Chapter 6: Selling to Businesses Online

TRUE/FALSE

1. In many companies, procurement staff need not have high levels of product knowledge to identify
and evaluate appropriate suppliers.

ANS: F PTS: 1

2. An important characteristic of purchasing, logistics, and support activities is flexibility.

ANS: T PTS: 1

3. A purchasing or logistics strategy that works this year may not work next year.

ANS: T PTS: 1

4. Large companies usually assign responsibility for purchasing direct and indirect materials to the
same department.

ANS: F PTS: 1

5. Businesses make a distinction between direct and indirect materials.

ANS: T PTS: 1

6. Direct materials that companies buy on a recurring basis are MRO supplies.

ANS: F PTS: 1

7. FedEx and UPS have freight-tracking available to their customers.

ANS: T PTS: 1

8. Governments perform many functions for their stakeholders.

ANS: T PTS: 1

9. Most B2C electronic commerce is an adaptation of EDI.

ANS: F PTS: 1

10. Many industry value chains no longer consist of a single sequence of companies linked in a single
line but include many parallel lines that are interconnected in a web or network configuration.

ANS: T PTS: 1

11. EDI was the first form of electronic commerce to be widely used in business.

ANS: T PTS: 1
12. Because of advances in computer technology, most businesses do not need to buy office supplies
or the services of freight and transportation companies.

ANS: F PTS: 1

13. The ASC X12 organization and the UN/EDIFACT group agreed in 2000 to develop one common
set of international standards, but this undertaking was not successful.

ANS: T PTS: 1

14. EDI increases the paper flow, but streamlines the interchange of information among departments
within a company.

ANS: F PTS: 1

15. Most VANs do not require an enrollment fee.

ANS: F PTS: 1

16. One of the major advantages of VANs is cost.

ANS: F PTS: 1

17. The up-front cost of implementing indirect connection EDI, including software, VAN enrollment
fee, and hardware, typically exceeds $500,000.

ANS: F PTS: 1

18. Using VANs can become cumbersome and expensive for companies that want to do business
with a number of trading partners, each using different VANs.

ANS: T PTS: 1

19. When EFTs involve two banks, they are executed using a VAN.

ANS: F PTS: 1

20. Many companies use strategic alliances, partnerships, and long-term contracts to create
relationships with other companies in the supply chains for the products that they manufacture or sell.

ANS: T PTS: 1

21. By coordinating the efforts of supply chain participants, firms that engage in supply chain
management are reaching beyond the limits of their own organization's hierarchical structure and creating
a new network form of organization among the members of the supply chain.

ANS: T PTS: 1
 22. By engaging competitors in cooperative, long-term relationships, companies have found that they
can work together with these competitors to identify new ways to provide their own customers with
faster, cheaper, and better services.

ANS: F PTS: 1

23. The ultimate goal of supply chain management is to achieve a higher-quality or lower-cost
product at the end of the chain.

ANS: T PTS: 1

24. A passive RFID tag does not need a power source.

ANS: T PTS: 1

25. Ventro opened its first industry marketplace, Chemdex, in early 1987.

ANS: F PTS: 1

MULTIPLE CHOICE

1. The term ____ generally includes all purchasing activities, plus the monitoring of all elements of
purchase transactions.
a. procurement c. distribution
b. logistics d. sales
ANS: A PTS: 1

2. ____ activities include managing the inbound movements of materials and supplies and the
outbound movements of finished goods and services.
a. Procurement c. Transaction
b. Logistics d. Production
ANS: B PTS: 1

3. The classic objective of ____ is to provide the right goods in the right quantities in the right place
at the right time.
a. procurement c. transaction processing
b. logistics d. production
ANS: B PTS: 1

4. One common support activity that underlies multiple primary activities is ____.
a. record-keeping c. training
b. auditing d. regulation
ANS: C PTS: 1

5. ____ is the intentional collection, classification, and dissemination of information about a

company, its products, and its processes.
a. Database management c. Data warehousing
b. Knowledge management d. Data mining
ANS: B PTS: 1

6. One trend that is becoming clear in purchasing, logistics, and support activities is the shift away
from hierarchical structures toward ____ structures.
a. vertical c. network
b. horizontal d. matrix
ANS: C PTS: 1

7. The Web is enabling this shift from hierarchical to network forms of _____.
a. economic organization c. community organization
b. social organization d. relationship management
ANS: A PTS: 1

8. The roots of Web technology for business-to-business transactions lie in a hierarchically

structured approach to interfirm information transfer called ____.
a. client/server c. object technology
b. TCP/IP d. electronic data interchange
ANS: D PTS: 1

9. EDI is the acronym for ____.

a. Education Interchange c. Electronic Data Interchange
b. Elementary Decision Implementation d. Electronic Distance Interface
ANS: C PTS: 1

10. With respect to EDIs, the two businesses that exchange information are called ____.
a. interaction monitors c. trading partners
b. hand-shakers d. collaborators
ANS: C PTS: 1

11. Firms that exchange data in specific standard formats are said to be ____.
a. standard codes c. common
b. EDI compatible d. protocol
ANS: B PTS: 1

12. The ____ has been the coordinating body for standards in the U.S. since 1918.
a. ACM c. ANSI
b. IEEE d. DPMA
ANS: C PTS: 1

13. In 1979, ANSI chartered a new committee to develop uniform EDI standards. This committee is
called the ____.
a. ASC X12 c. IEEE 2321
b. TSC X15 d. ASE A23
ANS: A PTS: 1
14. ____ requires each business in the network to operate its own on-site EDI translator computer.
a. Indirect connection EDI c. Repeated EDI
b. Direct connection EDI d. Wired EDI
ANS: B PTS: 1

15. To use the services of a VAN, a company must install ____ software that is compatible with the
VAN.
a. network compiler c. EDI translator
b. LAN interpreter d. VAN router
ANS: C PTS: 1

16. ____ allows trading partners to pass messages through the VAN instead of connecting their
computers directly to each other.
a. Indirect connection EDI c. Loop EDI
b. Direct connection EDI d. VAN EDI
ANS: A PTS: 1

17. Because EDI transactions are business contracts and often involve large amounts of money, the
issue of ____ is significant.
a. secrecy c. nonrepudiation
b. integrity d. privacy
ANS: C PTS: 1

18. EDI on the Internet is also called ____.

a. open EDI c. online EDI
b. closed EDI d. digital EDI
ANS: A PTS: 1

19. When companies integrate their supply management and logistics activities across multiple
participants in a particular product’s supply chain, the job of managing that integration is called ____.
a. supply chain management c. enterprise resource planning
b. procurement management d. total quality management
ANS: A PTS: 1

20. The long-term relationships that are created among participants in the supply chain are called
____.
a. quality partners c. supply alliances
b. JIT alliances d. joint suppliers
ANS: C PTS: 1

21. Businesses that engage in supply chain management work to establish long-term relationships
with a small number of very capable suppliers called ____.
a. tier-one suppliers c. secondary suppliers
b. primary suppliers d. supply alliances
ANS: A PTS: 1
 22. The major issue that most companies must deal with in forming supply chain alliances is
developing ____.
a. standard procedures c. network relationships
b. open communication channels d. trust
ANS: D PTS: 1

23. A(n) ____ has a password-protected entrance and offers negotiated price reductions on a limited
selection of products.
a. customer portals marketplace c. private store
b. public marketplace d. independent exchange
ANS: C PTS: 1

24. A ____ is a marketplace that provides auctions, request for quote postings, and other features to
companies that want to operate their own marketplaces.
a. private store c. private exchange
b. customer portals marketplace d. private company marketplace
ANS: D PTS: 1

25. A(n) ____ is a marketplace formed by several large buyers in a particular industry.
a. private company marketplace
b. private store
c. industry consortia-sponsored marketplace
d. customer portals marketplace
ANS: C PTS: 1

COMPLETION

1. The use of Internet technologies in procurement activities is called ____________________.

ANS: e-procurement

PTS: 1

2. The total dollar amount of the goods and services that a company buys during a year is called its
____________________.

ANS: spend

PTS: 1

3. In ____________________ purchasing, the company negotiates long-term contracts for most of

the materials it will need.

ANS:
contract
replenishment

PTS: 1
4. ____________________ materials include factory supplies, such as sandpaper, hand tools, and
replacement parts for manufacturing machinery.

