Question 1

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Compared to partnerships and sole proprietorships, a major advantage of the C (conventional)

corporation as a form of business ownership is that it:
Select one:
a. creates unlimited liability for its owners.
b. has the ability to raise more money.
c. is easier and less expensive to form.
d. qualifies for simplified tax treatment.

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The correct answer is: has the ability to raise more money.

Question 2

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As your good friend ponders putting some structure to his/her graphic design business idea,
which of the following do you not advise him/her to do?
Select one:
a. List the work that needs to be done such as (1) computer-assisted design; (2) sales
generation; (3) accounting and bookkeeping; (4) purchasing and supply ordering; and so on.
b. Prepare the nonchangeable marketing plan for the next three years, including
marketing analysis and marketing strategy.
c. List who will do the various jobs, including who will perform the computer work, who
will keep the books, and who will go out and create sales.
 d. Assign responsibility and authority to certain employees.

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The correct answer is: Prepare the nonchangeable marketing plan for the next three years,
including marketing analysis and marketing strategy.

Question 3

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The Social Security system:

Select one:
a. continues to burden businesses due to the fact that businesses must provide and pay for
this benefit for their employees.
b. met the needs of our nation when it was conceived, but needs an overhaul.
c. is failing because the U.S. government failed to invest the money that employees
contributed.
d. will continue to serve the needs of U.S. citizens into the distant future, due to the fact
that there are so few retirees placing a strain on it.

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The correct answer is: met the needs of our nation when it was conceived, but needs an
overhaul.

Question 4

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As Brett prepares to open his new business, he has identified the tasks that need to be
accomplished and has assigned employees to each task. This illustrates:
Select one:
a. management departmentalization.
b. specialization of priorities.
c. division of labor.
d. mass production economies.

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The correct answer is: division of labor.

Question 5

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The amount of goods and services people can buy with the money they have is called their:
Select one:
a. nominal income.
b. consumer price index.
c. profit margin.
d. standard of living.

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The correct answer is: standard of living.

Question 6

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Question text

Which of the following government policies would be least likely to encourage

entrepreneurship?
Select one:
a. Passage of laws that eliminate corruption in government and business.
b. Establishment of strict regulations specifying exactly how products should be made to
ensure safety and affordability.
c. Passage of laws that enable businesspeople to write enforceable contracts.
d. Establishment of a currency that is tradable in world markets.

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The correct answer is: Establishment of strict regulations specifying exactly how products
should be made to ensure safety and affordability.

Question 7

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A ____________ is a person who assumes the risk of starting a business.

Select one:
a. stakeholder
b. manager
c. private investor
d. entrepreneur

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The correct answer is: manager

Question 8

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Harper is a sales rep for an eyeglass company. The company is always on the cutting edge of
trendy designs. In her job, she frequently relies on the marketing department to provide her
with information and materials. When using customer satisfaction to judge the success of
their company, Harper's managers should:
Select one:
a. ignore Harper's satisfaction, since she is an employee rather than a customer.
b. take Harper's satisfaction into account, because customers can be internal as well as
external.
c. consider Harper's satisfaction, but place less emphasis on it than on the satisfaction of a
stockholder, since she is an external customer.
d. consider Harper's satisfaction only if she has worked in the same job for at least two
years.

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The correct answer is: take Harper's satisfaction into account, because customers can be
internal as well as external.

Question 9

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A partner (owner) who invests money in a business does not take an active role in managing
the operation, and is only subject to losing the funds he/she invested.
Select one:
a. partial partner.
b. corporate partner.
c. implied partner.
d. limited partner.
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The correct answer is: limited partner.

Question 10

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Which of the following describes the activity of a firm that assigns specific functions, such as
accounting or legal work, to other organizations rather than performing these functions
themselves?
Select one:
a. Functional sharing
b. Benchmarking
c. Outsourcing
d. Virtual distribution

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The correct answer is: Outsourcing

Question 11

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A free market is one in which decisions about what to produce and in what quantities are
made by:
Select one:
a. the Fed
b. the market
 c. the Congress
d. the community

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The correct answer is: the market

Question 12

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When prices are free to adjust over time, in the long run, the market price of a good tends to:
Select one:
a. equal the equilibrium price.
b. rise above the equilibrium price in the long run.
c. have no specific relationship to the equilibrium price.
d. fall below the equilibrium price in the long run.

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The correct answer is: equal the equilibrium price.

