moderate Page Ref: 67 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies.

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17. Monopolistic competition is what happens in a monopoly. Answer: False Diff: Easy Page Ref: 69 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 18. Businesses operating in monopolistic competition often use a brand name so that customers perceive significant differences in two similar products. Answer: True Diff: Easy Page Ref: 69 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 19. An oligopoly is a form of competition in which only a few businesses make up an industry. Answer: True Diff: Easy Page Ref: 69 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 20. Businesses influential enough to affect the price of an item are price takers. Answer: False Diff: Easy Page Ref: 70 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 21. A company should develop a new set of skills and strategies in each stage of the life cycle to remain competitive. Answer: True Diff: Easy Page Ref: 72 Goal: Explain how the life cycle of an industry, product, or business affects its competitive strategies. 22. The introductory stage of a business life cycle is the most profitable since the company is often alone in offering the unique product to the market. Answer: False Diff: Moderate Page Ref: 73 Goal: Explain how the life cycle of an industry, product, or business affects its competitive strategies. 23. Industries tend to spread out geographically during the growth stage of a business life cycle. Answer: True Diff: Moderate Page Ref: 73 Goal: Explain how the life cycle of an industry, product, or business affects its competitive strategies. 24. During the maturity stage of a business life cycle, a business may have excess funds to pay shareholders. Answer: True Diff: Moderate Page Ref: 74 Goal: Explain how the life cycle of an industry, product, or business affects its competitive strategies.

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25. In the decline stage of a business life cycle, sales decrease at an accelerating rate, but profits may continue to rise. Answer: True Diff: Moderate Page Ref: 75 Goal: Explain how the life cycle of an industry, product, or business affects its competitive strategies. MULTIPLE CHOICE 26. The economic system that best describes the United States is ________. a. capitalism b. communism c. mixed market d. socialism Answer: c Diff: Moderate Page Ref: 56 Goal: Describe why and how companies compete in a capitalist economy, and how a focus on sustainability and the triple bottom line keeps companies competitive. 27. In a capitalistic economy, the operation of the ________ determines the types of goods and services produced, the prices charged, and the amount of income received. a. supply chain b. free market c. triple bottom line d. shareholder Answer: b Diff: Easy Page Ref: 56 Goal: Describe why and how companies compete in a capitalist economy, and how a focus on sustainability and the triple bottom line keeps companies competitive. 28. Which is NOT a focus of the triple bottom line approach to sustainability? a. environment b. politics c. society d. economy Answer: b Diff: Easy Page Ref: 57 Goal: Describe why and how companies compete in a capitalist economy, and how a focus on sustainability and the triple bottom line keeps companies competitive. 29. Which is NOT a focus of the triple bottom line approach to sustainability? a. people b. planet c. product d. profits Answer: c Diff: Easy Page Ref: 57 Goal: Describe why and how companies compete in a capitalist economy, and how a focus on sustainability and the triple bottom line keeps companies competitive.

Chapter 3—Page 4

30. By carefully choosing the fisheries from which to purchase resources for their frozen fish products, Unilever is focusing on the sustainability of their ________. a. supply chain b. equilibrium price c. demand curve d. fixed costs Answer: a Diff: Easy Page Ref: 58 Goal: Describe why and how companies compete in a capitalist economy, and how a focus on sustainability and the triple bottom line keeps companies competitive. 31. Which statement is FALSE? a. Economists study how nations behave in response to certain material constraints. b. Economists assume we generally try to fulfill our self-interests. c. Economists are interested in predicting choices made after conditions change. d. Economists assume that a large percentage of people acts rationally. Answer: d Diff: Moderate Page Ref: 59 Goal: Identify the economic principles that dictate how competition occurs. 32. What term describes the situation in which good and services are limited? a. surplus b. shortage c. scarcity d. scale Answer: c Diff: Easy Page Ref: 59 Goal: Identify the economic principles that dictate how competition occurs. 33. In a free market economy, scarce resources are rationed through ________. a. government intervention b. prices c. economics d. societal pressures Answer: b Diff: Moderate Page Ref: 59 Goal: Identify the economic principles that dictate how competition occurs. 34. That’s Brilliant sells $1 light bulbs for home use. Last year, the company produced 10 million bulbs and sold 8.5 million bulbs. The number of light bulbs people wanted to buy at the price offered is the ________. a. supply b. demand c. surplus d. shortage Answer: b Diff: Moderate Page Ref: 60 Goal: Identify the economic principles that dictate how competition occurs.

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35. That’s Brilliant sells $1 light bulbs for home use. Last year, the company produced 10 million bulbs and sold 8.5 million bulbs. The number of light bulbs offered by That’s Brilliant is the ________. a. supply b. demand c. surplus d. shortage Answer: a Diff: Moderate Page Ref: 60 Goal: Identify the economic principles that dictate how competition occurs. 36. Which is true of demand? a. The quantity demanded decreases as the price increases. b. The quantity demanded decreases as the price decreases. c. The quantity demanded increases as the price of substitute goods decreases. d. The quantity demanded remains the same as price decreases. Answer: a Diff: Moderate Page Ref: 60 Goal: Identify the economic principles that dictate how competition occurs. 37. In a free market, if a product is offered, and buyers want it, the increasing demand for the product will ________. a. drive the price down because many of them sell b. drive the price up because the producer has a limited supply c. drive the supply and price down d. drive the demand curve to the left Answer: b Diff: Challenging Page Ref: 60 Goal: Identify the economic principles that dictate how competition occurs. 38. Which of these will NOT shift the demand curve? a. changes in customer preference b. increases in the number of potential buyers c. the prices of substitute products d. changes in production costs Answer: d Diff: Easy Page Ref: 61 Goal: Identify the economic principles that dictate how competition occurs. 39. Which of these will shift the demand curve? a. changes in production technology b. changes in the number of competitors c. changes in customer preferences d. changes in production costs Answer: c Diff: Easy Page Ref: 61 Goal: Identify the economic principles that dictate how competition occurs.

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40. Products that relate to one another or help complete each other are called ________. a. complimentary goods b. substitute goods c. surplus goods d. scare goods Answer: a Diff: Moderate Page Ref: 61 Goal: Identify the economic principles that dictate how competition occurs. 41. Costume shops experience seasonal spikes in sales. What will happen to the demand curve for costumes during the Halloween season? a. It will stay the same. b. It will shift to the right. c. It will shift to the left. d. It will shift to the right in the short term and to the left in the long term. Answer: b Diff: Moderate Page Ref: 61 Goal: Identify the economic principles that dictate how competition occurs. 42. Which of these will NOT shift the supply curve? a. changes in production costs b. changes in price expectations c. changes in customer preference d. changes in technology Answer: c Diff: Easy Page Ref: 62 Goal: Identify the economic principles that dictate how competition occurs. 43. Which will shift the supply curve? a. changes in production costs b. changes in customer preference c. increases in the number of potential buyers d. the prices of related products Answer: a Diff: Easy Page Ref: 62 Goal: Identify the economic principles that dictate how competition occurs. 44. You cannot make grape jelly without grapes. If the price of grapes increases, what happens to the supply curve for grape jelly? a. It will stay the same. b. It will shift to the right. c. It will shift to the left. d. It will shift to the right in the short term and to the left in the long term. Answer: c Diff: Moderate Page Ref: 62 Goal: Identify the economic principles that dictate how competition occurs.

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45. The point at which the supply and demand curves intersect is called the ________. a. ideal price b. interaction point c. equalizing point d. equilibrium price Answer: d Diff: Easy Page Ref: 63 Goal: Identify the economic principles that dictate how competition occurs. 46. When suppliers are selling all the goods they have produced and consumers are getting all the goods they demand, the ________ is achieved. a. equilibrium price b. ideal price c. ideal point d. equalizing point Answer: a Diff: Moderate Page Ref: 63 Goal: Identify the economic principles that dictate how competition occurs. 47. When supply exceeds demand, a company has a(n) ________. a. excess b. surplus c. shortage d. scarcity Answer: b Diff: Easy Page Ref: 63 Goal: Identify the economic principles that dictate how competition occurs. 48. When demand exceeds supply, there is a(n) ________ of that product. a. excess b. surplus c. shortage d. scarcity Answer: c Diff: Easy Page Ref: 63 Goal: Identify the economic principles that dictate how competition occurs. 49. Costs that remain constant and do not depend on the level of business being generated are called ________ costs. a. variable b. consistent c. economy d. fixed Answer: d Diff: Easy Page Ref: 64 Goal: Identify the economic principles that dictate how competition occurs.

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50. What is an example of a fixed cost? a. rent on a building b. wages of temporary laborers c. cost of production materials d. sales commissions Answer: a Diff: Moderate Page Ref: 64 Goal: Identify the economic principles that dictate how competition occurs. 51. When fixed costs can be spread out over a large number of products, thereby reducing the costs per product, ________ are present. a. economies of scale b. fixed scales c. supply and demand d. invisible hands Answer: a Diff: Easy Page Ref: 64 Goal: Identify the economic principles that dictate how competition occurs. 52. Sam’s Club can sell Tide detergent for a lower price than the local grocery store. They can do this because of ________. a. economies of scale b. fixed scales c. variable costs d. the supply chain Answer: a Diff: Moderate Page Ref: 64 Goal: Identify the economic principles that dictate how competition occurs. 53. Who is the 18th century philosopher known as “the father of economics?” a. Adam James b. Adam Smith c. John James d. John Smith Answer: b Diff: Moderate Page Ref: 65 Goal: Identify the economic principles that dictate how competition occurs. 54. What term is used to describe the force that guides free market capitalism through competition for scarce resources? a. the economies of scale b. the invisible force c. the invisible hand d. the market force Answer: c Diff: Easy Page Ref: 65 Goal: Identify the economic principles that dictate how competition occurs.

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55. The invisible hand theory holds that the entire society will benefit if people _________. a. act in the interest of societal goodwill b. act in the interest of corporate goodwill c. act in the interest of political goodwill d. act in their own self interests Answer: d Diff: Easy Page Ref: 65 Goal: Identify the economic principles that dictate how competition occurs. 56. The closest thing we have to a real-life example of perfect competition is the _________. a. agriculture industry b. retail industry c. automobile industry d. public utility industry Answer: a Diff: Easy Page Ref: 66 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 57. What term describes the level of competition in which there are many buyers and sellers of products that are virtually identical and where any seller can easily enter or exit the market? a. monopoly b. monopolistic competition c. oligopoly d. perfect competition Answer: d Diff: Easy Page Ref: 66 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 58. A number of stores at Findley Market sell fresh fruits and vegetables. The products appear to be identical and the prices differ little, if at all. What type of market structure is this? a. monopoly b. monopolistic competition c. oligopoly d. perfect competition Answer: d Diff: Moderate Page Ref: 66 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 59. Which is NOT a characteristic of perfect competition? a. There are many sellers. b. There are few buyers. c. The products offered are homogenous. d. There is easy entry into the market. Answer: b Diff: Easy Page Ref: 66

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Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 60. A farmer should increase production when ________. a. marginal revenue equals marginal cost b. marginal cost is greater than marginal revenue c. marginal revenue is greater than marginal cost d. marginal revenue is greater than profits Answer: c Diff: Moderate Page Ref: 67 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 61. What term describes the level of competition in which there is only one provider of a good or service and no substitutes for the product exist? a. monopoly b. monopolistic competition c. oligopoly d. perfect competition Answer: a Diff: Easy Page Ref: 67 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 62. Which statement about monopolies is FALSE? a. There is one seller. b. The products offered are unique. c. Entry into the market is almost impossible. d. The airline industry is a good example. Answer: d Diff: Easy Page Ref: 67 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 63. Who is permitted to operate as a monopoly? a. Appliance companies b. Life insurance companies c. Automobile companies d. Pharmaceutical companies Answer: d Diff: Moderate Page Ref: 67 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 64. Which is NOT a defensible reason for a monopoly? a. government ruling b. marginal revenue c. economies of scale d. ownership of a resource Chapter 3—Page 11

Answer: b Diff: Easy Page Ref: 68 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 65. Hometown Waterworks is a company that provides water to consumers and serves as a water distribution monopoly. Why is the company permitted to operate as a monopoly? a. Hometown Waterworks pays taxes annually. b. Hometown Waterworks campaigns to promote water conservation in the surrounding areas. c. Hometown Waterworks has complete control over the water supply in the area. d. Hometown Waterworks provides customers with the best service. Answer: c Diff: Moderate Page Ref: 68 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 66. What term describes the level of competition in which businesses compete against each other to sell similar products at prices usually higher than the lowest possible price? a. monopoly b. monopolistic competition c. oligopoly d. perfect competition Answer: b Diff: Easy Page Ref: 68 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 67. Which of the following determines the level of competition in a given market? a. The number of substitutes for a certain product or service. b. The amount of value attached to the cost of labor. c. The degree of government intervention in the market. d. The level of consumption for a given product. Answer: a Diff: Challenging Page Ref: 69 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 68. In a monopolistic competition, businesses try to make their products stand out from the rest. What is NOT a way to do this? a. Make products that are physically different. b. Use a brand name to create perceived differences. c. Create a low-cost production system. d. Provide superior customer service. Answer: c Diff: Moderate Page Ref: 69 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies.

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69. Erica chooses to purchase her winter coat from LL Bean because they offer her superior customer service. LL Bean is operating in a ________. a. monopoly b. monopolistic competition c. oligopoly d. perfect competition Answer: b Diff: Moderate Page Ref: 69 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 70. Which is NOT a characteristic of monopolistic competition? a. There are many sellers. b. There are relatively few buyers. c. The products are differentiated. d. Entry into the market is easy. Answer: b Diff: Easy Page Ref: 69 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 71. What term describes the level of competition in which only a few businesses make up an industry and have control over the price of their product? a. monopoly b. monopolistic competition c. oligopoly d. perfect competition Answer: c Diff: Easy Page Ref: 69 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 72. Which statement about an oligopoly is FALSE? a. There are few sellers. b. The products may be homogenous or differentiated. c. Entry into the market is easy. d. The airline industry serves as a good example. Answer: c Diff: Easy Page Ref: 69 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 73. Carl’s Clunkers used to be the only used car dealership near campus until ReRevved Engines opened a few months ago. The competition between dealerships is a(n) ________. a. monopoly b. monopolistic competition c. oligopoly d. perfect competition Answer: c Chapter 3—Page 13

Diff: Moderate Page Ref: 69 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 74. Which competitive strategy would NOT be used by a business in an oligopoly? a. lowering prices b. advertising to attract customers c. differentiating product d. preventing new entrants into the market Answer: a Diff: Moderate Page Ref: 70 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 75. What is the best example of an oligopoly? a. agriculture b. public utilities c. steel companies d. retail trade Answer: c Diff: Easy Page Ref: 70 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 76. Businesses that are influential enough to affect the price of an item are called ________. a. trendsetters b. influential pricers c. price makers d. price takers Answer: c Diff: Easy Page Ref: 70 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 77. Businesses that don’t have enough influence to affect a product’s price are called ________. a. trend followers b. influenced pricers c. price makers d. price takers Answer: d Diff: Easy Page Ref: 70 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 78. Which of these is NOT a stage of the business life cycle? a. introductory b. growth c. stability d. decline Chapter 3—Page 14

Answer: c Diff: Easy Page Ref: 72 Goal: Explain how the life cycle of an industry, product, or business affects its competitive strategies. 79. What stage of the business life cycle is characterized by the development of a new product or service? a. introductory b. growth c. maturity d. decline/rebirth Answer: a Diff: Easy Page Ref: 72 Goal: Explain how the life cycle of an industry, product, or business affects its competitive strategies. 80. Amazon.com spent a few years as the only seller of the wireless reading device. They were in the ________ stage of the business life cycle. a. introductory b. growth c. maturity d. decline/rebirth Answer: a Diff: Easy Page Ref: 72 Goal: Explain how the life cycle of an industry, product, or business affects its competitive strategies. 81. Which statement about the introductory stage of the business life cycle is FALSE? a. One business is often alone in the industry. b. There is no need to worry about competition. c. New ventures spend a lot of money on marketing. d. Profits are usually invested back into the business. Answer: b Diff: Moderate Page Ref: 73 Goal: Explain how the life cycle of an industry, product, or business affects its competitive strategies. 82. What stage of the business life cycle is characterized by rapidly increasing sales and profits? a. introductory b. growth c. maturity d. decline/rebirth Answer: b Diff: Moderate Page Ref: 73 Goal: Explain how the life cycle of an industry, product, or business affects its competitive strategies. 83. “Me too” companies often skip this stage in the business life cycle. a. introductory b. growth c. maturity d. decline/rebirth Answer: a Diff: Easy Page Ref: 73 Goal: Explain how the life cycle of an industry, product, or business affects its competitive strategies. Chapter 3—Page 15

84. Which statement about the growth stage of the business life cycle is FALSE? a. Sales increase throughout the industry. b. New companies start up. c. Industries cluster in one geographical area. d. Production becomes more efficient. Answer: c Diff: Moderate Page Ref: 73 Goal: Explain how the life cycle of an industry, product, or business affects its competitive strategies. 85. Apple now has many iPhone competitors and is trying to differentiate its product from its competitors to create demand. Apple is in the ________ stage of the business life cycle. a. introductory b. growth c. maturity d. decline/rebirth Answer: b Diff: Moderate Page Ref: 73 Goal: Explain how the life cycle of an industry, product, or business affects its competitive strategies. 86. What stage of the business life cycle is characterized by expanding sales and more competitive prices? a. introductory b. growth c. maturity d. decline/rebirth Answer: c Diff: Moderate Page Ref: 74 Goal: Explain how the life cycle of an industry, product, or business affects its competitive strategies. 87. Which statement about the maturity stage of a business life cycle is FALSE? a. A business may have excess funds to pay shareholders. b. Businesses stress the unique features of their products. c. Businesses may lower their prices. d. The competition in the marketplace weakens. Answer: d Diff: Moderate Page Ref: 74 Goal: Explain how the life cycle of an industry, product, or business affects its competitive strategies. 88. What stage of the business life cycle is characterized by continuous and rapidly decreasing sales? a. introductory b. growth c. maturity d. decline/rebirth Answer: d Diff: Easy Page Ref: 75 Goal: Explain how the life cycle of an industry, product, or business affects its competitive strategies.

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89. Which statement about the decline stage of the business life cycle is FALSE? a. A company may start the life cycle all over again with the same product. b. A company may be able to adapt to the consumers’ changing needs. c. Some competitors will drop out of the market. d. Some competitors will remain and compete in the now smaller market. Answer: a Diff: Moderate Page Ref: 75 Goal: Explain how the life cycle of an industry, product, or business affects its competitive strategies. 90. Some companies are able to prolong the business life cycle by revitalizing an existing brand. An example of this is ________. a. American telegrams b. Arm & Hammer baking soda c. Western Union telegraphs d. Sony videocassette recorders Answer: b Diff: Moderate Page Ref: 75 Goal: Explain how the life cycle of an industry, product, or business affects its competitive strategies. SHORT ANSWER 91. How do companies compete in a capitalistic economy? Answer: In a capitalistic economy, the means to produce goods and services are owned by private interests. People choose what they buy and what they sell; therefore, the free market determines what types of goods and services are produced and what prices are charged. The result is competition for customers and their dollars. Diff: Moderate Page Ref: 56 Goal: Describe why and how companies compete in a capitalist economy, and how a focus on sustainability and the triple bottom line keeps companies competitive. 92. What is sustainability and how does it keep companies competitive? Answer: Sustainability is the capacity for an organization to create profit for its shareholders today, while making sure that its business interests are in the best interests of the environment, and stakeholders of the future. Sustainable businesses are highly competitive and successful in the current market and have an excellent chance at remaining successful for generations. Diff: Moderate Page Ref: 57 Goal: Describe why and how companies compete in a capitalist economy, and how a focus on sustainability and the triple bottom line keeps companies competitive. 93. Describe the triple bottom line. Answer: The triple bottom line approach to sustainability suggests that when organizations benefit, society benefits as well—people have jobs and money, which ensures a high standard of living. It focuses on three aspects of the corporate bottom line: social, environmental, and economic—people, planet, and profits. Companies compete successfully in the marketplace when all stakeholders are content. Diff: Moderate Page Ref: 57 Goal: Describe why and how companies compete in a capitalist economy, and how a focus on sustainability and the triple bottom line keeps companies competitive. Chapter 3—Page 17

94. What is economics and how does it tie in to this chapter’s study of competition? Answer: By definition, economics aims to understand and predict how people act as they try to fulfill their wants and needs. It assumes rational behavior in light of material constraints (i.e., money). Because resources are scarce, businesses and consumers compete for goods. Diff: Moderate Page Ref: 59 Goal: Identify the economic principles that dictate how competition occurs. 95. Define supply and demand and what factors affect them. Answer: Supply is the quantity of goods and services available for purchase at a given time. Factors affecting supply include changes in prices of substitute products, changes in price expectations, changes in production costs, changes in technology, and changes in the number of competitors. Demand is the quantity of goods and services customers will buy at a given time and at various prices. Factors affecting the demand for goods include changes in customer preferences, increases in the number of potential buyers, the prices of related products, and the prices of substitute products. Diff: Moderate Page Ref: 60 Goal: Identify the economic principles that dictate how competition occurs. 96. What is the invisible hand? Answer: Adam Smith used the term to describe the natural force that guides a competitive marketplace. He believed that an individual, acting out of self interest when exchanging goods and services, actually benefits society. Buyers and sellers decide how much product they produce and how much product they buy; thereby creating an optimal supply, demand, and price structure for the entire marketplace. Diff: Moderate Page Ref: 65 Goal: Identify the economic principles that dictate how competition occurs. 97. Describe perfect competition and give an example. Answer: In a perfectly competitive market, there are many sellers of virtually identical products. It is very easy to enter and exit this market and there are many buyers. Price is rarely used to differentiate product. The agriculture industry is the closest we have to a real-life example of perfect competition—an ear of corn from one farm is virtually the same as an ear of corn from another farm. Diff: Moderate Page Ref: 66 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 98. Compare and contrast a monopoly and a monopolistic competition. Answer: In a monopoly, there is only one seller in the marketplace, which is almost impossible to enter. The product is unique, meaning there are no substitutes for it. Public utilities are an excellent example of monopolies. In a monopolistic competition, there are many sellers in the marketplace, which is extremely easy to enter. The products offered are similar to each other, but differentiated by style, design, price, or service provided. Retail products, like jeans, are excellent examples. Diff: Moderate Page Ref: 67 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. Chapter 3—Page 18

99. What is an oligopoly? Give an example. Answer: In an oligopoly, there are few sellers in the marketplace, which is difficult to enter. Products may be either homogenous or differentiated, depending on the industry represented. Each seller in the marketplace reacts to the actions of the other sellers. Good examples of oligopolies are the automobile, airline, and steel industries. Diff: Moderate Page Ref: 69 Goal: Identify different market structures, and understand how companies in each market structure form competitive business strategies. 100. Describe the business life cycle. Answer: There are four stages. In the introductory stage, new products are presented and companies focus on creating brand awareness. Sales begin to increase at a steady pace during the growth stage and other businesses enter the market. In the maturity, sales rise and earnings grow. As sales go down, the product enters the decline stage, where little more investment is made in the product. The company may leave the market at some point in time. Diff: Moderate Page Ref: 72 Goal: Explain how the life cycle of an industry, product, or business affects its competitive strategies.

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Chapter 4 Adapt: Monetary and Fiscal Policy, the Economic Cycle, and Economic Systems

Learning Objectives: The business cycle Economic indicators Monetary policy and fiscal policy Economic environments

Multiple choice questions

1. If there is a decline in the gross domestic product (GDP) for two consecutive quarters, the country will enter into a __________. a) depression b) contraction c) deflation d) recession d; challenging; p. 82 Learning Objective: The business cycle

2. A ________ is a prolonged and deep recession. a) depression b) downward spiral c) contraction d) downturn a; moderate; p. 82 Learning Objective: The business cycle

3. a) b) c) d)

The lowest point in the business cycle is called the _________ depression trough decline downturn

b; challenging; p. 82 Learning Objective: The business cycle

4. Economists refer to the pattern of fluctuating expansions and contractions in the economy as the ________. a) business cycle b) earnings curve c) economic spiral d) consumer price index a; easy; p. 82 Learning Objective: The business cycle

5. The business cycle is __________________. a) the economic environment in which an organization operates b) the total quantity and quality of goods and services that a country's citizens can purchase with the currency used in their economic system c) the pattern of ups and downs in an economy d) the measure of economic growth that compares how much a system produces with the resources needed to produce it c; moderate; p. 82 Learning Objective: The business cycle

6. The goal of the National Bureau of Economic Research is to _________________. a) monitor the stock market b) research sales figures c) follow economic indicators for signs of recession or expansion d) provide economic data to businesses d; moderate; p. 83 Learning Objective: Economic indicators

7. An increase of the GDP can be caused by higher _______________. a) productivity b) employment figures c) prices d) demand a; moderate; p. 84 Learning Objective: Economic indicators

8. The ________ refers to the total value of all goods and services produced within a given period by a national economy through domestic factors of production. a) standard of living b) aggregate output c) gross domestic product d) gross national produce c; easy; p. 82 Learning Objective: Economic indicators

9. The preferred measure of economic growth among analysts is the __________. a) gross domestic product b) gross national product c) unemployment rate d) stock market a; moderate; p. 83 Learning Objective: Economic indicators

10. Gross domestic product is _____________________. a) the total quantity of goods and services produced by an economic system b) the total value of all goods and services produced within a given period by a national economy through domestic factors of production c) the total quantity of goods that a country's citizens can purchase with the currency used in their economic system d) the conditions of the economic system in which an organization operates b; moderate; p. 83 Learning Objective: Economic indicators

11. Gross National Product _____. a) includes receipts from all businesses within a nation’s border b) includes receipts from foreign businesses within a nation’s border and receipts from operations in other locations around the globe c) includes receipts only from domestic businesses with a nation’s border d) includes receipts from domestic business within nation’s border and receipts from citizens of that nation working in other locations around the globe d; moderate; p. 84 Learning Objective: Economic indicators

12. Which of the following best describes the term gross national product? a) total quantity of goods and services produced by an economic system b) total quantity of goods and services produced within a given period by a national economy, not including foreign production c) total value of all goods and services produced within a given period by a national economy through domestic factors of production d) total value of all goods and services produced within a given period regardless of where the factors of production are located d; moderate; p. 84 Learning Objective: Economic indicators

13. Which of the following would be included in the gross national product of the United States? a) the profits earned by a U.S.-owned automobile plant in Brazil b) the profits earned by a Brazilian coffee company operating in the United States c) the profits earned by a Brazilian coffee company operating in Peru d) the wages paid to Brazilian workers producing coffee for sale in the United States a; challenging; p. 84 Learning Objective: Economic indicators

14. Which of the following would be included in the gross national product of Brazil? a) the profits earned by a U.S.-owned automobile plant in Brazil b) the profits earned by a Brazilian coffee company operating in the United States c) the profits earned by a U.S. coffee company operating in Peru d) none of the above b; challenging; p. 84 Learning Objective: Economic indicators

15. Which of the following would be included in the gross domestic product of Brazil? a) the profits earned by a U.S.-owned automobile plant in Brazil b) the profits earned by a Brazilian coffee company operating in the United States c) the profits earned by a Brazilian coffee company operating in Peru d) all of the above a; challenging; p. 84 Learning Objective: Economic indicators

16. Increased prices for products, decreased purchasing power, and decreased profit margins are likely to result from ________. a) low unemployment b) high unemployment c) low inflation d) a downward spiral a; moderate; p. 85 Learning Objective: Economic indicators

17. For business owners, the unemployment rate is a(n) ______________. a) bad omen b) planning tool c) factor of production d) external force b; moderate; p. 85 Learning Objective: Economic indicators

18. ________ is the economic condition characterized by widespread increased prices without increased purchasing power. a) Unemployment b) Inflation c) Expansion d) Deflation b; easy; p. 86 Learning Objective: The business cycle

19. The ________ is a measure of the prices of typical products purchased by consumers living in urban areas. a) gross national product b) national debt c) consumer price index d) gross domestic product c; easy; p. 86 Learning Objective: Economic indicators

20. Taken together, fiscal policy and monetary policy make up ________ . a) the economy b) stabilization c) financial policy d) the Federal Reserve Bank b; moderate; p. 88 Learning Objective: Monetary policy and fiscal policy

21. When people believe their income is increasing, they have a tendency to increase their spending. This is known as _______________. a) stimulus spending b) wealth management c) aggregate demand d) the wealth effect d; moderate; p. 89 Learning Objective: Monetary policy and fiscal policy

22. __________________ is the means by which the Fed maintains economic stability. a) Fiscal policy b) Taxation c) Aggregate demand d) Monetary policy d; challenging; p. 91 Learning Objective: Monetary policy and fiscal policy

23. When the Federal Reserve (the Fed) increases the money supply by adjusting the reserve requirement and the discount rate, it is applying _____________________. a) expansionary monetary policy b) economic stimulators c) open market operations d) economic indicators a; easy; p. 91

24. The reduced interest rate the Fed charges private banks when they borrow money is the __________________. a) aggregate demand b) reserve requirement c) regulated rate d) discount rate d; moderate; p. 92 Learning Objective: Monetary policy and fiscal policy

25. Government actions directed at stabilizing the economy are the ________ policy of the nation. a) fiscal b) monetary c) foreign d) economic a; easy; p. 88 Learning Objective: Monetary policy and fiscal policy

26. A nation controls the size of its money supply through ________ policy. a) fiscal b) monetary c) economic d) welfare b; moderate; p. 91 Learning Objective: Monetary policy and fiscal policy

27. To jumpstart the economy the government will ____________________. a) decrease spending and increase taxes b) increase spending and increase taxes c) decrease spending and decrease taxes d) none of the above d; moderate; p. 93 Learning Objective: Monetary policy and fiscal policy

28. The resources used to produce goods and services are called _____________. a) factors of production b) technological innovations c) business security d) assets and liabilities a; moderate; p. 93 Learning Objective: Economic environments

29. The key difference between economic systems is the different ways in which they manage ________. a) the factors of production b) the transportation of goods within their borders c) government rules and regulations d) the payment of workers a; moderate; p. 93 Learning Objective: Economic environments

30. Which of the following is not a factor of production? a) labor b) capital c) entrepreneurship d) government d; moderate; p. 93

31. The United States is a(n) ______________ economy. a) export-based b) manufacturing c) knowledge d) production c; moderate; p. 95 Learning Objective: Economic environments

32. Which of the following is not an important element in environmental scanning? a) political-legal factors b) sociocultural factors c) technological factors d) productivity factors d; moderate; p. 96 Learning Objective: Economic environments

33. Which economic system provides for the private ownership of the factors of production and encourages entrepreneurship by offering profits as an incentive? a) socialism b) communism c) capitalism d) free market economy c; easy; p. 100 Learning Objective: Economic environments

34. The economic system that best describes the United States is _______________. a) capitalism b) mixed market c) socialism d) democratic b; challenging; p. 101 Learning Objective: Economic environments

35. In which economic system does the government control certain industries? a) communism b) socialism c) free enterprise d) capitalism b; moderate; p. 99 Learning Objective: Economic environments

36. Which of the following is identified as a communist nation by the textbook? a) North Vietnam b) Indonesia c) Malaysia d) Iraq a; easy; p. 100 Learning Objective: Economic environments

True/False Questions

37. In theory the economy could expand indefinitely. True; moderate; p. 82 Learning Objective: The business cycle

38. Although they cause hardship to both producers and consumers, recessions are natural parts of the business cycle. True; easy; p. 82 Learning Objective: The business cycle

39. When the economy takes a nosedive businesses struggle because demand increases and suppliers must increase their prices. False; challenging; p. 83 Learning Objective: The business cycle

40. Gross domestic product (GDP) refers to the total value of goods and services produced by a national economy within a given period regardless of where the factors of production are located. False; moderate; p. 83 Learning Objective: Economic indicators

41. Inflation results in increased purchasing power for the consumer. False; moderate; p. 84 Learning Objective: Economic indicators

42. Inflation increases the spending power of the dollar. False; easy; p. 84 Learning Objective: Economic indicators

43. The average increase of real GDP in the United States is about 5 percent per year. False; moderate; p. 84 Learning Objective: Economic indicators

44. The Gross National Product (GNP) is the total value of all goods and services produced by a national economy within a year regardless of where the factors of production are located. True; moderate; p. 84 Learning Objective: Economic indicators

45. Inflation refers to widespread price increases in an economic system. True; easy; p. 86 Learning Objective: Economic indicators

46. The primary measure of growth in the business cycle is inflation. False; moderate; p. 86 Learning Objective: The business cycle

47. The consumer price index measures the prices of typical products purchased by consumers living in urban areas. True; easy; p. 86 Learning Objective: Economic indicators

48. Every week the Bureau of Labor Statistics releases the CPI data for a representative “basket” of consumer purchases. False; moderate; p. 86 Learning Objective: Economic indicators

49. Ideally, inflation should be increasing at about 1% annually. False; moderate; p. 86 Learning Objective: Economic indicators

50. Deflation causes the dollar’s purchasing power to increase. True; moderate; p. 86 Learning Objective: Economic indicators

51. A decreasing Producer Price Index (PPI) is often driven by increased demand for products that producers use. False; easy; p. 87 Learning Objective: Economic indicators

52. Economic indicators are useful because they are able to show what is happening as well as what will happen. False; moderate; p. 90 Learning Objective: Monetary policy and fiscal policy

53. When growth slows, the Federal Reserve (the Fed) takes actions to increase the money supply. True; easy; p. 91 Learning Objective: Monetary policy and fiscal policy

54. When the Federal Reserve (the Fed) restricts the money supply, it is practicing a tight monetary policy. True; moderate; p. 91 Learning Objective: Monetary policy and fiscal policy

55. When a government adjusts the nation's money supply by increasing or decreasing interest rates to help control inflation, the government is employing monetary policy. True; moderate; p. 92 Learning Objective: Monetary policy and fiscal policy

56. The United States government manages the collection and spending of its revenues through monetary policy. False; challenging; p. 92 Learning Objective: Monetary policy and fiscal policy

57. The purpose of monetary and fiscal policy is to smooth out fluctuations in output and unemployment and to stabilize prices. True; moderate; p. 93 Learning Objective: Monetary policy and fiscal policy

58. Tax increases and decreases are a form of fiscal policy. True; moderate; p. 90 Learning Objective: Monetary policy and fiscal policy

59. Land, labor, capital, and entrepreneurship are the four traditional factors of production. True; easy; p. 93 Learning Objective: Economic environments

60. Technology can help cut costs and increase productivity. True; easy; p. 94 Learning Objective: Economic environments

61. Economic systems allocate the factors of production differently. True; easy; p. 94 Learning Objective: Economic environments

62. In a socialist economy, the government controls certain industries. True; easy; p. 100 Learning Objective: Economic environments

63. The economic system most focused on social equality but which allows individuals the least degree of economic freedom is communism. True; moderate; p. 99 Learning Objective: Economic environments

64. China has embraced many concepts of capitalism in recent years. True; easy; p. 100 Learning Objective: Economic environments

65. The U.S. economy favors greater government intervention in the market than a socialist economy. False; moderate; p. 100 Learning Objective: Economic environments

Essay and fill-in questions

66. What is a depression? Answer: A depression is a long recession with more severe consequences. Moderate, p. 82 Learning Objective: The business cycle

67. Describe the differences between the Gross National Product and The Gross Domestic Product. Answer must include the following ideas: The Gross National Product (GNP) is the total value of goods and services produced by citizens of a country during a one-year period no matter where the citizens are living. The Gross Domestic Product (GDP) is the total value of goods and services produced in a given country during a one-year period. The difference is that the GDP measures economic activity generated within a specific geographic region and the location of economic activity is not limited for the GNP. Challenging, pp. 83-84 Learning Objective: Economic indicators

68. Name the four stages of the business cycle. Answer: Recession, trough, recovery, expansion Moderate, p. 83 Learning Objective: The business cycle

69. Define the term unemployment. Answer: Unemployment is the percentage of people in the labor force who are unemployed. Moderate, p. 84 Learning Objective: Economic indicators

70. Name five economic indicators. Answer: Gross National Product (GNP), Gross Domestic Product (GDP), the unemployment rate, the Consumer Price Index (CPI), and the Producer Price Index (PPI) Moderate, p. 88 Learning Objective: Economic indicators

71. Name three tools the Fed uses to stabilize the economy. Answer can include three of the following: monetary policy, the reserve requirement, the money supply, the discount rate, and/or engaging in open market operations. Challenging; p. 93 Learning Objective: Monetary policy and fiscal policy

72. Economists call the resources that societies use to produce goods and services ______. Answer: factors of production Easy; p. 93 Learning Objective: Economic environments

73. Where do businesses go to get information on economic indicators, monetary policy and fiscal policy, economic growth rates, inflation and deflation, consumer and producer price indexes, and unemployment? Answer: Government and Internet sources, and publications such as Fortune, The Wall Street Journal, Business Week, and The Economist. Moderate; p. 97 Learning Objective: Economic environments

74. When businesses scan the sociocultural environment, what are some of the factors they are looking at? Answer: Gender, age, demographics, income distributions, education levels, ethnicity, religious beliefs, and values Moderate: p. 97 Learning Objective: Economic environments

75. What are some of the ways business are finding to keep up with environmental concerns? Answer: Some example that can be included: By recycling packing, by staying current on laws directed at emissions controls and consumption, by reducing their carbon footprint, by taking steps to care for the environment, by reducing the environmental impact of their activities, even some executive bonuses at some firms that produce luxury goods are now tied to environmental goals such as reducing carbon emissions. Challenging; p. 98 Learning Objective: Economic environments

76. Identify three major economic systems, and give two characteristics of each. Answer: 1. Capitalism Individuals free to own key industries Individuals have a high degree of economic freedom The free market dominates social services Economy emphasizes private enterprise 2. Communism Government owns all key industries and most factors of production Government plans and controls the economy Government prioritizes social equality above pursuit of gain Government allocates wealth and regulates all industry 3. Socialism Government controls key industries, particularly social services Government provides many social services and employee benefits for public good Taxes are high to even out the distribution of wealth Challenging; pp. 99-100 Learning Objective: Economic environments

Anybody’s Business TIF questions: Chapter 5 Multiple Choice 1) Telecommuting A) is the use of cell phones by employees as they drive to work. B) allows employees to collaborate on work from remote locations. C) helps employees deliver work product by telephone. D) uses wireless technology to connect employees working on different floors of an office building. Answer: B Diff: Easy Page Ref: 108 Objective: Describe the trends in globalization and how businesses can capitalize on them. 2) Globalization is A) the rise in atmospheric temperature around the Earth. B) the recent movement to reduce international immigration. C) the flow of ideas, knowledge, people, business, and culture across borders. D) the upward trend in the number of mergers and acquisitions among companies. Answer: C Diff: Easy Page Ref: 108 Objective: Describe the trends in globalization and how businesses can capitalize on them. 3) The World Trade Organization A) functions as a single market, allowing the free flow of goods, services, workers, and capital between member countries. B) has set standards allowing member nations to exchange goods across borders with fewer restrictions than before. C) dictates how many workers from each member country can work in one or more other member countries. D) stipulates the kinds of jobs expatriate employees can hold in foreign countries around the globe. Answer: B Diff: Moderate Page Ref: 108 Objective: Describe the trends in globalization and how businesses can capitalize on them. 4) Emerging economies A) are new markets taking shape within a developed, Westernized nation. B) are nations experiencing lower birth rates than in developed economies. C) are regions consisting of five or more slow-growing nations. D) are non-industrialized nations achieving vast economic growth through new technologies. Answer: D

Diff: Easy Page Ref: 109 Objective: Describe the trends in globalization and how businesses can capitalize on them. 5) In emerging markets, demand for technology is A) growing. B) decreasing. C) staying level. D) fluctuating wildly. Answer: A Diff: Easy Page Ref: 109 Objective: Describe the trends in globalization and how businesses can capitalize on them. 6) You are an American citizen seeking a job with a major U.S. employer. How will globalization affect your job search? A) The company will likely want you to work overseas. B) The hiring manager will interview you and several other applicants as a group. C) You’ll have to compete with job seekers from other countries. D) If you’re hired, your pay will be pegged to that of the highest-paid foreign workers. Answer: C Diff: Moderate Page Ref: 109 Objective: Describe the trends in globalization and how businesses can capitalize on them. 7) Which of the following is an example of how reductions in trade barriers have affected economic activity within regions? A) Countries within a region are focusing on industries they excel at. B) Countries within a region are specializing industries they’ve not excelled at previously. C) Countries within a region are seeking to constrain their runaway GDP. D) Countries within a region are closing their borders to immigration from other region members. Answer: A Diff: Moderate Page Ref: 110 Objective: Describe the trends in globalization and how businesses can capitalize on them. 8) Outsourcing occurs when A) a company has certain tasks carried out in a foreign location. B) a company helps laid-off employees find jobs at other firms. C) a company contracts with another company or individual to handle specific tasks. D) a company expands its circle of suppliers to include entrepreneurial firms. Answer: C Diff: Moderate Page Ref: 110

Objective: Describe the trends in globalization and how businesses can capitalize on them. 9) Offshore outsourcing occurs when A) a company has certain tasks carried out in a foreign location. B) a company helps laid-off employees find jobs at other firms. C) a company contracts with another company or individual to handle specific tasks. D) a company expands its circle of suppliers to include entrepreneurial firms. Answer: A Diff: Moderate Page Ref: 110 Objective: Describe the trends in globalization and how businesses can capitalize on them. 10) How does a company benefit from offshore outsourcing? A) The company develops the skills of employees it sends to foreign locations where it is outsourcing the work. B) The company earns a reputation for integrity, corporate social responsibility, and ethical leadership. C) The company spreads the technologies it has developed to competing firms headquartered in the foreign locations. D) The company cuts costs because workers are plentiful and wages lower in many countries performing outsourced work. Answer: D Diff: Moderate Page Ref: 110 Objective: Describe the trends in globalization and how businesses can capitalize on them. 11) With the shift to a global economy, companies are A) seeing the costs of doing business increase. B) raising the prices of their products and services. C) finding cheaper ways to do business. D) hiring fewer foreign workers. Answer: C Diff: Moderate Page Ref: 110 Objective: Describe the trends in globalization and how businesses can capitalize on them. 12) India and China have become strong global competitors because of their A) abundant natural resources. B) governments’ unwillingness to meddle in science and technology sectors. C) knowledge base. D) ability to keep their borders closed to foreigners. Answer: C Diff: Moderate Page Ref: 110 Objective: Describe the trends in globalization and how businesses can capitalize on them.

13) Globalization includes A) the separation of countries’ economies, often through trade barriers. B) the integration of countries’ economies, usually through trade. C) the domination of one country over another, through military might. D) the restriction of movement by people from one country to another. Answer: B Diff: Easy Page Ref: 111 Objective: Describe the trends in globalization and how businesses can capitalize on them. 14) The number of customers in emerging countries is A) increasing. B) decreasing. C) staying level. D) fluctuating wildly. Answer: A Diff: Easy Page Ref: 111 Objective: Describe the trends in globalization and how businesses can capitalize on them. 15) Your business specializes in making goods it can produce at a lower opportunity cost compared to businesses in other countries. It then trades those goods with other countries for products whose opportunity costs are too high for them to produce. What type of advantage is your business leveraging? A) expansive B) reductive C) duplicative D) comparative Answer: D Diff: Moderate Page Ref: 111 Objective: Analyze a company’s strategies for reaching global markets. 16) Your business is headquartered in a country that has greater natural resources, a more skilled workforce, and a more temperate climate than another country has. You have a(n) _________ advantage over companies that work in that other country. A) expansive B) competitive C) duplicative D) reductive Answer: B Diff: Easy Page Ref: 111 Objective: Analyze a company’s strategies for reaching global markets. 17) What would happen if all countries produced the goods and services for which they have a comparative advantage?

A) Businesses within each country would use more resources. B) Individual companies would make lower profits. C) More high-quality goods and services would be produced. D) The countries would become more integrated politically. Answer: C Diff: Easy Page Ref: 112 Objective: Analyze a company’s strategies for reaching global markets. 18) Your business has made an agreement with a foreign government to swap sales of your product in that other country in exchange for manufacturing work. Through this arrangement, you have gained a share in a large foreign market while providing jobs to workers in that country. Your company is tapping into what kind of advantage? A) competitive B) collaborative C) comparative D) communicative Answer: B Diff: Easy Page Ref: 112 Objective: Analyze a company’s strategies for reaching global markets. 19) Through foreign direct investment (FDI), a company A) invests resources in another country to expand the business and increase profits. B) invests in workers from other countries by recruiting them to work in the company. C) invests in the campaigns of political leaders abroad to create favorable conditions for business. D) invests in products made in the home country but slated for sale in another country. Answer: A Diff: Easy Page Ref: 112 Objective: Analyze a company’s strategies for reaching global markets. 20) A joint venture is created when A) a company allows individuals or other companies to use its products, strategies, and trademarks in exchange for a royalty fee plus a percentage of sales. B) a company teams up with another company to create a product, often creating a new entity in the process. C) a company teams up with another company to achieve specific long-term goals, while keeping their separate identity. D) a company grants another company permission to use its copyright or patent. Answer: B Diff: Easy Page Ref: 113 Objective: Analyze a company’s strategies for reaching global markets. 21) A strategic alliance is created when A) a company allows individuals or other companies to use its products, strategies, and trademarks in exchange for a royalty fee plus a percentage of sales.

B) a company teams up with another company to create a product, often creating a new entity in the process. C) a company teams up with another company to achieve specific long-term goals, while keeping their separate identity. D) a company grants another company permission to use its copyright or patent. Answer: C Diff: Easy Page Ref: 113 Objective: Analyze a company’s strategies for reaching global markets. 22) A licensing arrangement is created when A) a company allows individuals or other companies to use its products, strategies, and trademarks in exchange for a royalty fee plus a percentage of sales. B) a company teams up with another company to create a product, often creating a new entity in the process. C) a company teams up with another company to achieve specific long-term goals, while keeping their separate identity. D) a company grants another company permission to use its copyright or patent. Answer: D Diff: Easy Page Ref: 113 Objective: Analyze a company’s strategies for reaching global markets. 23) A franchising arrangement is created when A) a company allows individuals or other companies to use its products, strategies, and trademarks in exchange for a royalty fee plus a percentage of sales. B) a company teams up with another company to create a product, often creating a new entity in the process. C) a company teams up with another company to achieve specific long-term goals, while keeping their separate identity. D) a company grants another company permission to use its copyright or patent. Answer: A Diff: Easy Page Ref: 113 Objective: Analyze a company’s strategies for reaching global markets. 24) Importing is A) sending workers to fill vacation positions in companies in another country. B) selling products or services to consumers or businesses in another country. C) hiring workers who were born and are currently employed in another country. D) buying products that were designed or manufactured in another country. Answer: D Diff: Easy Page Ref: 114 Objective: Analyze a company’s strategies for reaching global markets. 25) With reductions in trade barriers, importing is A) becoming more frequent. B) becoming less frequent. C) plateauing.

D) fluctuating unpredictably. Answer: A Diff: Easy Page Ref: 114 Objective: Analyze a company’s strategies for reaching global markets. 26) Importing benefits customers because A) it fosters diversity in product design. B) it increases the quality of products. C) it gives them more inexpensive options. D) it raises costs for producers. Answer: C Diff: Moderate Page Ref: 114 Objective: Analyze a company’s strategies for reaching global markets. 27) An import quota is a A) limitation on the number of workers one country can allow to emigrate to another country. B) limitation on the number of shipments of a product a country can export to another country. C) limitation on the prices a company from another nation can set on products it’s exporting. D) limitation on the shipping fees one country can charge another country to which it’s exporting products. Answer: B Diff: Easy Page Ref: 114 Objective: Analyze a company’s strategies for reaching global markets. 28) NAFTA is A) a trade agreement between the United States, Canada, and Mexico. B) a trade agreement between South America, North America, and Europe. C) a trade agreement between Japan, China, and North Korea. D) a trade agreement between the Middle East, Asia, and Africa. Answer: A Diff: Easy Page Ref: 114 Objective: Analyze a company’s strategies for reaching global markets. 29) How has NAFTA affected trade between the United States, Canada, and Mexico? A) It has increased tax tariffs and made trade more difficult. B) It has reduced tax tariffs and made trade easier. C) It has increased tax tariffs and made trade easier. D) It has reduced tax tariffs and made trade more difficult. Answer: B Diff: Easy Page Ref: 114 Objective: Analyze a company’s strategies for reaching global markets. 30) Exporting is

A) shifting company headquarters to another country. B) establishing manufacturing facilities in other countries. C) selling products to other countries. D) hiring workers from other countries. Answer: C Diff: Easy Page Ref: 114 Objective: Analyze a company’s strategies for reaching global markets. 31) Overall, a country gains when A) its imports are greater than its exports. B) its exports are greater than its imports. C) its imports and exports are equal. D) it engages only in importing or exporting, but not both. Answer: B Diff: Moderate Page Ref: 114 Objective: Analyze a company’s strategies for reaching global markets. 32) Multinational corporations A) have employees who hail from other countries as well as the home country. B) export their product to more than one foreign nation. C) have their headquarters in a country other than where the firm was founded. D) have assets in at least one country outside their home country. Answer: D Diff: Moderate Page Ref: 115 Objective: Analyze a company’s strategies for reaching global markets. 33) The exchange rate is the A) amount of any currency you receive when you trade it for another currency. B) percentage increase in a country’s gross domestic product, or GDP. C) annual increase or decrease in inflation within a particular nation. D) ratio of native to foreign-born workers in a country’s labor force. Answer: A Diff: Easy Page Ref: 116 Objective: Scan the trading environment of a particular region or culture and identify trends and opportunities based on what you discover. 34) You work for a company that exports much of its product. Your local currency becomes weaker than the currency in the countries to which you export. How do you feel about this? A) You are upset: Your products will sell for more in other countries, drying up demand. B) You are excited: Your products will sell for less in other countries, driving up demand. C) You are upset: You will be restricted by law from selling products in other countries.

D) You are excited: You will be permitted by law to sell more products than before in other countries. Answer: B Diff: Challenging Page Ref: 116 Objective: Scan the trading environment of a particular region or culture and identify trends and opportunities based on what you discover. 35) Exchange rates A) are updated annually. B) steadily increase. C) fluctuate constantly. D) apply only to certain currencies. Answer: C Diff: Easy Page Ref: 115 Objective: Scan the trading environment of a particular region or culture and identify trends and opportunities based on what you discover. 36) A country’s balance of trade is A) the value of everything it imports divided by the value of everything it exports. B) the value of everything it exports divided by the value of everything it imports. C) the value of everything it imports minus the value of everything it exports. D) the value of everything it exports minus the value of everything it imports. Answer: D Diff: Easy Page Ref: 117 Objective: Scan the trading environment of a particular region or culture and identify trends and opportunities based on what you discover. 37) Your home country spends more on imports than it makes on exports. It has a A) trade deficit. B) trade surplus. C) trade inequity. D) trade balance. Answer: A Diff: Easy Page Ref: 117 Objective: Scan the trading environment of a particular region or culture and identify trends and opportunities based on what you discover. 38) Your home country exports more than it imports. It has a A) trade deficit. B) trade surplus. C) trade inequity. D) trade balance. Answer: B Diff: Easy Page Ref: 117 Objective: Scan the trading environment of a particular region or culture and identify trends and opportunities based on what you discover.