ANS: Indirect

PTS: 1

5. MRO is the acronym for maintenance, repair, and ____________________.

ANS: operating

PTS: 1

6. One way that Procurement Departments control MRO spending is by issuing

____________________.

ANS:
p-cards
purchasing cards

PTS: 1

7. Finance and ____________________ includes activities such as making payments, processing

payments received from customers, planning capital expenditures, and budgeting and planning to ensure
that sufficient funds will be available to meet the organization’s obligations as they come due.

ANS: administration

PTS: 1

8. ____________________ activities include hiring, training, and evaluating employees,

administrating benefits, and complying with government record-keeping regulations.

ANS: Human resources

PTS: 1

9. The U.S. government’s Bureau of Public Debt operates the ____________________ site, which
allows individuals to buy savings bonds and financial institutions to buy treasury bills, bonds, and notes.

ANS: TreasuryDirect

PTS: 1

10. Some researchers who study the interaction of firms within an industry value chain are beginning
to use the term “supply ____________________” instead of “supply chain.”

ANS: web

PTS: 1
11. ____________________ are the names of the formats for specific business data interchanges.

ANS: Transaction sets

PTS: 1

12. Instead of connecting directly to each of its trading partners, a company might decide to use the
services of a(n) ____________________.

ANS:
value-added network
VAN (value-added network)
value-added network (VAN)
VAN

PTS: 1

13. A(n) ____________________ is a service that banks use to manage their accounts with each
other.

ANS:
ACH
automated clearing house
automated clearing house (ACH)
ACH (automated clearing house)

PTS: 1

14. ____________________ is the ability to establish that a particular transaction actually occurred.

ANS: Nonrepudiation

PTS: 1

15. A(n) ____________________ is the movement of money from one bank account to another.

ANS:
EFT (electronic funds transfer)
Electronic funds transfer (EFT)
Electronic funds transfer
EFT

PTS: 1

16. ____________________ prevents either party from denying the transaction’s validity or
existence.

ANS: Nonrepudiation

PTS: 1
17. ____________________ are small chips that use radio transmissions to track inventory.

ANS:
RFIDs (Radio frequency identification devices)
Radio frequency identification devices (RFIDs)
Radio frequency identification devices
RFIDs

PTS: 1

18. ____________________ tags are small enough to be installed on the face of credit cards or sewn
into clothing items.

ANS:
RFID
Radio frequency identification device
RFID (Radio frequency identification device)
Radio frequency identification device (RFID)

PTS: 1

19. One of the main goals of ____________________ is to help each company in the chain focus on
meeting the needs of the consumer at the end of the supply chain.

ANS: supply chain management

PTS: 1

20. Companies in industries with long supply chains have, in the past, often found it difficult to
maintain customer focus, which is often called a(n) ____________________.

ANS: ultimate consumer orientation

PTS: 1

21. Vertical trade portals consisting of industry marketplaces, independent exchanges, and public
marketplaces are known collectively as ____________________ industry marketplaces.

ANS: independent

PTS: 1

22. ____________________ exchanges are not controlled by a company that is an established buyer
or seller in the industry.

ANS: Independent

PTS: 1
 23. ____________________ marketplaces are open to new buyers and sellers just entering the
industry.

ANS: Public

PTS: 1

24. Cisco and Dell offer ____________________ for each of their major customers within their
selling Web sites.

ANS: private stores

PTS: 1

25. ____________________ is a marketplace that was created in 2000 by a consortium of

DaimlerChrysler, Ford, and General Motors.

ANS: Covisint

PTS: 1

ESSAY

1. What are purchasing activities and how are they different from procurement?

ANS:
Purchasing activities include identifying vendors, evaluating vendors, selecting specific products, placing
orders, and resolving any issues that arise after receiving the ordered goods or services.

Procurement generally includes all purchasing activities, plus the monitoring of all elements of purchase
transactions. It also includes the job of managing and developing relationships with key suppliers.

PTS: 1

2. What is the difference between direct and indirect materials?

ANS:
Direct materials are those materials that become part of the finished product in a manufacturing process.
Indirect materials are all other materials that the company purchases, including factory supplies such as
sandpaper, hand tools, and replacement parts for manufacturing machinery.

PTS: 1

3. What is the difference between indirect connection EDI and direct connection EDI?

ANS:
Direct connection EDI requires each business in the network to operate its own on-site EDI translator
computer. These EDI translator computers are then connected directly to each other using modems and
dial-up telephone lines or dedicated leased lines.
 With an indirect connection, the trading partners pass messages through the VAN instead of connecting
their computers directly to each other.

PTS: 1

4. What are the advantages of using a value-added network?

ANS:
Advantages of using VANs are as follows:

1) Users need to support only the VAN’s communications protocol instead of many possible protocols
used by trading partners.
2) The VAN records message activity in an audit log. This VAN audit log becomes an independent record
of transactions, and this record can be helpful in resolving disputes between trading partners.
3) The VAN can provide translation between different transaction sets used by trading partners.
4) The VAN can perform automatic compliance checking to ensure that the transaction set is in the
specified EDI format.

PTS: 1

5. What are the advantages of using Internet technologies in supply chain management?

ANS:
Suppliers can:

1) Share information about changes in customer demand.

2) Receive rapid notification of product design changes and adjustments.
3) Provide specifications and drawings more efficiently.
4) Increase the speed of processing transactions.
5) Reduce the cost of handling transactions.
6) Reduce errors in entering transaction data.
7) Share information about defect rates and types.

PTS: 1

Chapter 7: Virtual Communities

TRUE/FALSE

1. The Internet reduces transaction costs in value chains and offers an efficient means of
communication to anyone with an Internet connection.

ANS: T PTS: 1

2. Virtual communities began online after the Internet was in general use.

ANS: F PTS: 1

3. Most of the early Web community businesses are open and thriving today.
ANS: F PTS: 1

4. The general idea behind all of the social networking sites is that people are invited to join by
existing members who think they would be valuable additions to the community.

ANS: T PTS: 1

5. The 2008 U.S. elections saw the first major use of blogs as a political networking tool.

ANS: F PTS: 1

6. Social networking sites are used in the political realm to discuss issues, plan strategies, and even
arrange in-person meetings called mashups.

ANS: F PTS: 1

7. One of the first social shopping sites was craigslist, an information resource for San Francisco
area residents that was created in 1995 by WELL member Craig Newmark.

ANS: T PTS: 1

8. Many colleges and universities now offer courses that use distance learning platforms such as
Blackboard for student-instructor interaction.

ANS: T PTS: 1

9. Visitors spend a greater amount of time at portal sites than they do at most other types of Web
sites, which is attractive to advertisers.

ANS: T PTS: 1

10. Sites conducting monetizing campaigns are unconcerned about visitor backlash.

ANS: F PTS: 1

11. A growing number of large organizations have built internal Web sites that provide opportunities
for social interaction among their employees.

ANS: T PTS: 1

12. Dutch auctions move large numbers of commodity items relatively slowly.

ANS: F PTS: 1

13. The Dutch auction is also called an ascending-price auction.

ANS: F PTS: 1

14. In a double auction, buyers and sellers each submit combined price-quantity bids to an auctioneer.

ANS: T PTS: 1
15. Double auctions can be operated in sealed-bid format only.

ANS: F PTS: 1

16. Analysts believe that a more appropriate term for the electronic commerce that occurs in general
consumer auctions is consumer-to-consumer.

ANS: T PTS: 1

17. The most successful consumer auction Web site today is eBay.

ANS: T PTS: 1

18. The lock-in effect makes the task of creating successful general consumer Web sites much easier.

ANS: F PTS: 1

19. The types of products that work well for group shopping sites are branded products with well-
established reputations.

ANS: T PTS: 1

20. In industries where there is a high degree of competition among suppliers, reverse auctions can be
an efficient way to conduct and manage the price bidding that would naturally occur in that market.

ANS: T PTS: 1

21. Surveys indicate that as many as 50 percent of all Web auction buyers either do not receive the
items they purchased or find the items to be different from the seller's representation in some significant
way.

ANS: F PTS: 1

22. Sniping software observes auction progress until the last second or two of the auction clock.

ANS: T PTS: 1

23. The first auctioning software, named Cricket Jr., was written by David Eccles in 1997.

ANS: F PTS: 1

24. Because sniping software synchronizes its internal clock to the auction site clock and executes its
bid with a computer’s precision, the software almost always wins out over a human bidder.