Question 13

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A few years back, your three U.S. born friends that live in the State of Wyoming inherited a
dude ranch that they plan to turn into a retirement haven for race horses. Peaceful Pastures
wants to open its doors by spring of 2018. After attending several small business seminars,
the three friends are certain they need limited liability. The high-risk, labor-intensive business
will require a sizeable investment including an air-conditioned barn, several fenced-in
pastures and loads of animal feed. You recently heard that one form of business ownership
requires owners to pay self-employment taxes on the entire amount of earnings. You are
fairly certain this is one tax liability your friends would like to avoid. You recommend:
Select one:
a. general partnership
b. S corporation
c. limited liability company
d. sole proprietorship

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The correct answer is: S corporation

Question 14

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Nolivia is a small and poor nation, but its current president has a genuine desire to create
more wealth for Nolivia citizens. The president has received recommendations from several
of her advisors. Which of the following recommendations is likely to create the most wealth
for Nolivia?
Select one:
a. Establish a business environment that promotes and rewards entrepreneurship.
b. Establish barriers to trade to protect Nolivia businesses from foreign competition.
c. Acquire more land by invading a neighboring country that is even poorer and weaker
than Nolivia.
d. Use foreign aid from other nations to purchase more tools and machinery.

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The correct answer is: Establish a business environment that promotes and rewards
entrepreneurship.

Question 15

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__________ believed that managers were trustworthy and companies would do well if
employees simply did what they were told.
Select one:
a. John Keynes
b. Max Weber
c. Adam Smith
d. Peter Drucker

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The correct answer is: Max Weber

Question 16

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Some __________ ask members/customers to work at the organization for a number of hours
a month as part of their duties.
Select one:
a. cooperatives
b. limited partnerships
c. franchises
d. mutual funds

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The correct answer is: cooperatives

Question 17

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Which of the following entails the greatest amount of risk?

Select one:
a. Working for a small business
b. Working for a large business
c. Working for the government
d. Starting a business

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The correct answer is: Starting a business

Question 18

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A vision for a company is:

Select one:
a. a detailed plan that outlines the major organizational structure of the firm.
b. very relevant for the short-term, but less useful for the long-term.
c. the same thing as an objective.
d. an explanation of why the company exists and where it wants to go.

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The correct answer is: an explanation of why the company exists and where it wants to go.
Question 19

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The main difference between a matrix-style organization model and a cross-functional team
is:
Select one:
a. the matrix model is a more permanent arrangement, whereas the cross-functional team
is a temporary arrangement.
b. the matrix model has a limit on the number of functional units who send an expert to
join the team, whereas the cross-functional team does not.
c. the matrix model is a temporary arrangement, whereas the cross-functional team is a
more permanent arrangement.
d. the matrix model shares leadership responsibilities within the group, whereas the
cross-functional team does not.

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The correct answer is: the matrix model is a temporary arrangement, whereas the cross-
functional team is a more permanent arrangement.

Question 20

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Independence Electronics prides itself as a world-class producer of components used in CD

and DVD players. The outstanding performance of the production department indicates that
this activity is one of the firm's:
Select one:
a. fiscal responsibilities.
 b. core competencies.
c. target competitive advantages.
d. benchmark assets.

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The correct answer is: core competencies.

Question 21

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An organization that consists of many layers of management is referred to as a

____________ organization.
Select one:
a. tall
b. deep
c. wide
d. flat

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The correct answer is: tall

Question 22

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At the onset of the recent economic slowdown, prices at the grocery stores continued to rise.
In some cases, products such as milk and bread almost doubled in price. A Boston newspaper
reported, "The price of eggs was up 40% and milk was up 26%." Consumers were already
being hit with high energy costs, and now their confidence in the economy was further
shaken with job cuts and a loss of discretionary income due to increases in food prices. The
economy was slowing, but prices were rising, signifying the potential for _________.
Select one:
a. disinflation
b. deflation
c. stagflation
d. equalization

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The correct answer is: stagflation

Question 23

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__________ refer to those functions that an organization does as well as, or better than, any
other organization in the world.
Select one:
a. Comparative strengths
b. Residual functions
c. Core competencies
d. Primary functions

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The correct answer is: Core competencies

Question 24

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In rural areas electrical power is often sold by ____________ that take advantage of the
government's policy to sell them electricity at wholesale rates.
Select one:
a. limited partnerships
b. franchises
c. mutual funds
d. cooperatives

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The correct answer is: cooperatives

Question 25

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One of the four primary functions of management is:

Select one:
a. financing.
b. controlling.
c. designing.
d. marketing.

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The correct answer is: controlling.

Question 26
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Neo-Malthusians believe that the solution to poverty is:

Select one:
a. increasing taxes on the rich and increasing social programs.
b. increasing the world population.
c. educating poor people.
d. birth control.

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The correct answer is: birth control.