39) Protectionism is A) the policy of restricting trade through the erection of military infrastructure between countries. B) the policy of fostering trade through the lower of barriers like quotas and tariffs. C) the policy of restricting trade through barriers like quotas and tariffs. D) the policy of removing trade through the removal of military infrastructure between countries. Answer: C Diff: Easy Page Ref: 118 Objective: Scan the trading environment of a particular region or culture and identify trends and opportunities based on what you discover. 40) Which of the following is NOT a motivation for increased protectionism in a country? A) a desire to guard against trade deficits B) a concern about losing jobs to foreign competitors C) a desire to combat the smuggling of dangerous products into the country. D) a worry that there are too many native-born workers in the country. Answer: D Diff: Moderate Page Ref: 118 Objective: Scan the trading environment of a particular region or culture and identify trends and opportunities based on what you discover. 41) Proponents of the fair trade movement want to A) stop the use of small farms to generate produce that is then exported by intermediaries. B) ensure that farmers get a price for their produce that reflects their work and investment. C) increase compensation paid to intermediaries who buy produce from small farms and then export it. D) limit the selling of produce from small farms to customers within that country’s borders. Answer: B Diff: Moderate Page Ref: 119 Objective: Scan the trading environment of a particular region or culture and identify trends and opportunities based on what you discover. 42) A subsidy is A) government financial assistance paid to certain industries or businesses. B) a fine levied on certain industries or businesses by the government. C) a program by which a government takes over management of certain industries or businesses. D) an award given to certain industries or businesses by the government. Answer: A Diff: Easy Page Ref: 119

Objective: Scan the trading environment of a particular region or culture and identify trends and opportunities based on what you discover. 43) Dumping is A) the illegal practice of importing products from a foreign market at prices below domestic cost. B) the collaborative practice of selling products in a foreign market at prices above domestic cost. C) the competitive practice of unloading products in a foreign market at prices below domestic cost. D) the increasingly common practice of importing products from a foreign market at prices above domestic cost. Answer: C Diff: Moderate Page Ref: 119 Objective: Scan the trading environment of a particular region or culture and identify trends and opportunities based on what you discover. 44) A company is unloading products in a foreign market at prices below domestic cost. What practice is the company engaging in? A) dumping B) piling C) bundling D) soaking Answer: A Diff: Easy Page Ref: 119 Objective: Scan the trading environment of a particular region or culture and identify trends and opportunities based on what you discover. 45) People with a free trade mentality support A) the increase in the number of products and services donated gratis by companies to needy consumers. B) the eradication of national currencies around the world in favor of a global currency. C) the erecting of obstacles to constrain the flow of products across borders. D) the minimizing of obstacles to encourage the flow of products across borders. Answer: D Diff: Easy Page Ref: 119 Objective: Scan the trading environment of a particular region or culture and identify trends and opportunities based on what you discover. 46) The European Union accounts for __________ of the world’s GDP. A) just over three quarters B) almost one third C) exactly one half D) slightly under one fourth Answer: B

Diff: Moderate Page Ref: 119 Objective: Scan the trading environment of a particular region or culture and identify trends and opportunities based on what you discover. 47) The European Union’s currency is called the A) dinar. B) EU. C) euro. D) franc. Answer: C Diff: Easy Page Ref: 119 Objective: Scan the trading environment of a particular region or culture and identify trends and opportunities based on what you discover. 48) Three countries participating in the SAFTA regional trade agreement are A) Nepal, India, and Pakistan. B) Canada, Iceland, and the United Kingdom. C) Saudi Arabia, Iraq, and Iran. D) Algeria, Libya, and Egypt. Answer: A Diff: Moderate Page Ref: 120 Objective: Scan the trading environment of a particular region or culture and identify trends and opportunities based on what you discover. 49) A non-governmental organization is A) a legislative body with representatives from a geographic region. B) a group that rose to political power through illegal means. C) a company that sells products or services only to a national government. D) an advocacy group with primarily noncommercial goals. Answer: D Diff: Moderate Page Ref: 120 Objective: Scan the trading environment of a particular region or culture and identify trends and opportunities based on what you discover. 50) In the context of culture, proximity is the closeness in space between two or more A) countries. B) people. C) companies. D) homes. Answer: B Diff: Easy Page Ref: 121 Objective: Scan the cultural, legal, political, and ethical environment of a particular region or culture and identify trends and opportunities based on what you discover. 51) In the context of culture, power distance is A) how comfortable a culture is with unequal distributions of power.

B) how many reporting layers exist between executives and employees in companies within a particular country. C) how long it takes on average for entrepreneurs in a nation to generate a profit D) how much decision-making authority women have in a particular country. Answer: A Diff: Moderate Page Ref: 122 Objective: Scan the cultural, legal, political, and ethical environment of a particular region or culture and identify trends and opportunities based on what you discover. 52) You are marketing a new product to companies located in a high-PDI country. Which strategy would you use in your marketing campaign? A) Send printed marketing materials to the decision-makers in the companies who are most qualified to judge the product. B) Emphasize the product’s power to bring families closer together. C) Provide testimony for the product’s benefits and quality from experts. D) Tell stories about how ordinary consumers have benefited from the product. Answer: C Diff: Moderate Page Ref: 122 Objective: Scan the cultural, legal, political, and ethical environment of a particular region or culture and identify trends and opportunities based on what you discover. 53) You are advertising for an open position in your company, and you live in an individualistic culture. Which of the following phrases might you use in the part of the recruitment ad that lays out the qualities you are looking for in the new employee? A) “non-aggressive” B) “self-starter” C) “takes direction well” D) “respects tradition” Answer: B Diff: Easy Page Ref: 123 Objective: Scan the cultural, legal, political, and ethical environment of a particular region or culture and identify trends and opportunities based on what you discover. 54) You have accepted a one-year overseas assignment in a company that is located in a masculine-oriented culture. How should you act in your business dealings there? A) cooperative B) caring C) collaborative D) assertive Answer: D Diff: Easy Page Ref: 123 Objective: Scan the cultural, legal, political, and ethical environment of a particular region or culture and identify trends and opportunities based on what you discover. 55) You are doing business with a company located in a high-uncertainty-avoidance culture. How should you act in your business dealings there?

A) Allow people time to adjust to ideas before you proceed. B) Support your ideas by appealing to people’s emotions. C) Avoid involving locals in leadership roles. D) Encourage people to make decisions quickly. Answer: A Diff: Moderate Page Ref: 123 Objective: Scan the cultural, legal, political, and ethical environment of a particular region or culture and identify trends and opportunities based on what you discover. 56) You are doing business with a company located in a high-uncertainty-avoidance culture. How should you act in your business dealings there? A) Allow people time to adjust to ideas before you proceed. B) Support your ideas by appealing to people’s emotions. C) Avoid involving locals in leadership roles. D) Encourage people to forge business decisions quickly. Answer: A Diff: Easy Page Ref: 123 Objective: Scan the cultural, legal, political, and ethical environment of a particular region or culture and identify trends and opportunities based on what you discover. 57) Sustainable companies focus not just on making life better for people and preserving the environment but also on A) finding ways to get around the FCPA. B) eradicating all competitors. C) making profits. D) strengthening their home country’s military might. Answer: C Diff: Easy Page Ref: 124 Objective: Scan the cultural, legal, political, and ethical environment of a particular region or culture and identify trends and opportunities based on what you discover. 58) You are considering doing business in a foreign country, and you want to evaluate its political stability. You calculate the likelihood that all of the following events EXCEPT _____________will happen in that country. A) terrorist threats B) disease outbreaks C) violent conflicts between leaders D) fluctuations in GDP Answer: D Diff: Easy Page Ref: 124 Objective: Scan the cultural, legal, political, and ethical environment of a particular region or culture and identify trends and opportunities based on what you discover. True/False

59) An import quota is a limitation on the number of shipments of a product a country can export to another country. Answer: TRUE Diff: Easy Page Ref: 114 Objective: Analyze a company’s strategies for reaching global markets. 60) A tariff is an examination of imported goods. Answer: FALSE Diff: Easy Page Ref: 114 Objective: Analyze a company’s strategies for reaching global markets. 61) NAFTA is a trade agreement between the United States, Canada, and Mexico. Answer: TRUE Diff: Easy Page Ref: 114 Objective: Analyze a company’s strategies for reaching global markets. 62) The Foreign Corrupt Practices Act (FCPA) is UN law prohibiting corruption in governing bodies. Answer: FALSE Diff: Easy Page Ref: 124 Objective: Scan the cultural, legal, political, and ethical environment of a particular region or culture and identify trends and opportunities based on what you discover. 63) The exchange rate is the amount of any currency you receive when you trade it for another currency. Answer: TRUE Diff: Easy Page Ref: 116 Objective: Scan the trading environment of a particular region or culture and identify trends and opportunities based on what you discover. 64) Exchange rates are updated annually. Answer: FALSE Diff: Easy Page Ref: 115 Objective: Scan the trading environment of a particular region or culture and identify trends and opportunities based on what you discover. 65) A country’s balance of trade is the value of everything it exports minus the value of everything it imports. Answer: TRUE Diff: Easy Page Ref: 117 Objective: Scan the trading environment of a particular region or culture and identify trends and opportunities based on what you discover. 66) Through telecommuting, employees collaborate on work from remote locations. Answer: TRUE Diff: Easy Page Ref: 108

Objective: Describe the trends in globalization and how businesses can capitalize on them. 67) Globalization is the rise in atmospheric temperature around the Earth. Answer: FALSE Diff: Easy Page Ref: 108 Objective: Describe the trends in globalization and how businesses can capitalize on them. 68) The European Union’s currency is called the dinar. Answer: FALSE Diff: Easy Page Ref: 119 Objective: Scan the trading environment of a particular region or culture and identify trends and opportunities based on what you discover. 69) Foreign direct investment (FDI) is a business’s investment of resources in another country to expand and to increase profits. Answer: TRUE Diff: Easy Page Ref: 112 Objective: Analyze a company’s strategies for reaching global markets. 70) A licensing arrangement is created when a company grants another company permission to use its copyright or patent. Answer: TRUE Diff: Easy Page Ref: 113 Objective: Analyze a company’s strategies for reaching global markets. 71) A franchising arrangement is created when a company teams up with another company to create a product, often creating a new entity in the process. Answer: FALSE Diff: Easy Page Ref: 113 Objective: Analyze a company’s strategies for reaching global markets. 72) Protectionism is the policy of restricting trade through barriers like quotas and tariffs. Answer: TRUE Diff: Easy Page Ref: 118 Objective: Scan the trading environment of a particular region or culture and identify trends and opportunities based on what you discover. 73) A subsidy is government financial assistance paid to certain industries or businesses. Answer: TRUE Diff: Easy Page Ref: 119 Objective: Scan the trading environment of a particular region or culture and identify trends and opportunities based on what you discover.

74) The exchange rate is the percentage increase in a country’s gross domestic product, or GDP. Answer: FALSE Diff: Easy Page Ref: 116 Objective: Scan the trading environment of a particular region or culture and identify trends and opportunities based on what you discover. 75) Dumping is the competitive practice of unloading products in a foreign market at prices below domestic cost. Answer: TRUE Diff: Moderate Page Ref: 119 Objective: Scan the trading environment of a particular region or culture and identify trends and opportunities based on what you discover.

AB_Ch06_TIF CHAPTER 6: LEAD: VISION, INTEGRITY, CHANGE, AND TEAMS TRUE/FALSE 1. Leadership and management are interchangeable. Answer: False Diff: Easy Page Ref: 132 Goal: Distinguish managers from leaders, and recognize the importance of effective followers. 2. Effective followers do not necessarily need a strong leader to get the job done. Answer: True Diff: Easy Page Ref: 133 Goal: Distinguish managers from leaders, and recognize the importance of effective followers. 3. People follow leaders because they tend to exhibit qualities that draw others to trust and follow them. Answer: True Diff: Easy Page Ref: 134 Goal: Identify effective leadership, and develop leadership qualities in yourself. 4. An inspirational leader can safely ignore the company's vision and mission. Answer: False Diff: Easy Page Ref: 135 Goal: Identify effective leadership, and develop leadership qualities in yourself. 5. Part of being an introspective leader is also understanding all the various leadership styles and knowing how to select the most effective one for a given situation. Answer: True Diff: Easy Page Ref: 136 Goal: Identify effective leadership, and develop leadership qualities in yourself. 6. One of the best ways to become a leader is to build a mentor-apprentice relationship. Answer: True Diff: Easy Page Ref: 138 Goal: Identify effective leadership, and develop leadership qualities in yourself. 7. The only people in an organization who need to be motivated and inspired by a vision statement are the top managers. Answer: False Diff: Moderate Page Ref: 139 Goal: Explain how a vision provides direction for an organization, and create a vision for your own career. 8. It is nice, but not important that an organization's vision aligns with the owners' goals and beliefs. Answer: False Diff: Easy Page Ref: 140 Goal: Explain how a vision provides direction for an organization, and create a vision for your own career.

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9. A leader who inspires and stimulates positive change in his or her followers is sometimes referred to as a transformational leader. Answer: True Diff: Easy Page Ref: 141 Goal: Describe the importance of change, and be able to lead it effectively and avoid its potential pitfalls. 10. Innovators may not be as distrustful of change compared to late adopters, but they still avoid risk. Answer: False Diff: Easy Page Ref: 143 Goal: Describe the importance of change, and be able to lead it effectively and avoid its potential pitfalls. 11. Leaders need only to create a vision without also communicating it throughout the organization. Answer: False Diff: Easy Page Ref: 144 Goal: Describe the importance of change, and be able to lead it effectively and avoid its potential pitfalls. 12. Short-term wins have no effect on keeping people motivated Answer: False Diff: Easy Page Ref: 145 Goal: Describe the importance of change, and be able to lead it effectively and avoid its potential pitfalls. 13. Like anything that grows and develops, the formation of a team occurs all at once. Answer: False Diff: Easy Page Ref: 147 Goal: Form effective teams and resolve team issues. 14. Groupthink is the tendency for a team to want to conform in an effort to minimize conflict. Answer: True Diff: Easy Page Ref: 148 Goal: Form effective teams and resolve team issues. 15. The tendency for a team to want to conform is called continuous learning. Answer: False Diff: Easy Page Ref: 149 Goal: Form effective teams and resolve team issues.

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MULTIPLE CHOICE 16. A person who has formal authority and takes care of four main functions is a(n) ________. a. manager b. employee c. follower d. leader Answer: a Diff: Easy Page Ref: 132 Goal: Distinguish managers from leaders, and recognize the importance of effective followers. 17. A person who has the ability to motivate, inspire, and influence the behaviors of other people is a(n) ________. a. follower b. leader c. employee d. manager Answer: b Diff: Easy Page Ref: 132 Goal: Distinguish managers from leaders, and recognize the importance of effective followers. 18. The biggest thing that separates leading from managing is the focus on ________. a. directing operations b. influencing people c. organizing departments d. controlling budgets Answer: b Diff: Easy Page Ref: 132 Goal: Distinguish managers from leaders, and recognize the importance of effective followers. 19. Effective followers ________. a. liability b. wait for others to step up c. support decisions based on personal opinion d. have a me rather than a we focus Answer: c Diff: Easy Page Ref: 133 Goal: Distinguish managers from leaders, and recognize the importance of effective followers. 20. Ineffective followers _______. a. actively support the leader b. support decisions based on personal opinion c. take responsibility for their own success d. are proactive in determining strategies Answer: b Diff: Easy Page Ref: 133 Goal: Distinguish managers from leaders, and recognize the importance of effective followers.

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21. A great leader is ________ a good manager ________ a good leader. a. both; and b. only; not c. not; only d. neither; nor Answer: a Diff: Easy Page Ref: 133 Goal: Distinguish managers from leaders, and recognize the importance of effective followers. 22. There are ________ Is that are attributed to great leaders. a. three b. four c. five d. six Answer: c Diff: Easy Page Ref: 134 Goal: Identify effective leadership, and develop leadership qualities in yourself. 23. All of the following qualities of great leaders EXCEPT ________. a. intelligence b. innovation c. inspiration d. initiative Answer: a Diff: Moderate Page Ref: 134 Goal: Identify effective leadership, and develop leadership qualities in yourself. 24. One quality of a great leader is _______, a. inventory b. innovation c. intelligence d. inquisitiveness Answer: b Diff: Easy Page Ref: 134 Goal: Identify effective leadership, and develop leadership qualities in yourself. 25. Leaders do all of the following EXCEPT ________. a. possess an entrepreneurial mindset b. look for new and better ways to get things accomplished c. have no vision d. innovate in order to effect change Answer: c Diff: Moderate Page Ref: 135 Goal: Identify effective leadership, and develop leadership qualities in yourself.

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26. A set of skills that help people better communicate with themselves and the people around them is known as ________ intelligence. a. emotional b. introspection c. vision d. leadership Answer: a Diff: Easy Page Ref: 135 Goal: Identify effective leadership, and develop leadership qualities in yourself. 27. Which of the following questions can help you gauge your own emotional intelligence? a. Do you get people excited about anything? b. Do others come to you for advice when they are trying to do something new? c. How often does your honesty cost you something important? d. Do you motivate yourself? Answer: d Diff: Easy Page Ref: 136 Goal: Identify effective leadership, and develop leadership qualities in yourself. 28. Emotional intelligence is about all of the following EXCEPT ________. a. ignoring disagreements b. being persuasive c. understanding others d. getting people to focus positively on their work Answer: a Diff: Easy Page Ref: 136 Goal: Identify effective leadership, and develop leadership qualities in yourself. 29. A leader who works with employees to find the best way to complete a job while maintaining final authority is a(n) ________ leader. a. laissez-faire b. free-reign c. autocratic d. democratic Answer: d Diff: Easy Page Ref: 136 Goal: Identify effective leadership, and develop leadership qualities in yourself. 30. Integrity is about ________. a. being inconsistent b. recognizing that there is no connection between words and actions c. fearing to stay true to yourself d. speaking truthfully Answer: d Diff: Moderate Page Ref: 137 Goal: Identify effective leadership, and develop leadership qualities in yourself.

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31. Which one of the following questions evaluates your integrity? a. What are you passionate about? b. Do you get people excited about anything? c. What do you tinker with in life? d. When is the last time you had to sacrifice something to uphold the truth? Answer: d Diff: Moderate Page Ref: 137 Goal: Identify effective leadership, and develop leadership qualities in yourself. 32. An evaluation in which everyone around a leader rates the leader's performance on a regular basis is called a(n) ________ evaluation. a. all-around b. 180° c. 360° d. super-thorough Answer: c Diff: Easy Page Ref: 138 Goal: Identify effective leadership, and develop leadership qualities in yourself. 33. All of the following will help you become a better leader EXCEPT ________. a. evaluating yourself b. accepting that you were just not born with leadership qualities c. allowing others to evaluate you d. pursuing a mentoring relationship Answer: b Diff: Easy Page Ref: 138 Goal: Identify effective leadership, and develop leadership qualities in yourself. 34. A document explaining where the company wants to go is a(n) ________ statement. a. vision b. mission c. financial d. introspection Answer: a Diff: Easy Page Ref: 139 Goal: Explain how a vision provides direction for an organization, and create a vision for your own career. 35. A mission statement ________. a. explains where the company wants to go b. describes why the company exists c. outlines the company's future purpose d. motivates, excites, and inspires everyone Answer: b Diff: Easy Page Ref: 139 Goal: Explain how a vision provides direction for an organization, and create a vision for your own career.

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36. A coffee shop chain states the following on its Web site: to inspire and nurture the human spirit—one person, one cup, and one neighborhood at a time. This is an example of a(n) ________ statement. a. innovation b. mission c. integrity d. vision Answer: b Diff: Challenging Page Ref: 139 Goal: Explain how a vision provides direction for an organization, and create a vision for your own career. 37. A college or university has the vision of helping every student to graduate within six years. Some people can use this vision as a tool to motivate professors and students. Which one of the four hats does this use of the vision affect? a. owners/investors/trustees b. managers/deans c. employees/professors d. customers/students Answer: b Diff: Moderate Page Ref: 140 Goal: Explain how a vision provides direction for an organization, and create a vision for your own career. 38. A college or university has the vision of helping every student to graduate within six years. Some people can use this vision to assess whether the college is one they want to do business with. Which one of the four hats does this use of the vision affect? a. customers/students b. employees/professors c. managers/deans d. owners/investors/trustees Answer: a Diff: Moderate Page Ref: 140 Goal: Explain how a vision provides direction for an organization, and create a vision for your own career. 39. Change can often be unsettling for people because it means they have to________. a. work in a predictable environment b. learn about the unknown c. accept traditions d. choose safety over fear Answer: b Diff: Easy Page Ref: 141 Goal: Describe the importance of change, and be able to lead it effectively and avoid its potential pitfalls.

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40. A transformational leader who leads others to seeing change as an opportunity in which they can thrive is ________. a. declaring victory too soon b. emphasizing managing over leading c. demonstrating integrity d. instilling confidence Answer: d Diff: Easy Page Ref:141 Goal: Describe the importance of change, and be able to lead it effectively and avoid its potential pitfalls. 41. Which of the following is the second in the five steps that people go through when assessing their reaction to something new? a. Persuade b. Decide c. Confirm d. Implement Answer: a Diff: Moderate Page Ref: 142 Goal: Describe the importance of change, and be able to lead it effectively and avoid its potential pitfalls. 42. Which of the following groups describes many leaders? a. Late Adopters b. Early Adopters c. Middle Adopters d. Innovators Answer: b Diff: Moderate Page Ref: 142-143 Goal: Describe the importance of change, and be able to lead it effectively and avoid its potential pitfalls. 43. ________ are reluctant to change, but they generally decide to change so they do not miss out on the next big thing. a. Middle Adopters b. Early Adopters c. Late Adopters d. Laggards Answer: c Diff: Easy Page Ref: 143 Goal: Describe the importance of change, and be able to lead it effectively and avoid its potential pitfalls.

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44. ________ may be isolated from society and have fewer social connections, which can prevent these people from seeing the benefit of an innovation or change. a. Innovators b. Late Adopters c. Laggards d. Early Adopters Answer: c Diff: Easy Page Ref: 143 Goal: Describe the importance of change, and be able to lead it effectively and avoid its potential pitfalls. 45. One pitfall of change is ________. a. stifling complacency b. creating a vision statement c. performing as a team d. failing to build a substantial coalition Answer: d Diff: Moderate Page Ref: 143 Goal: Describe the importance of change, and be able to lead it effectively and avoid its potential pitfalls. 46. The reason that a change program may break down into various plans without a sense of direction is the pitfall of ________. a. permitting roadblocks against the vision b. failing to understand the need for a clear vision c. declaring victory too soon d. not anchoring changes Answer: b Diff: Moderate Page Ref: 144 Goal: Describe the importance of change, and be able to lead it effectively and avoid its potential pitfalls. 47. The leader of a Web news company tells employees that the site must move now to link to social networking sites. The leader is ________. a. empowering people to act b. consolidating and moving forward c. establishing a sense of urgency d. anchoring the change Answer: c Diff: Moderate Page Ref: 144 Goal: Describe the importance of change, and be able to lead it effectively and avoid its potential pitfalls.

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48. Empowering people to act means ________. a. clearing the path for employees to embrace a change program b. giving them a good reason to change c. cementing changes in the organization's policies d. inviting innovators and early adopters to join the team leading change Answer: a Diff: Moderate Page Ref: 145 Goal: Describe the importance of change, and be able to lead it effectively and avoid its potential pitfalls. 49. Showing people how a change is working and ensuring management is reinforcing the change are steps in ________. a. empowering people to act b. creating a coalition c. anchoring the change d. establishing a sense of urgency Answer: c Diff: Moderate Page Ref: 145 Goal: Describe the importance of change, and be able to lead it effectively and avoid its potential pitfalls. 50. Any time a collection of people come together and form a relationship to achieve certain goals, then they can be considered a ________. a. group b. team c. unit d. band Answer: b Diff: Easy Page Ref: 146 Goal: Form effective teams and resolve team issues. 51. A team ________ the sum of its parts. a. is equal to b. is greater than c. has no relationship to d. is less than Answer: b Diff: Easy Page Ref: 146 Goal: Form effective teams and resolve team issues. 52. When a group becomes more cohesive and the individual members begin to feel part of a team, the group is in the team development stage of ________. a. performing b. adjourning c. storming d. norming Answer: d Diff: Easy Page Ref: 147 Goal: Form effective teams and resolve team issues.

AB_Ch06_TIF 53. Once a team has settled on a set of expectations and a process for getting things done, they are ready to move on to the ________ stage. a. adjourning b. performing c. storming d. forming Answer: b Diff: Easy Page Ref: 147 Goal: Form effective teams and resolve team issues. 54. In the storming stage of team development, ________. a. there is a large amount of conflict within the group b. members first come together and get to know each other c. the team may decide to disband d. the team is ready to get to work Answer: a Diff: Easy Page Ref: 145 Goal: Form effective teams and resolve team issues. 55. If there are no other tasks to accomplish, the team may decide to ________. a. storm b. form c. perform d. adjourn Answer: d Diff: Easy Page Ref: 148 Goal: Make short-term and long-term financing decisions based on risk and diversification. 56. ________ means giving specific tasks to the right people according to their individual skill sets while also effectively explaining and clarifying the task and the goal. a. Delegating tasks b. Avoiding groupthink c. Providing feedback d. Encouraging continuous learning Answer: a Diff: Easy Page Ref: 148 Goal: Form effective teams and resolve team issues. 57. ________ means promoting individual opinions. a. Encouraging continuous learning b. Providing feedback c. Delegating tasks d. Avoiding groupthink Answer: d Diff: Easy Page Ref: 148 Goal: Form effective teams and resolve team issues.

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58. ________ allows the free flow of information by discussing goals and clarifying the vision. a. Providing feedback b. Avoiding groupthink c. Encouraging continuous learning d. Delegating tasks Answer: c Diff: Easy Page Ref: 149 Goal: Form effective teams and resolve team issues. 59. ________ means identifying acceptable behavior or opportunities for improvement. a. Encouraging continuous learning b. Providing feedback c. Avoiding groupthink d. Delegating tasks Answer: b Diff: Easy Page Ref: 149 Goal: Form effective teams and resolve team issues. 60. ________ feedback is best. a. Immediate b. Next-day c. Delayed d. No Answer: a Diff: Easy Page Ref: 149 Goal: Form effective teams and resolve team issues.

SHORT ANSWERS 61. As a production supervisor, Hidemi spends much of his time looking at how production is organized and thinking of ways to innovate and improve. He holds strategy sessions with his team leaders to describe his intuitive vision for the future and the opportunities that he sees coming. Is Hidemi a manager or a leader? Why? ANSWER: Hidemi is a leader. He has the ability to motivate, inspire, and influence the behaviors of other people. Leaders depend on intuition and innovation. Diff: Easy Page Ref: 132 Goal: Distinguish managers from leaders, and recognize the importance of effective followers. 62. Do successful organizations employ only managers or only leaders? ANSWER: The most successful organizations employ both managers and leaders, with leaders throughout all levels of the organization’s hierarchy. Diff: Easy Page Ref: 133 Goal: Distinguish managers from leaders, and recognize the importance of effective followers. 63. Describe a leader whom you know. What leadership qualities does this person have? ANSWER: Student answers will vary. Examples should include a focus on intuition and innovation and the ability to motivate, inspire, and influence the behaviors of other people. Diff: Moderate Page Ref: 134 Goal: Distinguish managers from leaders, and recognize the importance of effective followers.

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64. Jennifer Wyatt wanted to find new customers for her store. On her own, she decided to hand out fliers in the neighborhood. Which of the five Is is Jennifer demonstrating? ANSWER: Jennifer is showing initiative by stepping up to the challenge, acting independently, and taking control of the situation. Diff: Moderate Page Ref: 135 Goal: Identify effective leadership, and develop leadership qualities in yourself. 65. Explain why you agree or disagree with the following statement: Effective leaders should choose one leadership style and stick with it no matter what. ANSWER: Disagree. To be effective, leaders need to be flexible and know when to apply the right leadership style in a particular situation. The chapter uses Sir Richard Branson as an example. He has an autocratic personality, but uses the free-reign and democratic styles appropriately. Diff: Moderate Page Ref: 136 Goal: Identify effective leadership, and develop leadership qualities in yourself. 66. Why would employees look for integrity from their leaders? ANSWER: Leaders establish the moral climate of an organization. Employees who value working in an organizational climate that shows integrity will expect the organization's leaders to set good examples. Diff: Moderate Page Ref: 137 Goal: Identify effective leadership, and develop leadership qualities in yourself. 67. What is your personal career vision? ANSWER: Student answers will vary, but show consideration for career goals. Look for answers to the two following questions: (1) What choices should I make? (2) How do I want to lead my career life? Diff: Moderate Page Ref: 140 Goal: Explain how a vision provides direction for an organization, and create a vision for your own career. 68. The employees in your company are not working in a way that supports the vision statement. As a transformational leader, what should you do? ANSWER: Leaders need to know how to lead change and influence reaction to change. Instill confidence. Help others accept change. Avoid the pitfalls of change. Diff: Moderate Page Ref: 141 Goal: Describe the importance of change, and be able to lead it effectively and avoid its potential pitfalls. 69. List the five steps that people go through when assessing their reaction to something new. ANSWER: (1) Know. (2) Persuade. (3) Decide. (4) Implement. (5) Confirm. Diff: Easy Page Ref: 142 Goal: Describe the importance of change, and be able to lead it effectively and avoid its potential pitfalls.

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70. Why is allowing too much complacency a pitfall of change? ANSWER: Complacency is being satisfied where you are and not taking the initiative to grow. When people get complacent, they aren’t motivated to change. Diff: Easy Page Ref: 143 Goal: Describe the importance of change, and be able to lead it effectively and avoid its potential pitfalls. 71. Why is it important to create a coalition in order to ensure successful change? ANSWER: Without support, you won’t be able to get the program off the ground. Ideally, you’d want the support of the entire organization, but if you wait for that before going through with a change program, nothing will get done. Invite innovators and early adopters to join your coalition. Diff: Moderate Page Ref: 144-145 Goal: Describe the importance of change, and be able to lead it effectively and avoid its potential pitfalls. 72. In order to ensure successful change, why is it necessary to consolidate and keep moving? ANSWER: After celebrating a small goal, it may be tempting to take it easy. This can lead to one of the reasons change programs fail: Declaring victory too soon. Diff: Easy Page Ref: 145 Goal: Describe the importance of change, and be able to lead it effectively and avoid its potential pitfalls. 73. Describe the forming stage of team development. ANSWER: This is the stage in which members first come together and get to know each other. The ground rules of the group are established at this point. Diff: Easy Page Ref: 147 Goal: Form effective teams and resolve team issues. 74. Describe the interaction between leadership styles and team development stages. ANSWER: Different styles of leadership are needed at different stages of team development, and team leaders need to understand which style—autocratic, democratic, free-reign, or other—is most effective at each stage. An effective team leader is therefore able to adjust his or her style as appropriate. Diff: Challenging Page Ref: 148 Goal: Form effective teams and resolve team issues. 75. Imagine a student receiving the following feedback from an instructor: You flunked the last test. You do not study hard enough. How would you restate the feedback to be more professional and focused on behavior. ANSWER: Student answers will vary, but should follow a pattern like this: You grade on the last test was an F. A good next step would for us to work on your study habits. Diff: Moderate Page Ref: 149 Goal: Form effective teams and resolve team issues.

CHAPTER 7 Own: Entrepreneurship, Innovation, and Forms of Ownership TRUE/FALSE 1. A person who assumes the risks associated with organizing and managing a completely new business venture is called an entrepreneur. Answer: True Diff: Easy Page Ref: 155 Goal: Appreciate what it takes to be a successful entrepreneur. 2. Successful entrepreneurs are willing to accept any challenge, regardless of the risk involved. Answer: False Diff: Easy Page Ref: 157 Goal: Appreciate what it takes to be a successful entrepreneur. 3. Entrepreneurs need to address the problems of the present and must be able to let go of any need for a ten-year plan. Answer: False Diff: Moderate Page Ref: 157 Goal: Appreciate what it takes to be a successful entrepreneur. 4. Entrepreneurship requires an innovative spirit. Answer: False Diff: Moderate Page Ref: 159 Goal: Recognize innovation when you see it and justify its effect on the triple bottom line. 5. Innovation is change that customers reward with their purchasing power. Answer: True Diff: Easy Page Ref: 159 Goal: Recognize innovation when you see it and justify its effect on the triple bottom line. 6. The three types of innovation are incremental, disruptive, and exponential. Answer: False Diff: Easy Page Ref: 160 Goal: Recognize innovation when you see it and justify its effect on the triple bottom line. 7. Amazon.com’s Kindle, a wireless reading device, is an example of a disruptive innovation. Answer: True Diff: Moderate Page Ref: 160 Goal: Recognize innovation when you see it and justify its effect on the triple bottom line. 8. Entrepreneurs use SWOT analyses to find competitive advantages. Answer: True Diff: Moderate Page Ref: 162 Goal: Conduct a SWOT analysis to identify opportunities and drive decisions. 9. The document that compares a company’s internal strengths and external opportunities against their internal weaknesses and external threats is called a competitive balance sheet. Answer: False Chapter 7—Page 1

Diff: Easy Page Ref: 162 Goal: Conduct a SWOT analysis to identify opportunities and drive decisions. 10. The Post-It note was developed by an employee of 3M who had a new product idea. This employee was an intrapreneur. Answer: True Diff: Easy Page Ref: 165 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. 11. Purchasing an established business can be considered a form of entrepreneurship. Answer: True Diff: Easy Page Ref: 166 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. 12. Sole proprietors can treat sales revenues and operating expenses as part of their personal finances, paying taxes based on their personal tax rate. Answer: True Diff: Challenging Page Ref: 167 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. 13. Partnerships are the most common type of business because most people like to share responsibility and risk. Answer: False Diff: Easy Page Ref: 167 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. 14. Sole proprietorships have the easiest time obtaining loans from banks because they need less start-up capital than businesses with multiple owners. Answer: False Diff: Easy Page Ref: 168 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. 15. A business plan states an entrepreneur’s goals and the plan to achieve them. Answer: True Diff: Easy Page Ref: 170 Goal: Explain the critical components of a business plan. 16. A business plan should not list the names of the management team to avoid corporate raiding of staff. Answer: False Diff: Easy Page Ref: 172 Goal: Explain the critical components of a business plan. 17. It is never a good idea to include best- and worst-case scenarios in the financial analysis section of a business plan. Answer: False Diff: Moderate Page Ref: 173 Chapter 7—Page 2

Goal: Explain the critical components of a business plan. 18. Angel investors provide business start-ups with capital without asking for anything in return. Answer: False Diff: Easy Page Ref: 175 Goal: Locate helpful resources for starting a business, and avoid common mistakes. 19. Lynn, with a new degree in culinary arts, planned to start a catering business. Her mother, a chef in a French restaurant, offered to lend her $50,000 in return for a 30% share in the business and partial ownership. In this case, her mother is a venture capitalist. Answer: True Diff: Challenging Page Ref: 175 Goal: Locate helpful resources for starting a business, and avoid common mistakes. 20. Business incubators provide support to entrepreneurial businesses, including shared office spaces and support staff. Answer: True Diff: Easy Page Ref: 176 Goal: Locate helpful resources for starting a business, and avoid common mistakes. MULTIPLE CHOICE 21. A person who assumes the risks associated with organizing and managing a completely new business venture is called a(n) ________. a. innovator b. entrepreneur c. chief financial officer d. chief operating officer Answer: b Diff: Easy Page Ref: 155 Goal: Appreciate what it takes to be a successful entrepreneur. 22. Ani DiFranco is considered to be an entrepreneur because she ________. a. started her own record label b. writes anti-capitalist lyrics c. re-energized the Detroit area d. is successful Answer: a Diff: Easy Page Ref: 156 Goal: Appreciate what it takes to be a successful entrepreneur. 23. Entrepreneurs share some similar characteristics, among which are ________. a. reserve and optimism b. optimism and integrity c. integrity and pessimism d. risk avoidance and pessimism Answer: b Diff: Easy Page Ref: 157 Goal: Appreciate what it takes to be a successful entrepreneur.

Chapter 7—Page 3

24. Which person would MOST likely be a successful entrepreneur? a. Erica, who asks others to help her decide what to do next b. Allison, who embraces challenge, risk, and unexpected situations c. Steve, who focuses on the details of his current projects d. Jack, who needs regular paychecks to cover tuition Answer: b Diff: Moderate Page Ref: 157 Goal: Appreciate what it takes to be a successful entrepreneur. 25. Juanita is the type of person who adapts to unexpected situations, who quickly comes up with innovative solutions to problems she encounters, and who takes charge of putting solutions into practice. Would she likely become a successful entrepreneur? a. No, because she does not spend enough time thinking through the situation. b. Yes, because she is willing to share her ideas with others. c. Yes, because she takes responsibility for what needs to be done and does it. d. No, because she doesn’t ask for other opinions before launching into her plan of attack. Answer: c Diff: Moderate Page Ref: 157 Goal: Appreciate what it takes to be a successful entrepreneur. 26. Which statement is FALSE? To improve their chances of success, entrepreneurs should ________. a. make sure their talents exceed any risks they may encounter b. take the time to weigh all the possible risks they may encounter c. take calculated risks and proceed only when they have a reasonable chance of success d. take extreme risks and proceed quickly into the market before another company gets there first Answer: d Diff: Easy Page Ref: 157 Goal: Appreciate what it takes to be a successful entrepreneur. 27. Which of the following is NOT a goal of innovation? a. to earn a good reputation and cash in the marketplace b. to make a positive change in something so it increases in value c. to introduce customers to things they didn’t know they needed d. to revolutionize an industry Answer: c Diff: Moderate Page Ref: 159 Goal: Recognize innovation when you see it and justify its effect on the triple bottom line. 28. Which is NOT one of the levels of innovation? a. incremental b. disruptive c. revolutionary d. exponential Answer: d Diff: Easy Page Ref: 160 Goal: Recognize innovation when you see it and justify its effect on the triple bottom line.

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29. What level of innovation involves a simple improvement in current products or services? a. incremental b. disruptive c. revolutionary d. exponential Answer: a Diff: Easy Page Ref: 160 Goal: Recognize innovation when you see it and justify its effect on the triple bottom line. 30. Apple’s iPhone made improvements on the cellular phone. This is an example of ________ innovation. a. incremental b. disruptive c. revolutionary d. exponential Answer: a Diff: Moderate Page Ref: 160 Goal: Recognize innovation when you see it and justify its effect on the triple bottom line. 31. What level of innovation involves improving on an existing product and transforming an industry? a. incremental b. disruptive c. revolutionary d. exponential Answer: b Diff: Easy Page Ref: 160 Goal: Recognize innovation when you see it and justify its effect on the triple bottom line. 32. Amazon.com created a new way to read newspapers, magazines, and books with the Kindle, a wireless reading device. This is an example of ________ innovation. a. incremental b. disruptive c. revolutionary d. exponential Answer: b Diff: Moderate Page Ref: 160 Goal: Recognize innovation when you see it and justify its effect on the triple bottom line. 33. What level of innovation extends past individual products and markets to transform society and create a new way of living? a. incremental b. disruptive c. revolutionary d. exponential Answer: c Diff: Easy Page Ref: 160 Goal: Recognize innovation when you see it and justify its effect on the triple bottom line.

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34. The best example of a revolutionary innovation is ________. a. Microsoft Word 7.0 b. Apple iPhone c. the cell phone d. the Internet Answer: d Diff: Moderate Page Ref: 160 Goal: Recognize innovation when you see it and justify its effect on the triple bottom line. 35. Antonio runs an innovative company and focuses on the triple bottom line. What is NOT part of this focus? a. Turning the best profit b. Connecting with customers and giving them what they want c. Seeking professional rewards for marketing purposes d. Going green without undue financial hardship Answer: c Diff: Moderate Page Ref: 161 Goal: Recognize innovation when you see it and justify its effect on the triple bottom line. 36. Which is NOT one of Tom Kelly’s ideas for priming yourself for innovation? a. Think like an experimenter. b. Embrace age as experience. c. Use all of your brain d. Act like a traveler. Answer: b Diff: Easy Page Ref: 161 Goal: Recognize innovation when you see it and justify its effect on the triple bottom line. 37. When entrepreneurs perform SWOT analyses, they analyze the organization’s resources. They are identifying ________. a. strengths and weaknesses b. the triple bottom line c. opportunities and threats d. innovative ideas Answer: a Diff: Challenging Page Ref: 162 Goal: Conduct a SWOT analysis to identify opportunities and drive decisions. 38. When entrepreneurs perform a SWOT analyses, they analyze the environment. They are identifying ________. a. strengths and weaknesses b. the triple bottom line c. opportunities and threats d. innovative ideas Answer: c Diff: Challenging Page Ref: 162 Goal: Conduct a SWOT analysis to identify opportunities and drive decisions.

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39. In a SWOT analysis, the document that compares a company’s internal strengths and external opportunities against their internal weaknesses and external threats is called a ________. a. strategic balance sheet b. competitive balance sheet c. innovative balance sheet d. entrepreneurial balance sheet Answer: a Diff: Moderate Page Ref: 162 Goal: Conduct a SWOT analysis to identify opportunities and drive decisions. 40. What is the term for the skills and expertise of one company’s employees, which are considered better than those of people in other companies within the industry? a. cultural cores b. competitive intelligence c. core competencies d. critical competencies Answer: c Diff: Easy Page Ref: 163 Goal: Conduct a SWOT analysis to identify opportunities and drive decisions. 41. Which statement about SWOT analysis is FALSE? a. SWOT can be used by anyone for anything. b. SWOT can be used to find competitive advantages. c. SWOT can be used to identify core competencies. d. SWOT can be used as a one-time process. Answer: d Diff: Moderate Page Ref: 163 Goal: Conduct a SWOT analysis to identify opportunities and drive decisions. 42. A person who uses his or her entrepreneurial skills within an organization is a(n) ________. a. intrapreneur b. interpreneur c. social entrepreneur d. franchisee Answer: a Diff: Easy Page Ref: 165 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. 43. When 3M employee, Arthur Fry, invented the Post-It note, he was acting as a(n) ________. a. intrapreneur b. interpreneur c. social entrepreneur d. franchisee Answer: a Diff: Moderate Page Ref: 165 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies.

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44. A person who blends traditional entrepreneurial business development with objectives for the greater good of society is a(n) ________. a. intrapreneur b. business purchaser c. social entrepreneur d. franchisee Answer: c Diff: Easy Page Ref: 165 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. 45. What is one of the reasons an entrepreneur might want to consider buying an existing business? a. Staff loyalty to the company is guaranteed. b. It is easy to change customer’s perception of the company if needed. c. It is not necessary to start the business from scratch. d. There is no need to worry about mistakes made by the previous owner. Answer: c Diff: Easy Page Ref: 166 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies.

46. In a franchise agreement, a franchisee is ________. a. the parent company b. the local owner c. the supplier d. the customer base Answer: b Diff: Easy Page Ref: 166 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. 47. In a franchise agreement, a franchisor is ________. a. the parent company b. the local owner c. the supplier d. the customer base Answer: a Diff: Easy Page Ref: 166 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. 48. Owners of Subway restaurants, Supercuts hair salons, and UPS Stores are called ________. a. intrapreneurs b. interpreneurs c. social entrepreneurs d. franchisees Answer: d Diff: Moderate Page Ref: 166 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies.

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49. What is NOT a benefit of owning a franchise? a. Training is provided by the parent company. b. All profits remain with the franchisee. c. Advertising is done by the franchisor. d. There is limited risk involved. Answer: b Diff: Easy Page Ref: 166 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. 50. Glenda plans to buy a video store franchise. Which of the following MOST likely convinced her to buy a franchise instead of starting up her own business? a. Business owners are not totally responsible for their decision making. b. Business owners are not responsible for paying royalty fees in a franchise. c. Business owners are confident that the franchise company has a proven system of operation. d. Business owners are guaranteed not to compete with other franchisers. Answer: c Diff: Challenging Page Ref: 166 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. 51. The U.S. Department of Commerce considers a business “small” if it has fewer than ________ employees. a. 10 b. 50 c. 100 d. 500 Answer: d Diff: Moderate Page Ref: 167 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. 52. What form of business is owned and operated by a single person? a. sole proprietorship b. partnership c. limited partnership d. corporation Answer: a Diff: Easy Page Ref: 167 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. 53. Which is NOT an advantage of a sole proprietorship? a. They are easy to start. b. The owner has complete control. c. Special tax forms aren’t required. d. It is relatively easy to raise money for expansion. Answer: d Diff: Easy Page Ref: 167 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. Chapter 7—Page 9

54. Cecilia is opening a flower shop and has decided to operate as a sole proprietorship. Her sister warned her about ________, which is the legal principle holding Cecilia responsible for paying off all the debts of the business. a. privity b. limited liability c. unlimited liability d. unrestricted debt Answer: c Diff: Moderate Page Ref: 167 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. 55. What form of business is owned and operated by two or more people? a. sole proprietorship b. partnership c. limited liability company d. corporation Answer: b Diff: Easy Page Ref: 168 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. 56. What is NOT an advantage of a partnership? a. There is automatic unlimited liability. b. There is more start-up money available. c. They are very flexible. d. There are shared resources. Answer: a Diff: Easy Page Ref: 168 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. 57. Ryan and Kara have decided to start a landscaping business. One of the first things that they

do is sign the ________, which describes the investments and their responsibilities and makes provisions for the allocations of profits and dissolution of the business. a. articles of in corporation b. partnership agreement c. partnership charter d. corporate charter Answer: b Diff: Moderate Page Ref: 168 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. 58. A(n) ________ invests money in a partnership, but is liable only to the extent of his/her investment. a. agent b. general partner c. limited partner d. officer Chapter 7—Page 10

Answer: c Diff: Easy Page Ref: 168 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. 59. Which statement is FALSE? a. A limited partner is an investor in the business. b. All partners participate in running the business, including a limited partner. c. Limited liability is only offered to a limited partner. d. There may be more than one limited partner in a business. Answer: b Diff: Moderate Page Ref: 168 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. 60. What form of business is its own separate legal entity, distinct from its owners? a. sole proprietorship b. partnership c. limited partnership d. corporation Answer: d Diff: Easy Page Ref: 168 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. 61. American Business Machines is organized as a corporation. Its income will be taxed first at

the corporate level and also on shareholder returns as dividends. This situation is known as ________. a. double taxation b. dual costs c. regulatory costs d. dual taxation Answer: a Diff: Moderate Page Ref: 169 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. 62. What form of business combines the limited liability advantages of a corporation with the tax advantages of a partnership? a. limited partnership b. limited corporation c. limited liability company d. limited liability partnership Answer: c Diff: Easy Page Ref: 169 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies.

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63. In a ________, an entrepreneur summarizes strategy for a new venture and shows how it will be implemented. a. venture capital plan b. business plan c. franchise agreement d. financial analysis Answer: b Diff: Easy Page Ref: 170 Goal: Explain the critical components of a business plan. 64. A business plan is a ________. a. program that details a network of contacts to support a business. b. formal document that outlines a company's goals and strategies. c. list of tasks and a time frame for accomplishing them. d. research paper on the viability of a business proposal. Answer: b Diff: Moderate Page Ref: 170 Goal: Explain the critical components of a business plan. 65. Which is NOT a typical element of a business plan? a. terms for credit purchases b. mission statement c. marketing plan d. financial analysis Answer: a Diff: Easy Page Ref: 171 Goal: Explain the critical components of a business plan. 66. Which of the following statements would NOT appear in a business plan for Perez's Pets? a. Within the next three years, Perez's Pets plans on opening two more locations in the state. b. The financial forecast for the next quarter is strong. c. Perez's Pets sold a record number of dog collars during Labor Day weekend. d. Perez's Pets currently employs three full-time employees and six part-time employees. Answer: c Diff: Moderate Page Ref: 171 Goal: Explain the critical components of a business plan. 67. Which statement about the executive summary section of a business plan is FALSE? a. It should describe the business. b. It should identify the goals and objectives of the business. c. It should identify what is sought from potential investors. d. It should sound professional and be written in formal, technical language. Answer: d Diff: Moderate Page Ref: 171 Goal: Explain the critical components of a business plan. 68. Which is NOT contained in the business description section of a business plan? a. the company’s legal name and form b. the company’s market niche c. the company’s proposed location d. the company’s vision statement Chapter 7—Page 12

Answer: b Diff: Easy Page Ref: 171 Goal: Explain the critical components of a business plan. 69. What is the best example of a mission statement? a. We are in the business of entertaining children. b. We are seeking improved profits. c. We must retrain our employees. d. We are focused on quality. Answer: a Diff: Moderate Page Ref: 171 Goal: Explain the critical components of a business plan. 70. When writing a business plan, entrepreneurs identify the competition, including the ________, which is the subset of the group on which their product is focusing. a. strategic niche b. competitive niche c. market niche d. SWOT niche Answer: c Diff: Moderate Page Ref: 172 Goal: Explain the critical components of a business plan. 71. What should NOT be included in the management team section of a business plan? a. the name of the entrepreneur in a top management position b. the specialists or consultants c. the management style of the company d. the competitors Answer: d Diff: Easy Page Ref: 172 Goal: Explain the critical components of a business plan. 72. What questions would NOT be answered in the marketing plan section of a business plan? a. What are the sales forecasts for the product? b. What are the income projections for the product? c. How does the product compare to the competition? d. What will ensure repeat customers? Answer: b Diff: Moderate Page Ref: 172 Goal: Explain the critical components of a business plan. 73. People who invest their clients’ money into a business in exchange for partial ownership and a high return on investment are called ________. a. angel investors b. venture capitalists c. commercial lenders d. business incubators Answer: b Diff: Easy Page Ref: 175 Goal: Locate helpful resources for starting a business, and avoid common mistakes.

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74. People who invest their own money into a business in return for some level of ownership are called ________. a. angel investors b. venture capitalists c. commercial lenders d. business incubators Answer: a Diff: Easy Page Ref: 175 Goal: Locate helpful resources for starting a business, and avoid common mistakes. 75. The Small Business Administration is ________. a. an institution funded and run by the federal government to help small businesses prosper b. an independent agency of the federal government that helps small businesses prosper c. a private corporation founded by entrepreneurs to help small businesses prosper d. a state-run organization found on many college campuses that helps small businesses prosper Answer: b Diff: Challenging Page Ref: 176 Goal: Locate helpful resources for starting a business, and avoid common mistakes. 76. SCORE members are ________. a. venture capitalists b. commercial lenders c. retired executives d. employed by the SBA Answer: c Diff: Easy Page Ref: 176 Goal: Locate helpful resources for starting a business, and avoid common mistakes. 77. The volunteer group that counsels small business start ups is ________. a. SBDA b. NASE c. SBA d. SCORE Answer: d Diff: Easy Page Ref: 176 Goal: Locate helpful resources for starting a business, and avoid common mistakes. 78. What resource provides management support services to start-up businesses, including shared office space and administrative services? a. business incubators b. SCORE c. Small Business Administration d. U.S. Chamber of Commerce Small Business Center Answer: a Diff: Easy Page Ref: 176 Goal: Locate helpful resources for starting a business, and avoid common mistakes.