ANS: T PTS: 1

25. The act of placing a winning bid at the last second is called a lock-in.

ANS: F PTS: 1
MULTIPLE CHOICE

1. ____ were computers that allowed users to connect through modems (using dial-up connections
through telephone lines) to read and post messages in a common area.
a. Electronic social systems c. IRC systems
b. Bulletin chat systems d. Bulletin board systems
ANS: D PTS: 1

2. A(n) ____ is a gathering place for people and businesses that does not have a physical existence.
a. meetup c. lock-in community
b. online community d. escrow service
ANS: B PTS: 1

3. A(n) ____ site is a Web site that allows individuals to create and publish a profile, create a list of
other users with whom they share a connection (or connections), control that list, and monitor similar lists
made by other users.
a. social commerce c. social networking
b. electronic commerce d. social medium
ANS: C PTS: 1

4. The trend toward having readers help write the online newspaper is called ____ journalism.
a. participatory c. social
b. peer d. collective
ANS: A PTS: 1

5. The earliest written records of auctions are from Babylon and date from ____ B.C.
a. 100 c. 2000
b. 500 d. 4000
ANS: B PTS: 1

6. The 18th century saw the birth of two British auction houses, ____ in 1744 and Christie's in 1766.
a. William's c. Vickrey's
b. Sotheby's d. Tiffany
ANS: B PTS: 1

7. ____ are the prices that potential buyers in an auction are willing to pay for an item.
a. Bids c. Inquiries
b. Proposals d. Reserves
ANS: A PTS: 1

8. The whole auction process is managed by a(n) ____.

a. shill bidder c. observer
b. auctioneer d. developer
ANS: B PTS: 1
9. In some auctions, ____, employed by the seller or the auctioneer, can make bids on behalf of the
seller.
a. auction agents c. shill bidders
b. faux bidders d. auction dealers
ANS: C PTS: 1

10. An English auction is sometimes called a(n) ____ because the bids are publicly announced.
a. reverse auction c. open auction
b. double auction d. semi-open auction
ANS: C PTS: 1

11. The ____ auction is a form of open auction in which bidding starts at a high price and drops until
a bidder accepts the price.
a. English c. French
b. Dutch d. Spanish
ANS: B PTS: 1

12. In ____ auctions, bidders submit their bids independently and are usually prohibited from sharing
information with each other.
a. sealed-bid c. open-outcry
b. closed-bid d. secure-bid
ANS: A PTS: 1

13. In a first-price sealed-bid auction, the ____ bidder wins.

a. highest c. second lowest
b. second highest d. lowest
ANS: A PTS: 1

14. Second-price sealed-bid auctions are commonly called ____ auctions.

a. open outcry c. double
b. Vickrey d. Victory
ANS: B PTS: 1

15. In a(n) ____ auction, buyers and sellers each submit combined price-quantity bids to an
auctioneer.
a. sealed-bid c. English
b. Dutch d. double
ANS: D PTS: 1

16. The Chicago Board of Trade conducts ____ auctions of commodity futures and stock options.
a. first-price sealed-bid c. open-outcry double
b. sealed-bid double d. second-price sealed-bid
ANS: C PTS: 1
17. The New York Stock Exchange conducts ____ auctions of stocks and bonds in which the
auctioneer, called a specialist, manages the market for a particular stock or bond issue.
a. sealed-bid double c. open-cry double
b. first-price sealed d. second-price sealed-bid
ANS: A PTS: 1

18. The most common format used on eBay is a computerized version of the ____ auction.
a. Dutch c. English
b. sealed-bid d. Vickrey
ANS: C PTS: 1

19. A ____ is the amount by which one bid must exceed the previous bid.
a. minimum bid increment c. reserve bid
b. deposit bid d. maximum bid increment
ANS: A PTS: 1

20. In an auction, a third-party ____ service can be used to hold the buyer's payment until he or she
receives and is satisfied with the purchased item.
a. insurance c. escrow
b. risk management d. guarantee
ANS: C PTS: 1

21. Existing auction sites, such as eBay, are inherently more valuable to customers than new auction
sites. This is called a(n) ____.
a. opt-in effect c. lock-out effect
b. lock-in effect d. opt-out effect
ANS: B PTS: 1

22. Many people think of Priceline.com as a ____ auction site.

a. double c. sealed-bid
b. shill bid d. seller-bid
ANS: D PTS: 1

23. Large companies sometimes have ____ who find buyers for unusable inventory items.
a. liquidation specialists c. accountants
b. inventory specialists d. auditors
ANS: A PTS: 1

24. Smaller businesses often sell their unusable and excess inventory to ____, which are firms that
find buyers for these items.
a. inventory specialists c. inventory removal services
b. liquidation brokers d. secondary marketers
ANS: B PTS: 1

25. Companies, called ____ take an item and create an online auction for that item, handle the
transaction, and remit the balance of the proceeds after deducting a fee.
 a. auction consignment services c. sniping brokers
b. liquidation brokers d. escrow services
ANS: A PTS: 1

COMPLETION

1. Started at Duke University in 1979, ____________________ was a set of interconnected

computers devoted to storing information on specific topics.

ANS: Usenet

PTS: 1

2. Usenet ____________________ were message posting areas in which interested persons

(primarily from the education and research communities) could discuss various topics.

ANS: newsgroups

PTS: 1

3. In 1999, Geocities was purchased by ____________________ for $5 billion.

ANS:
Yahoo!
Yahoo

PTS: 1

4. The social networking site ____________________ was based on the idea that no more than six
persons separated anyone in the world from any other person.

ANS: Six Degrees

PTS: 1

5. Web sites that create communities based on the connections between ideas and that are more
abstract are called ____________________ virtual communities.

ANS: idea-based

PTS: 1

6. One rough measure of ____________________ is how long each user spends at a Web site.

ANS: stickiness

PTS: 1

7. By the late 1990s, virtual communities were selling ____________________ to generate revenue.
ANS: advertising

PTS: 1

8. ____________________-wave advertising fees are based less on up-front site sponsorship

payments and more on the generation of revenues from continuing relationships with people who use the
social networking sites.

ANS: Second

PTS: 1

9. ____________________ refers to the conversion of existing regular site visitors seeking free
information or services into fee-paying subscribers or purchasers of services.

ANS: Monetizing

PTS: 1

10. Because social networking sites ask their members to provide demographic information about
themselves, the potential for ____________________ marketing on these types of sites is very high.

ANS: targeted

PTS: 1

11. ____________________ allows Web pages formatted in HTML to be displayed on devices with
small screens.

ANS:
Wireless Application Protocol
WAP (Wireless Application Protocol)
Wireless Application Protocol (WAP)
WAP

PTS: 1

12. A(n) ____________________ site can charge both buyers and sellers to participate, and it can
sell advertising on its pages.

ANS: auction

PTS: 1

13. ____________________ valuations are amounts that bidders are willing to pay for an item.

ANS: Private

PTS: 1
14. In some cases, an English auction has a(n) ____________________ bid, or reserve price.

ANS: minimum

PTS: 1

15. In English auctions, bidders risk becoming caught up in the excitement of competitive bidding
and then bidding more than their private valuations. This phenomenon is called the
____________________.

ANS: winner's curse

PTS: 1

16. In 2004, Google used a(n) ____________________ auction to sell its stock to investors in its
initial public offering.

ANS: Dutch

PTS: 1

17. A(n) ____________________ auction is often better for the seller because the bidder with the
highest private valuation will not let the bid drop much below that valuation for fear of losing the item to
another bidder.

ANS: Dutch

PTS: 1

18. Dutch auctions are also called ____________________ auctions.

ANS: descending-price

PTS: 1

19. If multiple items are being auctioned in a(n) ____________________ sealed-bid auction,
successive lower (next highest) bidders are awarded the remaining items at the price they bid.

ANS:
first-price
first price

PTS: 1

20. William Vickrey won the 1996 Nobel Prize in Economics for his studies of the properties of
____________________ sealed-bid auctions.

ANS:
second-price
second price
 PTS: 1

21. ____________________ auctions, either sealed-bid or open-outcry, work well only for items of
known quality, such as securities or graded agricultural products, that are regularly traded in large
quantities.

ANS: Double

PTS: 1

22. In a(n) ____________________ auction, multiple sellers submit price bids to an auctioneer who
represents a single buyer.

ANS:
reverse
seller-bid

PTS: 1

23. In an eBay ____________________, the bidder specifies a maximum bid and as new bidders
enter the auction, the eBay site software continually enters higher bids for all bidders who placed such
bids.