Question 27

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According to the invisible hand concept, the best way for a society to encourage the creation
of jobs and the production of the products most wanted by consumers would be to:
Select one:
a. allow entrepreneurs personal freedom to follow their own self-interest.
b. allow private ownership of businesses, but make use of extensive regulation to force
businesses to behave in a socially desirable way.
c. permit government-owned industries, such as telecommunications, transportation, and
energy, and operate these firms as nonprofit organizations.
d. impose high taxes on individuals, and use the revenue to subsidize businesses to
encourage them to produce the maximum rate of output.

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The correct answer is: allow entrepreneurs personal freedom to follow their own self-interest.

Question 28

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In a sole proprietorship, the profits earned by the business are:

Select one:
a. taxed as income for the business, but exempt from the personal income tax paid by the
owner.
b. taxed at the lowest corporate rate.
c. tax-free if the appropriate exemption is filed with the local government.
d. the property of the owner, except for taxes owed to the government.

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The correct answer is: the property of the owner, except for taxes owed to the government.

Question 29

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Sierra is interested in becoming a franchise owner, by opening and operating one of 50

Cactus Katie's Grills, a very successful fast food chain specializing in food dishes from the
American southwest. Which of the following problems is Sierra most likely to encounter if
she agrees to become a franchisee?
Select one:
a. Lack of financing
b. Lack of managerial assistance
 c. High initial costs and fees
d. Poor name recognition and visibility

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The correct answer is: High initial costs and fees

Question 30

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In the Making Ethical Decisions box titled "Would You Sacrifice Safety for Profit?" which of
the following statements best expresses the theme of the discussion?
Select one:
a. The corporate culture you create as you begin your service will last a long time. Your
workers will adopt your values.
b. The only way to be profitable is to avoid risk. If new safety equipment becomes
available that is applicable to your business, even if it slows productivity, you should adopt it.
c. The principles of organization state that the only company objective is to gain profits
for the owner(s) or stockholders. If your competitors are cutting corners with safety
regulations, you should consider the same.
d. In the beginning, company procedures that require value judgments are often too
costly. As the business grows, the owner can add ethical procedures to each job.

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The correct answer is: The corporate culture you create as you begin your service will last a
long time. Your workers will adopt your values.

Question 31

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Question text

In recent years, U.S. manufacturing sector has experienced ___________ productivity.

Select one:
a. rising
b. falling slowly
c. falling very rapidly
d. relatively stable

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The correct answer is: rising

Question 32

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An increase in global trade will:

Select one:
a. decrease jobs.
b. increase prices.
c. increase political instability.
d. increase global competition.

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The correct answer is: increase global competition.

Question 33

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Question text

__________ is the market situation in which there are many sellers in a market and no seller
is large enough to dictate the price of a product.
Select one:
a. Oligopoly
b. Monopolistic competition
c. Perfect competition
d. Microeconomic competition

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The correct answer is: Perfect competition

Question 34

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Which of the following is true of cross-functional teams?

Select one:
a. Cross-functional teams are disbanded once the current project is complete.
b. Employees on the teams are frustrated by organizational rules and regulations.
c. Cross-functional teams are required not to share information across national
boundaries.
d. Cross-functional teams work best when the voice of the customer is brought into the
organization.

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The correct answer is: Cross-functional teams work best when the voice of the customer is
brought into the organization.

Question 35

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A __________ is an overall explanation of why an organization exists and where it is trying

to head.
Select one:
a. vision
b. corporate charter
c. prime directive
d. tactical plan

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The correct answer is: vision

Question 36

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A __________ analysis is used to help companies evaluate their internal strengths and
weaknesses, and develop an awareness of external threats and opportunities.
Select one:
a. ASSET
b. SWOT
c. WISH
d. SWAMP

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The correct answer is: SWOT

Question 37
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__________ is the study of how a society employs its limited resources to produce goods and
services and how it distributes them among competing groups and individuals.
Select one:
a. Marketing
b. Capitalism
c. Economics
d. Socialism

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The correct answer is: Economics

Question 38

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___________ means producing items using the least amount of resources.

Select one:
a. Efficiency
b. Technology
c. E-production
d. Productivity

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The correct answer is: Efficiency

Question 39

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Managers who listen to their subordinates and allow them to participate in decision making
are using the ____________ style of leadership.
Select one:
a. bureaucratic
b. participative
c. free-rein
d. autocratic

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The correct answer is: participative

Question 40

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Jamie and Maria invested all their savings in a small pizzeria they opened outside the
University of Western Kentucky. They operated the business as a general partnership. After
11 months, the business went broke and Jamie and Maria were left with outstanding bills of
$37,500, which was more than their initial investment in the company. Jamie and Maria can:
Select one:
a. lose only the funds they originally invested in their company.
b. lose their personal assets as the result of their company's financial problems.
c. lose only the total value of the assets actually used to operate the business.
 d. avoid any liability for these debts since a partnership is considered to be a business
entity that is separate and distinct from the partners who own it.