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79. Justin is planning on starting his own automation company. He was referred to an organization that provides support services, such as networking, financing, and administrative support. This organization is ________. a. the Service Corp of Retired Engineers b. the U.S. Chamber of Commerce Small Business Center c. a business incubator d. the Entrepreneurs Organization Answer: c Diff: Moderate Page Ref: 176 Goal: Locate helpful resources for starting a business, and avoid common mistakes. 80. Entrepreneurs make some common mistakes. What is not one of them? a. They do not have enough experience in economics and finance. b. They incur too much credit card debt. c. The do not properly predicting cash flow. d. They use excess personal funds to finance the business. Answer: d Diff: Moderate Page Ref: 177 Goal: Locate helpful resources for starting a business, and avoid common mistakes. SHORT ANSWER 81. What are some common items that appear on the “To Do” lists of successful entrepreneurs? Answer: Successful entrepreneurs act in certain ways. To act like an entrepreneur, take on responsibility, cope with risk, stay optimistic, set goals and stick to them, solve problems and learn from them, invest in the long term, act with integrity, and give back the community. Diff: Moderate Page Ref: 156 Goal: Appreciate what it takes to be a successful entrepreneur. 82. Why should entrepreneurs consider giving back to the community? Answer: Entrepreneurs who give back to the community can expect the community to give back to them. The text cites the example of Mike Ilitch who founded Little Caesars Pizza. When his business started to thrive, he revitalized Detroit landmarks and reintroduced the Detroit Red Wings. The community paid attention to these charitable acts. This propelled Little Caesars into a successful franchise. Diff: Moderate Page Ref: 158 Goal: Appreciate what it takes to be a successful entrepreneur. 83. What does it mean for an entrepreneur to act with integrity? Answer: Successful entrepreneurs are willing to do what is right, even if it means making tough decisions. Cultivating an atmosphere of trust and respect with employees and customers can boost a company’s reputation and, by extension, its profits. Diff: Moderate Page Ref: 158 Goal: Appreciate what it takes to be a successful entrepreneur. 84. Innovations are successful only if customers want them. Explain this statement with an example. Answer: Innovation is change that customers reward with their purchasing power. The text cites a good example of this with the Nokia cell phone. Nokia introduced a phone with many high-tech features, but, after interviewing customers, found that these features were confusing and difficult to use. When Chapter 7—Page 15

Nokia took customer advice and added some lower-tech, but highly desirable, features to its phone offerings, these phones caught on with customers. Diff: Moderate Page Ref: 159 Goal: Recognize innovation when you see it and justify its effect on the triple bottom line. 85. What are the three levels of innovation? Give an example of each. Answer: Incremental innovation is a simple improvement in current products or services. An example is Word 7.0. Disruptive innovation involves unprecedented products that transform an industry. An example is the cell phone. Revolutionary innovation extends past individual products and markets to transform society and create a new way of living. An example is the Internet. Diff: Moderate Page Ref: 160 Goal: Recognize innovation when you see it and justify its effect on the triple bottom line. 86. Technology has created new modes of innovation. Explain this statement with an example. Answer: Companies like Google, Facebook, and Apple are changing the nature of innovation by allowing customers to use technology to create unique, personalized products and services. No two Google homepages or iTunes libraries are the same. Now, innovation requires collaborating with customers and using global technologies to help each customer design the exact product that best fits his/her lifestyle. Diff: Moderate Page Ref: 160 Goal: Recognize innovation when you see it and justify its effect on the triple bottom line. 87. How do innovative companies focus on the triple bottom line? Give examples. Answer: Innovative companies focus on profits for basic survival. They also focus on people by creating products that enhance a person’s quality of life. These products aren’t merely moneymaking tools; they allow a company to connect directly with customers by giving them what they want. Innovative companies also focus on the planet by creating a culture of environmental sustainability. Diff: Moderate Page Ref: 161 Goal: Recognize innovation when you see it and justify its effect on the triple bottom line. 88. Why would an entrepreneur use a SWOT analysis? Answer: Entrepreneurs use SWOT techniques to create a strategic balance sheet that details a company’s strengths and weaknesses. They also use SWOT to constantly evaluate new opportunities and avoid threats in their industry. Diff: Moderate Page Ref: 162 Goal: Conduct a SWOT analysis to identify opportunities and drive decisions. 89. Define core competencies. What is your core competency? Answer: Core competencies are a company’s skills and areas of expertise, which are considered better than those of other companies within the industry. Personal core competencies include educational degrees, professional experience, interpersonal skills, etc. Diff: Moderate Page Ref: 163 Goal: Conduct a SWOT analysis to identify opportunities and drive decisions. 90. Why would anyone prefer to be an intrapreneur instead of an entrepreneur? Answer: Chapter 7—Page 16

Intrapreneurs may not want to accept the risks of being an entrepreneur, but they may still have the drive and innovation to make differences in their organizations. Diff: Moderate Page Ref: 165 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. 91. What are social entrepreneurs? Answer: Social entrepreneurs are people who blend traditional entrepreneurial business development with social objectives for the greater good of society. An example from the textbook is the Delancey Street Foundation. Diff: Moderate Page Ref: 166 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. 92. What are the benefits of buying a franchise over buying another kind of business? Answer: One of the best benefits of franchising is the limited risk involved. A franchise is a known entity within a community. The franchisor provides training, advertising, and other support services to the new business owner. Diff: Moderate Page Ref: 166 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. 93. Compare and contrast partnerships and corporations. Answer: In a partnership, two or more people share ownership of the business. There is more start-up money because each partner contributes to the business, there is more flexibility for partners to specialize in certain areas of the business, and there are shared resources. Partners may find that they have differences in work ethic or management style. General partners have unlimited liability; limited partners have limited liability. A corporation is its own legal entity separate from the owners. Corporations benefit from the ease of raising money and from limited liability. The downside to incorporating is increased paperwork and double taxation. Diff: Moderate Page Ref: 168 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. 94. What are the advantages and disadvantages of a limited liability company? Answer: Limited liability companies (LLCs) have limited liability and are not doubly taxed. Unfortunately, since the profits are reported on the investor’s tax return, increased profits can raise personal taxes. Diff: Moderate Page Ref: 169 Goal: Contrast the different flavors of entrepreneurship and legal forms of ownership and understand the risk/reward trade-offs that each implies. 95. Why is writing a business plan important to the success of a company? Answer: A business plan can improve a company’s chance of success because writing and researching it can help clarify what the company wants to accomplish in areas such as marketing, operations, finances, Chapter 7—Page 17

personnel, and long-term development. Diff: Moderate Page Ref: 170 Goal: Explain the critical components of a business plan. 96. What information is included in the executive summary of a good business plan? Answer: The executive summary should include a brief description of the business, the company’s goals and objectives, and what the business is seeking from potential investors. Diff: Moderate Page Ref: 171 Goal: Explain the critical components of a business plan. 97. Write a mission statement for the kind of clothing company at which you’d like to shop. Answer: An example: “Our mission is to improve our customers’ quality of life by providing cutting-edge clothing fashions in a boutique setting.” Diff: Moderate Page Ref: 171 Goal: Explain the critical components of a business plan. 98. List and describe three sources of funding for businesses. Answer: Three sources of funding are: personal finances, angel investors, and venture capitalists. Personal sources include cash of one’s own or an equity loan on valuable possessions. Angel investors are wealthy individuals who provide capital for businesses in exchange for some level of ownership. Venture capitalists are professional money managers who invest their client’s money in promising new businesses in exchange for partial ownership and a high return on the investment. Diff: Moderate Page Ref: 174 Goal: Locate helpful resources for starting a business, and avoid common mistakes. 99. What is the Small Business Administration and what services do they provide an entrepreneur? Answer: The SBA is an independent government agency that helps get businesses up and running and provides training and loans to keep the businesses going. Diff: Moderate Page Ref: 176 Goal: Locate helpful resources for starting a business, and avoid common mistakes. 100. How do business incubators help start-up companies? Answer: Business incubators provide a wide range of management support services and resources for start ups, including shared office space that several companies can use simultaneously to reduce overhead costs, office equipment, meeting rooms, and a fee-based business support staff to answer phones and perform basic administrative work. Diff: Moderate Page Ref: 176 Goal: Locate helpful resources for starting a business, and avoid common mistakes.

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Chapter 8 Act: Ethics and Corporate Social Responsibility

Learning Objectives: Ethical dilemmas What an ethical organization looks like An ethical toolbox Making ethical decisions Ethical dilemmas applied to different organizational departments Global ethics issues Corporate social responsibility

Multiple-choice questions

1. a) b) c) d)

Business ethics is ______________________. the impact of moral decisions on the business environment the practice of high moral values in a business environment the study of moral principles and conduct within a business environment setting a good example that follows a business code of conduct

c; easy; p. 184 Learning Objective: Ethical dilemmas

2. Ethics are rules or standards that govern_____. a. laws b. employees c. conduct d. morals c; moderate; p. 184 Learning Objective: Ethical dilemmas

3. What do you call a situation in which you have a war with your values and you must choose between two conflicting but arguably valid sides? a. A debate b. A quarrel c. An argument d. An ethical dilemma d; moderate; p. 184 Learning Objective: Ethical dilemmas

4. If you are having an ethical dilemma at work, generally the best way to address it is to _____________. a) take an aspirin b) request a leave of absence c) speak with your supervisor or manager d) take a 360° view of the situation d; easy; p. 185 Learning Objective: Ethical dilemmas

5. When news broke that seven people in the Chicago area who had purchased Tylenol, the Johnson & Johnson brand of painkiller, had died after ingesting pills from the bottles, Johnson & Johnson ______________. a) lowered the price of Tylenol on the market b) hired lawyers and followed their advice c) formed a strategy team to figure out how to protect the public from danger d) recalled 300,000 bottles of Tylenol from stores in the Chicago area c; moderate; p. 186 Learning Objective: An ethical toolbox

6. When the Exxon Valdez oil tanker spilled 11 million gallons of oil into Prince William Sound, Exxon _____________________. a) cooperated with the Coast Guard and the State of Alaska in b) launched a public relations campaign c) tried to shift the blame for the spill to the captain of the tanker d) researched the extent of ecological damage in the area b; moderate; p. 187 Learning Objective: An ethical toolbox

7. a) b) c) d)

A strong code of ethics helps promote _____________________. corporate identity and wealth management quality control and improved employee relations public confidence and loyalty positive public image and quality control

c; moderate; p. 188 Learning Objective: An ethical toolbox

8. a. b. c. d.

A company that has a code of ethics is one that_____. is consistently legal. is concerned about stakeholders’ rights. requires employees to be moral. is always concerned about the environment.

b; difficult; p. 188 Learning Objective: An ethical toolbox

9. a) b) c) d)

Codes of conduct generally cover ________________. Letter writing and corporate gift-giving etiquette dress code and gift-giving etiquette policies regarding the use of personal cell phones in the workplace gender discrimination issues and policies regarding receiving gifts

d; moderate; p. 188 Learning Objective: An ethical toolbox

10. Which of the following is not one of the tools leaders use to create an ethical organization? a) Cost-benefit analysis b) Code of conduct c) Code of ethics d) Ethics management program a; moderate; p. 188 Learning Objective: An ethical toolbox

11. Employees are aided in handling ethical dilemmas in the workplace best by ________________. a) comparing their issues with the ethics management programs of other businesses in the same industry b) the launch of an ethics training program c) ongoing policies and procedures d) the publication of an organization’s code of ethics c; challenging; p. 189 Learning Objective: An ethical toolbox

12. Ethisphere Institute is an international think tank dedicated to _________________. a) promoting business ethics b) evaluating companies around the world on the basis of their corporate hiring practices c) awarding employees who have reported on ethics violations within the companies they work for d) creating ethics management programs for multi-national corporations a; moderate; p. 189 Learning Objective: An ethical toolbox

13. If the ethics committee for a company decided to focus on customer service and satisfaction, you would expect to see ________________________. a) recycling receptacles placed in key locations at corporate headquarters b) policies regarding phone calls c) policies regarding computer use d) the hiring of a new public relations firm to handle corporate image b; moderate; p. 189 Learning Objective: An ethical toolbox

14. Which of the following tools will not provide solid guidelines for ethical behavior within a company? a) A code of ethics b) A corporate watchdog group c) A mission statement that emphasizes both profit making and ethics d) A code of conduct b; moderate; p. 190 Learning Objective: An ethical toolbox

15. Which of the following is not a helpful sign that you are making an ethical decision? a) Feeling like a headache is coming on b) Feeling butterflies in your stomach c) Wondering what your best friend would do in the same situation d) Thinking about putting your decision on your Facebook page a; moderate; p. 190 Learning Objective: Making ethical decisions

16. When evaluating a decision based on the ethical norm of utility, a manager will consider which of the following questions? a) Is the decision consistent with what we regard as fair? b) Does the decision respect the rights of the individuals involved? c) Is the decision consistent with people's responsibility to each other? d) Does the decision optimize the benefits for those who are affected by it? d; moderate; p. 191 Learning Objective: Making ethical decisions

17. The Universalist principle ___________________. a) looks at a person’s character b) takes a utilitarian approach c) has similarities to the Golden Rule d) will help in making decisions without allowing personal feelings to get in the way c; moderate; p. 192 Learning Objective: Making ethical decisions

18. Employees who are working for wages that are so low that they are unable to maintain an acceptable standard of living is a example of __________________. a) the Virtue Principle b) Cost-Benefit Analysis c) the Distributive Justice Principle d) the Moral Rights Principle d; challenging; p. 193 Learning Objective: Making ethical decisions

19. Which of the following is not a key step for a business to take in making an ethical decision? a) Determine the costs involved in conducting an annual ethics assessment. b) Consider who the decision will affect. c) Research similar instances. d) Consider people and the environment in addition to other factors. a; moderate; p. 194 Learning Objective: Making ethical decisions

20. When a company insider discloses something that exposes illegal or unethical behavior by others within the organization it is __________. a. whistle-blowing b. unethical c. likely to lead to a firing d. considered to be spying a; easy; p. 195 Learning Objective: Making ethical decisions

21. When the accounting firm Arthur Anderson was found to have acted unethically with regard to three major firms: Enron, Waste Management and Sunbeam, this said a lot about ________________. a) all the accountants who worked for that firm b) the accounting business in general c) the culture of the company d) the power of accountants in the mismanagement of client affairs c; challenging; p. 196 Learning Objective: Ethical dilemmas applied to different organizational departments

22. When accountants file inaccurate numbers in order to cover up losses this is called ____________. a) a felony b) poor management c) fraud d) a Ponzi scheme c; moderate; p. 196 Learning Objective: Ethical dilemmas applied to different organizational departments

23. Which of the following government agencies was created to protect the public from Ponzi schemes and similar criminal operations? a) the Commerce Department b) the Council of Economic Advisors c) the U.S. Securities and Exchange Commission d) the Bureau of Economic Analysis c; challenging; p. 196 Learning Objective: Ethical dilemmas applied to different organizational departments

24. Two factors that led to the stock market crash in 1929 were ______________________. a) Ponzi schemes and a decline in manufacturing leading to a loss of jobs b) unreliable information and abuse of financing c) bad investments and a decline in the value of the U.S. dollar d) anti-trust violations and a run on the stock market b; challenging; p. 196 Learning Objective: Ethical dilemmas applied to different organizational departments

25. The Sarbanes-Oxley Act, also called the Public Company and Investor Protection Act, was created in ______________. a) 1931 b) 1949 c) 1998 d) 2002 d; challenging; p. 196 Learning Objective: Ethical dilemmas applied to different organizational departments

26. Human resources employees have a part in many aspects of an organization, however they generally do not have a part in _______________. a) confidentiality issues b) discipline decisions c) employee investments d) harassment policy c; moderate; p. 197 Learning Objective: Ethical dilemmas applied to different organizational departments

27. Information technology (IT) employees have a part in many aspects of an organization including _______________. a) confidentiality issues b) discipline decisions c) employee investments d) harassment policy a; moderate; p. 198 Learning Objective: Ethical dilemmas applied to different organizational departments

28. CRT stands for _______________________. a) Credit, Refund, Transaction b) Caux Round Table c) Crisis, Recovery, Transition d) Corporate Responsibility Target b; easy; p. 200 Learning Objective: Global ethics issues

29. An ethical dilemma in an organization regarding invasion of privacy would likely come from the ______________________ department. a) accounting b) marketing c) information technology (IT) d) sales c; easy; p. 200 Learning Objective: Ethical dilemmas applied to different organizational departments

30. Unfair labor practices have been curtailed thanks to all of the following legal measures except _________________. a) anti-trust laws b) child labor rules c) safety measures d) the Sarbanes-Oxley Act d; challenging; p. 201 Learning Objective: Corporate social responsibility

31. Anti-trust laws do all of the following except _____________________. a) help level the playing field b) prohibit monopolies c) discourage Ponzi schemes d) outlaw unfair practices c; challenging; p. 201 Learning Objective: Corporate social responsibility

32. According to the principles of Corporate Social Responsibility, an organization is responsible for its impact on _______________________. a) the community and the environment b) the ethical conduct of competitors in the same industry c) shareholders and stock brokers d) global economic and environmental concerns a; challenging; p. 201 Learning Objective: Corporate social responsibility

33. According to the textbook, when a company “walks the talk” it is practicing ________________. a) corporate social responsibility b) truth in advertising c) “honesty is the best policy” d) fair and legal practices a; challenging; p. 201 Learning Objective: Corporate social responsibility

34. What is philanthropy? a) A study of human behavior b) A code of ethics c) Receiving charity d) Giving to charity d; easy; p. 201 Learning Objective: Corporate social responsibility

35. ________________________ is/are slowly becoming the gold standard for measuring sustainable businesses. a) Ethics management programs b) The triple bottom line c) Corporate philanthropy d) Ethical decision-making b; challenging; p. 201 Learning Objective: Corporate social responsibility

36. The Target Corporation refers to its employees as ______________. a) sales associates b) partners c) team members d) human resources c; easy; p. 201 Learning Objective: Corporate social responsibility

37. Many companies that have focused on eco-efficiency have discovered that doing more with less can lead to ___________________. a) an impact on the disastrous results of climate change b) advances in the efforts to reduce coal-fired emissions c) positive media coverage in response to proactive resource management d) a competitive advantage due to an increase in resource productivity d; challenging; p. 202 Learning Objective: Corporate social responsibility

38. An example of “natural capital” is ________________. a) gold b) worm waste c) human resources d) organic baby food b; challenging; p. 202 Learning Objective: Corporate social responsibility

39. Clif Bar is a company that offers employees many unusual benefits. One benefit they do not offer is _______________________. a) company transportation to and from work b) the opportunity to bring their children to work c) paid sabbaticals d) company-sponsored classes a; moderate; p. 203 Learning Objective: Corporate social responsibility

40. Corporate ethics means that business has obligations to _____. a. pursue profits b. protect people c. be legal d. consider the interests of society d; moderate; easy; p. 205 Learning Objective: Corporate social responsibility

Essay and fill-in questions

41, The motto of the Ritz-Carlton hotel chain is: We are ladies and gentlemen, serving ______________________. Answer: ladies and gentlemen Easy; p. 188 Learning Objective: An ethical toolbox

42. You may be entering questionable ethical territory if you follow the utilitarian approach. Why? Answer: Because some utilitarians believe the end result justifies whatever path was used to get there. Using this method it is possible you will completely the overlook the path taken. Moderate; p. 191 Learning Objective: Making ethical decisions

43. The recall of high-chairs because of a possible defect in manufacturing is an example of _______________ analysis. Answer: cost-benefit Challenging; p. 191 Learning Objective: Making ethical decisions

44. A costly philanthropic project initiated by a corporation, such as converting an existing parking lot into a park with playground equipment, can produce revenue for the corporation. Discuss why this statement is true or false. Answer: This is true because the positive public image engendered by the development of the park which could encourage the public to purchase products or services from the corporation, the possible publicity for the project in the local media and the possibility of qualifying for tax breaks from the government are all sources of possible increased revenue for the corporation. Moderate, p. 191 Learning Objective: Making ethical decisions

45. The Universalist Principle states that before making a decision, you need to determine whether the decision would be fair ______________________________. Answer: for everyone in all circumstances. Moderate; p. 193 Learning Objective: Making ethical decisions

46. You have a huge assignment for a 10-page research paper on the European Union in history class, and you are late in starting the project. In the middle of the night, as you are desperately searching the Internet for some facts on the European Union, you come across a paper that covers your topic. Your answer to your problem stares at you from the screen. What questions do you ask yourself as you try to make an ethical decision about this situation? Explain the process of decision making in the face of this ethical dilemma. Answer: Ask yourself these questions: 1) What are all the facts? What do you know? What hidden elements are not obvious or are difficult to discuss? Is this a case of plagiarizing or is the material in this paper available for your use? Can you rewrite the material so that it is you own composition and it is not plagiarism? 2) Who will your decision affect? Will others follow you example and plagiarize as well if that is what you am doing by using this paper? 3) Gather more information and research similar instances. Have you plagiarized before? Have others in any of you classes plagiarized? If you rewrite the material is that something that’s been done before? 4) Using a formal decision-making approach, what solution do you come up with taking into consideration all the information at your disposal. (Formal decision-making approaches include the virtue principle and utilitarianism. 5. After examining all of your potential solutions, choose the best decision and look at it from different perspectives (for example, the teacher’s perspective, the perspective of the other students, the perspective of the person who wrote the essay that you found on the Internet). 6. Take another look at your decision and if you still feel comfortable, implement it. Challenging, p. 194 Learning Objective: Making ethical decisions

47. Describe the Ponzi scheme that businessman Bernard Modoff carried out and for which he pleaded guilty to 11 felony charges. Answer: He convinced people to give money to his company by promising them a big return on their investment. Then, he would take money from new investors to make huge payouts to the old investors and repeat the process over and over. Challenging; p. 196 Learning Objective: Ethical dilemmas applied to different organizational departments

48. Advertisements for breakfast cereals that promote directly to children often raise ethical questions. Why? Answer: Children are neither educated enough nor mature enough to make wise decisions regarding their health. Therefore an advertisement for a breakfast cereal that is full of sugar may appeal to them because of a fun tiger that talks to them and seems friendly, however the product advertised may not be a healthy choice and the text of the advertisement may make faulty claims. Since children are consumers and have some say in what their parents purchase advertisers would like to take advantage of the unique perspective children have which at times will have a negative impact on children’s health. Challenging; p. 197 Learning Objective: Ethical dilemmas applied to different organizational departments

49. An advertisement that says that the product being offered is guaranteed to cure the common cold is operating unethically. How? Answer: The message in the advertisement is intentionally misleading, inaccurate, and manipulative. Since there is no guaranteed cure for the common cold, the company that created this marketing is using unethical practices in devising this marketing campaign. Moderate; p. 197 Learning Objective: Ethical dilemmas applied to different organizational departments

50. Hewlett-Packard’s leadership hired investigators who obtained Social Security numbers for Board members, employees, and reporters in order to access their personal phone records. This illegal scheme is known as ____________________. Answer: pretexting Challenging; p. 198 Learning Objective: Ethical dilemmas applied to different organizational departments

51. Social programs and charitable donations made by businesses that have a tangible impact on people’s lives are referred to as _________________________. Answer: corporate philanthropy Easy; p. 201 Learning Objective: Corporate social responsibility

52.

How are corporate social responsibility and business ethics related?

Answer: Business ethics affect individual behavior in the workplace. Corporate social responsibility is a related concept, but it refers to the overall way in which a business attempts to balance its commitments to relevant groups and individuals in its social environment and adheres to the Triple Bottom Line: people, planet, and profits. Moderate; p. 201 Learning Objective: Corporate social responsibility

53. ______________ development is the operation of a business following practices that will ensure that vital resources will be available for future generations. Answer: Sustainable Moderate, p. 201 Learning Objective: Corporate social responsibility

54. Profit motive is a company’s desire to make more money than it spends. Why can’t the other two bottom lines exist without it? Answer: A company may want to be environmentally friendly and give back to the community. However if there is no money to meet basic expenses, the company cannot afford to pay for those benefits to the people and the planet. Moderate; p. 202 Learning Objective: Corporate social responsibility

True/False

55. Ethics is the study of human conduct and moral principles. True; moderate; p. 184 Learning Objective: Ethical dilemmas

56. Many investors feel that ethical behavior in a business environment will hamper the goal of profitability. True; moderate; p. 185 Learning Objective: Ethical dilemmas

57. Determining what is ethically right is easy. False, easy, p. 185 Learning Objective: Ethical dilemmas

58. Companies are required by law to be ethical. False, moderate, p. 186 Learning Objective: What an ethical organization looks like

59. The code of ethics for a multi-national organization is best rewritten for foreign subsidiaries and branches of the company because of cultural differences among the various nationalities. False; moderate; p. 189 Learning Objective: An ethical toolbox

60. Making decisions for a company is ultimately a one-person responsibility in the hands of an executive because leaders of an organization set an ethical example for the rest of the organization, often have veto power and answer for the mission of the company. An example of this was the role played by the chairman of Exxon, Lawrence Rawl in 1989. False; moderate; p. 189 Learning Objective: An ethical toolbox

61. The question posed by utilitarianism is: Do the ends justify the means? True; moderate; p. 191 Learning Objective: Making ethical decisions

62. Perception of moral rights does not vary much because there are actions that are clearly either right or wrong and there are basic moral principles that should not be violated. False; challenging; p. 192 Learning Objective: Making ethical decisions

63. According to the Universal Declaration of Human Rights it’s not morally right to obtain inexpensive goods if they’re produced through the use of manufacturing centers with excessively low wages. True; easy; p. 192 Learning Objective: Making ethical decisions

64. An ethical multinational company should be concerned about the working conditions in its mainland facilities as well as those in its manufacturing centers abroad. True; easy; p. 192 Learning Objective: Making ethical decisions

65. If you see a coworker doing something that seems inappropriate, do not give them the benefit of doubt because they are probably violating the company code of conduct. False; moderate; p. 194 Learning Objective: Making ethical decisions

66. The virtue principle is summed up by the following question: How would you feel if the same decision you are making was applied to you? False; moderate; p. 195 Learning Objective: Making ethical decisions

67. Whistle blowing is not legal. False; easy, p. 195 Learning Objective: Making ethical decisions

68.

Whistle-blowers may report wrongdoing to their direct supervisors, as well as to outside agencies. True; moderate; p. 195 Learning Objective: Making ethical decisions

69. If you are a whistle-blower there is a good chance you will get fired. True; moderate; p. 195 Learning Objective: Making ethical decisions

70. When Patricia Dunn, the chairman of the Hewlett-Packard Board, hired investigators to spy on company employees and fellow Board members, she and other Board members had a legimate right to conduct their investigations because they had seen company secrets popping up in prominent papers and they were seeking to identify the person who had created the leak. False, moderate; p. 198 Learning Objective: Ethical dilemmas applied to different organizational departments

71. A multinational corporation is a corporation that has assets, including facilities, in at least one other country outside of its home location. True; moderate; p. 199 Learning Objective: Global ethics issues

72. Ethical standards relating to business practices are fairly consistent around the world. False; easy; p. 199 Learning Objective: Global ethics issues

73. In the modern world, cultural differences do not really affect the conduct of business. False, moderate, p. 199 Learning Objective: Global ethics issues

74. International laws governing the harmful exposure of workers to toxic materials such as asbestos protect workers in all parts of the world. False; moderate; p. 199 Learning Objective: Global ethics issues

75. Leaders of an organization set the ethical example, yet ethical dilemmas or misconduct can take place anywhere in an organization, from entry level to CEO. True; easy; p. 200 Learning Objective: Global ethics issues

76. Multinational corporations are able to take advantage of lax laws in other countries because there are no international organizations to protect moral and sustainability issues. False; moderate; p. 200 Learning Objective: Global ethics issues

77. Sustainability is a company’s capacity to create profit for its shareholders today while making sure that its business interests are also in the best interests of the environment and other stakeholders. True; moderate; p. 201 Learning Objective: Corporate social responsibility

CHAPTER 9 Plan: Roles, Mission, Strategy, and Plans TRUE/FALSE 1. In most organizations, there are less top level managers than first-level managers. Answer: True Diff: Easy Page Ref: 210 Objective: Differentiate the types of skills needed and responsibilities found at each level of management. 2. Middle managers are normally looking ahead approximately one quarter to a year from the present. Answer: True Diff: Easy Page Ref: 210 Objective: Differentiate the types of skills needed and responsibilities found at each level of management. 3. Top managers normally manage the daily aspects of the business. Answer: False Diff: Easy Page Ref: 211 Objective: Differentiate the types of skills needed and responsibilities found at each level of management. A company’s board of directors is a group of appointed individuals who oversee the activities of the company. Answer: True Diff: Easy Page Ref: 211 Objective: Differentiate the types of skills needed and responsibilities found at each level of management. 4.

5. Because it focuses on the here and now, a company must achieve its vision statement in order to succeed. Answer: False Diff: Moderate Page Ref: 214 Objective: Justify why having a mission statement and measurable goals is important to an organization and you. 6. The “A” in SMART stands for attainable, which means that the goal is well defined and clear. Answer: False Diff: Moderate Page Ref: 216 Objective: Justify why having a mission statement and measurable goals is important to an organization and you. 7. The “R” in SMART stands for relevant, which means a goal serves a purpose that helps to achieve the company’s vision and mission. Answer: True Diff: Moderate Page Ref: 217 Objective: Justify why having a mission statement and measurable goals is important to an organization and you.

8. Management by Objectives (MBO) relies on defining objectives for employees and then evaluating their performance based on the objectives that have been set. Answer: True Diff: Easy Page Ref: 218 Objective: Justify why having a mission statement and measurable goals is important to an organization and you. 9. Strategic planning involves determining the long-term goals of the organization and is normally performed at the top level of management. Answer: True Diff: Easy Page Ref: 218 Objective: Compare the different types of planning and identify their value to an organization. 10. Tactical planning is performed at the first level of management. Answer: False Diff: Easy Page Ref: 219 Objective: Compare the different types of planning and identify their value to an organization. 11. During planning, SWOT analysis is important to determine how to turn threats into opportunities. Answer: True Diff: Easy Page Ref: 220 Objective: Compare the different types of planning and identify their value to an organization. 12. In the time management matrix, activities in quadrant 1 are not important and not urgent. Answer: False Diff: Easy Page Ref: 223 Objective: Explain what tools managers use to create effective plans. 13. During the recognizing risk portion of risk management, benchmarks in the industry are studied. Answer: False Diff: Easy Page Ref: 225 Objective: Demonstrate how managers plan for and manage risk. 14. Risk is any circumstance in which the outcome of a decision or action is certain. Answer: False Diff: Easy Page Ref: 225 Objective: Demonstrate how managers plan for and manage risk. 15. Crisis and contingency planning is performed during the managing risk phase of risk management. Answer: False Diff: Easy Page Ref: 226 Objective: Demonstrate how managers plan for and manage risk.

MULTIPLE CHOICE 16. _____ are skills based on working with people and getting ideas across. a. Conceptual skills b. Interpersonal skills c. Technical skills d. Big picture skills Answer: b Diff: Moderate Page Ref: 210 Objective: Differentiate the types of skills needed and responsibilities found at each level of management. 17. Conceptual skills involve ________. a. working with people and getting ideas across b. having skills and abilities necessary to get a job done c. communicating both up and down within an organization d. planning and developing abilities Answer: d Diff: Moderate Page Ref: 210 Objective: Differentiate the types of skills needed and responsibilities found at each level of management. 18. Top level managers are focused on all the following EXCEPT what? a. long-term future b. planning c. organizing and controlling d. big picture Answer: c Diff: Moderate Page Ref: 210 Objective: Differentiate the types of skills needed and responsibilities found at each level of management. 19. _____ are the skills and management focus, respectively, for a first level manager. a. Interpersonal skills and planning b. Technical skills and directing c. Technical skills and planning d. Interpersonal skills and directing Answer: b Diff: Moderate Page Ref: 210 Objective: Differentiate the types of skills needed and responsibilities found at each level of management. 20. All of the following relate to a first level manager EXCEPT what? a. Communicating effectively is important both up and down an organization. b. Management focus is on directing employees to fulfill certain tasks. c. Conceptual skills are essential. d. They deal directly with employees to perform tasks for the immediate present. Answer: c Diff: Moderate Page Ref: 210 Objective: Differentiate the types of skills needed and responsibilities found at each level of management.

21. _____ are the management and time focus, respectively, for a top manager. a. Planning and the immediate present b. Organizing and the immediate present c. Planning and the long-term future d. Directing and the immediate present Answer: c Diff: Moderate Page Ref: 210 Objective: Differentiate the types of skills needed and responsibilities found at each level of management. 22. Kevin is a manager of XYZ company. His job is to organize and help control the organization. He is thinking ahead for the next quarter and of ways for the company to improve in the upcoming year. What level of management is Kevin most likely at? a. top manager b. first level manager c. supervisor d. middle manager Answer: d Diff: Moderate Page Ref: 210 Objective: Differentiate the types of skills needed and responsibilities found at each level of management. 23. The highest-ranking manager in an organization is generally the ________. a. chief executive officer b. chief financial officer c. chief operating officer d. chief information officer Answer: a Diff: Easy Page Ref: 211 Objective: Differentiate the types of skills needed and responsibilities found at each level of management. 24. Which managers are responsible for creating a vision for their organization? a. top manager b. first level manager c. supervisor d. middle manager Answer: a Diff: Easy Page Ref: 212 Objective: Differentiate the types of skills needed and responsibilities found at each level of management. 25. Jessica is responsible for a single department store and directs workflow, assesses problems, and oversees employees. Her main focus is on the day-to-day operations of the business. What manager level is Jessica? a. top manager b. first level manager c. chief executive officer d. middle manager Answer: b Diff: Easy Page Ref: 213 Objective: Differentiate the types of skills needed and responsibilities found at each level of management.

26. Which of the following is NOT true of a mission statement? a. It helps to explain where the company wants to go. b. It explains what endeavor the organization is engaged in performing business. c. It focuses on the needs and benefits of the company. d. It provides a reason that the company exists. Answer: a Diff: Moderate Page Ref: 214 Objective: Justify why having a mission statement and measurable goals is important to an organization and you. 27. What is the reason why managers of a company would want to know its mission statement? a. They want to know if they want to invest in the company. b. They want to decide if they want to spend their money there. c. As they are first entering the job market, they need to determine whether their values are compatible with the mission. d. Understanding the mission will guide their actions in the day-to-day operations from planning to prioritization choices. Answer: d Diff: Moderate Page Ref: 215 Objective: Justify why having a mission statement and measurable goals is important to an organization and you. 28. Of the following, what is NOT something to keep in mind when writing your own personal mission statement? a. You should write one to two pages clearly laying out all your goals and means to achieve those goals. b. The statement identifies your values. c. The statement identifies your goals. d. You should keep it short – no more than two sentences – in order to make the statement memorable. Answer: a Diff: Moderate Page Ref: 216 Objective: Justify why having a mission statement and measurable goals is important to an organization and you. 29. SMART is an acronym used to describe effective goals. What does SMART stand for? a. specific, measurable, attainable, realizable, and time-based b. specific, measurable, attainable, relevant, and time-based c. strategic, measurable, attainable, realizable, and time-based d. strategic, measurable, attainable, relevant, and time-based Answer: b Diff: Moderate Page Ref: 216 Objective: Justify why having a mission statement and measurable goals is important to an organization and you.

30. What does it mean for a goal for a business to be specific? a. It is well-defined and clear. b. There is a way to quantifiably determine progress. c. The goal is within one’s reach. d. The goal helps to achieve the company’s vision and mission. Answer: a Diff: Easy Page Ref: 216-217 Objective: Justify why having a mission statement and measurable goals is important to an organization and you. 31. What does it mean for a goal to be measurable? a. It is well-defined and clear. b. There is a way to quantifiably determine progress. c. The goal is within one’s reach. d. It provides an idea of when to complete the goal. Answer: b Diff: Easy Page Ref: 216-217 Objective: Justify why having a mission statement and measurable goals is important to an organization and you. 32. What does it mean for a goal to be attainable? a. It is well-defined and clear. b. There is a way to quantifiably determine progress. c. The goal is within one’s reach. d. It provides an idea of when to complete the goal. Answer: c Diff: Easy Page Ref: 216-217 Objective: Justify why having a mission statement and measurable goals is important to an organization and you. 33. What does it mean for a goal for a business to be relevant? a. It is well-defined and clear. b. There is a way to quantifiably determine progress. c. The goal is within one’s reach. d. The goal helps to achieve the company’s vision and mission. Answer: d Diff: Easy Page Ref: 216-217 Objective: Justify why having a mission statement and measurable goals is important to an organization and you. 34. What does it mean for a goal for a business to be time-based? a. It is well-defined and clear. b. It provides an idea of when to complete the goal. c. The goal is within one’s reach. d. The goal helps to achieve the company’s vision and mission. Answer: b Diff: Easy Page Ref: 216-217 Objective: Justify why having a mission statement and measurable goals is important to an organization and you.

35. XYZ company wants to cut expenses. The CFO states he wants to cut expenses by 10% and raise revenues by 5%. What part of SMART goals has the CFO fulfilled by using the figures 10% and 5% and providing a goal in quantifiable parts? a. specific b. measurable c. attainable d. relevant Answer: b Diff: Easy Page Ref: 216-217 Objective: Justify why having a mission statement and measurable goals is important to an organization and you. 36. A CEO from a company is meeting with its board of directors to provide a quarterly update. The CEO expresses to the board the goals for the upcoming quarter and emphasizes that these goals help to achieve the company’s vision and mission. However, he fails to provide quantifiable details about the goals and when the company hopes to achieve these goals. What two parts of SMART goals has the CEO failed? a. specific and measurable b. specific and time-based c. measurable and attainable d. measurable and time-based Answer: d Diff: Easy Page Ref: 216-217 Objective: Justify why having a mission statement and measurable goals is important to an organization and you. 37. Strategic planning is performed at what level of management, for what purpose? a. top management; determining the long-term goals of the organization b. top management; determining the specific tasks and activities necessary to carry out the tactical plan c. middle management; determining the long-term goals of the organization d. middle management; determining the specific tasks and activities necessary to carry out the tactical plan Answer: a Diff: Moderate Page Ref: 218-219 Objective: Compare the different types of planning and identify their value to an organization. 38. What type of planning is normally performed by top management? a. strategic b. tactical c. operational d. backward Answer: a Diff: Easy Page Ref: 218-219 Objective: Compare the different types of planning and identify their value to an organization.

39. Human resources planning is most closely tied with what other type of planning? a. strategic b. tactical c. operational d. backward Answer: a Diff: Easy Page Ref: 218-219 Objective: Compare the different types of planning and identify their value to an organization. 40. What type of planning is normally performed by middle level management in order to carry out the plans created by top management? a. strategic b. tactical c. operational d. backward Answer: b Diff: Easy Page Ref: 218-219 Objective: Compare the different types of planning and identify their value to an organization. 41. Operational planning is performed at what level of management, for what purpose? a. middle management; determining the long-term goals of the organization b. middle management; determining the specific tasks and activities necessary to carry out the tactical plan c. first level management; determining the specific tasks, responsibilities, and activities necessary to carry out the tactical plan d. first level management; aligning the right company resources with the strategic plan. Answer: c Diff: Moderate Page Ref: 218-219 Objective: Compare the different types of planning and identify their value to an organization. 42. In the management of hierarchy, there is top management, followed by middle management, and lastly by first level management. Starting with top management and going down in the hierarchy, what type of planning is performed at each level? a. operational, tactical, strategic b. operational, strategic, tactical c. strategic, operational, tactical d. strategic, tactical, operational Answer: d Diff: Easy Page Ref: 218-219 Objective: Compare the different types of planning and identify their value to an organization. 43. Which type of planning is normally performed during the budgeting process because middle management needs to figure out which resources are necessary to carry out the long-term future goals of the company? a. strategic b. tactical c. operational d. backward Answer: b Diff: Easy Page Ref: 218-219 Objective: Compare the different types of planning and identify their value to an organization.

44. Jessica is at the first level of management. She is planning on how to carry out the plans given to her by her bosses for the upcoming year. What type of planning is Jessica performing? a. strategic b. tactical c. operational d. backward Answer: c Diff: Easy Page Ref: 218-219 Objective: Compare the different types of planning and identify their value to an organization. 45. First level managers normally possess what types of skills and perform what type of planning at their position? a. conceptual skills, strategic planning b. interpersonal skills, operational planning c. technical skills, operational planning d. interpersonal skills, tactical planning Answer: c Diff: Moderate Page Ref: 210, 219 Objective: Differentiate the types of skills needed and responsibilities found at each level of management. Compare the different types of planning and identify their value to an organization. 46. Short-term goals are developed by middle management. What is the time frame for short-term goals? a. greater than 5 years b. greater than 1 year but less than 5 years c. greater than one month but less than a year d. less than one month Answer: c Diff: Moderate Page Ref: 220 Objective: Differentiate the types of skills needed and responsibilities found at each level of management. Compare the different types of planning and identify their value to an organization. 47. What is a business tool used to list out everything that needs to be done in a specific order to accomplish a specific goal? a. action plan b. timetable c. backward planning d. time management matrix Answer: a Diff: Easy Page Ref: 221 Objective: Explain what tools managers use to create effective plans. 48. What is a timetable? a. A list of completion dates that tell you when each stage of the project is due to be finished. b. A list of everything that needs to be done to accomplish a specific goal without completion dates. c. A table that prioritizes tasks as urgent or not urgent, and important or not important. d. A table used to study which 20 percent of the customers contribute to 80 percent of the revenue. Answer: a Diff: Easy Page Ref: 221 Objective: Explain what tools managers use to create effective plans.

49. What is type of planning is being performed if you start with your ultimate objective and work in reverse order to outline the plan? a. operational planning b. tactical planning c. backward planning d. strategic planning Answer: c Diff: Easy Page Ref: 222 Objective: Explain what tools managers use to create effective plans. 50. A time management matrix prioritizes tasks into urgent or not urgent, and important or not important. According to Dr. Stephen Covey, highly effective people make time for activities in which quadrant? a. urgent and important b. urgent and not important c. not urgent and important d. not urgent and not important Answer: c Diff: Moderate Page Ref: 222-223 Objective: Explain what tools managers use to create effective plans. 51. Relationship building, networking, and career development would be located in which quadrant of the time matrix? a. urgent and important b. urgent and not important c. not urgent and important d. not urgent and not important Answer: c Diff: Moderate Page Ref: 222-223 Objective: Explain what tools managers use to create effective plans. 52. What types of activities are located in quadrant 3 of the time management matrix? a. not urgent and important b. urgent and not important c. urgent and important d. not urgent and not important Answer: a Diff: Moderate Page Ref: 222-223 Objective: Explain what tools managers use to create effective plans. 53. In a business, employees should spend the least amount of time on activities that are not important and not urgent. In which quadrant of the time management matrix are these activities? a. 1 b. 2 c. 3 d. 4 Answer: d Diff: Moderate Page Ref: 223 Objective: Explain what tools managers use to create effective plans.

54. Pareto analysis is related to what percentage principle? a. 90/10 b. 80/20 c. 70/30 d. 60/40 Answer: b Diff: Easy Page Ref: 223 Objective: Explain what tools managers use to create effective plans. 55. Which of the following is NOT an example of the 80/20 Principle? a. 20 percent of employees produce 80 percent of the world’s output. b. 20 percent of your work can cause 80 percent of your problems. c. 20 percent of the world’s output is produced by 80 percent of employees. d. 20 percent of customers contribute 80 percent of your revenue. Answer: c Diff: Moderate Page Ref: 223 Objective: Explain what tools managers use to create effective plans. 56. Which of the following is an example of the 80/20 Principle? a. 20 percent of employees produce 80 percent of the world’s output. b. 20 percent of your problems can cause 80 percent of your work. c. 20 percent of the world’s output is produced by 80 percent of employees. d. 20 percent of your revenue comes from 80 percent of your customers. Answer: a Diff: Moderate Page Ref: 223 Objective: Explain what tools managers use to create effective plans. 57. Risk is similar to which part of SWOT analysis? a. strengths b. weaknesses c. opportunities d. threats Answer: d Diff: Easy Page Ref: 225 Objective: Demonstrate how managers plan for and manage risk. 58. Which of the following is true about risk? a. The greater the risk, the smaller the difference between a favorable or unfavorable outcome. b. The smaller the risk, the bigger the difference between a favorable or unfavorable outcome. c. The degree of the risk does not affect the difference between a favorable or unfavorable outcome. d. The smaller the risk, the smaller the difference between a favorable or unfavorable outcome. Answer: d Diff: Easy Page Ref: 225 Objective: Demonstrate how managers plan for and manage risk.

59. Which of the following is NOT a tool used for the measuring risk phase of risk management? a. contingency plan b. surveys c. benchmarks d. probabilities Answer: a Diff: Easy Page Ref: 225 Objective: Demonstrate how managers plan for and manage risk. 60. What type of planning is performed when a plan of action is created to prepare a company in case of an emergency and is put into effect to limit the disruption of the emergency to business procedures? a. crisis planning b. operational planning c. contingency planning d. tactical planning Answer: c Diff: Easy Page Ref: 226 Objective: Demonstrate how managers plan for and manage risk. 61. Which of the following is NOT a strategy to manage risk? a. accept the risk b. transfer the risk c. eliminate the risk d. avoid the risk Answer: c Diff: Easy Page Ref: 226-227 Objective: Demonstrate how managers plan for and manage risk.

SHORT ANSWER 62. What are the main types of skills that people at different levels of management possess? Diff: Moderate Page Ref: 210 Objective: Differentiate the types of skills needed and responsibilities found at each level of management. Answer: Top management possesses conceptual, big picture skills. Middle managers have interpersonal and communication skills. First-level managers or supervisors have technical skills necessary to complete the jobs they manage. 63. Describe the characteristics of a middle level manager. Diff: Moderate Page Ref: 212 Objective: Differentiate the types of skills needed and responsibilities found at each level of management. Answer: Middle level managers are responsible for carrying out the policies, plans, and strategies set by top management. They organize and control people, time, money, and other resources within their department. The focus of their work is on people and interpersonal skills. To be effective, these managers have to be able to communicate both up and down within an organization. They focus from one quarter to a year from now for the business.

64. Compare/contrast a mission statement and a vision statement. Diff: Moderate Page Ref: 214 Objective: Justify why having a mission statement and measurable goals is important to an organization and you. Answer: The mission statement focuses on the here and now; it defines what endeavor the organization is engaged (the nature of the business), who it intends to serve, what needs or benefits it will focus on, and how it will address those needs. The mission statement provides the reason for why the company exists. The vision statement explains where the company wants to go in the future. An organization does not necessarily have to achieve its vision to succeed but it must fulfill its mission statement. 65. What groups of people would want to see a company’s mission statement and why would they want to know that company’s mission statement? Diff: Challenging Page Ref: 215 Objective: Justify why having a mission statement and measurable goals is important to an organization and you. Answer: Investors, managers, employees, and customers would want to know an organization’s mission statement. Investors want to know what a company’s mission statement is before they put their money on the line. Managers need to know the mission statement in order to understand the company’s purpose because this will guide the managers’ actions – from planning to prioritization choices. Similarly to managers, their employees need to know the mission statement to see whether the employees’ values are compatible with the company’s fundamental goals. Customers knowing the mission statement help them decide where to spend their money.

66. When writing your own mission statement, what are the main things you need to establish and identify? Diff: Moderate Page Ref: 216 Objective: Justify why having a mission statement and measurable goals is important to an organization and you. Answer: When writing your own personal mission statement, you want to keep it short – no more than two sentences – and to make sure it is easily memorable. You will want to identify your values and your goals in your mission statement. 67. What does SMART stand for and what is its purpose? Diff: Moderate Page Ref: 216-217 Objective: Justify why having a mission statement and measurable goals is important to an organization and you. Answer: SMART stands for specific, measurable, attainable, relevant, and time-based. Its purpose is to create effective goals for oneself or for a business. To be specific, the goal must be well defined and clear. To be measurable, the goal must have some type of quantifiable progress. Attainable means that the goal is reachable. Relevant goals help to achieve a company’s vision and mission. Time-based goals give people an idea of when to complete the goal by.

68. What is Management by Objectives (MBO)? Diff: Moderate Page Ref: 218 Objective: Justify why having a mission statement and measurable goals is important to an organization and you. Answer: SMART goals are part of the MBO method of management, which relies on defining objectives for employees and then evaluating their performance their performance based on the objectives that have been set. By creating goals that align with your company’s goals, you can better your chances of career progression. 69. What are the different types of planning and at what levels of management are they performed? Diff: Moderate Page Ref: 218-219 Objective: Compare the different types of planning and identify their value to an organization Answer: Strategic planning is performed through top level management. It involves the long-term goals of the organization. Human resources is closely tied to this type of planning. To carry out the strategy, tactical planning is performed by middle managers to develop a short-term plan that aligns the right company resources with the strategic plan established by top management. To carry out the tactical plan, operational planning is performed by first level managers in specific departments in order to figure out how they will carry out the specific tasks, activities, and responsibilities they are assigned in the tactical plan. 70. What is SWOT analysis, and how does it relate to planning? Diff: Moderate Page Ref: 220 Objective: Compare the different types of planning and identify their value to an organization Answer: SWOT analysis determines the strengths and weaknesses of the organization in addition to opportunities and threats to the company. Knowing the organization’s strengths and weaknesses allows it to determine what its long-term goals are and what areas it needs to improve. The plans can be used to turn threats identified through the SWOT process into opportunities. 71. What is the difference between an action plan and a timetable? Diff: Moderate Page Ref: 221 Objective: Explain what tools managers use to create effective plans. Answer: An action plan lists everything that needs to be done to accomplish a specific goal. The tasks are listed out in the order that they need to be done. However, specific dates are not included on an action plan. An action plan is used for simple projects. A timetable is used for more complex projects. Tasks are listed out along with completion dates that tell you when each stage of the project is due to be finished.

72. How are timetables and backward planning related? Diff: Moderate Page Ref: 221-222 Objective: Explain what tools managers use to create effective plans. Answer: Creating a timetable works best by filling in the final project completion date and working backward. This method is called backward planning. 73. Describe the time management matrix and what the characteristics are for the four quadrants. Diff: Moderate Page Ref: 223 Objective: Explain what tools managers use to create effective plans. Answer: A time management matrix contains divides activities into four quadrants based on whether tasks are important or not important and urgent or not urgent. Quadrant 1 are activities that are urgent and important. They include dealing with missed delivery dates and back orders and handling important customer complaints. Quadrant 2 consists of tasks that are not urgent and important. These activities include relationship building, presentations, and career development. Dr. Stephen Covey states that highly effective people find time for tasks in quadrant 2. Quadrant 3 activities are those that are urgent but not important. Some of these tasks include answering some email, answering some phone calls, attending some meetings, and having interruptions. Quadrant 4 activities are not urgent and not important and keep employees from doing their work. Surfing the Internet for personal reasons, talking on the phone to friends, or doing busywork are all activities people engage in when avoiding work. 74. Describe the various parts of risk management. Diff: Moderate Page Ref: 224-227 Objective: Demonstrate how managers plan for and manage risk. Answer: Recognizing risk is determining what threats there are to an organization. The company decides whether to view certain risks as opportunities or situations to avoid. Measuring risk is accomplished by conducting surveys, researching industry benchmarks, calculating probabilities, and examining the company’s current activities. Planning for risk involves contingency planning and crisis planning. Both of these involve making a back up plan for various situations. Managing risk is determining whether to accept the risk, transfer risk, reduce the risk, and/or avoid the risk. Monitoring risk involves continually follow through with a formal audit or other mechanism to check the progress of actions taken to address risk. 75. What are contingency plans and crisis plans and what part of risk management is this performed? Diff: Moderate Page Ref: 226 Objective: Demonstrate how managers plan for and manage risk. Answer: Contingency plans and crisis plans are created during the planning for risk phase of risk management. Contingency plans are used to plan for potential problems. Crisis plans involve reacting to a sudden unexpected development.

76. Describe the four ways that a company can manage risk. Diff: Moderate Page Ref: 226-227 Objective: Demonstrate how managers plan for and manage risk. Answer: Companies can accept risk, transfer risk, reduce risk, and/or avoid risk. Accepting the risk can be done through default or by choice. Transferring risk can be achieved by taking out insurance. Reducing risk is achieved through diversification and loss-prevention techniques. Avoiding risk can be accomplished by not accepting a potentially hazardous job.

Anybody’s Business TIF questions: Chapter 10 Multiple Choice 1) An organization’s structure is the A) arrangement of physical facilities including office buildings and manufacturing plants. B) formal configuration of people, which determines the allocation of duties, responsibilities, and authority. C) network of information technology platforms installed throughout the organization. D) wiring, plumbing, lighting, and other utility systems running throughout the organization’s facilities. Answer: B Diff: Easy Page Ref: 234 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 2) An organization’s division of labor is the A) allocation of workers to roles based on gender, race, and ethnicity. B) physical separation of unionized and non-unionized workers. C) breakdown of different specialized roles that employees take on. D) assignments of job duties based on employees’ pay rates. Answer: C Diff: Easy Page Ref: 234 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 3) An organization’s structure determines all of the following EXCEPT A) who is responsible for what. B) who is unionized. C) who answers to whom. D) who will manage whom. Answer: B Diff: Easy Page Ref: 234 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 4) An effective division of labor A) reduces conflict between employees from different units or divisions. B) allocates the majority of workers to the company’s headquarters. C) helps an organization avoid human-resources-related lawsuits. D) maximizes an organization’s productivity. Answer: D Diff: Easy Page Ref: 234 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure.