ANS: proxy bid

PTS: 1

24. The site JustBeads.com is an example of a(n) ____________________ auction site that caters to
buyers and sellers who are geographically dispersed but share highly focused interests.

ANS:
specialized Web
specialty consumer

PTS: 1

25. A good source for current information about the sniping software and services business is the
____________________ Web site.

ANS: AuctionBytes

PTS: 1

ESSAY

1. Describe the operation of a typical auction.

ANS:
In an auction, a seller offers an item or items for sale, but does not establish a price. This is called "putting
an item up for bid" or "putting an item on the (auction) block." Potential buyers are given information
about the item or some opportunity to examine it; they then offer bids, which are the prices they are
willing to pay for the item. The potential buyers, or bidders, each have developed private valuations, or
amounts they are willing to pay for the item. The whole auction process is managed by an auctioneer.

PTS: 1

2. What is the difference between an English auction and a Dutch auction?

ANS:
In an English auction, bidders publicly announce their successive higher bids until no higher bid is
forthcoming. At that point, the auctioneer pronounces the item sold to the highest bidder at that bidder's
price. The Dutch auction is a form of open auction in which bidding starts at a high price and drops until a
bidder accepts the price.

PTS: 1

3. What is the main difference between eBay and a live English auction?

ANS:
The main difference between eBay and a live English auction is that on Ebay, bidders do not know who
placed which bid until the auction is over. The eBay English auction also allows sellers to specify that an
auction be made private. In an eBay private auction, the site never discloses bidders identities and the
prices they bid. At the conclusion of the auction, eBay notifies only the seller and the highest bidder.

PTS: 1

4. How does proxy bidding work on eBay?

ANS:
In proxy bidding, the bidder specifies a maximum bid. If that maximum bid exceeds the current bid, the
eBay site automatically enters a bid that is one minimum bid increment higher than the current bid. As
new bidders enter the auction, the eBay site software continually enters higher bids for all bidders who
placed proxy bids.

PTS: 1

5. List the supply chain characteristics that support reverse auctions.

ANS:
Supply chain characteristics that support reverse auctions are:
Suppliers are highly competitive
Product features can be clearly specified
Suppliers are willing to reduce the margin they earn on this product
Suppliers are willing to participate in reverse auctions

PTS: 1
Chapter 8: E-Business Law and Taxation

TRUE/FALSE

1. Any business that uses the Web immediately becomes an international business.

ANS: T PTS: 1

2. Businesses that operate on the Web must comply with the same laws and regulations that govern
the operations of all businesses.

ANS: T PTS: 1

3. In the physical world, geographic boundaries almost always coincide with legal and cultural
boundaries.

ANS: T PTS: 1

4. The legal systems of most countries include a concept called constructive notice.

ANS: T PTS: 1

5. Physical boundaries are a convenient and effective way to announce the ending of one legal or
cultural system and the beginning of another.

ANS: T PTS: 1

6. A business commits a torsion act by selling a product that causes harm to a buyer.

ANS: F PTS: 1

7. Non-U.S. corporations and individuals cannot be sued in U.S. courts if they conduct business or
commit tortious acts in the United States.

ANS: F PTS: 1

8. People enter into contracts on a daily, and often hourly, basis.

ANS: T PTS: 1

9. When a seller advertises goods for sale on a Web site, that seller is making an offer and inviting
offers from potential buyers.

ANS: F PTS: 1

10. In general, contracts are invalid if they are not in writing or signed.

ANS: F PTS: 1

11. The Statute of Frauds varies widely from state to state with regard to signed writings.
ANS: F PTS: 1

12. Any contract for the sale of goods includes implied warranties.

ANS: T PTS: 1

13. Digital signatures are not legally valid for contract purposes.

ANS: F PTS: 1

14. Click-wrap acceptance is when a Web site user agrees to that site’s EULA or its terms and
conditions by clicking a button on the Web site.

ANS: T PTS: 1

15. If an idea cannot be separated from its expression in a work, that idea cannot be copyrighted.

ANS: T PTS: 1

16. Creations that can be copyrighted include virtually all forms of artistic or intellectual expression.

ANS: T PTS: 1

17. Fictional characters cannot be trademarked.

ANS: F PTS: 1

18. In general, trademark protection prevents another firm from using the same or a similar name,
logo, or other identifying characteristics in a way that would cause confusion in the minds of potential
buyers.

ANS: T PTS: 1

19. Law enforcement agencies have difficulty combating many types of online crime.

ANS: T PTS: 1

20. Ethics issues are significant in the area of online privacy because laws have not kept pace with
the growth of the Internet and the Web.

ANS: T PTS: 1

21. Differences in cultures throughout the world have resulted in different expectations about privacy
in electronic commerce.

ANS: T PTS: 1

22. Transaction taxes are levied by the United States and other countries on certain commodities
when they are imported into the country.
 ANS: F PTS: 1

23. The connection between a tax-paying entity and a government is called jurisdiction.

ANS: F PTS: 1

24. Companies that sell through their Web sites establish nexus everywhere their goods are delivered
to customers.

ANS: F PTS: 1

25. Most states’ use tax rates are lower than their sales tax rates.

ANS: F PTS: 1

MULTIPLE CHOICE

1. ____ mark the range of culture and reach of applicable laws very clearly.
a. Territorial borders c. Ethical standards
b. Culture lines d. Online borders
ANS: A PTS: 1

2. ____ is a form of control over physical space and the people and objects that reside in that space,
and is a defining characteristic of statehood.
a. Ethics c. Legitimacy
b. Culture d. Power
ANS: D PTS: 1

3. The ability of a government to exert control over a person or corporation is called ____.
a. subjugation c. legitimacy
b. jurisdiction d. notice
ANS: B PTS: 1

4. The level of power asserted by a government is limited to that which is accepted by the culture
that exists within its ____ boundaries.
a. ethical c. geographic
b. cultural d. virtual
ANS: C PTS: 1

5. ____ is the idea that those subject to laws should have some role in formulating them.
a. Jurisdiction c. Legitimacy
b. Effect d. Notice
ANS: C PTS: 1

6. People receive ____ that they have become subject to new laws and cultural norms when they
cross an international border.
a. implied notice c. constructive notice
b. constructive warning d. summary notice
ANS: C PTS: 1

7. A ____ is an intentional or negligent action taken by a legal entity that causes harm to another
legal entity.
a. contract exception c. crime
b. tort d. deposition
ANS: B PTS: 1

8. ____ is a court's authority to decide a particular type of dispute.

a. Jurisdiction c. Subject-matter jurisdiction
b. Personal jurisdiction d. Notice
ANS: C PTS: 1

9. In the United States, federal courts have ____ over issues governed by federal law.
a. subject-matter jurisdiction c. notice
b. personal jurisdiction d. legitimacy
ANS: A PTS: 1

10. A ____ clause is a statement that the contract will be enforced according to the laws of a
particular state.
a. forum selection c. personal jurisdiction
b. jurisdiction d. subject-matter jurisdiction
ANS: A PTS: 1

11. The details of ____ vary from state to state, but generally create personal jurisdiction over
nonresidents who transact business or commit tortious acts in the state.
a. subject-matter jurisdiction c. statewide jurisdiction
b. long-arm statutes d. forum selection
ANS: B PTS: 1

12. A(n) ____ is a commitment with certain terms made to another party.
a. contract c. acceptance
b. offer d. consideration
ANS: B PTS: 1

13. A(n) ____ is the expression of willingness to take an offer, including all of its stated terms.
a. judicial comity c. acceptance
b. tort d. consideration
ANS: C PTS: 1

14. A(n) ____ can be formed by two or more parties that act as if a contract exists, even if no contract
has been written and signed.
a. offer c. subordinate contract
b. implied contract d. virtual contract
ANS: B PTS: 1

15. A(n) ____ is any symbol executed or adopted for the purpose of authenticating a writing.
a. stamp c. mark
b. icon d. signature
ANS: D PTS: 1

16. A(n) ____ is a statement declaring that the seller will not honor some or all implied warranties.
a. invalid contract c. warranty disclaimer
b. unsigned warranty d. warranty negation
ANS: C PTS: 1

17. Disputes that arise when one person has registered a domain name that is an existing trademark or
company name are settled by ____.
a. WIPO c. statutory law
b. common law d. ACPA
ANS: A PTS: 1

18. ____ occurs when owner information maintained by a public domain registrar is changed in the
registrar’s database to reflect a new owner’s name and business address.
a. Trademark infringement c. Domain name ownership change
b. Product disparagement d. Signatory change
ANS: C PTS: 1