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The correct answer is: lose their personal assets as the result of their company's financial
problems.

Question 41

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Which of the following statements has resulted in changes in the role of management?
Select one:
a. Firms are recognizing that their workforces are too diverse, so managers must find
ways to reduce diversity without violating federal laws against discrimination.
b. The marketplace is becoming global, which increases both competition and
opportunities for cooperation and integration.
c. The desire to encourage teamwork has resulted in larger, more cumbersome
organizations with too many workers.
d. Most workers today show little initiative or creativity, so managers must spend more
time directing their efforts.

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The correct answer is: The marketplace is becoming global, which increases both competition
and opportunities for cooperation and integration.

Question 42

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Question text

Selma owns a roofing business. She enjoys being her own boss, but her satisfaction comes at
a price. Her days are filled with organizing the activities of her employees and soliciting new
customers. She often misses activities with friends and family because of the obligations of
running her own business. She also knows that she has unlimited personal liability for any of

her firm's debts. Selma's business is organized as a :

Select one:
a. joint venture.
b. C corporation.
c. sole proprietorship.
d. S corporation.

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The correct answer is: sole proprietorship.

Question 43

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A simple supply curve shows a relationship between the:

Select one:
a. price of a good and the quantity of that good sellers are willing to offer for sale at a
specific point in time.
b. amount of a good a firm produces and the amount demanded by consumers.
c. amount of labor a firm hires and the amount of output it can produce.
d. amount of time required to produce a good and the relevant production costs.

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The correct answer is: price of a good and the quantity of that good sellers are willing to offer
for sale at a specific point in time.

Question 44
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Max is in charge of production for a family-owned firm that makes and sells sports gloves
including baseball gloves, softball gloves, golf gloves, and more. He has stated that speed of
delivery is the most important factor for success in the competitive environment. Which of
the following would be the best response to Max?
Select one:
a. You are the man, Max. As long as our price is competitive, speedy delivery will win in
today's changing marketplace.
b. Dude, you couldn't be more wrong. Quality is the name of the game. He who has the
best product will win in the competitive environment.
c. You are right on target, Max. Time is money.
d. Well, Max, speed isn't everything. What would exceed our customers' expectations?
Some consumers may put more importance on high quality and/or lower prices.

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The correct answer is: Well, Max, speed isn't everything. What would exceed our customers'
expectations? Some consumers may put more importance on high quality and/or lower prices.

Question 45

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When we think of successful music entertainment groups of the past 60 years, the Beatles
almost always appear in the top 5! In the early days, the entertainment group's life cycle
could have ended as so many other rock groups do—here today, gone tomorrow. The four
musicians were definitely creative and passionate about their craft and genre of music. As the
informal leader of the group, John Lennon _____________ the others to make important
compositional contributions. All four members had the opportunity to create musical
compositions and receive copyright credit for their contributions.
Select one:
a. empowered
b. commanded
c. transformed
d. enabled

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The correct answer is: empowered

Question 46

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The purpose of a farm cooperative is to:

Select one:
a. give members more economic power as a group than they would have as individuals.
b. allow socialism a foothold in the U.S.
c. equalize the members' standard of living.
d. give each farm an equal share in the running of the cooperative.

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The correct answer is: give members more economic power as a group than they would have
as individuals.

Question 47

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As a middle manager for her firm, Tori just finished comparing the results of a promotional
campaign with the outcome expectations. The next step in the control process is:
Select one:
a. establish discipline committees to decide on dismissals.
b. communicate results and deviations with management and employees involved.
c. set up contingency plans.
d. monitor and record actual performance.

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The correct answer is: communicate results and deviations with management and employees
involved.

Question 48

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__________ planning prepares alternative courses of action that may be used if the primary
plans are not achieving objectives.
Select one:
a. Strategic
b. Alternative
c. Contingency
d. Tactical

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The correct answer is: Contingency

Question 49

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 Flag question

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Communism is an economic system in which:

Select one:
a. the government and private citizens own equal shares of the economic resources.
b. the government makes almost all of the major economic decisions.
c. almost all of the productive resources are owned by private businesses.
d. individual consumers make all economic decisions.

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The correct answer is: the government makes almost all of the major economic decisions.

Question 50

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The number of businesses owned by Hispanics and Asians has:

Select one:
a. has decreased after the 9-11 terrorist attack.
b. significantly increased.
c. slowly increased.
d. remained relatively constant.

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The correct answer is: significantly increased.