5) An organization chart A) depicts the relationships between departments or employees in an enterprise. B) shows the competitive strategy that the organization’s management has defined. C) lays out the pay scales and actual salaries everyone in the company is earning. D) indicates the physical arrangement of the company’s office buildings and plants. Answer: A Diff: Easy Page Ref: 234 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 6) Which of the following is NOT a purpose of an organization chart? A) Describe different types of work or tasks and identify who is in charge of them. B) Show where unionized employees work and where nonunionized employees work. C) Indicate divisions or departments within the organization. D) Illustrate the relationships between individuals and departments. Answer: B Diff: Moderate Page Ref: 234 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 7) An organization’s hierarchy of authority is A) a diagram showing the governance bodies to whom the CEO reports. B) a list of the company’s top executives and their immediate direct reports. C) the organization’s official configuration of reporting relationships. D) the position the organization holds in its industry in terms of profitability. Answer: C Diff: Easy Page Ref: 235 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 8) You work in a company. You assign employees their work, monitor their progress, and provide guidance. What are you? A) a supervisor B) a regional manager C) a vice president D) a president or CEO Answer: A Diff: Easy Page Ref: 235 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 9) In general, managers have authority over ____________ in the company’s organization chart. A) managers who work in other units at the same level B) the employees directly above them

C) the employees directly below them D) people two levels above them. Answer: C Diff: Easy Page Ref: 235 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 10) In the company where you work, decision-making authority is in the hands of very few people. Your company has a ________ structure. A) centralized B) decentralized C) focused D) fragmented Answer: A Diff: Easy Page Ref: 235 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 11) In the company where you work, decisions are made at the top and filter down to lower-level employees through the hierarchy of authority. Your company has a ______ structure. A) focused B) decentralized C) fragmented D) centralized Answer: D Diff: Easy Page Ref: 235 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 12) Which of the following is a benefit of having a centralized organizational structure? A) Decisions are made quickly because only a few people need to reach consensus. B) Decisions are made more slowly and carefully because more people are involved in evaluating alternatives. C) Decisions are better informed because employees from the front lines provide their input. D) Decisions take the long term into account because customers and suppliers contribute their perspectives. Answer: C Diff: Moderate Page Ref: 235 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 13) In the organization where you work, decision making and authority are spread down through the organizational chart. Your company has a _______ structure. A) decentralized

B) centralized C) focused D) fragmented Answer: A Diff: Easy Page Ref: 235 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 14) The organization where you work is strictly hierarchical, has workers perform highly specialized jobs, has many rigidly imposed rules, and places all authority in the hands of a few top leaders. Your organization is A) neurotic. B) autocratic. C) bureaucratic. D) demagogic. Answer: C Diff: Easy Page Ref: 236 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 15) Which of the following is NOT a characteristic of a bureaucratic organization? A) The structure is strictly hierarchical. B) There are few rigidly imposed rules. C) Workers perform highly specialized jobs. D) All authority is in the hands of a few top leaders. Answer: B Diff: Easy Page Ref: 236 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 16) You work in a company that has only a few layers of management. The company has a _______ structure. A) flat B) round C) tall D) long Answer: A Diff: Easy Page Ref: 236 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 17) Brenda is a manager and has responsibility for many employees. She has a _______ span of control. A) short B) long C) narrow

D) wide Answer: D Diff: Easy Page Ref: 236 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 18) A manager’s span of control determines A) how many decisions he or she makes. B) how many employees he or she oversees. C) how many promotions he or she gets. D) how many performance reviews he or she conducts annually per employee. Answer: B Diff: Easy Page Ref: 236 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 19) Which of the following is NOT a benefit of a flat organizational structure? A) Employees can respond quickly to customers. B) Individual companies would make lower profits. C) There is extensive room for advancement. D) It is easy to communicate, because employees often work in teams. Answer: C Diff: Easy Page Ref: 236 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 20) You work in a company that has many layers of management. The company has a _______ structure. A) flat B) round C) tall D) long Answer: C Diff: Easy Page Ref: 236 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 21) In a tall organization A) managers oversee relatively few employees. B) there is little room for advancement. C) there are few layers of management. D) managers tend to have a wide span of control. Answer: A Diff: Moderate Page Ref: 236 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure.

22) Which of the following is NOT an advantage of a tall organizational structure? A) Managers can closely supervise their employees. B) Employees communicate easily, because they are on the same level. C) The role of employees at each layer in the organizational hierarchy is clearly defined. D) There are many opportunities for advancement, since there are numerous management positions. Answer: B Diff: Moderate Page Ref: 236 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 23) Which of the following is NOT a disadvantage of a tall organizational structure? A) The long chain of command means that decision making can be slow. B) Communication can be difficult, since it must pass through different layers of management. C) The role of lower-level workers may not be clearly defined, creating confusion over who does what. D) Costs may be high because managers are often paid more than lower-level employees. Answer: C Diff: Moderate Page Ref: 236 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 24) In an organization that has a linear structure A) each employee has an informal reporting relationship with several managers from other units. B) the hierarchy of authority goes from lower-level employees up to top management. C) each manager reports to a manager on the same level who is in charge of a different unit. D) the hierarchy of authority goes from top management down to lower-level employees. Answer: D Diff: Moderate Page Ref: 236 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 25) Which of the following is NOT true about an organization that has a matrix structure? A) Employees have more than one boss. B) Each person reports to just one other person. C) Employees “belong” to functional departments as well as product teams. D) A person’s boss can be a department manager one day and a product manager the next. Answer: B

Diff: Moderate Page Ref: 237 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 26) Which of the following is NOT an advantage of the matrix organizational structure? A) The structure promotes flexible use of human resources. B) The organization can easily take on a variety of short-term projects. C) The company can adapt quickly to changing conditions. D) Reporting lines are clear, making communication easy and effective. Answer: D Diff: Moderate Page Ref: 237 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 27) Departmentalization of labor occurs when A) a company divides different employees into units based on their roles. B) managers share employees across the departments they are responsible for. C) an organization has violated a law defined by the U.S. Department of Labor. D) a firm’s highest-paid workers are allocated to its headquarters facility. Answer: A Diff: Easy Page Ref: 237 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 28) At DudsForYou Inc., some employees’ work focuses on women’s wear, some on men’s wear, and some on children’s apparel. This structure is called _________ departmentalization. A) functional B) customer C) product D) geographic Answer: C Diff: Easy Page Ref: 237 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 29) YumGoods bakery chain has food preparation, customer service, and other departments. Employees in the food preparation department focus on baking and decorating pastries. Those in customer service focus on interacting with customers. This structure is called _________ departmentalization. A) functional B) customer C) product D) geographic Answer: A Diff: Easy Page Ref: 238

Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 30) Pen ‘n’ Ink Stationers has a department that serves retail buyers and another that serves wholesale buyers. This structure is called _________ departmentalization. A) functional B) customer C) product D) geographic Answer: B Diff: Easy Page Ref: 238 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 31) Giant Corp. has departments responsible for delivering products and services to specific regions where Giant does business. This structure is called _________ departmentalization. A) functional B) customer C) product D) geographic Answer: D Diff: Easy Page Ref: 238 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 32) The Department of Motor Vehicles has different departments customers go to depending on whether they need to obtain or renew a license, get a title for their vehicle, or register their vehicle. This structure is called _________ departmentalization. A) customer B) process C) product D) geographic Answer: B Diff: Easy Page Ref: 238 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 33) Organizational change is A) the amount of money a corporation receives back from the government if it overpays its corporate taxes. B) planned or unplanned transformations in the structure, technology, and people a company uses. C) a shift in customers’ preferences for a company’s products or services. D) the sudden emergence of new competitors that are targeting a company’s market.

Answer: B Diff: Moderate Page Ref: 238 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 34) James has been hired to fill a line position in an organization. This means that he will A) have executive responsibilities, such as formulating corporate-level strategy. B) take responsibility for designing the messages in marketing campaigns. C) support shared-services units such as human resources and legal. D) be directly involved in producing or selling a product. Answer: D Diff: Moderate Page Ref: 240 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 35) Shawna has a staff position in an organization. This means that she A) has executive responsibilities, such as formulating corporate-level strategy. B) supports people in line positions. C) is directly involved in producing or selling a product. D) is part of the unionized workforce. Answer: B Diff: Moderate Page Ref: 240 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 36) Which of the following is NOT true about line positions? A) They contribute directly to revenue. B) They often pay higher salaries than staff positions do. C) They are most often filled by young people. D) They present more opportunity for advancement than staff positions do. Answer: C Diff: Moderate Page Ref: 240 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 37) An organization’s culture consists of all of the following EXCEPT A) attitudes. B) values. C) challenges. D) norms. Answer: C Diff: Easy Page Ref: 241 Objective: Detect and recognize an organization’s culture in order to make decisions about your career. 38) Who establishes the culture in an organization?

A) people outside the organization. B) people at the middle levels of the hierarchy. C) people at the bottom of the hierarchy. D) people at the top of the hierarchy Answer: D Diff: Easy Page Ref: 241 Objective: Detect and recognize an organization’s culture in order to make decisions about your career. 39) The visible manifestations of an organization’s culture include all of the following EXCEPT A) the mission statement. B) informal leaders’ identities. C) dress codes. D) annual reports. Answer: B Diff: Easy Page Ref: 242 Objective: Detect and recognize an organization’s culture in order to make decisions about your career. 40) The invisible manifestations of an organization’s culture include all of the following EXCEPT A) relationships. B) behavioral norms. C) the organization chart. D) employees’ perceptions of top managers. Answer: C Diff: Easy Page Ref: 242 Objective: Detect and recognize an organization’s culture in order to make decisions about your career. 41) You are interviewing for a job at a company and want to assess its culture. Which of the following actions would you take? A) Read a book about the nature of organizational culture. B) Consult the Department of Labor’s survey of corporate cultures. C) Observe how employees interact with each other. D) Read the company’s official list of employees’ opinions. Answer: C Diff: Easy Page Ref: 243 Objective: Detect and recognize an organization’s culture in order to make decisions about your career. 42) Which of the following is NOT part of an organization’s informal communication network? A) conversations at the water cooler B) email exchanges between employees

C) rumors spreading through the grapevine. D) memos from the CEO sent to all employees. Answer: D Diff: Easy Page Ref: 243 Objective: Detect and recognize an organization’s culture in order to make decisions about your career. 43) How would you go about conducting a job analysis? A) List the achievements an employee has made in a particular role in the company. B) Document the requirements of a position and the work that must be performed. C) Assess the talent pool available for filling a particular position in the company. D) Examine trends related to a particular role, such as increases or decreases in vacant positions. Answer: B Diff: Easy Page Ref: 244 Objective: Use effective recruiting, selecting, and hiring strategies. 44) Which of the following actions would you take to gather information for a job analysis? A) Interview people who currently hold or have held the position in question. B) Directly observe employees in another company who hold positions similar to the one you are analyzing. C) Consult a list of job descriptions published annually by the U.S. Department of Labor. D) Review the job specifications related to the position in question. Answer: A Diff: Moderate Page Ref: 245 Objective: Use effective recruiting, selecting, and hiring strategies. 45) A job description explains A) what personal qualities company leaders consider important to the job. B) how much the position pays on an annual basis. C) what a job entails, such as a list of duties and responsibilities. D) what behaviors would be grounds for dismissal from the job. Answer: C Diff: Moderate Page Ref: 245 Objective: Use effective recruiting, selecting, and hiring strategies. 46) Job specifications describe A) the personal qualities company leaders consider important to the job. B) the behaviors that would be grounds for dismissal from the job. C) the salaries that similar positions in other companies pay for the job. D) the title that a person in that position would hold. Answer: A Diff: Moderate Page Ref: 245 Objective: Use effective recruiting, selecting, and hiring strategies.

47) Recruiting is the process of A) having a new employee fill out required documentation after accepting a job offer. B) winning employees’ buy-in for a major transformation program in the company. C) reviewing an employee’s performance to evaluate strengths and areas needing improvement. D) creating a pool of potential applicants from which to select qualified people for available jobs. Answer: D Diff: Easy Page Ref: 246 Objective: Use effective recruiting, selecting, and hiring strategies. 48) You want to recruit employees to fill new positions on your team. What is your best resource? A) employees who are working in companies similar to your own B) valued workers currently working in your organization C) job-search websites such as Monster.com, Hot Jobs, or craigslist D) a trusted employment agency that your company has used before Answer: B Diff: Moderate Page Ref: 246 Objective: Use effective recruiting, selecting, and hiring strategies. 49) You want to recruit some unskilled workers for entry-level jobs. You do not have a lot of money to spend. And you do not have a lot of time to attend job fairs or visit colleges looking for possibilities. Which of the following sources would you use? A) headhunters B) employment agencies specializing in the tasks the jobs require C) government-run job centers D) direct contact Answer: C Diff: Moderate Page Ref: 247 Objective: Use effective recruiting, selecting, and hiring strategies. 50) Direct contact recruiting consists of A) visiting job fairs, trade shows, and colleges to look for potential new hires. B) quickly hiring job applicants who show up at your organization’s facility. C) hiring a headhunter to approach people who are qualified for the open position. D) advertising the open position in local newspapers or magazines. Answer: A Diff: Moderate Page Ref: 247 Objective: Use effective recruiting, selecting, and hiring strategies. True/False 51) An organization’s structure is the formal configuration of people, which determines the allocation of duties, responsibilities, and authority.

Answer: TRUE Diff: Easy Page Ref: 234 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 52) An organization’s division of labor is the physical separation of unionized and nonunionized employees. Answer: FALSE Diff: Easy Page Ref: 234 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 53) An organization chart depicts the relationships between departments or employees in an enterprise. Answer: TRUE Diff: Easy Page Ref: 234 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 54) An organization’s hierarchy of authority is the official configuration of reporting relationships. Answer: TRUE Diff: Easy Page Ref: 235 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 55) A president or CEO is a top manager who assigns employees their work, monitors their progress, and provides guidance. Answer: FALSE Diff: Easy Page Ref: 235 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 56) In general, managers have authority over those employees who work at the same level as they do in the organization chart. Answer: FALSE Diff: Easy Page Ref: 235 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 57) In a company with a centralized structure, decision-making is in the hands of very few people. Answer: TRUE Diff: Easy Page Ref: 235 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure.

58) In the company with a centralized structure, decisions are made at the bottom and filter up to higher-level employees through the hierarchy of authority. Answer: FALSE Diff: Easy Page Ref: 235 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 59) In a bureaucratic organization, there are many rigidly imposed rules. Answer: TRUE Diff: Easy Page Ref: 236 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 60) In a bureaucratic organization, authority lies in the hands of lower-level employees. Answer: FALSE Diff: Easy Page Ref: 236 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 61) In a bureaucratic organization, workers perform highly specialized jobs. Answer: TRUE Diff: Easy Page Ref: 236 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 62) In a bureaucratic organization, the structure has no apparent hierarchy. Answer: FALSE Diff: Easy Page Ref: 236 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 63) An organization with a flat structure has many layers of management. Answer: FALSE Diff: Easy Page Ref: 236 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 64) A manager’s span of control determines how many employees he or she oversees. Answer: TRUE Diff: Easy Page Ref: 236 Objective: Interpret and understand an organization chart, and anticipate the role you would be expected to perform in an organization depending on its structure. 65) A mission statement is an invisible manifestation of a company’s culture. Answer: TRUE

Diff: Easy Page Ref: 242 Objective: Detect and recognize an organization’s culture in order to make decisions about your career. 66) The grapevine is part of an organization’s formal communication network. Answer: FALSE Diff: Easy Page Ref: 243 Objective: Detect and recognize an organization’s culture in order to make decisions about your career. 67) An organization’s culture consists of the attitudes, values, and norms shared by its members. Answer: TRUE Diff: Easy Page Ref: 241 Objective: Detect and recognize an organization’s culture in order to make decisions about your career. 68) A job description details the personal qualities the employer considers important for the position in question. Answer: FALSE Diff: Easy Page Ref: 245 Objective: Use effective recruiting, selecting, and hiring strategies. 69) Recruiting is the process of offering a promising candidate a job. Answer: FALSE Diff: Easy Page Ref: 246 Objective: Use effective recruiting, selecting, and hiring strategies. 70) Networking site are sources of potential candidates for an open position. Answer: TRUE Diff: Easy Page Ref: 246 Objective: Use effective recruiting, selecting, and hiring strategies. 71) Online recruiting is inexpensive and fast. Answer: TRUE Diff: Easy Page Ref: 246 Objective: Use effective recruiting, selecting, and hiring strategies. 72) Government-run job centers help companies find candidates for high-level positions that require extensive expertise. Answer: FALSE Diff: Easy Page Ref: 247 Objective: Use effective recruiting, selecting, and hiring strategies. 73) Managers should recruit constantly, even if they do not have a position to fill. Answer: TRUE

Diff: Easy Page Ref: 248 Objective: Use effective recruiting, selecting, and hiring strategies. 74) Direct contact recruiting involves hiring people who show up at an organization’s facility. Answer: FALSE Diff: Easy Page Ref: 247 Objective: Use effective recruiting, selecting, and hiring strategies. 75) Headhunters specialize in helping companies fill low-level positions that require little or no skill. Answer: FALSE Diff: Easy Page Ref: 247 Objective: Use effective recruiting, selecting, and hiring strategies.

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CHAPTER 11: DIRECT, CONTROL, EVALUATE: DECISION MAKING, DELEGATING, AND APPRAISING TRUE/FALSE 1. Directors are warm, enthusiastic individuals with strong communication skills and a tendency to exaggerate. Answer: False Diff: Easy Page Ref: 256 Goal: Characterize your communication style, recognize the communication styles of others, and prescribe how you could work together most effectively. 2. The best communicators are intuitive enough to understand the best ways to communicate with others. Answer: True Diff: Easy Page Ref: 257 Goal: Characterize your communication style, recognize the communication styles of others, and prescribe how you could work together most effectively. 3. Flexing means adapting your own communication style to match the behavior of the person you are communicating with. Answer: True Diff: Easy Page Ref: 258 Goal: Characterize your communication style, recognize the communication styles of others, and prescribe how you could work together most effectively. 4. According to Maslow's hierarchy of needs theory, for people to be effective, needs must be satisfied in a particular order based on how necessary they are for survival. Answer: True Diff: Easy Page Ref: 259 Goal: Prescribe the best methods for motivating someone, and explain how you yourself are motivated. 5. Hygiene factors and motivators are elements of Maslow's hierarchy of needs theory. Answer: False Diff: Easy Page Ref: 261 Goal: Prescribe the best methods for motivating someone, and explain how you yourself are motivated. 6. Victor Vroom's expectancy theory says that employees are motivated when they believe more effort will lead to better job performance, which in turn will lead to rewards they value. Answer: True Diff: Easy Page Ref: 262 Goal: Prescribe the best methods for motivating someone, and explain how you yourself are motivated.

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7. People who enjoy all five elements of the job characteristics theory likely have very low motivation at work. Answer: False Diff: Easy Page Ref: 264 Goal: Prescribe the best methods for motivating someone, and explain how you yourself are motivated. 8. The benefit of skill development is limited only to an employee's own career advancement. Answer: False Diff: Easy Page Ref: 265 Goal: Recommend methods for training and developing employees, and know how you can develop your own career. 9. With simulation training, managers have employees practice the work they are going to do to familiarize employees with company procedures and any equipment the employees will be using. Answer: True Diff: Easy Page Ref: 266 Goal: Recommend methods for training and developing employees, and know how you can develop your own career. 10. Decision making is a small part of running a successful business. Answer: False Diff: Easy Page Ref: 268 Goal: Make good decisions and be an effective delegator or delegatee. 11. Delegation requires assigning certain tasks to subordinates, but not giving them the responsibility to carry out the tasks. Answer: False Diff: Moderate Page Ref: 270 Goal: Make good decisions and be an effective delegator or delegatee. 12. Empowerment means giving employees control of and responsibility for running a particular part of a project, with minimal oversight. Answer: True Diff: Easy Page Ref: 271 Goal: Make good decisions and be an effective delegator or delegatee. 13. Controlling requires managers to create guidelines that ensure an organization is on track to achieve its goals. Answer: True Diff: Easy Page Ref: 272 Goal: Measure the results of your decisions and take corrective action when necessary. 14. Most companies have an annual or semi-annual formal performance appraisal that typically involves evaluations by both the employee and the manager. Answer: True Diff: Easy Page Ref: 275 Goal: Conduct a performance evaluation of someone, and recognize circumstances when someone should be promoted, reassigned, or fired.

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15. If an employee is becoming a problem, managers should make sure that the grounds that justify a firing are reflected in the employee’s performance evaluation and are backed up by documentation. Answer: True Diff: Easy Page Ref: 277 Goal: Conduct a performance evaluation of someone, and recognize circumstances when someone should be promoted, reassigned, or fired.

MULTIPLE CHOICE 16. If you know exactly what you want out of life, you are probably a ________. a. performer b. detailer c. director d. people-pleaser Answer: c Diff: Easy Page Ref: 256 Goal: Characterize your communication style, recognize the communication styles of others, and prescribe how you could work together most effectively. 17. If you relish the chance to launch into a story at any opportunity, you are probably a ________. a. performer b. director c. detailer d. people-pleaser Answer: a Diff: Easy Page Ref: 256 Goal: Characterize your communication style, recognize the communication styles of others, and prescribe how you could work together most effectively. 18. If you are kind-hearted and sensitive and like working with others, you are probably a ________. a. people-pleaser b. director c. performer d. detailer Answer: a Diff: Easy Page Ref: 257 Goal: Characterize your communication style, recognize the communication styles of others, and prescribe how you could work together most effectively.

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19. If you like to have all the facts before you make a decision, you are probably a ________. a. performer b. people-pleaser c. detailer d. director Answer: c Diff: Easy Page Ref: 257 Goal: Characterize your communication style, recognize the communication styles of others, and prescribe how you could work together most effectively. 20. If you are a performer, but you try communicating by being businesslike, task focused, and to the point, you are flexing toward a _______. a. people-pleaser b. detailer c. storyteller d. director Answer: d Diff: Easy Page Ref: 258 Goal: Characterize your communication style, recognize the communication styles of others, and prescribe how you could work together most effectively. 21. If you are a people-pleaser, but you try communicating by allowing the other person to talk, focusing on his or her needs, and being appreciative of that person's strengths and contributions, you are flexing toward a ________. a. detailer b. director c. performer d. collaborator Answer: c Diff: Easy Page Ref: 258 Goal: Characterize your communication style, recognize the communication styles of others, and prescribe how you could work together most effectively. 22. If you are a detailer, but you try communicating by trying to be sincere and not too formal, you are flexing toward a ________. a. performer b. task-focuser c. people-pleaser d. director Answer: c Diff: Easy Page Ref: 258 Goal: Characterize your communication style, recognize the communication styles of others, and prescribe how you could work together most effectively.

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23. If you are a director, but you try communicating by using facts to communicate your specific expectations, you are flexing toward a ________. a. detailer b. people-pleaser c. autocrat d. performer Answer: a Diff: Moderate Page Ref: 258 Goal: Characterize your communication style, recognize the communication styles of others, and prescribe how you could work together most effectively. 24. People who enjoy doing the work itself, so that the job is its own reward, are motivated by _______ factors. a. intrinsic b. both intrinsic and extrinsic c. extrinsic d. neither intrinsic nor extrinsic Answer: a Diff: Easy Page Ref: 259 Goal: Prescribe the best methods for motivating someone, and explain how you yourself are motivated. 25. People who enjoy the things they get as a result of doing the work are motivated by ________ factors. a. neither intrinsic nor extrinsic b. both intrinsic and extrinsic c. extrinsic d. intrinsic Answer: c Diff: Easy Page Ref: 259 Goal: Prescribe the best methods for motivating someone, and explain how you yourself are motivated. 26. What is in the middle of Maslow's hierarchy of needs pyramid? a. social needs b. physiological needs c. safety needs d. esteem needs Answer: a Diff: Moderate Page Ref: 260 Goal: Prescribe the best methods for motivating someone, and explain how you yourself are motivated.

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27. What is at the top of Maslow's hierarchy of needs pyramid? a. safety needs b. social needs c. self-actualization d. esteem needs Answer: c Diff: Moderate Page Ref: 260 Goal: Prescribe the best methods for motivating someone, and explain how you yourself are motivated. 28. Employees expect to receive certain things that do not create happiness, yet a company's lack of these things would eventually create dissatisfaction. These rewards are called _______. a. self-actualizers b. task identities c. hygiene factors d. motivators Answer: c Diff: Easy Page Ref: 261 Goal: Prescribe the best methods for motivating someone, and explain how you yourself are motivated. 29. Things that give people satisfaction and motivate them when they receive them are called ________. a. hygiene factors b. safety needs c. motivators d. feedback Answer: c Diff: Easy Page Ref: 261 Goal: Prescribe the best methods for motivating someone, and explain how you yourself are motivated. 30. The view that employees like work, are motivated, and do not need close supervision to do their work describes Theory ________. a. W b. Y c. X d. Z Answer: b Diff: Easy Page Ref: 262 Goal: Prescribe the best methods for motivating someone, and explain how you yourself are motivated.

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31. The idea that employees need to believe that their performance will actually lead to rewards is what Victor Vroom called ________. a. valence b. instrumentality c. expectancy d. self-actualization Answer: b Diff: Easy Page Ref: 262 Goal: Prescribe the best methods for motivating someone, and explain how you yourself are motivated. 32. Expectancy means that ________. a. employees need to understand what specific actions they need to take to yield good performance b. managers need to provide rewards that employees really value c. employees need to believe that their performance will actually lead to rewards d. employees can trust that they will be rewarded if they perform well Answer: a Diff: Easy Page Ref: 262 Goal: Prescribe the best methods for motivating someone, and explain how you yourself are motivated. 33. Which of the following is a theory that suggests ways to design jobs so that they are inherently motivating for employees? a. expectancy theory b. two-factor theory c. hierarchy of needs theory d. job characteristics theory Answer: d Diff: Easy Page Ref: 263-264 Goal: Prescribe the best methods for motivating someone, and explain how you yourself are motivated. 34. ________ describes whether you are involved in a job from beginning to end, rather than just bits and pieces. a. Skill variety b. Task significance c. Autonomy d. Task identity Answer: d Diff: Easy Page Ref: 264 Goal: Prescribe the best methods for motivating someone, and explain how you yourself are motivated.

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35. ________ describes whether your job is important. a. Task significance b. Feedback c. Skill variety d. Task identity Answer: a Diff: Easy Page Ref: 264 Goal: Prescribe the best methods for motivating someone, and explain how you yourself are motivated. 36. Employees who have neither the effort nor the skills to do a job fall into the training category of ________. a. lifters b. life-support c. leaners d. learners Answer: b Diff: Easy Page Ref: 265 Goal: Recommend methods for training and developing employees, and know how you can develop your own career. 37. Employees who are highly skilled but do not put forth much effort fall into the training category of ________. a. leaners b. life-support c. learners d. lifters Answer: a Diff: Easy Page Ref: 265 Goal: Recommend methods for training and developing employees, and know how you can develop your own career. 38. A quick and easy way to communicate as much information as possible to new employees is called ________. a. job shadowing b. online training c. off-the-job training d. orientation Answer: d Diff: Easy Page Ref: 266 Goal: Recommend methods for training and developing employees, and know how you can develop your own career.

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39. Teaching employees their jobs by immediately starting them to work and supervising them until they learn what they need to know is called ________. a. simulation training b. online training c. on-the-job training d. orientation Answer: c Diff: Easy Page Ref: 266 Goal: Recommend methods for training and developing employees, and know how you can develop your own career. 40. Training that employees receive from any computer at work or home is called ________. a. job shadowing b. orientation c. online training d. off-the-job training Answer: c Diff: Easy Page Ref: 267 Goal: Recommend methods for training and developing employees, and know how you can develop your own career. 41. New employees following and observing an experienced employee to see what he or she does is called ________. a. online training b. on-the-job training c. job shadowing d. simulation training Answer: c Diff: Easy Page Ref: 267 Goal: Recommend methods for training and developing employees, and know how you can develop your own career. 42. Employees going back to school to boost their skills is called ________. a. on-the-job training b. off-the-job training c. simulation training d. job shadowing Answer: b Diff: Easy Page Ref: 267 Goal: Recommend methods for training and developing employees, and know how you can develop your own career. 43. Decision making is getting results from considering a course of action ________. a. based on no alternatives b. based on just one alternative c. among several alternatives d. between just two alternatives Answer: c Diff: Easy Page Ref: 269 Goal: Make good decisions and be an effective delegator or delegatee.

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44. The first decision making step is ________. a. rank the alternatives b. identify the goal(s) to be achieved and the decision to be made c. decide and act d. isolate the facts Answer: b Diff: Easy Page Ref: 269 Goal: Make good decisions and be an effective delegator or delegatee. 45. The second decision making step is ________. a. isolate the facts b. list alternatives c. decide and act d. identify the goal(s) to be achieved and the decision to be made Answer: a Diff: Easy Page Ref: 269 Goal: Make good decisions and be an effective delegator or delegatee. 46. The fourth decision making step is ________. a. rank the alternatives b. identify the goal(s) to be achieved and the decision to be made c. list alternatives d. isolate the facts Answer: a Diff: Easy Page Ref: 270 Goal: Make good decisions and be an effective delegator or delegatee. 47. The fifth decision making step is ________. a. decide and act b. list alternatives c. isolate the facts d. rank the alternatives Answer: a Diff: Easy Page Ref: 270 Goal: Make good decisions and be an effective delegator or delegatee. 48. The sixth decision making step is ________. a. rank the alternatives b. isolate the facts c. identify the goal(s) to be achieved and the decision to be made d. debrief, measure, and evaluate Answer: d Diff: Easy Page Ref: 270 Goal: Make good decisions and be an effective delegator or delegatee.

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49. All of the following are questions that managers can ask to determine whether delegating is the right choice for a particular task EXCEPT ________. a. What is my communication style? b. Do I need to be personally involved because of my unique knowledge or skills? c. Is the task within my major area of responsibility? d. Is quick action needed? Answer: a Diff: Easy Page Ref: 270-271 Goal: Make good decisions and be an effective delegator or delegatee. 50. When you are a delegatee, you should do all of the following EXCEPT ________. a. make a comprehensive review of everything, including events that could cause delays b. alert your manager if will not be able to make a deadline, but only after you are at least a week late c. bring what you need to meetings and have the most up-to-date information d. keep your manager informed with relevant, accurate information Answer: b Diff: Easy Page Ref: 271 Goal: Make good decisions and be an effective delegator or delegatee. 51. When you are delegated responsibility for a particular facet of a project, be sure to ________. a. plan for each month because daily plans are unnecessary b. have the most up-to-date information c. not waste time worrying or anticipating problems d. answer every question, even if you do not have a particular figure or know the exact answer Answer: b Diff: Moderate Page Ref: 271 Goal: Make good decisions and be an effective delegator or delegatee. 52. Controlling is ultimately about monitoring all of the following EXCEPT ________. a. processes b. competitors c. employees d. procedures Answer: b Diff: Moderate Page Ref: 272 Goal: Measure the results of your decisions and take corrective action when necessary. 53. ________ act as the basis for managers to figure out how the business is doing. a. Vision statements b. Training and development c. Performance standards d. Mission statements Answer: c Diff: Easy Page Ref: 273 Goal: Measure the results of your decisions and take corrective action when necessary.

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54. The next step after establishing performance standards is ________ them. a. delegating b. communicating c. appraising d. identifying Answer: b Diff: Easy Page Ref: 273 Goal: Measure the results of your decisions and take corrective action when necessary. 55. Managers judge a company's performance and assess the outcome by taking a look at the established ________ and comparing them to the actual ________. a. vision and mission statements; performance b. performance; standards c. training; development d. standards; performance Answer: d Diff: Easy Page Ref: 274 Goal: Measure the results of your decisions and take corrective action when necessary. 56. In a formal appraisal, a manager's remarks should include all of the following EXCEPT ________. a. comments on the reasons and evidence supporting the conclusions b. notes after the evaluation meeting with the employee c. the employee's comments d. meaningless statements Answer: d Diff: Easy Page Ref: 275 Goal: Conduct a performance evaluation of someone, and recognize circumstances when someone should be promoted, reassigned, or fired. 57. In a formal appraisal, a manger's remarks should include ______. a. the communicating styles used during the meeting b. the applicability of the two-factor theory c. notes after the evaluation meeting with the employee d. comments about the dangers of groupthink Answer: c Diff: Easy Page Ref: 275 Goal: Conduct a performance evaluation of someone, and recognize circumstances when someone should be promoted, reassigned, or fired. 58. To make sure a performance appraisal is productive, a manager should be ________. a. honest and direct b. insensitive to emotion c. focused on the person, not behaviors d. clear when not having confidence in the employee Answer: a Diff: Easy Page Ref: 276 Goal: Conduct a performance evaluation of someone, and recognize circumstances when someone should be promoted, reassigned, or fired.

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59. As an employee receiving criticism in a performance appraisal, be sure to do all of the following EXCEPT ________. a. stay cool, calm, and collected b. be honest with yourself c. get defensive, combative, or argumentative d. thank your manager Answer: c Diff: Easy Page Ref: 276 Goal: Conduct a performance evaluation of someone, and recognize circumstances when someone should be promoted, reassigned, or fired. 60. Promotion-worthy employees ________. a. have very little experience delegating b. have a demonstrated record of success c. are extremely nervous about taking on more responsibility d. prefer to make decisions that have no effect the organization's success Answer: b Diff: Easy Page Ref: 277 Goal: Conduct a performance evaluation of someone, and recognize circumstances when someone should be promoted, reassigned, or fired.

SHORT ANSWERS 61. What are the four personality types that are closely tied to particular communication styles? ANSWER: The four personality types are (1) directors, (2) performers, (3) people-pleasers, and (4) detailers. Diff: Easy Page Ref: 256 Goal: Characterize your communication style, recognize the communication styles of others, and prescribe how you could work together most effectively. 62. Describe Christopher Galvin's management style at Motorola. ANSWER: Galvin replaced authoritative leaders with more people-oriented managers. He would send monthly e-mails to employees describing company activities and explaining his decision making calls. Galvin was a people-pleaser. Diff: Moderate Page Ref: 257 Goal: Characterize your communication style, recognize the communication styles of others, and prescribe how you could work together most effectively. 63. Does Maslow's hierarchy of needs really work to motivate employees? ANSWER: Student answers will vary. The chapter describes Chip Conley of the Joie de Vivre hotel chain used Maslow to double revenues. Diff: Moderate Page Ref: 260-261 Goal: Prescribe the best methods for motivating someone, and explain how you yourself are motivated.

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64. Give an example of a hygiene factor in an organization. ANSWER: Student answers will vary. Hygiene factors do not create employee happiness, but an organization's lack of hygiene factors would eventually create dissatisfaction. Employees expect to receive hygiene factors. Diff: Moderate Page Ref: 261 Goal: Prescribe the best methods for motivating someone, and explain how you yourself are motivated. 65. Does Herzberg's two-factor theory really work to motivate employees? ANSWER: Student answers will vary. Some people say Herzberg’s two-factor theory is too simplistic and does not take into account that some motivators may actually cause dissatisfaction for someone else. Diff: Moderate Page Ref: 262 Goal: Prescribe the best methods for motivating someone, and explain how you yourself are motivated. 66. Describe Theory X. ANSWER: Theory X assumes that employees dislike work and responsibility, so they need to be closely supervised. Diff: Easy Page Ref: 262 Goal: Prescribe the best methods for motivating someone, and explain how you yourself are motivated. 67. How can the job characteristics theory help employees? ANSWER: As an employee, using the job characteristics theory can help identify areas in a job in which the employee wants to improve, so that she or he can work with the manager to make that job more meaningful and satisfying. Diff: Moderate Page Ref: 264 Goal: Prescribe the best methods for motivating someone, and explain how you yourself are motivated. 68. As a category of employee needing training and development, what is a learner? ANSWER: Learners are people who try really hard, but do not yet have the skills required to advance to high positions within a company. Maybe they are new to the job or to the field, so they don’t have much background knowledge to go on. Diff: Easy Page Ref: 265 Goal: Recommend methods for training and developing employees, and know how you can develop your own career. 69. What is managerial training? ANSWER: Managerial training is used by employees to improve their position within the company—or to score a better job. A company may also send potential managers to management training so that they have the skill set they need when managerial positions become available. Diff: Easy Page Ref: 267 Goal: Recommend methods for training and developing employees, and know how you can develop your own career.

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70. What are the pros and cons of team decision making? ANSWER: Team decision making may be preferable because different people and departments may know different relevant information, have different areas of expertise, and represent different interests. Unpopular or controversial decisions may also be easier to swallow if everyone affected by them is part of the decision making process. Possible drawbacks include the possibility that, with so many ideas flowing around a conference room table, it’s often difficult to stay focused. Other times, two or more individuals may engage in power play, each having director communication styles, and will bicker so much that the rest of the team may be demoralized. Diff: Easy Page Ref: 269 Goal: Make good decisions and be an effective delegator or delegatee. 71. Describe the third decision making step. ANSWER: List alternatives. List as many ideas as possible and weigh the pros and cons of each. Also consider any negative ramifications from not making a decision at all. Then, through a process of elimination, narrow the ideas down to a few that can be considered further. Diff: Easy Page Ref: 270 Goal: Make good decisions and be an effective delegator or delegatee. 72. Should you be a micromanager? ANSWER: After delegating to subordinates, it might be tempting to keep a scrutinizing eye on their work. It is best, however, to avoid micromanagement, as this can stress and demoralize an employee. Instead, be sure to let the employee know what he or she is responsible for and provide support as needed. Diff: Moderate Page Ref: 271 Goal: Make good decisions and be an effective delegator or delegatee. 73. How challenging should performance standards be? ANSWER: Performance standards should be realistically challenging—neither impossible nor too easy to reach. If they’re impossible, it’s likely to lower employee and investor morale. On the other hand, meeting standards that employees feel are challenging can boost their morale, as well as increase investor confidence. Diff: Moderate Page Ref: 273 Goal: Measure the results of your decisions and take corrective action when necessary. 74. How can a manager evaluate a company's performance? ANSWER: During the evaluation process, managers judge the performance and assess the outcome. This can be done by taking a look at the established standards and comparing them to the actual performance. A process of evaluating feedback and making modifications helps identify what was done right and what could have been done better. If things can be done better, a decision needs to be made regarding how things can be improved. Diff: Moderate Page Ref: 274 Goal: Measure the results of your decisions and take corrective action when necessary.

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75. When is it a good time to promote someone? ANSWER: Student answers will vary. Generally, employees are promoted when companies recognize them for their performance and contributions and a higher-level position opens up. However, just because someone’s a good employee doesn’t mean he or she should be promoted. Perhaps an employee is doing such a great job because he or she is most suited for the job he or she currently has, and would not succeed in a promotion. Diff: Moderate Page Ref: 276 Goal: Conduct a performance evaluation of someone, and recognize circumstances when someone should be promoted, reassigned, or fired.

CHAPTER 12 Discover: The Marketing Mix, Market Research, and Target Marketing TRUE/FALSE 1. Sales and advertising are the most important parts of marketing. Answer: False Diff: Easy Page Ref: 284 Goal: Explain what marketing really is, and the use of the Ps of marketing to improve your marketing efforts. 2. As customers discover and learn about products, they made purchase decisions that contribute to a company’s triple bottom line. Answer: True Diff: Easy Page Ref: 284 Goal: Explain what marketing really is, and the use of the Ps of marketing to improve your marketing efforts. 3. Laser eye surgeries can be categorized as transformation products. Answer: True Diff: Easy Page Ref: 285 Goal: Explain what marketing really is, and the use of the Ps of marketing to improve your marketing efforts. 4. In many cases, the distribution system for a product is one of its primary points of differentiation. Answer: True Diff: Moderate Page Ref: 286 Goal: Explain what marketing really is, and the use of the Ps of marketing to improve your marketing efforts. 5. At Mercy Hospital, ICU nurses are considered external customers. Answer: False Diff: Moderate Page Ref: 290 Goal: Take a customer-centered approach to your marketing that includes both external and internal customers. 6. Snapshots Inc. sells digital photo prints in retail stores. Their counter clerks are considered internal customers. Answer: True Diff: Moderate Page Ref: 290 Goal: Take a customer-centered approach to your marketing that includes both external and internal customers. 7. Consumer and customer are interchangeable marketing terms. Answer: False Diff: Easy Page Ref: 290 Goal: Take a customer-centered approach to your marketing that includes both external and internal customers.

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8. In most cases, consumers base their decisions on relatively rapid product evaluations that often occur with little or no careful thought. Answer: True Diff: Easy Page Ref: 291 Goal: Take a customer-centered approach to your marketing that includes both external and internal customers. 9. Marketers begin the market research process by deciding how they will collect their data. Answer: False Diff: Easy Page Ref: 293 Goal: Use marketing research to reveal new insights about customers and markets 10. Companies must evaluate the opportunity cost of performing marketing research. Answer: True Diff: Moderate Page Ref: 294 Goal: Use marketing research to reveal new insights about customers and markets 11. A company’s own financial statements are considered primary data. Answer: False Diff: Moderate Page Ref: 294 Goal: Use marketing research to reveal new insights about customers and markets 12. A disadvantage of focus groups is there is a potential for groupthink to occur. Answer: True Diff: Moderate Page Ref: 295 Goal: Use marketing research to reveal new insights about customers and markets 13. When identifying a target market, the marketer always performs the same steps—segmenting, targeting, and positioning—at the same time and in the same order. Answer: False Diff: Moderate Page Ref: 297 Goal: Segment markets from one another and identify target markets. 14. When companies choose inappropriate target markets, they waste time and resources. Answer: True Diff: Easy Page Ref: 299 Goal: Segment markets from one another and identify target markets. 15. The goal of targeting is to make the company’s product appear better than the competition’s product. Answer: False Diff: Moderate Page Ref: 299 Goal: Segment markets from one another and identify target markets. 16. The greatest benefit of repositioning strategies is the low level of risk involved. Answer: False Diff: Moderate Page Ref: 300 Goal: Segment markets from one another and identify target markets. 17. By tracking purchases and looking for trends, credit card companies are attempting to understand consumer behavior. Answer: True

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Diff: Easy Page Ref: 303 Goal: Explain the impact of consumer behavior research on marketing strategy, and know how to make educated purchases yourself. 18. The popularity of sites like iTunes has changed consumer behavior. Answer: True Diff: Easy Page Ref: 304 Goal: Explain the impact of consumer behavior research on marketing strategy, and know how to make educated purchases yourself. 19. The business buyer’s decision-making process tends to be less complex than that of an individual consumer. Answer: False Diff: Easy Page Ref: 304 Goal: Explain the impact of consumer behavior research on marketing strategy, and know how to make educated purchases yourself. 20. The business-buying process is costlier than that of an individual consumer. Answer: True Diff: Easy Page Ref: 304 G5 Goal: Explain the impact of consumer behavior research on marketing strategy, and know how to make educated purchases yourself. MULTIPLE CHOICE 21. The term used to describe the entire range of activities that people in organizations perform to discover customer needs and to provide solutions to those needs is ________. a. accounting b. management c. economics d. marketing Answer: d Diff: Easy Page Ref: 284 Goal: Explain what marketing really is, and the use of the Ps of marketing to improve your marketing efforts. 22. Which statement is FALSE? a. Marketers use research to learn crucial information about customers. b. Marketers must be oriented toward the customer. c. Marketers consider sales and advertising the most important parts of their jobs. d. Marketers carefully select and target the customer markets in which they invest their time and resources. Answer: c Diff: Easy Page Ref: 284 Goal: Explain what marketing really is, and the use of the Ps of marketing to improve your marketing efforts.

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23. The term used to describe the unique combination of activities that an organization implements to create a product solution to meet customer needs is ________. a. promotion b. marketing mix c. marketing research d. market segmentation Answer: b Diff: Easy Page Ref: 284 Goal: Explain what marketing really is, and the use of the Ps of marketing to improve your marketing efforts.

24. Which is NOT part of the traditional marketing mix? a. perception b. price c. promotion d. place Answer: a Diff: Easy Page Ref: 284 Goal: Explain what marketing really is, and the use of the Ps of marketing to improve your marketing efforts. 25. Rock On is a company that makes rocking chairs for home use. The products they provide their customers can be categorized as ________. a. commodities b. services c. goods d. experiences Answer: c Diff: Moderate Page Ref: 284 Goal: Explain what marketing really is, and the use of the Ps of marketing to improve your marketing efforts. 26. Ye Olde Apple Orchard sells apples and other fall fruits. The products they provide their customers can be categorized as ________. a. commodities b. goods c. services d. experiences Answer: a Diff: Moderate Page Ref: 284 Goal: Explain what marketing really is, and the use of the Ps of marketing to improve your marketing efforts. 27. Debbie provides haircuts and nail care. The products she provides her customers can be categorized as ________. a. services b. commodities c. experiences

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d. goods Answer: a Diff: Moderate Page Ref: 284 Goal: Explain what marketing really is, and the use of the Ps of marketing to improve your marketing efforts. 28. Damian teaches youth yoga classes that focus on life-long stress relief. The product he provides his customers can be categorized as ________. a. experiences b. commodities c. goods d. transformations Answer: d Diff: Moderate Page Ref: 285 Goal: Explain what marketing really is, and the use of the Ps of marketing to improve your marketing efforts. 29. Perfect North Slopes offers skiing and snow tubing to its customers. These products are categorized as ________. a. commodities b. experiences c. goods d. transformations Answer: b Diff: Moderate Page Ref: 285 Goal: Explain what marketing really is, and the use of the Ps of marketing to improve your marketing efforts. 30. Ye Olde Apple Orchard sells apples and other fall fruits. They also allow their customers to pick their own apples. The products they provide their customers can be categorized as ________. a. commodities and experiences b. commodities and services c. goods and services d. goods and transformation Answer: a Diff: Moderate Page Ref: 285 Goal: Explain what marketing really is, and the use of the Ps of marketing to improve your marketing efforts. 31. The amount of money a company charges a customer to buy or use a product is the ________. a. price b. promotion c. profit d. perception Answer: a Diff: Easy Page Ref: 285 Goal: Explain what marketing really is, and the use of the Ps of marketing to improve your marketing efforts.

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32. Toy Biz created a new hand-held game for the consumer market and now needs to set the selling price. Which statement is FALSE? a. The price should account for the game’s production costs. b. Toy Biz should consider how much the competition charges for similar games. c. The price should be something the customers will remember (i.e., $24.44). d. Toy Biz should check for any government controls on the price of their game. Answer: c Diff: Easy Page Ref: 285 Goal: Explain what marketing really is, and the use of the Ps of marketing to improve your marketing efforts. 33. Which P from the marketing mix refers to designing a process to get the product to the customer? a. price b. promotion c. planet d. place Answer: d Diff: Easy Page Ref: 286 Goal: Explain what marketing really is, and the use of the Ps of marketing to improve your marketing efforts. 34. Renee’s Tailoring and Alterations needs to design a delivery mechanism to provide her services to customers when and where they want it. This mechanism is called the ________. a. transportation system b. distribution system c. promotion system d. production system Answer: b Diff: Moderate Page Ref: 286 Goal: Explain what marketing really is, and the use of the Ps of marketing to improve your marketing efforts. 35. Which marketing mix activity deals with two-way, interactive communication with customers? a. product b. price c. place d. promotion Answer: d Diff: Easy Page Ref: 286 Goal: Explain what marketing really is, and the use of the Ps of marketing to improve your marketing efforts. 36. At what time in marketing’s history did Henry Ford sell identical Model T cars? a. the selling era b. the customer era c. the production era d. the societal marketing era Answer: c

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Diff: Moderate Page Ref: 287 Goal: Explain what marketing really is, and the use of the Ps of marketing to improve your marketing efforts. 37. At what time in marketing’s history did marketers discover that they could increase sales and profits by focusing on the end users of their products? a. the selling era b. the customer era c. the production era d. the societal marketing era Answer: b Diff: Moderate Page Ref: 287 Goal: Explain what marketing really is, and the use of the Ps of marketing to improve your marketing efforts. 38. Fast-food companies are providing healthier food choices to help combat the skyrocketing obesity rates in the U.S. This time in marketing’s history is known as ________. a. the selling era b. the customer era c. the production era d. the societal marketing era Answer: d Diff: Moderate Page Ref: 287 Goal: Explain what marketing really is, and the use of the Ps of marketing to improve your marketing efforts. 39. The individuals or businesses with which a company develops and maintains relationships are called ________ customers. a. external b. internal c. B2B d. A2B Answer: a Diff: Easy Page Ref: 290 Goal: Take a customer-centered approach to your marketing that includes both external and internal customers. 40. The individuals and departments within an organization that need to be satisfied and to whom a business needs to market an idea or solution are called ________ customers. a. external b. internal c. B2B d. B2C Answer: b Diff: Easy Page Ref: 290 Goal: Take a customer-centered approach to your marketing that includes both external and internal customers.

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41. Book It is a company that produces textbooks and sells them to college students through retail stores. Who would be one of their external customers? a. their warehouse employees b. their editors c. their printing suppliers d. their sales managers Answer: c Diff: Moderate Page Ref: 290 Goal: Take a customer-centered approach to your marketing that includes both external and internal customers. 42. Book It is a company that produces textbooks and sells them to college students through retail stores. Who would be one of their internal customers? a. the individual students who purchase their books b. their printing suppliers c. their sales managers d. the instructors who choose books for their courses Answer: c Diff: Moderate Page Ref: 290 Goal: Take a customer-centered approach to your marketing that includes both external and internal customers. 43. TV, radio, and Internet advertisements, and sales promotions like coupons and rebates are a few examples of ________. a. business-to-business marketing b. business-to-consumer marketing c. internal marketing d. research marketing Answer: b Diff: Easy Page Ref: 290 Goal: Take a customer-centered approach to your marketing that includes both external and internal customers. 44. Companies who participate in ________ must understand how businesspeople with the title “buyer” make decisions. a. business-to-business marketing b. business-to-consumer marketing c. internal marketing d. research marketing Answer: a Diff: Moderate Page Ref: 291 Goal: Take a customer-centered approach to your marketing that includes both external and internal customers. 45. When organizations gather information to better understand their customers, generate more profits, and improve customer satisfaction, they are performing ________. a. market segmentation b. perceptual mapping c. repositioning Chapter 12—Page 8

d. market research Answer: d Diff: Easy Page Ref: 292 Goal: Use marketing research to reveal new insights about customers and markets 46. What is an example of quantitative information gathered through market research? a. sales volumes b. opinions c. ideas d. stories Answer: a Diff: Easy Page Ref: 294 Goal: Use marketing research to reveal new insights about customers and markets 47. What is an example of qualitative information gathered through market research? a. anecdotes b. ideas c. supplier costs d. opinions Answer: c Diff: Easy Page Ref: 294 Goal: Use marketing research to reveal new insights about customers and markets 48. What is NOT a question a researcher would ask when developing a market research approach? a. What information am I looking for? b. Who has the information I am looking for? c. How will I use the information once I get it? d. Does the benefit of the information I’m getting outweigh the costs of getting it? Answer: c Diff: Moderate Page Ref: 294 Goal: Use marketing research to reveal new insights about customers and markets 49. ________ is obtained directly from an information source. a. secondary data b. primary data c. internal data d. external data Answer: b Diff: Easy Page Ref: 294 Goal: Use marketing research to reveal new insights about customers and markets 50. ________ is acquired form resources that have already collected and processed information. a. secondary data b. primary data c. internal data d. external data Answer: a Diff: Easy Page Ref: 294 Goal: Use marketing research to reveal new insights about customers and markets

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51. Which is NOT an example of a primary source of data? a. observational research b. focus groups c. surveys d. a company’s own financial statements Answer: d Diff: Moderate Page Ref: 294 Goal: Use marketing research to reveal new insights about customers and markets 52. Which is NOT an example of a secondary source of data? a. interviews b. government publications c. magazines d. journals Answer: a Diff: Easy Page Ref: 294 Goal: Use marketing research to reveal new insights about customers and markets 53. What research method gathers information by asking questions to a sampling of people? a. surveys b. interviews c. observational research d. focus groups Answer: a Diff: Moderate Page Ref: 295 Goal: Use marketing research to reveal new insights about customers and markets 54. Which of these statements is NOT a benefit of a survey? a. They are flexible. b. The respondents are always truthful. c. They are easily analyzed. d. They are less expensive than other methods. Answer: b Diff: Moderate Page Ref: 295 Goal: Use marketing research to reveal new insights about customers and markets 55. What is a benefit of collecting information through an interview? a. They are typically easy to arrange. b. They are inexpensive. c. People give honest responses. d. People can respond in depth. Answer: d Diff: Moderate Page Ref: 295 Goal: Use marketing research to reveal new insights about customers and markets 56. What research method gathers information by paying attention to people’s behavior in specific situations? a. surveys b. interviews

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c. observational research d. focus groups Answer: c Diff: Easy Page Ref: 295 Goal: Use marketing research to reveal new insights about customers and markets 57. What is a benefit of observational research? a. It can uncover behaviors customers are not even aware of. b. It takes less time than other methods. c. It is more inexpensive than other methods. d. It can be used for long periods of time. Answer: a Diff: Moderate Page Ref: 295 Goal: Use marketing research to reveal new insights about customers and markets 58. What research method gathers information by forming organized sessions that solicit opinions and ideas about products from potential and existing customers? a. surveys b. interviews c. observational research d. focus groups Answer: d Diff: Easy Page Ref: 295 Goal: Use marketing research to reveal new insights about customers and markets 59. What is the best method of research for a company that is looking for perspectives on abstract ideas? a. surveys b. interviews c. observational research d. focus groups Answer: d Diff: Challenging Page Ref: 295 Goal: Use marketing research to reveal new insights about customers and markets 60. In the research process, the document that describes the proposed actions for responding to the research results is called ________. a. perceptual mapping b. competitive positioning c. the marketing plan d. the targeted plan Answer: c Diff: Easy Page Ref: 295 Goal: Use marketing research to reveal new insights about customers and markets 61. Which of these statements is NOT a step in a typical market research plan? a. identify an opportunity b. develop a market research approach c. collect and analyze information d. implement the plan Answer: d Diff: Easy Page Ref: 295

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Goal: Use marketing research to reveal new insights about customers and markets 62. A segment of the market that an organization focuses on in its marketing efforts is the ________. a. target market b. primary market c. secondary market d. perceptual market Answer: a Diff: Easy Page Ref: 297 Goal: Segment markets from one another and identify target markets. 63. What is NOT an activity used in identifying a group of potential customers to pursue? a. segmenting b. targeting c. positioning d. conditioning Answer: d Diff: Easy Page Ref: 297 Goal: Segment markets from one another and identify target markets. 64. Breaking down the overall customer market into smaller groups of buyers is called ________. a. market segmentation b. targeting c. competitive positioning d. conditioning Answer: a Diff: Easy Page Ref: 297 Goal: Segment markets from one another and identify target markets. 65. Catch-A-Wave sells surfboards. What type of variable would they typically use to segment their consumer market? a. geographic b. demographic c. topographic d. psychographic Answer: a Diff: Moderate Page Ref: 297 Goal: Segment markets from one another and identify target markets. 66. Nifty nails sells nail polish. What type of variable would they typically use to segment their consumer market? a. geographic b. demographic c. topographic d. psychographic Answer: b Diff: Moderate Page Ref: 298 Goal: Segment markets from one another and identify target markets.