19. A ____ is a digital code or stream embedded undetectably in a digital image or audio file.
a. validation code c. patent
b. watermark d. cookie
ANS: B PTS: 1

20. A ____ statement is a statement that is false and that injures the reputation of another person or
company.
a. defamatory c. deceptive
b. fraudulent d. critical
ANS: A PTS: 1

21. If a statement injures the reputation of a product or service instead of a person, it is called ____.
a. defamatory c. product disparagement
b. product defamation d. company defamation
ANS: C PTS: 1

22. In a(n) ____ policy approach, the company collecting the information does not use the
information for any other purpose unless the customer specifically chooses to allow that use.
a. opt-out c. fair use
b. implied d. opt-in
ANS: D PTS: 1
 23. If a company undertakes sufficient activities in a particular country, it establishes ____ with that
country and becomes liable for filing tax returns in that country.
a. jurisdiction c. terms of service
b. notice d. nexus
ANS: D PTS: 1

24. A(n) ____ tax is a tax levied by a state on property used in that state that was not purchased in
that state.
a. property c. use
b. import d. levy
ANS: C PTS: 1

25. A(n) ____ is assessed on the amount of value added at each stage of production.
a. VAT c. property tax
b. import tariff d. transaction tax
ANS: A PTS: 1

COMPLETION

1. State courts have ____________________ jurisdiction over issues governed by state laws.

ANS:
subject-matter
subject matter

PTS: 1

2. Governments that want to enforce laws regarding business conduct on the Internet must establish
____________________ over that conduct.

ANS: jurisdiction

PTS: 1

3. Businesses should be aware of ____________________ considerations when conducting

electronic commerce over state and international lines.

ANS:
jurisdictional
jurisdiction

PTS: 1

4. The most common examples of business-related intentional ____________________ involve

defamation, misrepresentation, fraud, and theft of trade secrets.

ANS: torts
PTS: 1

5. Every kind of agreement or exchange between parties, no matter how simple, is a type of
____________________.

ANS: contract

PTS: 1

6. ____________________ can arise when an employee of a company accepts a contract and the
company later asserts that the employee did not have the authority to do so.

ANS: Authority to bind

PTS: 1

7. In most cases, a Web site visitor is held to the ____________________ even if that visitor has not
read the text or clicked a button to indicate agreement with the terms.

ANS:
terms of service
ToS

PTS: 1

8. A(n) ____________________ is a right granted by a government to the author or creator of a

literary or artistic work.

ANS: copyright

PTS: 1

9. _________________________ is a general term that includes all products of the human mind.

ANS: Intellectual property

PTS: 1

10. The ____________________ of a copyrighted work includes copying it for use in criticism,
comment, news reporting, teaching, scholarship, or research.

ANS: fair use

PTS: 1

11. An entity becomes liable for ____________________ infringement if it is capable of supervising

the infringing activity and obtains a financial benefit from the infringing activity.

ANS: vicarious copyright

PTS: 1
12. A(n) ____________________ is an exclusive right granted by the government to an individual to
make, use, and sell an invention.

ANS: patent

PTS: 1

13. The ____________________ patent, which protects a specific set of procedures for conducting a
particular business activity, is quite controversial.

ANS: business process

PTS: 1

14. A(n) ____________________ is used to identify services provided.

ANS: service mark

PTS: 1

15. A(n) ____________________ is a distinctive mark, device, motto, or implement that a company
affixes to the goods it produces for identification purposes.

ANS: trademark

PTS: 1

16. The name or part of that name that a business uses to identify itself is called a(n)
____________________.

ANS: trade name

PTS: 1

17. ____________________ law arises when elected legislative bodies pass laws.

ANS: Statutory

PTS: 1

18. ____________________ is the practice of registering a domain name that is the trademark of
another person or company in the hopes that the owner will pay huge amounts of money to acquire the
URL.

ANS: Cybersquatting

PTS: 1

19. ____________________ occurs when someone other than a domain name’s owner changes the
ownership of the domain name.
ANS: Name stealing

PTS: 1

20. The ______________________________ publishes regulations and investigates claims of false

advertising.

ANS:
Federal Trade Commission
Federal Trade Commission (FTC)
FTC

PTS: 1

21. ____________________ taxes are levied by states and local governments on the personal
property and real estate used in the business.

ANS: Property

PTS: 1

22. ____________________ taxes are levied by national, state, and local governments on the net
income generated by business activities.

ANS: Income

PTS: 1

23. ____________________ taxes are levied on the products or services that the company sells or
uses.

ANS: Transaction

PTS: 1

24. The concept of nexus is similar in many ways to the concept of ____________________
jurisdiction.

ANS: personal

PTS: 1

25. The ______________________________ is the U.S. government agency charged with

administering the country's tax laws.

ANS:
Internal Revenue Service
Internal Revenue Service (IRS)
IRS
 PTS: 1

ESSAY

1. What is the difference between a contract and a tort?

ANS:
A contract is a promise or set of promises between two or more legal entities—persons or corporations—
that provides for an exchange of value (goods, services, or money) between or among them. A tort is an
intentional or negligent action taken by a legal entity that causes harm to another legal entity.

PTS: 1

2. What is the difference between subject-matter jurisdiction and personal jurisdiction?

ANS:
Subject-matter jurisdiction is a court’s authority to decide a particular type of dispute. For example, in the
United States, federal courts have subject-matter jurisdiction over issues governed by federal law (such as
bankruptcy, copyright, patent, and federal tax matters), and state courts have subject-matter jurisdiction
over issues governed by state laws (such as professional licensing and state tax matters). If the parties to a
contract are both located in the same state, a state court has subject-matter jurisdiction over disputes that
arise from the terms of that contract.

Personal jurisdiction is, in general, determined by the residence of the parties. A court has personal
jurisdiction over a case if the defendant is a resident of the state in which the court is located.

PTS: 1

3. What are the elements of the contract when a consumer buys a product at the supermarket?

ANS:
The store invites offers for an item at a stated price by placing it on a store shelf.

The consumer makes an offer by indicating a willingness to buy the product for the stated price. For
example, the consumer might take the item to a checkout station and present it to a clerk with an offer to
pay.

The store accepts the customer’s offer and exchanges its product for the consumer’s payment at the
checkout station.

PTS: 1

4. Mark Van Name and Bill Catchings, writing in PC Week in 1998, outlined four principles for
handling customer data. List these principles.

ANS:
These principles are as follows:
Use the data collected to provide improved customer service.
Do not share customer data with others outside your company without the customer’s permission.
Tell customers what data you are collecting and what you are doing with it.
 Give customers the right to have you delete any of the data you have collected about them.

PTS: 1

5. Discuss import tariffs.

ANS:
All countries in the world regulate the import and export of goods across their borders. In many cases,
goods can only be imported into a country if a tariff is paid. A tariff, also called a customs duty or duty, is
a tax levied on products as they enter the country. Countries have many reasons for imposing tariffs.
Goods that are ordered online are subject to tariffs when they cross international borders. Even products
that are delivered online (such as downloaded software) can be subject to tariffs. Many online shoppers
have been surprised when an item they ordered from another country arrives with a bill from their
government for the tariff.

PTS: 1

Chapter 9: Web Hosting and E-Business Software

TRUE/FALSE

1. Because of software scalability, a high-traffic electronic commerce site, with thousands of catalog
inquiries each minute, can use the same software as a small online shop selling a dozen items.

ANS: F PTS: 1

2. The type of electronic commerce software an organization needs depends on several factors, with
size and budget being the primary drivers.

ANS: T PTS: 1

3. Because of the cost of the technology involved, creating an online store can be much more
expensive than building a chain of retail stores.

ANS: F PTS: 1

4. All electronic commerce solutions must at least provide a catalog display, shopping cart
capabilities, and transaction processing.

ANS: T PTS: 1

5. Web stores often do not use the same department names as their physical counterparts.

ANS: F PTS: 1

6. Good sites give buyers alternative ways to find products.

ANS: T PTS: 1
7. Large sites with many products can provide a search engine that allows customers to enter
descriptive search terms so that they can quickly find the Web page containing what they want to
purchase.

ANS: T PTS: 1

8. Shopping cart software at some Web sites allows the customer to fill a shopping cart with
purchases, put the cart in virtual storage, and come back days later to confirm and pay for the purchases.

