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Test Bank for Business in Action 10th Edition by Bovee and Thill A+
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Created By: A SolutionTest Bank for Business in Action 10th Edition by
Bovee and Thill A+
Chapter 1 Developing a Business Mindset
1) is money that an organization brings in through the sale of its goods and services.
A) Competitive advantage
B) Revenue
C) Sales
D) Capital investment Answer: B
Explanation: Revenue is the money a company brings in through the sale of goods and services.
Difficulty: 1: Easy
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
categorize businesses.
2) Why is the link between risk and reward critical for a business?
A) It is a key aspect of social responsibility
B) It provides opportunities for not-for-profit organizations to stay in business
C) It is essential to the counter-cyclical business model
D) It provides incentive to take on the risk Answer: D
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Explanation: Without the promise of rewards, businesses would have no incentive to take on the
risks. And without entrepreneurs and companies willing to accept risk, little would get done in
the economy.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
categorize businesses.
3) A(n) is a framework of how a business intends to generate revenue.
A) business model
B) strategic management tool
C) profitability analysis
D) competitive advantage Answer: A
Explanation: A company's business model is a clear, simple outline of how the business intends
to generate revenue.
Difficulty: 1: Easy
AACSB: Analytical thinking
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
categorize businesses.
4) is the term used to describe the difference between revenue and expenses.
A) Profit
B) Interest
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C) Sales
D) Owner's equity Answer: A
Explanation: Profit is the amount of money left over after all the costs involved in doing
business, have been deducted from revenue.
Difficulty: 1: Easy
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
categorize businesses.
5) refers to some aspect of a product or company that makes it more appealing to
target customers.
A) Competitive advantage
B) Economies of scale
C) Horizontal integration
D) Vertical integration Answer: A
Explanation: Competitive advantage refers to some aspect of a product or company that makes it
more appealing to target customers.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
categorize businesses.
6) Which type of organization seeks to operate efficiently and effectively to achieve its
goals without focusing on profit as a motive?
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A) Business intermediary
B) Nonprofit organization
C) Service business
D) Goods-producing business Answer: B
Explanation: Not-for-profit organizations (also known as nonprofit organizations) such as
museums, most universities, and charities do not have a profit motive.
Difficulty: 2: Moderate
AACSB: Application of knowledge
LO: 1.1: Explain the concept of adding value in a business, and identify four useful ways to
categorize businesses.
7) If individuals and companies believe they can pursue rewards without facing the risks
that should be attached to those pursuits, they are more likely to engage in irresponsible and even
unethical behavior. This situation is known as a(n) .
A) moral hazard
B) professional dilemma
C) barrier to entry
D) competitive advantage Answer: A
Explanation: If individuals and companies believe they can pursue rewards without facing the
risks that should be attached to those pursuits, they are more likely to engage in irresponsible and
even unethical behavior–a situation known as moral hazard.
Difficulty: 2: Moderate
AACSB: Ethical understanding and reasoning
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