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67. Sudsy Soap sells cleaning products with all-natural ingredients. What type of variable would they typically use to segment their consumer market? a. geographic b. demographic c. topographic d. psychographic Answer: d Diff: Moderate Page Ref: 298 Goal: Segment markets from one another and identify target markets. 68. ________ is when an organization identifies what piece of the market it’s going to pursue. a. Market segmentation b. Targeting c. Competitive positioning d. Conditioning Answer: b Diff: Easy Page Ref: 298 Goal: Segment markets from one another and identify target markets. 69. What is NOT one of the primary criteria for evaluating potential market segments as a target market? a. size and anticipated growth b. accessibility c. availability of competitive products in the market d. consistency with an organization’s mission, goals, and strategy Answer: c Diff: Easy Page Ref: 298 Goal: Segment markets from one another and identify target markets. 70. Jennifer makes jewelry involving the colors, logos, and mascots of local high school sports teams. She loves that her job lets her meet people in her small community. When considering her target market, which of the primary evaluation criteria is she likely to consider most important? a. size and anticipated growth b. accessibility c. availability of competitive products in the market d. consistency with an organization’s mission, goals, and strategy Answer: a Diff: Moderate Page Ref: 298 Goal: Segment markets from one another and identify target markets. 71. Spray It sells products in aerosol cans. They discover a portion of their market uses their products for unsafe activities. When considering their target market, which of the primary evaluation criteria is Spray It likely to consider most important? a. size and anticipated growth b. accessibility c. availability of competitive products in the market d. consistency with an organization’s mission, goals, and strategy Answer: d Diff: Moderate Page Ref: 298

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Goal: Segment markets from one another and identify target markets. 72. The process by which companies communicate product features and benefits relative to those of competing products is called ________. a. market segmentation b. targeting c. competitive positioning d. conditioning Answer: c Diff: Easy Page Ref: 299 Goal: Segment markets from one another and identify target markets. 73. The technique that illustrates how customers perceive existing products, not only in relation to one another, but along a spectrum of product attributes is called ________. a. market segmentation b. perceptual mapping c. repositioning d. target marketing Answer: b Diff: Easy Page Ref: 300 Goal: Segment markets from one another and identify target markets. 74. What is the strategy meant to change the chosen market’s perception of a product? a. market segmentation b. perceptual mapping c. repositioning d. target marketing Answer: c Diff: Easy Page Ref: 300 Goal: Segment markets from one another and identify target markets. 75. ________ is also known as the psychology of marketing. a. Market segmentation b. Target marketing c. Consumer behavior d. Perceptual mapping Answer: c Diff: Easy Page Ref: 301 Goal: Explain the impact of consumer behavior research on marketing strategy, and know how to make educated purchases yourself. 76. The Hernandez family is bored with their usual choices in breakfast cereals and decides they’d like to try a new one. While at the store, Mr. Hernandez reads nutrition information on several cereal boxes and finds two that meet his criteria for a healthy breakfast. He purchases the one that looks tastier based on the picture on the box. His family eats it and loves it. The study of this informal decisionmaking scenario falls under the marketing category of ________. a. market segmentation b. target marketing c. consumer behavior d. perceptual marketing Answer: c

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Diff: Moderate Page Ref: 301 Goal: Explain the impact of consumer behavior research on marketing strategy, and know how to make educated purchases yourself. 77. What is TRUE of a business-to-business market? a. The buyers are highly trained. b. The products generally are standardized. c. Sales are indirect—bought from intermediaries. d. The selling style is impersonal. Answer: a Diff: Moderate Page Ref: 305 Goal: Explain the impact of consumer behavior research on marketing strategy, and know how to make educated purchases yourself. 78. Which statement about the business-to-business market is FALSE? a. There are a limited number of businesses in the market. b. Businesses may be concentrated in specific areas. c. Buyers are trained. d. Sales are indirect—bought from intermediaries. Answer: d Diff: Moderate Page Ref: 305 Goal: Explain the impact of consumer behavior research on marketing strategy, and know how to make educated purchases yourself. 79. When compared to a business-to-business market, which statement about the consumer market is TRUE? a. Products generally are customized. b. Consumers are spread out across a large area. c. Most purchases are made directly from manufacturers. d. The selling style is most often personal. Answer: b Diff: Moderate Page Ref: 305 Goal: Explain the impact of consumer behavior research on marketing strategy, and know how to make educated purchases yourself. 80. When compared to a business-to-business market, which statement about the consumer market is FALSE? a. The buyers are highly trained. b. The products generally are standardized. c. Sales are indirect—bought from intermediaries. d. The selling style is impersonal. Answer: a Diff: Moderate Page Ref: 305 Goal: Explain the impact of consumer behavior research on marketing strategy, and know how to make educated purchases yourself. SHORT ANSWER 81. What is the marketing mix? Answer:

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The marketing mix is the unique combination of marketing activities than an organization implements to create a product solution to meet customer needs. The traditional four Ps of the marketing mix are product, price, place, and promotion. Diff: Moderate Page Ref: 284 Goal: Explain what marketing really is, and the use of the Ps of marketing to improve your marketing efforts. 82. What are the different types of products? Give an example of each. Answer: Products can be commodities (fruits, vegetables, animals, grains), goods (clothing, cosmetics, books, furniture), services (oil changes, haircuts), experiences (movies, concerts, sky diving), and transformations (laser eye surgery, educational courses). Diff: Moderate Page Ref: 284 Goal: Explain what marketing really is, and the use of the Ps of marketing to improve your marketing efforts. 83. What two additional Ps of the marketing mix relate to the triple bottom line? Answer: The people P encompasses all of the individuals who were involved in the production and cocreation, service, and consumption of a product as well as all stakeholders affected by the marketer’s product or message. The planet P refers to the environmental impact of a product. Diff: Moderate Page Ref: 285 Goal: Explain what marketing really is, and the use of the Ps of marketing to improve your marketing efforts. 84. Give a brief description of the historical evolution of marketing. Answer: Marketing began in the production era, when manufacturing was the center of focus. It evolved into the selling era, when companies tried to find ways to convince people to purchase the products they had produced, whether or not the customers wanted them. The next era was the customer era, which is when marketers began focusing on what the customers wanted and needed. In the societal marketing era, companies began to realize their impact on society as a whole (i.e., obesity rates, pollution, etc.). Diff: Moderate Page Ref: 287 Goal: Explain what marketing really is, and the use of the Ps of marketing to improve your marketing efforts. 85. Define external customers. Who would be considered a hospital’s external customers? Answer: External customers are individuals or businesses with which a company develops and maintains relationships. Among a hospital’s external customers are the people who seek medical care from their emergency room, in-patient care facility, outpatient testing facilities, etc. Also included are suppliers of hospital equipment and medical supplies. Diff: Moderate Page Ref: 290 Goal: Take a customer-centered approach to your marketing that includes both external and internal customers. 86. Define internal customers. Who would be considered a restaurant’s internal customers? Answer:

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The individuals and departments within an organization that need to be satisfied and to whom a business needs to market an idea or solution are called internal customers. Among a restaurant’s internal customers are hosts, wait staff, chefs, cooks, bus persons, managers, etc. Diff: Moderate Page Ref: 290 Goal: Take a customer-centered approach to your marketing that includes both external and internal customers. 87. What is consumer marketing? Answer: Consumer marketing is the process of marketing to individuals who want to purchase products for use. It is also referred to as business-to-consumer marketing or B2C. Diff: Moderate Page Ref: 290 Goal: Take a customer-centered approach to your marketing that includes both external and internal customers. 88. What does it mean for a business to be customer centered? Answer: When an organization is customer centered, it considers customers when developing a mission, setting goals, developing strategies, and implementing plans. Diff: Moderate Page Ref: 292 Goal: Take a customer-centered approach to your marketing that includes both external and internal customers. 89. What is market research and why is it important? Answer: Market research is the gathering of information that an organization can use to better understand their customers, generate more profits, and improve customer satisfaction. It is important because it allows marketers to learn about the most important part of marketing—the customer. Diff: Moderate Page Ref: 292 Goal: Use marketing research to reveal new insights about customers and markets 90. When developing a market research plan, what kind of information might a researcher look for? Answer: A researcher may gather quantitative information, which is hard data. It might include sales volumes, revenue, and supplier costs. Marketers who are more interested in people’s thoughts gather qualitative information. Opinions, ideas, emotions, and stories, are all examples of qualitative information. Diff: Moderate Page Ref: 294 Goal: Use marketing research to reveal new insights about customers and markets 91. Define primary and secondary data and give an example of each. Answer: Primary data is obtained directly from an information source. An example is a survey. Secondary data is acquired from resources that have already been collected and processed information. An example is a government publication. Diff: Moderate Page Ref: 294 Goal: Use marketing research to reveal new insights about customers and markets 92. Why are marketing plans an important part of market research? Answer:

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A marketing plan is often the plan of action that results from the market research. It provides a SWOT analysis, goals for the marketing campaign, how the Ps will be implemented, and a budget. Diff: Moderate Page Ref: 295 Goal: Use marketing research to reveal new insights about customers and markets 93. Why do companies perform market segmentation? Answer: Companies perform market segmentation to try to understand their customers by categorizing them into smaller groups based on needs and desires. Diff: Moderate Page Ref: 297 Goal: Segment markets from one another and identify target markets. 94. How do companies evaluate market segments to define their target market? Answer: Many companies evaluate market segments by considering size and growth—selecting markets that are sufficiently large to generate sizable revenues. They also consider accessibility—choosing markets that can be reached and served. Finally, they consider consistency—how well those segments fit the company’s vision, mission, goals, and strategy. Diff: Moderate Page Ref: 298 Goal: Segment markets from one another and identify target markets. 95. What is the goal of competitive positioning? Answer: The process by which companies communicate product features and benefits relative to those of competing products is called competitive positioning. The goal is to make your product appear to be better than the competition’s product. Diff: Moderate Page Ref: 299 Goal: Segment markets from one another and identify target markets. 96. What is perceptual mapping? Answer: Perceptual mapping is the technique used to illustrate how customers perceive existing products, not only in relation to one another, but along a spectrum of product attributes or consumer perceptions. Diff: Moderate Page Ref: 300 Goal: Segment markets from one another and identify target markets. 97. What is consumer behavior? Answer: Consumer behavior is the psychology of marketing. It seeks to explain how customers feel, think, consume, and make decisions. Diff: Moderate Page Ref: 302 Goal: Explain the impact of consumer behavior research on marketing strategy, and know how to make educated purchases yourself. 98. Describe the informal decision-making process consumers go through when making an important decision. Answer: Consumers determine their problem, search for information, consider alternatives, choose the best one and make a purchase, and then evaluate the purchase. Diff: Moderate Page Ref: 302

Chapter 12—Page 18

Goal: Explain the impact of consumer behavior research on marketing strategy, and know how to make educated purchases yourself.

Chapter 12—Page 19

99. Why do marketers care about consumer behavior? Answer: Researchers focus on understanding how products are selected, purchased, and used to satisfy customer needs and maximize profits. Diff: Moderate Page Ref: 303 Goal: Explain the impact of consumer behavior research on marketing strategy, and know how to make educated purchases yourself. 100. How are business buying different from consumer buying? Answer: Business buyers use a more sophisticated decision-making process than do consumer buyers and business purchases involve a lot more people and far greater sums of money. Diff: Moderate Page Ref: 304 Goal: Explain the impact of consumer behavior research on marketing strategy, and know how to make educated purchases yourself.

Chapter 12—Page 20

Chapter 13 Create: Product Innovations, Branding, Pricing, and Value Learning Objective: Innovation (312) Creating and launching new products (313-317) Branding (317 – 319) Pricing strategy (323-326) Benefits (327) Value (328)

Multiple-choice questions

1. Innovation applies to _________________. a) goods b) services c) experiences d) all of the above d; Easy; p. 312 Learning Objective: Innovation

2. When a cell phone company introduces a new product with more features than the earlier model at a lower price that is called _____________________. a) a price reduction b) brand perception c) innovation d) concept testing c; Moderate; p. 312 Learning Objective: Innovation

3. The first step in the innovation process is often _____________________. a) evaluating production costs b) conceptualizing how the finished product will look c) figuring out what customers think they need d) determining how much customers will be willing to pay for the product you have in mind c; Moderate; p. 312 Learning Objective: Innovation

4. Surveys, interviews, and focus groups are methods of performing ___________________. a) innovation b) problem solving c) market research d) product testing c; Challenging; p. 312 Learning Objective: Innovatrion

5. A focus group is designed to _____. a) collect statistical data b) promote a product c) answer questions about a product d) perform market research d; Moderate; p. 312 Learning Objective: Innovation

6. When customers complained about the difficulty in getting ketchup out of a glass bottle, Heinz _______________________. a) developed a product concept b) developed the prototype c) discovered a need d) all of the above d; Moderate; p. 313 Learning Objective: Creating and launching new products

7. Concept testing is part of the process of ____________________. a) generating ideas for solutions b) analyzing the business case c) screening the ideas d) testing the prototype c; Challenging;, p. 313 Learning Objective: Creating and launching new products

8. Knowing what a customer wants and needs is the key to creating _________________. a) a successful product b) brand recognition c) the best pricing strategy d) an appealing prototype a; Easy; p. 313 Learning Objective: Creating and launching new products

9. Concept testing has become increasingly popular in recent years due to _________________. a) increased competition b) the Internet c) advances in technology d) a rush of new products on the market B; Moderate; p. 314 Learning Objective: Creating and launching new products

10.

When you ask whether your product will appeal to a wide range of consumers or to a specific target audience, you are analyzing the ______________. a) business case b) product concept c) customer benefits d) brand recognition a; Challenging; p. 314 Learning Objective: Creating and launching new products

11. A working model or representation of what a final product will be is a ____________. a) prototype b) test product c) positive image d) brand a; Moderate; p. 314 Learning Objective: Creating and launching new products

12. Analyzing the business case is part of the ____________ process. a) creation b) marketing c) innovation d) prototype c; Moderate; p. 314 Learning Objective: Creating and launching new products

13. If a product costs more than what consumers are willing to pay or is too costly to produce and distribute, that product is not ________________. a) meeting a need b) a strong idea c) creating a new solution d) feasible d; Easy; p. 314 Learning Objective: Creating and launching new products

14.

Testing a product, modifying it to incorporate customer feedback and then _______________ are likely to result in a finished product that meets customer needs. a) developing future products b) emphasizing the brand name c) creating a package d) retesting the product d; Challenging; p. 315 Learning Objective: Creating and launching new products

15.

The life of a product, consisting of four distinct stages is called the product _____ _____. a) history b) life cycle c) shelf life d) maturity phase b; Easy; p. 316 Learning Objective: Creating and launching new products

16.

The introduction phase, the growth stage, the maturity stage, and the decline stage are all part of the _______________. a) innovation process b) product life cycle c) packaging of tangible goods d) four Cs of pricing b; Moderate; p. 316 Learning Objective: Creating and launching new products

17. Three essential product concepts are product life cycle, ____ and ____. a) lines and mix b) lines and quality c) brand and lines d) market and price a; Moderate; p. 316 Learning Objective: Creating and launching new products

18.

Coke Classic, Coke Zero, and Diet Coke comprise a product _____ for the company. a. mix b. life cycle c. innovation d. line d; Challenging; p. 317 Learning Objective: Creating and launching new products

19. The total collection of products that a seller offers is the _______________. a) product line b) brand c) product mix d) premium c; Challenging; p. 317 Learning Objective: Creating and launching new products

20. Jane and Sue are buying supplies for their apartment and need dishwashing detergent. Jane reaches for the store generic brand that costs less but Sue insists that they buy Dawn, which she always used at home and liked its quality, despite the higher cost. Sue is displaying____ _____. a) brand loyalty b) price differentiation c) product loyalty d) customer loyalty a; Moderate; p. 318 Learning Objective: Branding 21. When a customer always chooses Fedex for overnight package delivery, this is an example of _______________. a) brand perception b) brand recognition c) meeting a need d) brand loyalty d; Moderate; p. 318 Learning Objective: Branding

22. The goals of branding include all of the following except ________________. a) building a positive image b) providing customer benefits c) creating brand loyalty d) establishing brand recognition b; Challenging; p. 318 Learning Objective: Branding

23. The Best Buy Reward Zone card does not encourage ____________________. a) brand recognition b) brand management c) brand loyalty d) brand perception b; Challenging; p. 319 Learning Objective: Branding

24. In 2009, in an effort to enhance brand recognition and increase sales of its products, Kraft Foods ________________. a) initiated innovative pricing strategies b) created a new company to introduce new products c) created a new logo d) enhanced the company’s presence on the Web c; Moderate; p. 320 Learning Objective: Branding

25. Product packaging is important for all of the following reasons except ______________. a) packaging addresses consumer safety warnings and warranties b) packing reflects the type of product a customer expects to receive c) packaging is a guarantee of success in product marketing d) packaging often improves the function of a product c; Challenging, p. 321 Learning Objective: Branding

26. The brown uniforms that UPS drivers wear are an example of _____________________. a) the company’s attitude toward pricing strategies b) packaging for non-tangible goods c) brand perception d) the overall identity of the company b; Challenging; p. 321 Learning Objective: Branding

27.

One of the greatest concerns in packaging now is the impact it has on ______. a) shoplifting b) the environment c) customer benefits d) shelf space b; Moderate; p. 322 Learning Objective: Branding

28. The packaging of a website includes all of the following except its ___________. a) interactivity b) layout c) color scheme d) brand perception d; Moderate; p. 322 Learning Objective: Branding

29. Prices for goods and services include _______________. a) membership fees b) interest c) tuition d) all of the above d; Moderate; p. 323 Learning Objective: Pricing strategy

30. The 4 Cs of pricing are __________________. a) creation, costs, channel, customers b) costs, competition, customers, control c) concept, creation, costs, competition d) concept, costs, comparisons, competition b; Challenging; p. 324 Learning Objective: Pricing strategy

31. In cost-plus pricing, the plus part is ________________. a) what allows the company to make a profit on the product b) the value-added benefit of a product after a cost/benefit analysis has been done c) the additional cost after product manufacture, such as shipping and distribution d) the overhead for running the business a; Challenging; p. 324 Learning Objective: Pricing strategy

32. Prices that are determined by what customers are willing to pay are called ____________. a) customer-driven pricing b) market-driven pricing c) everyday low pricing d) discount pricing a; Moderate; p. 325 Learning Objective: Pricing strategy

33. When a customer goes to a store and shows the salesperson an advertisement from a different store for a product that the customer wants to buy at the same price that is written in the ad this is called _______________. a) customer-driven pricing b) competitor-driven pricing c) cost-driven pricing d) cost-plus pricing b; Challenging; p. 325 Learning Objective: Pricing Strategy

34.

With penetration pricing, a manufacture can build sales ____ by charging a ____initial price. a) Loyalty/low b) Volume/high c) Volume / low d) Returns / high c; Moderate; p. 326 Learning Objective: Pricing strategy

35. _________________ are the positive outcomes of using a product. a) Value perceptions b) Benefits c) Innovations d) Rewards B; Easy; p. 327 Learning Objective: Benefits

36. Goals in developing a pricing strategy include __________________. a) getting a reasonable return b) building store traffic c) making a profit d) all of the above d; Easy; p. 332 Learning Objective: Pricing strategy

True/False questions 37. Even if a product has an innovative marketing campaign, if it doesn’t have a specific use, no one is going to buy it. True; Easy; p. 312 Learning Objective: Innovation 38. Innovation in product design generally increases value and increases cost. False; Moderate; p. 312 Learning Objective: Innovation 39. Portable computers were developed because customers who were using desktop computers in the 1980s expressed the need for a computer that they could carry with them from work to home. False; Moderate; p. 313 Learning Objective: Innovation

40. The visualization process does not apply to innovations in services, experiences, or transformations. False; Moderate; p. 313 Learning Objective: Creating and launching new products

41. Being innovative is a quality you can develop and improve over time. True; Moderate; p. 315 Learning Objective: Creating and launching new products 42. A product life cycle is its shelf life. False; Moderate; p. 316 Learning Objective: Creating and launching new products

43. Frito-Lay offers several flavors and types of potato chips, all part of their product line. Moderate, answer: true; p. 316 True; Moderate; p. 316 Learning Objective: Creating and launching new products

44.

General Mills offers cereals, cake mixes, puddings, and main meals, all part of their product line. Moderate, answer: false; p. 316 False; Moderate; p. 316 Learning Objective: Creating and launching new products

45. In a product life cycle, maturity immediately precedes decline. True; Moderate; p. 316 Learning Objective: Creating and launching new products 46. Soft drinks and automobiles are products in mature industries that are so well established, it is often too costly to develop entirely new products. True; Challenging; p. 318 Learning Objective: Branding

47. Customers experience less risk when they purchase generic products. False; Challenging; p. 318 Learning Objective: Branding 48. The image of a pink mechanized bunny is used to promote batteries because the company believes it evokes positive emotions and will leave a lasting impression. True; Easy; p. 318

49. Brand managers recognize that powerful brands, like the classic Disney brand, can be limiting. True; Moderate; p. 319 Learning Objective: Branding 50. M&M candies are now available in blue because the parent company, Mars, asked employees to design a new product on their own. False; Easy; p. 319 Learning Objective: Branding

51. Effective branding is one way to revitalize a product that is nearing the end of its product life cycle. True; Moderate; p. 320 Learning Objective: Branding

52. In order to position a product successfully, the customer has to be able to differentiate it from a similar product. True; Easy; p. 320 Learning Objective: Branding

53. The longer an industry has been in existence, the more likely it is that competitors will offer products that are extremely different in comparison with products from a long-established company. False; Challenging; p. 320 Learning Objective: Branding

54. When an established brand creates a more streamlined design for its packaging, it will usually be perceived as giving the company a more up-to-date look and since loyal customers will continue to buy the product based on the brand name and logo, the new image is likely to increase sales by making the product appealing to new customers as well. False; Challenging; p. 321 Learning Objective: Branding 55. A price taker sets the market price for products available for sale. False; Moderate; p. 323 Learning Objective: Pricing strategy 56. Sometimes companies will offer products at prices that are not profitable, thus taking a loss on those sales, in order to draw in new customers. True; Moderate; p. 324 Learning Objective: Pricing strategy

57. Designer clothing is often priced with the aim of social equality so that everyone can afford it. False; Moderate; p. 324 Learning Objective: Pricing strategy

58. Everyday low pricing is the pricing strategy in which customers are given special discounts for the lowest possible pricing. False; Moderate; p. 325

59. When the Mazda Miata unexpectedly was found to appeal to middle-aged men as well as teenagers, there was significantly increased demand which drove the price down. False; Challenging; p. 326

60. Providing a convenient place for people to buy lunch does not add any value to the product of the restaurant. False; Moderate; p. 328 Learning Objective: Value

61. Focusing on product features rather than what the customer wants is a good marketing strategy, since quality will win out over innovative designs. False; Challenging; p. 328 Learning Objective: Value

62. Negative customer experiences will not damage sales of a high quality product. False; Easy; p. 328 Learning Objective: Value

Essay and fill-in questions

63. Explain why companies do market research and list some of the methods they use. Answer: Companies do market research in order to reach their customers, understand their needs, establish two-way communication, and give them the products they want. Some of the methods they use are focus groups, surveys, interviews, and research on the Internet. Challenging, p. 312 Learning Objective: Innovation

64. When you run out of milk and you go to the store to buy some, this is an example of a customer ___________. Answer: need Moderate; p. 312 Learning Objective: Innovation

65. Professional ____________________ are always on the lookout for the next new trend or gadget. Answer: trend-spotters Moderate, p. 313 Learning Objective: Creating and launching new products

66. Describe the visualization process for a company that is preparing to introduce a new style of shoes. What questions will the company have to consider? Answer: A pair of shoes is a tangible good. The company must consider the form and function of the good. Here are some examples of questions regarding form and function. Will they be dress shoes or casual shoes? Will they be for men or for women or for boys or girls? Will they be worn primarily outdoors or indoors? Will they be worn for short periods of time (a few hours) or for an entire day? Then the company will have to brainstorm the elements. What materials will the upper part of the shoe and the soles be made of? Will they be slip-ons or will they have ties or zippers or Velcro or buckles other types of fasteners? Then the company will have to conceptualize how the finished product might look using drawings, paintings, computer graphics, models, adapting existing shoes or other design methods. Challenging; p. 313 Learning Objective: Creating and launching new products

67. Once a company comes up with a few ideas for new products, the company uses _________________ to see which idea people like most. This helps the company determine which products are most likely to sell. Answer: concept testing Moderate; p. 313 Learning Objective: Creating and launching new products 68. What are four questions you should ask when analyzing a concept to determine whether it will succeed in the market? Answer should include four of the six possible answers: What is the size of your potential market and is it big enough that an adequate number of people will buy your product? Will your product appeal to a wide range of consumers, or is there a specific target audience you are marketing it to? How much will customers pay for your product? How much will it cost to produce your product? How will you transport or deliver the product, and how much will this cost? Will your product contribute to your triple bottom line? Challenging, p. 314 Learning Objective: Creating and launching new products

69.

In the product life cycle, the product is officially made available to the public in the ______. Answer: introduction phase Moderate: p. 315 Learning Objective: Creating and launching new products

70.

When Arm & Hammer baking soda was repositioned as a deodorizer and carpet freshener, this was an example of a _________________ product life cycle. Answer: circular Challenging; p. 316 Learning Objective: Creating and launching new products

71. The process of innovation begins with what? Answer should include both discovering an existing need and discovering a potential need. Moderate, p. 317 Learning Objective: Creating and launching new products

72. Your grandfather just bought his eighth Dodge truck from the same dealer he has gone to over thirty years. He demonstrates brand ________. Answer: loyalty Easy; p. 319 Learning Objective: Branding 73. Choosing fiber paperboard instead of plastic for a supermarket product’s wrapping is an example of ____________________ packaging. Answer: “green” Easy; p. 322 Learning Objective: Branding

74. When the band Radiohead offered their album to customers for whatever price those customers wanted to pay for it and some customers received the album for free, this was an example of _______________________. Answer:: customer-driven pricing Moderate; p. 325 Learning Objective: Pricing strategy 75. The pricing strategy where the mode of distribution of the product determines the price of the product is called _____________________. Answer: channel-driven pricing Challenging; p. 325 Learning Objective: Pricing strategy

76. The strategy of attracting new customers by setting a low initial price for a product is called ______________ pricing. Answer: penetration Moderate; p. 326 Learning Objective: Pricing strategy

77. Buy one, get one free is an example of what pricing strategy? Answer: discounting Moderate; p. 326 Learning Objective: Pricing strategy

CHAPTER 14 Communicate: Promotions and Marketing TRUE/FALSE 1. The ultimate goal of different types of marketing communication is to achieve customer loyalty. Answer: True Diff: Easy Page Ref: 338 Goal: Establish SMART marketing communication goals for a marketing campaign. 2. Marketing campaigns consists primarily of advertising a product or service. Answer: False Diff: Easy Page Ref: 338 Goal: Establish SMART marketing communication goals for a marketing campaign. 3. Relational goals define what you want your target audience to know, believe, or perceive. Answer: False Diff: Easy Page Ref: 339 Goal: Establish SMART marketing communication goals for a marketing campaign. 4. Marketing communication refers to one part of the marketing process. It includes all the elements of the organizations communication with its target market. Answer: True Diff: Easy Page Ref: 339 Goal: Establish SMART marketing communication goals for a marketing campaign. 5. Publicity can be an extremely effective marketing tool because it is inexpensive; however, the company has minimal control over what is communicated. Answer: True Diff: Moderate Page Ref: 342 Goal: Select the promotional mix that is best suited for a marketing campaign. 6. The primary purpose of creating and implementing SMART marketing and communication goals is to provide enough definition to a marketing campaign to allow an organization to take action. Answer: True Diff: Moderate Page Ref: 340 Goal: Establish SMART marketing communication goals for a marketing campaign. 7. Gifts such as pens, pencils, coffee mugs, given for buying a product are examples of sales promotion. Answer: True Diff: Moderate Page Ref: 343 Goal: Establish SMART marketing communication goals for a marketing campaign. 8. Buzz and viral marketing are the most expensive forms of promotion. Answer: False Diff: Easy Page Ref: 344 Goal: Establish SMART marketing communication goals for a marketing campaign.

9. Public relations are considered to be more reliable than advertising. Answer: True Diff: Easy Page Ref: 344 Goal: Establish SMART marketing communication goals for a marketing campaign. 10. One reason advertising is very effective in our environment today is because people will pay attention and learn about an organization’s product. Answer: False Diff: Easy Page Ref: 347 Goal: Establish a creative strategy and select media vehicles for a marketing campaign. 11. Web 2.0 refers to the rise of social networking sites, blogs, wikis, and virtual communities that provide convenient platforms for people to share information and collaborate. Answer: True Diff: Easy Page Ref: 349 Goal: Establish a creative strategy and select media vehicles for a marketing campaign. 12. Creative marketing strategies can utilize both newer technologies such as Twitter, blogging, and social networking as well as older marketing methods and remain effective and competitive. Answer: True Diff: Moderate Page Ref: 350 Goal: Establish a creative strategy and select media vehicles for a marketing campaign. 13. Internet, radio, cell phones, and television are all examples of sales promotion. Answer: False Diff: Easy Page Ref: 351 Goal: Establish a creative strategy and select media vehicles for a marketing campaign. 14. Marketing 3.0 has risks because companies give up much control over content, design, and process. Answer: True Diff: Moderate Page Ref: 349 Goal: Establish a creative strategy and select media vehicles for a marketing campaign. 15. Bringing in new customers costs a company about five times more than retaining existing customers. Answer: True Diff: Moderate Page Ref: 354 Goal: Leverage your customer service strategy to achieve your goals by strengthening customer relationships, satisfaction, and loyalty. 16. One trick to successfully using online customer forums is to discourage dissatisfied customers from posting their experiences. Answer: False Diff: Moderate Page Ref: 355 Goal: Leverage your customer service strategy to achieve your goals by strengthening customer relationships, satisfaction, and loyalty.

17. Using Web 2.0 has made it easier for companies to gather valuable feedback from their customers very inexpensively. Answer: True Diff: Moderate Page Ref: 355 Goal: Leverage your customer service strategy to achieve your goals by strengthening customer relationships, satisfaction, and loyalty.

MULTIPLE CHOICE 18. New Beginnings Spa has introduced its own original organic skin care line. The company is donating a percentage of its profits to the National Breast Cancer Foundation, Inc. The marketing goal achieved by this strategy is ________. a. affective b. psychological c. behavioral d. rational Answer: a Diff: Moderate Page Ref: 338 Goal: Establish SMART marketing communication goals for a marketing campaign. 19. Which of the following is an example of a behavioral goal? a. Increase visits to website by 50 unique visits per week. b. Keep visitors at our website an average of 2 more pages per visit. c. Increase the number of online purchases by 12%. d. Increase the number of subscriptions to our email distribution by 17%. Answer: a Diff: Moderate Page Ref: 339 Goal: Establish SMART marketing communication goals for a marketing campaign. 20. If a company has chosen psychological goals as their marketing communication goal the company wants customers to ________ their product or brand. a. think or associate something with b. feel or have an emotional reaction to c. act in a particular way to d. trust and relate to Answer: a Diff: Easy Page Ref: 339 Goal: Establish SMART marketing communication goals for a marketing campaign.

21. When you arrive at your veterinary for your scheduled appointment you are greeted by the receptionist who immediately offers your dog a treat. The receptionist proceeds to let you know what to expect by explaining procedures and offering services. You are then led to a waiting room where you are offered a water bottle and a magazine. Your veterinary’s marketing communication goal is ________. a. psychological b. behavioral c. affective d. relational Answer: d Diff: Moderate Page Ref: 339 Goal: Establish SMART marketing communication goals for a marketing campaign. 22. SMART goals should be all of the following EXCEPT ________. a. attainable b. relevant c. specific d. spontaneous Answer: d Diff: Easy Page Ref: 340 Goal: Establish SMART marketing communication goals for a marketing campaign. 23. Jack is the leader of a team in charge of developing a new marketing campaign for a sports drink. Which of the following represents the first step Jack and his team will likely take using the AIDA model? a. Get customers to want to buy the sports drink. b. Get customers to buy the sports drink. c. Attract attention to the sports drink. d. Piquing customers interest so they want to learn about the sports drink. Answer: c Diff: Moderate Page Ref: 340 Goal: Establish SMART marketing communication goals for a marketing campaign. 24. Setting high goals can be motivating and beneficial for an organization. However, according to SMART goal setting, if goals are extremely aggressive and too high to achieve the biggest risk involved is ________. a. disappointment and loss of morale b. not clearly defining the goal c. excitement and loss of morale d. not knowing the time frame in which the goal should be achieved Answer: a Diff: Moderate Page Ref: 340 Goal: Establish SMART marketing communication goals for a marketing campaign.

25. AIDA is a model designed to ________. a. help marketing teams set attainable goals b. help marketing teams set specific goals c. replace the use of SMART goals d. specify how SMART goals will be achieved Answer: d Diff: Easy Page Ref: 340 Goal: Establish SMART marketing communication goals for a marketing campaign. 26. Which of he following would be considered a SMART goal? a. We will increase online sales by 15%. b. We will design 25 new cars lines in 2 months. c. We will have more customers visit our store by the end of the quarter. d. We will increase online subscriptions purchases by 12.5% within 6 months. Answer: d Diff: Easy Page Ref: 340 Goal: Establish SMART marketing communication goals for a marketing campaign. 27. How can marketers BEST implement the promotional mix? a. Integrate the competitor’s strategy. b. Create a greater marketing budget. c. Use a smaller marketing budget. d. Coordinate with other promotional efforts Answer: d Diff: Moderate Page Ref: 342 Goal: Select the promotional mix that is best suited for a marketing campaign. 28. What is one disadvantage of using advertising in your promotional mix? a. A company has no control over what is communicated. b. Advertising can be expensive and may not be feasible for smaller or start-up companies. c. Advertising messages are unpredictable. d. It is difficult for an organization to set a SMART goal when using advertising. Answer: b Diff: Moderate Page Ref: 342 Goal: Select the promotional mix that is best suited for a marketing campaign. 29. What is an organization’s method of explaining what it offers, creating customer

interest in their product, gaining customer trust and motivating them to act? a. advertising b. promotional mix c. promotion d. advertising mix Answer: c Diff: Moderate Page Ref: 342 Goal: Select the promotional mix that is best suited for a marketing campaign.

30. An organization has determined the best combination of marketing tools to use to achieve their promotional goals. This is called the ________. a. promotional plan b. promotional mix c. advertising plan d. advertising mix Answer: b Diff: Moderate Page Ref: 342 Goal: Select the promotional mix that is best suited for a marketing campaign. 31. Publicity is a tool that companies like to use because ________. a. it gets information out inexpensively b. it is very predictable c. they have control over the information communicated d. it is always accurate information Answer: b Diff: Moderate Page Ref: 342 Goal: Select the promotional mix that is best suited for a marketing campaign. 32. Sue walked into the grocery store and was offered a free sample of a new candy bar. She tasted it and immediately put two more bars in her cart. The part of the grocery store’s promotional mix Sue responded to is ________. a. advertising b. publicity c. sales promotions d. buzz and viral marketing Answer: c Diff: Moderate Page Ref: 343 Goal: Select the promotional mix that is best suited for a marketing campaign. 33. You read in the Sunday promotional CVS Drugstore flyer that CVS is providing a discount coupon to be used only in the CVS stores for Dawn dish detergent. This is an example of ________. a. sales promotion b. trade promotion c. personal selling d. buzz marketing Answer: a Diff: Moderate Page Ref: 343 Goal: Select the promotional mix that is best suited for a marketing campaign.

34. How is the marketing tool personal selling best described? a. presenting products face to face and is the least expensive marketing tool b. presenting products face to face and is the most expensive marketing tool c. consists of coupons, sweepstakes and free products and is the least expensive marketing tool d. consists of coupons, sweepstakes and free products and is the most expensive marketing tool Answer: b Diff: Easy Page Ref: 343 Goal: Select the promotional mix that is best suited for a marketing campaign. 35. All of the following EXCEPT ________ are examples of trade promotions? a. bulk item discounts b. employee discounts c. weekly coupons d. trade shows Answer: c Diff: Moderate Page Ref: 343 Goal: Select the promotional mix that is best suited for a marketing campaign. 36. Although personal selling may be the most expensive marketing tool in the marketing mix, it may be beneficial to an organization because it ________. a. provides an organization the opportunity to build customer relationships b. provides a way for an organization to reach a large audience rapidly c. necessitates customer involvement d. requires very little time to implement Answer: a Diff: Moderate Page Ref: 343 Goal: Select the promotional mix that is best suited for a marketing campaign. 37. Immediately after a news report about people getting sick from eating at Tasty’s Restaurant, the president of Tasty’s appeared on a number of talk TV shows to describe their supply chain management and health regulations. The president’s appearance is an example of ________. a. public relations b. buzz marketing c. viral marketing d. personal selling Answer: a Diff: Moderate Page Ref: 344 Goal: Select the promotional mix that is best suited for a marketing campaign.

38. Providing consumers with new products and asking them to share the information with their friends, family, co-workers, and others in their social network is called ________. a. publicity b. public relations c. buzz marketing d. viral marketing Answer: c Diff: Moderate Page Ref: 344 Goal: Select the promotional mix that is best suited for a marketing campaign. 39. All of the following are benefits to using viral marketing as a promotional tool EXCEPT it ________. a. is inexpensive to use b. requires some creativity to motivate users to pass the information c. can spread extremely fast d. necessitates user involvement Answer: a Diff: Moderate Page Ref: 344 Goal: Select the promotional mix that is best suited for a marketing campaign. 40. Sarah was just hired as the public relations manager of Endo Packaging company. Her role will include all of the following EXCEPT ________. a. providing customers with incentives to take action b. building and maintaining customer relations c. creating a positive company image d. dealing with unfavorable or negative feedback Answer: a Diff: Moderate Page Ref: 344 Goal: Select the promotional mix that is best suited for a marketing campaign. 41. After an organization has determined their communication goals, they use their ________ to decide what their marketing message will be. a. media vehicles b. creative strategy c. promotional mix d. creative brief Answer: b Diff: Easy Page Ref: 346 Goal: Establish a creative strategy and select media vehicles for a marketing campaign.

42. Because companies need to have a consistent creative strategy the marketing team will prepare a/an ________ to capture the company’s message. a. essential message b. media vehicle c. promotional mix d. creative brief Answer: d Diff: Easy Page Ref: 347 Goal: Establish a creative strategy and select media vehicles for a marketing campaign. 43. A blog is an example of what type of media vehicle? a. Internet b. direct mail c. radio d. magazine Answer: a Diff: Easy Page Ref: 349 Goal: Establish a creative strategy and select media vehicles for a marketing campaign. 44. After choosing the promotional mix of tools, marketers must come up with a ________ to implement those tools. a. media vehicle b. communication plan c. creative strategy d. creative brief Answer: c Diff: Easy Page Ref: 347 Goal: Establish a creative strategy and select media vehicles for a marketing campaign. 45. The goal of marketing 2.0 is to ________. a. get the message to consumers by using media vehicles such as billboards and magazine advertisements b. provide for direct interaction with customers c. use traditional marketing techniques with newer technology d. use social networking to communicate product awareness rapidly Answer: c Diff: Difficult Page Ref: 349 Goal: Establish a creative strategy and select media vehicles for a marketing campaign. 46. Marketing 3.0 is best defined as a type of marketing ________. a. in which marketers interact with customers to get a message out by using tools such as Web 2.0 b. in which marketers get a message out by using tools such as billboards, posters and newspapers c. tool using technology to promote marketing 1.0 ideas d. that uses every media vehicle as a way of reaching more customers Answer: a Diff: Moderate Page Ref: 349 Goal: Establish a creative strategy and select media vehicles for a marketing campaign.

47. All EXCEPT ________ are examples of using the Internet as a media vehicle. a. Twitter b. MySpace c. blogs d. marketing 1.0 Answer: d Diff: Easy Page Ref: 350 Goal: Establish a creative strategy and select media vehicles for a marketing campaign. 48. The television show The Apprentice has incorporated many company’s products into episodes. Companies such as Sam’s Club, 7-11, Honda and more have been featured. The type of media vehicle used by these companies would be called ________. a. plot placement b. product placement c. sales promotion d. marketing 3.0 Answer: a Diff: Moderate Page Ref: 351 Goal: Establish a creative strategy and select media vehicles for a marketing campaign. 49. Sunshine Windows has an unlimited marketing budget. They know the specific market they are trying to reach and have determined the specific message they want to send. The best two media vehicles to consider are ________. a. Internet and billboards b. radio and cell phones c. direct mail and television d. television and Internet Answer: c Diff: Difficult Page Ref: 351 Goal: Establish a creative strategy and select media vehicles for a marketing campaign. 50. A company may choose to use traditional billboards as their media vehicle if their creative strategy is to ________. a. target a specific audience b. gain visibility c. create interaction with customers d. send a very specific and detailed message Answer: b Diff: Easy Page Ref: 351 Goal: Establish a creative strategy and select media vehicles for a marketing campaign. 51. As you are watching your favorite television show, you notice an actor using your favorite brand of toothpaste. This type of media vehicle is referred to as ________. a. television b. plot placement c. product placement d. Twitter Answer: c Diff: Easy Page Ref: 351 Goal: Establish a creative strategy and select media vehicles for a marketing campaign.

52. A new assisted living facility is opening. Which of the following would most likely NOT be an effective media vehicle to promote the new facility? a. direct mail b. Internet c. newspapers d. radio Answer: b Diff: Moderate Page Ref: 352 Goal: Establish a creative strategy and select media vehicles for a marketing campaign. 53. As the marketing team is choosing an effective media tool the most important thing to keep in mind is ________. a. the budget b. current technology c. the target audience d. the creative strategy Answer: c Diff: Moderate Page Ref: 352 Goal: Establish a creative strategy and select media vehicles for a marketing campaign.

54. Which of the following is the most reliable way of maintaining loyal customers? a. Use innovative media vehicles. b. Develop a personal relationship with customers. c. Use traditional marketing techniques with newer technology. d. Solicit feedback from customers so their needs can be met. Answer: b Diff: Moderate Page Ref: 353 Goal: Leverage your customer service strategy to achieve your goals by strengthening customer relationships, satisfaction, and loyalty. 55. All of the following are excellent information gathering methods when trying to obtain very specific customer feedback EXCEPT ________. a. surveys b. focus groups c. personal interviews d. observations Answer: a Diff: Moderate Page Ref: 354 Goal: Leverage your customer service strategy to achieve your goals by strengthening customer relationships, satisfaction, and loyalty.

56. An opportunity to meet or exceed customer expectations or disappoint the customer with sub par products is referred to as a/an ________. a. opportunity to receive customer feedback b. moment of truth c. customer service moment d. customer relations opportunity Answer: b Diff: Easy Page Ref: 354 Goal: Leverage your customer service strategy to achieve your goals by strengthening customer relationships, satisfaction, and loyalty. 57. After purchasing a new entertainment center from your local electronics store you realize that four essential pieces are missing. You are frustrated because you have a deadline to meet and you fear you will be asked to return it for a new unopened box. After explaining the situation to the store manager, she offers to retrieve the missing parts from another box and courier them to you immediately. This electronics store would be considered ________. a. an expert at gathering customer feedback b. a moment of truth company c. a customer service tracking company d. to be customer-driven focused Answer: d Diff: Difficult Page Ref: 354 Goal: Leverage your customer service strategy to achieve your goals by strengthening customer relationships, satisfaction, and loyalty. 58. Savvy marketers are using Web 2.0 tools as a way to provide customer service by ________. a. measuring their customer service goals online b. empowering employees to meet company goals online c. creating interactive websites for customers to gather information and provide feedback on products d. creating YouTube video clips as advertising methods Answer: c Diff: Moderate Page Ref: 355 Goal: Leverage your customer service strategy to achieve your goals by strengthening customer relationships, satisfaction, and loyalty. 59. In what way does customer service differ from customer relationship management (CRM)? a. CRM involves looking for the quick fixes to satisfying customer needs. b. CRM takes a holistic approach in satisfying customer needs and expectations. c. Customer service only involves obtaining and reacting to customer feedback. d. Customer service is only considered if it will boost company profits. Answer: b Diff: Easy Page Ref: 356 Goal: Leverage your customer service strategy to achieve your goals by strengthening customer relationships, satisfaction, and loyalty.

60. Customer service is BEST described as the combination of obtaining and putting action to customer feedback and ________. a. building relationships with your customers b. using good tracking tools to find out your customer needs c. providing excellent response time to customer needs d. empowering employees to treat customers well Answer: a Diff: Easy Page Ref: 359 Goal: Leverage your customer service strategy to achieve your goals by strengthening customer relationships, satisfaction, and loyalty.

Short Answer 61. List the four types of communication goals and the responses marketers are looking for from each goal. Answer: • Affective goal – companies want customers to feel or have an emotional reaction to a company or brand • Psychological goals – companies want customers to think or associate something with their product or brand • Behavioral goals – companies want customers to act in a particular way • Relational goals – companies want customers to trust and relate to their company or brand Diff: Easy Page Ref: 338 Goal: Establish SMART marketing communication goals for a marketing campaign. 62. Define SMART goals and why they are important. Answer: SMART goals are specific, measurable, attainable, relevant, and time based. To be specific, the goal must be well defined and clear. To be measurable, the goal must have some type of quantifiable progress. Attainable means that the goal is realistic and reachable. Relevant goals help to achieve a company’s vision and mission. Time frame is the time in which the goal will be completed. SMART goals are important because it provides marketers with a tool to create effective and achievable goals for an organization. Diff: Easy Page Ref: 338 Goal: Establish SMART marketing communication goals for a marketing campaign. 63. What does AIDA stand for and how is it used? Answer: AIDA stands for Attention Interest Desire Action. It is used to move customers through their SMART goals. Diff: Moderate Page Ref: 340 Goal: Establish SMART marketing communication goals for a marketing campaign.

64. Since personal selling is the most expensive form of marketing communication on a per customer basis, why would a company choose this tool? Answer: Although it is an expensive option, the investment usually pays off in the form of building strong long-term relationships with customers that help ensure repeat business. Diff: Moderate Page Ref: 343 Goal: Select the promotional mix that is best suited for a marketing campaign. 65. What is buzz marketing? Answer: Buzz marketing is an inexpensive promotional tool that allows a company to spread its message by word of mouth. Diff: Easy Page Ref: 344 Goal: Select the promotional mix that is best suited for a marketing campaign. 66. When would advertising be a good promotional tool to use? Answer: Advertising is a good option to use when you have a good sized budget, you have a specific target audience you are trying to reach and you want to have good control of the content. Diff: Moderate Page Ref: 345 Goal: Select the promotional mix that is best suited for a marketing campaign. 67. What is a creative brief? Answer: A creative brief captures the essence of the company’s message so they can keep their creative strategy consistent. Diff: Moderate Page Ref: 347 Goal: Establish a creative strategy and select media vehicles for a marketing campaign. 68. What is a media vehicle? Answer: Media vehicles are methods companies use to get their message out and include print advertising, television and interactive online tools. Diff: Easy Page Ref: 348 Goal: Establish a creative strategy and select media vehicles for a marketing campaign. 69. What are the differences in marketing 1.0, marketing 2.0, and marketing 3.0? Answer: Marketing 1.0 is a way to get the marketing message out to as many customers as possible by using media vehicles such as billboards, posters and newspapers. Marketing 2.0 utilizes technology such as pop-ups, online banners, telemarketers, television and radio to get the message out. Marketing 3.0 uses interactive tools such as Web 2.0 to distribute the marketing message. Diff: Moderate Page Ref: 349 Goal: Establish a creative strategy and select media vehicles for a marketing campaign.

70. What is Web 2.0? Answer: Web 2.0 refers to the rise of social networking sites, blogs, wikis, and virtual communities that provide convenient platforms for people to share information and collaborate. Web 2.0 has opened up new opportunities for savvy marketers. Diff: Moderate Page Ref: 349 Goal: Establish a creative strategy and select media vehicles for a marketing campaign. 71. Has new technology replaced old marketing methods? Explain your answer. Answer: Newer technology has not eliminated the use of older marketing methods. Instead, new twists have been put into play with older marketing methods. For example, billboards have been updated to have electronic messages that can change to fit the target audience. A billboard may have one message in the early morning to target commuters and another message later in the day to target stay at home moms. Diff: Moderate Page Ref: 350 Goal: Establish a creative strategy and select media vehicles for a marketing campaign. 72. How has the Internet opened up new opportunities for marketers? Answer: The Internet has allowed for the creation of many new media vehicles for marketers such as social networking sites, blogs and Twitter. It has created a way for marketers to become very interactive with customers by using interactive web pages. Marketers are able to reach a wide audience rapidly and fairly inexpensively. Diff: Moderate Page Ref: 350 Goal: Establish a creative strategy and select media vehicles for a marketing campaign. 73. A company has designed a clothing line for teens. They have an extremely limited marketing budget. What would be the best media vehicle to use in this situation? Explain your answer. Answer: Because the target market is teens and the marketing budget is small, using the Internet, specifically social networking sites may best the best option. The Internet is used heavily by teens and it is fairly inexpensive for the company. Diff: Moderate Page Ref: 351 Goal: Establish a creative strategy and select media vehicles for a marketing campaign. 74. What is a moment of truth as it relates to customer service? Answer: A moment of truth is every interaction with customers. It is an opportunity to meet or exceed customer expectations or to disappoint the customer with poor customer service. Diff: Moderate Page Ref: 354 Goal: Leverage your customer service strategy to achieve your goals by strengthening customer relationships, satisfaction, and loyalty.

75.

Explain why it is important for organizations to meet the needs of internal customers, the employees. Answer: When organizations are good at meeting internal customer needs such as good communication and respectful working environment employee morale will be higher. If employees feel their roles are appreciated and their input is valued, the business will run more smoothly and external customers will be more satisfied with their experiences. Diff: Moderate Page Ref: 357 Goal: Leverage your customer service strategy to achieve your goals by strengthening customer relationships, satisfaction, and loyalty.