ANS: T PTS: 1

9. The database MySQL is not open source software.

ANS: F PTS: 1

10. Most of the cost of middleware is not the software itself, but the consulting fees needed to make
the software work in a given company.

ANS: T PTS: 1

11. Page-based systems are inappropriate choices for small and midsize Web sites.

ANS: F PTS: 1

12. ValueWeb is an example of a commerce service provider.

ANS: T PTS: 1

13. Yahoo! offers a wide range of Web-hosting and electronic commerce services for companies of
all sizes.

ANS: T PTS: 1

14. Today, the main mall-style CSP that remains in business is eBay Stores.

ANS: T PTS: 1

15. Midrange software traditionally does not offer connectivity to database systems that store catalog
information.

ANS: F PTS: 1

16. In Intershop Enfinity, management and editing of a storefront are done through a Web browser.

ANS: T PTS: 1

17. Buying and using midrange electronic commerce software is less expensive than using a CSP.

ANS: F PTS: 1
 18. IBM WebSphere Commerce Professional Edition can only be used for business-to-business
applications.

ANS: F PTS: 1

19. One of the advantages of IBM WebSphere is that no programming experience is required to use
the software, since it is entirely GUI based.

ANS: F PTS: 1

20. The term “class” is used in information systems to describe a system that serves multiple
locations or divisions of one company and encompasses all areas of the business or enterprise.

ANS: F PTS: 1

21. The goal of customer relationship management software is to understand each customer’s specific
needs and then customize a product or service to meet those needs.

ANS: T PTS: 1

22. Some companies create their own CRM software using outside consultants and their own IT
staffs.

ANS: T PTS: 1

23. SCM planning software helps companies develop coordinated demand forecasts using
information from each participant in the supply chain.

ANS: T PTS: 1

24. SCM software performs two general types of functions: planning and analysis.

ANS: F PTS: 1

25. The leading providers of content management software include IBM and Oracle, which provide
the software as components in other enterprise software packages.

ANS: T PTS: 1

MULTIPLE CHOICE

1. ____ often offer Web server management and rent application software to businesses.
a. Static catalog providers c. Knowledge management providers
b. Client service providers d. Commerce service providers
ANS: D PTS: 1

2. Commerce service providers are also called ____ service providers.

a. hosting c. knowledge management
b. managed d. business
ANS: B PTS: 1

3. A ____ is a listing of goods and services.

a. tier c. catalog
b. database d. record
ANS: C PTS: 1

4. In the early days of electronic commerce, shoppers selected items they wanted to purchase by
____.
a. filling out online forms c. selecting items one at a time
b. placing items into a shopping cart d. emailing credit card information
ANS: A PTS: 1

5. In a shopping cart, clicking the Checkout button usually displays a screen that asks for ____ and
shipping information.
a. stock availability c. billing
b. item descriptions d. tracking numbers
ANS: C PTS: 1

6. The Web is a ____ system, unable to remember anything from one transmission or session to
another.
a. stateless c. cacheless
b. stateful d. checkless
ANS: A PTS: 1

7. One way to uniquely identify users and store information about their choices is to create and store
____.
a. Web logs c. IP addresses
b. cookies d. database files
ANS: B PTS: 1

8. ____ occurs when the shopper proceeds to the virtual checkout counter by clicking a checkout
button.
a. Cookie enabling c. Shipping
b. Item selection d. Transaction processing
ANS: D PTS: 1

9. Large information systems that store the same data in many different physical locations are called
____ information systems.
a. centralized c. dispersed
b. distributed d. component
ANS: B PTS: 1

10. Application servers are usually grouped into two types: page-based and ____ systems.
a. server-based c. script-based
b. component-based d. group-based
ANS: B PTS: 1

11. ____ is accomplished by programs that transfer information from one application to another.
a. Application integration c. Co-location
b. Data mining d. Interoperability
ANS: A PTS: 1

12. Larger businesses often prefer to use a ____ application system that separates the presentation
logic from the business logic.
a. monolithic c. component-based
b. database-driven d. client-based
ANS: C PTS: 1

13. ____ software packages are business systems that integrate all facets of a business, including
accounting, logistics, manufacturing, marketing, planning, project management, and treasury functions.
a. ERP c. ERT
b. EML d. HTL
ANS: A PTS: 1

14. ERP is the acronym for ____.

a. electronic record processing c. enterprise record provider
b. enterprise resource planning d. electronic resource provider
ANS: B PTS: 1

15. The W3C defines ____ as software systems that support interoperable machine-to-machine
interaction over a network.
a. business logic c. dedicated hosting
b. Web services d. application integration
ANS: B PTS: 1

16. ____ is a message passing protocol that defines how to send marked-up data from one software
application to another across a network.
a. WSDL c. W3C
b. ERP d. SOAP
ANS: D PTS: 1

17. ____ is used to describe the

characteristics of the logic units that make up specific Web services.
a. WSDL c. W3C
b. ERP d. SOAP
ANS: A PTS: 1

18. ____ CSPs provide small business with an Internet connection, Web site creation tools, and little
or no banner advertising clutter.
a. Mall-style c. List-style
b. Store-style d. Simple provider
 ANS: A PTS: 1

19. ____ can help businesses find customers with common interests and discover previously
unknown relationships among the data.
a. Data mining c. Data warehousing
b. Databases d. Customer acquisition programs
ANS: A PTS: 1

20. ____ packages allow the merchant to have explicit control over merchandising choices, site
layout, internal architecture, and remote and local management options.
a. Web hosting c. Midrange
b. Basic electronic commerce d. CSP
ANS: C PTS: 1

21. WebSphere Commerce Suite is produced by ____.

a. Microsoft c. Oracle
b. Intel d. IBM
ANS: D PTS: 1

22. Commerce Server is produced by ____.

a. Microsoft c. Oracle
b. Intel d. IBM
ANS: A PTS: 1

23. ____ software typically provides tools for linking to and supporting supply and purchasing
activities.
a. Enterprise-class c. Web hosting
b. Midrange d. Server-based
ANS: A PTS: 1

24. ____ software often includes powerful search tools that use proprietary semantic and statistical
algorithms to help users find the content, human experts, and other resources that can aid them in their
research and decision-making tasks.
a. Content management c. Knowledge management
b. Data management d. Data mining
ANS: C PTS: 1

25. ____ software is designed to help businesses manage the information in documents, rather than
the documents themselves.
a. Programming management c. Indexing management
b. Knowledge management d. Information management
ANS: B PTS: 1

COMPLETION
1. ______________________________ are in the business of providing Internet access to
companies and individuals.

ANS:
Internet Service Providers
ISPs

PTS: 1

2. When companies need to incorporate electronic commerce components, they may opt to run
servers in-house; this approach is called ____________________.

ANS:
self hosting
self-hosting

PTS: 1

3. ____________________ hosting means that the client’s Web site is on a server that hosts other
Web sites simultaneously and is operated by the service provider at its location.

ANS: Shared

PTS: 1

4. With ____________________ hosting, the service provider makes a Web server available to the
client, but the client does not share the server with other clients of the service provider.

ANS: dedicated

PTS: 1

5. In a(n) ____________________ service, the service provider rents a physical space to the client
to install its own server hardware and software.

ANS:
co-location
collocation
colocation

PTS: 1

6. The best hosting services provide Web server hardware and software combinations that are
____________________, which means that they can be adapted to meet changing requirements when
their clients grow.

ANS: scalable

PTS: 1
7. A(n) ____________________ is a simple list written in HTML that appears on a Web page or a
series of Web pages.

ANS: static catalog

PTS: 1

8. A(n) ____________________ stores information about items in a database, usually on a separate

computer that is accessible to the server that is running the Web site itself.

ANS: dynamic catalog

PTS: 1

9. A(n) _________________________ is a collection of information that is stored on a computer in

a highly structured way.

ANS: database

PTS: 1

10. An example of a(n) ____________________ is: When a customer logs in, check the password
entered against the password file in the database.

ANS: business rule

PTS: 1

11. Making a company’s information systems work together is called ____________________ and is
an important goal of companies when they install middleware.

ANS: interoperability

PTS: 1

12. The actions that an application server software performs are determined by the rules used in the
business. These rules are called ____________________.

ANS: business logic

PTS: 1

13. ____________________ application systems return pages generated by scripts that include the
rules for presenting data on the Web page with the business logic.

ANS:
Page-based
Page based

PTS: 1
14. In some applications, ____________________ provide data feeds between two different
companies.

ANS: Web services

PTS: 1

15. A general name for the ways programs interconnect with each other is
___________________________________.

ANS:
application program interface (API)
application program interface
API

PTS: 1

16. ____________________ allow programs written in different languages, on different platforms, to

communicate with each other and accomplish transaction processing and other business tasks.

ANS: Web services

PTS: 1

17. A key element of the ____________________ approach is that programmers can write software
that accesses certain units of business application logic without knowing the details of how each unit is
implemented.

ANS: Web services

PTS: 1

18. A principle called ________________________________________ describes the way the Web

uses networking architecture to identify and locate Web pages and the elements (graphics, audio clips,
and so on) that make up those Web pages.

ANS:
Representational State Transfer (REST)
Representational State Transfer
REST

PTS: 1

19. Much of the data in SOAP applications is stored and transmitted in ____________________
format.

ANS: XML

PTS: 1
 20. Data mining ____________________ can indicate problematic pages in a store’s design where,
for example, a large number of customers get stuck and then leave the Web site.

ANS: reports

PTS: 1

21. For businesses that want to sell more than a few items, Amazon offers its
____________________ program.

ANS: Pro Merchant

PTS: 1

22. ____________________ electronic commerce software provides tools for both B2B and B2C
commerce.

ANS:
Enterprise-class
Enterprise class

PTS: 1

23. ________________________________________ uses information about customers to sell them

more (or more profitable) goods or services.

ANS:
CRM
Customer relationship management
Customer relationship management (CRM)

PTS: 1

24. SCM ____________________ software helps with tasks such as warehouse and transportation
management.

ANS: execution

PTS: 1

25. ____________________ software helps companies control the large amounts of text, graphics,
and media files that have become a key part of doing business.

ANS: Content management

PTS: 1

ESSAY

1. What is the difference between shared hosting and dedicated hosting?

ANS:
Shared hosting means that the client’s Web site is on a server that hosts other Web sites simultaneously
and is operated by the service provider at its location. With dedicated hosting, the service provider makes
a Web server available to the client, but the client does not share the server with other clients of the
service provider.

PTS: 1

2. List at least five software components that large and complex electronic commerce sites can
include in addition to a catalog display, shopping cart capabilities, and transaction processing.

ANS:
Larger and more complex electronic commerce sites use software that adds other features and capabilities
to the basic set of commerce tools. These additional software components can include:

Middleware that integrates the electronic commerce system with existing company information systems
that handle inventory control, order processing, and accounting

Enterprise application integration

Web services

Integration with enterprise resource planning (ERP) software

Supply chain management (SCM) software

Customer relationship management (CRM) software

Content management software

Knowledge management software

PTS: 1

3. What is the difference between a static catalog and a dynamic catalog?

ANS:
A static catalog is a simple list written in HTML that appears on a Web page or a series of Web pages. To
add an item, delete an item, or change an item’s listing, the company must edit the HTML of one or more
pages. A dynamic catalog stores the information about items in a database, usually on a separate computer
that is accessible to the server that is running the Web site itself. A dynamic catalog can feature multiple
photos of each item, detailed descriptions, and a search tool that allows customers to search for an item
and determine its availability.

PTS: 1

4. What are the benefits of using a mall-style commerce service provider? What costs are associated
with them?

ANS:
 Mall-style CSPs provide small businesses with an Internet connection, Web site creation tools, and little
or no banner advertising clutter. These service providers charge a low monthly fee and may also charge
one-time setup fees. Some of these providers also charge a percentage of or fixed amount for each
customer transaction. These Web hosts also provide online store design tools, storefront templates, an
easy-to-use interface, and Web page-generation capabilities and page maintenance. Mall-style CSPs
provide shopping cart software or the ability to use another vendor’s shopping cart software. They also
provide payment processing services so the online store can accept credit cards.

PTS: 1

5. What is the purpose of supply chain management software?

ANS:
Supply chain management (SCM) software helps companies to coordinate planning and operations with
their partners in the industry supply chains of which they are members. SCM software performs two
general types of functions: planning and execution.

PTS: 1

Chapter 10: Online Security

TRUE/FALSE

1. Threats that are deemed low risk and unlikely to occur can be ignored when the cost to protect
against the threat exceeds the value of the protected asset.

ANS: T PTS: 1

2. The element of necessity in computer security refers to preventing data delays or denials
(removal).

ANS: T PTS: 1

3. Absolute security is relatively easy to achieve.

ANS: F PTS: 1

4. The most complete way for Web site visitors to protect themselves from revealing private
information or being tracked by cookies is to disable cookies entirely.

ANS: T PTS: 1

5. Active content is launched in a Web browser automatically when that browser loads a Web page
containing active content.

ANS: T PTS: 1

6. Developers use active content because it extends the functionality of HTML and moves some
data processing chores from the busy server machine to the user’s client computer.
ANS: T PTS: 1

7. JavaScript and ActiveScript are examples of active content forms.

ANS: F PTS: 1

8. Java is a programming language used widely in Web pages to provide active content.

ANS: T PTS: 1

9. When Java applets are run within the constraints of the sandbox, they have full access to the
client computer.

ANS: F PTS: 1

10. Java applets operating in a sandbox can perform file input, output, or delete operations.

ANS: F PTS: 1

11. JavaScript can be used to record the URLs of Web pages a user visits.

ANS: T PTS: 1

12. JavaScript programs, like Java applets, operate under the restrictions of the Java sandbox security
model.

ANS: F PTS: 1

13. When a Windows-based Web browser downloads a Web page containing an embedded ActiveX
control, the control is executed on the client computer.

ANS: T PTS: 1

14. Worms can spread quickly through the Internet.

ANS: T PTS: 1

15. A digital certificate for software can attest to the quality of the software.

ANS: F PTS: 1

16. Digital certificates never expire.

ANS: F PTS: 1

17. Message packets on the Internet travel a planned path from a source node to a destination node.

ANS: F PTS: 1

18. Any message traveling on the Internet is subject to secrecy, integrity, and necessity threats.
 ANS: T PTS: 1

19. One significant threat to electronic commerce is theft of sensitive or personal information.

ANS: T PTS: 1

20. Secrecy protection is a legal matter.

ANS: F PTS: 1

21. E-mail secrecy issues address whether company supervisors should be permitted to read
employees’ messages randomly.

ANS: F PTS: 1

22. A computer that has experienced a necessity threat slows processing to an intolerably slow speed.

ANS: T PTS: 1

23. The shorter the session key, the more resistant the encryption is to attack.

ANS: F PTS: 1

24. A Web browser that has entered into an SSL session indicates that it is in an encrypted session.

ANS: T PTS: 1

25. A hash algorithm uses a secret key.

ANS: F PTS: 1

MULTIPLE CHOICE

1. ____ is the protection of computer assets from unauthorized access, use, alteration, or destruction.
a. Computer security c. Access security
b. Computer risk d. Logical security
ANS: A PTS: 1

2. Any act or object that poses a danger to computer assets is known as a ____.
a. problem c. threat
b. concern d. risk
ANS: C PTS: 1

3. The protection of assets using nonphysical means is called ____ security.

a. virtual c. computer
b. logical d. nonphysical
ANS: B PTS: 1
4. A(n) ____ is a person or device that is able to listen in on and copy Internet transmissions.
a. eavesdropper c. dropper
b. surveillor d. listener
ANS: A PTS: 1

5. Originally, the term ____ was used to describe a dedicated programmer who enjoyed writing
complex code that tested the limits of technology.
a. eavesdropper c. cracker
b. hacker d. wardriver
ANS: B PTS: 1

6. ____ refers to protecting against unauthorized data disclosure and ensuring the authenticity of the
data source.
a. Necessity c. Integrity
b. Secrecy d. Encryption
ANS: B PTS: 1

7. ____ refers to preventing unauthorized data modification.

a. Integrity c. Necessity
b. Secrecy d. Completeness
ANS: A PTS: 1

8. ____ refers to preventing data delays or denials.

a. Integrity c. Necessity
b. Secrecy d. Readiness
ANS: C PTS: 1

9. The purpose of a(n) ____ is to provide a way for a third-party Web site to place cookies from that
third-party site on a visitor’s computer.
a. ACL c. Web bug
b. digital ID d. gateway server
ANS: C PTS: 1

10. ____ refers to programs that are embedded transparently in Web pages and that cause action to
occur.
a. Action page c. Dynamic content
b. Active content d. Activity control
ANS: B PTS: 1