Anybody’s Business TIF questions: Chapter 15 [NOTE: Page Refs are mspp (ch is still in manuscript)] Multiple Choice 1) Technology is the product of acquiring some kind of __________ and applying it to a problem to create a capability you did not have before. A) funding B) knowledge C) hardware D) software Answer: B Diff: Moderate Page Ref: 4 Objective: Recognize the scope of technology and appreciate its value in business. 2) Gore Tex keeps you dry while allowing you to sweat. This is an example of A) the application of knowledge. B) knowledge. C) a capability. D) a technology. Answer: C Diff: Moderate Page Ref: 4 Objective: Recognize the scope of technology and appreciate its value in business. 3) The first Internet system was developed between A) computers in government offices. B) computers at universities. C) computers in Fortune 100 corporations. D) computers in hackers’ garages. Answer: B Diff: Easy Page Ref: 6 Objective: Recognize the scope of technology and appreciate its value in business. 4) Information technology (IT) enables people to enhance their _________ by applying their _______ from the information they acquire. A) software / skills. B) knowledge / capabilities. C) hardware / conclusions. D) capabilities / knowledge. Answer: D Diff: Easy Page Ref: 7 Objective: Recognize the scope of technology and appreciate its value in business. 5) Data is A) a collection of numbers, measures, and anything else that can be gathered and interpreted.

B) the information that an organization gains when it makes use of its information technology. C) the knowledge that a company acquires after conducting research into marketplace trends. D) a capability of an organization derived from applying knowledge to a particular problem. Answer: A Diff: Easy Page Ref: 9 Objective: Describe how businesses transform data into information that can drive effective decisions. 6) Your company tracks data on the location of inventory items throughout its physical facilities by attaching a tiny microchip to the items. The company is using A) GPS technology. B) RFID tags. C) web metrics. D) inventory meters. Answer: B Diff: Easy Page Ref: 10 Objective: Describe how businesses transform data into information that can drive effective decisions. 7) Your company uses electronic set-top boxes installed to consumers’ TVs to track the programs they are watching. The company is using A) GPS technology. B) RFID tags. C) web metrics. D) people meters. Answer: D Diff: Easy Page Ref: 14 Objective: Describe how businesses transform data into information that can drive effective decisions. 8) Syndicated data organizations are A) businesses that specialize in collecting data and then reselling it to companies who need it. B) companies that collect their own data from an array of locations and use it to make business decisions. C) firms whose executives strive to be quoted in syndicated news outlets to gain publicity. D) enterprises that develop the technology needed to analyze data on consumer preferences. Answer: A Diff: Moderate Page Ref: 15 Objective: Describe how businesses transform data into information that can drive effective decisions.

9) Self-aggregators are A) businesses that specialize in collecting data and then reselling it to companies who need it. B) companies that collect their own data from an array of locations and use it to make business decisions. C) firms whose executives strive to be quoted in syndicated news outlets to gain publicity. D) enterprises that develop the technology needed to analyze data on consumer preferences. Answer: B Diff: Moderate Page Ref: 15 Objective: Describe how businesses transform data into information that can drive effective decisions. 10) Your company collects its own data instead of hiring an outside firm to do it. Your firm is a(n) A) self-aggregator. B) syndicated data organization. C) data tracker and analyst. D) information compiler. Answer: A Diff: Easy Page Ref: 15 Objective: Describe how businesses transform data into information that can drive effective decisions. 11) Your company collects data and then resells it to other companies who need it. Your firm is a(n) A) self-aggregator. B) syndicated data organization. C) data tracker and analyst. D) information compiler. Answer: B Diff: Easy Page Ref: 15 Objective: Describe how businesses transform data into information that can drive effective decisions. 12) Data mining is the process of A) using data to identify and target underground supplies of minerals needed for industrial products. B) extracting corrupted data from IT systems before it can cause a system crash. C) analyzing data to find patterns and relationships and to turn it into useful information. D) transforming new knowledge and capabilities into 1’s and 0’s that can be read by a computer. Answer: C

Diff: Moderate Page Ref: 16 Objective: Describe how businesses transform data into information that can drive effective decisions. 13) Which of the following is NOT a common error related to data mining? A) hiring the wrong syndicated data organization to sell you data B) failing to use a variety of data collection techniques C) neglecting to design data mining around the correct questions D) discounting data that does not follow overall trends Answer: A Diff: Moderate Page Ref: 18 Objective: Describe how businesses transform data into information that can drive effective decisions. 14) A marketing dashboard A) is a control panel used in aircraft whose purpose is to overfly a company’s sales region and gather data. B) shows a geographic representation of the consumer markets a company is targeting to enhance growth. C) collects and organizes data measuring how well an organization’s marketing activities are performing. D) is a device used by salespeople in their vehicles to record the results of sales calls with potential customers. Answer: C Diff: Easy Page Ref: 20 Objective: Describe how businesses transform data into information that can drive effective decisions. 15) Your work for a cell-phone provider. The company uses an IT system to display data such as how many new customers the company brings in, how many subscribers cancel their service, the number of customer complaints, and the number of dropped calls experienced by users. This IT system is called a A) service monitor. B) marketing dashboard. C) performance watchdog. D) product overseer. Answer: B Diff: Easy Page Ref: 20 Objective: Describe how businesses transform data into information that can drive effective decisions. 16) A organization’s IT department is most often headed by a A) Company Information Overseer. B) Corporate Information Officer. C) Captain of Information Oversight. D) Chief Information Officer.

Answer: D Diff: Easy Page Ref: 22 Objective: Describe the basic components of an information technology (IT) system in an organization and how parts of the organization can use technology to their best advantage. 17) The central, master computer in an organization that allows all connected computers to share software, files, and databases is a company’s A) local area network. B) organizer. C) handler. D) server. Answer: D Diff: Easy Page Ref: 22 Objective: Describe the basic components of an information technology (IT) system in an organization and how parts of the organization can use technology to their best advantage. 18) In many companies, computers’ connection to the server is maintained through a A) website maintenance network (WMN). B) local area network (LAN). C) user linkage network (ULN). D) hardware/software network (HSN). Answer: B Diff: Easy Page Ref: 23 Objective: Describe the basic components of an information technology (IT) system in an organization and how parts of the organization can use technology to their best advantage. 19) Ian works for a retailer whose remote employees use an IT system to access company information and leave quick notes and reminders to each other, as well as post their profiles and request assistance on company projects. This company has a(n) _________ system. A) vastnet B) extranet C) intranet D) overnet Answer: C Diff: Easy Page Ref: 23 Objective: Describe the basic components of an information technology (IT) system in an organization and how parts of the organization can use technology to their best advantage. 20) Margo works for a consumer-products firm where customers and suppliers can access to portions of the company’s computer network. The company has a(n) _______ IT system.

A) vastnet B) extranet C) intranet D) overnet Answer: B Diff: Easy Page Ref: 23 Objective: Describe the basic components of an information technology (IT) system in an organization and how parts of the organization can use technology to their best advantage. 21) Fadi’s job involves using advanced data retrieval systems and accounting software to investigate financial fraud or disputes and to reconstruct accurate financial records so that, if necessary, the truth can be presented in court. Fadi is a A) forensic accountant. B) computer hacker. C) data detective. D) pixel police officer. Answer: A Diff: Easy Page Ref: 24 Objective: Describe the basic components of an information technology (IT) system in an organization and how parts of the organization can use technology to their best advantage. 22) You work on a project team. Members are using ______ to post ideas and information related to the project, vote on proposed courses of action for the project, and post needed project-related materials such as schedules and spreadsheets. A) wackies B) wikis C) walkies D) wookies Answer: B Diff: Easy Page Ref: 26 Objective: Describe the basic components of an information technology (IT) system in an organization and how parts of the organization can use technology to their best advantage. 23) Zeenat works for a company that uses a type of online survey software that allows customers to give quantitative feedback (such as ranking a product’s features on a scale of 1 to 5) and open-ended, qualitative feedback (such as comments about what they like and do not like about the product). This approach is known as A) consumer rating survey (CRS). B) customer feedback monitoring (CFM). C) enterprise feedback management (EFM). D) organizational assessment programming (OAP). Answer: C Diff: Moderate Page Ref: 27

Objective: Describe the basic components of an information technology (IT) system in an organization and how parts of the organization can use technology to their best advantage. 24) Business software used by a nuclear power plant and a sewage-treatment plant was hacked into. The hacking raised concerns about the software’s effectiveness and prompted many people to demand government regulation to make the software more secure. The name of this software is A) PARSA. B) DACSA. C) OSHA. D) SCADA. Answer: D Diff: Moderate Page Ref: 31 Objective: Effectively leverage IT and avoid its pitfalls in your personal and professional life. 25) Which of the following is NOT an example of a security challenge presented by IT? A) preventing hackers from taking over an organization’s operations B) safeguarding computer hardware from attacks by anti-technology protestors C) securing data from theft D) protecting cell phone users’ data and privacy Answer: B Diff: Easy Page Ref: 31 Objective: Effectively leverage IT and avoid its pitfalls in your personal and professional life. 26) The U.S. National Institute of Standards and Technology has created a device that uses _________ to change ordinary messages (written text or spoken words) into a code that is hard to decipher. A) eruption B) disruption C) description D) encryption Answer: D Diff: Easy Page Ref: 33 Objective: Effectively leverage IT and avoid its pitfalls in your personal and professional life. 27) You recently purchased a sweater from an online retailer’s website. You engaged in A) e-commerce. B) e-dealing. C) e-business. D) e-action. Answer: A Diff: Easy Page Ref: 33

Objective: Effectively leverage IT and avoid its pitfalls in your personal and professional life. 28) The company you work for originally had a store on a busy street in a major city. Eventually, it assumed an online presence and opened its doors to e-commerce. Its initial store can be described as A) “plaster and wood.” B) “roof and frame.” C) “brick and mortar.” D) “post and beam.” Answer: C Diff: Easy Page Ref: 33 Objective: Effectively leverage IT and avoid its pitfalls in your personal and professional life. 29) An e-business uses technology to encrypt messages sent between Web browsers and servers, to ensure that customers’ credit card information is transmitted in scrambled form to its destination. This technology is called A) Secure Sockets Layer (SSL). B) virtual private network (VPN). C) Social Security Protection (SSP). D) online safety action (OSA). Answer: A Diff: Moderate Page Ref: 34 Objective: Effectively leverage IT and avoid its pitfalls in your personal and professional life. 30) What does it mean when the beginning of a Web site’s URL reads “https” rather than the standard “http”? A) Transactions done on that page are vulnerable to hackers. B) Any activity that takes place on that page is secure. C) Business conducted on that page is being monitored by the government. D) Data that a user has input into that page is corrupt. Answer: B Diff: Moderate Page Ref: 34 Objective: Effectively leverage IT and avoid its pitfalls in your personal and professional life. 31) A(n) _________ is an encrypted Internet channel between two organizations. A) Secure Sockets Layer (SSL) B) virtual private network (VPN) C) Social Security Protection path (SSPP) D) online safety action (OSA) Answer: B Diff: Moderate Page Ref: 34

Objective: Effectively leverage IT and avoid its pitfalls in your personal and professional life. 32) A virtual private network (VPN) is usually used for e-commerce between A) a business and a group of similar customers. B) a business and the government. C) two businesses. D) a business and a single customer. Answer: C Diff: Moderate Page Ref: 34 Objective: Effectively leverage IT and avoid its pitfalls in your personal and professional life. 33) The stealing of personal information such as names, addresses, driver license numbers, and military identification codes is called A) self theft. B) identity theft. C) privacy theft. D) hacker theft. Answer: B Diff: Easy Page Ref: 35 Objective: Effectively leverage IT and avoid its pitfalls in your personal and professional life. 34) Which of the following does a company NOT have the right to do? A) monitor Web sites that its workers visit B) install software to block employees’ access to certain Web sites C) review emails written and sent by workers D) listen to business-related phone calls made from employees’ homes Answer: D Diff: Moderate Page Ref: 35 Objective: Effectively leverage IT and avoid its pitfalls in your personal and professional life. 35) You have just been hired for a job in the IT department of a large company. You know you will have access to a lot of sensitive data about the company itself and the individuals who work there. You want to make sure you avoid misusing this data. What document(s) would help you in your quest? A) descriptions of government regulations regarding online privacy B) the Association for Computing Machinery’s code of ethics C) the Bible, Koran, or other book important to your religious affiliation D) guidelines published by the police agency in the jurisdiction where your company is headquartered Answer: B Diff: Moderate Page Ref: 36

Objective: Effectively leverage IT and avoid its pitfalls in your personal and professional life. 36) During 1995-2004, productivity in the United States grew nearly 4 percent, as many IT innovations took hold. Since then, productivity has A) continued increasing by about 4 percent. B) jumped 10 percent to 12 percent each year. C) increased a little over 2 percent each quarter. D) decreased 5 percent to 7 percent each quarter. Answer: C Diff: Moderate Page Ref: 37 Objective: Effectively leverage IT and avoid its pitfalls in your personal and professional life. 37) A study revealed that e-mails and phone calls cause employees to turn their attention away from primary tasks every three minutes. The same study showed that it then takes an average of _______ for workers to re-focus on their primary task. A) 5 minutes B) 1 hour C) 30 seconds D) 30 minutes Answer: D Diff: Challenging Page Ref: 37 Objective: Effectively leverage IT and avoid its pitfalls in your personal and professional life. 38) Information overload erodes employees’ productivity because it A) confuses them about how to perform their tasks. B) distracts them from their tasks. C) titillates them so they cannot think clearly. D) bores them so they tire easily. Answer: B Diff: Easy Page Ref: 37 Objective: Effectively leverage IT and avoid its pitfalls in your personal and professional life. 39) You are convinced that information technology is eroding your productivity at work. Which of the following actions would you NOT take to address the problem? A) Set a limit on the number of times you check your e-mail inbox each day. B) Spend more time on the Internet learning about how to boost your productivity. C) Establish a separate e-mail account for non-essential e-mail and check it rarely. D) Subscribe to fewer RSS feeds and opt-in e-mails than you have in the past. Answer: B Diff: Easy Page Ref: 38 Objective: Effectively leverage IT and avoid its pitfalls in your personal and professional life.

40) You are a new college graduate seeking a job. You want to use Facebook effectively in your job-search efforts. You A) create a phony Facebook account to prevent potential employers from using it to research your background. B) give interviewers your Facebook username and password so they can learn about you. C) remove photos showing you drunk at a party in case potential employers search your page. D) post controversial and provocative opinions on your page to demonstrate the originality and sharpness of your thought. Answer: C Diff: Easy Page Ref: 39 Objective: Effectively leverage IT and avoid its pitfalls in your personal and professional life. 41) You stumble across a sheet of paper with a sequence of number and letter pairs—for example, 1a, 2f, 3d, 4e, and so on. You don’t know what the sequence means. You are looking at A) information. B) knowledge. C) data. D) a competency. Answer: C Diff: Moderate Page Ref: 1 Objective: Recognize the scope of technology and appreciate its value in business. 42) You stumble across a sheet of paper with a sequence of number and letter pairs—for example, 1a, 2f, 3d, 4e, and so on. You learn from a friend that these are the answers to a multiple-choice quiz you will be taking in your next class. You are looking at A) information. B) knowledge. C) data. D) a competency. Answer: A Diff: Easy Page Ref: 1 Objective: Recognize the scope of technology and appreciate its value in business. 43) The invention of the _________ paved the way for the first integrated circuit. A) desktop computer B) transistor C) microprocessor D) fiber-optic cable Answer: B Diff: Easy Page Ref: 6 Objective: Recognize the scope of technology and appreciate its value in business.

44) To have information you can use to make a decision in your job, you need to do all of the following EXCEPT A) reduce data. B) acquire data. C) organize data. D) interpret data. Answer: A Diff: Moderate Page Ref: 9 Objective: Describe how businesses transform data into information that can drive effective decisions. 45) An RFID tag A) identifies the name of a clerk or other employee working in a retail store. B) shows shoppers in a store the price of an item they might purchase. C) sends a unique radio signal from an inventory item to a transceiver. D) is placed on consumers’ license plates to track store locations they visit. Answer: C Diff: Moderate Page Ref: 10 Objective: Describe how businesses transform data into information that can drive effective decisions. 46) GPS data is often integrated into a broader application called A) geographic information systems (GIS). B) global analysis platforms (GAP). C) general location tools (GLT). D) greenfield identification technologies (GIT). Answer: A Diff: Moderate Page Ref: 11 Objective: Describe how businesses transform data into information that can drive effective decisions. 47) A pet-supply retailer is considering building several new stores. The company gathers data on the neighborhoods that might be promising locations for the new stores. Data include residents’ addresses, the average income of households in each neighborhood, the proportion of households that have pets, and the number of vehicles that pass through specific intersections each day. This retailer is using a(n) _______ application. A) INS B) ODS C) RFID. D) GIS Answer: D Diff: Easy Page Ref: 11 Objective: Describe how businesses transform data into information that can drive effective decisions.

48) Manuel works the cash register at a grocery store that uses supermarket scanners. Which of the following is NOT an example of the data the scanners gather? A) the price of each product purchased B) the number of times each shopper has bought a particular product C) the number of units of a specific product that were sold D) the identify of other items that were purchased with a particular product Answer: B Diff: Moderate Page Ref: 13 Objective: Describe how businesses transform data into information that can drive effective decisions. 49) A company that uses speech analytics A) examines employees’ phone communications to determine their political and religious affiliations B) taps consumers’ home phone lines to identify shifts in their preferences for particular products and services. C) records customers’ phone calls to the company and analyzes key words spoken, pauses, and voice timbre. D) purchases studies of trends in slang to make its marketing communications more effective. Answer: C Diff: Moderate Page Ref: 13 Objective: Describe how businesses transform data into information that can drive effective decisions. 50) A major music label wants to use “people meters” to deepen its understanding of consumers’ musical habits. Which of the following devices would it use? A) a device attached to consumers’ clothing that tracks which radio stations the consumers are exposed to, at home and in outside locations B) a chip attached to consumers’ CD players that records which artists they are listening to, how often, and for how long C) an RFID tag glued to music CDs in stores that monitors the number of units of each CD sold D) a UPC bar code scanned at CD stores that indicates the price of each CD sold Answer: A Diff: Moderate Page Ref: 14 Objective: Describe how businesses transform data into information that can drive effective decisions. True/False 51) Technology is the product of acquiring some kind of knowledge and applying it to a problem to create a capability you did not have before. Answer: TRUE Diff: Easy Page Ref: 4

Objective: Recognize the scope of technology and appreciate its value in business. 52) The first Internet system was developed between computers in Fortune 100 corporations. Answer: FALSE Diff: Easy Page Ref: 6 Objective: Recognize the scope of technology and appreciate its value in business. 53) Data is a collection of numbers, measures, and anything else that can be gathered and interpreted. Answer: TRUE Diff: Easy Page Ref: 9 Objective: Describe how businesses transform data into information that can drive effective decisions. 54) The desktop PC paved the way for the first integrated circuit. Answer: FALSE Diff: Easy Page Ref: 5 Objective: Recognize the scope of technology and appreciate its value in business. 55) IT refers to all the technology that companies use to create and implement computer systems that process and distribute data and connect with others. Answer: TRUE Diff: Easy Page Ref: 7 Objective: Recognize the scope of technology and appreciate its value in business. 56) Information is a collection of numbers that can be gathered and interpreted. Answer: FALSE Diff: Easy Page Ref: 9 Objective: Describe how businesses transform data into information that can drive effective decisions. 57) An RFID tag is a tiny microchip placed on inventory items that enables a company to track the items’ locations. Answer: TRUE Diff: Easy Page Ref: 10 Objective: Describe how businesses transform data into information that can drive effective decisions. 58) GPS is an acronym for “geographic positioning server.” Answer: FALSE Diff: Easy Page Ref: 11 Objective: Describe how businesses transform data into information that can drive effective decisions.

59) A Web site operator can use RFID technology to determine how many visitors view its page every day. Answer: FALSE Diff: Easy Page Ref: 11 Objective: Describe how businesses transform data into information that can drive effective decisions. 60) People meters are used to track which TV programs consumers are watching and which radio stations they are exposed to. Answer: TRUE Diff: Easy Page Ref: 14 Objective: Describe how businesses transform data into information that can drive effective decisions. 61) A syndicated data organization specializes in collecting data and reselling the information to companies that need it. Answer: TRUE Diff: Easy Page Ref: 15 Objective: Describe how businesses transform data into information that can drive effective decisions. 62) Self-aggregators hiring an outside firm to collect data that is important to them. Answer: FALSE Diff: Easy Page Ref: 15 Objective: Describe how businesses transform data into information that can drive effective decisions. 63) Data mining is the process of analyzing data to find patterns and relationships and to turn the data into useful information. Answer: TRUE Diff: Easy Page Ref: 16 Objective: Describe how businesses transform data into information that can drive effective decisions. 64) A marketing dashboard is a device salespeople install in their vehicles and use to record the results of visits to potential customers. Answer: FALSE Diff: Easy Page Ref: 20 Objective: Describe how businesses transform data into information that can drive effective decisions. 65) Most IT departments are headed by a Chief Information Officer (CIO). Answer: TRUE Diff: Easy Page Ref: 22

Objective: Describe the basic components of an information technology (IT) system in an organization and how parts of the organization can use technology to their best advantage. 66) Ensuring that a company’s servers and networks are operating properly is a secondary responsibility of the firm’s IT department. Answer: FALSE Diff: Easy Page Ref: 22 Objective: Describe the basic components of an information technology (IT) system in an organization and how parts of the organization can use technology to their best advantage. 67) A company’s server is a central, master computer that allows all connected computers to share software, files, and databases. Answer: TRUE Diff: Easy Page Ref: 22 Objective: Describe the basic components of an information technology (IT) system in an organization and how parts of the organization can use technology to their best advantage. 68) The connection of a company’s computers to its server is maintained through an extranet system. Answer: FALSE Diff: Easy Page Ref: 23 Objective: Describe the basic components of an information technology (IT) system in an organization and how parts of the organization can use technology to their best advantage. 69) Intranet applications are used to allow remote employees to access company information or to house items requiring high levels of security. Answer: TRUE Diff: Easy Page Ref: 23 Objective: Describe the basic components of an information technology (IT) system in an organization and how parts of the organization can use technology to their best advantage. 70) An enterprise feedback management (EFM) survey is a printed list of questions about products that a company can mail to consumers and solicit their opinions. Answer: FALSE Diff: Easy Page Ref: 27 Objective: Describe the basic components of an information technology (IT) system in an organization and how parts of the organization can use technology to their best advantage. 71) The stealing of personal information such as names, credit card numbers, addresses, driver license numbers, and military identification codes is called identity theft.

Answer: TRUE Diff: Easy Page Ref: 35 Objective: Effectively leverage IT and avoid its pitfalls in your personal and professional life. 72) The Supervisory Control and Data Acquisition (SCADA) software used by many U.S. businesses is new technology that is protected from hacker attacks. Answer: FALSE Diff: Easy Page Ref: 32 Objective: Effectively leverage IT and avoid its pitfalls in your personal and professional life. 73) Encryption is a process through which ordinary messages—written text or spoken words—are changed into a code that is hard to decipher. Answer: TRUE Diff: Easy Page Ref: 33 Objective: Effectively leverage IT and avoid its pitfalls in your personal and professional life. 74) Secure Sockets Layer (SSL) technology includes an encrypted Internet channel between two organizations. Answer: FALSE Diff: Easy Page Ref: 34 Objective: Effectively leverage IT and avoid its pitfalls in your personal and professional life. 75) Employers are not required to tell employees that the company is monitoring how workers are using company computers, such as which Web sites they are visiting and what e-mails they are sending. Answer: TRUE Diff: Easy Page Ref: 35 Objective: Effectively leverage IT and avoid its pitfalls in your personal and professional life.

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CHAPTER 16: IMPROVE: OPERATIONS, QUALITY, AND DISTRIBUTION TRUE/FALSE 1. Production is the use of various factors of production to transform raw materials into products. Answer: True Diff: Easy Page Ref: ms 3 Goal: Describe ways in which organizations improve their production processes. 2. Lean manufacturing applies only to processes that create goods. Answer: False Diff: Easy Page Ref: ms 4 Goal: Describe ways in which organizations improve their production processes. 3. Value stream mapping is the visual mapping of the total production process. Answer: True Diff: Easy Page Ref: ms 6 Goal: Describe ways in which organizations improve their production processes. 4. Just-in-time (JIT) inventory control ensures materials arrive and leave a facility at exactly the time when they are needed, not before or after. Answer: True Diff: Easy Page Ref: ms 8 Goal: Describe ways in which organizations improve their production processes. 5. In the business world, the term operations refers to everything that is involved in the physical process of making a particular good, delivering a service, or creating an experience or transformation, starting with raw materials and moving all the way to a finished product. Answer: True Diff: Easy Page Ref: ms 12 Goal: Describe the implications of operations management on a business. 6. Efficiently planning, organizing, directing, and controlling all of the processes that are involved in creating a particular product is known as operations control. Answer: False Diff: Easy Page Ref: ms 13 Goal: Describe the implications of operations management on a business. 7. The availability of labor thus can heavily influence a company’s decision of where to set up. Answer: True Diff: Easy Page Ref: ms 16 Goal: Describe the implications of operations management on a business. 8. A PERT chart lays out each task that must be completed during the course of production, along with the time that each task should take. Answer: True Diff: Easy Page Ref: ms 18 Goal: Describe the implications of operations management on a business.

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9. Operations management is the set of activities that ensures that everyone in the production process, including customers, gets what they want, when they want it, in the form and quantity they want, and with the services and support they need to properly use it. Answer: True Diff: Easy Page Ref: ms 21 Goal: Discuss the importance of supply chain management. 10. Quality control benefits companies by ensuring their products meet or exceed customer expectation. Answer: True Diff: Easy Page Ref: ms 25 Goal: Define quality control and identify various ways that it is implemented within an organization. 11. The primary goal of the Six Sigma approach is for only 3.4 defects to occur per one million opportunities. Answer: True Diff: Moderate Page Ref: ms 27 Goal: Define quality control and identify various ways that it is implemented within an organization. 12. The International Organization for Standards (ISO) polices companies to ensure that their products are in line with ISO standards. Answer: False Diff: Easy Page Ref: ms 29 Goal: Define quality control and identify various ways that it is implemented within an organization. 13. Technological advances like Twitter give customers an almost instant impact on the quality of the products they receive. Answer: True Diff: Easy Page Ref: ms 31 Goal: Define quality control and identify various ways that it is implemented within an organization. 14. The process by which products make their way to customers where and when they want them is called distribution. Answer: True Diff: Easy Page Ref: ms 33 Goal: Explain the role that distribution and transportation strategies play in a company’s ability to deliver products. 15. Utility refers to the ability of a product to satisfy a customer. Answer: True Diff: Easy Page Ref: ms 35 Goal: Explain the role that distribution and transportation strategies play in a company’s ability to deliver products.

AB_Ch16_TIF MULTIPLE CHOICE 16. Having a firm grip on all production operations is one of the best ways to ________ profits. a. maximize b. minimize c. slightly decrease d. create no change in Answer: a Diff: Easy Page Ref: ms 3 Goal: Describe ways in which organizations improve their production processes. 17. Efficiently planning, organizing, directing, and controlling all of the processes that are involved in creating a particular product is called operations ________. a. management b. production c. manufacturing d. efficiency Answer: a Diff: Easy Page Ref: ms 3 Goal: Describe ways in which organizations improve their production processes. 18. Producing the goods customers want exactly when they want them is known as ________. a. just-in-time delivery b. pokayoke c. kaizen d. obeya Answer: a Diff: Easy Page Ref: ms 4 Goal: Describe ways in which organizations improve their production processes. 19. Lean manufacturing emphasizes being all of the following EXCEPT ________. a. flexible b. nimble c. focused only on manufacturing d. adaptable Answer: c Diff: Easy Page Ref: ms 5 Goal: Describe ways in which organizations improve their production processes. 20. A complex value stream map generally includes the _______. a. facility layout b. location of the business c. inventory quantities produced at each step of the production process d. marketing plan Answer: c Diff: Easy Page Ref: ms 7 Goal: Describe ways in which organizations improve their production processes.

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21. All of the following generally are included in a complex value stream map EXCEPT the ________. a. steps in the production process b. inventory quantities produced at each step of the production process c. marketing plan d. outbound and inbound transportation methods and frequency Answer: c Diff: Easy Page Ref: ms 7 Goal: Describe ways in which organizations improve their production processes. 22. Software that helps product developers plan products to exact specifications with greater ease and precision, but that does not determine how best to make the products, is known as ________ software. a. CAD b. CAM c. CDA d. CDM Answer: a Diff: Easy Page Ref: ms 9 Goal: Describe ways in which organizations improve their production processes. 23. Software that uses product specifications to determine how the product can best be made is known as ________ software. a. CAM b. CMA c. CAD d. CDM Answer: a Diff: Easy Page Ref: ms 9 Goal: Describe ways in which organizations improve their production processes. 24. Computer-aided manufacturing software especially _______. a. helps product developers design products to exact specification b. uses product specifications to determine how the product can best be manufactured c. is useful in the architecture and home-building businesses d. contributes to the writing of vision and mission statements Answer: b Diff: Moderate Page Ref: ms 9 Goal: Describe ways in which organizations improve their production processes. 25. Strategically implemented production processes and methods that boost efficiency and effectiveness contribute to which aspect of the triple bottom line? a. packaging b. profit c. people d. planet Answer: b Diff: Easy Page Ref: ms 10 Goal: Describe ways in which organizations improve their production processes.

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26. Strategically implemented production processes and methods that create less waste and environmental damage contribute to which aspect of the triple bottom line? a. profit b. packaging c. people d. planet Answer: d Diff: Easy Page Ref: ms 10 Goal: Describe ways in which organizations improve their production processes. 27. Strategically implemented production processes and methods that lead to better working conditions and future opportunities for employees of and investors in companies contribute to which aspect of the triple bottom line? a. planet b. packaging c. people d. profit Answer: c Diff: Easy Page Ref: ms 10 Goal: Describe ways in which organizations improve their production processes. 28. Operations management includes all of the following EXCEPT _______. a. purchasing b. material requirements planning c. transportation methods d. facility layout Answer: c Diff: Easy Page Ref: ms 13 Goal: Describe the implications of operations management on a business. 29. Shifting back and forth from one layout plan to another is known as ________ layout. a. flexible b. fixed-position c. product d. process Answer: a Diff: Easy Page Ref: ms 14 Goal: Describe the implications of operations management on a business. 30. Setting up machines and equipment in the order in which they are needed to create a good is known as ________ layout. a. process b. fixed-position c. flexible d. product Answer: d Diff: Easy Page Ref: ms 14 Goal: Describe the implications of operations management on a business.

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31. When a clothing store chooses to locate in a high-density population area, the business is choosing its location based on ________. a. availability of labor b. proximity to markets c. proximity to materials d. cost of resources Answer: b Diff: Easy Page Ref: ms 15 Goal: Describe the implications of operations management on a business. 32. When an oil refinery chooses to locate near offshore oil fields, the business is choosing its location based on ________. a. proximity to markets b. availability of labor c. proximity to materials d. cost of resources Answer: c Diff: Easy Page Ref: ms 15 Goal: Describe the implications of operations management on a business. 33. When a data processing center chooses to locate where electricity costs are low, the business is choosing its location based on _______. a. proximity to markets b. proximity to materials c. availability of labor d. cost of resources Answer: d Diff: Easy Page Ref: ms 16 Goal: Describe the implications of operations management on a business. 34. MRP stands for ________. a. management requirements planning b. material requirements planning c. material resource planning d. material requirements purchasing Answer: b Diff: Easy Page Ref: ms 17 Goal: Describe the implications of operations management on a business. 35. ERP stands for ________. a. enterprise resource purchasing b. enterprise resource planning c. enterprise requirements planning d. economic resource planning Answer: b Diff: Easy Page Ref: ms 17 Goal: Describe the implications of operations management on a business.

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36. ________ is the process through which all of the materials and services that go into creating products are acquired. a. Purchasing b. Planning c. Management d. Motivation Answer: a Diff: Easy Page Ref: ms 18 Goal: Describe the implications of operations management on a business. 37. Operations functions that combine to save time, money, labor, and other valuable resources contribute to which aspect of the triple bottom line? a. purchasing b. profit c. people d. planet Answer: b Diff: Easy Page Ref: ms 19 Goal: Describe the implications of operations management on a business. 38. Facility layouts that emphasize open space, windows, light, and home-like amenities contribute to which aspect of the triple bottom line? a. planet b. profit c. people d. purchasing Answer: c Diff: Easy Page Ref: ms 19 Goal: Describe the implications of operations management on a business. 39. Selecting locations that make for environmentally advantageous operations contributes to which aspect of the triple bottom line? a. planet b. people c. profit d. purchasing Answer: a Diff: Easy Page Ref: ms 20 Goal: Describe the implications of operations management on a business. 40. Cutting costs by buying larger volumes of materials from fewer suppliers contributes to which aspect of the triple bottom line? a. people b. profit c. planet d. project Answer: b Diff: Easy Page Ref: ms 23 Goal: Discuss the importance of supply chain management.

AB_Ch16_TIF 41. Green supply chain management PRIMARILY contributes to which aspect of the triple bottom line? a. profit b. planet c. people d. project Answer: b Diff: Easy Page Ref: ms 23 Goal: Discuss the importance of supply chain management. 42. Gaining higher employee satisfaction as a result of green supply chain management PRIMARILY contributes to which aspect of the triple bottom line? a. planet b. project c. profit d. people Answer: d Diff: Easy Page Ref: ms 24 Goal: Discuss the importance of supply chain management. 43. The process of making sure products meet certain standards before they are delivered to customers is called _______ control. a. quality b. inventory c. operations d. management Answer: a Diff: Easy Page Ref: ms 25 Goal: Define quality control and identify various ways that it is implemented within an organization. 44. In service-oriented businesses, quality control may involve ________. a. inspection machines b. people checking against product size guidelines c. customer feedback d. machines checking against product weight guidelines Answer: c Diff: Easy Page Ref: ms 25 Goal: Define quality control and identify various ways that it is implemented within an organization. 45. An approach to quality control that focuses on reducing or eliminating variation between similar products is ________. a. the Six Sigma method b. statistical process control c. total quality control d. the Deming approach Answer: d Diff: Moderate Page Ref: ms 26 Goal: Define quality control and identify various ways that it is implemented within an organization.

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46. An approach to quality control that aims to identify errors in production before they occur is ________. a. statistical process control b. the Deming approach c. the Six Sigma method d. total quality control Answer: c Diff: Easy Page Ref: ms 27 Goal: Define quality control and identify various ways that it is implemented within an organization. 47. An approach to quality control that uses statistics about the product at each stage of the production process to create a graph of its attributes is ________. a. the Six Sigma method b. the Deming approach c. total quality control d. statistical process control Answer: d Diff: Easy Page Ref: ms 28 Goal: Define quality control and identify various ways that it is implemented within an organization. 48. ISO stands for ________. a. Innovative Organization for Standards b. International Operational Standards c. International Organization for Standards d. International Organization for Supplies Answer: c Diff: Easy Page Ref: ms 28 Goal: Define quality control and identify various ways that it is implemented within an organization. 49. Companies that focus on quality in ________ facets of production are said to be practicing total quality control. a. zero b. all c. half of d. a few Answer: b Diff: Easy Page Ref: ms 29 Goal: Define quality control and identify various ways that it is implemented within an organization.

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50. From management's perspective, empowering employees as part of total quality control usually leads to all of the following EXCEPT ________. a. happier employees b. higher-quality products c. happier customers d. higher salaries Answer: d Diff: Moderate Page Ref: ms 29 Goal: Define quality control and identify various ways that it is implemented within an organization. 51. A Web site that offers smart phone applications for download would be primarily concerned with total ________. a. quality control b. manufacturing control c. quality service d. service supply Answer: c Diff: Moderate Page Ref: ms 29 Goal: Define quality control and identify various ways that it is implemented within an organization. 52. Consistently delivering quality products, establishing a positive reputation, and satisfying customers PRIMARILY contributes to which aspect of the triple bottom line? a. profit b. people c. planet d. product Answer: a Diff: Easy Page Ref: ms 31 Goal: Define quality control and identify various ways that it is implemented within an organization. 53. Developing happier employees who transfer positive attitudes to satisfied customers contributes to which aspect of the triple bottom line? a. profit b. product c. planet d. people Answer: d Diff: Easy Page Ref: ms 31 Goal: Define quality control and identify various ways that it is implemented within an organization.

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54. Meeting ISO standards that assess and minimize a company's carbon footprint contributes to which aspect of the triple bottom line? a. people b. product c. planet d. profit Answer: c Diff: Easy Page Ref: ms 32 Goal: Define quality control and identify various ways that it is implemented within an organization. 55. The path that products follow as they make their way from producers to customers is called a distribution ________. a. pathway b. chain c. river d. channel Answer: d Diff: Easy Page Ref: ms 33 Goal: Explain the role that distribution and transportation strategies play in a company’s ability to deliver products. 56. Businesses that sell for the most part to other organizations rather than directly to customers are ________. a. retailers b. wholesalers c. brokers d. agents Answer: b Diff: Easy Page Ref: ms 33 Goal: Explain the role that distribution and transportation strategies play in a company’s ability to deliver products. 57. All of the following are reasons to use an intermediary EXCEPT ______. a. increasing the price of the product b. saving money and other resources c. greater access to customers d. increased efficiency of distribution Answer: a Diff: Moderate Page Ref: ms 34 Goal: Explain the role that distribution and transportation strategies play in a company’s ability to deliver products.

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58. Technological advances in distribution and transportation contribute to which aspect of the triple bottom line? a. planet b. profit c. planning d. people Answer: b Diff: Easy Page Ref: ms 38 Goal: Explain the role that distribution and transportation strategies play in a company’s ability to deliver products. 59. Cutting unnecessary transportation and distribution components thereby cutting prices to customers contributes PRIMARILY to which aspect of the triple bottom line? a. planning b. people c. profit d. planet Answer: b Diff: Easy Page Ref: ms 38 Goal: Explain the role that distribution and transportation strategies play in a company’s ability to deliver products. 60. Distributing through digital means in order to cut a company's carbon footprint contributes PRIMARILY to which aspect of the triple bottom line? a. profit b. planet c. people d. planning Answer: b Diff: Easy Page Ref: ms 38 Goal: Explain the role that distribution and transportation strategies play in a company’s ability to deliver products.

SHORT ANSWERS 61. What is the main goal of operations management? ANSWER: The main goal of operations management is to make sure that every part of the production process runs smoothly in order to create a high-quality product that customers want. Diff: Easy Page Ref: ms 3 Goal: Describe ways in which organizations improve their production processes.

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62. What is the relationship between lean manufacturing and customer satisfaction? ANSWER: The principles of lean manufacturing take customer satisfaction into account in every respect, including saving customers time, offering the product in a convenient location, and simplifying the purchasing experience. The impact this can have on a company can make the difference between determining if it will be just one of many competitors or a leader in the industry. Diff: Moderate Page Ref: ms 5 Goal: Describe ways in which organizations improve their production processes. 63. Which aspect of the triple bottom line do strategically implemented production processes and methods contribute? ANSWER: Strategically implemented production processes and methods can add tremendous value to a company, contributing to all three aspects of its triple bottom line: profits, people, and the planet. Diff: Easy Page Ref: ms 9-10 Goal: Describe ways in which organizations improve their production processes. 64. Give an example of how streamlined production processes contribute to the planet. ANSWER: Streamlined production processes often go hand in hand with green initiatives. Such processes translate into less waste and environmental damage. Diff: Moderate Page Ref: ms 10 Goal: Describe ways in which organizations improve their production processes. 65. Describe a fixed-position layout. ANSWER: A fixed-position layout is used when a good is too large to be produced within a factory or facility. As a result, workers and equipment must set up around the good itself— such as in the case of building bridges, ships, airplanes, or houses. Diff: Easy Page Ref: ms 14 Goal: Describe the implications of operations management on a business. 66. What are three factors that operations managers must consider when choosing a particular location? ANSWER: Three factors to consider when choosing a location are (1) proximity to markets and materials, (2) availability of labor, and (3) cost of resources. Diff: Easy Page Ref: ms 15-16 Goal: Describe the implications of operations management on a business. 67. What is a Gantt chart? ANSWER: A Gantt chart is a bar graph that shows the amount of work that has been accomplished and the amount that is left to do by what time. It is especially useful in manufacturing, where several component parts must be completed before a final product is assembled. Diff: Easy Page Ref: ms 18 Goal: Describe the implications of operations management on a business.

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68. Describe the supply chain for a good or service. ANSWER: Student answers will vary, but should describe the path that materials take to become a product and be distributed to customers. A supply chain includes every source that contributes to the creation and distribution of a product. Diff: Challenging Page Ref: ms 21 Goal: Discuss the importance of supply chain management. 69. How does radio-frequency identification (RFID) contribute to supply chain management? ANSWER: RFID devices help companies keep track of their inventory by emitting a radio signal that is then read by specialized devices. Using RFID data, companies can stay on top of the location of their products and relay that information to other links of their supply chain. Diff: Easy Page Ref: ms 22 Goal: Discuss the importance of supply chain management. 70. How does quality control benefit customers? ANSWER: Quality control benefits customers in that they receive products that are safe, reliable, free of defect, and that meet their expectations. Diff: Easy Page Ref: ms 25 Goal: Define quality control and identify various ways that it is implemented within an organization. 71. Describe how Kaizen fits into the Deming approach to quality. ANSWER: The focus of Deming’s methods was on reducing or eliminating variation between similar products. Deming contended that limiting variation can eliminate both waste and the need for post-production inspection. Deming also emphasized continuous improvement, the Japanese concept of Kaizen. Essentially, the Deming approach demands that all efforts be directed toward making sure that things are done right, and well, the first time. Diff: Challenging Page Ref: ms 27 Goal: Define quality control and identify various ways that it is implemented within an organization. 72. Do you agree or disagree that there is no role for employees in total quality control? Why? ANSWER: Total quality control rests as much on employees as it does on management. Employees must be dedicated to excellence, feel responsible for the quality of their work, and be empowered to suggest changes. This sense of empowerment usually leads to happier employees, higher-quality products, and, thus, happier customers. Diff: Moderate Page Ref: ms 29 Goal: Define quality control and identify various ways that it is implemented within an organization.

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73. Describe how quality control affects the triple bottom line. ANSWER: Quality control ensures that every step of the production process is offering quality output, and in the long run, this saves companies time, money, and other resources, thereby increasing profit. A focus on total quality control and total quality service leads to happier employees who have a positive attitude with regard to their work. Finally, Some ISO standards specifically address a company’s environmental management and assess and minimize an organization’s carbon footprint. Diff: Moderate Page Ref: ms 31-32 Goal: Define quality control and identify various ways that it is implemented within an organization. 74. What are intermediaries? ANSWER: Intermediaries are go-betweens that enable the transfer of products from the producer to the customer. Intermediaries for tangible goods come primarily in the form of retailers and wholesalers. Retailers sell directly to customers, while wholesalers for the most part sell to other organizations. Brokers and agents serve as intermediaries for organizations that provide services, such as real estate or insurance sales. Diff: Moderate Page Ref: ms 33 Goal: Explain the role that distribution and transportation strategies play in a company’s ability to deliver products. 75. Name the four categories of utility. ANSWER: The four categories of utility are (1) form utility, (2) place utility, (3) time utility, and (4) possession utility. Diff: Easy Page Ref: ms 35 Goal: Explain the role that distribution and transportation strategies play in a company’s ability to deliver products.

Chapter 17 Connect: Business Presentations, E-mail, and Memos TRUE/FALSE 1. Most business communication takes place over e-mail and other non-face-to-face formats, so truly understanding how to communicate effectively is critical to career success. Answer: True Diff: Easy Ms Page Ref: 2 Goal: Know how and when to listen for support and to listen for information. 2. In business, the skill and habit that could have the most profound impact on your success is how well you speak in public. Answer: False Diff: Easy Ms Page Ref: 3 Goal: Know how and when to listen for support and to listen for information. 3. Most of us listen autobiographically—hearing everything from our point of view rather than the other person’s perspective. Answer: True Diff: Easy Ms Page Ref: 3 Goal: Know how and when to listen for support and to listen for information. 4. The goal of listening for information is to learn what the other person thinks and how he or she feels. Answer: False Diff: Easy Ms Page Ref: 4 Goal: Know how and when to listen for support and to listen for information. 5. After listening for information, it is often effective to send an e-mail summarizing the information. Answer: True Diff: Easy Ms Page Ref: 4 Goal: Know how and when to listen for support and to listen for information. 6. Effective listeners maintain eye contact as much as possible. Answer: True Diff: Easy Ms Page Ref: 5 Goal: Know how and when to listen for support and to listen for information. 7. Emily is not comfortable speaking in front of a crowd. When choosing the best communication channel, her comfort level should be her biggest concern. Answer: False Diff: Moderate Ms Page Ref: 8 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 8. One of the most common communication mistakes experienced businesspeople make is using e-mail to convey emotions or resolve conflict. Answer: True Diff: Easy Ms Page Ref: 9

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Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 9. One benefit of a text message is that it conveys sincerity and personal attention. Answer: False Diff: Easy Ms Page Ref: 9 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 10. Business memos require time to write professionally and they cost money to distribute. Answer: True Diff: Easy Ms Page Ref: 9 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 11. A phone call accommodates verbal and nonverbal communication and visual information. Answer: False Diff: Easy Ms Page Ref: 9 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 12. A face-to-face meeting is expensive and time consuming. Answer: True Diff: Easy Ms Page Ref: 9 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 13. When creating a communication plan, it is best to condense a request to one sentence and present it within the first 30 seconds or line of communication. Answer: True Diff: Moderate Ms Page Ref: 11 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 14. The best presentations use a word-for-word script and a good deal of clip art to liven things up. Answer: False Diff: Easy Ms Page Ref: 14 Goal: Write effective memos and e-mails and deliver effective presentations. 15. When giving a presentation, simple fonts and light backgrounds with darker text work best. Answer: True Diff: Easy Ms Page Ref: 14 Goal: Write effective memos and e-mails and deliver effective presentations. 16. E-mails are more formal than business memos. Answer: False Diff: Easy Ms Page Ref: 15 Goal: Write effective memos and e-mails and deliver effective presentations. 17. Business memos should be sent only to the people who need to receive them. Answer: True Chapter 17—Page 2

Diff: Easy Ms Page Ref: 15 Goal: Write effective memos and e-mails and deliver effective presentations. 18. When used poorly or too informally, e-mail can trigger conflict or misunderstandings. Answer: True Diff: Easy Ms Page Ref: 16 Goal: Write effective memos and e-mails and deliver effective presentations. 19. Unlike other forms of written communication, e-mails cannot be passed on to others without the sender’s knowledge. Answer: False Diff: Easy Ms Page Ref: 17 Goal: Write effective memos and e-mails and deliver effective presentations. 20. The best way to improve communication skills is to practice, critique, improve, and practice again. Answer: True Diff: Easy Ms Page Ref: 19 Goal: Write effective memos and e-mails and deliver effective presentations. MULTIPLE CHOICE 21. The most important, yet most overlooked, aspect of effective communication is ________. a. listening b. writing c. reading d. speaking Answer: a Diff: Easy Ms Page Ref: 2 Goal: Know how and when to listen for support and to listen for information. 22. Roughly half of a person’s waking hours are spent _________. a. listening b. writing c. reading d. speaking Answer: a Diff: Easy Ms Page Ref: 3 Goal: Know how and when to listen for support and to listen for information. 23. Effective business communication focuses on _________. a. words themselves b. meaning of words used c. memo writing only d. speech giving only Answer: b Diff: Easy Ms Page Ref: 3 Goal: Know how and when to listen for support and to listen for information.

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24. Which statement about listening for support is TRUE? a. The listener should keep a written record of what was said to avoid future miscommunication. b. The listener should ignore the speaker’s feelings on the subject and focus only on the facts. c. The listener should paraphrase back to the speaker what was just said and what emotions were conveyed. d. The listener should process the information from his or her own viewpoint or perspective. Answer: c Diff: Easy Ms Page Ref: 4 Goal: Know how and when to listen for support and to listen for information. 25. Which statement about listening for support is FALSE? a. The listener should focus on the speaker’s feelings and emotions. b. The listener should process the information from his or her own viewpoint or perspective. c. The listener should paraphrase back to the speaker what was just said and what emotions were conveyed. d. The listener should keep a written record of what was said to avoid future miscommunications. Answer: b Diff: Moderate Ms Page Ref: 4 Goal: Know how and when to listen for support and to listen for information. 26. Which statement about listening for information is TRUE? a. The listener should focus on the speaker’s feelings and emotions. b. The listener should paraphrase back to the speaker what was just said and what emotions were conveyed. c. The listener should process the information from his or her own viewpoint or perspective. d. The listener should keep a written record of what was said to avoid future miscommunication. Answer: d Diff: Easy Ms Page Ref: 4 Goal: Know how and when to listen for support and to listen for information. 27. Which statement about listening for information is FALSE? a. The listener should paraphrase back to the speaker what was just said and what emotions were conveyed. b. The listener should keep a written record of what was said to avoid future miscommunication. c. The listener should ignore the speaker’s feelings on the subject and only focus on the facts. d. The listener should ask questions dealing with how, what, when, and where. Answer: a Diff: Easy Ms Page Ref: 4 Goal: Know how and when to listen for support and to listen for information. 28. Dominic wants to start his own sports memorabilia business, but is nervous and unsure of how to begin. He asks Greg, a respected small business owner in his community, for advice. Which of the following is most likely to happen? a. Greg will listen for information on Dominic’s new business by asking questions about how Dominic feels about the venture. b. Greg will listen for information on Dominic’s new business by asking questions about what Dominic’s target market is. c. Greg will listen for support on Dominic’s new business by asking questions about what Dominic anticipates in sales. d. Greg will listen for support on Dominic’s new business and take notes on what he hears Dominic say. Chapter 17—Page 4

Answer: b Diff: Moderate Ms Page Ref: 4 Goal: Know how and when to listen for support and to listen for information.

29. Lindsey has been offered a promotion within her company. The position is in her current department and provides tremendous opportunities for further career advancement. Lindsey is unsure about accepting the position because she’s considering taking her career in a whole new direction. She calls her co-worker and friend Carley to discuss her situation. Which of the following is most likely to happen? a. Carley will listen for information on Lindsey’s dilemma by asking questions about how she feels about her future boss. b. Carley will listen for information on Lindsey’s dilemma by asking questions about what Lindsey thinks is unfulfilling about her current job. c. Carley will listen for support on Lindsey’s dilemma by paraphrasing what she hears Lindsey say she expects in salary and bonuses. d. Carley will listen for support on Lindsey’s dilemma by paraphrasing what she hears Lindsey say about her emotions toward the promotion. Answer: d Diff: Moderate Ms Page Ref: 4 Goal: Know how and when to listen for support and to listen for information. 30. Which of the following statements is NOT a tip on becoming a good listener? a. Restate what you just heard the speaker say. b. Pretend like you are listening. c. Take notes using pen and paper. d. Maintain eye contact as much as possible. Answer: b Diff: Easy Ms Page Ref: 5 Goal: Know how and when to listen for support and to listen for information. 31. Which of the following statements is FALSE? a. Effective listeners watch the clock or a cell phone to stay on a tight schedule. b. Effective listeners take notes with old-fashioned pen and paper. c. Effective listeners eliminate distractions with a brief interruption in the conversation. d. Effective listeners multi-task by surfing the Web while talking on the phone. Answer: a Diff: Easy Ms Page Ref: 5 Goal: Know how and when to listen for support and to listen for information. 32. Which statement about communications via phone calls is FALSE? a. Check e-mails after the phone call is complete. b. Driving while talking can be dangerous and should be avoided. c. Deal with any distractions quietly and privately. Never interrupt a phone call. d. Having lunch while on a phone call is convenient, but inappropriate. Answer: c Diff: Easy Ms Page Ref: 5 Goal: Know how and when to listen for support and to listen for information.