11. A(n) ____ is a small application program.

a. applet c. runner
b. buffer d. procedure
ANS: A PTS: 1

12. A(n) ____ is a program hidden inside another program or Web page that masks its true purpose.
a. mask program c. hidden route
b. Trojan horse d. insider program
ANS: B PTS: 1

13. Java is a programming language developed by ____.

a. Microsoft c. Oracle
b. IBM d. Sun Microsystems
ANS: D PTS: 1

14. A(n) ____ is an object that contains programs and properties that Web designers place on Web
pages to perform particular tasks.
a. objective c. ActiveX control
b. Java++ d. plug-in
ANS: C PTS: 1

15. ActiveX controls run only on computers with ____ operating systems.
a. Windows c. UNIX
b. Linux d. Mac
ANS: A PTS: 1

16. A(n) ____ is software that attaches itself to another program and can cause damage when the host
program is activated.
a. applet c. virus
b. cookie d. message digest
ANS: C PTS: 1

17. The term ____ describes the process of hiding information within another piece of information.
a. ACL c. firewall
b. steganography d. decryption
ANS: B PTS: 1

18. ____ is the protection of individual rights to nondisclosure.

a. Secrecy c. Necessity
b. Privacy d. Sensitivity
ANS: B PTS: 1

19. Software applications called ____ provide the means to record information that passes through a
computer or router that is handling Internet traffic.
a. intruder programs c. sniffer programs
b. copier programs d. backdoor programs
ANS: C PTS: 1

20. A(n) ____ allows anyone with knowledge of its existence to cause damage by observing
transactions, deleting data, or stealing data.
a. sniffer c. tunnel
b. backdoor d. opener
 ANS: B PTS: 1

21. ____ is the electronic defacing of an existing Web site’s page.

a. Masquerading c. Cybersquatting
b. Steganography d. Cybervandalism
ANS: D PTS: 1

22. ____ is pretending to be someone you are not or representing a Web site as an original when it is
really a fake.
a. Hash coding c. Cybersquatting
b. Spoofing d. Warchalking
ANS: B PTS: 1

23. ____ encryption encodes a message with an algorithm that uses a single numeric key, such as
456839420783, to encode and decode data.
a. Hash coding c. Asymmetric
b. Symmetric d. Transformative
ANS: B PTS: 1

24. A Web server can compromise ____ if it allows automatic directory listings.
a. necessity c. secrecy
b. integrity d. authenticity
ANS: C PTS: 1

25. ____ is an area of memory set aside to hold data read from a file or database.
a. RAM c. A buffer
b. A cookie d. Main memory
ANS: C PTS: 1

COMPLETION

1. ____________________ is the general name for a procedure, either physical or logical, that
recognizes, reduces, or eliminates a threat.

ANS: Countermeasure

PTS: 1

2. A(n) ____________________ occurs when an Internet e-mail message is intercepted and its
contents are changed before it is forwarded to its original destination.

ANS: integrity violation

PTS: 1
3. Any organization concerned about protecting its electronic commerce assets should have a(n)
____________________ in place.

ANS: security policy

PTS: 1

4. ____________________ security means having all security measures working together to prevent
unauthorized disclosure, destruction, or modification of assets.

ANS: Integrated

PTS: 1

5. ____________________ cookies exists until the Web client ends the connection.

ANS: Session

PTS: 1

6. ____________________ cookies remain on the client machine indefinitely.

ANS: Persistent

PTS: 1

7. Cookies can be placed on the client computer by the Web server site, in which case they are
called ____________________ cookies.

ANS:
first-party
first party

PTS: 1

8. A(n) ____________________ cookie originates from a Web site other than the site being visited.

ANS:
third-party
third party

PTS: 1

9. A Web ____________________ is a tiny graphic that a third-party Web site places on another
site’s Web page.

ANS: bug

PTS: 1
10. ____________________ is used in electronic commerce to place items into a shopping cart and
compute a total invoice amount, including sales tax, handling, and shipping costs.

ANS: Active content

PTS: 1

11. A(n) ____________________ is a Trojan horse that secretly takes over another computer for the
purpose of launching attacks on other computers.

ANS: zombie

PTS: 1

12. A Trojan horse could snoop around a client computer and send back private information to a
cooperating Web server, which is a(n) ____________________ violation.

ANS: secrecy

PTS: 1

13. ____________________ Java applets are those that have not been established as secure.

ANS: Untrusted

PTS: 1

14. ____________________ are programs that enhance the capabilities of browsers.

ANS: Plug-ins

PTS: 1

15. A(n) ____________________ is an attachment to an e-mail message or program embedded in a

Web page that verifies that the sender or Web site is who it claims to be.

ANS:
digital certificate
digital ID

PTS: 1

16. A digital certificate is a(n) ____________________ message or code.

ANS: signed

PTS: 1

17. A(n) ____________________ is simply a number that is used with the encryption algorithm to
“lock” the characters of the message being protected so that they are undecipherable without the key.
ANS: key

PTS: 1

18. A(n) ____________________ security device is one that uses an element of a person’s biological
makeup to perform the identification.

ANS: biometric

PTS: 1

19. ____________________ exists when an unauthorized party can alter a message stream of
information.

ANS: Active wiretapping

PTS: 1

20. ______________________________ are the computers on the Internet that maintain directories
that link domain names to IP addresses.

ANS:
Domain name servers
DNSs
Domain name servers (DNSs)
DNSs (Domain name servers)

PTS: 1

21. In some cities that have large concentrations of wireless networks, attackers, called
____________________, drive around in cars using their wireless-equipped laptop computers to search
for accessible networks.

ANS: wardrivers

PTS: 1

22. ____________________ is the coding of information by using a mathematically based program

and a secret key to produce a string of characters that is unintelligible.

ANS: Encryption

PTS: 1

23. The science that studies encryption is called ____________________.

ANS: cryptography

PTS: 1
 24. The program that transforms normal text into cipher text is called a(n) ____________________
program.

ANS: encryption

PTS: 1

25. Asymmetric encryption is also known as ____________________ encryption.

ANS:
public key
public-key

PTS: 1

ESSAY

1. Briefly describe the requirements for secure electronic commerce.

ANS:
Secrecy: Prevent unauthorized persons from reading messages and business plans, obtaining credit card
numbers, or deriving other confidential information.
Integrity: Enclose information in a digital envelope so that the computer can automatically detect
messages that have been altered in transit.
Availability: Provide delivery assurance for each message segment so that messages or message segments
cannot be lost undetectably.
Key management: Provide secure distribution and management of keys needed to provide secure
communications.
Nonrepudiation: Provide undeniable, end-to-end proof of each message’s origin and recipient.
Authentication: Securely identify clients and servers with digital signatures and certificates.

PTS: 1

2. Describe the security dangers inherent in ActiveX controls.

ANS:
The security danger with ActiveX controls is that once they are downloaded, they execute like any other
program on a client computer. They have full access to all system resources, including operating system
code. An ill-intentioned ActiveX control could reformat a user’s hard disk, rename or delete files, send e-
mails to all the people listed in the user’s address book, or simply shut down the computer. Because
ActiveX controls have full access to client computers, they can cause secrecy, integrity, or necessity
violations.

PTS: 1

3. What is the difference between a virus and a worm?

ANS:
A virus is software that attaches itself to another program and can cause damage when the host program
is activated. A worm is a type of virus that replicates itself on the computers that it infects. Worms can
spread quickly through the Internet.

PTS: 1

4. What are the six main elements included on a digital certificate?

ANS:
Digital certificates cannot be forged easily. A digital certificate includes six main elements, including: 1)
Certificate owner’s identifying information; 2) Certificate owner’s public key; 3) Dates between which
the certificate is valid; 4) Serial number of the certificate; 5) Name of the certificate issuer; and 6) Digital
signature of the certificate issuer.

PTS: 1

5. How might a buffer in a Web server cause security threats?

ANS:
A buffer is an area of memory set aside to hold data read from a file or database. A buffer is necessary
whenever any input or output operation takes place because a computer can process file information much
faster than the information can be read from input devices or written to output devices. Programs filling
buffers can malfunction and overfill the buffer, spilling the excess data outside the designated buffer
memory area. This is called a buffer overrun or buffer overflow error. Usually, this occurs because the
program contains an error or bug that causes the overflow, but it can also be intentional. An overflow
condition can consume the resources of the computer until it can no longer function.

PTS: 1