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33. When talking to others, Rodrigo maintains eye contact as much as he can. He restates the information he hears to make sure he understands things completely. When a co-worker interrupts him, he asks for a moment to tell the co-worker that they’ll talk later. He values communication so much that he often works through lunch and eats while on conference calls. What mistake is Rodrigo making? a. His restating information is prolonging conversations and annoying the speaker. b. Eating while talking on the phone can be distracting to both parties. c. He should maintain minimal eye contact so the speaker is more comfortable. d. He should ignore the co-worker. Interrupting phone calls is rude. Answer: b Diff: Moderate Ms Page Ref: 6 Goal: Know how and when to listen for support and to listen for information. 34. Which of the following statements about effective communications is FALSE? a. Businesspeople identify their audience. b. Businesspeople define what they want to say. c. Businesspeople weigh the pros and cons of different forms of communication d. Businesspeople choose communication methods based on their personal comfort level. Answer: d Diff: Easy Ms Page Ref: 8 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 35. Which written form of communication conveys sincerity and personal attention? a. handwritten letter b. business memo c. e-mail d. text message Answer: a Diff: Easy Ms Page Ref: 9 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 36. Julia runs a small bakery in small town. One of her best customers, an elderly woman, had an unpleasant experience with some baked goods. What is the BEST way for Julia to communicate with this customer in this particular situation? a. mailing a handwritten letter b. sending an e-mail c. sending a text message d. leaving a voicemail Answer: a Diff: Moderate Ms Page Ref: 9 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 37. Which written form of communication provides an official document appropriate for distribution? a. handwritten letter b. business memo c. e-mail d. text message Answer: b Diff: Easy Ms Page Ref: 9 Chapter 17—Page 6

Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 38. Unfinished Furniture Inc. is making a minor change to their health insurance offerings. They need to communicate this change with the entire company. What is the BEST way for them to communicate with the company in this particular situation? a. sending a handwritten letter b. sending a text message c. sending a business memo d. making phone calls Answer: c Diff: Moderate Ms Page Ref: 9 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 39. Which written form of communication is used too informally and is often used inappropriately to convey emotions or to solve conflicts? a. handwritten letter b. business memo c. e-mail d. text message Answer: c Diff: Easy Ms Page Ref: 9 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 40. Jamal supervises seven people at a local mid-sized company. He receives an emergency phone call and needs to leave for the day. What is the BEST way for him to communicate with his subordinates in this particular situation? a. sending a handwritten letter b. writing a business memo c. leaving voicemails d. sending an e-mail Answer: d Diff: Moderate Ms Page Ref: 9 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 41. Which written form of communication leaves no written record and often is used too informally? a. handwritten letter b. business memo c. e-mail d. text message Answer: d Diff: Easy Ms Page Ref: 9 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating.

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42. Ross works at Bert’s Bakery. While Ross is in class at the local college, Bert decides he would like Ross to arrive for work one hour earlier than scheduled. What is the BEST way for Bert to communicate with Ross in this particular situation? a. sending a business memo b. sending a text message c. sending a handwritten note d. having a face-to-face meeting Answer: b Diff: Moderate Ms Page Ref: 9 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 43. Which form of oral communication requires both parties to be present at the same time and lacks visual information? a. phone call b. voicemail c. face-to-face meeting d. presentation Answer: a Diff: Easy Ms Page Ref: 9 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 44. Craig disagrees with a co-worker on the best way to increase sales for his division. Craig decides he needs to communicate his ideas and viewpoints to his co-worker so they can resolve their differences. What is the BEST way for Craig to communicate with his co-worker in this particular situation? a. sending a business memo b. sending an e-mail c. making a phone call d. leaving a voicemail Answer: c Diff: Moderate Ms Page Ref: 9 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 45. Which form of oral communication conveniently allows for information to be shared and reviewed at any time? a. phone call b. voice mail c. face-to-face meeting d. text message Answer: b Diff: Easy Ms Page Ref: 9 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating.

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46. Tyrone needs to pass along information about an upcoming meeting to one of his subordinates. The information is tricky to explain and time is running out. What is the BEST way for Tyrone to communicate the meeting information to the subordinate in this particular situation? a. sending a handwritten note b. sending an e-mail c. leaving a voicemail d. sending a text message Answer: c Diff: Moderate Ms Page Ref: 9 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 47. Which form of oral communication best accommodates verbal and nonverbal communication and visual information? a. phone call b. voicemail c. face-to-face meeting d. presentation Answer: c Diff: Easy Ms Page Ref: 9 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 48. Stephanie is a supervisor and is concerned with the work performance of Dan, one of her subordinates in the office. Stephanie knows the information is sensitive and is worried about how Dan will react. She wants to be able to gauge his reactions to what she has to say. What is the BEST way for Stephanie to communicate her concerns to Dan in this particular situation? a. sending a business memo b. sending an e-mail c. making a phone call d. having a face-to-face meeting Answer: d Diff: Moderate Ms Page Ref: 9 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 49. Which form of oral communication is expensive, time consuming, and mostly one-way? a. phone call b. voicemail c. face-to-face meeting d. presentation Answer: d Diff: Easy Ms Page Ref: 9 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating.

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50. The Discount Store Inc. is making a major change to the company’s health care plan. The information is difficult to understand and employees are likely to have many questions. What is the BEST way for the store to communicate the new information to their employees in this particular situation? a. sending a business memo b. sending an e-mail c. making phone calls d. giving a presentation Answer: d Diff: Moderate Ms Page Ref: 9 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 51. Which statement about developing a communication plan is FALSE? a. The plan should define the audience. b. The plan should be a formal one. c. The plan should present the main idea in the first 30 seconds. d. The plan should choose the best communication channel. Answer: b Diff: Easy Ms Page Ref: 11 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 52. Which statement about preparing a business presentation is FALSE? a. Use clip art and animations sparingly. b. Limit the number of slides by including as much text as possible. c. Proofread all slides. d. Practice giving the presentation to get a sense of its pacing. Answer: b Diff: Easy Ms Page Ref: 14 Goal: Write effective memos and e-mails and deliver effective presentations. 53. Which statement about preparing a business presentation is TRUE? a. Using as many animations as possible holds audience interest. b. Limit the number of slides by including as much text as possible. c. Use a simple, large, sans serif font for readability. d. Keep presentations fresh and interesting by not practicing them. Answer: c Diff: Easy Ms Page Ref: 14 Goal: Write effective memos and e-mails and deliver effective presentations. 54. Catherine is preparing a presentation for her management class. She wrote an outline for her speech and created PowerPoint slides to duplicate exactly what she says. Her slides are visually appealing and easy to read. She proofreads her slides and practices her speech. What mistake did Catherine make? a. She wrote an outline and not a word-for-word speech. b. Her PowerPoint slides should compliment her speech by showing key points, not duplicate it. c. Her slides should be more colorful and graphic. d. She should keep the speech fresh and unrehearsed by not practicing it. Answer: b Diff: Moderate Ms Page Ref: 14 Chapter 17—Page 10

Goal: Write effective memos and e-mails and deliver effective presentations. 55. Which statement about preparing a business memo is TRUE? a. Proofread the memo before sending it out. b. Write a brief and general subject line. c. Send the memo to everyone you can, so they stay informed of what goes on around them. d. Take the opportunity to explain ideas completely and thoroughly. Answer: a Diff: Easy Ms Page Ref: 15 Goal: Write effective memos and e-mails and deliver effective presentations. 56. Which statement about preparing a business memo is FALSE? a. Send the memo only to those who need to read it. b. Write an informative subject line. c. Take the opportunity to explain ideas completely and thoroughly. d. Proofread the memo before sending it out. Answer: c Diff: Easy Ms Page Ref: 15 Goal: Write effective memos and e-mails and deliver effective presentations. 57. Megan works for a magazine publisher. She wrote a business memo to announce a meeting being held specifically to address concerns of the graphic designers. She used the subject line “emergency design meeting,” typed out the meeting’s date, time, and location, and then sent the memo to the entire art department. What mistake did Megan make? a. Her subject line should include more information. b. She sent the memo to more people than she needed to. c. The memo should be more concise. d. She should spend more time planning the memo. Answer: b Diff: Moderate Ms Page Ref: 15 Goal: Write effective memos and e-mails and deliver effective presentations. 58. Which statement about preparing a business e-mail is TRUE? a. Send the e-mail only to those who need to read it. b. Use a brief and general subject line. c. Using obscure abbreviations adds professionalism. d. Messages cannot be passed around to others without your knowledge. Answer: a Diff: Easy Ms Page Ref: 17 Goal: Write effective memos and e-mails and deliver effective presentations. 59. Which statement about preparing a business e-mail is FALSE? a. Plan out the main idea or request. b. Avoid slang and acronyms. c. Send the e-mail only to those who need to read it. d. Keep the subject line simple. Save the information for the body of the memo. Answer: d Diff: Easy Ms Page Ref: 17 Goal: Write effective memos and e-mails and deliver effective presentations.

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60. Joe runs a financial services business. He sends an e-mail to several of his clients detailing a policy change that specifically affects them. He uses the subject line “policy change—urgent.” Joe keeps the internal message simple and instead attaches several large files that review the changes in great detail. What mistake did Joe make? a. His subject line should be more informative. b. He sent the memo to more people than he needed to. c. The message was too wordy. d. He sent large attachments that might fill up the recipient’s in-boxes. Answer: d Diff: Moderate Ms Page Ref: 17 Goal: Write effective memos and e-mails and deliver effective presentations. SHORT ANSWER 1. What does “listening autobiographically” mean? Is this an effective form of communication? Answer: A person who listens autobiographically hears everything and processes it from his or her own viewpoint and perspective, rather than trying to understand what it means from the other person’s perspective. It is not an effective form of communication because the goal of effective listening is to learn what others think and feel. Diff: Moderate Ms Page Ref: 3 Goal: Know how and when to listen for support and to listen for information. 2. Define listening for support. Answer: Listening for support involves listening without offering advice, and rephrasing the content of what the other person is saying while reflecting the feelings of what the other person is experiencing. The goal of effective listening is to learn what the other person thinks and how he or she feels. Diff: Moderate Ms Page Ref: 4 Goal: Know how and when to listen for support and to listen for information. 3. Define listening for information. Answer: Listening for information involves note taking and asking how, what, when, where, and why questions. Restating exactly what was heard is important for clarity. A written record of the conversation is maintained to prevent further miscommunications. Diff: Moderate Ms Page Ref: 4 Goal: Know how and when to listen for support and to listen for information. 4. What are some tips for becoming a good listener? Answer: Good listeners take notes the old-fashioned way (pen and paper), maintain eye contact as long as possible, avoid other activities (i.e., sending e-mail, driving, eating, etc.), and restate what was said. They do not pretend like they’re listening when they are not. When distracted, they ask for a brief interruption to eliminate the distraction. Diff: Moderate Ms Page Ref: 5 Goal: Know how and when to listen for support and to listen for information. 5. What are some things to consider before choosing to communicate by e-mail? Answer: E-mail should not be used to convey emotions or resolve conflicts because it cannot capture the nonverbal elements of communication. Before sending an email, a person should consider whether or Chapter 17—Page 12

not the message has emotional content, if the message could be misunderstood or misinterpreted, or if they would be comfortable if the message were printed and publicly displayed. Diff: Moderate Ms Page Ref: 9 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 6. What are the four primary channels of written communication? Answer: The four primary channels of written communication are the handwritten letter, the business memo, the e-mail, and the text message. Diff: Moderate Ms Page Ref: 9 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 7. What are the four primary channels of oral communication? Answer: The four primary channels of oral communication are the phone call, the voicemail, the face-to-face meeting, and the presentation. Diff: Moderate Ms Page Ref: 9 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 8. What are the pros and cons of writing a business memo? Answer: A business memo is an official document that is appropriate for distribution to others. It requires time to write professionally and time and expense to distribute. Diff: Moderate Ms Page Ref: 9 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 9. What are the benefits of leaving a voicemail? What things need to be considered? Answer: A voicemail conveniently allows information to be shared and reviewed at any time. It is often faster to leave a voicemail than to type an email. Voicemails cannot be converted to text information for long-term use. Diff: Moderate Ms Page Ref: 9 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 10. What are the benefits of a face-to-face meeting? What things need to be considered? Answer: A face-to-face meeting accommodates verbal and nonverbal communication and visual information. Unfortunately, it is also expensive and time consuming. Diff: Moderate Ms Page Ref: 9 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 11. What would a good communication plan include? Answer: A good communication plan determines how formal the communication style should be, how detailed or technical the information should be, and how the audience is expected to act. It boils the idea or Chapter 17—Page 13

request down to a sentence, which is presented in the first 30 seconds or line of the communication. Finally, it chooses the best channel based on the audience and the message. Diff: Moderate Ms Page Ref: 11 Goal: Know when it’s most effective to use e-mail, text messages, a phone call, or another form of communication, and develop a plan for communicating. 12. What are some tips useful in planning more effective business presentations? Answer: When preparing an effective business presentation, a businessperson should start with a plan to determine who the audience is and to create a presentation outline. Then, the presenter should create a limited number of slides with a few points each, use simple colors, use a readable font, and use visual effects effectively. The presenter should proofread the presentation and practice it beforehand. Diff: Moderate Ms Page Ref: 13 Goal: Write effective memos and e-mails and deliver effective presentations. 13. What are some tips useful in planning more effective business memos? Answer: When writing a business memo, the businessperson should start with a plan to determine who the audience is and what the main idea is. Then, the writer should use an informative subject line, keep the message brief, and proofread. The memo should be sent only to those who need to receive it. Diff: Moderate Ms Page Ref: 15 Goal: Write effective memos and e-mails and deliver effective presentations. 14. What are some tips useful in planning more effective business e-mails? Answer: When writing a business e-mail, the businessperson should start with a plan to determine who the audience is and what the main idea is. Then, the writer should use an informative subject line, keep the message brief, and proofread. Large attachments should be avoided and the e-mail should be sent only to those who need to receive it. Diff: Moderate Ms Page Ref: 16 Goal: Write effective memos and e-mails and deliver effective presentations. 15. What is the best way to improve communication skills? Answer: The best way to improve communication skills is to practice, critique, improve, and practice again. Diff: Moderate Ms Page Ref: 17 Goal: Write effective memos and e-mails and deliver effective presentations.

Chapter 17—Page 14

Chapter 18 Enforce: Business Law

Learning Objectives: How and why business laws are created Business law from a customer’s perspective Business law from an employee’s perspective Business law from a manager’s perspective Business law from an owner’s perspective

Multiple-choice Questions

1. When someone refers to the “law,” that person is referring to all of the following except _____________. a) agencies b) police cars c) regulations d) administrative authorities b; easy; manuscript p. 2 Learning Objective: How and why business laws are created

2. a) b) c) d)

Business laws that are in written form are known as _____________. preventative law statutory law remedial law common law

b; moderate; manuscript p. 2 Learning Objective: How and why business laws are created

3. The case of Rescuecom Corporation v. Google, Inc. that was discussed in the textbook was decided by _______________. a) the U.S. Court of Appeals for the D.C. Circuit b) the California Supreme Court c) the U.S. District Court for the Northern District of New York d) U.S. Supreme Court Justice Ruth Bader Ginsburg c; moderate; manuscript p. 2 Learning Objective: How and why business laws are created

4. a) b) c) d)

Tort law is a type of ____________________. contract law remedial law preventative law intellectual property law

b; moderate; manuscript p. 3 Learning Objective: How and why business laws are created

5. When an industry fails to self-regulate its behavior and violates important principles and conduct that our society believes in it is likely that __________________. a) the stock market will suffer losses b) key players in that industry will declare bankruptcy c) a new law will be passed d) investigators will conduct in-depth research into mismanagement issues c; challenging; manuscript p. 4 Learning Objective: How and why business laws are created

6. a) b) c) d)

Business law affects everyone because everyone is a ___________________. customer self-regulator business person free agent

a; moderate; manuscript p. 4 Learning Objective: How and why business laws are created

7. When you order a dozen long-stemmed roses to be delivered Valentine’s Day to your sweetheart, and the florist delivers a bouquet in the shape of a pacifier with a note that reads: Congratulations on the new baby!, this is an example of _________________________. a) a poorly executed sales agreement b) a failure by one party to fully complete the terms of a contract c) a bad faith arrangement d) an implied warranty b; challenging; manuscript p. 6 Learning Objective: Business law from a customer’s perspective

8. a) b) c) d)

A binding contract contains all of the following terms except ________________. signatures of both parties to the contract an agreement to adopt certain ethical standards a statement that both parties are of legal age and considered mentally competent a stipulation that both buyer and seller are required to do certain things within specific time parameters

b; challenging; manuscript p. 6 Learning Objective: Business law from a customer’s perspective

9. a) b) c) d)

A written warranty ___________________________. guarantees the safety of a purchased item requires the buyer and seller to do certain things within specific time parameters implies that an item cannot be resold for the purchase price spells out a contract between the customer and the company that sold the item

d; challenging; manuscript p. 6 Learning Objective: Business law from a customer’s perspective

10. If you have a friend who is a real estate agent who offers to represent both you, the buyer, and the person who owns the house you are interested in buying, the seller, the agent’s role is referred to as ________________. a) dual agency b) conflict of interest c) an ethical dilemma d) the law of agency a; challenging; manuscript p. 7 Learning Objective: Business law from a customer’s perspective

11. When a homebuyer signs an agreement with a buyer’s agent and the agent agrees to provide loyalty and liability first and foremost to the buyer, this includes __________________. a) honesty and reliability b) fidelity and what the agent is responsible for c) good feelings and the assumption of risk d) common sense and state licensing b; challenging; manuscript p. 7 Learning Objective: Business law from a customer’s perspective

12. When one party unintentionally harms another, this is a form of ______________. a) liability b) remedial law c) battery d) negligence d; moderate; manuscript p. 8 Learning Objective: Business law from a customer’s perspective

13. Product liability is a domain of __________________. a) preventative law b) consumer advocacy c) written warranties d) tort law d; challenging; manuscript p. 8 Learning Objective: Business law from a customer’s perspective

14. If a manufacturer is shown to be negligent in ensuring the quality of its products, the manufacturer ___________________. a) can be held accountable for any harm that occurs as a result of poor quality standards b) can be sued and taken to court c) can be required to award a multi-million dollar settlement to the injured party d) may have any or all of the above actions taken against it d; moderate; manuscript p. 8 Learning Objective: Business law from a customer’s perspective

15. The Federal Trade Commission (FTC) is a federal agency that regulates ___________________. a) competition and pricing in the marketplace b) investments and banking c) consumer safety d) the sale and marketing of imported goods a; easy; manuscript p. 9 Learning Objective: Business law from a customer’s perspective

16. The Food and Drug Administration (FDA) and the Bureau of Alcohol, Tobacco, and Firearms (BATF) are two examples of _______________________. a) consumer advocacy groups b) consumer protection agencies c) federal trade commissions d) divisions of the self-regulatory Office of Economic Development b; moderate; p. 9 Learning Objective: Business law from a customer’s perspective

17. An employment contract will generally include all of the following except _______________. a) how your job performance will be evaluated b) the duration of your employment c) your responsibilities in that job d) what compensation you will receive b; moderate; manuscript p. 10 Learning Objective: Business law from an employee’s perspective

18. A wrongful termination suit filed against an employer is a form of _______________. a) limited liability insurance b) remedial law c) collective negotiation d) preventative legal claim b; easy; manuscript p. 10 Learning Objective: Business law from an employee’s perspective

19. Intellectual property is __________________________. a) the brain trust of major U.S. corporations b) the general term applied to policies developed by think tanks c) the collection of products that today’s knowledge workers produce in the course of business d) the creative property of artists and highly educated employees c; challenging; manuscript p. 10 Learning Objective: Business law from an employee’s perspective

20. When a creative person develops an idea while working for a corporation, that idea is most often considered the property of ___________________. a) the corporation the creative person works for when the idea is developed b) the creative person c) the creative person’s employer when the idea is later applied to creating a marketable product d) the brain trust of the corporation the creative person works for a; challenging; manuscript p. 10 Learning Objective: Business law from an employee’s perspective

21. If you work in information technology for a company and you have created a company database, that information is, under any and all circumstances, ___________________________. a) available for use by you and anyone you allow access it b) the responsibility of the information technology department c) the property of your employer d) the basis for a public information database, such as a list of employees offered on the company website c; challenging; manuscript p. 12 Learning Objective: Business law from an employee’s perspective

22. Which of the following questions can an employer ask a potential employee? a) What is your street address, in addition to your mailing address? b) What is your age? c) Do you have or plan to have children? d) All of the above. a; challenging; manuscript p. 12 Learning Objective: Business law from a manager’s perspective

23. Employment law touches on all of the following responsibilities of a manager except _________________________. a) equal opportunity access for qualified candidates b) choosing an employee’s days off for observance of religious practices c) coordinating policies to prevent workplace discrimination d) firing of employees who are members of minority groups b; moderate; manuscript p. 13 Learning Objective: Business law from a manager’s perspective

24. Which of the following acts of legislation is not an employment-related law? a) The Americans with Disabilities Act of 1990 b) The Civil Rights Act of 1964 c) The SEC Act of 1934 d) The Fair Labor Standards Act of 1938 c; easy; manuscript p. 13 Learning Objective: Business law from a manager’s perspective

25. When managers schedule an appointment with a prospective employee, which of the following activities must be in compliance with the laws and regulations that govern employment activities? a) The time of day the appointment is scheduled. b) The interview questions the manager will ask. c) The location of the interview. d) The length of the interview. b; moderate; manuscript p. 13 Learning Objective: Business law from a manager’s perspective

26. Companies that provide products and services to an organization, such as employee health insurance, retirement, and other benefits, are known as _______________. a) vendors b) benefit suppliers c) health and welfare funds d) contractual partners a; moderate; manuscript p. 14 Learning Objective: Business law from a manager’s perspective

27. The primary federal agency with authority over marketing and competitive activities is the _____________________. a) Office of Economic Development b) Federal Trade Commission c) Food and Drug Administration d) Occupational Safety and Health Administration b; moderate; manuscript p. 14 Learning Objective: Business law from a manager’s perspective

28. What laws govern worker safety? a) Social security b) Fair Labor Standards c) OSHA d) Workers compensation c; easy; manuscript p. 14 Learning Objective: Business law from a manager’s perspective

29. Minimum wage is set by ________________. a) OSHA b) the Federal Trade Commission c) unions d) the Fair Labor Standards Act d; moderate; manuscript p. 14 Learning Objective: Business law from a manager’s perspective

30. One of the primary reasons business owners establish corporations is to _______________________. a) increase profitability b) improve brand recognition c) reduce their personal liability d) create more viable management structures within the organization c; moderate; manuscript p. 15 Learning Objective: Business law from a manager’s perspective

31. Income tax is ___________________. a) tax on a business’ gross income b) tax on a business’ net income c) tax on a business’ income after licensing and registration fees have been paid d) tax on a business’ income before sales tax has been included b; easy; manuscript p. 17 Learning Objective: Business law from an owner’s perspective

32. Excise tax is ___________________. a) tax on alcohol and cigarettes b) tax on a business’ income after sales tax has been included c) unpaid tax from the previous year that is now due d) tax on specific activities or events d; moderate; manuscript p. 17 Learning Objective: Business law from an owner’s perspective

33. The Sarbanes-Oxley Act was established in response to _________________. a) labor discrimination cases b) corporate accounting scandals c) union-busting efforts by large corporations d) financial mismanagement issues including Ponzi schemes b; moderate; manuscript p. 17 Learning Objective: Business law from an owner’s perspective

34. The Securities and Exchange Commission (SEC) regulates ________________. a) how stocks and bonds are traded and sold b) the insuring of deposits in savings banks c) the value of the dollar on the world market d) the exchange rate of foreign currencies offered by banks and other financial institutions a; easy; manuscript p. 17 Learning Objective: Business law from an owner’s perspective

35. A patent for an invention grants the owner with a number of rights. These rights include all of the following except __________________. a) the right to exclude others from offering the invention for sale b) the right to exclude others from providing media coverage to the invention c) the right to exclude others from using the invention d) the right to exclude others from importing the invention b; challenging; manuscript p. 17 Learning Objective: Business law from an owner’s perspective

36. A trademark or servicemark indicates that the brand name, logo, or phrase is the legal property of ____________________. a) the U.S. Patent Office b) the designer of the symbol or writer of the phrase c) the owner d) the company that is the source of the goods or services c; moderate; manuscript p. 18 Learning Objective: Business law from an owner’s perspective

37. A copyright owner has the exclusive right to _______________________. a) display the copyrighted work publicly b) reproduce the copyrighted work c) distribute copies of the copyrighted work d) all of the above d; easy; manuscript p. 18 Learning Objective: Business law from an owner’s perspective

38. Two common forms of alternative dispute resolution are _________________. a) arbitration and appeals b) arbitration and mediation c) mediation and hearings d) counseling and coaching b; moderate; manuscript p. 18 Learning Objective: Business law from an owner’s perspective

39. The defendant in a dispute _________________. a) always must obtain legal counsel b) cannot identify a third person in a mediation c) is accused of causing harm d) is defending his or her right to legal protection c; moderate; manuscript p. 18 Learning Objective: Business law from an owner’s perspective

40. In arbitration _______________________. a) a third person facilitates a resolution acceptable to both parties b) the process is often costly and takes years c) a third person acts as a judge and rules in favor of the accuser or the accused d) the plaintiff and the defendant receive counseling to resolve the dispute c; moderate; manuscript p. 19 Learning Objective: Business law from an owner’s perspective

41. Which of the following is not a domain of tort law that affects customers? a) Intentional tort b) Negligence c) Product liability d) Contract law d; moderate; manuscript p. 20 Learning Objective: Business law from an owner’s perspective

Essay and fill-in questions

42. What benefits do rules provide to games and businesses? Name at least three benefits. Answer: Rules provide order and structure. They provide a framework that makes it possible for people to participate in an activity. Without rules, people could not even play many games. Without rules, people could not organize something called a “market,” an “industry,” or a “company.” Moderate; manuscript p. 2 Learning Objective: How and why business laws are created

43. Discuss the difference between preventative law and remedial law.

Answer: Preventative law is designed to prevent harm or some other unfortunate circumstance from happening, whereas remedial law is design to provide remedies when harm has already occurred. Easy; manuscript p. 2 Learning Objective: How and why business laws are created

44. _______________________ is a type of preventative law in which two or more parties establish a formal agreement intended to protect the parties from harm. Answer: Contract Law Challenging; manuscript p. 3 Learning Objective: How and why business laws are created

45. When workers organize themselves into a union and collectively negotiate an employment contract with the employer, this negotiation is called a ____________________. Answer: collective bargaining process Moderate; manuscript p.10 Learning Objective: Business law from an employee’s perspective

46. The body of laws and regulations that govern the relationship between employers and employees is referred to as ____________________. Answer: employment law Easy; manuscript p. 12 Learning Objective: Business law from an employee’s perspective

47. Title VII protects employees from what forms of discrimination? Also provide the name, including the date, of this legislation. Answer: The Civil Rights Act of 1964 protects employees from discrimination based on race, color, gender, religion, and national origin. Challenging; manuscript p. 13 Learning Objective: Business law from a manager’s perspective

48. The Occupational Safety and Health Administration (OSHA) enforces the OSH Act of 1970 which requires employers to do what? Answer: Employers must provide safe working conditions for their employees. For every type of workplace, safety guidelines specify requirements ranging from first aid equipment for workplace injuries to air quality requirements. Moderate; manuscript p. 14 Learning Objective: Business law from a manager’s perspective

49. Why do companies mention all the possible side effects of their drugs in TV and print advertising? Answer: Companies are required by law to provide information about the side effects if they make claims about the drug’s potential benefits in an advertisement. The marketing practices of pharmaceutical companies are regulated by the Food and Drug Adminstration. Challenging; manuscript p. 15 Learning Objective: Business law from a manager’s perspective

50. Describe what is meant by “piercing the corporate veil.” Answer: The protection against personal liability offered in a corporation no longer applies when an executive in a corporation willfully violates laws or the policies that were established for the corporation. Challenging; manuscript p. 16 Learning Objective: Business law from an owner’s perspective

51. What does it mean when you see the “TM” or “SM” symbol next to a brand name or tagline in an advertisement. Answer: It means that the brand name, logo, or phrase is a trademark or servicemark that is the legal property of the owner. Moderate; manuscript p. 18 Learning Objective: Business law from an owner’s perspective

52. The protection that is provided to authors of “original works of authorship” including published and unpublished literary, musical, artistic, and other intellectual work is called _______________. Answer: copyright Easy; manuscript p. 18 Learning Objective: Business law from an owner’s perspective

53. Explain why ownership rights are a big issue in the music industry right now. Answer: Artists are trying to maintain their ownership rights over their music as provided for in the copyright laws, even when the music is in digital form and sold through services like iTunes. There have been file sharing issues as well where individuals who own copies of these digital files exchange them freely with no compensation paid to the artists who created the original material. Moderate; manuscript p. 18 Learning Objective: Business law from an owner’s perspective

54. When companies adopt standards and methods of monitoring and enforcing those standards by their own initiative it is called ____________________. Answer: self-regulation Moderate; manuscript p. 20 Learning Objective: Business law from an owner’s perspective

True/False Questions

55. Common law is not written law. True; easy; manuscript p. 2 Learning Objective: How and why business laws are created

56. Business people sometimes agree with each other to adopt certain ethical standards for themselves instead of relying on laws and regulatory agencies to do so. True; moderate; manuscript p. 3 Learning Objective: How and why business laws are created

57. When they are voluntarily self-regulating, it is not legal for business people to agree to consequences for individuals who violate rules. False; moderate; manuscript p. 3 Learning Objective: How and why business laws are created

58. It is against the law for alcohol companies to promote their products on television. False; challenging; manuscript p. 4 Learning Objective: How and why business laws are created

59. When a law is passed it is the first, tentative step in the process of imposing higher ethical standards on society and its members. False; moderate; manuscript p. 4 Learning Objective: How and why business laws are created

60. A purchase transaction puts in place an agreement – or contract – between the customer and the company that sold the item. True; challenging; manuscript p. 6 Learning Objective: Business law from a customer’s perspective

61. If a financial services representative informs a client about all the possible risks associated with a certain investment, the client can sue the financial services firm for negligence. False; moderate; manuscript p. 8 Learning Objective: Business law from a customer’s perspective

62. Almost every aspect of business that impacts customers is regulated by specific laws or agencies. True; moderate; manuscript p. 8 Learning Objective: Business law from a customer’s perspective

63. There is a body of common or unwritten laws about employer/employee relationships that supports lawsuits and other legal claims when an employer has been harmed by an employee. True; challenging; manuscript p. 10 Learning Objective: Business law from an employee’s perspective

64. Trade secrets are facts about an industry that are not shared with business people in other industries. False; challenging; manuscript p. 10 Learning Objective: Business law from an employee’s perspective

65. If you receive an e-mail at work from your doctor and it reveals private information regarding your personal health, that e-mail cannot be monitored by your employer because of the nature of the information. False; moderate; manuscript p. 11 Learning Objective: Business law from an employee’s perspective

66. Companies can legally monitor employee behavior, such as the number of times an employee goes to a particular web site. True; moderate; manuscript p. 11 Learning Objective: Business law from an employee’s perspective

67. If you are hired at a job where you become a member of a union, your employment contract and your union contract will be essentially the same. False; moderate; manuscript p. 12 Learning Objective: Business law from an employee’s perspective

68. Remedial law does not apply when employers intentionally harm employees. False; challenging; manuscript p. 12 Learning Objective: Business law from an employee’s perspective

69. Exaggeration about a product is illegal because companies should only make claims that can be factually substantiated, particularly when these claims are against a competitor’s products. False; challenging, manuscript p. 15 Learning Objective: Business law from a manager’s perspective

70. The regulations imposed on the marketing practices of pharmaceutical companies are intended to make sure that consumers get all the information about a drug, both positive and negative. True; easy; manuscript p. 15 Learning Objective: Business law from a manager’s perspective

71. In a sole proprietorship the owner is personally liable for negligence or product liability claims against the company. True, moderate; manuscript p. 16 Learning Objective: Business law from an owner’s perspective

72. Executives in a corporation cannot be held personally liable for any violation of laws by the corporation or for any violations of policies that were established for the corporation because claims against the company are directed against the corporation as an entity, not the individuals in the corporation. False; moderate; manuscript p. 16 Learning Objective: Business law from an owner’s perspective

73. The owner of a small non-profit organization must account for the financial activities of the business with the appropriate tax authorities and cannot rely on the certified public accountant who is hired to prepare all tax statements to do so. True; moderate; manuscript p. 17 Learning Objective: Business law from an owner’s perspective

74. GAAP stands for the Generally Accepted Accounting Principles. True; moderate; manuscript p. 17 Learning Objective: Business law from an owner’s perspective

75. For most business owners, their most valuable assets are the property and buildings they own. False; challenging; manuscript p. 17 Learning Objective: Business law from an owner’s perspective

76. The U.S. legal system provides protection for intangible assets of a business. True; challenging; manuscript p. 18 Learning Objective: Business law from an owner’s perspective

77. Hearings employ procedures for resolving disputes that require litigation or court action. True; moderate; manuscript p. 19 Learning Objective: Business law from an owner’s perspective

78. Arriving at a resolution using mediation is often costly and usually takes years. False; moderate; manuscript p. 19 Learning Objective: Business law from an owner’s perspective

79. Private companies and publicly traded companies must comply with the same laws regulating how they report their financial performance and how they manage their relationships with investors. False; challenging; manuscript p. 20 Learning Objective: Business law from an owner’s perspective

CHAPTER 19 ADVANCE: Careers, Networking, and Interviewing TRUE/FALSE 1. One of the best ways to starting planning your career is to establish a network of relationships with people who can help you along the path to success. Answer: True Diff: Easy Page Ref: 2 Goal: Identify careers that best match your interests, abilities, and values. 2. The Department of Labor’s Occupational Information Network can help you search careers by skills, interests, values, and other criteria. Answer: True Diff: Easy Page Ref: 5 Goal: Identify careers that best match your interests, abilities, and values. 3. The role of Chief Diversity Officer would be an excellent entry-level position for a college graduate interested in pursuing a career in business. Answer: False Diff: Easy Page Ref: 6 Goal: Identify careers that best match your interests, abilities, and values. 4. When choosing a career, it is important to know the job title or company you would like to pursue. Answer: False Diff: Easy Page Ref: 6 Goal: Identify careers that best match your interests, abilities, and values. 5. Because employers may only glance at a resume for 15-30 seconds, it is critical to embellish your accomplishments to get your resume noticed. Answer: False Diff: Easy Page Ref: 9 Goal: Identify careers that best match your interests, abilities, and values. 6. Including a well-written cover letter with your resume will help to get your resume noticed. Answer: True Diff: Easy Page Ref: 11 Goal: Identify careers that best match your interests, abilities, and values. 7. Having an effective network will help you work through several degrees of separation to get your resume in front of a decision maker. Answer: True Diff: Moderate Page Ref: 13 Goal: Build your network and engage in networking.

8. Building a network is helpful in a career search, but is not the best tool in finding a career so minimal effort should be spent building a network. Answer: False Diff: Easy Page Ref: 13 Goal: Build your network and engage in networking. 9. When building a network, you need to include more than just casual acquaintances and onetime introductions. Answer: True Diff: Moderate Page Ref: 14 Goal: Build your network and engage in networking. 10. Networking will help you get your foot in the door and will secure a position. Answer: False Diff: Easy Page Ref: 17 Goal: Build your network and engage in networking. 11. Building a network and networking are sufficient conditions for a successful career. Answer: False Diff: Difficult Page Ref: 17 Goal: Prepare for and have effective informational and job interviews. 12. The gateway to your chosen career is in the interview. Answer: True Diff: Easy Page Ref: 18 Goal: Prepare for and have effective informational and job interviews. 13. When an employer contacts you for an interview, it is called an informational interview. Answer: True Diff: Easy Page Ref: 18 Goal: Prepare for and have effective informational and job interviews. 14. The purpose of an informational interview is to briefly visit with someone successful and find out what it would take to succeed in that person’s industry or company. Answer: True Diff: Easy Page Ref: 19 Goal: Prepare for and have effective informational and job interviews. 15. The best time to find out in which industry a prospective company resides is during an informational interview. Answer: False Diff: Moderate Page Ref: 19 Goal: Prepare for and have effective informational and job interviews. 16. When pursuing a career at a company, most candidates start by setting up an informational interview. Answer: False Diff: Difficult Page Ref: 20 Goal: Prepare for and have effective informational and job interviews.

17. A formal job interview is a meeting between a prospective employee and an employer. Answer: True Diff: Easy Page Ref: 20 Goal: Prepare for and have effective informational and job interviews.

MULTIPLE CHOICE 18. According to Benjamin Fairless, the four ingredients for successful achievement include each of the following EXCEPT ________. a. choose a career you love b. give your career the best there is in you c. seize your opportunities d. be strong and independent Answer: d Diff: Moderate Page Ref: 2 Goal: Identify careers that best match your interests, abilities, and values. 19. A brand is defined as the unique set of qualities and associations that a company creates in the customer’s mind to ________. a. differentiate its products from the competitors b. create competition in the market c. increase sales d. decrease distribution of products by competitors Answer: a Diff: Moderate Page Ref: 2 Goal: Identify careers that best match your interests, abilities, and values. 20. Your personal brand ________. a. is one of your first building blocks to career success b. is an exciting career field c. is one way to segment career opportunities in business d. helps create experience or transformations Answer: a Diff: Easy Page Ref: 3 Goal: Identify careers that best match your interests, abilities, and values. 21. At the core of any business is a product which can include each of the following EXCEPT ________. a. tangible goods b. services c. expenses d. experiences or transformations Answer: c Diff: Easy Page Ref: 3 Goal: Identify careers that best match your interests, abilities, and values.

22. The same principles used in planning a company apply to planning your career and include the following EXCEPT ________. a. establishing SMART goals b. developing a plan for achieving goals c. a budget for career planning expenses d. developing a personal mission statement Answer: c Diff: Easy Page Ref: 3 Goal: Identify careers that best match your interests, abilities, and values. 23. Identifying your personal brand and delivering on its promise allows you to ________. a. acquire the education and training needed to get hired b. build a strong network c. let potential employers know what they will get from you d. secure the career fit to your talents Answer: c Diff: Moderate Page Ref: 4 Goal: Identify careers that best match your interests, abilities, and values. 24. Which of the following is not a book to help you in building your personal brand? a. The 7 Habits of Highly Effective People b. The Power of Personal Branding: Creating Celebrity Status with Your Target Audience c. U R a Brand! How Smart People Brand Themselves for Business Success d. You, Inc.: The Art of Selling Yourself Answer: a Diff: Easy Page Ref: 4 Goal: Identify careers that best match your interests, abilities, and values. 25. Which of the following segments career opportunities by industry? a. Department of Labor’s Occupational Information Network b. North American Industry Classification System c. Newly Emerging Careers Guide d. Career Builders Answer: b Diff: Moderate Page Ref: 5 Goal: Identify careers that best match your interests, abilities, and values. 26. Some newly emerging careers include all of the following EXCEPT ________. a. Chief Ethics Officer b. Chief Diversity Officer c. Chief Operating Officer d. Chief Blogging Officer Answer: c Diff: Moderate Page Ref: 6 Goal: Identify careers that best match your interests, abilities, and values.

27. The role of the Chief Blogging Officer is to ________. a. serve as the voice for the organization, helping to connect to customers, inspire loyalty, and tell the company’s story b. create ethics training programs for employees and ensure that ethical standards and codes are being enforced c. clearly define corporate strategies and ensure proper communication of the strategies to employees and shareholders d. create an organization’s strategy for developing diversity and make sure that diversity is leveraged within the organization Answer: a Diff: Moderate Page Ref: 6 Goal: Identify careers that best match your interests, abilities, and values. 28. Brooke is completing her degree in business administration and communications next month. Brooke will be qualified to apply for which of the following positions? a. Chief Blogging Officer b. Chief Compliance Officer c. marketing representative d. human resources department head Answer: c Diff: Moderate Page Ref: 6 Goal: Identify careers that best match your interests, abilities, and values. 29. Questions to help you differentiate your career opportunities include all the following EXCEPT ________. a. Do I want to work for a for-profit or non-profit? b. Are there any industries that I am interested in? c. Do I want to work in a small company or large company? d. Do I want a desk near a high traffic area or in a quiet location? Answer: d Diff: Moderate Page Ref: 7 Goal: Identify careers that best match your interests, abilities, and values. 30. As Joe meets fellow business professionals at a conference, he exchanges business cards. The BEST reason for Joe to exchange business cards is to ________. a. establish camaraderie b. initiate discussions on his career goals c. establish credibility d. be part of the business club Answer: c Diff: Moderate Page Ref: 7 Goal: Identify careers that best match your interests, abilities, and values.

31. The structure of a chronological resume is to capture ________. a. your expertise in chronological sequence and is the least common type b. your expertise in chronological sequence and is the most common type c. the story of your life in chronological sequence from start to finish and is the least common type d. the story of your life in chronological sequence from start to finish and is the most common type Answer: d Diff: Moderate Page Ref: 8 Goal: Identify careers that best match your interests, abilities, and values. 32. Kim is very proud of her involvement in planning and organizing a successful countywide food drive. She wants her resume to highlight that she can get things done. The BEST resume structure for Kim to use is ________. a. chronological b. functional c. result-oriented d. organizational Answer: c Diff: Moderate Page Ref: 8 Goal: Identify careers that best match your interests, abilities, and values. 33. Because Adam was involved in the redesign of his student union’s webpage, he became very skilled as a web designer. If Adam wants to highlight this skill in his resume he will use the ________ structure. a. chronological b. functional c. result-oriented d. organizational Answer: b Diff: Moderate Page Ref: 8 Goal: Identify careers that best match your interests, abilities, and values. 34. Because potential employers may only spend 15-30 seconds looking at your resume, it is critical that your resume is ________. a. easy to read and uses active verbs b. easy to read and uses descriptive adverbs c. error free and factual d. error free and uses descriptive adverbs Answer: c Diff: Moderate Page Ref: 9 Goal: Identify careers that best match your interests, abilities, and values.

35. When using the chronological resume structure, include all the following EXCEPT

________. a. descriptions of your skills without including dates b. facts about your education c. your experiences d. a brief listing of your skills Answer: a Diff: Difficult Page Ref: 10 Goal: Identify careers that best match your interests, abilities, and values. 36. When using the chronological resume structure, the BEST way to start your resume is

with your ________. e. job objective f. education g. experience h. skills Answer: a Diff: Moderate Page Ref: 10 Goal: Identify careers that best match your interests, abilities, and values. 37. The MAIN purpose of including a cover letter with your resume is to ________. a. introduce yourself b. identify the position you are interested in c. explain why you would be a good fit for the position d. generate interest in looking at your resume Answer: d Diff: Difficult Page Ref: 11 Goal: Identify careers that best match your interests, abilities, and values. 38. The following should be included in a cover letter EXCEPT ________. a. introduction of yourself b. identification of the position you are interested in c. details of your qualifications d. a request for action Answer: c Diff: Difficult Page Ref: 11 Goal: Identify careers that best match your interests, abilities, and values. 39. “It’s not what you know, it’s who you know,” demonstrates the importance of ________. a. a well written cover letter b. a detailed resume c. networking d. interviewing Answer: c Diff: Moderate Page Ref: 13 Goal: Build your network and engage in networking.

40. A network is a collection of connections among all of the following EXEPT your ________. a. prospective employers b. acquaintances c. personal friends d. working relationships Answer: a Diff: Moderate Page Ref: 13 Goal: Build your network and engage in networking. 41. “Six degrees of separation” is used to describe ________. a. prospective employers you have connected with recently b. acquaintances you have connected with recently c. your connection to almost anyone d. your disconnection to most people Answer: c Diff: Easy Page Ref: 13 Goal: Build your network and engage in networking. 42. As you share your career goals at a social gathering, an acquaintance shares he has a friend whose Father’s fiend is planning to expand his business and may be hiring in your field. This example best demonstrates how critical ________ is in building a network. a. attending social functions b. degrees of separation c. informational interviewing d. asking questions Answer: b Diff: Moderate Page Ref: 13 Goal: Build your network and engage in networking. 43. After building a strong network, the next step is transitioning to ________. a. interviewing b. networking c. building relationships d. gathering feedback Answer: b Diff: Easy Page Ref: 13 Goal: Prepare for and have effective informational and job interviews. 44. Most people who have successful careers would say they got their jobs by ________. a. searching the internet b. networking c. creating noticeable resumes d. interviewing well Answer: b Diff: Moderate Page Ref: 13 Goal: Prepare for and have effective informational and job interviews.

45. Building a network includes all of the following EXCEPT ________. a. building a database of people you know b. submitting resumes to potential employers c. finding a coach or mentor d. looking for professionals Answer: b Diff: easy Page Ref: 14 Goal: Build your network and engage in networking. 46. To hold your network together you need to do all of the following EXCEPT ________. a. build relationships b. follow up on initial contacts c. transition to networking d. determine contacts to eliminate Answer: d Diff: easy Page Ref: 14 Goal: Build your network and engage in networking. 47. Networking is defined as ________. a. actively developing contacts with others b. actively developing interview tips from others c. creating lists of friends and acquaintances d. creating lists of potential employers Answer: d Diff: Moderate Page Ref: 15 Goal: Prepare for and have effective informational and job interviews. 48. People who are the best at networking are good at ________. a. listening and asking effective questions b. speaking and asking effective questions c. listening and presenting their personal brand d. speaking and presenting their personal brand Answer: c Diff: Moderate Page Ref: 15 Goal: Prepare for and have effective informational and job interviews. 49. The BIGGEST impediment to effective networking is ________. a. sharing too much b. sharing too little c. listening to prospects d. missing the opportunity Answer: d Diff: Moderate Page Ref: 15 Goal: Prepare for and have effective informational and job interviews.

50. Which of the following are good networking prospects? a. relatives b. friends c. acquaintances d. all of the above Answer: d Diff: Easy Page Ref: 16 Goal: Prepare for and have effective informational and job interviews. 51. A common mistake in networking is ________. a. contacting too many friends and family b. not investing in the contacts you have made c. including professionals in your database d. taking excessive notes when making new contact Answer: b Diff: Moderate Page Ref: 16 Goal: Prepare for and have effective informational and job interviews. 52. Which of the following is NOT a good networking tip to set you apart from others? a. remembering people’s names when you meet them b. taking notes when you receive a business card c. joining a professional association d. keeping your networking possibilities narrow Answer: d Diff: Moderate Page Ref: 16 Goal: Prepare for and have effective informational and job interviews. 53. A network and networking will get your foot in the door then you must ________. a. perform well b. listen well c. use your resume to get hired d. continue networking because it is never done Answer: a Diff: Moderate Page Ref: 16 Goal: Prepare for and have effective informational and job interviews. 54. The gateway to your career is the ________. a. network you have built b. networking c. interview d. preparation Answer: c Diff: Easy Page Ref: 17 Goal: Prepare for and have effective informational and job interviews.

55. The two general types of interviews are ________ and ________. a. informational, networking b. informational, formal c. casual, formal d. listening, semi-formal Answer: b Diff: Easy Page Ref: 17 Goal: Prepare for and have effective informational and job interviews. 56. An interview that you request with a professional or potential employer is called ________. a. formal b. semi-formal c. branding d. informational Answer: d Diff: Moderate Page Ref: 18 Goal: Prepare for and have effective informational and job interviews. 57. The interview when an employer requests that you come in is referred to as ________. a. formal b. informal c. informational d. semi-formal Answer: a Diff: Moderate Page Ref: 18 Goal: Prepare for and have effective informational and job interviews. 58. A successful informational interview includes all of the following EXCEPT ________. a. waiting for human resources to contact you after the interview b. researching the company before the visit c. preparing a list of questions d. conducting yourself professionally Answer: a Diff: Moderate Page Ref: 19 Goal: Prepare for and have effective informational and job interviews. 59. The BEST reason to follow up after an informational interview is to ________. a. find out if they were able to schedule an interview for you b. find out if they have names of people you can contact c. thank them d. make sure they have your contact information Answer: c Diff: Moderate Page Ref: 19 Goal: Prepare for and have effective informational and job interviews.

60. All of the following are important in preparing for a successful informational interview EXCEPT ________. a. researching the company b. preparing a list of questions c. asking for about an hour of time d. following up Answer: c Diff: Moderate Page Ref: 19 Goal: Prepare for and have effective informational and job interviews. 61. The best indicator that you have had a successful informational interview is if you ________. a. are asked to tell a little about yourself b. find out about open positions c. find out more about the company d. are given a tour Answer: a Diff: Moderate Page Ref: 20 Goal: Prepare for and have effective informational and job interviews. 62. The MAIN purpose of informational interviews include all the following EXCEPT ________. a. gaining information about a company b. strengthening your network c. polishing your interviewing skills d. determining if you will like working for that company Answer: d Diff: Difficult Page Ref: 20 Goal: Prepare for and have effective informational and job interviews. 63. If considering the job interview from the perspective of the four BizHats, the employee is the job hunter. It is your job to do all of the following EXCEPT ________. a. demonstrate that your personal brand is the one they should pick b. demonstrate what you would be like as a coworker and employee c. use the interview as a way to build your network d. appear and communicate professionally Answer: c Diff: Moderate Page Ref: 20 Goal: Prepare for and have effective informational and job interviews. 64. In terms of the four BizHats, the customer in a job interview is the ________ and the manager is the ________. a. job hunter, employer b. employer, job hunter c. job hunter, job hunter d. employer, employer Answer: d Diff: Moderate Page Ref: 20 Goal: Prepare for and have effective informational and job interviews.

65. The interviewer for an entry-level position will most likely be ________. a. the CEO b. a recruiter c. the owner d. a key investor Answer: b Diff: Moderate Page Ref: 21 Goal: Prepare for and have effective informational and job interviews. 66. Although company owners and investors may not be directly involved in the decision to hire you, it is important to demonstrate you will contribute to the company’s bottom line because they ________. a. determine your compensation b. decide on your role in the company c. always have the final decision d. have influence on the kinds of people the company hires Answer: d Diff: Moderate Page Ref: 21 Goal: Prepare for and have effective informational and job interviews.

Short Answer 67. Explain why your personal brand is so important in career planning. Answer: Personal branding is important in career planning because it will help differentiate you from your competition and allow you to confidently tell potential employers what they will get when they hire you. Diff: Easy Page Ref: 3 Goal: Identify careers that best match your interests, abilities, and values. 68. What is a chronological resume and how would you structure one? Answer: A chronological resume is used to tell the story of your life in chronological sequence from start to finish. It includes an explanation of what you have been doing and is the most common type. It should include your objective, education, experience, skills and references. Diff: Moderate Page Ref: 8 & 10 Goal: Identify careers that best match your interests, abilities, and values.

69. Discuss tips for writing effective resumes and cover letters. Answer: Resumes should be easy to read which means well-organized and visually formatted in a way that makes it easy for the reader to capture the main ideas quickly. Use active verbs to describe your experience, expertise, or results. Always proofread for typos and grammatical errors. Avoid embellishing about yourself because you may be asked to provide evidence of your accomplishments. Cover letters are used to introduce yourself and to move your resume to the top of “the stack.” They should introduce you and generate interest in learning more about you. Address you letter to the main point of contact at the company, refer to the position you are interested in, and explain why you would be a good fit for that position. Diff: Moderate Page Ref: 10 &11 Goal: Identify careers that best match your interests, abilities, and values.

70. What is a network? Answer: A network is a collection of connections among your acquaintances, personal friends, and working relationships. Diff: Easy Page Ref: 12 Goal: Build your network and engage in networking. 71. How do you build a network? Answer: You can build a network by starting a database of all the people you know, looking for professionals with whom you have come in contact and finding a coach or mentor to give you important hints, tips and feedback. Diff: Easy Page Ref: 13 Goal: Build your network and engage in networking. 72. List tips about networking that will set you apart from others. Answer: • Remember people’s names when you meet them • Take notes when making new contacts • Follow up with new and existing contacts • Broaden your network locations • Join a professional association • Remember that networking goes both ways Diff: Easy Page Ref: 17 Goal: Build your network and engage in networking. 73. What can you do to prepare for an informational interview? Answer: To prepare for an informational interview, do research on the company you are visiting. Prepare a short list of questions that you polish and practice. Keep the questions to 15 minutes or less. Be professional by leaving your cell phone in the car, checking your appearance, and being prepared with a resume and/or business card in case it is requested. Diff: Moderate Page Ref: 19 Goal: Prepare for and have effective informational and job interviews.

74. List the benefits of an informational interview. Answer: • Gain information about a company • Build and strengthen your network • Opportunity to polish your interviewing skills • Practice operating in a business environment • Sets you apart from your competition because very few request informational interviews Diff: Moderate Page Ref: 20 Goal: Prepare for and have effective informational and job interviews. 75. What is a good way to conclude a formal interview? Answer: The best way to conclude a formal interview is to express a clear interest in the job and follow up with a thank you note. Diff: Moderate Page Ref: 21 Goal: Prepare for and have effective informational and job interviews.

CHAPTER 20 INVEST: Your Money, Your Future TRUE/FALSE 1. The first step in creating a financial plan is to create a set of financial goals and personal goals. Answer: True Diff: Easy Page Ref: 3 Objective: Build a solid financial foundation and establish an effective budget. 2. Most people find it difficult to determine how much money they want to have in their future in addition to what they want to spend their money on. Answer: False Diff: Easy Page Ref: 3 Objective: Build a solid financial foundation and establish an effective budget. 3. A balance sheet deals with acquiring assets without incurring excessive liabilities so that owner’s equity grows. Answer: True Diff: Easy Page Ref: 4 Objective: Build a solid financial foundation and establish an effective budget. 4. If an organization has very little or no cash, then it is not profitable. Answer: False Diff: Moderate Page Ref: 4 Objective: Build a solid financial foundation and establish an effective budget. 5. If your assets are less than your liabilities, the difference represents your personal equity. Answer: False Diff: Easy Page Ref: 5 Objective: Build a solid financial foundation and establish an effective budget. 6. A budget is a plan that details your monthly and annual financial targets for earning money, spending money, saving money, and investing money. Answer: True Diff: Easy Page Ref: 5 Objective: Build a solid financial foundation and establish an effective budget. 7. After a budget has been created, there is no need to go back and either update or revise the budget. Answer: True Diff: Easy Page Ref: 5 Objective: Build a solid financial foundation and establish an effective budget. 8. The difference between a person’s gross income and net income comes from federal taxes, state taxes, local taxes, social security, insurance, and retirement deductions. Answer: True Diff: Easy Page Ref: 6 Objective: Build a solid financial foundation and establish an effective budget.

9. Your gross income is the amount of income you take home after all deductions have been made. Answer: False Diff: Moderate Page Ref: 6 Objective: Build a solid financial foundation and establish an effective budget. 10. Paying yourself last is a good strategy because most people are able to pay themselves after all their other expenses have been paid. Answer: False Diff: Moderate Page Ref: 6 Objective: Build a solid financial foundation and establish an effective budget. 11. The Rule of 72 shows the number of years a person will need to double their money. Answer: True Diff: Easy Page Ref: 7 Objective: Build a solid financial foundation and establish an effective budget. 12. A particular lifestyle chooses people; people do not choose their lifestyle. Answer: False Diff: Moderate Page Ref: 8 Objective: Build a solid financial foundation and establish an effective budget. 13. If you are in debt, you might be able to create potential savings by switching from one type of debt to another type of debt. Answer: True Diff: Easy Page Ref: 10 Objective: Build a solid financial foundation and establish an effective budget. 14. An asset is anything you owe. Answer: False Diff: Easy Page Ref: 11 Objective: Know how to acquire assets and protect them by managing risk. 15. The wealthy buy assets that generate income while the middle class buy assets that generate liabilities and monthly expenses. Answer: True Diff: Easy Page Ref: 12 Objective: Know how to acquire assets and protect them by managing risk. 16. An unsecured loan is loan that requires collateral. Answer: False Diff: Easy Page Ref: 14 Objective: Know how to acquire assets and protect them by managing risk. 17. A mortgage describes the terms of any loan. Answer: False Diff: Easy Page Ref: 14 Objective: Know how to acquire assets and protect them by managing risk.

18. Insurance is a tool that that can be used to manage risk which protects yourself against damage, theft, or loss. Answer: True Diff: Easy Page Ref: 15 Objective: Know how to acquire assets and protect them by managing risk. 19. Homeowner’s insurance insures your possessions within your residence if you rent an apartment or home. Answer: False Diff: Moderate Page Ref: 15 Objective: Know how to acquire assets and protect them by managing risk. 20. Auto insurance is made up of collision insurance and liability insurance. Answer: True Diff: Easy Page Ref: 15 Objective: Know how to acquire assets and protect them by managing risk. 21. The probability that someone gets disabled before the age of 65 is higher than someone dying before retirement age. Answer: True Diff: Moderate Page Ref: 16 Objective: Know how to acquire assets and protect them by managing risk. 22. An insurance premium is the amount you pay monthly or per annually for insurance coverage. Answer: True Diff: Easy Page Ref: 16 Objective: Know how to acquire assets and protect them by managing risk. 23. An insurance premium is how much the policy owner has to pay for a claim before the insurance company pays their part. Answer: False Diff: Moderate Page Ref: 16 Objective: Know how to acquire assets and protect them by managing risk. 24. When you acquire a vested interest in someone’s company, it is considered investing. Answer: True Diff: Easy Page Ref: 18 Objective: Create an investment strategy to make your dreams come true. 25. Investors who receive ownership interests in a company by purchasing a share of ownership are called bondholders. Answer: False Diff: Easy Page Ref: 19 Objective: Create an investment strategy to make your dreams come true. 26. The only way you can make money on stocks is through dividends. Answer: False Diff: Easy Page Ref: 19 Objective: Create an investment strategy to make your dreams come true.

27. Secured bonds are backed only by the creditor’s promise and reputation. Answer: False Diff: Easy Page Ref: 20 Objective: Create an investment strategy to make your dreams come true. 28. The advantage of mutual funds is that you acquire a narrow interest in one organization so that when that organization does well, you receive the best benefit. Answer: False Diff: Moderate Page Ref: 21 Objective: Create an investment strategy to make your dreams come true. 29. The smaller the risk of an investment, the greater the potential reward. Answer: False Diff: Easy Page Ref: 21 Objective: Create an investment strategy to make your dreams come true. 30. Both mutual funds and a diversified portfolio are made up of a pooled collection of investments. Answer: True Diff: Easy Page Ref: 21, 22 Objective: Create an investment strategy to make your dreams come true. 31. People who tend to be more willing to take risks are known to be risk averse. Answer: False Diff: Easy Page Ref: 21 Objective: Create an investment strategy to make your dreams come true. 32. Companies and individuals have lesser risk when they practice diversification. Answer: True Diff: Easy Page Ref: 22 Objective: Create an investment strategy to make your dreams come true. 33. If you want to have your investment back in a short period of time, a certificate of deposit (CD) is a good idea since it is low risk and liquid. Answer: True Diff: Easy Page Ref: 22 Objective: Create an investment strategy to make your dreams come true. MULTIPLE CHOICE 34. To build a financial plan, the first step is to create a ________. a. cash flow statement b. income statement c. list of financial goals d. balance sheet Answer: c Diff: Moderate Page Ref: 3 Objective: Build a solid financial foundation and establish an effective budget.

35. Joshua just resigned from his job as an information technology specialist at a leading manufacturing firm in the United States. He wants to make a financial plan to manage the money he saved and the property he has acquired over the past few years. The first thing he needs to do is what? a. create a budget b. make a list of financial goals c. create a balance sheet d. pay himself first Answer: b Diff: Moderate Page Ref: 3 Objective: Build a solid financial foundation and establish an effective budget. 36. What is the hardest question which most people have a hard time answering when making their financial and personal goals? a. How much money do we want to have in the future? b. What do we want to spend our money on? c. How do we create positive cash flow? d. How do we get the money we need? Answer: d Diff: Moderate Page Ref: 3 Objective: Build a solid financial foundation and establish an effective budget. 37. A financial plan is a combination of all the following EXCEPT what? a. financial goals b. strategies c. daily decisions d. federal tax return Answer: d Diff: Moderate Page Ref: 3 Objective: Build a solid financial foundation and establish an effective budget. 38. What should people create first when they want to determine how to get their money and how to invest the money properly? a. financial plan b. cash flow statement c. balance sheet d. budget Answer: a Diff: Moderate Page Ref: 3 Objective: Build a solid financial foundation and establish an effective budget. 39. If someone has negative cash flow, what of the following is NOT necessarily true? a. Cash inflows are smaller relatively to cash outflows. b. Cash outflows are greater relatively to cash inflows. c. There are more expenses than revenues. d. There is less cash coming in than cash going out. Answer: c Diff: Moderate Page Ref: 3 Objective: Build a solid financial foundation and establish an effective budget.

40. Which of the following relates to an income statement? a. A company wants to have more revenues than expenses. b. A company wants to have more assets than liabilities. c. A company needs to maximize its cash inflows and minimize its cash outflows. d. A company creates a plan that details their monthly and annual financial targets. Answer: a Diff: Moderate Page Ref: 3-4 Objective: Build a solid financial foundation and establish an effective budget. 41. Which financial statement shows the most direct source of profitability for a company? a. income statement b. balance sheet c. cash flow statement d. budget Answer: a Diff: Easy Page Ref: 4 Objective: Build a solid financial foundation and establish an effective budget. 42. What is a difference between a personal cash flow statement and a personal income statement? a. When you received cash, it is recorded on the cash flow statement but not on the income statement. b. When you pay cash for a debt, it is recorded on the income statement but not on the cash flow statement. c. When you are owed money but you have not been paid, it is recorded on the cash flow statement but not the income statement. d. When you owe someone money but have not paid, it is recorded on the income statement but not on the cash flow statement. Answer: d Diff: Challenging Page Ref: 4 Objective: Build a solid financial foundation and establish an effective budget. 43. _____ shows the profitability of a company, and a ________ illustrates how assets, liabilities, and owner’s equity are related. a. Balance sheet; cash flow statement b. Balance sheet; income statement c. Income statement; cash flow statement d. Income statement; balance sheet Answer: d Diff: Moderate Page Ref: 4 Objective: Build a solid financial foundation and establish an effective budget. 44. Assets are to the ________ as revenue is to the ________. a. balance sheet; cash flow statement b. balance sheet; income statement c. income statement; cash flow statement d. income statement; balance sheet Answer: b Diff: Moderate Page Ref: 4 Objective: Build a solid financial foundation and establish an effective budget.

45. Which of the following two things can be found on an income statement? a. revenue and liabilities b. assets and liabilities c. assets and expenses d. revenue and expenses Answer: d Diff: Moderate Page Ref: 4 Objective: Build a solid financial foundation and establish an effective budget. 46. Which of the following two things can be found on a balance sheet? a. revenue and liabilities b. assets and liabilities c. assets and expenses d. revenue and expenses Answer: b Diff: Moderate Page Ref: 4 Objective: Build a solid financial foundation and establish an effective budget. 47. What attribute is true of a strong balance sheet? a. higher revenues than expenses b. higher expenses than revenues c. greater assets without incurring excessive liabilities d. greater liabilities without incurring excessive assets Answer: c Diff: Easy Page Ref: 4 Objective: Build a solid financial foundation and establish an effective budget. 48. Jeff is making his financial plan. He is currently creating a document which lists out money coming in and money going out. Also, this document includes money that he is owed but has not received in addition to his charges on his credit card bill. Which type of document is Jeff making? a. cash flow statement b. income statement c. balance sheet d. budget Answer: b Diff: Moderate Page Ref: 4 Objective: Build a solid financial foundation and establish an effective budget. 49. What is TRUE about the relationship between revenue and cash? a. If there is more revenue, there is more cash. b. If there is less revenue, there is more cash. c. If there is more revenue, there is less cash. d. There is no certain relationship between cash and revenue. Answer: d Diff: Moderate Page Ref: 4 Objective: Build a solid financial foundation and establish an effective budget.

50. What is FALSE about the relationship between an income statement and cash flow statement? a. When you received cash, it is recorded as revenue on the income statement and as a cash inflow on the cash flow statement. b. When you pay cash for a debt, it is recorded as an expense on the income statement but not recorded on the cash flow statement. c. When you are owed money but you have not been paid, it is recorded as revenue on the income statement but is not recorded on the cash flow statement. d. When you owe someone money but have not paid, it is recorded as an expense on the income statement but is not recorded on the cash flow statement. Answer: b Diff: Challenging Page Ref: 4 Objective: Build a solid financial foundation and establish an effective budget. 51. Jill makes a document by listing out all his possessions such as his car, house, and jewelry. She also writes down everything she owes for credit cards, mortgage payments, car payments, and other debt. What document has Jill created? a. budget b. balance sheet c. cash flow statement d. income statement Answer: b Diff: Moderate Page Ref: 5 Objective: Build a solid financial foundation and establish an effective budget. 52. _____ is a plan that details your monthly and annual financial targets for earning money, spending money, saving money, and investing money. a. Budget b. Income statement c. Balance sheet d. Cash flow statement Answer: a Diff: Easy Page Ref: 5 Objective: Build a solid financial foundation and establish an effective budget. 53. Malia wants to achieve her goals in her financial plan. Therefore, she makes another plan that details her monthly and annual financial targets. What has Malia created? a. income statement b. balance sheet c. cash flow statement d. budget Answer: d Diff: Easy Page Ref: 5 Objective: Build a solid financial foundation and establish an effective budget.

54. Which of the following is NOT true of a budget? a. It is used to helps a person fulfill his or her financial plan. b. It details monthly and annual financial targets for earning money, spending money, saving money, and investing money. c. The first thing to do is list out earnings and other cash inflows. d. The order of priorities is to pay off a person’s debts first and then pay himself second. Answer: d Diff: Moderate Page Ref: 5 Objective: Build a solid financial foundation and establish an effective budget. 55. Ideally, what is the first thing you start with when making your budget? a. liabilities and other cash outflows b. amount set aside each period to pay yourself first c. revenue and other cash inflows d. plan for paying off your debt Answer: b Diff: Moderate Page Ref: 5 Objective: Build a solid financial foundation and establish an effective budget. 56. Brian is trying to save money, but he's not sure how to stick to his savings plan. Which of the following would be LEAST helpful to Brian in his effort to make his savings plan work? a. Brian should pay off unpaid credit card debt. b. Brian could pay for items with cash only. c. Before paying himself, he should pay all other bills and then deposit anything that is left over at the end of the month into savings. d. Brian finds a way to reduce the interest rates on his loans. Answer: c Diff: Moderate Page Ref: 5 Objective: Build a solid financial foundation and establish an effective budget. 57. Approximately what percentage of gross income is withheld? a. 0% to 10% b. 10% to 25% c. 25% to 40% d. 40% to 50% Answer: c Diff: Moderate Page Ref: 5 Objective: Build a solid financial foundation and establish an effective budget. 58. When carrying out your budget, when should you pay yourself? a. first b. at the end of the month c. after expenses have been paid d. before deductions are taken out of gross income Answer: a Diff: Moderate Page Ref: 6 Objective: Build a solid financial foundation and establish an effective budget.

59. Jessica’s only source of income is from XYZ Company. She has a salary of $35,000 per year. However, over the course of the year, she only gets to take home $24,500. The $35,000 is her ________ while the $24,500 is her ________. a. gross income; net income b. net income; gross income c. contribution margin; net income d. net income; contribution margin Answer: a Diff: Moderate Page Ref: 6 Objective: Build a solid financial foundation and establish an effective budget. 60. Martha set up a budget and realizes she needs to reduce some of her spending to improve her savings. Each of the following options would be fine for this EXCEPT what? a. pay off unpaid credit card debt b. use cash only c. pay herself last d. reduce interest rates on credit card debt Answer: c Diff: Moderate Page Ref: 6 Objective: Build a solid financial foundation and establish an effective budget. 61. What expression refers to when you should pay yourself after you are paid? a. paying yourself first b. paying yourself second c. paying yourself third d. paying yourself last Answer: a Diff: Moderate Page Ref: 6 Objective: Build a solid financial foundation and establish an effective budget. 62. The Rule of ________ is an equation used to see how long it will take to double a person’s money at a given interest rate. a. 70 b. 72 c. 74 d. 76 Answer: b Diff: Easy Page Ref: 7 Objective: Build a solid financial foundation and establish an effective budget. 63. Elliot wants to determine the time it will take for his investment to increase twice at a given interest rate. Which of the following tools can he use to determine his investment period? a. credit report b. spending plan c. defined contribution plan d. Rule of 72 Answer: d Diff: Easy Page Ref: 7 Objective: Build a solid financial foundation and establish an effective budget.

64. The Rule of 72 can be used to find the amount of time for what to happen to your investment? a. double b. triple c. vest d. mature Answer: a Diff: Easy Page Ref: 7 Objective: Build a solid financial foundation and establish an effective budget. 65. What is compound interest? a. Interest earned only on principal plus any other new assets you gain each month. b. Interest earned on any interest earned previously but not on the original investment. c. Interest earned on principal, but also on any liabilities you incurred since the last payment. d. Interest that is earned on principal and any interest earned previously. Answer: d Diff: Moderate Page Ref: 7 Objective: Build a solid financial foundation and establish an effective budget. 66. If you invest $2,000 in a bank account at 2% today, approximately how many years will it take for the investment to grow to $4,000 assuming there were no more deposits or withdrawals? a. 32 years b. 36 years c. 40 years d. 44 years Answer: b Diff: Moderate Page Ref: 7 Objective: Build a solid financial foundation and establish an effective budget. 67. If you invest $4,000 in a bank account at 3% today, approximately how much will be in the account after 24 years? a. $6,000 b. $7,000 c. $8,000 d. $9,000 Answer: c Diff: Moderate Page Ref: 7 Objective: Build a solid financial foundation and establish an effective budget. 68. If you invest $4,000 in a bank account at 4% today, approximately how much will be in the account after 36 years? a. $8,000 b. $12,000 c. $16,000 d. $20,000 Answer: c Diff: Challenging Page Ref: 7 Objective: Build a solid financial foundation and establish an effective budget.

69. If you invest $100 today into an account, and it grows to $200 in 18 years, what was the approximate interest rate on the account? a. 2% b. 3% c. 4% d. 5% Answer: c Diff: Challenging Page Ref: 7 Objective: Build a solid financial foundation and establish an effective budget. 70. Using the Rule of 72, how long will it take $5,000 to grow to $20,000 at an interest rate of 8%? a. 9 years b. 12 years c. 18 years d. 36 years Answer: c Diff: Challenging Page Ref: 7 Objective: Build a solid financial foundation and establish an effective budget. 71. It is determined that it takes 24 years for an investment of $10,000 to grow to $40,000 at a certain interest rate. Using the Rule of 72, what is the approximate value for the interest rate? a. 3% b. 6% c. 9% d. 12% Answer: b Diff: Challenging Page Ref: 7 Objective: Build a solid financial foundation and establish an effective budget. 72. _____ means that interest earned is added to the previous period’s savings and then earns even more interest in future periods. a. Compound growth b. Simple growth c. Present value d. Future value Answer: a Diff: Easy Page Ref: 7 Objective: Build a solid financial foundation and establish an effective budget. 73. Which of the following is NOT a good use of savings? a. reserve funds for unexpected and emergency expenses b. one-time special purchases c. 401(k) plan d. emergency fund in case normal income is temporarily interrupted or reduced Answer: c Diff: Moderate Page Ref: 7 Objective: Build a solid financial foundation and establish an effective budget.

74. _____ is/are reserve funds that you will need for unexpected and emergency expenses, one-time special purchases that you cannot predict in advance, and a fund that you can draw from if your income should ever be temporarily interrupted or reduced. a. Assets b. Mutual funds c. 401(k) d. Savings Answer: d Diff: Easy Page Ref: 7 Objective: Build a solid financial foundation and establish an effective budget. 75. Which of the following is put in the correct order from first to last when making a budget? a. pay yourself, establish a savings account for emergencies, and pay normal monthly expenses such as housing, transportation, clothing, and utilities b. pay yourself, pay normal monthly expenses such as housing, transportation, clothing, and utilities, and establish a savings account for emergencies c. pay normal monthly expenses such as housing, transportation, clothing, and utilities, pay yourself, and establish a savings account for emergencies d. pay normal monthly expenses such as housing, transportation, clothing, and utilities, establish a savings account for emergencies, and pay yourself Answer: a Diff: Moderate Page Ref: 8 Objective: Build a solid financial foundation and establish an effective budget. 76. What is the best way to accurately estimate your needs for your budget? a. look at bills for the past 6 months b. research on the Internet or by some other external media c. seek advice from family and friends d. track actual spending for a few months in the future Answer: d Diff: Moderate Page Ref: 8 Objective: Build a solid financial foundation and establish an effective budget. 77. Which of the following is NOT a way you should use to get out of debt? a. stop spending more money than you bring in b. increase your income by finding new sources of income c. pay off your debts as much as possible first before you pay yourself d. reduce your expenses Answer: c Diff: Moderate Page Ref: 9-10 Objective: Build a solid financial foundation and establish an effective budget. 78. _____ is anything you own or control that you can exchange for some value while a ________ is anything you owe. a. Asset; liability b. Liability; asset c. Owner’s equity; asset d. Owner’s equity; liability Answer: a Diff: Moderate Page Ref: 11 Objective: Know how to acquire assets and protect them by managing risk.

79. What is the best description of an asset? a. anything that is owed b. anything coming into the business c. anything that is owned that you can exchange for some value d. amount of ownership share in the company Answer: c Diff: Easy Page Ref: 11 Objective: Know how to acquire assets and protect them by managing risk. 80. What is the best description of a liability? a. anything that is owed b. anything coming into the business c. anything that is owned that you can exchange for some value d. amount of ownership share in the company Answer: a Diff: Easy Page Ref: 11 Objective: Know how to acquire assets and protect them by managing risk. 81. Which of the following is normally true in relation to assets or liabilities to the wealthy or middle class? a. The wealthy buy assets that generate liabilities. b. The wealthy incur liabilities that will lead to assets. c. The middle class acquire assets that generate liabilities. d. The middle class incur liabilities that will lead to asset. Answer: c Diff: Moderate Page Ref: 11-12 Objective: Know how to acquire assets and protect them by managing risk. 82. What does APR stand for? a. accumulated percentage rate b. annual progressive rate c. accumulated progressive rate d. annual percentage rate Answer: d Diff: Easy Page Ref: 13 Objective: Know how to acquire assets and protect them by managing risk. 83. What describes the interest rate of a loan? a. It is the length of time needed to repay the loan. b. The money charged on the loan. c. It guarantees an item of value. d. The contract between you and the lender. Answer: b Diff: Easy Page Ref: 13 Objective: Know how to acquire assets and protect them by managing risk.

84. You borrow $1,000 from a bank today. You pay the loan off in one year. Which of the following could be the amount you paid in a year from now? a. $900 b. $950 c. $1,000 d. $1,050 Answer: d Diff: Easy Page Ref: 13 Objective: Know how to acquire assets and protect them by managing risk. 85. A ________ interest rate as a rate that remains constant while a ________ interest rate changes over time. a. constant; variable b. constant; uneven c. fixed; variable d. fixed; uneven Answer: c Diff: Moderate Page Ref: 13-14 Objective: Know how to acquire assets and protect them by managing risk. 86. What is the loan period of a loan? a. It is the length of time needed to repay the loan. b. The money charged on the loan. c. It guarantees an item of value. d. The contract between you and the lender. Answer: a Diff: Easy Page Ref: 14 Objective: Know how to acquire assets and protect them by managing risk. 87. What is a secured loan? a. It is the length of time needed to repay the loan. b. The money charged on the loan. c. It guarantees an item of value. d. The contract between you and the lender. Answer: c Diff: Easy Page Ref: 14 Objective: Know how to acquire assets and protect them by managing risk. 88. What is the term for an item of value as a guarantee for a secured loan? a. promissory note b. insurance c. collateral d. premium Answer: c Diff: Easy Page Ref: 14 Objective: Know how to acquire assets and protect them by managing risk.

89. What is a promissory note? a. It is the length of time needed to repay the loan. b. The money charged on the loan. c. It guarantees an item of value. d. The contract between you and the lender. Answer: d Diff: Easy Page Ref: 14 Objective: Know how to acquire assets and protect them by managing risk. 90. _____ can be used to protect against damage, theft, or loss. a. Deductibles b. Insurance c. Premiums d. Dividends Answer: b Diff: Easy Page Ref: 15 Objective: Know how to acquire assets and protect them by managing risk. 91. Auto insurance is made up of what two things? a. life insurance and liability insurance b. life insurance and collision coverage c. collision coverage and liability insurance d. life insurance and disability insurance Answer: c Diff: Moderate Page Ref: 15 Objective: Know how to acquire assets and protect them by managing risk. 92. _____ covers damage to your automobile or damage to other automobiles while ________ covers medical expenses and other costs associated with an accident. a. Collision insurance; liability insurance b. Liability insurance; life insurance c. Collision insurance; life insurance d. Liability insurance; collision insurance Answer: a Diff: Moderate Page Ref: 15 Objective: Know how to acquire assets and protect them by managing risk. 93. Which of the following automobile insurance options covers damage or medical injury you cause someone else? a. liability b. collision c. comprehensive d. exclusive Answer: a Diff: Easy Page Ref: 15 Objective: Know how to acquire assets and protect them by managing risk.

94. Which of the following automobile insurance options covers damage to your automobile or damage to other automobiles? a. liability b. collision c. comprehensive d. exclusive Answer: b Diff: Easy Page Ref: 15 Objective: Know how to acquire assets and protect them by managing risk. 95. Which of the following about particular types of insurance is NOT true? a. Liability insurance covers damages to your automobile or damage to other automobiles. b. Life insurance is paying other people when a person dies. c. Renter’s insurance insures a person’s possessions if he or she rents an apartment or home. d. Homeowner’s insurance insures your home and its contents. Answer: a Diff: Moderate Page Ref: 15 Objective: Know how to acquire assets and protect them by managing risk. 96. Before the bank would lend Evan money for a mortgage, he had to buy insurance for the property. Which of the following insurance did the bank require? a. liability b. life c. homeowner’s d. renters Answer: c Diff: Easy Page Ref: 15 Objective: Know how to acquire assets and protect them by managing risk. 97. A young person who is single with no dependents has the LEAST amount of need for what insurance? a. life b. collision c. liability d. renter’s Answer: a Diff: Easy Page Ref: 15 Objective: Know how to acquire assets and protect them by managing risk. 98. Which type of insurance pays other people when the covered person dies? a. disability insurance b. liability insurance c. death insurance d. life insurance Answer: d Diff: Easy Page Ref: 15 Objective: Know how to acquire assets and protect them by managing risk.

99. Ben is worried about his family and wants to purchase insurance in case he cannot go to work due to injury, accident, illness, or death. What two types of insurance should he purchase? a. life insurance and liability insurance b. liability insurance and disability insurance c. disability insurance and life insurance d. auto insurance and liability insurance Answer: c Diff: Moderate Page Ref: 15-16 Objective: Know how to acquire assets and protect them by managing risk. 100. What are two types of insurance that you should consider as part of your financial strategy but are both not required to be purchased by a lender or certain laws? a. life insurance and liability insurance b. liability insurance and disability insurance c. disability insurance and life insurance d. auto insurance and liability insurance Answer: c Diff: Moderate Page Ref: 15-16 Objective: Know how to acquire assets and protect them by managing risk. 101. The ________ is the amount you pay monthly or annually for insurance coverage while the ________ is the amount the policy owner must pay for a claim before the insurance company pays its part. a. deductible; premium b. deductible; collateral c. premium; collateral d. premium; deductible Answer: d Diff: Moderate Page Ref: 16 Objective: Know how to acquire assets and protect them by managing risk. 102. John was in a car accident and was not able to work for three weeks. Luckily, he had purchased insurance that paid him during this time period. What type of insurance had John purchased which paid him for the three weeks? a. life b. disability c. unemployment d. collision Answer: b Diff: Moderate Page Ref: 16 Objective: Know how to acquire assets and protect them by managing risk. 103. Which of the following is NOT a factor when buying most types of insurance? a. premium b. deductible c. terms and conditions of the contract d. interest rates Answer: d Diff: Moderate Page Ref: 16 Objective: Know how to acquire assets and protect them by managing risk.

104. Which of the following IS a factor when buying insurance? a. diversification b. time horizon c. premium d. interest rates Answer: c Diff: Moderate Page Ref: 16 Objective: Know how to acquire assets and protect them by managing risk. 105. Which of the following is normally TRUE about the relationship between an insurance premium and deductible? a. If the premium is higher, the deductible is normally higher. b. If the premium is lower, the deductible is normally lower. c. The premium and deductible are not normally related in any way. d. If the deductible is higher, the premium is normally lower. Answer: d Diff: Easy Page Ref: 16 Objective: Know how to acquire assets and protect them by managing risk. 106. Anita has had many medical expenses over the past 3 months due to dislocating both of her knees. According to the terms and conditions of her insurance policy, Anita has to pay $2,650 herself before insurance pays its part. What term describes the $2,650 amount? a. premium b. deductible c. collateral d. savings Answer: b Diff: Challenging Page Ref: 16 Objective: Know how to acquire assets and protect them by managing risk. 107. Danny has an insurance plan. As part of his insurance plan, if he has a claim, he has to pay a large amount himself before his insurance pays its part. Because Danny pays a large amount himself for a claim, he probably has a really small what? a. savings b. premium c. deductible d. collateral Answer: b Diff: Challenging Page Ref: 16 Objective: Know how to acquire assets and protect them by managing risk. 108. Danny has an insurance plan. As part of his insurance plan, if he has a claim, he has to pay a large amount himself before his insurance pays its part. What is this large amount that Danny pays? a. savings b. premium c. deductible d. collateral Answer: c Diff: Moderate Page Ref: 16 Objective: Know how to acquire assets and protect them by managing risk.

109. Jim has a medical insurance plan through his work. To pay for the plan, there is a set amount of money taken out of each paycheck to pay for the coverage. What is this set amount of money called? a. savings b. premium c. deductible d. collateral Answer: b Diff: Moderate Page Ref: 16 Objective: Know how to acquire assets and protect them by managing risk. 110. Which of the following is the best description of investing? a. The amount a policy owner has to pay for a claim. b. Money is spread across a variety of stocks, bonds, or mutual funds. c. It is the process of creating a detailed plan of your monthly and annual financial goals. d. A vested interested is acquired in someone else’s business. Answer: d Diff: Moderate Page Ref: 18 Objective: Create an investment strategy to make your dreams come true. 111. Which of the following is NOT one of the three best picks for initially investing your money? a. collateral b. mutual funds c. stock d. bonds Answer: a Diff: Easy Page Ref: 19 Objective: Create an investment strategy to make your dreams come true. 112. _____ represents a share of ownership in a company. a. Collateral b. A mutual fund c. Stock d. A bond Answer: c Diff: Easy Page Ref: 19 Objective: Create an investment strategy to make your dreams come true. 113. A dividend is to ________ as interest is to ________. a. mutual funds; stocks b. bonds; stocks c. stocks; mutual funds d. stocks; bonds Answer: d Diff: Moderate Page Ref: 19, 20 Objective: Create an investment strategy to make your dreams come true.

114. Which of the following is NOT true of stock? a. Investors of stock receive ownership interests in the company. b. Investors can make money on their stock through receiving interest from the company. c. Investors can make money if a dividend is paid from the corporation to the investors. d. Investors can make money if you can sell the stock for greater than your bought price. Answer: b Diff: Moderate Page Ref: 19 Objective: Create an investment strategy to make your dreams come true. 115. _____ is a payment corporations sometimes make to their shareholders. a. Interest b. Collateral c. A dividend d. A certificate of deposit Answer: c Diff: Easy Page Ref: 19 Objective: Create an investment strategy to make your dreams come true. 116. _____ is an agreement to lend to a company or government organization money that will be repaid at a later date. a. Collateral b. A mutual fund c. Stock d. A bond Answer: d Diff: Easy Page Ref: 20 Objective: Create an investment strategy to make your dreams come true. 117. Which of the following investments is backed by collateral? a. Secured bonds b. Stocks c. Unsecured bonds d. Mutual funds Answer: a Diff: Easy Page Ref: 20 Objective: Create an investment strategy to make your dreams come true. 118. _____ is a pooled collection of investments that allows an investor to acquire ownership in a broader set of stocks and bonds than if the investor purchased each of the investments separately. a. Collateral b. A mutual fund c. Stock d. A bond Answer: b Diff: Easy Page Ref: 20, 21 Objective: Create an investment strategy to make your dreams come true.

119. What are two investments that relate to an investor having pooled or wide variety of investments? a. stocks and a diversified portfolio b. mutual funds and stocks c. mutual funds and a diversified portfolio d. bonds and stocks Answer: c Diff: Moderate Page Ref: 21, 22 Objective: Create an investment strategy to make your dreams come true. 120. Which of the following is TRUE of the relationship between risk and reward? a. If there is greater risk, there is less possibility of potential reward. b. There is normally not a relationship between risk and reward. c. If there is less risk, there is a greater possibility of potential reward. d. A greater potential reward normally has been caused by greater risk. Answer: d Diff: Moderate Page Ref: 21 Objective: Create an investment strategy to make your dreams come true. 121. People who tend to be more willing to take risks are known to be risk ________ while people who are less willing to take risks are known to be risk ________. a. averse; seeking b. seeking; averse c. searching; averse d. searching; avoiding Answer: b Diff: Moderate Page Ref: 21 Objective: Create an investment strategy to make your dreams come true. 122. Which of the following is FALSE about risk? a. If there is greater risk, there is a smaller possibility of potential reward. b. A greater potential reward is normally found for risk seeking people. c. If there is less risk, there is a smaller possibility of potential reward. d. Risk averse people have a smaller possibility of potential reward. Answer: a Diff: Moderate Page Ref: 21 Objective: Create an investment strategy to make your dreams come true. 123. _____ means to spread your money across a variety of stocks, bonds, or mutual funds. a. Diversify b. Liquid c. Risk d. Investing Answer: a Diff: Easy Page Ref: 22 Objective: Create an investment strategy to make your dreams come true.

124. Which of the following would have the LEAST amount of risk? a. long-term bond b. mutual fund c. certificate of deposit d. stock Answer: c Diff: Moderate Page Ref: 22 Objective: Create an investment strategy to make your dreams come true. 125. Which of the following would have the GREATEST amount of risk? a. short-term bond b. certificate of deposit c. liquid savings account d. stock Answer: d Diff: Moderate Page Ref: 22 Objective: Create an investment strategy to make your dreams come true. 126. Short-term savings accounts can be converted to cash in a relatively short amount of time. Because of the conversion, what property do savings accounts have? a. diversified b. liquid c. risky d. secured Answer: b Diff: Easy Page Ref: 22 Objective: Create an investment strategy to make your dreams come true. 127. Which of the following is TRUE for certificate of deposit (CD) in relation to its time horizon and liquidity? a. short-term and liquid b. long-term and liquid c. short-term and not liquid d. long-term and not liquid Answer: a Diff: Moderate Page Ref: 22 Objective: Create an investment strategy to make your dreams come true. 128. Which of the following would be taxed as capital gains? a. stock sold at a profit b. dividends received on stock c. interest received on bonds d. a 401(k) that increases in value Answer: a Diff: Challenging Page Ref: 22-23 Objective: Create an investment strategy to make your dreams come true.

129. If your 401(k) increases in value, this increase in value would be taxed as what? a. The increase would be taxed as capital gains. b. The increase would be taxed as unemployment income. c. The increase would be taxed as ordinary income. d. The increase would not be taxed. Answer: d Diff: Moderate Page Ref: 22-23 Objective: Create an investment strategy to make your dreams come true. 130. If your stock is sold for a profit, this profit would be taxed as what? a. The profit would be taxed as capital gains. b. The profit would be taxed as unemployment income. c. The profit would be taxed as ordinary income. d. The profit would not be taxed. Answer: a Diff: Moderate Page Ref: 22-23 Objective: Create an investment strategy to make your dreams come true. 131. If your stock has increased in value but has NOT been sold, this increase in value would be taxed as what? a. The increase would be taxed as capital gains. b. The increase would be taxed as unemployment income. c. The increase would be taxed as ordinary income. d. The increase would not be taxed. Answer: d Diff: Challenging Page Ref: 22-23 Objective: Create an investment strategy to make your dreams come true. 132. When an organization helps everyone in its company understand how the decisions they make and the activities they perform affect the organization’s bottom line, this is related to ________. a. closed book management b. disclosed book management c. covert book management d. open book management Answer: d Diff: Easy Page Ref: 23 Objective: Create an investment strategy to make your dreams come true. SHORT ANSWER 133. What is a financial plan? Diff: Moderate Page Ref: 3 Objective: Build a solid financial foundation and establish an effective budget. Answer: A financial plan is a clearly defined combination of financial goals, strategies, and daily decisions that put in place your overall financial strategy. It is a roadmap for achieving financial and personal goals so that you do not get lost along the way. The first step with a financial plan is to list out the financial goals and personal goals that will require money for you to achieve.

134. What are some things that need to be determined when people are listing out your financial and personal goals? Diff: Moderate Page Ref: 3 Objective: Build a solid financial foundation and establish an effective budget. Answer: They need to figure out how much money they want to have and by what time. In addition they need to determine how much money they want to have in the future or what they want to spend it on. Finally, people have to figure out how to get the money they need and how to make it work for them by investing it properly. 135. What are the fundamental concepts of a cash flow statement, income statement, and a balance sheet? Diff: Challenging Page Ref: 3-4 Objective: Build a solid financial foundation and establish an effective budget. Answer: For a cash flow statement, to have positive cash flow, a company needs to maximize its inflows, minimize its outflows, and make sure that there is less cash going out than coming in. An income statement depicts profitability. To be profitable, a company needs to have higher revenues than expenses. A balance sheet deals with assets, liabilities, and owner’s equity. To have a strong balance sheet, a company needs to acquire assets without incurring excessive liabilities so that the value of the company (its owners’ equity) continues to grow. 136. Is it certain that more cash on the cash flow statement means that there is more revenue on the income statement (and vice versa)? Diff: Easy Page Ref: 4 Objective: Build a solid financial foundation and establish an effective budget. Answer: No, more cash does not necessarily mean more revenue. An income statement will be similar to a cash flow statement except that it records those times when a company earns “revenue” without immediately receiving cash for it (such as when the business was owed money but have not received it yet), and when the company incurs “expenses” but don’t have to pay cash immediately for them (such as when something is bought on a credit card or an account). It is possible for an organization to have little or no cash but still be profitable (or vice versa).

137. How can you apply the same principles of a cash flow statement, income statement, and balance sheet to evaluate your own financial success? Diff: Challenging Page Ref: 4-5 Objective: Build a solid financial foundation and establish an effective budget. Answer: For the personal cash flow statement, you simply write down every time you use cash to make a purchase, and every time you receive cash for some reason. By recording your in and out cash transactions for a couple of months, you’ll determine where your cash really goes and where it comes from. For the personal income statement, it is similar to your cash flow statement except that it records those times when you earn “revenue” without immediately receiving cash for it (such as when you are owed money but haven’t received it yet), and when you incur “expenses” but do not have to pay cash immediately for them (such as when you charge something on a credit card). It’s important to keep in mind that just as an organization might have little or no cash but still be profitable (or vice versa), you might be profitable but have very little cash to show for it, or you could have a lot of cash in your wallet and still be unprofitable. For the personal balance sheet, you list all the assets you own (such as a home), and all the liabilities you owe (such as student loans). If your assets are worth more than your liabilities, the difference represents your personal equity. 138. What is the difference between a person’s gross income and net income? Diff: Moderate Page Ref: 6 Objective: Build a solid financial foundation and establish an effective budget. Answer: Gross income is income before anything is withheld. Net income is gross income minus all deductions such as taxes, insurance, and retirement. Net income is the amount you take home. 139. Explain the concept of paying yourself first and what you should use with this money. Diff: Moderate Page Ref: 6 Objective: Build a solid financial foundation and establish an effective budget. Answer: Paying yourself first means that every time you get paid, you immediately take a set amount and transfer it somewhere else, perhaps to a mutual fund, a 401(k) plan (a long-term investment account with special tax incentives), or another type of retirement plan, and do not touch that money unless you are using it to make more money. Therefore, the first item on your budget should be to write a check to yourself. 140. If you pay yourself first, what are some good results that could occur? Diff: Easy Page Ref: 6 Objective: Build a solid financial foundation and establish an effective budget. Answer: You will be able to accumulate wealth over a long period of time. Also, most people find that if they make a habit to pay themselves first, they are able to live on less money than had they not set this money aside. If you do not pay yourself first and instead wait to see how much you have at the end of the month to save (that is, if you pay yourself last), you will most likely find you won’t be able to pay yourself at all.

141. What is the Rule of 72 and what is it used to calculate? Diff: Moderate Page Ref: 7 Objective: Build a solid financial foundation and establish an effective budget. Answer: The Rule of 72 is a simple equation that shows the number of years you will need to double your money based on a given interest rate. The equation states that the number of years to double your money equals 72 divided by the interest rate (as a percent). 142. The Rule of 72 shows the power of compound growth. What is compound growth? Diff: Moderate Page Ref: 7 Objective: Build a solid financial foundation and establish an effective budget. Answer: Compound growth is what happens when the interest you earn is added to your savings, and then your account earns even more interest. 143. After paying yourself first, you need create savings. What are savings used for as part of your personal budget? Diff: Moderate Page Ref: 7 Objective: Build a solid financial foundation and establish an effective budget. Answer: A savings account is used for unexpected and emergency expenses, one-time special purchases that you cannot predict in advance, and a fund that you can draw from if your income should ever be temporarily interrupted or reduced. 144. When making your budget, in what order do you allocate your money? Diff: Challenging Page Ref: 8 Objective: Build a solid financial foundation and establish an effective budget. Answer: Pay yourself by taking a set amount and transferring it somewhere else such as a mutual fund or retirement plan. After that, establish a savings account for unexpected and emergency expenses, one-time special purchases that you cannot predict in advance, and a fund that you can draw from if your income should ever be temporarily interrupted or reduced. After savings, you can allocate the rest of your budget toward housing and utilities, transportation, food/dining, clothing, insurance, medical and personal care, household items, entertainment, travel, gifts, charitable giving, and all of the other things that require money. 145. What tradeoff or decision do you have to make in regards to your lifestyle and budget? Diff: Moderate Page Ref: 8 Objective: Build a solid financial foundation and establish an effective budget. Answer: You can live a more expensive lifestyle now and have less money to save and invest for future needs and wants OR you can live a less expensive lifestyle now, save and invest more, and potentially have far greater resources later to pursue your lifelong goals and dreams. 146. If you are in debt, the first step to get out of debt is to stop the habits that got you into debt in the first place. What are two ways this could be done? Diff: Moderate Page Ref: 9 Objective: Build a solid financial foundation and establish an effective budget. Answer: One way is to increase your income, often by finding new sources of income. A second way is to reduce your expenses, perhaps in novel ways that you have not thought of before.

147. What is the difference between an asset and a liability? Diff: Easy Page Ref: 11 Objective: Know how to acquire assets and protect them by managing risk. Answer: An asset is anything you own or control that you can exchange for some value while a liability anything you owe. 148. How can you buy a liability? Diff: Moderate Page Ref: 11-12 Objective: Know how to acquire assets and protect them by managing risk. Answer: Some assets that are bought create future liabilities and these items continue to consume cash and create expenses. Examples are cars, boats, clothing, jewelry, cell phones, and vacation houses. 149. What is the difference between buying assets and buying liabilities and which groups of people purchase these assets or liabilities? Diff: Challenging Page Ref: 11-12 Objective: Know how to acquire assets and protect them by managing risk. Answer: Buying assets means buying things that generate income. The wealthy people are able to do this. An example is purchasing a tow truck and hiring a driver to generate towing income. Buying liabilities means buying assets that generate liabilities and additional expenses. This is performed by people in the middle class and is one of the reasons why they are not in the upper class. An example is purchasing a vacation house which will need upkeep such as a new roof, painting, etc. 150. What is the difference between an unsecured loan and a secured loan? Diff: Moderate Page Ref: 14 Objective: Know how to acquire assets and protect them by managing risk. Answer: Unsecured loans are not guaranteed by any item of value, just by an individual’s personal guarantee. Other loans (such as car loans and home mortgages) are secured, because they have collateral—an item of value (such as a car or house) that is committed by the borrower as a guarantee of payment. If you are unable to pay off secured loans, the lender can take possession of these items in an effort to recover the money they lent to you. 151. What do bonds and promissory notes have in common? Diff: Moderate Page Ref: 14, 20 Objective: Know how to acquire assets and protect them by managing risk. Create an investment strategy to make your dreams come true. Answer: They are both agreements or contracts between a lender and an investor. They both have details on the transaction.

152. What are the two parts that make auto insurance? Diff: Moderate Page Ref: 15 Objective: Know how to acquire assets and protect them by managing risk. Answer: Auto insurance includes collision coverage and liability insurance. Collision coverage includes damages to your auto or damage to other autos while liability insurance covers medical expenses and other costs associated with an accident. 153. What are two types of insurance you should consider as part of your financial strategy which are both not required by lenders or law? What do these types of insurance cover? Diff: Moderate Page Ref: 15-16 Objective: Know how to acquire assets and protect them by managing risk. Answer: You should consider life insurance and disability insurance as part of your financial plan. Both are not required by law or lenders. However, they both provide benefits. Life insurance pays another person or persons a specified amount of money when you die. People who are married or have children often insure themselves so that those who depend on them will be taken care of in the event of their death. Disability insurance pays to replace part or all of your income should you become disabled due to an injury, accident, or illness. 154. What is the difference between an insurance premium and an insurance deductible? How are they related? Diff: Challenging Page Ref: 16 Objective: Know how to acquire assets and protect them by managing risk. Answer: An insurance premium is the amount you pay monthly or annually for insurance coverage. Insurance premiums are determined by the amount of coverage you are purchasing, the risk associated with the item or activity being insured (you will pay more for life insurance if you skydive regularly than someone who does not), and the amount of your deductible. A deductible is how much the policy owner has to pay for a claim before the insurance company pays their part. A deductible is a form of selfinsurance—the amount of risk you are willing to bear vs. the amount of risk that is covered by your insurer. Premiums for an insurance policy with a relatively large deductible tend to be less than for a policy that has a lower deductible. 155. What are different factors that affect the insurance premium? Diff: Moderate Page Ref: 16 Objective: Know how to acquire assets and protect them by managing risk. Answer: Insurance premiums are determined by the amount of coverage you are purchasing, the risk associated with the item or activity being insured (you will pay more for life insurance if you skydive regularly than someone who does not), and the amount of your deductible. 156. What are different factors you should consider when buying insurance? Diff: Moderate Page Ref: 16-17 Objective: Know how to acquire assets and protect them by managing risk. Answer: You should consider the premium, deductible, terms and conditions of the contract, and the reputation and service provided by the insurer.

157. What would you want to know about the reputation of an insurer? Diff: Moderate Page Ref: 17 Objective: Know how to acquire assets and protect them by managing risk. Answer: You will want to know how long an insurance company has been in business, how successful they are, how well they are rated by rating agencies such as A.M. Best, and the quality and responsiveness of their customer service. 158. What are three investment options that are best for getting started with investing your money? Diff: Easy Page Ref: 19 Objective: Create an investment strategy to make your dreams come true. Answer: Stocks, bonds, and mutual funds are normally the three best picks as first time investment options. 159. If you purchase a stock, what are the two ways you can make money off this investment? Diff: Moderate Page Ref: 19 Objective: Create an investment strategy to make your dreams come true. Answer: When you own stock, you can make money in two ways. One way is if the value of that stock increases over time, you can sell the stock for more than you bought it for and the net difference will be income for you (although you will have to pay taxes on that income). You can also make money on a stock through dividends. A dividend is a payment that some corporations make on a regular basis to their shareholders. Not all corporations pay dividends, so you will need to research potential stocks you plan to purchase to determine if you’ll be receiving dividends.

160. Define and describe the investment characteristics of stocks, bonds, and mutual funds. Diff: Challenging Page Ref: 19-21 Objective: Create an investment strategy to make your dreams come true. Answer: Stock is a share of ownership in a company. Investors can be individuals or institutions that become known as shareholders, and in return for the money they paid, they receive ownership interests in the company. When you own stock, you can make money in two ways. One way is if the value of that stock increases over time, you can sell the stock for more than you bought it for and the net difference will be income for you (although you will have to pay taxes on that income). You can also make money on a stock through dividends. A dividend is a payment that some corporations make on a regular basis to their shareholders. Not all corporations pay dividends, so you will need to research potential stocks you plan to purchase to determine if you’ll be receiving dividends. A bond is basically an agreement to lend to a company or government organization money that will be repaid at a later date. Companies and governments typically issue bonds in order to finance a venture, and investors in these bonds might be individuals or institutions. In return for lending the money, the individuals or institutions become creditors. As a result, they receive a promise that the company will repay them their money, with interest. The interest you earn from purchasing bonds is the income you receive from your investment. You also receive your entire original investment back at a specified future date. There are secured bonds, which are backed with collateral of some kind, and unsecured bonds, which are backed only by the company’s promise and reputation. Bonds that yield a higher interest rate tend to be riskier, reflecting the tradeoff between risk and reward that occurs in investing. Mutual funds are a pooled collection of investments, and individual investors can purchase shares of these funds. The benefit of a mutual fund is that you can acquire ownership in a much broader set of stocks, bonds, and other investments than you could if you were to purchase each of them separately. Mutual funds may drop in value just as much as they may increase in value, and there are typically fees that you have to pay to the mutual fund to cover the expenses of hiring money managers and analysts who decide which investments the mutual fund should purchase. 161. How are mutual funds and a diversified portfolio similar? Diff: Moderate Page Ref: 20, 22 Objective: Create an investment strategy to make your dreams come true. Answer: They both are a pooled collection of investments. This causes your money to be spread across a variety of investments so that if one is performing poorly, you have a good chance that another investment might be performing better.

162. What are the criteria you should consider when evaluating investment options such as stocks, bonds, and mutual funds? Diff: Challenging Page Ref: 21-23 Objective: Create an investment strategy to make your dreams come true. Answer: You need to consider risk, diversification, time horizon, and taxes. Risk: For risk, you have to consider how much risk you can and are willing to take. People who tend to be more willing to take risks are known to be risk seeking, whereas people who are less willing to take risks are known to be risk averse. To gain a reward, you have to take risks, and the greater the risk, the greater potential for a reward. The amount of risk you take, however, should be within your comfort zone and reflect how risk seeking or risk averse you are. Through diversification, companies and individuals can lessen their risks. When you diversify, you spread your money across a variety of investments so that if one is performing poorly, you have a good chance that another investment might be performing better. If you invested all of your money in one stock, for example, your investment is not as diversified as when you purchase shares of a mutual fund that owns stock in many different companies. In general, a more diversified portfolio, or collection of investments, will have lower risk than a less diversified portfolio. For the time horizon, you need to consider when you will need the money. If you need to recoup your investment in a relatively short period of time—say less than a year—you’re likely to need a lowerrisk investment like a certificate of deposit (CD) at a bank that allows you to cash it in within that time horizon. For example, a couple who is planning to retire in less than a year would want to make sure that their investment is low risk and unlikely to drop in value, and is liquid, or able to be converted into cash within a relatively short period of time. A young college graduate who is investing money for retirement in 30 years, on the other hand, would have the flexibility to select riskier investments that have greater volatility but also have the potential to significantly increase in value over that time. Investments generate either taxable income or tax-free income. When you put money in a 401(k) retirement account and it increases in value, that increase is generally not taxed. If you personally purchased several shares of a stock and later sold them for a profit, that profit would be taxable income called capital gains. The decision to purchase investments that are tax-free or taxable can be a bit complicated, but it is important to understand that the taxability of investment income should be a factor to consider when picking investment options. 163. What advantage does an investor have if he has a long-term time horizon (more than 10 years) in terms of his investment? Diff: Moderate Page Ref: 22 Objective: Create an investment strategy to make your dreams come true. Answer: The investor would have the flexibility to select riskier investments that have greater volatility but also have the potential to significantly increase in value over time. 164. In terms of taxes, what is the different treatment for increases in a 401(k) account versus an increase and sale of shares of stock? Diff: Moderate Page Ref: 22-23 Objective: Create an investment strategy to make your dreams come true. Answer: When you put money in a 401(k) retirement account and it increases in value, that increase is generally not taxed. If you personally purchased several shares of a stock and later sold them for a profit, that profit would be taxable income as capital gains.

165. What is open book management and how can it be applied to your personal finances?? Diff: Challenging Page Ref: 23 Objective: Create an investment strategy to make your dreams come true. Answer: Organizations that practice open book management help everyone in the organization understand how the decisions they make and the activities they perform affect the organization’s bottom line. To apply open book management to your personal finances, you need to make a connection between the decisions you make in your daily life and your short- and long-term financial goals. In fact, if you are in a family, you need to get everyone in the “company” (i.e., your family) on board, monitoring the essential numbers and using those numbers to make decisions.